<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
INTERMEDIA CAPITAL PARTNERS IV, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 4841 94-3247750
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
INTERMEDIA PARTNERS IV, CAPITAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 9999 94-3247948
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
235 MONTGOMERY STREET, SUITE 420
SAN FRANCISCO, CA 94563
(415) 616-4600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
LEO J. HINDERY, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTERMEDIA PARTNERS IV, CAPITAL CORP.
235 MONTGOMERY STREET, SUITE 420
SAN FRANCISCO, CA 94563
(415) 616-4600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
GREGG F. VIGNOS, ESQ.
THERESA G. MORAN, ESQ.
PILLSBURY MADISON & SUTRO LLP
235 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 983-1000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION FEE
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1)(2) (2)
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<S> <C> <C> <C> <C>
11 1/4% Senior Notes Due 2006..... $292,000,000 100% $292,000,000 $33,563.22
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated in accordance with Rule 457(f)(2) under the Securities Act of
1933. Because the Registrant has an accumulated capital deficit, the filing
fee is based on a maximum aggregate offering price equal to one-third of the
Notes' stated value ($292,000,000.00). Therefore, in accordance with Rule
457(f)(2), the maximum aggregate offering price for purposes of calculating
the registration fee is $97,333,333.33.
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 THE 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
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV, CAPITAL CORP.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K, AND RULE 404(a)
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN S-4
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-4 LOCATION OR HEADING IN PROSPECTUS
- --------------------------------------- ----------------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................ Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Prospectus Summary; Risk Factors; Selected
Financial Information and Operating Data
4. Terms of the Transaction......... Prospectus Summary; The Exchange Offer;
Description of the Notes
5. Pro Form Financial
Information...................... Pro Forma Financial Information
6. Material Contracts with the
Company Being Acquired........... Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters..................... Plan of Distribution
8. Interests of Named Experts and
Counsel.......................... Legal Matters
9. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities....... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to
S-3 Registrants.................. Not Applicable
11. Incorporation of Certain
Information by Reference......... Not Applicable
12. Information with Respect to
S-2 or S-3 Registrations......... Not Applicable
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information with Respect to
Registrants Other than S-2 or S-3
Registrants...................... Prospectus Summary; Risk Factors; The
Exchange Offer; Capitalization; Selected
Financial Information and Operating Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Principal Security Holders; Certain
Relationships and Related Transactions;
Description of Other Obligations;
Description of the Notes; Financial
Statements
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN FORM S-4 LOCATION OR HEADING IN PROSPECTUS
- ------------------------------------------- ---------------------------------------------
<S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies...................... Not Applicable
16. Information with Respect to
S-2 or S-3 Companies............... Not Applicable
17. Information with Respect to
Companies Other than S-2 or S-3
Companies.......................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations are to
be Solicited....................... Not Applicable
19. Information if Proxies,
Consents or Authorizations are to
be Solicited or in an Exchange
Offer.............................. Not Applicable
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1996
PROSPECTUS STRICTLY CONFIDENTIAL
[LOGO]
OFFER TO EXCHANGE ALL OUTSTANDING
11 1/4% SENIOR NOTES DUE 2006
FOR
11 1/4% SENIOR NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993
OF
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV, CAPITAL CORP.
InterMedia Capital Partners IV, L.P., a California limited partnership
("ICP-IV"), and InterMedia Partners IV, Capital Corp., a Delaware corporation
and a wholly owned subsidiary of ICP-IV ("IPCC," and together with ICP-IV, the
"Issuers") hereby offer, jointly and severally, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal," and together with this Prospectus, the
"Exchange Offer"), to exchange its 11 1/4% Senior Notes Due 2006 (the "Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus is a part, for the outstanding 11 1/4% Senior Notes Due
2006 (the "Old Notes" and, together with the Exchange Notes, the "Notes") of the
Issuers.
The Issuers will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1996, unless the Exchange Offer is
extended (the "Expiration Date"). The exchange of Exchange Notes for the Old
Notes will be made as soon as practicable after the close of the Exchange Offer.
The Issuers will accept for exchange all Old Notes tendered and not validly
withdrawn pursuant to the Exchange Offer and will deliver to the Trustee (as
defined herein) for cancellation all Old Notes so accepted for exchange. The
Issuers shall cause the Trustee to authenticate and deliver to each holder of
the Old Notes the Exchange Notes equal in principal amount to the Old Notes of
such holder so accepted for exchange. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange. See "The
Exchange Offer." The Issuers have agreed to pay the expenses of the Exchange
Offer.
The Exchange Notes will be obligations of the Issuers issued pursuant to the
Indenture (as defined herein) under which the Old Notes were issued. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Old Notes except that the Exchange Notes will not contain
terms with respect to transfer restrictions and the Exchange Notes have been
registered under the Securities Act. See "The Exchange Offer."
(Cover continued on next page)
The Issuers will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer. See "Use of
Proceeds."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
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.
The date of this Prospectus is September 12, 1996
<PAGE> 5
(Continued from cover page)
The Exchange Notes will mature on August 1, 2006, unless previously
redeemed. Interest on the Exchange Notes is payable semi-annually on August 1
and February 1 of each year, commencing February 1, 1997. The Exchange Notes
will be redeemable, in whole or in part, at the option of the Issuers, at any
time on or after August 1, 2001 at the redemption prices set forth herein plus
accrued and unpaid interest and Liquidated Damages (as defined herein) thereon,
if any, to the date of redemption. Notwithstanding the foregoing, any time on or
before August 1, 1999, the Issuers, at their option, may redeem up to 35% of the
aggregate principal amount of Exchange Notes originally issued with the net
proceeds of one or more Public Equity Offerings or Strategic Equity Investments
(as defined herein), at 111.25% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
redemption, provided however that at least 65% of the aggregate principal amount
of Exchange Notes originally issued are outstanding immediately after giving
effect to any such redemption. Upon a Change of Control (as defined herein), the
Issuers will be required to make an offer to repurchase all outstanding Exchange
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase. See "Description of the Notes."
The Exchange Notes will be obligations of the Issuers and will rank pari
passu in payment with all senior indebtedness of the Issuers, if any, and senior
in right of payment to all future subordinated indebtedness of the Issuers, if
any. However, all other consolidated indebtedness of ICP-IV, including
borrowings by ICP-IV's subsidiaries under the Bank Facility (as defined herein),
will be structurally senior to the Exchange Notes and secured by substantially
all of ICP-IV's assets. The Exchange Notes will not be guaranteed by any of
ICP-IV's subsidiaries. ICP-IV is a holding company with no direct operations
and, therefore, the Notes will also be effectively subordinated to all other
liabilities (including trade payables and accrued liabilities) of ICP-IV's
subsidiaries. As of June 30, 1996 after giving effect to the Transactions (as
defined herein), the obligations of ICP-IV's subsidiaries that are structurally
senior to the Exchange Notes would have included total indebtedness of $558.0
million (including obligations under the Bank Facility) and total trade payables
and other liabilities of $42.2 million, including $12.0 million in mandatorily
redeemable preferred stock of a subsidiary of ICP-IV. The Indenture will allow
the Company (as defined herein) to incur additional indebtedness. See "Risk
Factors -- Holding Company Structure; Structural Subordination."
The Exchange Notes are being offered hereunder to satisfy certain
obligations of the Issuers contained in the Registration Agreement (as defined
herein). Based on existing interpretations of the Securities Act by the staff of
the Securities and Exchange Commission ("Commission") set forth in several
no-action letters to third parties, and subject to the immediately following
sentence, the Issuers believe that the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
the holders thereof without further compliance with the registration and
prospectus delivery provisions of the Securities Act. However, any holder of the
Old Notes who is an "affiliate" of the Issuers or who intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Notes (i) will
not be able to rely on the interpretation by the staff of the Commission set
forth in the above mentioned no-action letters, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale or transfer of the Old Notes unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange the Old Notes for Exchange Notes in the Exchange Offer is
required to represent to the Issuers that (i) it is not an affiliate of the
Issuers, (ii) any Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of the commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Issuers have agreed that, starting on the Expiration
Date and ending on the close of business on the 180th day following the
Expiration Date, they will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "The Exchange Offer" and "Plan
of Distribution."
Until 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.
The Old Notes and the Exchange Notes constitute new issues of securities
with no established public trading market. The Old Notes, however, have traded
on the National Association of Securities Dealers, Inc.'s PORTAL Market. Any Old
Notes not tendered and accepted in the Exchange Offer will remain outstanding.
To the extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, and tendered but unaccepted, Old Notes
could be adversely affected. Following consummation of the Exchange Offer, the
holders of Old Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuers will have no further obligation to such holders
to provide for the registration under the Securities Act of the Old Notes. See
"Description of the Notes -- Registration Rights; Liquidation Damages." No
assurance can be given as to the liquidity of the trading market for either the
Old Notes or the Exchange Notes.
<PAGE> 6
[LOGO]
[MAP OF LOCATION OF THE COMPANY'S CABLE TELEVISION SYSTEMS]
<PAGE> 7
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR
A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
FOR FLORIDA RESIDENTS:
PURSUANT TO SECTION 517.061(11)(a)(5) OF THE FLORIDA SECURITIES ACT, YOU
HAVE THE RIGHT TO RESCIND YOUR SUBSCRIPTION (UNLESS YOU ARE AN INSTITUTIONAL
INVESTOR DESCRIBED IN SECTION 517.061(7) OF THE FLORIDA SECURITIES ACT) BY
GIVING NOTICE OF SUCH RESCISSION BY TELEPHONE, TELEGRAPH OR LETTER, WITHIN THREE
DAYS AFTER YOU FIRST TENDER CONSIDERATION, TO THE INITIAL PURCHASERS. IF NOTICE
IS NOT RECEIVED BY SUCH TIME, THE FOREGOING RIGHT OF RESCISSION SHALL BE NULL
AND VOID.
------------------------
AVAILABLE INFORMATION
The Issuers filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement," which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement. For further information with respect to the
Issuers and the Exchange Offer, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, at the Regional Offices of the Commission
at 7 World Trade Center, 14th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
Under the terms of the Indenture (as defined herein), under which the Old
Notes were issued, and under which the Exchange Notes are to be issued, each of
the Issuers has agreed that, whether or not it is required to do so by the rules
and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and file with the
Commission (unless the Commission will not accept such a filing) annual reports
of ICP-IV 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. Such reports will contain
a management's discussion and analysis of financial condition and results of
operation and each such annual report will include summary subscriber
information. In addition, for
i
<PAGE> 8
so long as any of the Notes remain outstanding, ICP-IV has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUERS SINCE THE DATE HEREOF.
ii
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, financial statements, including the notes thereto, and pro forma
financial information appearing elsewhere in this prospectus (the "Prospectus").
As used in this Prospectus, unless the context requires otherwise, (i) the
"Company" refers to InterMedia Capital Partners IV, L.P., a California limited
partnership ("ICP-IV"), and its subsidiaries, (ii) "Systems" refers to the cable
television systems acquired by the Company pursuant to the Acquisitions (as
defined herein), (iii) "IPCC" refers to InterMedia Partners IV, Capital Corp., a
Delaware corporation and a wholly owned subsidiary of ICP-IV, (iv) the "Issuers"
refers to ICP-IV and IPCC, (v) the "Operating Partnership" refers to InterMedia
Partners IV, L.P., a California limited partnership ("IP-IV") and a subsidiary
of ICP-IV, (vi) the "Related InterMedia Entities" refers, collectively, to
InterMedia Partners, a California limited partnership, InterMedia Partners II,
L.P., InterMedia Partners III, L.P., InterMedia Partners V, L.P. and their
consolidated subsidiaries, that are affiliated with the Company (see "The
Acquisitions"), (vii) "TCI" refers to Tele-Communications, Inc. or
Tele-Communications, Inc. and its affiliates, as the context requires, (viii)
"DMA" refers to Designated Market Area, a term developed by A.C. Nielsen
Company, a national media ratings service, and used to describe a geographically
distinct market and (ix) "EBI" refers to Effective Buying Income, which is
defined as personal income less personal tax and certain nontax payments, and is
also referred to as "disposable" or "after tax" income. A glossary of certain
terms appearing herein has been included in this Prospectus. See "Glossary."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN
INVESTMENT IN THE NOTES.
THE COMPANY
The Company was formed to acquire and consolidate various cable television
systems located in high-growth areas of the southeastern United States (the
"Southeast"), including certain cable television systems owned by the Related
InterMedia Entities and TCI or affiliates thereof. TCI, an investor in each of
the Related InterMedia Entities, directly owns 49.0% of ICP-IV's non-preferred
equity. The Company has one of the largest concentrations of basic subscribers
in the Southeast and is the largest cable television service provider in
Tennessee. In addition, the Company's operations are composed of three clusters
that, in aggregate, served approximately 569,713 basic subscribers and passed
approximately 835,551 homes as of June 30, 1996.
The three clusters are comprised of (i) Nashville, its suburbs and
surrounding areas (the "Nashville/MidTennessee Cluster"), (ii) the
Greenville/Spartanburg metropolitan area and northeastern Georgia (the
"Greenville/Spartanburg Cluster") and (iii) eastern Tennessee, which includes
suburban Knoxville (the "Knoxville/East Tennessee Cluster").
As of June 30, 1996, the operating data for the Company's three clusters
was as follows:
<TABLE>
<S> <C>
Basic Subscribers:
Nashville/Mid-Tennessee Cluster.......................................... 324,808
Greenville/Spartanburg Cluster........................................... 147,499
Knoxville/East Tennessee Cluster......................................... 97,406
-------
Total............................................................ 569,713
=======
Homes Passed:
Nashville/Mid-Tennessee Cluster.......................................... 496,945
Greenville/Spartanburg Cluster........................................... 204,208
Knoxville/East Tennessee Cluster......................................... 134,398
-------
Total............................................................ 835,551
=======
</TABLE>
1
<PAGE> 10
The Company serves approximately 90.0% and 70.0%, respectively, of all the
basic cable television subscribers in the Nashville Metropolitan Market (as
defined herein) and the Greenville/Spartanburg Metropolitan Market (as defined
herein). The Nashville Metropolitan Market and the Greenville/Spartanburg
Metropolitan Market are located within the 33rd and 35th largest DMAs in the
United States, respectively.
The Company operates in primarily urban and suburban areas in the Southeast
that in recent years have experienced significant economic, household and income
growth. The Southeast has been, and is projected to continue to be, one of the
fastest growing regions in the United States due to a diverse employment base, a
low cost of living and a favorable business climate. According to Market
Statistic, Inc., from 1995 to 2000, the counties served by the Systems are
projected to experience a weighted average estimated compounded annual household
growth of 2.0%, as compared to national estimated compounded annual household
growth of 1.1%. The counties served by the Systems are also projected to achieve
a weighted average EBI compounded annual growth rate of 3.4% from 1994 to 1999,
as compared to a national average compounded annual growth rate of 3.0%. These
attractive demographic trends helped the Systems to achieve, from December 31,
1993 to December 31, 1995, a compounded internal basic subscriber growth rate of
approximately 5.3% per annum compared to a national compounded average growth
rate of 3.4% per annum, according to the National Cable Television Association
("NCTA"). Management believes that the attractive demographic trends of these
counties provide the potential for continued significant basic subscriber and
revenue growth.
BUSINESS STRATEGY
Overview
The Company and each of the Related InterMedia Entities were created by Leo
J. Hindery, Jr., who has over 10 years of experience in the cable television
industry, to own and operate cable television systems in the United States. Mr.
Hindery created the Company with the goal of developing it into a medium-sized
multiple system operator ("MSO"). TCI, the largest cable television operator in
the United States, with wholly owned and affiliated cable television systems
serving approximately 15.2 million basic subscribers, directly owns 49.0% of
ICP-IV's non-preferred equity. Management believes that the Company's
relationship with TCI provides substantial benefits, including (i) the ability
to purchase programming and equipment at rates approximating those available to
TCI and (ii) access to TCI's engineering, technical, marketing, advertising,
accounting and regulatory expertise. There can be no assurance, however, that
such benefits will continue to be available to the Company. See "Risk
Factors -- Loss of Beneficial Relationship with TCI" and
"Business -- Relationship with TCI."
Operating Strategy
The Company's strategy is to own, operate and develop cable television
systems primarily in geographically clustered, high-growth markets in the
Southeast. The operating strategy was developed by a senior management team of
experienced operating, engineering, marketing and financial executives. The
operating strategy includes the following key elements:
Cluster Subscribers. Management believes the Company can derive
significant economies of scale and operating efficiencies by clustering its
operations. Operational advantages and cost savings associated with clustering
include centralizing management, billing, marketing, customer service, technical
and administrative functions, and reducing the number of headends. Management
believes that clustering will enable the Company to more effectively utilize
capital by more efficiently delivering cable and related services to a greater
number of households. Management also believes that clustering will provide the
Company with significant revenue opportunities, including the ability to attract
additional advertising and to offer a broader platform for data services, and
residential and business telephony services.
Focus on Regions with Attractive Demographics. The Company owns and
develops cable television systems in areas that in recent years have experienced
annual economic, household and income growth that have exceeded national
averages. See "Business -- Overview of Cable Television Systems." In recent
years,
2
<PAGE> 11
the Southeast has been one of the fastest growing regions in the United States
due in part to a diverse employment base, a low cost of living and a favorable
business climate. Management believes that the Company will continue to benefit
from the household growth in, and the outward expansion of, the metropolitan
areas served by the Company. Management further believes that households located
in areas with attractive demographics are more likely to subscribe to cable
television services, premium service packages and new service offerings.
Upgrade Cable Television Systems. The Company has begun a capital
improvement program (the "Capital Improvement Program") to comprehensively
upgrade its operating network. Management believes that the Capital Improvement
Program will further the Company's efforts to reduce costs, create additional
revenue opportunities, increase customer satisfaction and enhance system
reliability. Successfully upgrading the architecture of the Systems will expand
channel capacity, enhance network quality and dependability, augment
addressability and allow the Company to offer two-way transmission and advanced
interactive services. Currently, over 81.0% of the Company's operations offer
between 30 to 61 channels of programming. Following implementation of the
Capital Improvement Program, over 85.0% of such operations will be able to offer
62 or more channels and over 70.0% will be served by plant with a bandwidth of
750 MHz enabling subscribers to receive the equivalent of 82 or more analog
channels. Through 2001, the Company expects to spend approximately $235.7
million in additional capital on the Capital Improvement Program that it expects
to finance with internally generated cash flow and borrowings available under
the Revolving Credit Facility (as defined herein). See "Risk Factors -- Future
Capital Requirements" and "Business -- Upgrade Strategy and Capital
Expenditures."
Target Additional Revenue Sources. Management believes that the Company's
geographic clustering, the demographic profile of its subscribers and
implementation of the Capital Improvement Program affords the Company the
opportunity to pursue revenue sources incremental to its core business.
Management also believes that the Company can create additional revenue growth
opportunities through further development of existing advertising, pay-per-view
and home shopping services. Possible future services include high-speed data
transmission (including Internet access), near video-on-demand ("NVOD"),
interactive services such as video games, and residential and business
telephony, including a wireline network platform for personal communications
services ("PCS") operators.
Emphasize Customer Service. Management believes that the Company provides
quality customer service and attractive programming packages at reasonable
rates. As part of its customer service efforts, the Company has instituted
training and incentive programs for all of its employees and instituted
same-day, evening and weekend installation and repair visit options in several
of its service areas. To further emphasize customer service, the Company's
employee bonus program includes specific customer service incentives designed to
increase the speed and effectiveness of service visits, shorten installation
response times and ensure that customer telephone calls are answered promptly by
customer service representatives.
Utilize Innovative Sales and Marketing Techniques. The Company is seeking
to increase its penetration levels for basic service, expanded basic service and
premium service and to increase revenue per household through targeted
promotions and innovative marketing strategies. For example, the Company has
entered into a co-marketing campaign with Sprint Corporation to offer a
combination of cable television and long distance telephone services. Additional
marketing strategies that the Company utilizes include promotional previews of
premium programs, discounted installation fees, expedited installation service
and special pricing on premium services. The Company seeks to maximize its
revenue per subscriber by cross-promoting its programming services, by using
"tiered" packaging strategies for marketing premium services and promoting niche
programming services, and by offering more entertainment choices and new
services.
3
<PAGE> 12
THE ACQUISITIONS
Primary Acquisitions. On February 1, 1996, InterMedia Partners of Tennessee
("IP-TN"), a subsidiary of ICP-IV, acquired cable television assets located in
Kingsport, Tennessee (the "Kingsport System") from Time Warner Entertainment
Company, L.P. ("Time Warner"), and cable television assets located in
Hendersonville, Waverly and Monterey, Tennessee, and Fort Campbell, Kentucky
(the "ParCable System") from ParCable, Inc. ("ParCable"). These systems served,
as of June 30, 1996, approximately 53,930 basic subscribers and were acquired
for an aggregate purchase price of $92.6 million which was funded with a portion
of the proceeds from the Bridge Loan (as defined herein). On July 30, 1996 the
Company acquired cable television systems serving approximately 360,401 basic
subscribers in Tennessee, South Carolina and Georgia as of June 30, 1996 upon
the Company's acquisition of equity interests in Robin Media Holdings, Inc.
("RMH") and InterMedia Partners of West Tennessee, L.P. ("IPWT") and TCI's
contribution to the Company of certain cable television systems. On August 1,
1996, a subsidiary of ICP-IV acquired the cable television assets of Viacom in
the Nashville Metropolitan Market for a purchase price of $317.7 million. The
acquired cable television assets in and around Nashville (the "Viacom Nashville
System") served, as of June 30, 1996, 149,362 basic subscribers. The acquisition
of the cable television assets of Time Warner, ParCable, IPWT, RMH, TCI and
Viacom are collectively referred to as the "Primary Acquisitions." The fair
market values of the Primary Acquisitions aggregate approximately $1,098.0
million and were financed with proceeds from the offering of the Old Notes (the
"Private Offering"), borrowings available under the Bank Facility (as defined
herein) and the Contributed Equity (as defined herein). See "The Acquisitions --
Primary Acquisitions."
Miscellaneous Acquisitions. The Company, through IP-TN, also acquired
cable television systems in Tennessee from Annox, Inc. ("Annox"), Tellico Cable,
Inc. ("Tellico"), Rochford Realty and Construction Company, Inc. ("Rochford")
and Prime Cable Partners, Inc. ("Prime Cable"), that served, as of June 30,
1996, an aggregate of approximately 6,020 basic subscribers. The aggregate
purchase price for the Annox, Tellico and Rochford systems of $8.3 million was
funded with a portion of the proceeds from the Bridge Loan. The purchase price
for the Prime Cable System of $1.5 million was funded with borrowings under the
Revolving Credit Facility (as herein defined). The acquisitions of the cable
television assets of Annox, Tellico, Rochford and Prime Cable are referred to
herein as the "Miscellaneous Acquisitions." Except as otherwise noted, financial
results for the systems acquired pursuant to the Miscellaneous Acquisitions are
not included herein due to the immateriality of such systems. See "The
Acquisitions -- Miscellaneous Acquisitions." The Miscellaneous Acquisitions,
together with the Primary Acquisitions, are referred to herein as the
"Acquisitions."
4
<PAGE> 13
The following table sets forth, for each acquisition, the cluster in which
the system is located, the approximate number of basic subscribers, the
acquisition price and adjusted EBITDA.
<TABLE>
<CAPTION>
ANNUALIZED SIX
MONTHS ENDED
JUNE 30, 1996
BASIC SUBSCRIBERS ACQUISITION ADJUSTED
AS OF PRICE (1) EBITDA (2)
ACQUISITION CLUSTER(S) JUNE 30, 1996 (IN MILLIONS) (IN MILLIONS)
- ---------------------------- ------------------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
PRIMARY ACQUISITIONS:
Kingsport System.......... Knoxville/East Tennessee 31,955 $ 62.5 $ 6.2
ParCable System........... Nashville/Mid-Tennessee 21,975 30.1 3.0
IPWT...................... Nashville/Mid-Tennessee 48,010 72.5 7.3
RMH....................... Nashville/Mid-Tennessee 100,942 376.3 35.8
Knoxville/East Tennessee 63,950
Greenville/Spartanburg 31,492
TCI....................... Greenville/Spartanburg 116,007 238.9 20.8
Viacom Nashville System... Nashville/Mid-Tennessee 149,362 317.7 26.7
MISCELLANEOUS ACQUISITIONS:
Nashville/Mid-Tennessee 4,519 9.8 --
Knoxville/East Tennessee 1,501
------- -------- -----
Total
Acquisitions.... 569,713 $ 1,107.8 $ 99.8(3)
======= ======== =====
</TABLE>
- ---------------
(1) The aggregate acquisition price of the Acquisitions does not include total
estimated acquisition costs of $1.7 million. For RMH and IPWT, the
acquisition price represents the fair market value of equity interests
acquired and liabilities assumed. For the TCI cable television systems the
acquisition price represents the fair market value of assets contributed by
TCI to the Company. Furthermore, certain of the acquisitions are subject to
further purchase price adjustments. See "The Acquisitions."
(2) EBITDA represents income (loss) before interest expense, income taxes,
depreciation and amortization, and other income (expense). Adjusted EBITDA
represents EBITDA before payment of management and consulting fees and
corporate overhead allocation. Management believes that adjusted EBITDA is a
commonly used measure of cable system value in the cable television
industry. Adjusted EBITDA is not presented in accordance with generally
accepted accounting principles and should not be considered an alternative
to, or more meaningful than, operating income or operating cash flows as an
indicator of the Company's operating performance.
(3) Does not include results from the Miscellaneous Acquisitions.
5
<PAGE> 14
THE TRANSACTIONS
The Private Offering was part of a financing plan (the "Financing Plan")
designed to enable the Company to complete the Primary Acquisitions, repay the
Bridge Loan and provide the Company with future liquidity and working capital
through a revolving credit facility. Under the Financing Plan, (i) the Operating
Partnership entered into a $475.0 million revolving credit facility (the
"Revolving Credit Facility") and a $220.0 million term loan (the "Term Loan"
and, together with the Revolving Credit Facility, the "Bank Facility"), (ii)
ICP-IV and IPCC issued the Old Notes, (iii) RMH issued $12.0 million of
mandatorily redeemable preferred stock (the "RMH Redeemable Preferred Stock")
and (iv) ICP-IV received $360.0 million of cash and in-kind contributions of new
equity from its partners ("Contributed Equity"). The Private Offering closed
concurrently with the Bank Facility, the receipt of the Contributed Equity by
ICP-IV and the consummation of certain of the Primary Acquisitions.
Approximately $88.8 million of the net proceeds from the Private Offering was
used to purchase a portfolio of securities, initially consisting of U.S.
government securities (including any securities substituted in respect thereof,
the "Pledged Securities") which, together with interest thereon, represent funds
sufficient to provide for payment in full of interest on the Notes through
August 1, 1999 and which are pledged as security for repayment of principal of
the Notes under certain circumstances. In addition, a portion of the borrowings
under the Bank Facility, proceeds of the Private Offering and Contributed Equity
was used to pay transaction costs and expenses related to the Acquisitions and
the Financing Plan. The Acquisitions and Financing Plan are collectively
referred to herein as the "Transactions."
The following table presents the sources and uses under the Financing Plan
upon completion of the Transactions:
<TABLE>
<S> <C>
SOURCES (IN MILLIONS)
----------------------
Bank Facility:
Revolving Credit Facility(1)............................................. $ 338.0
Term Loan................................................................ 220.0
Senior Notes............................................................... 292.0
RMH Redeemable Preferred Stock(2).......................................... 12.0
Cash transferred from acquired systems..................................... 2.2
Contributed Equity:
Cash contributions....................................................... 190.6
Contribution of cable properties(3)...................................... 117.6
General and limited partner interests in IPWT(4)......................... 13.3
Note receivable from IPWT in exchange for limited partnership
interest(5)........................................................... 11.7
Note receivable from IPWT in exchange for preferred limited partnership
interest(5)........................................................... 25.0
Contribution of note receivable from the General Partner(6).............. 1.8
-------
Total Contributed Equity.............................................. 360.0
-------
TOTAL SOURCES FOR THE ACQUISITIONS......................................... $1,224.2
=======
USES (IN MILLIONS)
-------------------
Investments held in escrow(7).............................................. $ 88.8
Fair market values of Primary Acquisitions:
IPWT(4)(5)(8)............................................................ 72.5
RMH(9)................................................................... 376.3
TCI Greenville/Spartanburg(3)............................................ 238.9
Viacom Nashville......................................................... 317.7
-------
Total Primary Acquisitions............................................... 1,005.4
Repayment of the Bridge Loan(10)........................................... 101.0
Acquisition of the Prime Cable System...................................... 1.5
Note receivable from General Partner(6).................................... 1.8
Payment of first year's management fee(11)................................. 3.4
Transaction costs and expenses............................................. 19.0
-------
TOTAL USES FOR THE ACQUISITIONS............................................ $1,220.9
=======
NET CASH................................................................... $ 3.3
=======
</TABLE>
- ---------------
(1) The Company had $137.0 million of borrowings available under the Revolving
Credit Facility after giving effect to the Acquisitions.
6
<PAGE> 15
(2) Represents mandatorily redeemable preferred stock of RMH, a subsidiary of
ICP-IV, held by a wholly owned subsidiary of TCI. See note 9 below and
"Description of Other Obligations -- Description of Preferred Equity
Interests."
(3) Affiliates of TCI have contributed to ICP-IV cable television systems
located within the Greenville/Spartanburg Metropolitan Market
(collectively, the "Greenville/Spartanburg System") having an aggregate
estimated fair market value of $238.9 million in exchange for (i) $117.6
million of limited partnership interests and (ii) the assumption of $121.3
million of TCI debt by the Company which was paid upon completion of the
Financing Plan. See "The Acquisitions -- The Primary Acquisitions."
(4) Prior to completion of the Transactions, InterMedia Partners ("IP-I") was
the 80.1% general partner and 9.9% limited partner of IPWT. General
Electric Capital Corporation ("GECC") was a 10.0% limited partner of IPWT.
IP-I and GECC transferred their interests in IPWT for limited partner
interests in ICP-IV valued at $13.3 million.
(5) GECC transferred to ICP-IV its $55.8 million note and related interest
receivables of $3.4 million, including contingent interest, from IPWT in
exchange for (i) cash of approximately $22.5 million, (ii) an $11.7 million
limited partner interest in ICP-IV and (iii) a $25.0 million preferred
limited partner interest in ICP-IV. See "Description of Other
Obligations -- Description of Preferred Equity Interests."
(6) Represents a note receivable from InterMedia Capital Management IV, L.P.
("ICM-IV") issued in connection with ICM-IV's capital contributions to
ICP-IV. See "Certain Relationships and Related Transactions -- Certain
Other Related Transactions -- ICM-IV."
(7) Represents a portion of the proceeds from the Private Offering used to
purchase a portfolio of Pledged Securities which represent funds sufficient
to provide for payment in full of interest on the Notes through August 1,
1999 and that, under certain circumstances, will be pledged as security for
repayment of principal on the Notes.
(8) Represents the estimated fair market value of IPWT's assets.
(9) Represents the estimated fair market value of RMH's assets. In conjunction
with a recapitalization of RMH, a wholly owned subsidiary of TCI converted
an outstanding loan to a Related InterMedia Entity into a partnership
interest and received in dissolution thereof (i) 365 shares of RMH Class B
Common Stock (as defined herein) valued at $.037 million and (ii) 12,000
shares of RMH Redeemable Preferred Stock valued at $12.0 million. IP-IV
purchased 3,285 shares of RMH Class A Common Stock (as defined herein) for
$0.3 million and loaned RMH $364.0 million, which RMH used to repay $346.5
million of indebtedness, $14.3 million of accrued interest and a $3.2
million call premium on the RMG Notes (as defined herein). On July 31,
1996, RMH merged with and into RMG, with RMG as the surviving corporation.
All of the RMH capital stock described herein was converted as a result of
the merger into capital stock of RMG with the same terms. See "Description
of Other Obligations -- Description of Preferred Equity Interests."
(10) The borrowings from the Bridge Loan were used for (i) the Miscellaneous
Acquisitions other than the Prime Cable System acquisition ($8.3 million),
(ii) the acquisitions of the ParCable System ($30.1 million) and the
Kingsport System ($62.5 million), and (iii) payment of $0.1 million of
accrued interest on the Bridge Loan. The Company loaned $15.0 million of
the proceeds from the Bridge Loan to RMH to fund an interest payment for
RMG. The $15.0 million loan is not included in the $101.0 million repayment
of the Bridge Loan, but is included in the $346.5 million of indebtedness
of RMH described in note 9 above.
(11) Represents payment of the first year's management and consulting fees paid
to ICM-IV. Under ICP-IV's Partnership Agreement (as defined herein),
management fees are equal to 1.0% of ICP-IV's non-preferred Contributed
Equity and ICP-IV has agreed to pay the first year's management fees upon
receipt of the Contributed Equity. Thereafter, the Partnership Agreement
provides that management fees generally are to be paid in advance on a
quarterly basis.
7
<PAGE> 16
THE ISSUERS
IPCC is a wholly owned subsidiary of ICP-IV and is a Delaware corporation
formed solely for the purpose of serving as a co-issuer of the Notes in order to
facilitate the Private Offering. ICP-IV believes that certain prospective
purchasers of the Notes may be restricted in their ability to purchase debt
securities of limited partnerships, such as ICP-IV, unless such debt securities
are jointly issued by a corporation. IPCC will not have any substantial
operations or assets of any kind and will not have any revenues. As a result,
prospective purchasers of the Notes should not expect IPCC to participate in
servicing the interest and principal obligations on the Notes. The Indenture
imposes substantial restrictions on the activities of IPCC. See "Description of
the Notes -- Certain Covenants."
ICP-IV is a California limited partnership formed in March 1996. The
partners of the Operating Partnership transferred their partnership interests to
ICP-IV as of June 1996. References herein to ICP-IV or the Company prior to June
1996 refer to the Operating Partnership and its subsidiaries. The Company's
executive offices are located at 235 Montgomery Street, Suite 420, San
Francisco, California 94104, and its telephone number at such location is (415)
616-4600. The Company's operational headquarters is located at 424 Church
Street, Suite 1600, Nashville, Tennessee 37219, and its telephone number at such
location is (615) 244-2300.
THE EXCHANGE OFFER
SECURITIES OFFERED............ $292,000,000 aggregate principal amount of
11 1/4% Senior Notes Due 2006, which have been
registered under the Securities Act (the
"Exchange Notes," and, together with the Old
Notes, the "Notes").
THE EXCHANGE OFFER............ Upon the terms and subject to the conditions
set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter
of Transmittal"), the Company hereby offers to
exchange (the "Exchange Offer"), $1,000
principal amount of Exchange Notes in exchange
for each $1,000 principal amount of Old Notes
that are validly tendered and not withdrawn on
or prior to the Expiration Date (as defined
herein). Holders of Old Notes whose Old Notes
are not tendered and accepted in the Exchange
Offer will continue to hold such Old Notes and
will be entitled to all the rights and
preferences and will be subject to the
limitations applicable thereto under the
Indenture governing the Old Notes and the
Exchange Notes.
RESALE........................ Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
broker-dealers, as set forth below, and any
such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery
requirements of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and
that such holder has no arrangement or
understanding with any person to participate in
the distribution of such Exchange Notes. Any
holder who tenders in the Exchange Offer with
the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes or who is an affiliate of
the Company may not rely upon such
interpretations by
8
<PAGE> 17
the staff of the Commission and, in the absence
of an exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any secondary resale
transaction. Failure to comply with such
requirements in such instance may result in
such holder incurring liabilities under the
Securities Act for which the holder is not
indemnified by the Company. Each broker-dealer
(other than an affiliate of the Company) that
receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result
of market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. The Company has agreed that,
for a period of 180 days after the Expiration
Date (as defined herein), it will make this
Prospectus available to any broker-dealer for
use in connection with any such resale. See
"Plan of Distribution." Any broker-dealer who
is an affiliate of the Company may not rely on
such no-action letters and must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale transaction.
The Exchange Offer is not being made to, nor
will the Company accept surrenders for exchange
from, holders of Old Notes in any jurisdiction
in which this Exchange Offer or the acceptance
thereof would not be in compliance with the
securities or blue sky laws of such
jurisdiction.
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1996,
unless extended, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange
Offer -- Conditions of the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered. The Issuers reserve the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such conditions.
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or
facsimile thereof, together with such Old Notes
and any other required documentation to The
Bank of New York, the Exchange Agent, at the
address set forth herein and therein. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person
has an arrangement or under-
9
<PAGE> 18
standing with any person to participate in the
distribution of such Exchange Notes and that
neither the holder nor any such other person is
an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act
or, that if such holder or other person is an
affiliate of the Company, such holder or other
person will comply with the registration and
prospectus delivery requirements of the
Securities Act to the extent applicable. See
"The Exchange Offer -- Terms of the Exchange
Offer -- Procedures for Tendering Old Notes"
and "The Exchange Offer -- Terms of the
Exchange Offer -- Guaranteed Delivery
Procedures".
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner
must, prior to completing and executing the
Letter of Transmittal and delivering his Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered ownership
may take considerable time and may not be able
to be completed prior to the Expiration Date.
See "The Exchange Offer -- Terms of the
Exchange Offer -- Procedures for Tendering Old
Notes."
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely
basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in
"The Exchange Offer -- Terms of the Exchange
Offer -- Guaranteed Delivery Procedures."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE NOTES.... Subject to certain conditions (as described
more fully in "The Exchange OfferConditions of
the Exchange Offer"), the Company will accept
for exchange any and all Old Notes which are
properly tendered in the Exchange Offer and not
withdrawn, prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered as promptly as practicable
following the Expiration Date.
WITHDRAWAL RIGHTS............. Except as otherwise provided herein, tenders of
Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer -- Terms of the Exchange
Offer -- Withdrawal of Tenders of Old Notes."
10
<PAGE> 19
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS................ For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Old Notes, see "Certain
Federal Income Tax Considerations."
EXCHANGE AGENT................ The Bank of New York is the Exchange Agent. The
address, telephone number and facsimile number
of the Exchange Agent are set forth in "The
Exchange Offer -- Exchange Agent."
CONSEQUENCES OF FAILURE TO
EXCHANGE OLD NOTES............ Holders of Old Notes who do not exchange their
Old Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes
as set forth in the legend thereon as a
consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions
not subject to, the registration requirements
of the Securities Act and applicable state
securities laws. In general, the Old Notes may
not be offered or sold, unless registered under
the Securities Act, except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. The Company does not currently
anticipate that it will register the Old Notes
under the Securities Act.
11
<PAGE> 20
THE NOTES
THE NOTES..................... $292.0 million principal amount of 11 1/4%
Senior Notes Due 2006. The form and terms of
the Exchange Notes are identical in all
material respects to the form and terms of the
Old Notes (except that the Exchange Notes will
be registered under the Securities Act) and,
therefore, will be treated as a single class
under the Indenture with any Old Notes that
remain outstanding. The Exchange Notes and the
Old Notes are herein collectively referred to
as the "Notes."
ISSUERS....................... InterMedia Capital Partners IV, L.P. and
InterMedia Partners IV, Capital Corp.
ISSUE PRICE................... The Notes will be issued at 100.0% of their
principal amount.
INTEREST PAYMENT DATES........ Cash interest at 11 1/4% per annum will accrue
and will be payable on August 1 and February 1
of each year, commencing February 1, 1997.
SECURITY...................... At the closing of the Private Offering, ICP-IV
used $88.8 million of the net proceeds thereof
to purchase a portfolio of Pledged Securities
that, together with interest thereon, represent
funds sufficient to provide for payment in full
of interest on the Notes through August 1, 1999
and that are pledged as security for repayment
of principal of the Notes under certain
circumstances. Proceeds from the Pledged
Securities will be used by ICP-IV to make
interest payments on the Notes through August
1, 1999. See "Description of the
Notes -- Security." The Pledged Securities are
held by the Trustee under the Pledge Agreement
pending disbursement.
MATURITY DATE................. August 1, 2006.
SINKING FUND.................. None.
OPTIONAL REDEMPTION........... Except as provided below, the Notes will not be
subject to redemption at the option of the
Issuers prior to August 1, 2001. Thereafter,
the Notes will be redeemable, upon not less
than 30 nor more than 60 days notice, at the
Issuers' option, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages (as defined herein) thereon, if any, to
the date of redemption. See "Description of the
Notes -- Optional Redemption."
In addition, at any time on or prior to August
1, 1999, the Issuers, at their option, may
redeem up to 35.0% of the aggregate principal
amount of Notes originally issued with the net
proceeds of one or more Public Equity Offerings
or Strategic Equity Investments (as defined
herein), at a redemption price equal to 111.25%
of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages
thereon, if any, to the date of redemption,
provided however that at least 65.0% of the
aggregate principal amount of Notes originally
issued are immediately outstanding after giving
effect to any such redemption and, provided
further, that such redemption occurs within 90
days of the closing of such Public Equity
Offering or Strategic Equity Investment.
12
<PAGE> 21
CHANGE OF CONTROL............. In the event of a Change of Control (as defined
herein), each holder of the Notes ("Holder")
may require the Issuers to repurchase all of
the Notes held by such Holder at 101.0% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase. See
"Description of the Notes -- Change of Control
Offer."
RANKING....................... The Notes will be general obligations of the
Issuers and will rank pari passu with all
senior indebtedness of the Issuers, if any, and
senior in right of payment with all future
subordinated indebtedness of the Issuers, if
any. ICP-IV is a holding company with no direct
operations and, therefore, the Notes will be
effectively subordinated to all other
liabilities (including trade payables and
accrued liabilities) of ICP-IV's subsidiaries.
As of June 30, 1996, after giving effect to the
Transactions, the obligations of ICP-IV's
subsidiaries that are structurally senior to
the Notes would have included total
indebtedness of $558.0 million (including
obligations under the Bank Facility) and total
trade payables and other liabilities of $42.2
million, including $12.0 million in RMH
Redeemable Preferred Stock. The Indenture
allows ICP-IV and its subsidiaries to incur
additional indebtedness.
CERTAIN COVENANTS............. The Indenture contains certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i)
limitations on restricted payments; (ii)
limitations on incurrence of indebtedness and
issuance of preferred equity; (iii) limitations
on asset sales; (iv) restrictions on dividends
and other payments affecting subsidiaries; (v)
limitations on certain transactions with
affiliates; and (vi) restrictions on mergers,
consolidations and the transfer of all or
substantially all of the assets of the Issuers
to another person. These covenants are subject
to important exceptions and qualifications. In
the event that the ratings assigned to the
Notes from rating agencies are "Investment
Grade Ratings" and no Default (as defined
herein) or Event of Default (as defined herein)
exists, the Issuers will no longer be required
to comply with certain covenants. See
"Description of the Notes -- Certain
Covenants."
USE OF PROCEEDS............... The Company will not receive any proceeds from
this exchange offer, and no underwriter is
being utilized in connection with the Exchange
Offer. See "Use of Proceeds."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
carefully considered in evaluating an investment in the Notes or tendering the
Old Notes in exchange for the Exchange Notes offered hereby.
13
<PAGE> 22
ORGANIZATIONAL STRUCTURE OF THE COMPANY(1)
The Company's organizational structure is summarized as follows (a more
detailed organizational chart is located at page 81):
[ORGANIZATIONAL CHART]
- ---------------
(1) In the chart above, "G.P." represents general partner and "L.P." represents
limited partner.
(2) Issuers of Notes offered hereby.
14
<PAGE> 23
SUMMARY SUPPLEMENTAL HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The following table presents summary historical financial data of the
Kingsport System, the ParCable System, IPWT, RMH, the Greenville/Spartanburg
System and the Viacom Nashville System on an aggregate basis for the periods
indicated. These supplemental data have not been prepared in accordance with
GAAP, which do not allow for the aggregation of financial data for entities that
are not under common ownership. Nevertheless, management believes that the
aggregate financial information shown below (which excludes the Miscellaneous
Acquisitions, except the Annox System and the Tellico System since their
acquisitions by the Company on January 29, 1996 and May 2, 1996, respectively)
may be helpful in understanding the historical results of operations of the
systems combined in the Acquisitions and in evaluating an investment in the
Notes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------ ------------------------------------
PRO FORMA PRO FORMA
1993(1) 1994(1) 1995 1995(2) 1995 1996 1996(2)
-------- -------- -------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $171,845 $190,196 $211,821 $211,821 $103,132 $112,110 $ 112,110
Operating Expenses:
Program fees.................. 32,252 40,445 43,338 42,779 21,066 24,492 23,733
Other operating costs......... 68,304 75,132 79,474 79,474 37,998 41,772 41,772
Management and consulting
fees........................ 465 585 2,058 3,350 953 454 1,675
Depreciation and
amortization................ 134,948 62,761
--------- ----------
Total operating
expenses.............. 260,551 129,941
--------- ----------
Loss from operations............ (48,730 ) (17,831 )
Total interest expense(3)....... 77,209 38,605
Net loss........................ (109,148 ) (48,875 )
BALANCE SHEET DATA
(at end of period):
Total assets.................... $1,015,053
Total debt...................... 850,000
Total partners' capital......... 122,834
Financial Ratios and Other Data:
EBITDA(4)....................... $ 70,824 $ 74,034 $ 86,951 $ 43,115 $ 45,392 $ 44,930
EBITDA margin................... 41.2% 38.9% 41.0% 41.8% 40.5% 40.1 %
Capital expenditures (excluding
acquisitions)................. 29,513 46,968 50,887 19,534 27,613
Annualized EBITDA(5)............ 89,860
Total debt to annualized
EBITDA(5)..................... 9.5 x
Net debt to annualized
EBITDA(6)..................... 8.5 x
EBITDA to total interest
expense(3).................... 1.2 x
Ratio of earnings to fixed
charges(7).................... --
OPERATING STATISTICAL DATA (at
the end of period, except
averages):
Homes passed.................... 756,081 789,878 813,731 801,094 832,081
Basic subscribers............... 493,109 528,038 553,865 539,126 567,194
Basic penetration............... 65.2% 66.9% 68.1% 67.3% 68.2%
Premium service units........... 341,537 404,557 431,278 424,202 441,859
Premium penetration............. 69.3% 76.6% 77.9% 78.7% 77.9%
Average monthly revenue per
basic subscriber.............. $ 31.67 $ 31.09 $ 32.74 $ 31.69 $ 32.95
</TABLE>
- ---------------
(1) The comparability of the combined results of operations for 1993 and 1994 is
affected by RMH's acquisitions of cable television systems in 1993. During
February, March and December 1993, RMH acquired cable television systems
serving, as of their respective acquisition dates, approximately 1,400,
15
<PAGE> 24
15,600 and 30,300 basic subscribers, respectively, in the
Greenville/Spartanburg Cluster and the Nashville Mid-Tennessee Cluster (the
"1993 Acquisitions"). Results of operations for the 1993 Acquisitions are
included in the 1993 results of operations only from the dates the systems
were acquired, whereas results of operations for these systems are included
for the full year in 1994 and 1995.
(2) For more detailed information regarding the pro forma financial results, see
"Pro Forma Financial Information."
(3) The total interest expense and ratio of EBITDA to total interest expense do
not include the interest income from the Pledged Securities.
(4) Earnings before interest, income taxes, depreciation and amortization, gain
(loss) on disposal of fixed assets and other income (expense). EBITDA is
commonly used in the cable industry to analyze and compare cable television
companies on the basis of operating performance, leverage and liquidity.
However, it does not purport to represent cash flows from operating
activities in related Statements of Cash Flows and should not be considered
in isolation or as a substitute for measures of performance in accordance
with GAAP. EBITDA as presented does not include any adjustments for
selling, general and administrative cost savings that management
anticipates achieving, compared to predecessors' costs, from the clustering
of the Systems. Management estimates such annual costs savings will be
approximately $3.3 million. There can be no assurance that the expected
cost savings will be achieved in conjunction with the Acquisitions.
(5) EBITDA for the six months ended June 30, 1996 multiplied by two. Annualized
EBITDA is not necessarily indicative of results that might be expected for
the year ended December 31, 1996. Annualized EBITDA does not reflect any
adjustments to normalize the effect of seasonality in advertising revenues,
which are generally more significant during each of the last two quarters
of the year.
(6) Pro forma net debt is computed as total debt outstanding of $850 million
after giving effect to the Transactions, net of approximately $88.8 million
of Pledged Securities which represent funds sufficient to provide for
payment in full of interest on the Notes through August 1, 1999 and which,
under certain circumstances, will be pledged as security for repayment of
principal of the Notes.
(7) In computing the pro forma ratio of earnings to fixed charges, pro forma
earnings consist of pro forma loss before income tax benefit and pro forma
fixed charges. Pro forma fixed charges include pro forma interest on
long-term borrowings, related amortization of debt issue costs, preferred
equity dividend requirements and the portion of pro forma rental expense
under operating leases deemed to be representative of the interest factor.
Pro forma earnings, as adjusted for the Transactions, were inadequate to
cover pro forma fixed charges by $125.6 million for the year ended December
31, 1995 and by $56.0 million for the six months ended June 30, 1996.
16
<PAGE> 25
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The historical financial and operating data of the Company as of and for
the six months ended June 30, 1996 include the results of operations of the
Kingsport System, the ParCable System, the Annox System and the Tellico System
from the dates the systems were acquired by the Company in 1996. Prior to its
acquisition of the four systems during the first five months of 1996, the
Company had no operating results to report. Summary financial information has
not been provided for IPCC because it was formed in April 1996 in contemplation
of the Transactions and its financial position and results of operations are
insignificant.
As a result of the substantial continuing interest in the Company of the
former owners of IPWT, RMH and the Greenville/Spartanburg System (the
"Previously Affiliated Entities"), which the Company acquired on July 30, 1996
pursuant to the Primary Acquisitions, the historical financial information of
the Previously Affiliated Entities has been combined on a historical cost basis
as if the Previously Affiliated Entities had always been members of the same
operating group, except for the Greenville/Spartanburg System, which has been
included from January 27, 1995, the date such system was acquired by TCI from an
unrelated former cable operator. The summary financial and operating data for
the Kingsport System and the ParCable System for each of the three years in the
period ended December 31, 1995, the six months ended June 30, 1995 and the one
month ended January 31, 1996, which are periods prior to the Company's
acquisition of each such system, are presented separately. The summary financial
and operating data for the Greenville/Spartanburg System are also presented
separately for each of the two years in the period ended December 31, 1994 and
for the period from January 1, 1995 through January 26, 1995.
The Summary Financial and Operating Data of the Previously Affiliated
Entities presented below include the historical financial information of IPWT
and of RMH for each of the three years in the period ended December 31, 1995 and
for the six months ended June 30, 1995 and 1996, and of the
Greenville/Spartanburg System for the period from January 27, 1995 through
December 31, 1995, for the period from January 27, 1995 through June 30, 1995
and for the six months ended June 30, 1996. The financial information for the
Previously Affiliated Entities has been derived from the Combined Financial
Statements of the Previously Affiliated Entities for each of the three years in
the period ended December 31, 1995 and for the six months ended June 30, 1995
and 1996. The Summary Financial and Operating Data of the Kingsport System, the
ParCable System, the Greenville/Spartanburg System and the Viacom Nashville
System have been derived from the audited and unaudited financial statements and
accounting records of each of those systems. These data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto of the Previously Affiliated Entities, the Greenville/Spartanburg
System, the Kingsport System and the Viacom Nashville System included elsewhere
in this Prospectus, which include a discussion of events that affect the
comparability of the information presented below.
17
<PAGE> 26
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
THE COMPANY JUNE 30, 1996
- ---------------------------------------------------------------------------------------- -------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................................................. $ 7,934
Operating expenses:
Program fees.......................................................................... 1,581
Other operating costs................................................................. 2,503
Depreciation and amortization......................................................... 4,735
-------------
Total operating expenses....................................................... 8,819
-------------
Loss from operations.................................................................... (885)
Net loss................................................................................ (4,436)
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)............................................................................... $ 3,850
EBITDA margin........................................................................... 48.5%
Capital expenditures (excluding acquisitions)........................................... 584
Ratio of earnings to fixed charges(2)................................................... --
OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES):
Homes passed(3)......................................................................... 75,986
Basic subscribers(4).................................................................... 57,431
Basic penetration(5).................................................................... 75.6%
Premium service units(4)................................................................ 23,861
Premium penetration(5).................................................................. 41.5%
Average monthly revenue per basic subscriber(6)......................................... $ 28.38
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
PREVIOUSLY AFFILIATED ENTITIES(7) 1993 1994 1995(8) 1995(8) 1996
- ---------------------------------------------------------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................... $57,685 $73,049 $128,971 $61,495 $69,325
Operating expenses:
Program fees............................................ 9,376 13,189 24,684 11,842 14,680
Other operating costs................................... 20,215 25,675 47,360 21,860 25,243
Management and consulting fees.......................... 465 585 815 473 341
Depreciation and amortization........................... 66,940 68,216 70,154 34,533 31,364
------- ------- -------- ------- -------
Total operating expenses......................... 96,996 107,665 143,013 68,708 71,628
------- ------- -------- ------- -------
Loss from operations...................................... (39,311) (34,616) (14,042) (7,213) (2,303)
Net loss.................................................. (55,992) (60,027) (44,910) (22,959) (26,911)
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)................................................. $27,629 $33,600 $ 56,112 $27,320 $29,061
EBITDA margin............................................. 47.9% 46.0% 43.5% 44.4% 41.9%
Capital expenditures (excluding acquisitions)............. 11,334 12,432 26,301 8,146 15,127
Ratio of earnings to fixed charges(2)..................... -- -- -- -- --
OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT
AVERAGES):
Homes passed(3)........................................... 308,429 332,645 503,246 496,184 512,390
Basic subscribers(4)...................................... 211,745 227,050 354,436 345,304 360,401
Basic penetration(5)...................................... 68.7% 68.3% 70.4% 69.6% 70.3%
Premium service units(4).................................. 128,732 151,528 265,216 261,385 271,603
Premium penetration(5).................................... 60.8% 66.7% 74.8% 75.7% 75.4%
Average monthly revenue per basic subscriber(6)........... $ 27.86 $ 27.85 $ 31.08 $ 31.59 $ 32.28
</TABLE>
18
<PAGE> 27
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD
--------------------- 1/1/95-
GREENVILLE/SPARTANBURG SYSTEM 1993 1994 1/26/95(8)
- -------------------------------------------------------------------- -------- -------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................................. $ 43,892 $ 45,899 $ 3,117
Operating expenses:
Program fees...................................................... 10,908 14,076 795
Other operating costs............................................. 16,859 17,998 1,309
Depreciation and amortization..................................... 7,328 7,332 618
-------- -------- --------
Total operating expenses................................... 35,095 39,406 2,722
-------- -------- --------
Income from operations.............................................. 8,797 6,493 395
Net income.......................................................... 4,931 3,503 146
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)........................................................... $ 16,125 $ 13,825 $ 1,013
EBITDA margin....................................................... 36.7% 30.1% 32.5%
Capital expenditures (excluding acquisitions)....................... 7,871 11,032 385
Ratio of earnings to fixed charges(2)............................... 4.8x 3.4x 2.3x
OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES):
Homes passed(3)..................................................... 153,600 155,624
Basic subscribers(4)................................................ 105,621 112,985
Basic penetration(5)................................................ 68.8% 72.6%
Premium service units(4)............................................ 95,022 102,668
Premium penetration(5).............................................. 90.0% 90.9%
Average monthly revenue per basic subscriber(9)..................... $ 35.23 $ 34.99
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS MONTH
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------- JUNE 30, JANUARY 31,
KINGSPORT SYSTEM 1993 1994 1995 1995 1996
- ---------------------------------------------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $10,443 $10,100 $10,914 $ 5,343 $ 937
Operating expenses:
Program fees................................ 2,065 1,950 2,219 973 211
Other operating costs....................... 3,203 3,116 3,484 1,783 356
Depreciation and amortization............... 1,094 924 1,087 487 87
------- ------- ------- ------- ----
Total operating expenses............. 6,362 5,990 6,790 3,243 654
------- ------- ------- ------- ----
Income from operations........................ 4,081 4,110 4,124 2,100 283
Net income.................................... 4,126 4,230 3,268 2,291 193
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)..................................... $ 5,175 $ 5,034 $ 5,211 $ 2,587 $ 370
EBITDA margin................................. 49.6% 49.8% 47.7% 48.4% 39.5%
Capital expenditures (excluding
acquisitions)............................... 430 508 1,108 441 18
Ratio of earnings to fixed charges(2)......... 57.5x 50.8x 4.5x 64.6x 3.0x
OPERATING STATISTICAL DATA (AT END OF PERIOD,
EXCEPT AVERAGES):
Homes passed period(3)........................ 39,951 41,180 42,307 41,641
Basic subscribers(4).......................... 30,006 31,032 31,434 31,438
Basic penetration(5).......................... 75.1% 75.4% 74.3% 75.5%
Premium service units(4)...................... 9,015 11,049 12,809 13,513
Premium penetration(5)........................ 30.0% 35.6% 40.7% 43.0%
Average monthly revenue per basic
subscriber(6)............................... $ 29.15 $ 27.64 $ 28.91 $ 28.47
</TABLE>
19
<PAGE> 28
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS MONTH
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------- JUNE 30, JANUARY 31,
PARCABLE SYSTEM 1993 1994 1995 1995 1996
- ---------------------------------------------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $ 6,406 $ 6,500 $ 6,777 $ 3,343 $ 621
Operating expenses:
Program fees................................ 1,528 1,606 1,746 861 148
Other operating costs....................... 3,854 3,390 2,223 1,073 242
Management and consulting fees.............. -- -- 1,243 480 113
Depreciation and amortization............... 722 680 662 334 55
------- ------- ------- ------- ----
Total operating expenses............. 6,104 5,676 5,874 2,748 558
------- ------- ------- ------- ----
Income from operations........................ 302 824 903 595 63
Net income.................................... 108 789 829 559 58
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)..................................... $ 1,024 $ 1,504 $ 1,565 $ 929 $ 118
EBITDA margin................................. 16.0% 23.1% 23.1% 27.8% 19.0%
Capital expenditures (excluding
acquisitions)............................... 190 169 135 92 6
Ratio of earnings to fixed charges(2)......... 10.6x 16.9x 26.1x 34.1x 22.0x
OPERATING STATISTICAL DATA (AT END OF PERIOD,
EXCEPT AVERAGES):
Homes passed(3)............................... 26,985 27,238 27,529 27,379
Basic subscribers(4).......................... 20,363 21,019 21,729 21,339
Basic penetration(5).......................... 75.5% 77.2% 78.9% 77.9%
Premium service units(4)...................... 9,788 9,833 9,464 9,802
Premium penetration(5)........................ 48.1% 46.8% 43.6% 45.9%
Average monthly revenue per basic
subscriber(6)............................... $ 26.96 $ 26.33 $ 26.64 $ 26.38
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- ---------------------
VIACOM NASHVILLE SYSTEM 1993 1994 1995 1995 1996
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $ 53,419 $ 54,648 $ 62,042 $ 29,834 $ 33,293
Operating expenses:
Program fees................................ 8,375 9,624 13,894 6,595 7,872
Other operating costs....................... 24,173 24,953 25,098 11,973 13,428
Depreciation and amortization............... 8,010 8,368 9,655 4,605 5,657
-------- -------- -------- -------- --------
Total operating expenses............. 40,558 42,945 48,647 23,173 26,957
-------- -------- -------- -------- --------
Income from operations........................ 12,861 11,703 13,395 6,661 6,336
Net income.................................... 9,461 6,308 3,793 1,823 1,734
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)..................................... $ 20,871 $ 20,071 $ 23,050 $ 11,266 $ 11,993
EBITDA margin................................. 39.1% 36.7% 37.2% 37.8% 36.0%
Capital expenditures (excluding
acquisitions)............................... 9,688 22,827 22,958 10,470 12,480
Ratio of earnings to fixed charges(2)......... 3.4x 2.7x 2.4x 2.4x 2.3x
OPERATING STATISTICAL DATA (AT END OF PERIOD,
EXCEPT AVERAGES):
Homes passed(3)............................... 227,116 233,191 240,649 235,890 243,705
Basic subscribers(4).......................... 125,374 135,952 146,266 141,045 149,362
Basic penetration(5).......................... 55.2% 58.3% 60.8% 59.8% 61.3%
Premium service units(4)...................... 98,980 129,479 143,789 139,502 146,395
Premium penetration(5)........................ 78.9% 95.2% 98.3% 98.9% 98.0%
Average monthly revenue per basic
subscriber(6)............................... $ 36.07 $ 34.76 $ 36.57 $ 35.53 $ 37.15
</TABLE>
20
<PAGE> 29
- ---------------
(1) Earnings before interest, income taxes, depreciation and amortization, gain
(loss) on disposal of fixed assets and other income (expense). EBITDA is
commonly used in the cable industry to analyze and compare cable television
companies on the basis of operating performance, leverage and liquidity.
However, it does not purport to represent cash flows from operating
activities in related Statements of
Cash Flows and should not be considered in isolation or as a substitute for
or superior to measures of performance in accordance with GAAP.
(2) In computing the ratio of earnings to fixed charges, earnings consist of
income (loss) before income tax expense (benefit) and fixed charges. Fixed
charges include interest on long-term borrowings, related amortization of
debt issue costs and the portion of rental expense under operating leases
deemed to be representative of the interest factor. For the following
entities, earnings were inadequate to cover fixed charges by the following
amounts for each of the following periods:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
The Company.................................. -- -- -- -- $ 4,436
Previously Affiliated Entities............... $77,648 $79,047 $62,412 $31,418 $39,231
</TABLE>
(3) Homes passed refers to estimates of the approximate number of dwelling units
in a particular community that can be connected to the cable television
distribution system without any further significant extension of principal
transmission lines. Such estimates are derived from a variety of sources,
including billing records, house counts, city directories and other local
sources.
(4) Except for the Viacom Nashville System, basic subscribers at end of period
are determined as the sum of all private residential customers being
directly billed for basic cable services and total bulk and commercial
equivalent units. Total bulk and commercial equivalent units for any month
are equal to related cable revenue for such month divided by the predominant
rate charged within the system for basic and expanded basic services. For
the Viacom Nashville System, basic subscribers at end of period are
determined as the number of subscribers directly billed for basic cable
services. Premium service units at end of period equal the aggregate number
of single premium channels to which customers subscribed. A basic subscriber
may subscribe to more than one premium service.
(5) Basic penetration represents basic subscribers at the end of a period
calculated as a percentage of homes passed at the end of such period.
Premium penetration represents premium service units at the end of a period
calculated as a percentage of total basic subscribers as of the
corresponding period end.
(6) Average monthly revenue per basic subscriber is calculated as the sum of
total revenue per average number of basic subscribers for each month divided
by the number of months during the period presented. The average number of
basic subscribers for each month is calculated as the sum of the number of
basic subscribers as of the beginning of the month and the number of basic
subscribers as of the end of the month divided by two.
(7) The combined information of the Previously Affiliated Entities includes the
historical financial information of IPWT and RMH as of and for each of the
three years in the period ended December 31, 1995 and as of and for each of
the six months ended June 30, 1995 and 1996, and of the Greenville/
Spartanburg System as of December 31, 1995, June 30, 1995 and June 30, 1996
and for the period from January 27, 1995 through December 31, 1995, for the
period from January 27, 1995 through June 30, 1995 and for the six months
ended June 30, 1996. The comparability of the combined results of operations
for 1993 and 1994 is affected by RMH's 1993 Acquisitions of cable television
systems serving approximately 47,300 basic subscribers in the
Greenville/Spartanburg Cluster and the Nashville/Mid-Tennessee Cluster.
Results of operations for the 1993 Acquisitions are included in 1993 results
of operations only from the dates such systems were acquired, whereas
results of operations for such systems are included for the full year in
1994 and 1995.
(8) The historical financial information of the Previously Affiliated Entities
have been combined on a historical cost basis as if the Previously
Affiliated Entities had always been members of the same operating group,
except for the Greenville/Spartanburg System, which has been included from
Janu-
21
<PAGE> 30
ary 27, 1995, the date such system was acquired by TCI from an unrelated
former cable operator. The results of operations of the
Greenville/Spartanburg System for the period from January 1, 1995 through
January 26, 1995 are presented separately under the Summary Historical
Financial and Operating Data of the Greenville/Spartanburg System, along
with the 1993 and 1994 information for the Greenville/Spartanburg System.
(9) Average monthly revenue per basic subscriber for the Greenville/Spartanburg
System for the years ended December 31, 1993 and 1994 is calculated as the
total revenue for the year divided by the average number of basic
subscribers for the corresponding year. Average number of basic subscribers
was calculated as the sum of the number of basic subscribers at January 1
and December 31 of each year divided by two. The number of basic subscribers
for each month in 1993 and 1994 is not available.
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RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Old Notes for the Exchange Notes offered hereby, holders of Old
Notes and prospective purchasers should consider carefully the following
factors, which (other than "Consequences of Exchange and Failure to Exchange"
and "Absence of Public Market; Possible Volatility of Exchange Note Price") are
generally applicable to the Old Notes as well as the Exchange Notes:
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. The Issuers do not
intend to register the Old Notes under the Securities Act. In addition, any
holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for the Old Notes
could be adversely affected. See "The Exchange Offer."
SUBSTANTIAL LEVERAGE; DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
The Company has indebtedness that is substantial in relation to partners'
capital. On June 30, 1996, on a pro forma basis after giving effect to the
Transactions, the Company's indebtedness would have been approximately $850.0
million and partners' capital would have been approximately $122.8 million.
Under the Financing Plan, ICP-IV has received $360.0 million of new equity from
its partners, comprised of cash and in-kind contributions. Pro forma earnings,
as adjusted for the Transactions, were inadequate to cover pro forma fixed
charges by $125.6 million for the year ended December 31, 1995 and by $56.0
million for the six months ended June 30, 1996. See "Pro Forma Financial
Information." In addition, subject to the restrictions in the indenture for the
Notes (the "Indenture"), ICP-IV and its subsidiaries (other than IPCC) may incur
additional indebtedness from time to time to finance acquisitions and capital
expenditures or for general corporate purposes. The high level of the Company's
indebtedness will have important consequences to Holders of the Notes,
including: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to debt service and will not be available for general
corporate purposes or for the Capital Improvement Program; (ii) the Company's
ability to obtain additional debt financing in the future for working capital,
capital expenditures, acquisitions or for the Capital Improvement Program may be
limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to changes in the industry and economic conditions
generally. See "-- Future Capital Requirements."
There can be no assurance that the Company will generate earnings in future
periods sufficient to cover its fixed charges, including its debt service
obligations with respect to the Notes. In the absence of such earnings or other
financial resources, the Company could face substantial liquidity problems.
ICP-IV's ability to pay interest on the Notes and to satisfy its other debt
obligations will depend upon its future operating performance, including the
successful implementation of the Capital Improvement Program (which the Company
currently anticipates will require approximately $235.7 million in additional
capital through 2001), and will be affected by prevailing economic conditions
and financial, business and other factors, many of which are beyond the
Company's control. Based upon expected increases in revenue and cash flow, the
Company anticipates that its cash flow, together with available borrowings,
including borrowings under the Revolving Credit Facility, will be sufficient to
meet its operating expenses and capital expenditure requirements and to service
its debt requirements for the next several years. However, in order to satisfy
its repayment obligations with respect to the Notes, ICP-IV may be required to
refinance the Notes on their maturity. There can be no assurance that financing
will be available in order to accomplish any necessary refinancing on terms
favorable
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to the Company or at all. If the Company is unable to service its indebtedness,
it will be forced to adopt an alternative strategy that may include actions such
as reducing or delaying capital expenditures, selling assets, restructuring or
refinancing its indebtedness or seeking additional equity capital. There can be
no assurance that any of these strategies could be effected on satisfactory
terms, if at all. Management believes that substantial growth in revenues and
operating cash flows is not achievable without implementing at least a
significant portion of the Capital Improvement Program. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Notes will be general obligations of the Issuers and will rank pari
passu with all senior indebtedness of the Issuers, if any. The Company's
operations are conducted through the Operating Partnership's direct and indirect
subsidiaries. The Issuers hold no significant assets other than their
investments in and advances to ICP-IV's subsidiaries and the Issuers have no
independent operations and, therefore, are dependent on the cash flow of
ICP-IV's subsidiaries and other entities to meet their own obligations,
including the payment of interest and principal obligations on the Notes when
due. Accordingly, the Issuers' ability to make interest and principal payments
when due to Holders and the Issuers' ability to purchase the Notes upon a Change
of Control or Asset Sale is dependent upon the receipt of sufficient funds from
ICP-IV's subsidiaries and will be severely restricted by the terms of existing
and future indebtedness of ICP-IV's subsidiaries. The Bank Facility was entered
into by a subsidiary of ICP-IV and prohibits payment of distributions by any of
ICP-IV's subsidiaries to the Issuers prior to February 1, 2000, and permits such
distributions thereafter only to the extent necessary for ICP-IV to make cash
interest payments on the Notes at the time such cash interest is due and
payable, provided that no default or event of default with respect to the Bank
Facility exists or would exist as a result. See "Description of Other
Obligations -- The Bank Facility." There can be no assurance that the Bank
Facility will permit the distribution of amounts sufficient for ICP-IV to make
cash interest payments when due. See "-- Substantial Leverage; Deficiency of
Earnings to Cover Fixed Charges." Furthermore, ICP-IV's subsidiaries, other than
IPCC, will not be obligors under the Notes. As a result, the creditors of
ICP-IV, including the Holders, will effectively rank junior to all creditors of
ICP-IV's subsidiaries, other than IPCC, including trade creditors and the bank
lenders under the Bank Facility. In the event of dissolution, bankruptcy,
liquidation or reorganization of ICP-IV or any of its subsidiaries, the Holders
will not receive any amounts in respect of the Notes until after payment in full
of the claims of creditors of ICP-IV's subsidiaries, other than IPCC. As of June
30, 1996, after giving effect to the Transactions, the obligations of ICP-IV's
subsidiaries that are structurally senior to the Notes would have included total
indebtedness of $558.0 million (including obligations under the Bank Facility),
and total trade payables and other liabilities of $42.2 million, including $12.0
million in RMH Redeemable Preferred Stock. In addition, the Indenture will allow
ICP-IV and its subsidiaries to incur additional Indebtedness. See
"Capitalization"; "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Description of the Notes."
NONRECOURSE NATURE OF THE NOTES
The Notes are being issued solely by the Issuers, which are the sole
obligors thereunder. Neither the general partner of ICP-IV (the "General
Partner"), the direct and indirect investors in ICP-IV (including TCI and other
institutional investors), nor any of their respective directors, officers,
partners, stockholders, employees or affiliates will be an obligor under the
Notes, and the Indenture expressly provides that the General Partner, the
investors in ICP-IV (including TCI and other institutional investors), together
with their respective directors, officers, partners, stockholders, employees or
affiliates shall not have any liability for any obligations of the Issuers under
the Notes or such Indenture or any claim based on, in respect of, or by reason
of, such obligations, and that by accepting the Notes, each Holder waives and
releases all such liability, which waiver and release are part of the
consideration for issuance of the Notes. There should be no expectation that the
General Partner, the direct and indirect investors in ICP-IV (including TCI and
other institutional investors), or any person other than the Issuers, will, in
the future, fund the operations or deficits of the Issuers or any of their
subsidiaries. See "Description of the Notes."
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RESTRICTIONS IMPOSED BY LENDERS
The Bank Facility and, to a lesser extent, the Indenture contain a number
of significant covenants that, among other things, restrict the ability of the
Company to dispose of assets or merge, incur debt, pay distributions, repurchase
or redeem capital stock, create liens, make capital expenditures and make
certain investments or acquisitions and otherwise restrict corporate activities.
The Bank Facility also contains, among other covenants, requirements that the
Operating Partnership maintain specified financial ratios, including maximum
leverage and minimum interest coverage and prohibits the Operating Partnership
and its subsidiaries from prepaying the Company's other indebtedness (including
the Notes). The ability of the Company to comply with such provisions may be
affected by events that are beyond the Company's control. The breach of any of
these covenants could result in a default under the Bank Facility. In the event
of any such default, lenders party to the Bank Facility could elect to declare
all amounts borrowed under the Bank Facility, together with accrued interest and
other fees, to be due and payable. If the indebtedness under the Bank Facility
were to be accelerated, all indebtedness outstanding under such Bank Facility
would be required to be paid in full before the subsidiaries of ICP-IV that are
parties to the Bank Facility would be permitted to distribute any assets or cash
to ICP-IV. There can be no assurance that the assets of ICP-IV and its
subsidiaries would be sufficient to repay all borrowings under the Bank Facility
and the other creditors of such subsidiaries in full. In addition, as a result
of these covenants, the ability of the Operating Partnership and its
subsidiaries to respond to changing business and economic conditions and to
secure additional financing, if needed, may be significantly restricted, and the
Company may be prevented from engaging in transactions that might otherwise be
considered beneficial to the Company. See "Description of Other
Obligations -- The Bank Facility."
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuers are required to
make an offer to purchase all outstanding Notes at a purchase price equal to
101.0% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. There can be no assurance that the
Issuers will have available funds sufficient to purchase the Notes upon a Change
of Control. In addition, any Change of Control, and any repurchase of the Notes
required under the Indenture upon a Change of Control, would constitute an event
of default under the Bank Facility, with the result that the obligations of the
borrowers thereunder could be declared due and payable by the lenders. Any
acceleration of the obligations under the Indenture or the Bank Facility would
make it unlikely that the Operating Partnership could make adequate
distributions to ICP-IV in order to service the Notes and, accordingly, that the
Operating Partnership could make adequate distributions to ICP-IV as required to
permit the Issuers to effect a purchase of the Notes upon a Change of Control.
See "Description of Other Obligations."
FUTURE CAPITAL REQUIREMENTS
Consistent with the Company's business strategy, and in order to comply
with requirements imposed by certain of its franchising authorities and to
address existing and potential competition, the Company has begun implementing
the Capital Improvement Program. Pursuant to the Capital Improvement Program,
the Company plans to expand and upgrade the Systems' plant to improve channel
capacity and system reliability and to allow for interactive services such as
enhanced pay-per-view, home shopping, data transmission (including Internet
access), telephone services and other interactive services to the extent they
become technologically viable and economically practicable. The Company expects
to upgrade both its existing systems with a digital-capable, high-capacity,
broadband hybrid fiber/coaxial cable to accomplish these objectives. The Company
currently plans to spend approximately $235.7 million in additional capital
through 2001 to fully implement the Capital Improvement Program. Although the
Company has taken steps to begin the upgrading process and anticipates that it
will continue to upgrade portions of its systems over the next several years,
there can be no assurance that the Company will be able to upgrade its cable
television systems at a rate that will allow it to remain competitive with
competitors that either do not rely on cable into the home (e.g., MMDS and DBS
(as defined herein)) or have access to significantly greater amounts of capital
and an existing communications network (e.g., certain telephone companies). In
addition, the Company
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currently estimates that it will make other capital expenditures through 2001 of
approximately $131.8, principally for maintenance of its plant and other fixed
assets. The Company's business requires continuing investment to finance capital
expenditures and related expenses for expansion of the Company's subscriber base
and system development. There can be no assurance that the Company will be able
to fund its Capital Improvement Program or any of its other capital
expenditures. The Company's inability to upgrade its cable television systems or
make its other planned capital expenditures would have a material adverse effect
on the Company's operations and competitive position and could have a material
adverse effect on the Company's ability to service its debt, including the
Notes. See "Business -- Upgrade Strategy and Capital Expenditures."
LIMITED OPERATING HISTORY; DEPENDENCE ON MANAGEMENT
ICP-IV was organized in March 1996. The partners of the Operating
Partnership transferred their partnership interests to ICP-IV in 1996. See "The
Partnership Agreement -- Organization." Prospective investors, therefore, have
limited historical financial information about the Company upon which to base an
evaluation of its performance and an investment in the Notes. Pursuant to the
Acquisitions, the Company has substantially increased the size of its
operations. Therefore, the historical financial data of the Company may not be
indicative of the Company's future results of operations. Further, there can be
no assurance that the Company will be able to successfully implement its
business strategy. The future success of the Company will be largely dependent
upon the efforts of senior management of its general partner, ICM-IV, including
Leo J. Hindery, Jr., the Company's founder who manages the business and
operations of the Company. See "Management" and "Certain Relationships and
Related Transactions -- Management by ICM-IV." Although ICM-IV as general
partner of ICP-IV may acquire systems on behalf of the Company, there is no
obligation to do so. Further, the Related InterMedia Entities or a new entity
controlled by Mr. Hindery may acquire cable television systems not contemplated
in this Prospectus, which may require a substantial amount of the attention of
Mr. Hindery.
COMPETITION IN CABLE TELEVISION INDUSTRY; RAPID TECHNOLOGICAL CHANGE
Cable television systems face competition from other sources of news,
information and entertainment, such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, interactive computer programs
and home video products, including video tape cassette recorders. Competing
sources of video programming include, but are not limited to, off-air broadcast
television, direct broadcast satellite ("DBS") service, multipoint multichannel
distribution service ("MMDS") systems, satellite master antenna television
("SMATV") systems and other new technologies. Furthermore, the cable television
industry is subject to rapid and significant changes in technology. The effect
of any future technological changes on the viability or competitiveness of the
Company's business cannot be predicted. See "Business -- Competition."
In addition, the Telecommunications Act of 1996 has repealed the
cable/telephone cross-ownership ban, and telephone companies will now be
permitted to provide cable television service within their service areas.
Certain of such potential service providers have greater financial resources
than the Company, and in the case of local exchange carriers seeking to provide
cable service within their service areas, have an installed plant and switching
capabilities, any of which could give them competitive advantages with respect
to cable television operators such as the Company. The Company cannot predict
either the extent to which competition will materialize or, if such competition
materializes, the extent of its effect on the Company. See
"Business -- Competition."
REGULATION OF THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, state and local levels, and many aspects of such regulation are
currently the subject of judicial proceedings and administrative or legislative
proposals. In February 1996, Congress passed, and the President signed into law,
major telecommunications reform legislation, the Telecommunications Act of 1996
(the "1996 Act"). Among other things, the 1996 Act reduces in some circumstances
and by 1999 will eliminate, rate regulation for cable programming service
("CPS") packages for all cable television systems and immediately eliminates
regulation of this service tier for small cable operators. The Federal
Communications Commission (the "FCC") is undertaking
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numerous rulemaking proceedings to interpret and implement the provisions of the
1996 Act. The 1996 Act and the FCC's implementing regulations could have a
significant effect on the cable television industry. In addition, the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") imposed substantial regulation on the cable television industry, including
rate regulation, and significant portions of the 1992 Act remain in effect
despite the enactment of the 1996 Act and remain highly relevant to the
Company's operations.
The Company elected the benchmark or cost-of-service methodologies to
justify its basic and CPS tier rates in effect prior to May 15, 1994, but relied
primarily upon the cost-of-service methodology to justify regulated service
rates in effect after May 14, 1994. The Company's cost-of-service cases
justifying certain rates for the CPS tier of service are currently pending
before the FCC. Additionally, pursuant to the FCC's regulations, several local
franchising authorities are reviewing the Company's basic rate justifications
and several other franchising authorities have requested that the FCC review the
Company's basic rate justifications. Although the Company generally believes
that its rates are justified under the FCC's benchmark or cost-of-service
methodologies, it cannot predict the ultimate resolution of these cases.
Management believes that the regulation of the cable television industry
will remain a matter of interest to Congress, the FCC and other regulatory
bodies. There can be no assurance as to what, if any, future actions such
legislative and regulatory authorities may take or the effect thereof on the
industry or the Company. See "Legislation and Regulation."
EXPIRATION OF FRANCHISES
As of March 31, 1996, twenty-four franchises relating to approximately
30,775 of the basic subscribers served by the Systems, have expired or are
scheduled to expire prior to December 31, 1996. The terms of these franchises
require the Company to negotiate the renewals of such franchises with the local
franchising authorities, and all 24 franchises are currently in informal renewal
negotiations. In connection with a renewal of a franchise, the franchising
authority may require the Company to comply with different conditions with
respect to franchise fees, channel capacity and other matters, which conditions
could increase the Company's cost of doing business. Although management
believes that it generally will be able to negotiate renewals of its franchises,
there can be no assurance that the Company will be able to do so and the Company
cannot predict the impact of any new or different conditions that might be
imposed by franchising authorities in connection with such renewals. See
"Business -- Franchises."
RELATED PARTY TRANSACTIONS
Conflicts of interests may arise due to certain contractual relationships
of the Company and the Company's relationship with the Related InterMedia
Entities and its other affiliates. InterMedia Management, Inc. ("IMI"), which is
wholly owned by Leo J. Hindery, Jr., provides administrative services at cost to
the Company and to the operating companies of the Related InterMedia Entities.
Conflicts of interest may arise in the allocation of management and
administrative services as a result of such relationships. NationsBanc Capital
Markets, Inc., one of the Initial Purchasers, is an affiliate of NationsBanc
Investment Corp. and certain of its affiliates, which together hold a 9.0%
limited partnership interest in ICP-IV. Toronto Dominion Securities (USA) Inc.,
one of the Initial Purchasers, is an affiliate of Toronto Dominion Capital,
which holds a 3.0% limited partnership interest in ICP-IV. See "The
Acquisitions"; "Certain Relationships and Related Transactions" and "Plan of
Distribution."
LOSS OF BENEFICIAL RELATIONSHIP WITH TCI
The Company's relationship with TCI currently enables the Company to (i)
purchase programming services and equipment from a subsidiary of TCI at rates
that management believes are generally lower than the Company could obtain
through arm's-length negotiations with third parties, (ii) share in TCI's
marketing test results, (iii) share in the results of TCI's research and
development activities and (iv) consult with TCI's operating personnel with
expertise in engineering, technical, marketing, advertising, accounting and
regulatory matters. TCI is under no obligation to offer such benefits to the
Company, and there can be no assurance that
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such benefits will continue to be available in the future should TCI's ownership
in the Company significantly decrease or should TCI for any other reason decide
not to continue to offer such benefits to the Company. The loss of the
relationship with TCI could adversely affect the financial position and results
of operations of the Company. See "Business -- Relationship with TCI"; "Certain
Relationships and Related Transactions -- Certain Other Relationships" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Transactions with Affiliates."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF EXCHANGE NOTE PRICE
The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for the inclusion of the Exchange Notes in any
automated quotation system. Although the Company has been advised by the Initial
Purchasers that, following completion of the Private Offering, the Initial
Purchasers intended to make a market in the Notes, they are not obligated to do
so and any such market making activities may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. If a market for the Exchange
Notes were to develop, the Exchange Notes could trade at prices that may be
higher or lower than their initial offering price depending upon many factors,
including prevailing interest rates, the Company's operating results and the
markets for similar securities. Historically, the market for non-investment
grade debt has been subject to disruptions that have caused substantial
volatility in the prices of securities similar to the Exchange Notes. There can
be no assurance that, if a market for the Exchange Notes were to develop, such a
market would not be subject to similar disruptions.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally issued and sold by the Issuers on July 30,
1996 to the Initial Purchasers in reliance on Section 4(2) of the Securities
Act. The Initial Purchasers offered and sold the Old Notes only to "qualified
institutional buyers" (as defined in Rule 144A) in compliance with Rule 144A and
to a limited number of other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to their
purchase of Old Notes, delivered to the Initial Purchasers a letter containing
certain representations and agreements.
In connection with the sale of the Old Notes, the Issuers and the Initial
Purchasers entered into a Registration Rights Agreement dated July 19, 1996 (the
"Registration Agreement"), which generally requires the Issuers (i) to file with
the Commission the Exchange Offer Registration Statement with respect to the
Exchange Offer or (ii) to cause the Old Notes to be registered under the
Securities Act pursuant to a Shelf Registration Statement (as defined herein).
The sole purpose of this Exchange Offer is to fulfill the obligations of the
Issuers with respect to the Registration Agreement. The term "holder" with
respect to the Exchange Offer means any person in whose name Notes are
registered on the registrar's books or any other person who has obtained a
properly completed bond power from the registered Holder, or any person whose
Notes are held of record by The Depository Trust Company ("DTC") who desires to
deliver such Old Notes, by book-entry transfer at DTC.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuers believe the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any Holder thereof
(other than broker-dealers, as set forth below, and any such Holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such Holder's business and that such Holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any Holder who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating, in
a distribution of the Exchange Notes or who is an affiliate of the Issuers may
not rely upon such interpretations by the staff of the Commission and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Failure to comply with such requirements in such
instance may result in such Holder incurring liabilities under the Securities
Act for which the Holder is not indemnified by the Issuers. Each broker-dealer
(other than an affiliate of the Issuers) that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Issuers have agreed that, for a period of 180
days after the Expiration Date, it will make the Prospectus available to any
broker-dealer for use in connection with any such sale. See "Plan of
Distribution." Any broker-dealer who is an affiliate of the Issuers may not rely
on such no-action letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
The Exchange Offer is not being made to, nor will the Issuers accept
surrenders for exchange from, Holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each Holder of Old Notes will represent
to the Issuers that, among other things, (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being acquired in the ordinary course of
business of the person receiving such Exchange Notes, whether or not such person
is the Holder, (ii) neither the Holder of Old Notes nor any such other person
has an arrangement or understanding
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<PAGE> 38
with any person to participate in the distribution of such Exchange Notes, (iii)
neither the Holder nor any such other person is an "affiliate" of the Issuers as
defined in Rule 405 under the Securities Act or, if such Holder is an
"affiliate," that such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
the Holder is not a broker-dealer, that neither the Holder nor any such other
person is engaged in or intends to engage in the distribution of such Exchange
Notes, and (v) if such Holder is a broker-dealer, that it will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to participate. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
Pursuant to the terms of the Registration Agreement, if, under certain
circumstances, the Exchange Offer is not permitted, the Issuers shall, as
promptly as practicable (but in no event more than 30 days after so required or
requested pursuant to the Registration Agreement), file with the Commission and
thereafter shall cause to be declared effective under the Securities Act within
90 days after so required or requested pursuant to the Registration Agreement a
Shelf Registration Statement relating to the offer and sale of the Old Notes or
the Exchange Notes, as applicable, by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Agreement. The Issuers will be required to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by the Holders for a period of
three years from the date of the Shelf Registration Statement is declared
effective by the Commission or such shorter period that will terminate when all
the Old Notes or Exchange Notes, as applicable, covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement.
TERMS OF THE EXCHANGE OFFER
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Issuers hereby offer to
exchange any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. Subject to the minimum
denomination requirements of the Exchange Notes, the Issuers will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may
be tendered only in amounts that are integral multiples of $1,000 principal
amount.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the Exchange
Notes will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer and (ii) Holders of the Exchange Notes will not
be entitled to certain rights of Holders of Old Notes under the Registration
Agreement, which will terminate upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture and will be treated as a single class thereunder
with any Old Notes that remain outstanding. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Old Notes being
tendered for exchange.
As of the date of this Prospectus, $292,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996 to all Holders
known to the Issuers.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Issuers intend to conduct the Exchange Offer in accordance
with the provisions of the Registration Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue.
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<PAGE> 39
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purposes of receiving the Exchange Notes from the Issuers. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering Holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1996, unless the Issuers,
in their sole discretion, extend the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Issuers have no current intention to extend the
Exchange Offer, the Issuers reserve the right to extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the Exchange Offer, all Notes previously
tendered pursuant to the Exchange Offer and not withdrawn will remain subject to
the Exchange Offer. The date of the exchange of the Exchange Notes for Old Notes
will be the first New York Stock Exchange trading day following the Expiration
Date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth under "-- Conditions of the
Exchange Offer" below shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Holders of Old Notes. If
the Exchange Offer is amended in any manner determined by the Issuers to
constitute a material change, the Issuers will promptly disclose such amendment
by means of a prospectus supplement that will be distributed to the Holders of
Old Notes, and the Issuers will extend the Exchange Offer for a period of time,
depending upon the significance of the amendment and the manner of disclosure to
such Holders, if the Exchange Offer otherwise would expire during such period.
In all cases, issuance of the Exchange Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Issuers reserve the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in the tender of Old Notes. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the Holder desires to exchange, such unaccepted or non-exchanged Old
Notes or substitute Old Notes evidencing the unaccepted portion, as appropriate,
will be returned without expense to the tendering Holder (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with DTC), unless otherwise
provided in the Letter of Transmittal, as promptly as practicable after the
expiration or termination of the Exchange Offer.
Interest on the Exchange Notes. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each Exchange Note will bear interest from the most recent date to
which interest has been paid on the Old Notes or Exchange Notes, or if no
interest has been paid on the Old Notes or Exchange Notes, from July 30, 1996.
Procedures for Tendering Old Notes. The tender to the Issuers of Old Notes
by a Holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such Holder and the Issuers in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
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<PAGE> 40
Transmittal. A Holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing Old Notes being tendered
(or confirmation of a book-entry-transfer of such Old Notes into the Exchange
Agent's account at DTC pursuant to the book-entry procedures described below)
and any required signature guarantees, to the Exchange Agent at its address set
forth in the Letter of Transmittal on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Old Notes are to be reissued) in the name
of the registered Holder (which term, for the purposes described herein, shall
include any participant in DTC, also referred to as a book-entry facility) whose
name appears on a security listing as the owner of Old Notes, the signature of
such signer need not be guaranteed. In any other case, the tendered Old Notes
must be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Issuers and duly executed by the registered Holder and the
signature on the endorsement or instrument of transfer must be guaranteed by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" as defined by rule 17Ad-15 under the Exchange Act (any of the
foregoing hereinafter referred to as an "Eligible Institution"). If the Exchange
Notes or Old Notes not exchanged are to be delivered to an address other than
that of the registered Holder appearing on the note register for the Old Notes,
the signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
A tender will be deemed to have been received as of the date when (i) the
tendering Holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) is received by the Exchange
Agent or (ii) a Notice of Guaranteed Delivery or letter or facsimile
transmission to similar effect (as provided below) from an Eligible Institution
is received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Old Notes tendered pursuant to a Notice of Guaranteed Delivery or letter or
facsimile transmission to similar effect (as provided below) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes (or confirmation of a book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC pursuant to the book-entry procedures described
below).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Issuers, which determination will be final and binding. The Issuers reserve
the absolute right to reject any and all tenders not in proper form or the
acceptance for exchange of which may, in the opinion of the Issuers' counsel, be
unlawful. The Issuers also reserve the absolute right to waive any of the
conditions of the Exchange Offer or any defect or irregularity in the tender of
any Old Notes. None of the Issuers, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. Any
Old Notes received by the Exchange Agent that are not validly tendered and as to
which the defects or irregularities have not been cured or waived, or if Old
Notes are submitted in principal amount greater than the principal amount of Old
Notes being tendered by such tendering Holder, such unaccepted or
32
<PAGE> 41
non-exchanged Old Notes will be returned by the Exchange Agent to the tendering
Holder, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Issuers reserve the right in their sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date and (ii) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ from the terms
of the Exchange Offer.
Book-Entry Transfer. The Issuers understand that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish an
account with respect to the Old Notes at DTC for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in DTC's system may make book-entry delivery
of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's
account with respect to the Old Notes in accordance with DTC's Automated Tender
Offer Program ("ATOP") procedures for such book-entry transfers. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the exchange for Old Notes so tendered will
only be made after timely confirmation (a "Book-Entry Confirmation") of such
book-entry transfer of the Old Notes into the Exchange Agent's account, and
timely receipt by the Exchange Agent of an Agent's Message (as defined herein)
and any other documents required by the Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by DTC and received by the Exchange Agent
and forming part of the Book-Entry Confirmation, which states that DTC has
received express acknowledgment from a participant tendering Old Notes that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that such agreement may be enforced against such participant.
Guaranteed Delivery Procedures. If a Holder desires to participate in the
Exchange Offer and such Holder's Old Notes are not immediately available, or
time will not permit such Holder's Old Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) on or
prior to the Expiration Date, the Exchange Agent has received from an Eligible
Institution a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Issuers (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the tendering Holder, the
name(s) in which the Old Notes are registered, the certificate number(s) of the
Old Notes to be tendered and the amount tendered, and stating that the tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed Delivery,
such Old Notes, in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC), will be
delivered by such Eligible Institution together with any other documents
required by the Letter of Transmittal and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC,
as the case may be, and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three New Stock Exchange
Trading Days after the date of execution of the Notice of Guaranteed Delivery.
Unless Old Notes being tendered by the above-described method are deposited with
the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuers may, at their option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange Agent.
Terms and Conditions of the Letter of Transmittal. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Issuers and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's true and lawful agent and
attorney-in-fact with respect to such tendered Old Notes, with full power of
substitution, among other things, to cause the Old Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the old
33
<PAGE> 42
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Old Notes, and that, when the same are accepted for exchange, the Issuers will
acquire good and unencumbered title to the tendered Old Notes, free and clear of
all liens, restrictions, charges, encumbrances and adverse claims. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents reasonably requested by the Issuers or the Exchange Agent
as necessary or desirable to complete and give effect to the transactions
contemplated by the Letter of Transmittal. The Transferor further agrees that
acceptance of any tendered Old Notes by the Issuers and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Issuers
of their obligations under the Registration Rights Agreement and that the
Issuers shall have no further obligations or liabilities thereunder (except in
certain limited circumstances). All authority conferred by the Transferor will
survive the death, bankruptcy or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of such Transferor.
By executing a Letter of Transmittal, each Holder will make to the Issuers
the representations set forth above under the heading "-- Purpose and Effect of
the Exchange Offer."
Withdrawal of Tenders of Notes. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Old Notes), (iii) contain a statement that such
Holder is withdrawing his election to have such Old Notes exchanged, (iv) be
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such Old
Notes in the name of the person withdrawing the tender and (v) specify the name
in which any such Old Notes are to be registered, if different from that of the
Depositor. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at DTC. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers,
which determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the Holder
thereof without cost to such Holder (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at DTC pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with DTC for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering Old Notes" at any
time on or prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Issuers will not be required to accept for exchange, or
exchange Exchange Notes for, any Old Notes, and may terminate the Exchange Offer
or, at their option, modify or otherwise amend the Exchange Offer as provided
herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Issuers, seeks to or would prohibit,
restrict, materially delay or otherwise render illegal consummation of the
Exchange Offer, or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuers or any of its subsidiaries
has occurred which, in the sole judgment of the Issuers,
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<PAGE> 43
might materially impair the ability of the Issuers to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Issuers, or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Issuers' reasonable judgment, might
materially impair the Issuers' ability to proceed with the Exchange Offer.
If the Issuers determine in their sole discretion that any of the above
conditions is not satisfied, the Issuers may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject, however, to the right of Holders to withdraw such Old Notes (see
"-- Terms of the Exchange Offer-- Withdrawal of Tenders of Notes") or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all validly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Issuers will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the Holders of Old Notes, and the Issuers will extend the
Exchange Offer for a period of time, depending upon the significance of the
waiver and the manner of disclosure to such Holders, if the Exchange Offer
otherwise would expire during such period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal must be directed to the Exchange
Agent at one of the addresses set forth below.
By mail (registered or certified mail recommended):
The Bank of New York
Reorganization Section
101 Barclay Street, 7E
New York, New York 10286
Attn: Enrique Lopez
By hand or over-night delivery:
The Bank of New York
101 Barclay Street-Lobby Level
Corporate Trust Services Window
New York, New York 10286
Attn: Enrique Lopez
By Facsimile Transmission (for Eligible Institutions only):
(212) 571-3080
Attn: Enrique Lopez
Confirm by Telephone:
(212) 815-2742
Delivery to an address other than as set forth above, or transmissions of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
FEES AND EXPENSES
The Issuers have not retained any dealer-manager or other soliciting agent
in connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Issuers,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Issuers also may pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange. The
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<PAGE> 44
expenses to be incurred in connection with the Exchange Offer will be paid by
the Issuers. Such expenses include, among others, fees and expenses of the
Exchange Agent, accounting and legal fees and printing costs.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, Exchange Notes, or
Old Notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Old Notes tendered or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the Holder
or any other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuers. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuers since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuers may, at
their discretion, take such action as they may deem necessary to make the
Exchange Offer in any such jurisdiction and extend the Exchange Offer to Holders
of Old Notes in such jurisdiction. In any jurisdiction the securities laws or
blue sky laws of which require the Exchange Offer to be made by a licensed
broker or dealer, the Exchange Offer is being made on behalf of the Issuers by
one or more registered brokers or dealers which are licensed under the laws of
such jurisdiction.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Issuers or any subsidiary thereof, (ii) inside the United States to a qualified
institutional buyer in compliance with Rule 144A, (iii) inside the United States
to an institutional accredited investor that, prior to such transfer, furnishes
to the Trustee a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Old Notes (the form of which
letter can be obtained from the Trustee) and, if such transfer is in respect of
an aggregate principal amount of Old Notes at the time of transfer of less than
$100,000, an opinion of counsel acceptable to the Issuers that such transfer is
in compliance with the Securities Act, (iv) outside the United States in
compliance with Rule 904 under the Securities Act, (v) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if available)
or (vi) pursuant to an effective registration statement under the Securities
Act. The liquidity of the Old Notes could be adversely affected by the Exchange
Offer. See "Risk Factors -- Consequences of Exchange and Failure to Exchange."
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, as reflected in the Issuers' accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Issuers. The costs of the Exchange Offer and the unamortized
expenses related to the issuance of the Old Notes will be amortized over the
term of the Exchange Notes.
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<PAGE> 45
USE OF PROCEEDS
The Issuers will not receive any proceeds from this exchange offer, and no
underwriter is being utilized in connection with the Exchange Offer.
CAPITALIZATION
The following table sets forth the Company's consolidated capitalization as
of June 30, 1996 on an actual basis and on a pro forma basis to give effect to
the Transactions. This table should be read in conjunction with the "Summary
Supplemental Historical and Pro Forma Financial Data"; "Summary Historical
Financial and Operating Data"; "Selected Historical Financial Data" and the
related notes thereto and "Pro Forma Financial Information" and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
Long-term debt:
Bridge Loan............................................................ $114,000 $ --
Bank Facility Revolving Credit Facility(1)............................. -- 338,000
Term Loan............................................................ -- 220,000
11 1/4% Senior Notes Due 2006........................................ -- 292,000
-------- --------
Total debt................................................... 114,000 850,000
-------- --------
RMH Redeemable Preferred Stock(2)...................................... -- 12,000
Minority interest(3)................................................... -- 37
Partners' capital:
Preferred Limited Partner Interest(4)................................ -- 25,000
General and limited partners' interest............................... (5,158) 99,684
Note receivable from general partner................................. -- (1,850)
-------- --------
Total partners' capital...................................... (5,158) 122,834
-------- --------
Total capitalization......................................... $108,842 $ 984,871
======== ========
</TABLE>
- ---------------
(1) The Revolving Credit Facility provides for borrowings up to $475.0 million
in the aggregate, with permanent annual commitment reductions beginning in
1999, and matures in 2004. The above table assumes consummation of the
Transactions on June 30, 1996. Upon consummation of the Transactions, the
Company had $137.0 million available under the Revolving Credit Facility.
(2) The RMH Redeemable Preferred Stock has an annual cumulative dividend of
10.0% and is mandatorily redeemable on September 30, 2006. See "Description
of Other Obligations -- Description of Preferred Equity Interests."
(3) Represents TCI's 10.0% ownership interest in RMH's common stock pursuant to
the Transactions.
(4) The Preferred Limited Partner Interest (as defined herein) has an annual
cumulative dividend of 11.75% and is not mandatorily redeemable. See
"Description of Other Obligations -- Description of Preferred Equity
Interests."
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<PAGE> 46
PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Condensed Combined Financial Statements
(the "Pro Forma Financial Information") are based on the historical financial
statements of the Company, the Kingsport System, the ParCable System, the
Previously Affiliated Entities and the Viacom Nashville System and exclude the
Miscellaneous Acquisitions, except the Annox System and the Tellico System,
which are included since their acquisitions by the Company on January 29, 1996
and May 2, 1996, respectively. The Company's historical results of operations
for the six months ended June 30, 1996 include the operating results of the
Kingsport System, the ParCable System, the Annox System, and the Tellico System
only from their respective acquisition dates. The historical statement of
operations information for the Kingsport System and the ParCable System for the
month ended January 31, 1996, representing that portion of 1996 prior to the
Company's acquisition of the systems, is presented separately from the
historical results of the Company for the six months ended June 30, 1996. As a
result of the substantial continuing interest in the Company to be held by the
partners of IPWT, the shareholders of RMH and the shareholder of the
Greenville/Spartanburg System, the historical combined financial information of
the Previously Affiliated Entities has been combined on a historical cost basis
as if the Previously Affiliated Entities had always been members of the same
operating group, except for the Greenville/Spartanburg System, which has been
included only from January 27, 1995, the date TCI acquired the system from an
unrelated former cable operator. The statement of operations information for the
period January 1, 1995 through January 26, 1995 for the Greenville/ Spartanburg
System, representing that portion of 1995 prior to its ownership by TCI, is
presented separately under the heading "Historical" in deriving the pro forma
results for the year ended December 31, 1995.
The Pro Forma Condensed Combined Statements of Operations for the six
months ended June 30, 1996 and for the year ended December 31, 1995 give effect
to the Transactions as if they had occurred as of January 1, 1996 and January 1,
1995, respectively, and the Pro Forma Condensed Combined Balance Sheet as of
June 30, 1996 gives effect to the Transactions as if they had occurred as of
June 30, 1996. The Transactions and related adjustments are described in the
accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements. The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The Pro Forma
Condensed Combined Statements of Operations do not include any adjustments for
selling, general and administrative cost savings management anticipates
achieving, compared to predecessors' costs, from the clustering of the Systems.
As discussed further at Note 2 below, management estimates such annual cost
savings will be approximately $3.3 million. There can be no assurance that
expected cost savings will be achieved in conjunction with the Acquisitions. The
Pro Forma Financial Information does not purport to represent what the Company's
results of operations or financial condition would actually have been had the
Transactions in fact occurred on such dates or to project the Company's results
of operations or financial condition for any future period or date. The Pro
Forma Financial Information should be read in conjunction with the historical
financial statements of the Company, the Previously Affiliated Entities, the
Kingsport System and the Viacom Nashville System included elsewhere in this
Prospectus.
For purposes of the accompanying Pro Forma Financial Information,
adjustments relating to the Transactions are made under the purchase method of
accounting for the Kingsport System, the ParCable System and the Viacom
Nashville System, whereas historical cost bases are used for the Previously
Affiliated Entities due to the continuing interests of certain partners of the
Company in these entities. For all of the acquisitions accounted for under the
purchase method of accounting, such adjustments are based upon a preliminary
allocation of the purchase prices and upon the assumptions and adjustments
described in the accompanying notes. In the opinion of management, all
adjustments have been made that are necessary to present fairly the Pro Forma
Financial Information.
38
<PAGE> 47
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL(1)
------------------------------------------------------------------
PREVIOUSLY KINGSPORT PARCABLE VIACOM
AFFILIATED (1/1/96- (1/1/96- NASHVILLE PRO FORMA PRO
COMPANY ENTITIES 1/31/96) 1/31/96) SYSTEM COMBINED ADJUSTMENTS FORMA(2)
------- ---------- --------- -------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic and cable services....... $6,108 $ 48,374 $ 736 $412 $20,527 $76,157 $ $76,157
Pay services................... 1,199 12,207 100 107 6,025 19,638 19,638
Other services................. 627 8,744 101 102 6,741 16,315 16,315
------ -------- ---- ---- ------- ------- -------- -------
Total revenues............. 7,934 69,325 937 621 33,293 112,110 112,110
------- -------- ---- ---- ------- -------- -------- -------
Program fees................... 1,581 14,680 211 148 7,872 24,492 (759)(3) 23,733
Other direct expenses.......... 902 8,355 133 92 4,546 14,028 14,028
Depreciation and
amortization................. 4,735 31,364 87 55 5,657 41,898 12,980(4) 62,761
7,883(5)
Selling, general and
administrative............... 1,601 16,888 223 150 8,882 27,744 27,744
Management and consulting
fees......................... 341 113 454 1,221(6) 1,675
------ -------- ---- ---- ------- -------- -------- --------
Total operating expenses....... 8,819 71,628 654 558 26,957 108,616 21,325 129,941
------ -------- ---- ---- ------- -------- -------- --------
Income (loss) from
operations................... (885) (2,303) 283 63 6,336 3,494 (21,325) (17,831)
Interest and other income
(expense).................... 451 42 -- -- (41) 452 452
Interest expense............... (4,002) (36,970) (90) -- (2,436) (43,498) 4,893(7) (38,605)
------- -------- ---- ---- ------- -------- -------- --------
Income (loss) before income
taxes........................ (4,436) (39,231) 193 63 3,859 (39,552) (16,432) (55,984)
Income tax expense (benefit)... -- (12,320) -- 5 2,125 (10,190) (973)(8) (7,672)
3,491(9)
------- -------- ---- ---- ------- -------- -------- --------
Income before minority
interest..................... (4,436) (26,911) 193 58 1,734 (29,362) (18,950) (48,312)
Minority interest.............. -- -- -- -- -- -- 563(10) 563
------- -------- ---- ---- ------- -------- -------- --------
Net income (loss).............. $(4,436) $(26,911) $ 193 $ 58 $ 1,734 $(29,362) $ (19,513) $(48,875)
======= ======== ==== ==== ======= ======== ======== ========
</TABLE>
39
<PAGE> 48
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(1) The pro forma presentation includes the historical statements of operations
of the Company, the Previously Affiliated Entities, the Kingsport System,
the ParCable System and the Viacom Nashville System. The historical
statement of operations of the Previously Affiliated Entities include the
results of IPWT, RMH and the Greenville/Spartanburg System for the six
months ended June 30, 1996. The results of operations of the Kingsport
System and the ParCable System are for the period from January 1, 1996
through January 31, 1996. The results of operations of the Kingsport
System, the ParCable System, the Annox System and the Tellico System are
included in the results of the Company since their respective acquisition
dates.
(2) The pro forma results presented above do not include any adjustments for
selling, general and administrative cost savings that management
anticipates achieving, compared to predecessors' costs, from the clustering
of the Systems. Such cost savings are anticipated from the cost sharing
agreements the Company and the Related InterMedia Entities have with IMI to
provide accounting, operational, marketing, engineering, legal, regulatory
compliance and other administrative services at cost. Other cost savings
are anticipated from headcount reductions at the Viacom Nashville System
and changes to sales commission programs at the Greenville/Spartanburg
System. Management anticipates aggregate annual cost savings from these
items will be approximately $3,300. There can be no assurance that expected
cost savings will be achieved in conjunction with the Acquisitions.
(3) Through its affiliation with TCI, the Company is able to purchase
programming services from a subsidiary of TCI pursuant to an agreement that
is also available to each of the acquired Systems. The pro forma adjustment
to programming expenses reflects the Company's estimate of programming
expense savings using the rates specified in the agreement. All previous
TCI affiliates were already receiving the benefits of similar agreements
with a subsidiary of TCI. See "Certain Relationships and Related
Transactions--Certain Other Relationships."
(4) Represents the pro forma effect of additional depreciation and amortization
expense resulting from (i) the increase (decrease) in property and
equipment of $1,349, $2,434 and $(14,399) for the Kingsport System, the
ParCable System and the Viacom Nashville System, respectively (ii) the
increase in franchise rights and other intangibles of $53,490, $25,477 and
$209,905 for the Kingsport System, the ParCable System and the Viacom
Nashville System, respectively and (iii) the use of different lives for
depreciation and amortization. The changes in property and equipment and
franchise rights and other intangible assets result from the estimated
effects of applying purchase accounting for these acquisitions. Pro forma
depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
ASSETS YEARS
------
<S> <C>
Cable television plant................................................ 5 - 10
Buildings and improvements............................................ 10
Furniture and fixtures................................................ 3 - 7
Equipment and other................................................... 3 - 10
</TABLE>
Pro forma franchise rights are amortized on a straight-line basis over the
weighted average lives, calculated based on the lesser of the remaining
franchise lives or the base twelve-year term of ICP-IV's Partnership
Agreement. Other intangible assets, consisting primarily of goodwill, are
amortized on a straight-line basis over the term of ICP-IV's Partnership
Agreement.
The pro forma adjustments to depreciation and amortization expense are
comprised of additional depreciation and amortization of $529 and $226 for
the Kingsport System and the ParCable System for the one month ended
January 31, 1996, respectively, and $12,225 for the Viacom Nashville System
for the six months ended June 30, 1996.
40
<PAGE> 49
(5) Represents the pro forma effect of using the double-declining balance
method rather than the straight-line method of computing depreciation
expense for the Greenville/Spartanburg System and the effect of amortizing
the Greenville/Spartanburg System's intangible assets over the weighted
average lives of the franchise rights or the term of ICP-IV's Partnership
Agreement, calculated as described above, versus 40 years to conform to the
policies of the Company. The pro forma adjustments are computed as follows:
<TABLE>
<S> <C>
Depreciation and amortization expense as previously recorded.................. $ 6,627
Depreciation and amortization expense based on the Company's accounting
policies.................................................................... 14,510
-------
Pro forma adjustment.......................................................... $ 7,883
=======
</TABLE>
(6) Reflects an increase in management and consulting fees. Under ICP-IV's
Partnership Agreement, management fees are equal to one percent of ICP-IV's
non-preferred Contributed Equity. See "The Partnership Agreement."
(7) Adjustment of interest expense to give effect to the Transactions is
summarized as follows:
<TABLE>
<S> <C>
Elimination of historical interest expense:
The Company................................................................. $ 4,002
Previously Affiliated Entities:
RMH...................................................................... 18,417
IPWT..................................................................... 68
Greenville/Spartanburg System............................................ 18,485
-------
Total Previously Affiliated Entities................................ 36,970
Kingsport System (1/1/96-1/31/96)........................................... 90
Viacom Nashville System..................................................... 2,436
-------
Total historical.................................................... 43,498
-------
Interest expense related to the amount of debt incurred by the Company in
connection with the Bank Facility and the Notes:
Interest on the Revolving Credit Facility (LIBOR plus 1.625%)............ 12,253
Interest on the Term Loan (LIBOR plus 2.375%)............................ 8,800
Interest on the Notes (11.25%)........................................... 16,425
Other commitment fees.................................................... 257
Amortization of debt issue costs......................................... 870
-------
Total pro forma interest expense.................................... 38,605
-------
Net reduction in pro forma interest expense................................. $(4,893)
=======
</TABLE>
(8) Reflects the tax effect of the pro forma adjustments to RMH's reduction in
interest expense after giving effect to the Transactions at a combined
federal and state effective rate of approximately 38.0%. The pro forma
adjustment for interest expense is the only adjustment affecting RMG's
historical financial information and RMH is the only taxable entity on a
pro forma basis. Upon completion of the Acquisitions, RMG, as a
corporation, is the only taxpaying entity in the Company's corporate
structure. The pro forma adjustments are calculated as follows:
<TABLE>
<CAPTION>
INTEREST TAX TAX
EXPENSE RATE EFFECT
-------- ---- ------
<S> <C> <C> <C>
RMH's historical interest expense for the six months ended June
30, 1996...................................................... $ 18,417 $
Pro forma interest expense allocated from ICP-IV and the
Operating Partnership to RMH after giving effect to the
Acquisitions.................................................. 15,855
-------
Pro forma adjustment.......................................... (2,562) 38.0% (973)
=======
</TABLE>
41
<PAGE> 50
(9) Represents the elimination of the historical tax provisions of the ParCable
System, the Greenville/ Spartanburg System and the Viacom Nashville System
pursuant to the Transactions. As a partnership, the tax effects of ICP-IV's
results of operations accrue to its partners.
(10) Represents the pro forma adjustment for TCI's minority interest in RMH,
comprised of (i) a 10.0% cumulative preferred dividend based on the RMH
Redeemable Preferred Stock value of $12,000 payable upon redemption and
(ii) 10.0% of RMH's net loss before minority interest, up to the
outstanding amount of RMH Class B Common Stock, valued at approximately
$37. See "Description of Other Obligations -- Description of Preferred
Equity Interests -- RMG Redeemable Preferred Stock."
42
<PAGE> 51
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL(1)
--------------------------------------------------------------------------------
GREENVILLE/
PREVIOUSLY SPARTANBURG VIACOM
AFFILIATED (1/1/95- NASHVILLE PRO FORMA PRO
COMPANY ENTITIES 1/26/95) KINGSPORT PARCABLE SYSTEM COMBINED ADJUSTMENTS FORMA(2)
------- ---------- ----------- --------- -------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic and cable
services......... $ $ 85,632 $ 1,835 $ 8,427 $4,815 $37,243 $137,952 $ $137,952
Pay services....... -- 23,942 783 1,192 1,320 11,575 38,812 38,812
Other services..... -- 19,397 499 1,295 642 13,224 35,057 35,057
------- -------- ------ ------- ------ ------- -------- -------- ---------
Total
revenues..... -- 128,971 3,117 10,914 6,777 62,042 211,821 -- 211,821
------- -------- ------ ------- ------ ------- -------- -------- ---------
Program fees....... -- 24,684 795 2,219 1,746 13,894 43,338 (559)(3) 42,779
Other direct
expenses......... -- 16,851 720 1,426 1,054 8,954 29,005 29,005
Depreciation and
amortization..... -- 70,154 618 1,086 662 9,655 82,175 35,124(4) 134,948
17,649(5)
Selling, general
and
administrative... -- 30,509 589 2,058 1,169 16,144 50,469 50,469
Management and
consulting
fees............. -- 815 -- -- 1,243 -- 2,058 1,292(6) 3,350
------- -------- ------ ------- ------ ------- -------- -------- ---------
Total operating
expenses......... -- 143,013 2,722 6,789 5,874 48,647 207,045 53,506 260,551
------- -------- ------ ------- ------ ------- -------- -------- ---------
Income (loss) from
operations....... -- (14,042) 395 4,125 903 13,395 4,776 (53,506) (48,730 )
Interest and other
income
(expense)........ -- 465 -- -- -- (124) 341 341
Interest expense... -- (48,835) (161) (856) -- (4,819) (54,671 ) (22,538)(7) (77,209 )
------- -------- ------ ------- ------ ------- -------- -------- ---------
Income (loss)
before income
taxes............ -- (62,412) 234 3,269 903 8,452 (49,554 ) (76,044) (125,598 )
Income tax expense
(benefit)........ -- (17,502) 88 -- 74 4,659 (12,681 ) (2,337)(8) (17,613 )
(2,595)(9)
------- -------- ------ ------- ------ ------- -------- -------- ---------
Income before
minority
interest......... -- (44,910) 146 3,269 829 3,793 (36,873 ) (71,112) (107,985 )
Minority
interest......... -- -- -- -- -- -- 1,163(10) 1,163
------- -------- ------ ------- ------ ------- -------- -------- ---------
Net income
(loss)........... $ -- $(44,910) $ 146 $ 3,269 $ 829 $ 3,793 $(36,873) $ (72,275) $(109,148)
======= ======== ====== ======= ====== ======= ======== ======== =========
</TABLE>
43
<PAGE> 52
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(1) The pro forma presentation includes the historical statements of operations
of the Company, the Previously Affiliated Entities, the Kingsport System,
the ParCable System and the Viacom Nashville System. The historical
statement of operations of the Previously Affiliated Entities include the
results of IPWT and RMH for the year ended December 31, 1995 and the
results of operations for the period from January 27, 1995 through December
31, 1995 of the Greenville/Spartanburg System. The results of operations of
the Greenville/Spartanburg System for the period from January 1, 1995
through January 26, 1995 are presented separately.
(2) The pro forma results presented above do not include any adjustments for
selling, general and administrative cost savings that management
anticipates achieving, compared to predecessors' costs, from the clustering
of the Systems. Such cost savings are anticipated from the cost sharing
agreements the Company and the Related InterMedia Entities have with IMI to
provide accounting, operational, marketing, engineering, legal, regulatory
compliance and other administrative services at cost. Other cost savings
are anticipated from headcount reductions at the Viacom Nashville System
and changes to sales commission programs at the Greenville/Spartanburg
System. Management anticipates aggregate annual cost savings from these
items will be approximately $3,300. There can be no assurance that expected
cost savings will be achieved in conjunction with the Acquisitions.
(3) Through its affiliation with TCI, the Company is able to purchase
programming services from a subsidiary of TCI pursuant to an agreement that
is also available to each of the acquired Systems. The pro forma adjustment
to programming expenses reflects the Company's estimate of programming
expense savings using the rates specified in the agreement. All previous
TCI affiliates were already receiving the benefits of similar agreements
with a subsidiary of TCI. See "Certain Relationships and Related
Transactions -- Certain Other Relationships."
(4) Represents the pro forma effect of additional depreciation and amortization
expense resulting from (i) the increase (decrease) in property and
equipment of $1,280, $2,387 and $(6,701) for the Kingsport System, the
ParCable System and the Viacom Nashville System, respectively, (ii) the
increase in franchise rights and other intangibles of $53,490, $25,475 and
$209,205 for the Kingsport System, the ParCable System and the Viacom
Nashville System, respectively and (iii) the use of different lives for
depreciation and amortization. The changes in property and equipment and
franchise rights and other intangible assets result from the estimated
effects of applying purchase accounting for these acquisitions. Pro forma
depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
ASSETS YEARS
--------------------------------------------------------------------- -----
<S> <C>
Cable television plant............................................... 5 - 10
Buildings and improvements........................................... 10
Furniture and fixtures............................................... 3 - 7
Equipment and other.................................................. 3 - 10
</TABLE>
Pro forma franchise rights are amortized on a straight-line basis over the
weighted average lives, calculated based on the lesser of the remaining
franchise lives or the base twelve-year term of ICP-IV's Partnership
Agreement. Other intangible assets, consisting primarily of goodwill, are
amortized on a straight-line basis over the term of ICP-IV's Partnership
Agreement.
The pro forma adjustments to depreciation and amortization expense are
comprised of additional depreciation and amortization of $6,309, $2,706 and
$26,109 for the Kingsport System, the ParCable System and the Viacom
Nashville System, respectively.
(5) Represents the pro forma effect of using the double-declining balance
method rather than the straight-line method of computing depreciation
expense for the Greenville/Spartanburg System and the effect of amortizing
the Greenville/Spartanburg System's intangible assets over the weighted
average lives of the franchise rights or the term of ICP-IV's Partnership
Agreement, calculated as described above, versus
44
<PAGE> 53
40 years to conform to the policies of the Company. The pro forma
adjustments are computed as follows:
<TABLE>
<S> <C>
Depreciation and amortization expense as previously recorded.................. $14,139
Depreciation and amortization expense based on the Company's accounting
policies.................................................................... 31,788
-------
Pro forma adjustment.......................................................... $17,649
=======
</TABLE>
(6) Reflects an increase in management and consulting fees. Under ICP-IV's
Partnership Agreement, management fees are equal to one percent of ICP-IV's
non-preferred Contributed Equity and the first year's management fees are
paid in advance upon receipt of the Contributed Equity. See "The
Partnership Agreement."
(7) Adjustment of interest expense to give effect to the Transactions is
summarized as follows:
<TABLE>
<S> <C>
Elimination of historical interest expense:
RMH........................................................................... $36,462
IPWT.......................................................................... 534
Greenville/Spartanburg System (1/27/95-12/31/95).............................. 11,839
-------
Previously Affiliated Entities................................................ 48,835
Greenville/Spartanburg System (1/1/95-1/26/95)................................ 161
Kingsport System.............................................................. 856
Viacom Nashville System....................................................... 4,819
-------
Total historical......................................................... 54,671
-------
Interest expense related to the amount of debt incurred by the Company in
connection with the Bank Facility and the Notes:
Interest on the Revolving Credit Facility (LIBOR plus 1.625%)................. 24,505
Interest on the Term Loan (LIBOR plus 2.375%)................................. 17,600
Interest on the Notes (11.25%)................................................ 32,850
Other commitment fees......................................................... 514
Amortization of debt issue costs.............................................. 1,740
-------
Total pro forma interest expense.............................................. 77,209
-------
Net increase to pro forma interest expense.................................... $22,538
=======
</TABLE>
(8) Reflects the tax effect of the pro forma adjustments to RMH's reduction in
interest expense after giving effect to the Transactions and the Viacom
Nashville Acquisition at a combined federal and state effective rate of
approximately 38.0%. Following the completion of the Acquisitions, RMG, as
a corporation, will be the only taxpaying entity in the Company's corporate
structure. The pro forma adjustments are calculated as follows:
<TABLE>
<CAPTION>
INTEREST TAX TAX
EXPENSE RATE EFFECT
-------- ---- -------
<S> <C> <C> <C>
RMH's 1995 historical interest expense...................... $ 36,462
Pro forma interest expense allocated from ICP-IV and the
Operating Partnership to RMH after giving effect to the
Acquisitions.............................................. 30,307
-------
Pro forma adjustment........................................ (6,155) 38.0% $(2,337)
=======
</TABLE>
(9) Represents the elimination of the historical tax provisions of the ParCable
System, the Greenville/Spartanburg System and the Viacom Nashville System
pursuant to the Transactions. As a partnership, the tax effects of ICP-IV's
results of operations accrue to its partners.
(10) Represents the pro forma adjustment for TCI's minority interest in RMH,
composed of (i) a 10.0% cumulative preferred dividend based on the RMH
Redeemable Preferred Stock value of $12,000 payable upon redemption and
(ii) 10.0% of RMH's net loss before minority interest, up to the
outstanding amount of RMH Class B Common Stock, valued at approximately
$37. See "Description of Other Obligations -- Description of Preferred
Equity Interests -- RMG Redeemable Preferred Stock."
45
<PAGE> 54
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL(1)
--------------------------------------------
PREVIOUSLY VIACOM
AFFILIATED NASHVILLE PRO FORMA
COMPANY ENTITIES SYSTEM COMBINED ADJUSTMENTS PRO FORMA
-------- ---------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 739 $ 5,115 $ -- $ 5,854 $ 7,764(2) $ 11,934
(1,684)(3)
Accounts receivable.............................. 1,734 8,441 2,081 12,256 2,576(4) 14,832
Receivable from affiliates....................... 423 423 423
Prepaids......................................... 71 376 312 759 3,350(5) 4,109
Inventory........................................ 153 4,541 -- 4,694 2,619(6) 7,313
Investments held to maturity..................... -- -- -- -- 13,853(7) 13,853
Other current assets............................. -- 571 -- 571 -- 571
-------- -------- -------- -------- --------- ----------
Total current assets......................... 2,697 19,467 2,393 24,557 28,478 53,035
Intangible assets, net........................... 82,850 446,943 51,558 581,351 209,905(6) 699,687
(212)(8)
16,261(9)
(107,618)(10)
Property and equipment, net...................... 14,559 108,120 69,956 192,635 (14,399)(6) 178,236
Note receivable from affiliate................... 15,347 -- -- 15,347 (15,347)(11) --
Investments...................................... -- 795 -- 795 -- 795
Deferred income taxes............................ -- 4,777 -- 4,777 2,301(12) 7,078
Investments held to maturity..................... -- -- -- -- 74,902(7) 74,902
Other assets..................................... 31 1,289 -- 1,320 -- 1,320
-------- -------- -------- -------- --------- ----------
Total assets................................. $115,484 $581,391 $ 123,907 $820,782 $ 194,271 $1,015,053
======== ======== ======== ======== ========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities......... $ 3,530 $ 10,332 $ 4,233 $18,095 $ -- $ 18,095
Deferred revenue................................. 1,065 4,117 130 5,312 2,576(4) 7,888
Payable to affiliates............................ 1,875 2,324 -- 4,199 -- 4,199
-------- -------- -------- -------- --------- ----------
Total current liabilities.................... 6,470 16,773 4,363 27,606 2,576 30,182
Note payable to affiliate........................ -- 15,347 -- 15,347 (15,347)(11) --
Accrued interest................................. 172 9,386 -- 9,558 (9,558)(13) --
Long-term debt................................... 114,000 408,996 -- 522,996 850,000(13) 850,000
(522,996)(13)
Deferred income taxes............................ -- 107,618 7,942 115,560 (107,618)(10) --
(7,942)(14)
Other non-current liabilities.................... -- -- 480 480 (480)(14) --
-------- -------- -------- -------- --------- ----------
Total liabilities............................ 120,642 558,120 12,785 691,547 188,635 880,182
Mandatorily redeemable preferred stock held by
minority interest.............................. -- -- -- -- 12,000(15) 12,000
Minority interest................................ -- -- -- -- 37(16) 37
PARTNERS' CAPITAL
Preferred limited partner interest............... -- -- -- -- 25,000(15) 25,000
General and limited partners interest............ (5,158) 23,271 111,122 129,235 (1,684)(3) 99,684
(212)(8)
(3,760)(12)
(12,000)(15)
10,000(15)
(37)(16)
21,746(17)
97,400(18)
(121,260)(19)
(329)(20)
(500)(21)
(1,363)(22)
95,000(23)
(111,122)(23)
(1,430)(24)
Note receivable from general partner............. -- -- (1,850)(25) (1,850)
-------- -------- -------- -------- --------- ----------
Total partners' capital...................... (5,158) 23,271 111,122 129,235 (6,401) 122,834
-------- -------- -------- -------- --------- ----------
Total liabilities and partners' capital...... $115,484 $581,391 $ 123,907 $820,782 $ 194,271 $1,015,053
======== ======== ======== ======== ========= ==========
</TABLE>
46
<PAGE> 55
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
(1) The pro forma presentation includes the historical balance sheets of the
Company, the Previously Affiliated Entities and the Viacom Nashville
System. The historical balance sheets of the Kingsport System and the
ParCable System are not presented separately because these systems were
acquired by the Company on February 1, 1996.
(2) Pro forma adjustments to cash resulting from the Transactions are as
follows:
<TABLE>
<S> <C>
SOURCES OF CASH FROM THE FINANCING PLAN
Revolving Credit Facility....................................... $338,000
Term Loan....................................................... 220,000
11 1/4% Senior Notes Due 2006................................... 292,000
Cash equity..................................................... 144,000
--------
Total sources of cash from the Financing Plan................ 994,000
--------
USES OF CASH OBTAINED FROM THE FINANCING PLAN
Investments held in escrow...................................... 88,755
Repayment of the Bridge Loan.................................... 114,000
Payment of accrued interest on the Bridge Loan.................. 172
Purchase price of RMH Class A Common Stock...................... 329
Payment to TCI for Greenville/Spartanburg assumed debt.......... 74,710
Purchase price of the Viacom Nashville System................... 318,800
Working capital adjustment to the purchase price of the Viacom
Nashville System............................................. (1,970)
Acquisition costs for the Viacom Nashville Acquisition.......... 839
Fees incurred in connection with the acquisition/contribution of
the Previously Affiliated Entities........................... 500
Repayment of RMG revolving credit facility...................... 25,000
Redemption of RMG Notes......................................... 306,450
Interest cost of defeasing RMG Notes............................ 2,856
Call premium on RMG Notes....................................... 3,205
Repayment of IPWT's note payable to GECC........................ 20,800
Payment of accrued interest on RMG's debt....................... 8,721
Payment of accrued interest on IPWT's debt...................... 665
Payment of contingent interest on IPWT's debt................... 1,363
Debt issuance costs............................................. 16,261
Syndication costs............................................... 1,430
Payment of first year's ICM-IV management and consulting fees... 3,350
--------
Total uses of cash........................................... 986,236
--------
$ 7,764
========
</TABLE>
(3) Represents the elimination of the Greenville/Spartanburg System's
historical cash balance not contributed in connection with TCI's
contribution of such system to the Company.
(4) Reflects an adjustment to the Greenville/Spartanburg System's accounts
receivable and deferred revenue to conform the balance sheet classification
related to billings for cable services not yet provided. Such amounts are
classified as contra accounts receivable in the Greenville/Spartanburg
System's financial statements and as deferred revenue in the Company's
financial statements.
(5) Represents first year's management and consulting fees paid to ICM-IV.
Under ICP-IV's Partnership Agreement, management fees are equal to one
percent of ICP-IV's non-preferred Contributed Equity, and the first year's
management fees are paid in advance upon receipt of the Contributed Equity.
See "The Partnership Agreement."
47
<PAGE> 56
(6) Management's preliminary allocation of the purchase price for the Viacom
Nashville System acquisition is in accordance with the purchase method of
accounting and is as follows:
<TABLE>
<S> <C>
ACQUISITIONS COSTS
Cash to be paid at closing...................................... $318,800
Fees and expenses............................................... 839
Net working capital deficit assumed (excluding inventory)....... (1,970)
--------
Total........................................................ $317,669
========
ALLOCATED AS FOLLOWS
Fair market value of property and equipment..................... $ 55,557
Supply inventory................................................ 2,619
Fair market value of franchise rights and other intangible
assets....................................................... 261,463
Net working capital deficit assumed (excluding inventory)....... (1,970)
--------
Total........................................................ $317,669
========
RECORDED AS FOLLOWS
Existing net book value of property and equipment............... $ 69,956
Decrease in property and equipment to fair market value......... (14,399)
Existing net book value of supply inventory..................... --
Increase in supply inventory to fair market value............... 2,619
Existing net book value of franchise rights and other intangible
assets....................................................... 51,558
Increase in franchise rights and other intangible assets........ 209,905
Net working capital deficit assumed (excluding inventory)....... (1,970)
--------
$317,669
========
</TABLE>
(7) Represents a portion of the proceeds from the Notes used to purchase a
portfolio of Pledged Securities that, together with interest thereon,
represent funds sufficient to provide for payment in full of interest on
the Notes through August 1, 1999 and that, under certain circumstances,
will be pledged as security for repayment of principal of the Notes.
(8) Represents the write-off of the carrying value of the Company's, RMG's and
IPWT's debt issuance costs at June 30, 1996 related to the historical debt
obligations, including the Bridge Loan, that was repaid pursuant to the
Transactions.
(9) Represents financing costs incurred in connection with the borrowings under
the Bank Facility and the Private Offering.
(10) Represents the Greenville/Spartanburg System's net deferred income tax
liabilities not assumed by the Company in connection with the contribution
of the system. TCI accounted for its acquisition of the
Greenville/Spartanburg System in January 1995 under the purchase method of
accounting, which gave rise to the deferred income tax liability and the
corresponding increase to intangible assets. As a partnership, the tax
effects of the Company's results of operations and the related
assets/liabilities will accrue to its partners.
(11) Represents the elimination of the Company's note receivable ($15,000) and
related interest receivable ($347) from RMH.
(12) Represents call premium of $3,205 and one month's interest of $2,856 on RMG
Notes charged against equity, net of income tax benefit of $2,301. One
month's interest on RMG Notes was placed in escrow for the purpose of
defeasing the outstanding principal amounts of the RMG Notes.
(13) The pro forma adjustments to record the new borrowings and repayments of
historical debt obligations pursuant to the Transactions are as follows:
48
<PAGE> 57
<TABLE>
<S> <C>
BORROWINGS
Revolving Credit Facility....................................... $338,000
Term Loan....................................................... 220,000
11 1/4% Senior Notes Due 2006................................... 292,000
--------
Total borrowings................................................ $850,000
========
REPAYMENTS OF HISTORICAL DEBT OBLIGATIONS
Accrued interest on the Bridge Loan at June 30, 1996............ $ 172
RMG's accrued interest at June 30, 1996......................... 8,721
IPWT's accrued interest at June 30, 1996........................ 665
--------
Total accrued interest at June 30, 1996......................... $ 9,558
========
Bridge Loan....................................................... 114,000
RMG's debt........................................................ 331,450
IPWT's debt....................................................... 20,800
--------
466,250
Exchange IPWT's long-term debt for limited partner interest in
ICP-IV.......................................................... 10,000
Exchange IPWT's long-term debt for preferred limited partner
interest in ICP-IV........................................... 25,000
Write-off of IPWT's debt restructuring credit (17)................ 21,746
--------
Total debt................................................... $522,996
========
</TABLE>
(14) Represents pro forma adjustments for certain non-current liabilities not
assumed pursuant to the Viacom Nashville Acquisition.
(15) Represents RMH's Redeemable Preferred Equity Interest owned by TCI
($12,000) pursuant to the acquisition of RMH; and a preferred limited
partner interest and a limited partner interest in ICP-IV owned by GECC
($25,000 and $10,000, respectively) pursuant to the acquisition of IPWT.
(16) Represents TCI's 10.0% ownership interest in RMH's common stock pursuant to
the Transactions.
(17) Represents IPWT's debt restructuring credit balance at June 30, 1996
written off pursuant to the Transactions (see IPWT's March 31, 1996
Financial Statements for details).
(18) Represents the cash equity contributions pursuant to the Financing Plan.
(19) Represents payment to TCI for the Greenville/Spartanburg assumed debt of
$121,260 pursuant to the G/S Contribution Agreement (as defined herein).
(20) Represents cash paid to IP-V for the acquisition of RMH's Class A Common
Stock.
(21) Represents fees incurred in connection with the acquisitions/contribution
of the Previously Affiliated Entities.
(22) Upon completion of the Transactions, conditions were met for an accrual of
$3,030 of contingent interest under the terms of IPWT's loan agreement with
GECC. Of the total contingent interest, a cash payment of $1,363 was made
to GECC, and the remaining interest of $1,667 was converted to a limited
partner interest in ICP-IV.
(23) Represents the additional cash equity contributions of $95,000 and the
elimination of historical equity balance of $111,122 of the Viacom
Nashville System that was not transferred pursuant to the Viacom Nashville
Acquisition.
(24) Represents syndication costs incurred in connection with raising ICP-IV's
Partners' Capital.
(25) Represents notes receivable from ICM-IV issued in connection with ICM-IV's
capital contributions to ICP-IV.
49
<PAGE> 58
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
THE COMPANY
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The selected financial information as of December 31, 1995 and as of and
for the six months ended June 30, 1996 have been derived from the financial
statements of the Company. The Company's financial information and operating
data as of and for the six months ended June 30, 1996 include the results of
operations of the Kingsport System, the ParCable System, the Annox System and
the Tellico System from the dates such systems were acquired by the Company in
1996. Prior to its acquisition of the four systems during the first five months
of 1996, the Company had no operating results to report. These data should be
read in conjunction with the financial statements and related notes thereto of
the Company as of December 31, 1995 and June 30, 1996 and for the year ended
December 31, 1995 and for the six months ended June 30, 1996 included elsewhere
in this Prospectus. The selected financial information of the Kingsport System
and the ParCable System for the periods prior to their acquisition by the
Company are provided separately in this Prospectus. Selected financial
information has not been provided for IPCC because it was formed in April 1996
in contemplation of the Transactions and its financial position and results of
operations are insignificant.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................................. $ -- $ 7,934
Operating expenses:
Programs fees..................................................... -- (1,581)
Other operating costs............................................. -- (2,503)
Depreciation and amortization..................................... -- (4,735)
-------- --------
Loss from operations................................................ -- (885)
Interest and other income........................................... -- 451
Interest expense.................................................... -- (4,002)
-------- --------
Net loss............................................................ $ -- $ (4,436)
======== ========
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets........................................................ $ 707 $115,484
Total debt.......................................................... -- 114,000
Total partners' deficit............................................. (625) (5,158)
FINANCIAL RATIOS AND OTHER DATA
EBITDA(1)........................................................... $ -- $ 3,850
EBITDA margin....................................................... -- 48.5%
Capital expenditures (excluding acquisitions)....................... -- 584
Ratio of earnings to fixed charges(2)............................... -- --
OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES):
Homes passed........................................................ -- 75,986
Basic subscribers................................................... -- 57,431
Basic penetration................................................... -- 75.6%
Premium services units.............................................. -- 23,861
Premium penetration................................................. -- 41.5%
Average monthly revenue per basic subscriber(3)..................... $ -- $ 28.38
</TABLE>
50
<PAGE> 59
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
PREVIOUSLY AFFILIATED ENTITIES
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
As a result of the substantial continuing interest in the Company of the
former owners of the Previously Affiliated Entities, the historical financial
information of the Previously Affiliated Entities has been combined on a
historical cost basis as if the Previously Affiliated Entities had always been
members of the same operating group, except for the Greenville/Spartanburg
System, which has been included only from January 27, 1995, the date such system
was acquired by TCI from an unrelated former cable operator.
The selected combined financial information presented below includes the
historical financial information (i) of RMH as of December 31, 1992, for the
period from May 1, 1992 (the date of RMH's acquisition of RMG) through December
31, 1992, as of and for each of the three years in the period ended December 31,
1995, as of June 30, 1996 and for each of the six month periods ended June 30,
1995 and 1996, (ii) of IPWT as of and for each of the five years in the period
ended December 31, 1995, as of June 30, 1996 and for each of the six month
periods ended June 30, 1995 and 1996, and (iii) of the Greenville/Spartanburg
System as of December 31, 1995, for the period from January 27, 1995 through
December 31, 1995, for the period January 27, 1995 through June 30, 1995 and as
of and for the six months ended June 30, 1996. The combined financial
information of the Previously Affiliated Entities as of and for each of the five
years in the period ended December 31, 1995 have been derived from the audited
Combined Financial Statements of the Previously Affiliated Entities as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995, and from the audited financial statements of RMH as of
December 31, 1992 and 1993 and for the period from April 30, 1992 (the date of
RMH's acquisition of RMG) through December 31, 1992, and from the unaudited
financial statements of IPWT as of December 31, 1991, 1992 and 1993 and for each
of the two years in the period ended December 31, 1992. The combined financial
information of the Previously Affiliated Entities as of and for each of the six
month periods ended June 30, 1995 and 1996 have been derived from the unaudited
Combined Financial Statements of the Previously Affiliated Entities as of June
30, 1996 and for each of the six month periods ended June 30, 1995 and 1996.
These data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements and notes thereto of the Previously Affiliated Entities
included elsewhere in this Prospectus, which includes a discussion of events
that affect the comparability of the information presented below.
The selected financial information of RMH's predecessor business for
periods prior to May 1, 1992 are not included in the combined financial
information presented below. The predecessor business consisted of the combined
operations of certain cable operations in middle and east Tennessee acquired by
RMH on April 30, 1992. Selected consolidated financial information for periods
prior to the date the systems were acquired by RMH is not available or not
practicable to obtain, except for total revenues which were $22,412 and $7,923
for the year ended December 31, 1991 and the period from January 1, 1992 through
April 30, 1992, respectively. The selected financial information of the
Greenville/Spartanburg System as of and for each of the four years in the period
ended December 31, 1994 and for the period from January 1, 1995 through January
26, 1995 are provided separately.
51
<PAGE> 60
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
PREVIOUSLY AFFILIATED ENTITIES (4)
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $ 9,616 $ 32,581 $ 57,685 $ 73,049 $ 128,971 $ 61,495 $ 69,325
Operating expenses:
Program fees.................. (1,644) (4,933) (9,376) (13,189) (24,684) (11,842) (14,680)
Other operating costs......... (4,536) (12,766) (20,215) (25,675) (47,360) (21,860) (25,243)
Management and consulting
fees........................ -- (177) (465) (585) (815) (473) (341)
Depreciation and
amortization................ (15,884) (56,511) (66,940) (68,216) (70,154) (34,533) (31,364)
-------- -------- --------- --------- --------- -------- --------
Total operating
expenses............. (22,064) (74,387) (96,996) (107,665) (143,013) (68,708) (71,628)
-------- -------- --------- --------- --------- -------- --------
Loss from operations............ (12,448) (41,806) (39,311) (34,616) (14,042) (7,213) (2,303)
Interest and other income....... 7 8,793 8,898 1,442 1,172 574 154
Gain (loss) on disposal of fixed
assets........................ -- (2) (1,967) (1,401) (63) 27 (14)
Interest expense................ (8,640) (32,357) (44,760) (44,278) (48,835) (24,161) (36,970)
Other expense................... -- (8) (508) (194) (644) (645) (98)
Equity in net loss of
investee...................... -- (4,900) -- -- -- -- --
-------- -------- --------- --------- --------- -------- --------
Loss before income tax
benefit....................... (21,081) (70,280) (77,648) (79,047) (62,412) (31,418) (39,231)
Income tax benefit.............. 13,756 21,656 19,020 17,502 8,459 12,320
-------- -------- --------- --------- --------- -------- --------
Net loss........................ $(21,081) $(56,524) $ (55,992) $ (60,027) $ (44,910) $(22,959) $(26,911)
======== ======== ========= ========= ========= ======== ========
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................... $ 67,732 $430,716 $ 357,652 $ 275,058 $ 590,494 $581,391
Total debt...................... 92,877 408,655 431,896 403,500 411,219 423,996
Total equity (deficit).......... (27,881) (73,808) (129,800) (166,977) 37,249 23,271
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)....................... $3,436 $ 14,705 $ 27,629 $ 33,600 $ 56,112 $ 27,320 $ 29,061
EBITDA margin................... 35.7% 45.1% 47.9% 46.0% 43.5% 44.4% 41.9%
Capital expenditures (excluding
acquisitions)................. 3,350 9,842 11,334 12,432 26,301 8,146 15,127
Ratio of earnings to fixed
charges(2).................... -- -- -- -- -- -- --
OPERATING STATISTICAL DATA (AT
END OF PERIOD, EXCEPT
AVERAGES):
Homes passed.................... 65,653 228,462 308,429 332,645 503,246 496,184 512,390
Basic subscribers............... 42,374 150,733 211,745 227,050 354,436 345,304 360,401
Basic penetration............... 64.5% 66.0% 68.7% 68.3% 70.4% 69.6% 70.3%
Premium service units........... 18,128 78,868 128,732 151,528 265,216 261,385 271,603
Premium penetration............. 42.8% 52.3% 60.8% 66.7% 74.8% 75.7% 75.4%
Average monthly revenue per
basic subscriber(3)........... $ 18.83 $ 25.20 $ 27.86 $ 27.85 $ 31.08 $ 31.59 $ 32.28
</TABLE>
52
<PAGE> 61
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
GREENVILLE/SPARTANBURG SYSTEM
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The selected financial information for the Greenville/Spartanburg System as
of and for each of the four years in the period ended December 31, 1994 and for
the period from January 1, 1995 through January 26, 1995 have been derived from
the financial statements of the Greenville/Spartanburg System. 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 thereto of the Previously Affiliated Entities, which include the
financial information of the Greenville/Spartanburg System for the period from
January 27, 1995 through December 31, 1995, and the audited financial statements
of the Greenville/Spartanburg System as of and for the year ended December 31,
1994 and for the period January 1, 1995 through January 26, 1995 included
elsewhere in this Prospectus. The balance sheet and statement of operations data
as of and for the years ended December 31, 1991, 1992 and 1993 have been derived
from unaudited financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD
-------------------------------------------- 1/1/95-
1991 1992 1993 1994 1/26/95
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $ 36,935 $ 40,186 $ 43,892 $ 45,899 $3,117
Operating expenses:
Program fees.......................... (9,253) (9,975) (10,908) (14,076) (795 )
Other operating costs................. (14,885) (15,625) (16,859) (17,998) (1,309 )
Depreciation and amortization......... (6,618) (6,922) (7,328) (7,332) (618 )
-------- -------- -------- -------- -------
Total operating expenses...... (30,756) (32,522) (35,095) (39,406) (2,722 )
-------- -------- -------- -------- -------
Income from operations.................. 6,179 7,664 8,797 6,493 395
Interest and other income............... 1,540 998 1,086 1,278 --
Gain on disposal of fixed assets........ 9 13 28 -- --
Interest expense........................ (2,980) (2,068) (1,932) (2,150) (161 )
-------- -------- -------- -------- -------
Income before income tax expense........ 4,748 6,607 7,979 5,621 234
Income tax expense...................... (1,599) (2,194) (3,048) (2,118) (88 )
-------- -------- -------- -------- -------
Income before cumulative effect of
change in accounting principle........ 3,149 4,413 4,931 3,503 146
Cumulative effect of change in
accounting principle.................. 2,635 -- -- -- --
-------- -------- -------- -------- -------
Net income.............................. $ 5,784 $ 4,413 $ 4,931 $ 3,503 $ 146
======== ======== ======== ======== =======
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................ $ 64,477 $ 66,631 $ 71,200 $ 66,469
Total debt.............................. 30,063 28,792 27,386 20,467
Total parent's investment............... 23,818 26,431 31,362 34,865
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)............................... $ 12,797 $ 14,586 $ 16,125 $ 13,825 $1,013
EBITDA margin........................... 34.6% 36.3% 36.7% 30.1% 32.5 %
Capital expenditures (excluding
acquisitions)......................... 7,921 7,016 7,871 11,032 385
Ratio of earnings to fixed charges(2)... 2.5x 4.0x 4.8x 3.4x 2.3 x
OPERATING STATISTICAL DATA (AT END OF
PERIOD, EXCEPT AVERAGES):
Homes passed............................ 148,937 152,071 153,600 155,624
Basic subscribers....................... 96,219 102,031 105,621 112,985
Basic penetration....................... 64.6% 67.1% 68.8% 72.6%
Premium service units................... 80,495 88,054 95,022 102,668
Premium penetration..................... 83.7% 86.3% 90.0% 90.9%
Average monthly revenue per basic
subscriber(5)......................... $ 31.99 $ 33.78 $ 35.23 $ 34.99
</TABLE>
53
<PAGE> 62
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
KINGSPORT SYSTEM
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The selected financial information for the Kingsport System as of and for
the year ended December 31, 1995 and for the period from January 1, 1996 through
January 31, 1996 have been derived from the audited financial statements of the
Kingsport System. The balance sheet and statement of operations data as of and
for the years ended December 31, 1992, 1993 and 1994 and for the six month
period ended June 30, 1995 have been derived from unaudited records of the
Kingsport System. 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 thereto of the Kingsport
System as of and for the year ended December 31, 1995 and as of January 31, 1996
and for the period from January 1, 1996 through January 31, 1996 included
elsewhere in this Prospectus. The selected financial information of the
Kingsport System for 1991, during which period the system was under the
management of a predecessor cable operator, is not practicable to obtain.
<TABLE>
<CAPTION>
SIX
MONTHS MONTH
YEAR ENDED DECEMBER 31, ENDED ENDED
---------------------------------------- JUNE 30, JANUARY 31,
1992 1993 1994 1995 1995 1996
------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................. $ 9,918 $ 10,443 $ 10,100 $ 10,914 $ 5,343 $ 937
Operating expenses:
Program fees...................... (1,875) (2,065) (1,950) (2,219) (973) (211)
Other operating costs............. (2,231) (3,203) (3,116) (3,484) (1,783) (356)
Depreciation and amortization..... (1,207) (1,094) (924) (1,087) (487) (87)
------- ------- ------- ------- ------- -----
Total operating
expenses................ (5,313) (6,362) (5,990) (6,790) (3,243) (654)
------- ------- ------- ------- ------- -----
Income from operations.............. 4,605 4,081 4,110 4,124 2,100 283
Gain on disposal of fixed assets.... -- 45 -- -- -- --
Interest income (expense)........... -- -- 120 (856) 191 (90)
------- ------- ------- ------- ------- -----
Net income.......................... $ 4,605 $ 4,126 $ 4,230 $ 3,268 $ 2,291 $ 193
======= ======= ======= ======= ======= =====
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets........................ $ 8,911 $ 7,791 $ 7,735 $ 8,385
Total debt.......................... -- -- -- --
Total divisional equity............. 7,612 6,867 6,686 6,644
FINANCIAL RATIOS AND OTHER DATA:
EBITDA (1).......................... $ 5,812 $ 5,175 $ 5,034 $ 5,211 $ 2,587 $ 370
EBITDA margin....................... 58.6% 49.6% 49.8% 47.7% 48.4% 39.5%
Capital expenditures (excluding
acquisitions)(6).................. 430 508 1,108 441 18
Ratio of earnings to fixed
charges(2)........................ 80.4x 57.5x 50.8x 4.5x 64.6x 3.0x
OPERATING STATISTICAL DATA (AT END
OF PERIOD, EXCEPT AVERAGES):
Homes passed........................ 39,423 39,951 41,180 42,307 41,641
Basic subscribers................... 29,788 30,006 31,032 31,434 31,438
Basic penetration................... 75.6% 75.1% 75.4% 74.3% 75.5%
Premium service units............... 12,157 9,015 11,049 12,809 13,513
Premium penetration................. 40.8% 30.0% 35.6% 40.7% 43.0%
Average monthly revenue per basic
subscriber(3)..................... $ 28.14 $ 29.15 $ 27.64 $ 28.91 $ 28.47
</TABLE>
54
<PAGE> 63
SELECTED FINANCIAL INFORMATION AND OTHER OPERATING DATA
PARCABLE SYSTEM
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The selected financial information for the ParCable System as of and for
each of the five years in the period ended December 31, 1995, for the six month
period ended June 30, 1995 and for the period from January 1, 1996 through
January 31, 1996 have been derived from unaudited financial records furnished by
the management of the ParCable System.
<TABLE>
<CAPTION>
SIX
MONTHS MONTH
YEAR ENDED DECEMBER 31, ENDED ENDED
----------------------------------------------- JUNE 30, JANUARY 31,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ $ 5,400 $ 5,888 $ 6,406 $ 6,500 $ 6,777 $ 3,343 $ 621
Operating expenses:
Program fees................. (1,217) (1,349) (1,528) (1,606) (1,746) (861) (148)
Other operating costs........ (2,569) (2,689) (3,854) (3,390) (2,223) (1,073) (242)
Management and consulting
fees...................... -- -- -- -- (1,243) (480) (113)
Depreciation and
amortization.............. (729) (762) (722) (680) (662) (334) (55)
------- ------- ------- ------ ------ ------ -----
Total operating
expenses........... (4,515) (4,800) (6,104) (5,676) (5,874) (2,748) (558)
------- ------- ------- ------- ------- -------- -----
Income from operations......... 885 1,088 302 824 903 595 63
Interest and other income...... 36 66 34 20 -- -- --
Interest expense............... -- -- -- (18) -- -- --
------- ------- ------- ------- ------- -------- -----
Income before income tax
expense...................... 921 1,154 336 826 903 595 63
Income tax expense............. -- -- 228 37 74 36 5
------- ------- ------- ------- ------- -------- -----
Net income..................... $ 921 $ 1,154 $ 108 $ 789 $ 829 $ 559 $ 58
======= ======= ======= ======= ======= ======== =====
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets................... $ 4,326 $ 3,727 $ 3,188 $ 2,693 $ 2,221
Total debt..................... -- -- -- -- --
Total shareholder's equity..... 5,839 7,012 8,195 10,790 13,318
FINANCIAL RATIOS AND OTHER
DATA:
EBITDA(1)...................... $ 1,614 $ 1,850 $ 1,024 $ 1,504 $ 1,565 $ 929 $ 118
EBITDA margin.................. 29.9% 31.4% 16.0% 23.1% 23.1% 27.8% 19.0%
Capital expenditures (excluding
acquisitions)................ 296 176 190 169 135 92 6
Ratio of earnings to fixed
charges(2)................... 29.8x 29.1x 10.6x 16.9x 26.1x 34.1x 22.0x
OPERATING STATISTICAL DATA (AT
END OF PERIOD, EXCEPT
AVERAGES):
Homes passed................... 26,622 26,827 26,985 27,238 27,529 27,379
Basic subscribers.............. 18,846 19,385 20,363 21,019 21,729 21,339
Basic penetration.............. 70.8% 72.3% 75.5% 77.2% 78.9% 77.9%
Premium service units.......... 10,906 9,992 9,788 9,833 9,464 9,802
Premium penetration............ 57.9% 51.5% 48.1% 46.8% 43.6% 45.9%
Average monthly revenue per
basic subscriber(3).......... $ 25.61 $ 25.93 $ 26.96 $ 26.33 $ 26.64 $ 26.38
</TABLE>
55
<PAGE> 64
SELECTED FINANCIAL INFORMATION AND OPERATING DATA
VIACOM NASHVILLE SYSTEM
(IN THOUSANDS, EXCEPT FOR RATIOS AND OPERATING DATA)
The selected financial information for the Viacom Nashville System as of
and for each of the five years in the period ended December 31, 1995 have been
derived from the audited financial statements of the Viacom Nashville System.
The selected financial information for the Viacom Nashville System as of and for
the six months ended June 30, 1995 and 1996 have been derived from the unaudited
financial records of the Viacom Nashville System. This data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto of the Viacom Nashville System for each of the three years in the period
ended December 31, 1995 and the six months ended June 30, 1995 and 1996 included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ $ 44,097 $ 48,746 $ 53,419 $ 54,648 $ 62,042 $ 29,834 $ 33,293
Costs and expenses:
Program fees................. (6,973) (7,788) (8,375) (9,624) (13,894) (6,595) (7,872)
Other operating costs........ (20,877) (22,322) (24,173) (24,953) (25,098) (11,973) (13,428)
Depreciation and
amortization............... (7,141) (7,155) (8,010) (8,368) (9,655) (4,605) (5,657)
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses............ (34,991) (37,265) (40,558) (42,945) (48,647) (23,173) (26,957)
-------- -------- -------- -------- -------- -------- --------
Income from operations......... 9,106 11,481 12,861 11,703 13,395 6,661 6,336
Interest and other income...... 64 4 1 4 13 -- --
Gain on disposal of fixed
assets....................... 30 20 4 13 20 -- --
Interest expense............... (6,513) (4,372) (3,043) (3,599) (4,819) (2,458) (2,436)
Other expense.................. (81) (73) (80) (108) (157) (61) (41)
-------- -------- -------- -------- -------- -------- --------
Income before income tax
expense and extraordinary
item......................... 2,606 7,060 9,743 8,013 8,452 4,142 3,859
Income tax expense............. (1,716) (3,278) (282) (1,705) (4,659) (2,319) (2,125)
Extraordinary
item -- utilization of net
operating loss
carryforwards................ -- 1,022 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income..................... $ 890 $ 4,804 $ 9,461 $ 6,308 $ 3,793 $ 1,823 $ 1,734
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................... $ 88,387 $ 84,909 $ 90,342 $104,187 $117,198 $123,907
Total debt..................... -- -- -- -- --
Total owner's equity........... 86,140 82,659 87,122 99,482 105,637 $111,122
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(1)...................... $ 16,247 $ 18,636 $ 20,871 $ 20,071 $ 23,050 $ 11,266 $ 11,993
EBITDA margin.................. 36.8% 38.2% 39.1% 36.7% 37.2% 37.8% 36.0%
Capital expenditures (excluding
acquisitions)................ 3,132 5,013 9,688 22,827 22,958 10,470 12,480
Ratio of earnings to fixed
charges(2) 1.3x 2.3x 3.4x 2.7x 2.4x 2.4x 2.3x
OPERATING STATISTICAL DATA (AT
END OF PERIOD, EXCEPT
AVERAGES):
Homes passed................... 214,208 221,376 227,116 233,191 240,649 235,890 243,705
Basic subscribers.............. 112,354 119,089 125,374 135,952 146,266 141,045 149,362
Basic penetration.............. 52.5% 53.8% 55.2% 58.3% 60.8% 59.8% 61.3%
Premium service units.......... 80,763 81,420 98,980 129,479 143,789 139,502 146,395
Premium penetration............ 71.9% 68.4% 78.9% 95.2% 98.3% 98.9% 98.0%
Average monthly revenue per
basic subscriber(3).......... $ 33.43 $ 34.95 $ 36.07 $ 34.76 $ 36.57 $ 35.53 $ 37.15
</TABLE>
56
<PAGE> 65
NOTES TO SELECTED FINANCIAL INFORMATION AND OPERATING DATA
(1) Earnings before interest, income taxes, depreciation and amortization, gain
(loss) on disposal of fixed assets, other income (expense) and equity in net
loss of investee (which is applicable only to RMH in 1992, see Note 7 to RMH
Consolidated Financial Statements). EBITDA is commonly used in the cable
industry to analyze and compare cable television companies on the basis of
operating performance, leverage and liquidity. However, it does not purport
to represent cash flows from operating activities in related Statements of
Cash Flows and should not be considered in isolation or as a substitute for
or superior to measures of performance in accordance with GAAP.
(2) In computing the ratio of earnings to fixed charges, earnings consist of
income (loss) before income tax expense (benefit) and fixed charges. Fixed
charges include interest on long-term borrowings, related amortization of
debt issuance costs and the portion of rental expense under operating leases
deemed to be representative of the interest factor. For the following
entities, earnings were inadequate to cover fixed charges by the following
amounts for each of the following periods:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
The Company........................... -- -- -- -- -- -- $ 4,436
Previously Affiliated Entities(a)..... $21,081 $70,280 $77,648 $79,047 $62,412 $31,418 $39,231
</TABLE>
--------------------
(a) The 1991 information for RMH is not included, as the information is not
practicable to obtain. The 1992 amount for RMH represents earnings
inadequate to cover fixed charges for the period from May 1, 1992 to
December 31, 1992.
(3) Average monthly revenue per basic subscriber is calculated as the sum of
total revenue per average number of basic subscribers for each month divided
by the number of months during the period presented. The average number of
basic subscribers for each month is calculated as the sum of the number of
basic subscribers as of the beginning of the month and the number of basic
subscribers as of the end of the month divided by two.
(4) The comparability of the operating data set forth above for the Previously
Affiliated Entities for 1992, 1993 and 1994 is affected by RMH's acquisition
of cable systems. The number of basic subscribers served by RMH increased by
approximately 26,800 and 47,300 during 1992 and 1993, respectively, as a
result of the cable television systems acquired.
(5) Average monthly revenue per basic subscriber for the Greenville/Spartanburg
System for the years ended December 31, 1991, 1992, 1993 and 1994 is
calculated as the total revenue for the year divided by the average number
of basic subscribers for the corresponding year. Average number of basic
subscribers was calculated as the sum of the number of basic subscribers at
January 1 and December 31 of each year divided by two.
(6) The amount of capital expenditures for the Kingsport System in 1992 is not
practicable to obtain.
57
<PAGE> 66
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the separate
financial statements of the Previously Affiliated Entities, the
Greenville/Spartanburg System, the Viacom Nashville System and the Kingsport
System, and other information appearing elsewhere in this Prospectus. The
audited financial statements for the Previously Affiliated Entities present the
results of operations for IPWT, RMH and the Greenville/Spartanburg System on a
combined basis as if the entities had always been members of the same operating
group, except for the Greenville/Spartanburg System, which has been included
from January 27, 1995, the date such system was acquired by TCI from TeleCable
Corporation ("TeleCable").
The discussion of results of operations covers periods prior to the
Transactions. Accordingly, the analysis does not reflect the significant impact
that the Transactions will have on the Company. In addition, the discussion does
not address the historical results of operations or financial condition of the
ParCable System and the Miscellaneous Acquisitions due to the relative
immateriality of their respective results during the periods covered. See "Pro
Forma Financial Data" and "The Acquisitions."
OVERVIEW
Each of the Previously Affiliated Entities, the Greenville/Spartanburg
System, the Viacom Nashville System and the Kingsport System has generated
substantially all of its revenues from monthly subscription fees for basic,
expanded basic (also referred to as cable programming services, "CPS"), premium
and ancillary services (such as rental of converters and remote control devices)
and installation charges. Additional revenues have been generated from local and
national advertising sales, pay-per-view programming and home shopping
commissions.
The Systems have generated increases in revenues during each of the past
three years and the six months ended June 30, 1996 primarily as a result of
internal subscriber growth. The Company's ability to increase its basic and
expanded basic service rates has been limited by the 1992 Cable Act, which
generally became effective on September 1, 1993. However, after 1994, channels
have been added in certain of the Company's cable television systems and rate
increases have been implemented on the expanded basic tier. Programming fees,
which comprise a substantial portion of total operating expenses, have
experienced significant industry-wide increases, particularly during 1995 and
the first quarter of 1996. Operating, general and administrative expenses have
also increased as a result of subscriber growth and costs related to
implementing rate regulation. The net effect of these factors has had a negative
impact on EBITDA margins. The Company expects to realize significant general and
administrative cost savings as a result of clustering the systems and to realize
reduced program fees through its relationship with TCI. There can be no
assurance that expected cost savings can be achieved in conjunction with the
Acquisitions. See "Business -- Relationship with TCI," "-- Operating Strategy"
and "Risk Factors -- Loss of Relationship with TCI."
Each of the Company, IPWT and RMH has reported net losses primarily caused
by high levels of depreciation and amortization and interest expense.
Depreciation and amortization expense also had a significant impact on the
operating results of the Viacom Nashville System and the Greenville/Spartanburg
System. Management believes that net losses are common for cable television
companies and that the Company will incur net losses in the future.
Historically, certain programmers have periodically increased the rates
charged for their services. Management believes that such rate increases are
common for the cable television industry and that the Company will experience
program fee rate increases in the future.
Rate Regulation and Competition
The 1992 Cable Act significantly changed the regulatory environment in
which the Company operates. Rate regulations adopted by the FCC in response to
the 1992 Cable Act generally became effective on September 1, 1993 and were
subsequently amended on several occasions. The 1996 Act eliminates rate
regulation on the CPS tier after March 31, 1999. In addition, rates are
deregulated on both the basic and CPS
58
<PAGE> 67
tiers when a cable system becomes subject to effective competition, which under
the 1996 Act would include the provision, other than by direct broadcast
satellite, of comparable video programming by a local exchange carrier in the
franchise area.
RMH and IPWT have elected to justify their existing basic and CPS tier
rates under FCC cost of service rules, which are subject to further revision and
regulatory interpretation. The Viacom Nashville System, the
Greenville/Spartanburg System and the Kingsport System have determined their
rates based on a benchmark established by the FCC. RMH's and IPWT's cost of
service cases justifying rates for the CPS tier of service are currently pending
before the FCC and, pursuant to FCC regulations, several local franchises have
requested that the FCC review the Systems' basic rate justifications. Management
believes that the Systems and the Viacom Nashville System have substantially
complied in all respects with related FCC regulations and the outcome of these
proceedings will not have a material adverse effect on the financial statements
of the Company. See "Risk Factors -- Regulation of the Cable Television
Industry" and "Legislation and Regulation."
The Company is subject to actual or potential competition from alternative
providers of video services, including wireless service providers and local
telephone companies. Management cannot predict the effect of such competition on
the Company. See "Risk Factors -- Competition in Cable Television Industry;
Rapid Technological Change"; "Business -- Competition" and "Legislation and
Regulation."
Transactions with Affiliates
TCI's indirect ownership of IPWT and RMH and its direct ownership of the
Greenville/Spartanburg System from January 27, 1995 has enabled each of these
systems to purchase programming services from Satellite Services Inc. ("SSI"), a
subsidiary of TCI. During the three years ended December 31, 1995, IPWT and RMH
paid, in the aggregate, 83.7% of their program fees to SSI. During the period
from January 27, 1995 to December 31, 1995, the Greenville/Spartanburg System
paid 74.5% of its program fees to SSI.
Due to TCI's equity ownership in the Company, the Company is also able to
purchase programming services from SSI. Management believes that the aggregate
programming rates obtained through this relationship are lower than the rates
the Company could obtain through arm's-length negotiations with third parties.
TCI is under no obligation to offer such benefits to the Company, and there can
be no assurance that such benefits will continue to be available in the future
should TCI's ownership in the Company significantly decrease or should TCI for
any other reason decide not to continue to offer such benefits to the Company.
The loss of the relationship with TCI could adversely affect the financial
position and results of operations of the Company. See "Risk Factors -- Loss of
Beneficial Relationship with TCI."
The Related InterMedia Entities and the Company have entered into
agreements ("Administrative Agreements") with IMI, pursuant to which IMI
provides accounting, operational, marketing, engineering, legal, regulatory
compliance and other administrative services at cost. IMI is wholly owned by Leo
J. Hindery, Jr., who is the managing general partner of and owns the controlling
interest in ICM-IV, which is the general partner of ICP-IV. Generally, IMI
charges costs to the Related InterMedia Entities based on each entity's number
of basic subscribers as a percentage of total basic subscribers for all of the
Related InterMedia Entities. In addition to changes in IMI's aggregate cost of
providing such services, changes in the number of the Company's basic
subscribers and/or changes in the number of basic subscribers for the other
Related InterMedia Entities will affect the level of IMI costs charged to the
Company. IMI charged $0.4 million, $0.6 million, $0.6 million and $0.3 million
to IPWT in 1993, 1994, 1995, and the first six months of 1996, respectively, and
$1.1 million, $2.0 million, $2.4 million and $1.3 million to RMH in 1993, 1994,
1995, and the first six months of 1996, respectively. Under the terms of the
Administrative Agreements, management expects the level of IMI costs charged to
the Company in 1996 to be comparable to the level of costs charged to RMH and
IPWT in 1995.
ICM-IV manages the business of the Company for an annual fee of one percent
of non-preferred Contributed Equity. InterMedia Capital Management V, L.P.
("ICM-V") managed the business of RMH for fees of $0.5 million for each of the
years ended December 31, 1993 and 1994 and $0.3 million for the year ended
December 31, 1995. InterMedia Capital Management ("ICM") managed the business of
IPWT for a
59
<PAGE> 68
fee of $0.1 million for the year ended December 31, 1994 and $0.5 million for
the year ended December 31, 1995. For a more detailed description of the
agreements the Company and the Related InterMedia Entities have with IMI, see
"Certain Relationships and Related Transactions."
RESULTS OF OPERATIONS -- THE COMPANY
The following table sets forth for the period indicated statement of
operations and other data of the Company expressed in dollar amounts (in
thousands) and as a percentage of revenue. On January 29, 1996, February 1, 1996
and May 2, 1996, the Company acquired several cable television systems. The
acquisitions have been accounted for as purchases and the results of operations
of the acquired systems have been included in the 1996 results of operations
only from the dates the systems were acquired.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
----------------------
PERCENTAGE
AMOUNT OF REVENUE
------- ----------
<S> <C> <C>
Statement of Operations Data:
Revenue......................................................... $ 7,934 100.0%
Costs and Expenses:
Program fees.................................................. (1,581) (19.9)
Other direct and operating expenses(1)........................ (902) (11.4)
Selling, general and administrative(2)........................ (1,601) (20.2)
Depreciation and amortization................................... (4,735) (59.7)
------- -----
Loss from operations............................................ (885) (11.2)
Interest and other income....................................... 451 5.7
Interest expense................................................ (4,002) (50.4)
------- -----
Net loss........................................................ $(4,436) (55.9)
======= =====
Other Data:
EBITDA(3)....................................................... $ 3,850 48.5%
</TABLE>
- ---------------
(1) Other direct and operating expenses consist of expenses relating to
installations, plant repairs and maintenance and other operating costs
directly associated with revenues.
(2) Selling, general and administrative expenses consist mainly of costs related
to system offices, customer service representatives and sales and
administrative employees.
(3) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and other income (expense). EBITDA is a commonly used
measure of performance in the cable industry. However, it does not purport
to represent cash flows from operating activities in related Consolidated
Statements of Cash Flows and should not be considered in isolation or as a
substitute for measures of performance in accordance with GAAP. For
information concerning cash flows from operating, investing and financing
activities, see Audited Financial Statements included elsewhere in this
Prospectus.
For the six months ended June 30, 1996, the Company generated a loss from
operations of $0.9 million, or 11.2% of revenues, and EBITDA of $3.9 million or
48.5% of revenues. From the dates of acquisition through June 30, 1996 revenues
of $7.9 million were generated from approximately 57,431 basic subscribers and
approximately 23,861 premium units. The acquired systems had total revenues of
$18.9 million (unaudited) for the year ended December 30, 1995. Costs and
expenses for the period represent normal operating costs and include program fee
expenses of $1.6 million, or 19.9% of revenues, other direct and operating costs
of $0.9 million, or 11.4% of revenues, and selling, general and administrative
expenses of $1.6 million, or 20.2% of revenues. Depreciation and amortization
expense of $4.7 million, or 59.7% of revenues, represents depreciation and
amortization on the revalued system assets purchased in January, February and
May 1996. The Company's loss from operations primarily resulted from the
significant level of depreciation and amortization expense. Interest expense,
which primarily reflects interest on funds borrowed and used to
60
<PAGE> 69
acquire the Company's cable assets, amounted to $4.0 million, or 50.4% of
revenues. Management expects interest expense to increase during the remainder
of the year in response to higher levels of borrowings to fund future planned
acquisitions. The Company recognized a net loss of $4.4 million, or 55.9% of
revenues, primarily as a result of the high levels of interest, depreciation and
amortization expenses.
RESULTS OF OPERATIONS -- THE PREVIOUSLY AFFILIATED ENTITIES
The comparability of results of operations for the Previously Affiliated
Entities for the years ended December 31, 1993 and 1994 is affected by RMH's
acquisitions of cable television systems. During February, March and December
1993, RMH acquired cable television assets serving at the time approximately
1,400, 15,600 and 30,300 basic subscribers, respectively, in the
Greenville/Spartanburg Cluster and Nashville/Mid-Tennessee Cluster (the "1993
Acquisitions"). Results of operations for the 1993 Acquisitions are included in
1993 results of operations only from the dates the systems were acquired, while
results of operations for these systems are included for the full years in 1994
and 1995.
The comparability of results of operations for the Previously Affiliated
Entities for the six months ended June 30, 1995 and 1996, and the years ended
December 31, 1994 and 1995 is affected by the combining of results of operations
for the Greenville/Spartanburg System from January 27, 1995 with results of
operations for IPWT and RMH (the "1995 Combination").
The following table sets forth for the periods indicated statement of
operations and other data of the Previously Affiliated Entities expressed in
dollar amounts (in thousands) and as a percentage of revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------
1995 1996
----------------------- -----------------------
PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $ 61,495 100.0% $ 69,325 100.0%
Costs and Expenses:
Program fees.......................... (11,842) (19.2) (14,680) (21.2)
Other direct and operating
expenses(1)........................ (8,119) (13.2) (8,355) (12.1)
Selling, general and
administrative(2).................. (13,741) (22.3) (16,888) (24.3)
Management and consulting fee........... (473) (0.8) (341) (0.5)
Depreciation and amortization........... (34,533) (56.2) (31,364) (45.2)
------- ----- ------- -----
Loss from operations.................... (7,213) (11.7) (2,303) (3.3)
Interest and other income............... 574 0.9 154 0.2
Gain (loss) on disposal of fixed
asset................................. 27 0.0 (14) 0.0
Interest expense........................ (24,161) (39.3) (36,970) (53.3)
Other expense........................... (645) (1.0) (98) (0.1)
Income tax benefit...................... 8,459 13.8 12,320 17.7
------- ----- ------- -----
Net loss................................ (22,959) (37.3) (26,911) (38.8)
======= ===== ======= =====
OTHER DATA:
EBITDA(3)............................... 27,320 44.4% 29,061 41.9%
</TABLE>
61
<PAGE> 70
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1993 1994 1995
----------------------- ----------------------- -----------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE AMOUNT OF REVENUE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $ 57,685 100.0% $ 73,049 100.0% $128,971 100.0%
Costs and Expenses:
Program fees.................. (9,376) (16.3) (13,189) (18.1) (24,684) (19.1)
Other direct and operating
expenses(1)................. (7,801) (13.5) (9,823) (13.4) (16,851) (13.1)
Selling, general and
administrative(2)........... (12,414) (21.5) (15,852) (21.7) (30,509) (23.7)
Management and consulting fee... (465) (0.8) (585) (0.8) (815) (0.6)
Depreciation and amortization... (66,940) (116.0) (68,216) (93.4) (70,154) (54.4)
------- ------ ------- ----- ------- -----
Loss from operations............ (39,311) (68.1) (34,616) (47.4) (14,042) (10.9)
Interest and other income....... 8,898 15.4 1,442 2.0 1,172 0.9
Loss on disposal of fixed
assets........................ (1,967) (3.4) (1,401) (1.9) (63) --
Interest expense................ (44,760) (77.6) (44,278) (60.6) (48,835) (37.9)
Other expense................... (508) (0.9) (194) (0.3) (644) (0.5)
Income tax benefit.............. 21,656 37.5 19,020 26.0 17,502 13.6
------- ------ ------- ----- ------- -----
Net loss........................ $(55,992) (97.1)% $(60,027) (82.2)% $(44,910) (34.8)%
======= ====== ======= ===== ======= =====
OTHER DATA:
EBITDA(3)....................... $ 27,629 47.9% $ 33,600 46.0% $ 56,112 43.5%
</TABLE>
- ---------------
(1) Other direct and operating expenses consist of expenses relating to
installations, plant repairs and maintenance and other operating costs
directly associated with revenues.
(2) Selling, general and administrative expenses consist mainly of costs related
to system offices, customer service representatives and sales and
administrative employees.
(3) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization, gain (loss) on disposal of fixed assets and other income
(expense). EBITDA is a commonly used measure of performance in the cable
industry. However, it does not purport to represent cash flows from
operating activities in related Consolidated Statements of Cash Flows and
should not be considered in isolation or as a substitute for measures of
performance in accordance with GAAP. For information concerning cash flows
from operating, investing and financing activities, see Audited Financial
Statements included elsewhere in this Prospectus.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Revenues. The Previously Affiliated Entities' revenues increased $7.8
million, or by 12.7%, for the six months ended June 30, 1996 compared with the
corresponding period in the prior year. The impact of comparing revenues for the
six months ended June 30, 1996 with revenues for the period from January 27,
1995 to June 30, 1995 for the Greenville/Spartanburg System resulted in a $3.1
million increase in revenues. Additionally, revenues increased $2.4 million due
to subscriber growth, $2.5 million due to basic and expanded basic rate
increases and $0.3 million due to increases in ancillary service revenues. As of
June 30, 1996, basic subscribers and premium units increased from June 30, 1995
by approximately 15,100 subscribers, or 4.4%, and 10,220 units, or 3.9%,
respectively. The increase in basic subscribers primarily reflects the impact of
an increase of approximately 16,210 homes passed and higher basic penetration
which grew from 69.6% at June 30, 1995 to 70.3% at June 30, 1996. During the
three months ended March 31, 1996, each of the Previously Affiliated Entities
implemented basic and/or expanded basic rate increases. The rate increases
resulted in a 4.2% average increase in overall rates charged for basic and
expanded basic services combined. Partially offsetting these revenue increases
was a $0.4 million decrease in pay service revenues reflecting the
62
<PAGE> 71
impact of premium discount packages which offer combinations of premium channels
at prices that represent significant savings over the price for an individual
channel.
Program Fees. Program fees increased $2.8 million, or by 24.0%, for the
six months ended June 30, 1996 compared with the corresponding period in the
prior year. The impact of comparing program fees for the six months ended June
30, 1996 with program fees for the period from January 27, 1995 to June 30, 1995
for the Greenville/Spartanburg System resulted in a $0.8 million increase in
program fees. Additionally, program fees increased $0.5 million due to
subscriber growth and $1.5 million due to the net impact of higher rates charged
by certain programmers and higher pay-per-view program costs. The increase in
program fees as a percentage of revenues reflects the impact of program fee
increases outpacing revenue growth for the period.
Other Direct and Operating Expenses. Other direct and operating expenses
increased $0.2 million, or by 2.9%, for the six months ended June 30, 1996
compared with the corresponding period in the prior year. The impact of
comparing other direct and operating expenses for the six months ended June 30,
1996 with the period from January 27, 1995 to June 30, 1995 for the
Greenville/Spartanburg System resulted in a $0.7 million increase in expense.
Increased labor costs for the RMH and IPWT systems contributed $0.2 million to
the increase in costs. RMH labor costs increased primarily due to an increase in
workforce driven by basic subscriber growth, and IPWT labor costs increased due
to an increase in the average salary per employee. These increases were offset
by a $0.7 million reduction in costs primarily due to lower labor costs for the
Greenville/Spartanburg System driven by a decrease in workforce and an increase
in construction-related activities. Also contributing to the decrease was a
reduction in repairs and maintenance expense for the RMH and IPWT systems. Other
direct and operating expenses as a percentage of revenues decreased due to
proportionately lower increases in costs relative to revenue growth.
Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses increased $3.1 million, or by 22.9%, for the six months ended
June 30, 1996 compared with the corresponding period of the prior year. The
impact of comparing SG&A for the six months ended June 30, 1996 with SG&A for
the period from January 27, 1995 to June 30, 1995 for the Greenville/Spartanburg
System resulted in a $0.6 million increase in SG&A. Of the remaining increase,
$0.4 million represents an increase in the corporate overhead cost allocation
from TCI to the Greenville/Spartanburg System which TCI began allocating in May
1995. Also contributing to the higher costs were increases in labor, marketing
and advertising sales expense and professional services costs of approximately
$0.4 million, $0.6 million, and $0.2 million, respectively. The labor cost
increase primarily resulted from increases in the workforce driven by basic
subscriber growth. The marketing and advertising sales expense increases
resulted from higher levels of marketing activities for each of the Previously
Affiliated Entities and an increase in advertising sales activities for the
Greenville/ Spartanburg System. The increase in professional services reflects
increased utilization of outside labor for the RMH system. In addition, other
SG&A costs increased by an aggregate amount of $0.9 million due to subscriber
growth.
SG&A as a percentage of revenues increased due to proportionately higher
costs for the Greenville/ Spartanburg System in relation to revenue growth.
Depreciation and Amortization. Depreciation and amortization decreased
$3.2 million, or by 9.2%, for the six months ended June 30, 1996 compared with
the corresponding period of the prior year. The decrease reflects a combined
$3.8 million decrease for the IPWT and RMH systems due to their use of an
accelerated depreciation method that results in higher depreciation expense
being recognized in the earlier years and lower expense in the later years. This
decrease was offset by the $0.6 million impact of comparing depreciation and
amortization for the six months ended June 30, 1996 with depreciation and
amortization for the period from January 27, 1995 to June 30, 1995 for the
Greenville/Spartanburg System.
Interest Expense. Interest expense increased $12.8 million, or by 53.0%,
for the six months ended June 30, 1996 compared with the corresponding period of
the prior year because of an increase in interest expense allocations from TCI
for the Greenville/Spartanburg System.
Income Tax Benefit. Income tax benefit increased $3.9 million, or by
45.6%, for the six months ended June 30, 1996 compared with the corresponding
period of the prior year primarily due to an increase in the
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<PAGE> 72
taxable loss before income tax benefit coupled with an increase in the effective
tax benefit rates for the Greenville/Spartanburg System and RMH.
RMH has not established a valuation allowance to reduce the deferred tax
assets related to its unexpired net operating loss carryforwards. Due to an
excess of appreciated asset value over the tax basis of RMH's net assets,
Management believes it is more likely than not that the deferred tax assets
related to the unexpired net operating losses will be realized.
Net Loss. Net loss increased $4.0 million, or by 17.2%, for the six months
ended June 30, 1996 compared with the corresponding period of the prior year
primarily due to the increase in interest expense partially offset by an
increase in EBITDA and the income tax benefit.
EBITDA. EBITDA increased $1.7 million, or by 6.4%, for the six months
ended June 30, 1996 compared with the corresponding period of the prior year. Of
the increase, $1.0 million represents the impact of comparing EBITDA for the six
months ended June 30, 1996 with EBITDA for the period January 27, 1995 to June
30, 1995 for the Greenville/Spartanburg System. The remainder of the increase is
attributable to higher revenues partially offset by increases in program fees,
other direct and operating expenses and SG&A. EBITDA as a percentage of revenues
decreased due to increases in program fees and SG&A expenses as a percentage of
revenues.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenues. The Previously Affiliated Entities' revenues increased $15.4
million, or 26.6%, for 1994 compared to 1993 and increased $55.9 million, or
76.6%, for 1995 compared to 1994. The 1993 Acquisitions accounted for $11.7
million of the increase in revenues for 1994 compared to 1993 and the 1995
Combination accounted for $47.2 million of the increase in revenues for 1995
compared to 1994.
Excluding the impact of the 1993 Acquisitions and the 1995 Combination,
internal subscriber growth accounted for approximately $4.9 million and $4.8
million of the increase in revenues for 1994 compared to 1993 and 1995 compared
to 1994, respectively. Basic subscribers increased by approximately 15,300, or
7.2%, for 1994 compared to 1993 and 13,000, or 5.8%, for 1995 compared to 1994.
The increase in basic subscribers primarily reflects the impact of an increase
in homes passed during the three year period and higher basic penetration rates
for 1995 compared to 1994. The number of premium units increased by
approximately 22,800 units, or 17.7%, and 10,500 units, or 6.9%, for 1994
compared to 1993 and 1995 compared to 1994, respectively, reflecting the impact
of premium discount packages which offer combinations of premium channels at
prices that represent significant savings over the price for individual
channels. This volume increase was slightly offset by decreases in revenues of
approximately $0.4 million and $0.1 million for 1994 compared to 1993 and 1995
compared to 1994, respectively, due to the impact of lower rates per subscriber
from the premium discount packages.
The impact of higher rates due to basic and expanded basic rate increases
accounted for approximately $3.9 million of the increase in revenues for 1995
compared to 1994. The FCC ordered a freeze on basic and expanded basic rates for
the period April 5, 1993 through May 15, 1994. In compliance with the rate
freeze, IPWT and RMH did not increase their basic and expanded basic rates
during this period, and chose to maintain their rates through December 30, 1994.
During the period from December 31, 1994 through the first quarter of 1995,
channels were added and rate increases were implemented on the expanded basic
tier. The rate increases resulted in a 7.6% average increase in RMH's and IPWT's
overall rates charged for basic and expanded basic services combined.
Effective September 1, 1993, FCC regulations required the Previously
Affiliated Entities to cease charging monthly rates for additional outlets. In
1993, IPWT and RMH recognized additional outlet revenues of $1.7 million, or
3.0% of total revenues. The impact of lost additional outlet revenues was
partially offset by a $0.7 million increase in revenues from ancillary services
and installation charges.
Program Fees. Program fees increased $3.8 million, or 40.7%, for 1994
compared to 1993 and increased $11.5 million, or 87.2%, for 1995 compared to
1994. Program fees increased $1.8 million for 1994 compared to
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<PAGE> 73
1993 due to the 1993 Acquisitions and increased $9.1 million for 1995 compared
to 1994 due to the 1995 Combination.
Excluding the impact of the 1993 Acquisitions, program fees increased
approximately $1.3 million for 1994 compared to 1993 as a result of internal
subscriber growth. The remainder of the 1994 increase was attributable to new
channel additions and the impact of higher rates charged by certain programmers,
slightly offset by lower premium service effective rates attributable to volume
discounts for the RMH and IPWT systems. Excluding the impact of the 1995
Combination, program fees increased in 1995 compared to 1994 by $1.2 million due
to subscriber growth and by $1.2 million due to the net impact of (i) new
channel additions, (ii) higher rates charged by certain programmers and (iii)
higher pay-per-view program costs, slightly offset by lower premium service
effective rates due to volume discounts.
The increase in program fees as a percentage of revenues for 1994 compared
to 1993 reflects the impact of (i) the rate freeze on revenues and (ii) premium
discount packages. In 1995, program fees as a percentage of revenues increased
compared to 1994 reflecting the impact of the premium discount packages.
Other Direct and Operating Expenses. Other direct and operating expenses
increased $2.0 million, or 25.9%, for 1994 compared to 1993 and increased $7.0
million, or 71.6%, for 1995 compared to 1994. The 1993 Acquisitions accounted
for $1.2 million of the increase for 1994 compared to 1993 and the 1995
Combination accounted for $6.6 million of the increase for 1995 compared to
1994. Excluding the impact of the 1993 Acquisitions and the 1995 Combination,
other direct and operating expenses increased due to internal subscriber growth.
Other direct and operating expenses as a percentage of revenues remained
relatively constant for the three years ended December 31, 1995.
Selling, General and Administrative. SG&A expenses increased $3.4 million,
or 27.7%, for 1994 compared to 1993 and increased $14.7 million, or 92.5%, for
1995 compared to 1994. The 1993 Acquisitions accounted for $1.9 million of the
increase for 1994 compared to 1993 and the 1995 Combination accounted for $12.1
million of the increase for 1995 compared to 1994.
The remainder of the 1994 increase resulted from increases in payroll
expense for IPWT and RMH attributable to the implementation of customer service
and marketing initiatives and an increase in the corporate overhead allocation
due to corporate cost increases primarily related to the implementation of FCC
rate regulation. The remainder of the 1995 increase resulted from increases in
payroll, data processing and marketing costs for IPWT and RMH reflecting the
impact of an increase in the average salary per employee, subscriber growth and
customer service initiatives.
SG&A as a percentage of revenue remained relatively constant in 1994
compared to 1993. SG&A as a percentage of revenue increased in 1995 compared to
1994 primarily due to proportionately higher costs for the
Greenville/Spartanburg System in relation to revenue.
Depreciation and Amortization. Depreciation and amortization expense
increased $1.3 million, or 1.9%, for 1994 compared to 1993 and increased $1.9
million, or 2.8%, for 1995 compared to 1994. The increase in 1994 compared to
1993 primarily reflects the impact of the 1993 Acquisitions, partially offset by
the impact of the use of an accelerated depreciation method by IPWT and RMH.
The increase in 1995 compared to 1994 is primarily due to the impact of the
1995 Combination, offset by (i) the impact of IPWT's and RMH's use of an
accelerated depreciation method that results in higher depreciation expense
being recognized in the earlier years and lower expense in later years and (ii)
the effect of the cost of certain IPWT and RMH franchise rights becoming fully
amortized during 1994.
Interest and Other Income. Interest and other income consist primarily of
interest on RMH notes receivable that were issued in connection with previous
sales of cable television systems (the "RMH Seller Notes") and interest earned
on cash equivalents. Interest and other income decreased $7.5 million, or 83.8%,
and $0.3 million, or 18.7%, for 1994 compared to 1993 and 1995 compared to 1994,
respectively. The decrease for 1994 reflects the effect of collection in 1994 of
the RMH Seller Notes and a 1993 gain on sale of investments. In 1993, a $4.3
million gain on sale of investments resulted from redemption by the investee of
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<PAGE> 74
the partnership interests acquired by RMH in connection with previous sales of
cable television systems. No such transaction occurred in 1994 or 1995. The
decrease for 1995 reflects the effect of collection in 1994 of the RMH Seller
Notes.
Interest Expense. Interest expense decreased by $0.5 million, or 1.1%, for
1994 compared to 1993 and increased by $4.6 million, or 10.3%, for 1995 compared
to 1994. The decrease in 1994 compared to 1993 reflects a decrease of $1.7
million for the IPWT system as a result of a debt restructuring completed in
October 1994, offset by a $1.2 million increase for RMH due to interest on
additional borrowings. The 1995 increase reflects the impact of (i) the 1995
Combination of $11.8 million and (ii) a $0.9 million increase for RMH due to
interest on additional borrowings, offset by an $8.2 million decrease for the
IPWT system reflecting the effect of the October 1994 debt restructuring.
Income Tax Benefit. The income tax benefit decreased $2.6 million, or
12.2%, for 1994 compared to 1993 due to a lower effective tax benefit rate. The
income tax benefit decreased $1.5 million, or 8.0%, for 1995 compared to 1994
due to the impact of a decrease in the taxable loss before income tax benefit,
partially offset by a higher effective tax benefit rate.
Net Loss. In 1994, the Previously Affiliated Entities' net loss increased
$4.0 million, or 7.2%, from 1993 primarily as a result of decreases in interest
income due to collection of the RMH Seller Notes and the gain on sale of RMH
partnership interests in 1993. The Previously Affiliated Entities' net loss
decreased $15.1 million, or 25.2%, for 1995 compared to 1994 primarily due to an
increase in EBITDA and lower depreciation and amortization expense.
EBITDA. EBITDA increased $6.0 million, or 21.6%, for 1994 compared to 1993
and increased $22.5 million, or 67.0%, for 1995 compared to 1994. EBITDA
increased approximately $6.8 million for 1994 compared to 1993 due to the 1993
Acquisitions. Excluding the effect of the 1993 Acquisitions, EBITDA decreased
slightly due to the impact of the rate freeze on revenues and increases in
program fees, other direct and operating costs and SG&A.
The 1995 Combination accounted for $19.4 million of the increase for 1995
compared to 1994. The remainder of the 1995 increase reflects the impact of
revenue growth partially offset by increases in program fees, other direct and
operating expenses and SG&A for the RMH and IPWT systems.
EBITDA as a percentage of revenues decreased in 1995 compared to 1994
primarily because of the increases in program fees and SG&A as a percentage of
revenues. In 1994 compared to 1993, EBITDA as a percentage of revenues decreased
slightly because of the increase in program fees as a percentage of revenues.
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<PAGE> 75
RESULTS OF OPERATIONS -- GREENVILLE/SPARTANBURG SYSTEM
The following table sets forth, for the periods indicated, statement of
operations data of the Greenville/Spartanburg System expressed in dollar amounts
(in thousands) and as a percentage of revenue. For purposes of this analysis
only and to facilitate a meaningful comparison of results of operations for the
two-year periods ended December 31, 1994 and 1995 and the six months ended June
30, 1995 and 1996, the results of operations for the period from January 1, 1995
to January 26, 1995 have been combined with the results of operations for the
period from January 27, 1995 to December 31, 1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------------------
1995 1996
---------------------- -----------------------
PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................. $24,558 100.0% $ 25,886 100.0%
Costs and Expenses:
Program fees........................... (5,005) (20.4) (6,089) (23.5)
Other operating expenses (1)........... (9,023) (36.7) (10,344) (40.0)
Depreciation and amortization.......... (6,610) (26.9) (6,627) (25.6)
------- ----- ------- -----
Income from operations................... 3,920 16.0 2,826 10.9
Interest expense......................... (5,607) (22.9) (18,485) (71.4)
Income tax benefit....................... 565 2.3 5,621 21.7
------- ----- ------- -----
Net loss................................. $(1,122) (4.6) $(10,038) (38.8)
======= ===== ======= =====
OTHER DATA:
EBITDA (2)............................... 10,530 42.9% 9,453 36.5%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1995
----------------------- -----------------------
PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 45,899 100.0% $ 50,331 100.0%
Cost and expenses:
Program fees....................... (14,076) (30.7) (9,879) (19.6)
Other operating expenses (1)....... (17,998) (39.2) (20,006) (39.8)
Depreciation and amortization...... (7,332) (16.0) (14,757) (29.3)
------- ----- ------- -----
Income from operations................ 6,493 14.1 5,689 11.3
Interest and other income............. 1,278 2.8 -- --
Interest expense...................... (2,150) (4.7) (12,000) (23.8)
Income tax (expense) benefit.......... (2,118) (4.6) 2,138 4.2
------- ----- ------- -----
Net income (loss)..................... $ 3,503 7.6 $ (4,173) (8.3)
======= ===== ======= =====
OTHER DATA:
EBITDA (2).............................. $ 13,825 30.1% $ 20,446 40.6%
</TABLE>
- ---------------
(1) Other operating expenses consist of expenses relating to installations,
plant repairs and maintenance and other costs directly associated with
revenues in addition to selling, general and administrative expenses related
to system offices, customer service representatives and sales and
administrative employees. For purposes of this analysis other direct
expenses and selling, general and administrative expenses have been combined
to present consistent classifications upon combination of results of
operations for the period from January 1, 1995 to January 26, 1995 with
results of operations for the period from January 27, 1995 to December 31,
1995.
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<PAGE> 76
(2) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and other income (expense). EBITDA is a commonly used
measure of performance in the cable industry. However, it does not purport
to represent cash flows from operating activities in related Consolidated
Statements of Cash Flows and should not be considered in isolation or as a
substitute for measures of performance in accordance with GAAP. For
information concerning cash flows from operating, investing and financing
activities, see Audited Financial Statements included elsewhere in this
Prospectus.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Revenues. The Greenville/Spartanburg System's revenues increased $1.3
million, or by 5.4%, for the six months ended June 30, 1996 compared with the
corresponding period of the prior year. Revenue increases attributable to
subscriber growth and basic and expanded basic rate increases totaled $0.4
million and $1.2 million, respectively. As of June 30, 1996, basic subscribers
and premium units increased from June 30, 1995 by approximately 3,460
subscribers, or 3.1% and 12,360 units, or 12.2%, respectively. The increase in
basic subscribers primarily reflects the impact of an approximate 1,860 increase
in homes passed and higher basic penetration that grew from 72.1% at June 30,
1995 to 73.5% at June 30, 1996. During the three months ended March 31, 1996,
the system implemented rate increases on the basic and expanded basic tier. The
rate increases resulted in a 2.0% average increase in the rates charged for
basic and expanded basic services combined. Partially offsetting these revenue
increases was a $0.2 million decrease in premium revenues reflecting the impact
of lower rates per subscriber from premium discount packages and a $0.1 million
decrease in ancillary service revenues.
Program Fees. Program fees increased $1.1 million, or by 21.7%, for the
six months ended June 30, 1996 compared with the corresponding period of the
prior year primarily due to higher rates charged by certain programmers. The
increase in program fees as a percentage of revenues reflects the impact of
program fee increases outpacing revenue growth for the period.
Other Operating Expenses. Other operating expenses increased $1.3 million,
or by 14.6%, for the six months ended June 30, 1996 compared with the
corresponding period of the prior year. Contributing to the increase was a $0.4
million increase in the corporate overhead cost allocation from TCI. In May
1995, TCI began allocating corporate overhead to the Greenville/Spartanburg
System. Also contributing to the increase was a $1.7 million increase in SG&A
costs primarily attributable to increased SG&A labor, marketing and advertising
sales costs driven by basic subscriber growth and increased levels of marketing
and advertising sales activities, respectively. Partially offsetting these
increases was an approximate $0.8 million reduction in other direct and
operating expenses primarily associated with a reduction in the direct labor
force and an increase in the level of construction activity. Other operating
expenses as a percentage of revenues increased due to proportionately higher
increases in costs relative to revenue growth.
Interest Expense. Interest expense increased $12.9 million, or by 229.7%,
for the six months ended June 30, 1996 compared with the corresponding period of
the prior year due to higher interest expense allocations from TCI.
Income Tax Benefit. The income tax benefit increase of $5.1 million for
the six months ended June 30, 1996 compared with the corresponding period of the
prior year is due to an increase in the loss before income tax benefit coupled
with an increase in the effective tax benefit rate.
Net Loss. The net loss increase of $8.9 million for the six months ended
June 30, 1996 compared with the corresponding period of the prior year is
primarily due to the increase in interest expense partially offset by the
increase in income tax benefit.
EBITDA. EBITDA decreased $1.1 million, or by 10.2%, for the six months
ended June 30, 1996 compared with the corresponding period of the prior year
because revenue growth was more than offset by increases in program fees and
other operating expenses. EBITDA as a percentage of revenues decreased because
of increases in program fees and other operating expenses as a percentage of
revenue.
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<PAGE> 77
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1995
Revenues. The Greenville/Spartanburg System's revenues increased $4.4
million, or 9.7%, for 1995 compared to 1994. Of the increase, $1.1 million was
attributable to subscriber growth and $0.4 million resulted from the impact of
basic and expanded basic rate increases. Basic subscribers, which totaled
approximately 114,300 at December 31, 1995, increased by approximately 1,350, or
1.2%, from the prior period end. The number of premium units served between 1994
and 1995 remained relatively constant and totaled approximately 103,200 units at
December 31, 1995. The increase in basic subscribers primarily reflects the
impact of a 1,070 increase in homes passed, which totaled approximately 156,700
at December 31, 1995, and an increase in basic penetration, which grew from
72.6% at December 31, 1994 to 73.0% at December 31, 1995. During the first
quarter of 1995, the Greenville/Spartanburg System implemented rate increases on
the basic and expanded basic tier. The rate increases resulted in a 5.5% average
increase in overall rates charged for basic and expanded basic services
combined. The remainder of the revenue increase was due to a $3.2 million
increase in ancillary service revenues, including a $1.9 million impact of a
change in accounting treatment for franchise fees charged to customers, offset
by a $0.2 million decrease in premium revenues reflecting the impact of lower
rates per subscriber from premium discount packages. Franchise fees charged to
customers are excluded from revenues and operating expenses in 1994. In 1995
franchise fees charged to customers are included in revenues and an offsetting
expense is included in operating expenses.
Program Fees. Program fees decreased $4.2 million, or 29.8%, for 1995
compared to 1994. The decrease reflects the impact of lower program fees as a
result of the Greenville/Spartanburg System's affiliation with TCI effective
January 27, 1995, the date the system was acquired by TCI from TeleCable. Prior
to January 27, 1995, under the ownership of TeleCable, the
Greenville/Spartanburg System's program fees were based on an allocation of
total program fees incurred by TeleCable and the allocated cost did not reflect
the impact of volume discounts.
Other Operating Expenses. Other operating expenses increased $2.0 million,
or 11.2%, for 1995 compared to 1994. Of this increase, $1.9 million is due to a
change in accounting treatment for franchise fees charged to customers.
Franchise fees charged to customers are excluded from revenues and operating
expenses in 1994 and included in revenues and operating expenses in 1995.
Excluding the impact of the different accounting treatment, other operating
costs remained relatively constant for 1995 compared to 1994. Other operating
costs as a percentage of revenues decreased slightly reflecting the impact of
efficiencies gained by combining the operations of the system with TCI's
existing operations.
Depreciation and Amortization. Depreciation and amortization expense
increased $7.4 million, or 101.3%, for 1995 compared to 1994 due primarily to a
revaluation of the Greenville/Spartanburg System's assets in January 1995, at
the time the system was acquired by TCI from TeleCable. As a result of purchase
accounting, TCI recognized a significant step up in the value of assets of the
Greenville/Spartanburg System.
Interest and Other Income. In 1994, interest and other income of $1.3
million represents interest earned on a receivable from an affiliate which
resulted from daily cash management activities between the system and its former
owner, TeleCable. There was no interest or other income in 1995.
Interest Expense. Interest expense increased $9.9 million, or 458.1%, for
1995 compared to 1994 primarily due to interest expense allocations from TCI
effective January 27, 1995, the date TCI acquired the Greenville/Spartanburg
System from TeleCable.
Income Tax Expense. Income tax expense decreased $4.3 million, from a $2.1
million expense in 1994 to a $2.1 million benefit in 1995, due to the loss
before income tax benefit in 1995, primarily resulting from the increase in
interest expense for 1995 compared to 1994, offset by a decrease in the
effective tax rate.
Net Income/Loss. Net income (loss) decreased $7.7 million from net income
in 1994 of $3.5 million to a net loss in 1995 of $4.2 million, primarily due to
the increase in interest expense for 1995 compared to 1994.
EBITDA. EBITDA increased $6.6 million, or 47.9%, for 1995 compared to 1994
as a result of higher revenues and lower programming fees. EBITDA as a
percentage of revenues increased in 1995 compared to 1994 because of the
decrease in programming fees.
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<PAGE> 78
RESULTS OF OPERATIONS -- VIACOM NASHVILLE SYSTEM
The following table sets forth, for the periods indicated, statement of
operations and other data of the Viacom Nashville System expressed in dollar
amounts (in thousands) and as a percentage of revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------
1995 1996
---------------------- ----------------------
PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................. $29,834 100.0% $33,293 100.0%
Costs and expenses:
Program fees............................ (6,595) (22.1) (7,872) (23.6)
Other direct expenses(1)................ (4,188) (14.0) (4,546) (13.7)
Selling, general and
administrative(2).................... (7,785) (26.1) (8,882) (26.7)
Depreciation and amortization........... (4,605) (15.4) (5,657) (17.0)
------- ----- ------- -----
Operating income.......................... 6,661 22.3 6,336 19.0
Interest expense.......................... (2,458) (8.2) (2,436) (7.3)
Other expense............................. (61) (0.2) (41) (0.1)
Income tax expense........................ (2,319) (7.8) (2,125) (6.4)
------- ----- ------- -----
Net income................................ $ 1,823 6.1% $ 1,734 5.2%
======= ===== ======= =====
OTHER DATA:
EBITDA (3)................................ $11,266 37.8% $11,993 36.0%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1993 1994 1995
--------------------- --------------------- ---------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE AMOUNT OF REVENUE
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 53,419 100.0% $ 54,648 100.0% $ 62,042 100.0%
Costs and expenses:
Program fees..................... (8,375) (15.7) (9,624) (17.6) (13,894) (22.4)
Other direct expenses(1)......... (8,032) (15.0) (8,355) (15.3) (8,954) (14.4)
Selling, general and
administrative(2)............. (16,141) (30.2) (16,598) (30.4) (16,144) (26.0)
Depreciation and amortization.... (8,010) (15.0) (8,368) (15.3) (9,655) (15.6)
------- ----- -------- ----- -------- -----
Operating income................... 12,861 24.1 11,703 21.4 13,395 21.6
Interest expense................... (3,043) (5.7) (3,599) (6.6) (4,819) (7.8)
Other expense...................... (75) (0.2) (91) (0.2) (124) (0.2)
Income tax expense................. (282) (0.5) (1,705) (3.1) (4,659) (7.5)
------- ----- -------- ----- -------- -----
Net income......................... $ 9,461 17.7% $ 6,308 11.5% $ 3,793 6.1%
======= ===== ======== ===== ======== =====
OTHER DATA:
EBITDA(3).......................... $ 20,871 39.1% $ 20,071 36.7% $ 23,050 37.2%
</TABLE>
- ---------------
(1) Other direct expenses consist of labor, plant repairs and maintenance and
other operating costs directly associated with revenues.
(2) Selling, general and administrative expenses consist mainly of costs related
to system offices, customer service representatives and sales and
administrative employees.
(3) EBITDA is defined as net income before interest, income taxes, depreciation
and amortization, and other income (expense). EBITDA is a commonly used
measure of performance in the cable industry. However, EBITDA does not
purport to represent cash flows from operating activities in related
70
<PAGE> 79
Statements of Cash Flows and should not be considered in isolation or as
substitute for measures of performance in accordance with GAAP. For
information concerning cash flows from operating, investing and financing
activities, see Audited Financial Statements included elsewhere in this
Prospectus.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Revenues. Revenues increased $3.5 million, or 11.6%, for 1996 compared to
1995. Of the increase, $1.8 million was attributable to subscriber growth and
$0.8 million resulted from the impact of net rate increases. The remaining $0.9
million increase was primarily due to increases in pay-per-view subscriptions
($0.4 million) and equipment lease revenues ($0.3 million). As of June 30, 1996,
basic subscribers and premium units increased by approximately 8,317, or 5.9%,
and 6,893, or 4.9%, respectively. The increase in basic subscribers primarily
reflects the impact of a 7,815 increase in homes passed and higher basic
penetration which grew from 59.8% in 1995 to 61.3% in 1996. Premium penetration
decreased from 98.9% in 1995 to 98.0% in 1996. During 1995 and 1996, Nashville
added channel capacity and implemented rate increases on the expanded basic
tier. The rate increases resulted in a 5.8% increase in the average monthly
subscription revenue for basic and expanded basic services combined and was
offset by a 3.0% decrease in average premium service revenue.
Program Fees. Program fees increased $1.3 million, or 19.4%, for 1996
compared to 1995. Of the increase, $0.5 million was primarily due to subscriber
growth, and $0.6 million was attributable to new channel additions and the
impact of increases in rates charged by certain programmers. The remaining $0.2
million increase is primarily due to pay-per-view product costs. Program fees as
a percentage of revenues increased, reflecting the impact of increased
programming fee rates and increased channels.
Other Direct Expenses. Other direct expenses increased $0.4 million, or
8.5%, for 1996 compared to 1995 due to increased franchise fees and copyright
fees directly corresponding to increased revenues. Other direct expenses as a
percentage of revenues decreased, primarily reflecting the high impact of 1996
revenue growth.
Selling, General and Administrative. Selling, general and administrative
expenses increased $1.1 million, or 14.1%, from 1995 due to the increased
allocation of corporate administrative expenses (see Note 2 of the Notes to
Financial Statements of VSC Cable Inc.) resulting primarily from a non-recurring
marketing credit in 1995. Selling, general and administrative expenses as a
percentage of revenues increased, reflecting the impact of the increased
corporate administrative expense allocation.
Depreciation and Amortization. Depreciation and amortization expense
increased $1.1 million, or 22.8%, from 1995 primarily due to distribution system
rebuilds which occurred between late 1994 and 1996, offset by assets which
became fully depreciated during 1995 and 1996. Total capital expenditures from
July 1, 1995 to June 30, 1996 amounted to $24.9 million.
Interest Expense. Interest expense remained relatively constant from 1995
(see Note 2 of the Notes to Financial Statements of VSC Cable Inc.).
Provision for Income Taxes. Provision for income taxes decreased $0.2
million, or 8.4%, from 1995 primarily due to decreased taxable income and a
reduced effective tax rate.
Net Income. Net income decreased $0.1 million, or 4.9%, from 1995 as a
result of increased operating expenses offset by increased revenues and
decreased provision for income taxes.
EBITDA. EBITDA increased $0.7 million, or 6.5%, from 1995 as a result of
higher revenues partly offset by increased program fees, other direct and
selling, general and administrative expenses. EBITDA as a percentage of revenues
decreased from 1995 due to the increase in program fees and selling, general and
administrative expenses as a percentage of revenue.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenues. Revenues increased $1.2 million, or 2.3%, for 1994 compared to
1993. The increase was attributable to subscriber growth and increases in other
service revenues, offset by effective rate decreases for
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basic and expanded basic combined and for premium services. The reduction in the
combined basic and expanded basic rate was a result of rate regulations
implemented pursuant to the 1992 Cable Act. As of December 31, 1994, basic
subscribers and premium units have increased since December 31, 1993, by 10,578,
or 8.4%, and 30,499, or 30.8%, respectively, resulting in a $4.3 million
increase in revenues. The increase in basic subscribers primarily reflects the
impact of a 6,075 increase in homes passed and higher basic penetration which
grew from 55.2% in 1993 to 58.3% in 1994. Premium penetration increased from
78.9% in 1993 to 95.2% in 1994 due primarily to package pricing of premium
services which lowered revenue per premium unit. Premium service revenue
increased $0.4 million, or 5.1%. Decreases in basic and expanded basic combined
rates and premium rates accounted for $6.3 million of the decrease in revenues.
The rate decreases resulted in a 11.6% decrease in the average monthly
subscription revenue for basic and expanded basic services combined and a 19.3%
decrease in average premium service revenue. Other service revenue increases
consist primarily of equipment lease ($1.9 million) due to increased customers
and equipment charges, and advertising ($0.6 million).
Revenues increased $7.4 million, or 13.5%, for 1995 compared to 1994. Of
the increase, approximately $4.5 million was attributable to subscriber growth
and $0.5 million resulted from the impact of net rate increases. The remaining
$2.4 million increase was primarily due to increases in pay-per-view ($0.6
million), advertising ($0.5 million) and equipment lease ($0.9 million)
revenues. As of December 31, 1995, basic subscribers and premium units have
increased since December 31, 1994, by 10,314, or 7.6%, and 14,310, or 11.1%,
respectively. The increase in basic subscribers primarily reflects the impact of
a 7,458 increase in homes passed and higher basic penetration, which grew from
58.3% in 1994 to 60.8% in 1995. Premium penetration increased from 95.2% in 1994
to 98.3% in 1995. During 1994 and 1995, the Viacom Nashville System added
channel capacity and implemented rate increases on the expanded basic tier. The
rate increases resulted in a 3.0% increase in the average monthly subscription
revenue for basic and expanded basic services combined and was offset by a 6.2%
decrease in average premium service revenue.
Program Fees. Program fees increased $1.2 million, or 14.9%, for 1994
compared to 1993 due primarily to subscriber growth. Program fees increased $4.3
million, or 44.4%, for 1995 compared to 1994. Of the increase, $1.3 million was
primarily due to subscriber growth, and $2.6 million was attributable to new
channel additions and the impact of increases in rates charged by certain
programmers. The remaining $0.4 million increase is primarily due to
pay-per-view product costs.
Program fees as a percentage of revenues increased for 1994 compared to
1993 and 1995 compared to 1994, reflecting the impact of increased programming
fee rates and increased channels.
Other Direct Expenses. Other direct expenses increased $0.3 million, or
4.0%, for 1994 compared to 1993 and $0.6 million, or 7.2%, for 1995 compared to
1994. The increase for 1994 compared to 1993 is primarily a result of subscriber
growth. Of the increase in 1995 compared to 1994, $0.3 million relates to
increased franchise fees and copyright fees directly corresponding to increased
revenues. The remaining $0.3 million increase reflects the increased cost of
maintaining the distribution system. Other direct expenses as a percentage of
revenues increased slightly for 1994 compared to 1993, primarily reflecting slow
1994 revenue growth. Other direct expenses as a percentage of revenues decreased
for 1995 compared to 1994, primarily reflecting the high impact of 1995 revenue
growth.
Selling, General and Administrative. SG&A increased $0.5 million, or 2.8%,
for 1994 compared to 1993 due to increased payroll costs offset by the decreased
allocation of corporate administrative expenses (see Note 3 of the Notes to
Financial Statements of VSC Cable Inc.). SG&A decreased $0.5 million, or 2.7%,
for 1995 compared to 1994 due to the decreased allocation of corporate
administrative expenses offset by increased payroll costs. Payroll costs
increased during the three year period ended December 31, 1995 primarily due to
increases in the workforce driven by basic subscriber growth and increases in
average salary per employee.
SG&A as a percentage of revenues increased for 1994 compared to 1993
reflecting the impact of the increase in payroll costs relative to revenue
growth. SG&A as a percentage of revenues decreased for 1995 compared to 1994,
reflecting the impact of the decreased corporate administrative expense
allocation.
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Depreciation and Amortization. Depreciation and amortization expense
increased $0.4 million, or 4.5%, for 1994 compared to 1993 and increased $1.3
million, or 15.4%, for 1995 compared to 1994 primarily due to distribution
system rebuilds which occurred between late 1994 through 1995, offset by assets
which became fully depreciated during 1995.
Interest Expense. Interest expense increased $0.6 million, or 18.3%, for
1994 compared to 1993 and increased $1.2 million, or 33.9%, for 1995 compared to
1994 due to the increased allocation of corporate interest (see Note 3 of the
Notes to Financial Statements of VSC Cable Inc.).
Income Taxes. Provision for income taxes increased $1.4 million, or
504.6%, for 1994 compared to 1993 and increased $3.0 million, or 173.3%, for
1995 compared to 1994 as a result of the effective tax rate increasing caused
primarily by the utilization of net operating loss carryforwards in 1994 and
1993.
Net Income. Net income decreased $3.2 million, or 33.3%, for 1994 compared
to 1993 as a result of increased programming fees, other direct expenses,
selling, general and administrative expenses, interest expense and provision for
income taxes offset by increased revenues. Net income decreased $2.5 million, or
39.9%, for 1995 compared to 1994 as a result of increased programming fees,
other direct expenses, interest expense and provision for income taxes offset by
increased revenues and decreased selling, general and administrative expenses.
EBITDA. EBITDA decreased $0.8 million, or 3.8%, for 1994 compared to 1993
as a result of increased programming, other direct, and SG&A expenses partly
offset by higher revenues. EBITDA increased $3.0 million, or 14.8%, for 1995
compared to 1994 as a result of higher revenues and decreased SG&A expenses
partly offset by increased programming and other direct expenses. EBITDA as a
percentage of revenues decreased for 1994 compared to 1993 due to the increase
in programming, other direct and SG&A expenses as a percentage of revenue.
EBITDA as a percentage of revenues increased for 1995 compared to 1994 due to
the decrease in other direct and SG&A expenses as a percentage of revenue.
RESULTS OF OPERATIONS -- KINGSPORT SYSTEM
The following table sets forth, for the periods indicated, certain
statement of operations and other data of the Kingsport System expressed in
dollar amounts (in thousands) and as a percentage of revenue.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 (UNAUDITED) 1995
------------------------ -----------------------
PERCENTAGE PERCENTAGE
AMOUNT OF REVENUE AMOUNT OF REVENUE
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $ 10,100 100.0% $10,914 100.0%
Costs and Expenses:
Program fees.......................... (1,950) (19.3) (2,219) (20.3)
Other operating costs(1).............. (3,116) (30.9) (3,484) (31.9)
Depreciation and amortization......... (924) (9.1) (1,087) (10.0)
------ ---- ------ ----
Income from operations.................. 4,110 40.7 4,124 37.8
Other income (expense).................. 120 1.2 (856) (7.8)
------ ---- ------ ----
Net income.............................. $ 4,230 41.9% $ 3,268 30.0%
====== ==== ====== ====
OTHER DATA:
EBITDA(2)............................... $ 5,034 49.8% $ 5,211 47.8%
</TABLE>
- ---------------
(1) Other operating costs consist of expenses relating to installations, plant
repairs and maintenance and other costs directly associated with revenues in
addition to SG&A expenses related to system offices, customer service
representatives and sales and administrative employees.
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(2) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and other income (expense). EBITDA is a commonly used
measure of performance in the cable industry. However, it does not purport
to represent cash flows from operating activities in related Consolidated
Statements of Cash Flows and should not be considered in isolation or as a
substitute for measures of performance in accordance with GAAP. For
information concerning cash flows from operating, investing and financing
activities, see Audited Financial Statements included elsewhere in this
Prospectus.
Revenues. The Kingsport System's revenues for 1995 increased 8.1% from the
prior year primarily due to subscriber growth. The number of basic subscribers
served by the system increased by 402, or 1.3%, from 31,032 at December 31, 1994
to 31,434 at December 31, 1995. The number of homes passed increased from 41,180
at December 31, 1994 to 42,307 at December 31, 1995. Premium units increased
1,760, or 15.9%, from 11,049 to 12,809 for December 31, 1995 compared to
December 31, 1994 primarily reflecting the impact of premium discount packages.
Basic and premium penetration levels were 74.3% and 40.7%, respectively, at
December 31, 1995.
Program Fees. Program fees for 1995 increased 13.8% from the prior year
primarily due to subscriber growth and higher rates charged by certain
programmers. Program fees as a percentage of revenues totaled 20.3% for 1995 and
19.3% for the prior year.
Other Operating Expenses. Other operating expenses for 1995 increased
11.8% from the prior year. The increase from the prior year was primarily due to
increased compensation and employee related costs and corporate expenses. Other
operating expenses as a percentage of revenue were 31.9% in 1995 and 30.9% for
the prior year.
Depreciation and Amortization. Depreciation and amortization was 10.0% of
revenues for 1995 and increased 17.6% from the prior year.
Net Income. The Kingsport System's net income for 1995 decreased 22.7%
from the prior year. The decrease in net income primarily reflects the impact of
an increase in depreciation and amortization and interest expense.
EBITDA. EBITDA increased 3.5% from the prior year primarily due to
increased revenues partially offset by increased program fees and other
operating costs. EBITDA as a percentage of revenues was 47.8% in 1995 compared
with 49.8% for the prior year because increases in program fees and other
operating costs for 1995 outpaced revenue growth during the period.
LIQUIDITY AND CAPITAL RESOURCES
Historical Overview -- Liquidity
The Company. The Company generated cash flows from operating activities of
$3.9 million for the six months ended June 30, 1996 and used borrowings of
$114.0 million under the Bridge Loan to fund the related party note receivable
and the Miscellaneous Acquisitions that closed through June 30, 1996.
Previously Affiliated Entities. The Previously Affiliated Entities
reported a deficit in cash provided from operations of $(12.2) million, $(0.1)
million and $(12.4) million for 1993, 1994 and the six months ended June 30,
1996, respectively, and generated cash from operating activities of $8.1 million
for the year ended December 31, 1995.
For the three year period ended December 31, 1995, RMH's principal sources
of cash consisted of (i) $33.5 million of cash acquired upon RMH's purchase of
RMG, (ii) collections of $60.8 million on the RMH Seller Notes, (iii) proceeds
of $18.3 million from sales of acquired partnership interest, and (iv)
additional borrowings of $25.0 million. RMH reported a net deficit in cash
provided from operations for each of the three years ended December 31, 1995,
primarily due to interest payments on long-term obligations of approximately
$35.0 million in each year. RMH's other principal uses of cash during the
periods were (i) acquisitions of cable television systems totaling $78.3
million, and (ii) capital expenditures totaling $32.3 million. RMH reported a
net deficit in cash provided from operations of $3.7 million for the six months
ended June 30, 1996.
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For the years ended December 31, 1993, 1994 and 1995 and the six months
ended June 30, 1996, IPWT has relied on cash generated from operating activities
of $2.3 million, $6.8 million, $2.0 million, and $0.5 million, respectively, in
addition to a $20.1 million capital contribution in 1994, to fund its capital
expenditures, service its indebtedness and finance its working capital needs
during each period.
The Greenville/Spartanburg System generated cash from operating activities
of $8.4 million during the period from January 27, 1995 through December 31,
1995 which along with a $6.5 million capital contribution from TCI was used to
fund its capital expenditures and working capital requirements during the
period. The Greenville/Spartanburg System reported a deficit in cash provided
from operating activities of $(9.1) million for the six months ended June 30,
1996 and relied on funding from TCI of $12.9 million to meet its capital
expenditures and working capital requirements during the period.
Viacom Nashville System. The Viacom Nashville System generated cash from
operating activities totaling $15.0 million, $15.8 million, $19.9 million and
$8.9 million for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1996, respectively, which combined with a $6.1 million
contribution from Viacom International Inc. in 1994, was used to fund its
capital expenditure and working capital needs during each period.
Kingsport System. The Kingsport System generated cash from operating
activities totaling $4.3 million in 1995 which was used to fund its capital
expenditure and working capital needs during the year.
Historical Overview -- Capital Resources
The Previously Affiliated Entities', the Greenville/Spartanburg System's
and the Kingsport System's most significant capital needs have been to finance
cable system upgrades and rebuilds, plant extensions and initial subscriber
installations.
Capital expenditures for the Previously Affiliated Entities were $11.3
million, $12.4 million, $26.3 million and $15.1 million for the years ended
December 31, 1993, 1994 and 1995, and the six months ended June 30, 1996,
respectively. The impact of combining the Greenville/Spartanburg System with RMH
and IPWT effective January 27, 1995, accounted for $13.0 million of capital
expenditures for the Previously Affiliated Entities for 1995. Capital
expenditures for the Greenville/Spartanburg System were $11.0 million, $13.4
million and $4.0 million for the years ended December 31, 1994 and 1995 and the
six months ended June 30, 1996, respectively. Capital expenditures for the
Viacom Nashville System were $9.7 million, $22.8 million, $23.0 million and
$12.5 million for the years ended December 31, 1993, 1994 and 1995, and for the
six months ended June 30, 1996, respectively. The Viacom Nashville System's
capital expenditures increased in 1994 as a result of rebuild projects begun by
the system, consistent with the specifications of the Company's Capital
Improvement Program. The Kingsport System expended $1.1 million for capital
expenditures in 1995.
Pro Forma Information
Upon consummation of the Transactions, the Company's principal sources of
liquidity will be cash generated from operations and borrowings under the
Revolving Credit Facility. The Revolving Credit Facility provides for borrowings
up to $475.0 million in the aggregate, with permanent annual commitment
reductions beginning in 1999, and matures in 2004. The Company borrowed $338.0
million from the Revolving Credit Facility in completing the Transactions,
leaving availability of $137.0 million. Prior to January 1, 1999, the Company
will have no mandatory amortization requirements under the Bank Facility. See
"Description of Other Obligations -- The Bank Facility."
Management believes that cash provided by operations, together with
available borrowing capacity under the Revolving Credit Facility, will be
sufficient to fund required interest payments and planned capital expenditures
over the next several years. However, the Company may not be able to generate
sufficient cash from operations or accumulate sufficient cash from other
activities or sources to repay in full the principal amounts outstanding under
the Notes on maturity. In order to satisfy its repayment obligations with
respect to the Notes, the Company may be required to refinance the Notes. There
can be no assurance that financing will
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<PAGE> 84
be available in order to accomplish any necessary refinancing on terms favorable
to the Company. See "Risk Factors -- Substantial Leverage; Deficiency of
Earnings to Cover Fixed Charges."
The Bank Facility and the Indenture restrict, among other things, the
Company's ability to incur additional indebtedness, incur liens, pay
distributions or make certain other restricted payments, consummate certain
asset sales and enter into certain transactions with affiliates. In addition,
the Bank Facility and Indenture restrict the ability of a subsidiary to pay
distributions or make certain payments to ICP-IV, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. The Bank Facility also
requires the Company to maintain specified financial ratios and satisfy certain
financial condition tests. Obligations under the Bank Facility are secured by a
pledge of all of the equity interests of ICP-IV's subsidiaries (other than
IPCC). Such restrictions and compliance tests, together with the Company's
substantial leverage and the pledge of substantially all of ICP-IV's assets,
could limit the Company's ability to respond to market conditions, to provide
for unanticipated capital investments or to take advantage of business
opportunities. See "Risk Factors -- Restrictions Imposed by Lenders";
"Description of Other Obligations -- The Bank Facility" and "Description of the
Notes."
Capital Improvement Program
The Company's most significant capital needs are to finance cable system
upgrades and rebuilds, plant extensions and purchases of converters and other
customer premise equipment. Planned capital expenditures also provide for
initial subscriber installations, purchases of digital and insertion equipment
and replacement purchases of machinery and equipment. The following table
summarizes the Company's planned capital expenditures:
<TABLE>
<CAPTION>
SIX MONTHS FOUR YEARS
ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 2001 TOTAL
------------ ------------ ------------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Capital Improvement Program
Upgrades and rebuilds................... $ 54.0 $ 84.3 $ 49.6 $187.9
Converters.............................. 13.1 8.2 26.5 47.8
----- ------ ------ ------
Total Capital Improvement Program.... 67.1 92.5 76.1 235.7
----- ------ ------ ------
Line extensions and other................. 10.0 24.8 97.0 131.8
----- ------ ------ ------
Total planned capital
expenditures.................. $ 77.1 $117.3 $173.1 $367.5
===== ====== ====== ======
</TABLE>
Management expects to fund capital expenditures from borrowings available
under the Revolving Credit Facility and cash generated from operations. However,
there can be no assurance that all of the funds required for these planned
capital expenditures will be available as needed. See "Risk Factors -- Future
Capital Requirements" and "Description of the Notes."
The Capital Improvement Program is expected to allow the Company to expand
system capacity, provide the capability to offer new services including
additional premium packages, enhanced pay-per-view programming, additional
advertising and data and voice services and to create the marketing flexibility
to fund revenue growth for existing services. Other expenditures will target new
revenue sources and be expended on an incremental basis when these revenue
streams are quantifiable. Management believes that substantial growth in
revenues and operating cash flows is not achievable without implementing at
least a significant portion of the Capital Improvement Program.
In addition to capital expenditures expected to be incurred in connection
with the Capital Improvement Program, the Company currently estimates that it
will make other capital expenditures through 2001 of approximately $131.8
million, principally for line extensions and other capital requirements as set
forth in the table above. The Company's business requires continuing investment
to finance capital expenditures and related expenses for expansion of the
Company's subscriber base and system development. The Company's
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<PAGE> 85
inability to upgrade its cable television systems or make its other planned
capital expenditures would have a material adverse effect on the Company's
operations and competitive position and could have a material adverse effect on
the Company's ability to service its debt, including the Notes. See "Risk
Factors -- Future Capital Requirements" and "-- Restrictions Imposed by
Lenders."
Inflation
During the periods covered in this discussion, inflation did not have a
significant impact on results of operations and financial position of the cable
television systems. Periods of high inflation could have an adverse effect to
the extent that increased operating costs and increased borrowing costs for
variable interest rate debt may not be offset by increases in subscriber rates.
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THE ACQUISITIONS
GENERAL
The Company was formed to acquire and consolidate various cable television
systems in the Southeast, including certain cable television systems owned by
the Related InterMedia Entities and by TCI. Pursuant to the Acquisitions, the
Company acquired several cable television systems, primarily in Tennessee and
South Carolina, serving an aggregate of approximately 569,713 basic subscribers
as of June 30, 1996. The Acquisitions had an aggregate purchase price of
approximately $1,109.5 million including related acquisition costs of $1.7
million. The aggregate consideration for certain of the Acquisitions is subject
to certain adjustments, including adjustments based on the working capital of
the acquired systems at the time of the Acquisitions.
The following discussion summarizes the terms and conditions of the Primary
Acquisitions and the Miscellaneous Acquisitions (which taken together constitute
the "Acquisitions").
PRIMARY ACQUISITIONS
The aggregate purchase price for the Primary Acquisitions of $1,099.5
million, including related acquisition costs of $1.5 million, was funded with
the proceeds from the Bridge Loan and a portion of the proceeds from the
Financing Plan. See "Description of Other Obligations." Financial results for
the Primary Acquisitions are included in the Company's Pro Forma Financial
Information.
Kingsport System. On February 1, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of Time Warner in Kingsport,
Tennessee, which served approximately 31,955 basic subscribers as of June 30,
1996, for a total purchase price of $62.5 million.
ParCable System. On February 1, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of ParCable in Hendersonville,
Waverly and Monterey, Tennessee, and in Fort Campbell, Kentucky, which together
served approximately 21,975 basic subscribers as of June 30, 1996, for an
aggregate purchase price of $30.1 million.
IPWT. On July 30, 1996, pursuant to a contribution agreement by and among
ICP-IV, IP-I and GECC (the "IPWT Contribution Agreement"), ICP-IV acquired the
partnership interests and debt of IPWT, which served approximately 48,010 basic
subscribers in West Tennessee as of June 30, 1996. IPWT was acquired for total
consideration of $72.5 million. The partners of IPWT were (i) IP-I, which was an
80.1% general partner and a 9.9% limited partner and (ii) a wholly owned
subsidiary of GECC, which was a 10.0% limited partner. The total consideration
of $72.5 million included an equity value of $13.3 million and the acquisition
of indebtedness owed to GECC of approximately $55.8 million in principal plus
interest of $3.4 million. GECC transferred to ICP-IV the indebtedness owed by
IPWT to GECC in exchange for (i) approximately $22.5 million in cash, (ii) a
$25.0 million preferred limited partner interest in ICP-IV (the "Preferred
Limited Partner Interest") and (iii) an $11.7 million limited partner interest
in ICP-IV. In addition, IP-I and GECC transferred to ICP-IV their partnership
interests in IPWT in exchange for a $12.0 million limited partnership interest
and a $1.3 million limited partnership interest, respectively, in ICP-IV. The
foregoing transaction was structured such that 99.0% of the acquired partnership
interests in IPWT was transferred to the Operating Partnership and the remaining
1.0% limited partnership interest in IPWT was transferred to IP-TN. See
"Description of Other Obligations -- Description of Preferred Equity Interests."
RMH. On July 30, 1996, the Operating Partnership acquired RMH and its
wholly owned subsidiary, RMG, which served approximately 196,384 basic
subscribers in Nashville, Knoxville and Northeastern Georgia as of June 30,
1996, for total consideration of approximately $376.3 million. InterMedia
Partners V, L.P. ("IP-V") owned all of the outstanding equity of RMH prior to
consummation of the acquisition. Pursuant to a stock purchase agreement between
the Operating Partnership and ICM-V, the general partner of IP-V, the Operating
Partnership purchased 3,285 shares of RMH's Class A common stock (the "RMH Class
A Common Stock") for $0.3 million. As part of the acquisition of RMH, the
Company paid the following obligations of RMG, aggregating to $364.0 million
including (i) $306.5 million to repay the RMG
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Notes, (ii) $3.2 million to pay the call premium on the RMG Notes, (iii) $14.3
million to pay the accrued interest on RMG's indebtedness, (iv) $15.0 million to
repay an intercompany loan from IP-TN, the proceeds of which were used to fund a
payment on the RMG Notes on April 1, 1996 and (v) $25.0 million to repay the RMG
Revolving Loan. In connection with the RMH transaction, RMH's capital structure
was reorganized to provide for three classes of capital stock, (i) the RMH Class
A Common Stock, (ii) the RMH Class B common stock (the "RMH Class B Common
Stock") and (iii) the RMH Redeemable Preferred Stock. As part of the
recapitalization of RMH, TCID-IP V, Inc., a wholly owned subsidiary of TCI,
converted its outstanding loan to IP-V into a partnership interest and received
in dissolution thereof (i) 365 shares of RMH Class B Common Stock valued at
approximately $0.037 million and (ii) 12,000 shares of RMH Redeemable Preferred
Stock valued at $12.0 million. Upon completion of this recapitalization, the
Operating Partnership has 60.0% of the voting power of RMH (and TCI has the
remaining 40.0%) and owns 100.0% of the RMH Class A outstanding Common Stock,
with TCID-IP V, Inc. owning 100.0% of RMH's Class B Common Stock and $12.0
million in RMH Redeemable Preferred Stock. On July 31, 1996, RMH merged with and
into RMG, with RMG as the surviving corporation. All of the RMH capital stock
described herein was converted as a result of the merger into capital stock of
RMG with the same terms. See "Description of Other Obligations -- Description of
Preferred Equity Interests."
TCI Greenville/Spartanburg. The Greenville/ Spartanburg System was
contributed to the Company on July 30, 1996 under the terms of the contribution
agreement (the "G/S Contribution Agreement") by and among ICP-IV and TCI of
Greenville, Inc., TCI of Piedmont, Inc. and TCI of Spartanburg, Inc., each of
which is a wholly owned subsidiary of TCI (collectively, the "TCI Entities").
Under the G/S Contribution Agreement, the TCI Entities transferred their
interests in the Greenville/Spartanburg System to the Company in exchange for
consideration valued at $238.9 million. The consideration for the
Greenville/Spartanburg System consisted of $117.6 million of limited partnership
interests in ICP-IV and an assumption of $121.3 million of indebtedness by the
Company that was subsequently repaid with the proceeds of the Financing Plan.
Viacom Nashville. On August 1, 1996, pursuant to an exchange agreement
between IPSE, a subsidiary of ICP-IV, and TCIC, a wholly owned subsidiary of TCI
(the "Exchange Agreement"), the Company acquired the Viacom Nashville System,
which served approximately 149,362 basic subscribers as of June 30, 1996. Under
the Exchange Agreement, in a transaction intended to qualify as a like-kind
exchange that is substantially tax-free under section 1031 of the Code, TCIC
transferred the Viacom Nashville System to IPSE in exchange for cable television
systems in Houston, Texas and cash equal to the difference between the fair
market values of the systems. The Company had acquired the Houston cable
television systems from affiliates of Prime Cable on May 8, 1996 for
approximately $300.0 million. The aggregate purchase price of the Viacom
Nashville System pursuant to the exchange was approximately $317.7 million,
subject to certain adjustments.
MISCELLANEOUS ACQUISITIONS
The aggregate purchase price for the Miscellaneous Acquisitions of $10.0
million, including related acquisition costs of $0.2 million, was funded with a
portion of the proceeds from the Bridge Loan and borrowings available under the
Revolving Credit Facility. Financial results for the Miscellaneous Acquisitions
(except for the Annox System and the Tellico System since their acquisitions by
the Company on January 29, 1996 and May 2, 1996, respectively) are not included
in the Pro Forma Financial Information due to the immateriality of these
systems.
Annox System. On January 29, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of Annox (the "Annox System")
located in Cheatham, Davidson, Dickson and Robertson counties near Nashville,
which in aggregate served approximately 2,000 basic subscribers as of June 30,
1996, for an aggregate purchase price of $4.2 million.
Tellico System. On May 2, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of Tellico (the "Tellico
System") located in Loudon and Blount counties near Knoxville, which in
aggregate served approximately 1,501 basic subscribers as of June 30, 1996, for
an aggregate purchase price of $2.1 million.
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<PAGE> 88
Rochford System. On July 1, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of Rochford (the "Rochford
System") located in Davidson and Williamson counties near Nashville, which in
aggregate served approximately 1,359 basic subscribers as of June 30, 1996, for
an aggregate purchase price of $2.0 million.
Prime Cable System. On August 6, 1996, IP-TN, through an asset purchase
agreement, purchased the cable television assets of Prime Cable (the "Prime
Cable System") located in central Tennessee for an aggregate purchase price of
approximately $1.5 million. The system is estimated to have served an aggregate
of 1,160 basic subscribers as of June 30, 1996.
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<PAGE> 89
ORGANIZATIONAL STRUCTURE OF THE COMPANY (1)
The Company's organizational structure is as shown below:
[ORGANIZATIONAL CHART]
- ---------------
(1) In the chart above, "G.P." represents general partner, "M.G.P." represents
managing general partner and "L.P." represents limited partner.
(2) Issuers of Notes offering hereby.
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<PAGE> 90
BUSINESS
GENERAL
The Company was formed to acquire and consolidate various cable television
systems located in high-growth areas of the Southeast, including certain cable
television systems owned by the Related InterMedia Entities and TCI. TCI, an
investor in each of the Related InterMedia Entities, directly owns 49.0% of ICP-
IV's non-preferred equity. The Company has one of the largest concentrations of
basic subscribers in the Southeast and is the largest cable television service
provider in Tennessee. The Company's operations are composed of three clusters
that, in aggregate, served approximately 569,713 basic subscribers and passed
approximately 835,551 homes as of June 30, 1996.
The three clusters served, as of June 30, 1996, approximately (i) 324,808
basic subscribers in the Nashville/Mid-Tennessee Cluster, (ii) 147,499 basic
subscribers in the Greenville/Spartanburg Cluster and (iii) 97,406 basic
subscribers in the Knoxville/East Tennessee Cluster.
The Company serves approximately 90.0% and 70.0%, respectively, of all of
the basic cable television subscribers in the Nashville Metropolitan Market and
the Greenville/Spartanburg Metropolitan Market. The Nashville Metropolitan
Market and the Greenville/Spartanburg Metropolitan Market are located within the
33rd and 35th largest DMAs in the United States, respectively.
The Company operates primarily in urban and suburban areas in the Southeast
that in recent years have experienced significant economic, household and income
growth. The Southeast has been, and is projected to continue to be, one of the
fastest growing regions in the United States due to a diverse employment base, a
low cost of living and a favorable business climate. According to Market
Statistic, Inc., from 1995 to 2000, the counties served by the Systems are
projected to experience a weighted average compounded annual household growth of
2.0% as compared to national estimated compounded annual household growth of
1.1%. The counties served by the Systems are also projected to achieve a
weighted average EBI compounded annual growth rate of 3.4% from 1994 to 1999, as
compared to a national average compounded annual growth rate of 3.0%. These
attractive demographic trends helped the Systems to achieve, from December 31,
1993 to December 31, 1995, a compounded weighted internal basic subscriber
growth rate of approximately 5.3% per annum compared to a national compounded
average growth rate of 3.4% per annum, according to the NCTA. Management
believes that the attractive demographic trends of these counties provide the
potential for continued significant basic subscriber and revenue growth.
The Company and each of the Related InterMedia Entities were created by Leo
J. Hindery, Jr., who has over 10 years of experience in the cable television
industry, to own and operate cable television systems in the United States. Mr.
Hindery created the Company with the goal of developing it into a medium-sized
MSO. Mr. Hindery is the managing general partner of the general partners of each
of the Related InterMedia Entities.
RELATIONSHIP WITH TCI
TCI, through wholly owned subsidiaries, directly owns 49.0% of ICP-IV's
non-preferred equity. TCI is the largest cable television operator in the United
States, with wholly owned and affiliated systems serving approximately 15.2
million subscribers. Management believes that the Company's relationship with
TCI provides substantial benefits, including (i) the ability to purchase
programming and equipment at rates approximating those available to TCI and (ii)
access to TCI's engineering, technical, marketing, advertising, accounting and
regulatory expertise.
As a result of its relationship with TCI, the Company has the ability to
purchase its programming at rates approximating those available to TCI. The
Company has a contract with SSI, a subsidiary of TCI, to obtain basic and
premium programming. SSI contracts with various programmers to purchase
programming for TCI and its related companies. The Company has the option to
purchase its programming through its contract with SSI for which it pays SSI's
cost plus an administrative fee.
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In addition, management believes the Company benefits from its relationship
with TCI by (i) sharing in TCI's marketing test results, which typically involve
leading edge services and technologies, such as NVOD, (ii) sharing in the
results of TCI's research and development activities, including TCI's research
on broadband fiber, digital compression and technical standards, and (iii)
access to and the ability to consult with TCI's operating personnel with
expertise in technical, marketing, accounting and regulatory matters. Through
the Company's access to and relationship with TCI, the Company benefits from the
potential to participate at an early stage in joint ventures between TCI and
other telecommunications and media companies such as Internet access provider
@Home and PCS provider Sprint Spectrum.
TCI, however, is under no obligation to offer such benefits to the Company,
and there can be no assurance that such benefits will continue to be available
in the future should TCI's ownership in the Company significantly decrease or
should TCI otherwise decide not to continue to offer such participation to the
Company. The loss of the relationship with TCI would adversely affect the
financial position and results of operations of the Company. See "Risk
Factors -- Loss of Beneficial Relationship with TCI."
OPERATING STRATEGY
The Company's strategy is to own, operate and develop cable television
systems in geographically clustered, high-growth markets in the Southeast. The
operating strategy was developed by the Company's senior management team, which
includes experienced operating, engineering, marketing and financial executives.
The operating strategy includes the following key elements:
Cluster Subscribers. Management believes the Company can derive
significant economies of scale and operating efficiencies by clustering its
operations. Operational advantages and cost savings associated with
clustering include centralizing management, billing, marketing, customer
service, technical and administrative functions, and reducing the number of
headends. Management believes that clustering will enable the Company to
more effectively utilize capital by more efficiently delivering cable and
related services to a greater number of households. The Company intends to
(i) create regional customer service centers in each of the operating
regions, which should allow the Company to staff, train and monitor its
customer service operations more effectively, and (ii) substantially reduce
the number of its headends, engineering support facilities and associated
maintenance costs. Management believes that clustering also provides the
Company with significant revenue opportunities including the ability to
attract additional advertising and to offer a broader platform for data
services, and residential and business telephony services.
Focus on Regions with Attractive Demographics. The Company owns and
develops cable television systems in areas that in recent years have
experienced annual economic, household and income growth that has exceeded
national averages. See "-- Overview of Cable Television Systems." In recent
years, the Southeast has been one of the fastest growing regions in the
United States due in part to a diverse employment base, a low cost of
living and a favorable business climate. Management believes that the
Company will continue to benefit from the household growth in, and the
outward expansion of, the metropolitan areas served by the Company.
Furthermore, management believes that households located in areas with
attractive demographics are more likely to subscribe to cable television
services, premium service packages and new service offerings.
Upgrade Cable Television Systems. The Company has begun a Capital
Improvement Program to comprehensively upgrade its operating network.
Management believes that the Capital Improvement Program will further the
Company's efforts to reduce costs, create additional revenue opportunities,
increase customer satisfaction and enhance system reliability. Successfully
upgrading the architecture of the Company's operations will expand channel
capacity, enhance network quality and dependability, augment addressability
and allow the Company to offer two-way transmission and advanced
interactive services. Currently, over 81.0% of the Company's operations
offer between 30 to 61 channels of programming. Following implementation of
the Capital Improvement Program, over 85.0% of such operations will be able
to offer 62 or more channels and over 70.0% will be served by plant with a
bandwidth of 750 MHz enabling subscribers to receive the equivalent of 82
or more analog channels. Through 2001, the Company expects to spend
approximately $235.7 million in additional capital on the
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Capital Improvement Program that it expects to finance with internally
generated cash flow and borrowings available under the Bank Facility. See
"Risk Factors -- Future Capital Requirements"; "-- Upgrade Strategy and
Capital Expenditures" and "Description of Other Obligations."
Target Additional Revenue Sources. Management believes that the
Company's geographic clustering, the demographic profile of its subscribers
and implementation of the Capital Improvement Program afford the Company
the opportunity to pursue revenue sources incremental to its core business.
Management also believes that the Company can create additional revenue
growth opportunities through further development of existing advertising,
pay-per-view and home shopping services. Possible future services include
high-speed data transmission (including Internet access), NVOD, interactive
services such as video games, and residential and business telephony,
including a wireline network platform for PCS operators.
Emphasize Customer Service. Management believes that the Company
provides quality customer service and attractive programming packages at
reasonable rates. As part of its customer service efforts, the Company has
instituted training and incentive programs for all of its employees and
instituted same-day, evening and weekend installation and repair visit
options in several of its service areas. Six months before the cable
industry adopted its widely publicized "On Time Guarantee Program," the
Related InterMedia Entities offered free installation if a technician
arrived late for a scheduled installation. The Company's customer service
representatives have undergone training in a new response model entitled
"Selling, Saving & Serving," which is based on a comprehensive survey of
customer needs and buying habits. When speaking to a customer, the customer
service representatives are trained to answer questions regarding service
and repair issues as well as to identify and present the most appropriate
package and services based on the customer's profile. To further emphasize
customer service, the Company's employee bonus program includes specific
customer service incentives designed to increase the speed and
effectiveness of service visits, shorten installation response times and
ensure that customer telephone calls are answered promptly by customer
service representatives.
Utilize Innovative Sales and Marketing Techniques. The Company is
seeking to increase its penetration levels for basic service, expanded
basic service and premium service and to increase revenue per household
through targeted promotions and innovative marketing strategies. For
example, the Company has entered into a co-marketing campaign with Sprint
Corporation to offer a combination of cable television and long distance
services. Through this arrangement, subscribers receive a discount on their
cable bill when subscribing to both cable and long-distance services. The
Company realizes incremental revenue from Sprint Corporation through
royalties and an upfront marketing fee, and is reimbursed for the
subscriber's discount. Additional marketing strategies that the Company
utilizes include promotional previews of premium programs, discounted
installation fees, expedited installation service and special pricing on
premium services. The Company seeks to maximize its revenue per subscriber
by cross-promoting its programming services, by using "tiered" packaging
strategies for marketing premium services and promoting niche programming
services, and by offering more entertainment choices and new services. The
Company has introduced several retention marketing campaigns, including
quarterly newsletters that inform subscribers of programming and
system-specific news. Through this vehicle, subscribers are also given the
opportunity to win programming sponsored prizes that range from computers
to free travel. Various image spots are also aired in an effort to increase
recognition of the InterMedia brand name.
The Company is also an active participant in Cable in the Classroom, a
nonprofit organization sponsored by cable MSOs. Cable companies throughout
the United States provide schools with installation and monthly cable
television services free of charge, and educators receive a satellite feed
of commercial-free programming that can be taped and used at their
convenience.
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<PAGE> 93
OVERVIEW OF CABLE TELEVISION SYSTEMS
The Company's operations are located in areas of the Southeast that have
experienced rapid economic, household and income growth during the past five
years. The following table summarizes the historical and projected growth rates
of the regions served by the Company.
DEMOGRAPHIC DATA BY CLUSTER (1)
<TABLE>
<CAPTION>
ESTIMATED PROJECTED ESTIMATED PROJECTED PROJECTED
'90 - '95 '95 - '00 '90 - '95 '95 - '00 '94 - '99
HOUSEHOLD HOUSEHOLD POPULATION POPULATION HOUSEHOLD EBI
CLUSTER(2) CAGR(2) CAGR(2) CAGR(2) CAGR(2) CAGR(2)
- ---------------------------------- --------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Nashville/Mid-Tennessee........... 1.7% 1.9% 1.5% 1.5% 3.4%
Greenville/Spartanburg............ 1.5% 1.6% 1.6% 1.3% 3.3%
Knoxville/East Tennessee.......... 1.6% 1.9% 1.3% 1.6% 3.4%
Total Systems................ 1.6% 1.8% 1.5% 1.5% 3.4%
National Average.................. 0.7% 1.1% 1.0% 0.9% 3.0%
</TABLE>
- ---------------
(1) There can be no assurance that these estimates or projections have been or
will be realized. Sources: Market Statistics: Demographics USA -- County
Edition 1995 (Bill Communications); Sales and Marketing Management 1990,
Survey of Buying Power (Bill Communications).
(2) Represents the average compound annual growth rates ("CAGR's") for the
counties served by each cluster weighted by the number of basic subscribers
in each county.
The following table summarizes the homes passed, basic subscribers and
basic penetration percentages, premium service units and premium penetration
percentages as of June 30, 1996, in the regions served by the Company.
OPERATING DATA BY CLUSTER
<TABLE>
<CAPTION>
PREMIUM
HOMES BASIC BASIC SERVICE PREMIUM
CLUSTER PASSED(1) SUBSCRIBERS(2) PENETRATION UNITS(3) PENETRATION
- ---------------------------------- --------- -------------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C>
Nashville/Mid-Tennessee........... 496,945 324,808 65.4% 259,307 79.8%
Greenville/Spartanburg............ 204,208 147,499 72.2% 134,098 90.9%
Knoxville/East Tennessee.......... 134,398 97,406 72.5% 49,435 50.8%
------- ------- -------
Total........................... 835,551 569,713 68.2% 442,840 77.7%
</TABLE>
- ---------------
(1) Homes passed refers to estimates by the Company of the approximate number of
dwelling units in a particular community that can be connected to the cable
network without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.
(2) Basic subscribers are determined as the sum of all private residential
subscribers being directly billed for basic cable services and total bulk
and commercial equivalent units. Total bulk and commercial equivalent units
for any month are computed as related cable revenue for such month divided
by the predominant rate charged within the system for basic and expanded
basic services.
(3) Premium service units represents the aggregate number of single premium
channels subscribed for a monthly fee per channel. A basic subscriber may
subscribe to more than one premium service.
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The following table provides operating data at year-end for each of the
years in the four-year period ended December 31, 1995 and as of June 30, 1996
for the Company on a pro forma basis after giving effect to the Acquisitions.
PRO FORMA OPERATING DATA (1)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
------------------------------------------- 30,
1992 1993(2) 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Homes Passed............................. 668,159 756,081 789,878 823,097 835,551
Basic Subscribers........................ 421,026 493,109 528,038 559,973 569,713
Basic Penetration........................ 63.0% 65.2% 66.9% 68.0% 68.2%
Premium Service Units.................... 270,491 341,537 404,557 433,732 442,840
Premium Penetration...................... 64.2% 69.3% 76.6% 77.5% 77.7%
</TABLE>
- ---------------
(1) The data for the Miscellaneous Acquisitions are unavailable for 1992 through
1994 and are therefore only included in 1995 and 1996. As of December 31,
1995 the approximate totals for these systems were 9,366 homes passed, 6,108
basic subscribers and 2,454 premium service units. As of June 30, 1996 the
approximate totals were 9,408 homes passed, 6,020 basic subscribers and
2,757 premium service units.
(2) The 1993 Acquisitions represent an increase in basic subscribers of 47,300.
NASHVILLE/MID-TENNESSEE CLUSTER
[MAP OF CLUSTER]
Market Demographics. The Nashville Metropolitan Market is located within
the nation's 33rd largest DMA and has a population of approximately 1,044,000.
The Nashville/Mid-Tennessee Cluster serves approximately 90.0% of the basic
cable television subscribers in the seven contiguous counties (Robertson,
Sumner, Wilson, Rutherford, Williamson, Cheatham and Davidson) that encompass
Nashville and its suburbs (the "Nashville Metropolitan Market"). The
Nashville/Mid-Tennessee Cluster also serves rural and suburban areas located in
other counties in middle Tennessee, and an area of western Tennessee between
Nashville and Memphis.
The greater Nashville area is among the fastest growing metropolitan areas
in the United States, with estimated household growth in its four largest
counties of 5.0% in Williamson County, 4.7% in Rutherford
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<PAGE> 95
County, 2.3% in Sumner County and 1.1% in Davidson County from 1990 to 1995.
Household growth for the cluster is projected to grow at a weighted average
annual rate of 2.5% over the period from 1995 to 2000 compared to a national
average of 1.1%. The construction of an interstate highway encircling Nashville
has led to the expansion of the Nashville Metropolitan Market and fueled
household growth. Further, the cluster's weighted average household EBI is
projected to grow at an annual rate of 3.4% between 1994 and 1999, as compared
to a national average of 3.0% over the same period. The Nashville Metropolitan
Market has a diverse employment base, a low cost of living and a favorable
business climate. The primary industries located in the Nashville Metropolitan
Market include health care, entertainment (music and tourism), auto
manufacturing, government, finance and education. In addition, Nashville's
location at the convergence of several major interstate highways makes it one of
the larger distribution and transportation hubs in the Southeast.
Summary Operating Information. The following table provides operating data
at year-end for each of the years in the four-year period ended December 31,
1995 and at June 30, 1996 for the Nashville/Mid-Tennessee Cluster.
NASHVILLE/MID-TENNESSEE CLUSTER
SUMMARY OPERATING DATA (1)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- JUNE 30,
1992 1993(2) 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Homes Passed........................ 362,712 440,412 465,363 488,670 496,945
Basic Subscribers................... 212,490 274,459 295,920 319,788 324,808
Basic Penetration................... 58.6% 62.3% 63.6% 65.4% 65.4%
Premium Service Units............... 134,279 191,453 236,574 260,712 259,307
Premium Penetration................. 63.2% 69.8% 80.0% 81.5% 79.8%
</TABLE>
- ---------------
(1) The data for the Miscellaneous Acquisitions are unavailable for 1992 through
1994 and are therefore only included in 1995 and 1996. As of December 31,
1995 the approximate totals for those systems located in the
Nashville/Mid-Tennessee Cluster were 7,666 homes passed, 4,706 basic
subscribers and 2,104 premium service units. As of June 30, 1996 the
approximate totals were 7,670 homes passed, 4,519 basic subscribers and
2,408 premium service units.
(2) The 1993 Acquisitions represent an increase in basic subscribers of 45,892.
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<PAGE> 96
GREENVILLE/SPARTANBURG CLUSTER
[MAP OF CLUSTER]
Market Demographics. Located in the northwest corner of South Carolina and
the northeast corner of Georgia, the Greenville/Spartanburg Cluster serves the
Greenville/Spartanburg Metropolitan Market, which has a population of
approximately 756,100, and areas in northeast Georgia, which have a combined
population of 614,000. The Greenville/Spartanburg Metropolitan Market is located
in the nation's 35th largest DMA and serves approximately 70.0% of the basic
cable television subscribers in the five counties (Greenville, Spartanburg,
Cherokee, Union and Pickens) that encompass the combined metropolitan area of
Greenville/Spartanburg (the "Greenville/Spartanburg Metropolitan Market").
The Greenville/Spartanburg Cluster has experienced household growth above
the national average. The counties of Greenville and Spartanburg experienced
combined annual household growth of 1.3% from 1990 to 1995, as compared to a
national average of 0.7% during the same period. Household growth for the
cluster is projected to grow at a weighted average annual rate of 1.6% over the
period from 1995 to 2000 compared to a national average of 1.1%. The remainder
of the cluster includes communities in northeast Georgia such as the towns of
Gainesville, which is in Hall County and has the highest concentration of the
Company's basic subscribers in northeast Georgia. Household growth in Hall
County is estimated to have averaged 2.4% per annum from 1990 to 1995. The
Greenville/Spartanburg Metropolitan Market has experienced economic growth due
to a low cost of living and favorable business climate. Further, the average
household EBI is projected to grow at a weighted average annual rate of 3.3%
between 1994 and 1999, as compared to a national average of 3.0% over the same
period. Industries located in this area include textiles and light
manufacturing.
Summary Operating Information. The following table provides operating data
at year-end for each of the years in the four-year period ended December 31,
1995 and at June 30, 1996 for the Greenville/Spartanburg Cluster.
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<PAGE> 97
GREENVILLE/SPARTANBURG CLUSTER
SUMMARY OPERATING DATA
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
------------------------------------------- 30,
1992 1993(2) 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Homes Passed............................. 189,694 194,933 198,444 201,738 204,208
Basic Subscribers........................ 127,401 133,345 142,700 145,405 147,499
Basic Penetration........................ 67.2% 68.4% 71.9% 72.1% 72.2%
Premium Service Units.................... 105,154 113,949 123,231 124,188 134,098
Premium Penetration...................... 82.5% 85.5% 86.4% 85.4% 90.9%
</TABLE>
KNOXVILLE/EAST TENNESSEE CLUSTER
[MAP OF CLUSTER]
Market Demographics. The Knoxville/East Tennessee Cluster serves
approximately 52,313 basic subscribers in the suburbs of Knoxville, which
include parts of Blount, Knox, Loudon and Sevier counties, and approximately
9,318 basic subscribers in rural areas west and south of Knoxville (the
"Knoxville Metropolitan Market"). In addition, the cluster serves approximately
35,775 basic subscribers in the city of Kingsport and the surrounding Tri-Cities
area (the cities of Kingsport, Johnson City and Bristol), which are located in
Tennessee's fourth largest Metropolitan Statistical Area ("MSA") and have a
population of approximately 450,000.
The Knoxville Metropolitan Market has experienced strong economic growth as
a result of low unemployment and a pro-business environment. Recent household
growth in the Knoxville/East Tennessee Cluster has averaged 1.6% per annum on a
weighted average basis over the past five years compared to the national average
of 0.7%. Household growth for the cluster is projected to grow at a weighted
average annual rate of 1.9% over the period from 1995 to 2000 compared to a
national average of 1.1% over the same period. The city of Kingsport and the
surrounding Tri-Cities area have developed a strong economy with a low cost of
living and industry centered around manufacturing. Further, the average
household EBI is projected to grow at a weighted average annual rate of 3.4% as
compared to a national average of 3.0% over the same period. Eastman Chemical is
the largest employer in the area.
Summary Operating Information. The following table presents operating data
at year-end for each of the years in the four-year period ended December 31,
1995 and at June 30, 1996 for the Knoxville/East Tennessee Cluster.
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KNOXVILLE/EAST TENNESSEE CLUSTER
SUMMARY OPERATING DATA (1)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- JUNE 30,
1992 1993(2) 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Homes Passed........................ 115,753 120,736 126,071 132,689 134,398
Basic Subscribers................... 81,135 85,305 89,418 94,780 97,406
Basic Penetration................... 70.1% 70.7% 70.9% 71.4% 72.5%
Premium Service Units............... 31,058 36,135 44,752 48,832 49,435
Premium Penetration................. 38.3% 42.4% 50.1% 51.5% 50.8%
</TABLE>
- ---------------
(1) The data for the Miscellaneous Acquisitions are unavailable for 1992 through
1994 and are therefore only included in 1995 and 1996. As of December 31,
1995 the approximate totals for those systems in the Knoxville/East
Tennessee Cluster were 1,700 homes passed, 1,402 basic subscribers and 350
premium service units. As of June 30, 1996 the approximate totals were 1,738
homes passed, 1,501 basic subscribers and 349 premium service units.
UPGRADE STRATEGY AND CAPITAL EXPENDITURES
Overview
The Company plans to upgrade its cable television systems pursuant to its
Capital Improvement Program, which is based in large part on TCI's
specifications and which has already commenced in some of the Systems.
The Capital Improvement Program is designed to (i) deploy fiber optic
cable, (ii) consolidate and upgrade headends, (iii) increase the use of
addressable technology, (iv) install two-way transmission capability and (v)
introduce digital compression capability. Through 2001, the Company expects to
spend approximately $235.7 million in additional capital on the Capital
Improvement Program that it expects to finance with internally generated cash
flow and working capital available from borrowings under the Bank Facility. See
"Risk Factors -- Future Capital Requirements."
Pursuant to the Capital Improvement Program, the Company plans to upgrade
the Systems and to continue certain upgrades already begun in the
Greenville/Spartanburg System and the Viacom Nashville System. Since April 1995,
TCI has been upgrading its cable television systems in the
Greenville/Spartanburg area in accordance with the Capital Improvement Program.
As a result of these efforts, cable plant serving, as of June 30, 1996,
approximately 12.0% of the basic subscribers in the Greenville/Spartanburg
Cluster have already been rebuilt to 750 MHz. In anticipation of the acquisition
of the Viacom Nashville System, management has worked closely with Viacom since
late 1994 to plan and implement the rebuild of that system to the Capital
Improvement Program's specifications. As a result of these efforts, cable plant
serving, as of June 30, 1996, approximately 21.2% of the basic subscribers in
the Nashville/Mid-Tennessee Cluster has already been rebuilt to 750 MHz.
The table below summarizes the Systems' existing technical profile.
<TABLE>
<CAPTION>
BASIC CHANNEL CAPACITY AS A
SUBSCRIBERS PERCENTAGE OF BASIC SUBSCRIBERS ADDRESSABLE
AS OF ----------------------------------------- CONVERTERS AS A
JUNE 30, 30-53 54-61 62-81 82+ PERCENTAGE OF
CLUSTER 1996 CHANNELS CHANNELS CHANNELS CHANNELS BASIC SUBSCRIBERS
- ----------------------------------- ---------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Nashville/Mid-Tennessee............ 324,808 75.8% 3.0% 0.0% 21.2% 34.5%
Greenville/Spartanburg............. 147,499 45.1% 30.9% 12.0% 12.0% 79.5%
Knoxville/East Tennessee........... 97,406 8.0% 92.0% 0.0% 0.0% 17.9%
------
Total............................ 569,713 56.4% 25.3% 3.1% 15.2% 43.4%
</TABLE>
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Upon completion of the Capital Improvement Program, the Company expects its
technical profile to be as follows:
<TABLE>
<CAPTION>
BASIC CHANNEL CAPACITY AS A
SUBSCRIBERS PERCENTAGE OF BASIC SUBSCRIBERS ADDRESSABLE
AS OF ----------------------------------------- CONVERTERS AS A
JUNE 30, 30-53 54-61 62-81 82+ PERCENTAGE OF
CLUSTER 1996 CHANNELS CHANNELS CHANNELS CHANNELS BASIC SUBSCRIBERS
- ---------------------------------- ----------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Nashville/Mid-Tennessee........... 324,808 0.0% 19.0% 10.9% 70.1% 69.0%
Greenville/Spartanburg............ 147,499 4.9% 0.0% 0.0% 95.1% 69.8%
Knoxville/East Tennessee.......... 97,406 0.0% 13.6% 48.0% 38.4% 56.0%
------
Total........................... 569,713 1.3% 13.1% 14.3% 71.3% 67.0%
</TABLE>
Upgrade Characteristics
To make the most efficient use of its capital, the Company expects to use
three different architectural profiles in implementing the Capital Improvement
Program. Management prioritizes which of the Company's Systems to upgrade by
considering (i) additional revenue potential, (ii) competition, (iii) cost
effectiveness and (iv) requirements under franchise agreements. Set forth below
are the general specifications for each of the three architecture types:
<TABLE>
<CAPTION>
EXPECTED
PERCENTAGE OF POTENTIAL
ARCHITECTURE TYPE SUBSCRIBERS BANDWIDTH NODE SIZE
- ------------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Metro/Suburban................................... 71.3% 750 MHz...... 500 Homes
Suburban......................................... 14.3% 550 MHz...... 2,000 Homes
Rural............................................ 14.4% 300-450 MHz.. 2,000 Homes
</TABLE>
The Company expects to upgrade plant serving the majority of its
subscribers using the metro/suburban or the suburban architectures. The
Company's system architecture is scaleable in that the specifications of each
architecture type are adaptable to the needs of each service area. Each
architecture type is designed to be easily upgraded to the next level (i.e.,
systems being rebuilt at 550 MHz will be migratable to 750 MHz). All design and
construction will support this architecture; however, the timing of the
installation of various elements of the network will depend upon local market
demand, economics, competition and other factors. This flexibility in the timing
of upgrades will enable the Company to delay certain expenditures until revenue
sources justify the capital outlay. Notwithstanding the size of the community or
the type of architecture, the Capital Improvement Program is intended to:
Deploy fiber optic cable to increase capacity, improve picture quality,
enhance reliability, reduce maintenance costs and provide a platform for future
services. Fiber optic cable makes it possible to divide a system into a number
of discrete service areas, or "nodes." The nodes, which are expected to be fed
signals by a direct fiber optic line from the headend, are designed to serve
between 500 and 2,000 homes, depending on the population density of the area
covered by that section of the system. This design is expected to make it
immediately possible to (i) narrow-cast advertising and programming to specific
groupings of subscribers, (ii) significantly reduce ongoing maintenance and
repair expenses, as it reduces the number of active electronic devices, (iii)
isolate the number of subscribers affected by most types of system malfunction
or failure thus enhancing reliability and (iv) deliver data, interactive and
voice services. The Company's extensive deployment of fiber optic cable is also
expected to reduce system powering requirements. Additionally, the deployment of
fiber optic cable will permit the reduction in the number of headends operated
by the Company, resulting in a decrease in the Company's headend-related capital
and maintenance expenditures.
Consolidate and upgrade headends with backup power and remote network
monitoring to increase system efficiency and reliability. Where feasible,
neighboring systems are expected to be interconnected via fiber optic cable into
a single, upgraded headend to help introduce addressable and digital technology.
Refinements planned for all headends are designed to deliver high system
reliability and improved operating efficiency.
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Network monitoring is expected to make it possible to identify and correct many
types of system malfunctions before they become evident to the subscriber.
Increase use of addressable technology, which will broaden choices for
subscribers. Addressable technology is widely available in the
Greenville/Spartanburg System and the Viacom Nashville System. The Company
intends to increase the number of addressable converters deployed in its
systems. Addressable technology provides subscribers with the ability to
purchase the monthly, daily or per-event programs they desire and eliminates the
need to "roll a truck" when subscribers change their selection of optional
services. Additional revenues are expected to be realized both from the rental
of addressable converters and the sale of additional programming services.
Addressable technology could also provide substantial improvement in securing
signals from theft of service.
Install two-way transmission capability for "impulse" pay-per-view, data,
interactive and voice services. Cable television systems traditionally have been
designed to transmit in a single direction from the headend. The Capital
Improvement Program is expected to make two-way transmission possible throughout
the Systems. Initially, it is expected that this capability will be used to
provide "impulse" pay-per-view, which would permit a subscriber to order an
event via a remote-control device. Trials of "impulse" pay-per-view services
have increased the buy rates of these services. Currently, the Company's
pay-per-view services must be ordered over the telephone. Two-way capability is
also expected to support the introduction of data services, interactive services
(such as games, advertising, information retrieval and home shopping) and voice
services.
Introduce the capability to carry digitally compressed signals, thus
increasing channel capacity. Digital compression, which is expected to be
commercially available within approximately 12 months, is expected to enable a
system to carry four to ten times as many channels as it can today. For example,
if an 8-to-1 digital compression system were employed, a system that can carry
30 analog channels today could carry up to 240 channels. There can be no
assurance that the technology will be available in this time period or at all.
New and Enhanced Services
The Capital Improvement Program is expected to provide for, among other
benefits, the immediate addition of channel capacity. This would enable the
Company to offer additional programming variety to subscribers and provide the
opportunity to garner increased revenue through numerous existing services as
well as new services. Selected opportunities for revenue growth include: (i)
offering additional services, which are technically possible but which the
Company has been unable to provide because of channel constraints, including (a)
a la carte programming offerings and the multiplexing of premium services, (b)
additional pay-per-view selections and (c) additional channels dedicated to
advertising, home shopping and infomercials; and (ii) the offering of other new
services to the extent they become financially and technologically feasible,
such as data, interactive and telephony services.
A La Carte Programming and Multiplexing. The Company will seek to offer
additional programming options to subscribers through a la carte premium
services such as new product tier offerings and through the multiplexing of
premium products. The Company expects the increased channel capacity resulting
from the Capital Improvement Program to enable it to offer these additional
premium selections, which management believes will increase pay penetration as
well as pay revenue per month per subscriber.
Pay-Per-View. The Company currently offers pay-per-view programming on a
per-day or per-event basis. The services include feature movies, special events,
sporting events and adult programming. The Systems' pay-per-view buy rates have
been limited due to the lack of addressability and channel capacity. As the
Company continues to upgrade its plant and to increase addressability, and as
digital compression technology becomes available, the Company expects buy rates
to increase. The Company will seek to offer a NVOD format where it offers the
current top 10 video releases and starts each of them every 15 to 30 minutes,
allowing a convenient viewing schedule for the subscriber.
Advertising, Home Shopping and Infomercials. The Company expects to
increase advertising revenue as a result of its geographic clustering of cable
television systems, high penetration rates and favorable demographic profile.
Furthermore, the increased diversity and ratings of cable programming should
enhance
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the attractiveness of cable to potential advertisers. The consolidation of the
systems in the Nashville/Mid-Tennessee Cluster eliminated the need for
advertisers to contract with multiple cable operators in order to blanket the
region and enabled the Company to deliver the entire market or any part of it to
advertisers with one transaction. Through the use of digital ad insertion
equipment, which the Company recently began to purchase, the Company would be
able to sell time directed at specific audiences and update ad content more
frequently. Furthermore, with expanded channel capacity the Company intends to
offer additional channels dedicated to home shopping and infomercials.
Data Services. As a broadband network, cable has the ability to deliver
data at a rate 350 times faster than the rate currently available over telephone
modem connections and 80 times faster than ISDN. Following completion of the
Capital Improvement Program and installation of cable modems, the Company would
be able to capitalize on this technology by providing, in addition to other
services, high-speed Internet access through services such as @Home. @Home, a
TCI joint venture that is unaffiliated with the Company, expects to utilize a
Netscape browser to offer high-speed data service with superior graphics,
original local content, audio/visual capability and rapid response times via a
hybrid fiber/coaxial connection to personal computers. The Company could also
benefit by targeting other data transmission applications, including local area
networks ("LANs") that connect businesses, government offices, or schools with
multiple outside locations. Potential LAN applications include the networking of
a local hospital with its affiliated physicians and clinics, which would allow
for near-instantaneous sharing of patient records. The Company expects new
demand for high-speed Internet access to arise as many organizations begin
offering multimedia applications with improved functionality and graphics.
Interactive Services. Classified advertising, interactive shopping and
video games (such as the SEGA Channel) offer other incremental revenue
opportunities for the Company. Unlike the "classified channels" that are
currently offered on some cable television systems, these services would also be
interactive, thereby allowing the user to view information as desired. Relative
to the print-based advertising (Yellow Pages and newspaper classified sections)
with which this service would compete, cable delivery would allow the
advertisers to make more frequent change of copy, to provide more detailed
information and, potentially, to include still or live video. With two-way
transmission capability, the Company would also be able to offer interactive
shopping on shop-at-home channels allowing a subscriber to buy on impulse and
explore only products of interest and interactive game channels allowing a
subscriber to play video games against other subscribers in different locations.
Telephony Services. Through the upgrade of its plant, management believes
the Company will be positioned to become a provider of voice services.
Applications in the field of telephony include residential toll bypass, shared
tenant services and local telephony services. The Company is exploring
opportunities to provide a wireline network platform for PCS operators.
COMPETITION
Cable television systems face competition from other sources of news and
entertainment such as newspapers, movie theaters, live sporting events,
interactive computer programs and home video products, including videotape
cassette recorders and alternative methods of receiving and distributing video
programming. Competing sources of video programming include, but are not limited
to, off-air broadcast television, DBS, MMDS, SMATV and, potentially, telephone
companies. In addition, the federal government in recent years has sought and
continues to seek ways in which to increase competition in the cable industry.
See "Legislation and Regulation." The extent to which cable service is
competitive depends upon the ability of the cable system to provide at least the
same quantity and quality of programming at competitive prices and service
levels as competitors.
DBS. DBS involves the transmission of an encoded signal directly from a
satellite to the home user. DBS provides video service using a relatively small
dish located at each subscriber's premises. In 1994, two companies offering
high-power DBS video service utilizing an 18-inch satellite receiver dish,
DIRECTV, Inc. ("DIRECTV") and United States Satellite Broadcasting, began
operations over DIRECTV's DBS satellites, and at present, together offer over
150 channels of programming to over 1.4 million households as of April 1996.
PrimeStar Partners, L.P. ("PrimeStar"), which offers 70 channels of programming
to over 1.1 million households as of April 1996, is a medium-power DBS service
provider using larger (36-inch) satellite receiver
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dishes than high-power DBS providers. DIRECTV currently requires the consumer to
purchase home dish equipment, while PrimeStar, which is owned primarily by a
consortium of cable television operators (including TCI), leases its dishes to
consumers. Both of these services provide the consumer with access to most
satellite-delivered cable television programming, including premium channels,
pay-per-view and national sporting events. Some of the services offered by DBS
are not available through the Systems, including special events and packages of
Major League Baseball, National Basketball Association, National Football League
and National Hockey League games. The DBS systems use video compression
technology to increase their channel capacity and are able to use 18-inch or
36-inch dish antennae to receive the satellite signals directly. Several
companies including EchoStar Communications Corp. have begun, and a venture
between MCI Telecommunications Corporation and The News Corporation Limited is
scheduled to begin, offering high-power DBS services.
DBS service similar to the Company's basic expanded service starts at
approximately $30 per month nationally. Prices for DBS systems have fallen
dramatically over the last year. A DBS satellite dish can be purchased for
approximately $200 under promotional offers from certain DBS service providers.
The Company is experiencing increased competition from DBS, although the product
is still in early stages of implementation. While it is difficult to assess the
magnitude of the impact that DBS will have on the Company's operations and
revenues, there can be no assurance that it will not have a material adverse
effect on the Company. See "Risk Factors -- Competition in the Cable Television
Industry; Rapid Technological Change." Prior to the advent of the high- to
medium-power satellite services, several satellite companies were offering and
continue to offer low-power service (also known as direct to the home or DTH)
requiring a much larger dish and higher upfront costs without many of the
service offerings that currently exist on high- to medium-power systems (i.e.,
sports packages and pay-per-view).
MMDS/Wireless Cable. Wireless program distribution services such as MMDS,
commonly called wireless cable television systems, use low-power microwave
frequencies to transmit video programming to subscribers. These systems
typically offer 20 to 34 channels of programming, which may include local
programming. Because MMDS is a first generation technology in its early stages
of implementation, it is difficult to assess the magnitude of the impact MMDS
will have on the cable industry or upon the Company's operations and revenue.
See "Risk Factors -- Competition in the Cable Television Industry; Rapid
Technological Change." Certain wireless cable companies may become more
competitive as a result of recently announced transactions with certain
telephone companies.
SMATV. SMATV systems may also present potential competition for cable
television operators. SMATV operators typically enter into exclusive agreements
with apartment building owners or homeowners' associations to service
condominiums, apartment complexes, hospitals, hotels, commercial complexes and
other multiple dwelling units ("MDUs"). This often precludes franchised cable
operators from serving residents of such private complexes. Due to widespread
availability of reasonably priced earth stations, SMATV systems can offer many
of the same satellite-delivered program services that are offered by franchised
cable television systems.
In most of the Company's markets there are few MDUs. Also, under the 1996
Act, the Company can engage in competitive pricing in response to pricing
offered by SMATV systems. However, it is unclear, in particular because of a
constantly changing regulatory environment, what the future impact of SMATV
operators will be on the Company's operations and revenues. See "Risk
Factors -- Competition in the Cable Television Industry; Rapid Technological
Change."
Telephone Companies. Certain regional telephone operating companies and
long distance telephone companies could become significant competitors in the
future, as they have expressed an interest in becoming subscription television
providers. Certain telephone companies have also received authorization to
test-market video and other services to certain geographic areas using fiber
optic cable and digital compression over existing telephone lines. In order to
offer video service, however, in some cases telephone companies may be required
to receive local regulatory approval (i.e., a franchise) similar to the
approvals obtained by cable operators. See "Legislation and Regulation."
The federal law that banned the cross-ownership of cable television and
telephone companies in the same service area has been repealed so that
potentially strong competitors, including telephone companies, which were
previously subject to various restrictions against entering the cable television
industry, may now provide
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cable television service in their service areas. The 1996 Act permits telephone
companies to provide cable television service through cable television systems
and open video systems ("OVS"), and by leasing capacity as common carriers to
other cable television service providers. Telephone companies may also provide
video programming over wireless cable television systems. Assuming telephone
companies begin to provide programming and other services to their customers on
a commercial basis, they have competitive advantages which include an existing
relationship with substantially every household in their service areas,
substantial financial resources, an existing infrastructure and the potential
ability to subsidize the delivery of programming through their position as the
sole source of telephone service to the home. Given the financial resources of
the local telephone companies and the changing legislative and regulatory
environment, it is expected that the local telephone companies will provide
increased competition for the cable television industry, including the Systems
which could have a material adverse effect on the Company. See "Risk
Factors -- Competition in Cable Television Industry; Rapid Technological Change"
and "Legislation and Regulation -- Federal Regulatory Provisions -- Ownership."
Overbuilds. Since the Systems generally operate under non-exclusive
franchises, other operators may obtain franchises to build competing cable
television systems. The 1992 Cable Act prohibits franchising authorities from
unreasonably refusing to award additional franchises and permits the authorities
to operate cable television systems themselves without franchises. Currently the
Company is not aware of any material overbuild, or any pending applications for
overbuilds, in any of its franchise areas. However, the Company is unable to
predict whether any of the Systems will be subject to an overbuild by
franchising authorities or other cable operators in the future, or what effect,
if any, such an overbuild may have on the Company.
Other Competition. Other new technologies, such as the proposed Local
Multipoint Distribution Service, may become competitive with services that cable
communications systems can offer. In addition, with respect to non-video
services, the FCC has authorized television broadcast stations to transmit, in
subscriber frequencies, text and graphic information useful both to consumers
and to businesses. The FCC also permits commercial and non-commercial FM
stations to use their subcarrier frequencies to provide non-broadcast services,
including data transmissions. The FCC recently established an over-the-air
interactive video and data service that will permit two-way interaction with
commercial and educational programming, along with informational and data
services. Telephone companies and other common carriers also provide facilities
for the transmission and distribution of data and other non-video services.
Additionally, the 1996 Act permits registered public utility holding companies,
subject to regulatory approval, to diversify into telecommunications,
information services and related services through a single-purpose subsidiary.
Such utilities have substantial resources and could pose substantial competition
to the cable industry. Prior to the passage of the 1996 Act, utility holding
companies were required to obtain approval from the SEC before entering into any
telecommunication business ventures.
Technological advances and changes in the legislative and regulatory
environment have made it very difficult to predict the effect that ongoing and
future developments may have on the cable television industry in general or on
the Company in particular. While the Company's upgrade strategy is intended to
enhance its ability to respond effectively to competition, there can be no
assurance that the Company will be successful in meeting competition.
FRANCHISES
Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
typically contain many conditions, such as time limitations on commencement and
completion of construction; conditions of service, including number of channels,
broad categories of programming, and provision of free service to schools and
certain other public institutions; and maintenance of insurance and indemnity
bonds. Certain provisions of local franchises are subject to federal regulation
under both the Cable Communications Policy Act of 1984 (the "1984 Cable Act"),
the 1992 Cable Act and the 1996 Act. See "Legislation and Regulation."
As of March 31, 1996, the Systems held 160 franchises. These franchises,
all of which are non-exclusive, provide for the payment of fees to the issuing
authority. Annual franchise fees imposed on the Systems range up to 5.0% of the
gross revenues generated by the system. The 1984 Cable Act prohibits franchising
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authorities from imposing franchise fees in excess of 5.0% of gross revenues and
also permits the cable operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances.
As of March 31, 1996, twenty-four franchises relating to approximately
30,775 of the Systems' basic subscribers have expired or are scheduled to expire
prior to December 31, 1996. The terms of these franchises require the Company to
negotiate the renewals of such franchises with the local franchising
authorities, and all twenty-four franchises are currently in informal renewal
negotiations. In connection with a renewal of a franchise, the franchising
authority may require the Company to comply with different conditions with
respect to franchise fees, channel capacity and other matters, which conditions
could increase the Company's cost of doing business. Although management
believes that it generally will be able to negotiate renewals of its franchises,
there can be no assurance that the Company will be able to do so and the Company
cannot predict the impact of any new or different conditions that might be
imposed by franchising authorities in connection with such renewals. See "Risk
Factors -- Expiration of Franchises."
The table below categorizes the Systems' franchises by date of expiration
and presents the approximate number of franchises held and the corresponding
percentage of subscribers subject to the franchises as of March 31, 1996.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF TOTAL
YEAR OF FRANCHISE EXPIRATION FRANCHISES SUBSCRIBERS
--------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Prior to 1997.................................................. 24 5.5%
1997-2001...................................................... 50 21.0%
2002 and after................................................. 86 73.5%
--- -----
Total................................................ 160 100.0%
=== =====
</TABLE>
PROPERTIES
The Company's principal physical assets consist of cable television
operating plant and equipment, including signal receiving, encoding and decoding
devices, headends and distribution systems and customer drop equipment for each
of its cable television systems. The Company's cable distribution plant and
related equipment generally are 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 Company owns or leases real property for signal reception sites and
business offices in many of the communities served by the Systems and for its
principal operating offices in Nashville, Tennessee and San Francisco,
California. The Company owns all 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
There are no material legal proceedings to which the Company is a party or
to which the Company's properties are subject. The Company knows of no
threatened or pending material legal action against it or its properties.
EMPLOYEES
The Company has approximately 1,150 full-time employees. The Company
considers its relationship with its current employees to be good.
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LEGISLATION AND REGULATION
The cable television industry is regulated at the federal level through a
combination of federal legislation and FCC regulations, by some state
governments and by substantially all local government franchising authorities.
Various legislative and regulatory proposals under consideration from time to
time by the Congress and various federal agencies have in the past, and may in
the future, materially affect the Company and the cable television industry.
Additionally, many aspects of regulation at the federal, state and local level
are currently subject to judicial review or are the subject of administrative or
legislative proposals to modify, repeal or adopt new laws and administrative
regulations and policies. The following is a summary of significant federal laws
and regulations affecting the growth and operation of the cable television
industry and a description of certain state and local laws.
FEDERAL STATUTORY LAW
THE TELECOMMUNICATIONS ACT OF 1996
On February 1, 1996, Congress passed the Telecommunications Act of 1996
("1996 Act"), which was signed into law by the President on February 8, 1996.
The 1996 Act substantially revises the Communications Act of 1934, as amended,
including the Cable Communications Policy Act of 1984 ("1984 Cable Act") and the
Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable
Act") under which the cable industry is regulated. The FCC is required to
conduct and currently is conducting various rulemaking proceedings to implement
the provisions of the 1996 Act.
The 1996 Act has been described as one of the most significant changes in
communications regulation since the original Communications Act of 1934. The
1996 Act modifies various rate regulation provisions of the 1992 Cable Act.
Generally, under the 1996 Act, customer programming service ("CPS") tier rates
are deregulated on March 31, 1999. Upon enactment, the CPS rates charged by
small cable operators are deregulated in systems serving 50,000 or fewer basic
subscribers. The 1996 Act allows cable operators to aggregate equipment costs
into broad categories, such as converter boxes, regardless of the varying levels
of functionality of the equipment within each such broad category, on a
franchise, system, regional, or company level. The statutory changes also
facilitate the rationalizing of equipment rates across jurisdictional
boundaries. These favorable cost-aggregation rules do not apply to the limited
equipment used by basic service-only subscribers.
The 1996 Act is intended, in part, to promote substantial competition in
the marketplace for telephone local exchange service and in the delivery of
video and other services and permits cable television operators to enter the
local telephone exchange market. The Company's ability to competitively offer
telephone services may be adversely affected by the degree and form of
regulatory flexibility afforded to local telephone companies (also known as
local exchange carriers or "LECs"), and in part, will depend upon the outcome of
various FCC rulemakings, including the current proceeding dealing with the
interconnection obligations of telecommunications carriers. The FCC recently
adopted a national framework for interconnection but left to the individual
states the task of implementing the FCC's rules. Although the FCC's
interconnection order is intended to benefit new entrants in the local exchange
market, it is uncertain how effective its order will be until the FCC completes
all of its rulemaking proceedings under the 1996 Act and state regulators begin
to implement the FCC's regulations. The 1996 Act also repeals the cable
television/telephone cross-ownership ban adopted in the 1984 Cable Act and
permits LECs and other service providers to provide video programming.
The most far-reaching changes in communications businesses will result from
the telephony provisions of the 1996 Act. These provisions promote local
exchange competition as a national policy by eliminating legal barriers to
competition in the local telephone business and setting standards to govern the
relationships among telecommunications providers, establishing uniform
requirements and standards for entry, competitive carrier interconnection and
unbundling of LEC monopoly services. The statute expressly preempts any legal
barriers to competition under state and local laws. Many of these barriers have
been lifted by state actions over the last few years, but the 1996 Act completes
the task. The 1996 Act also establishes new requirements to maintain
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and enhance universal telephone service and new obligations for
telecommunications providers to maintain the privacy of customer information.
Under the 1996 Act, LECs may provide video service as cable operators or
through OVS, a regulatory regime that may give them more flexibility than
traditional cable systems. The FCC has determined that a cable operator may
operate an OVS only if it is subject to effective competition within its
franchise area and this determination has been appealed; but, an operator that
elects to operate an OVS continues to be subject to the terms of any current
franchise or other contractual agreements. The 1996 Act eliminates the
requirement that telephone companies file Section 214 applications with the FCC
before providing video service. This will limit the ability of cable operators
to challenge telephone company entry into the video market. With certain
exceptions, the 1996 Act also restricts buying out incumbent cable operators in
the LEC's service area.
Other parts of the 1996 Act also will affect cable operators. The 1996 Act
directs the FCC to revise the current pole attachment rate formula. This will
result in an increase in the rates paid by entities, including cable operators,
that provide telecommunication services. (Cable operators that provide only
cable services are unaffected.) Under the V-chip provisions of the 1996 Act,
cable operators and other video providers are required to carry any program
rating information that programmers include in video signals. Cable operators
also are subject to new scrambling requirements for sexually explicit
programming. In addition, cable operators that provide Internet access or other
online services are subject to new indecency limitations. Legal proceedings have
been instituted which challenge these scrambling requirements and indecency
limitations.
These decisions preliminarily have been held invalid on constitutional
grounds but are subject to Supreme Court review.
Under the 1996 Act, a franchising authority may not require a cable
operator to provide telecommunications services or facilities, other than an
institutional network, as a condition to a grant, renewal, or transfer of a
cable franchise, and franchising authorities are preempted from regulating
telecommunications services provided by cable operators and from requiring cable
operators to obtain a franchise to provide such services. The 1996 Act also
repeals the 1992 Cable Act's anti-trafficking provision which generally required
the holding of cable television systems for three years.
It is premature to predict the effect of the 1996 Act on the cable industry
in general or the Company in particular. The FCC is undertaking numerous
rulemaking proceedings to interpret and implement the 1996 Act. It is not
possible at this time to predict the outcome of those proceedings or their
effect on the cable television industry or the Company.
FEDERAL REGULATION
In addition to the 1996 Act, the cable industry is regulated under the 1984
Cable Act, the 1992 Cable Act and the regulations implementing these statutes.
The FCC has promulgated regulations covering such areas as the registration of
cable television systems, cross-ownership of cable television systems and other
communications businesses, carriage of television broadcast programming,
consumer protection and customer service standards and lockbox availability,
origination cablecasting and sponsorship identification, limitations on
commercial advertising in children's programming, the regulation of basic cable
and cable programming service and equipment rates in cable service areas not
subject to effective competition, signal leakage and frequency use, technical
performance, maintenance of various records, equal employment opportunity,
antenna structure notification, marking and lighting, and program exclusivity.
Additionally, cable operators periodically are required to file various
informational reports with the FCC. 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 administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. State or local franchising
authorities, as applicable, also have the right to enforce various regulations,
impose fines or sanctions, issue orders or seek revocation subject to the
limitations imposed upon such franchising authorities by federal, state and
local laws and regulations.
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CABLE COMMUNICATIONS POLICY ACT OF 1984
On December 29, 1984, the 1984 Cable Act, which amended the Communications
Act of 1934, took effect (as so amended, the "Communications Act"). This
legislation imposed uniform national regulations on cable television systems and
franchising authorities. Among other things, the legislation regulated the
provision of cable television service pursuant to a franchise, specified those
circumstances under which a cable television operator may modify its franchise,
established franchise renewal procedures, and established a 5.0% maximum
franchise fee payable by cable television operators to franchising authorities.
The law prescribes a standard of privacy protection for cable subscribers,
and imposes equal employment opportunity requirements on the cable television
industry. Franchising authorities are granted authority to establish
requirements in new franchises and upon the renewal of existing franchises for
the designation and use of public, educational and governmental access channels.
Franchising authorities are empowered to establish requirements for
cable-related facilities and equipment, which may include requirements that
relate to channel capacity, system configuration and other facility or equipment
requirements related to the establishment and operation of a cable television
system.
CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION ACT OF 1992
On October 5, 1992, Congress enacted the 1992 Cable Act. The 1992 Cable Act
amends the 1984 Cable Act in many respects. The 1992 Cable Act allows for a
greater degree of regulation of the cable industry with respect to, among other
things: (i) cable system rates for both basic and cable programming services and
equipment; (ii) programming access terms and conditions and exclusivity
arrangements including volume discounts available to larger cable operators;
(iii) access to cable channels by unaffiliated programming services; (iv) leased
access terms and conditions; (v) horizontal and vertical ownership of cable
systems; (vi) customer service standards; (vii) franchise renewals; (viii)
television broadcast signal carriage ("must carry") and retransmission consent;
(ix) technical standards; (x) customer privacy; (xi) cable equipment
compatibility; (xii) home wiring requirements; and (xiii) obscene or indecent
programming. Additionally, the 1992 Cable Act seeks to encourage competition
with existing cable television systems by: (i) allowing municipalities to own
and operate their own cable television systems without having to obtain a
franchise; (ii) preventing franchising authorities from granting exclusive
franchises or unreasonably refusing to award additional franchises covering an
existing cable system's service area; and (iii) prohibiting the common ownership
of co-located MMDS or SMATV systems. The 1992 Cable Act also includes an
"anti-buy-through prohibition" which prohibits cable systems that have
addressable technology and addressable converters in place from requiring cable
subscribers to purchase service tiers above basic as a condition to purchasing
premium movie channels. Cable systems which are not addressable are allowed a
10-year phase-in period to comply. Management believes that compliance with a
number of provisions in this legislation relating to, among other things, rate
regulation, has had, and will most likely continue to have, a significant
negative impact on the cable television industry and on the Company's business.
Various cable operators and other parties have filed actions in the United
States District Court for the District of Columbia (the "D.C. District Court")
challenging the constitutionality of several sections of the 1992 Cable Act. A
three-judge panel of the D.C. District Court granted summary judgment for the
government upholding the constitutional validity of the must-carry provisions of
the 1992 Cable Act. That decision was appealed directly to the United States
Supreme Court (the "Supreme Court"), which remanded the case to the D.C.
District Court for further proceedings. On December 12, 1995, the three judges
of the D.C. District Court again upheld the must-carry rules' constitutional
validity. Pending the Supreme Court's final review of the constitutionality of
the must-carry rules, such rules continue in force.
On September 4, 1996, the United States Court of Appeals for the District
of Columbia (the "D.C. Appeals Court") upheld the constitutionality of several
provisions of the 1984 and 1992 Cable Acts against a First Amendment
constitutional challenge in a case that has been pending since 1993. The Court
affirmed a lower court decision upholding the constitutionality of the federal
statutory provisions authorizing (i) public, educational and governmental access
channels, (ii) commercial leased access channels, (iii) rate regulation, (iv)
liability for operators carrying obscene programming on access channels, and (v)
municipal immunity
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from damage claims; and it reversed the lower court's determination that the
federal statutory provisions authorizing (i) advance subscriber notice for
certain free premium channel previews and associated blocking requirements and
(ii) direct broadcast satellite channel set-aside requirements were
unconstitutional. The Court deferred a ruling on the constitutional challenge to
statutory requirements mandating program access and system ownership
restrictions and determined that it will consider the validity of these
provisions in a separate case involving a challenge to the FCC's regulations
implementing these statutory provisions. The 1992 Act also includes three
provisions addressing "indecent" programming on access channels -- two of which
were recently held unconstitutional in a decision by the Supreme Court. The
decision gives cable operators discretion to prohibit the provision of indecent
programming on commercial leased access channels, but not on public access
channels. An operator may prohibit or restrict indecent programming only to the
extent consistent with a written and published policy.
D.C. Appeals Court recently upheld the FCC's rate regulations implemented
pursuant to the 1992 Cable Act, but ruled that the FCC impermissibly failed to
permit cable operators to adjust rates for certain cost increases incurred
during the period between the 1992 Cable Act's passage and the initial date of
rate regulation. The Supreme Court has declined to review the decision, and the
FCC has not yet implemented the appeals court's ruling.
Although regulation under the 1992 Cable Act has been detrimental to the
Company, it is still not possible to predict the 1992 Cable Act's full impact on
the Company. Its impact will be dependent, among other factors, on the
continuing interpretation to be afforded by the FCC and the courts to the
statute and the implementing regulations, as well as the actions of the Company
in response thereto. The Company expects to continue to sustain higher operating
costs in order to administer the additional regulatory burdens imposed by the
1992 Cable Act.
FEDERAL REGULATORY PROVISIONS
Rate Regulation. The 1992 Cable Act substantially changed the rate
regulation standards contained in the 1984 Cable Act and corresponding FCC
regulations. Effective September 1, 1993, rate regulation was instituted for
certain cable television services and equipment in communities that are not
subject to effective competition as defined in the legislation. "Effective
competition" is defined by the 1992 Cable Act to exist only where (i) fewer than
30% of the households in the franchise area subscribe to a cable service; or
(ii) at least 50% of the homes in the franchise area are passed by at least two
unaffiliated multichannel video programming distributors where the penetration
of at least one distributor other than the largest exceeds 15%; or (iii) a
multichannel video programming distributor operated by the franchising authority
for that area passes at least 50% of the homes in the franchise area. Under the
1992 Cable Act virtually all cable television systems not subject to effective
competition are subject to rate regulation for basic service by local
authorities under the oversight of the FCC, which has prescribed guidelines and
criteria for such rate regulation. A local franchising authority seeking to
regulate basic service rates must certify to the FCC, among other matters, that
it has adopted regulations consistent with the FCC's rate regulation guidelines
and criteria. The 1992 Cable Act also requires the FCC to resolve complaints
about rates for CPS (i.e., rates other than for programming offered on the basic
service tier or on a per channel or per program basis) and to reduce any such
rates found to be unreasonable. The 1992 Cable Act eliminates the automatic 5.0%
annual basic service rate increase permitted by the 1984 Cable Act without local
approval.
In April 1993, the FCC adopted regulations governing the regulation of
rates for basic tier and cable programming tier services and equipment. The
regulations became effective on September 1, 1993. Cable operators may elect to
justify regulated rates for both tiers of service under either a benchmark or
cost-of-service methodology regulatory scheme. Except for those operators that
filed cost-of-service showings, cable operators with rates that were above
September 30, 1992 benchmark levels generally reduced those rates to the
benchmark level or by 10.0%, whichever was less, adjusted forward for inflation.
Cable operators that have not adjusted rates to permitted levels could be
subject to refund liability including applicable interest.
In February 1994, the FCC revised its benchmark regulations. Effective May
1994, cable television systems not seeking to justify rates with a
cost-of-service showing were to reduce rates up to 17.0% of the rates
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in effect on September 30, 1992, adjusted for inflation, channel adjustments and
changes in equipment and programming costs. Under certain conditions systems
were permitted to defer these rate adjustments until July 14, 1994. Further rate
reductions for cable systems whose rates were below the revised benchmark
levels, as well as reductions that would require operators to reduce rates below
benchmark levels in order to achieve a 17.0% rate reduction, were held in
abeyance pending completion of cable system cost studies. Based on its cost
studies, the FCC could decide to defer permanently any further rate reductions,
or require the additional 7.0% rate roll back for some or all of these systems.
The FCC also adopted a cost of service rate form to permit operators to recover
the costs of upgrading their plant.
The Company elected the benchmark or cost-of-service methodologies to
justify its basic and CPS tier rates in effect prior to May 15, 1994, but relied
primarily upon the cost-of-service methodology to justify regulated service
rates in effect after May 14, 1994. The FCC recently released a series of orders
in which it found the Company's rates in a significant majority of cases to be
reasonable, but several cost of service cases are still pending before the FCC.
These include a number of cases in which several local franchising authorities,
with the Company's concurrence, have requested that the FCC review the Company's
rate justifications. Although the Company generally believes that its rates are
justified under the FCC's benchmark or cost-of-service methodologies, it cannot
predict the ultimate resolution of these remaining cases.
In November 1994, the FCC also revised its regulations governing rate
adjustments due to channel changes and additions. Commencing on January 1, 1995,
and continuing through December 31, 1996, cable operators may charge basic
subscribers up to $.20 per channel for channels added after May 14, 1994.
Adjustments to monthly rates are capped at $1.20 plus an additional $.30 to
cover programming license fees for those channels. In 1997, cable operators may
increase rates by $.20 for one additional channel. Rates may also increase in
the third year to cover any additional costs for the programming for any of the
channels added during the entire three-year period. Cable operators electing to
use the $.20 per channel adjustment may not also take a 7.5% mark-up on
programming cost increases that is otherwise permitted under the FCC's
regulations. The FCC has requested further comment on whether cable operators
should continue to receive the 7.5% mark-up on increases in license fees for
existing programming services.
Additionally, the FCC will permit cable operators to exercise their
discretion in setting rates for New Product Tiers ("NPTs") containing new
programming services, so long as, among other conditions, the channels that are
subject to rate regulation are priced in conformance with applicable regulations
and cable operators do not remove programming services from existing
rate-regulated service tiers and offer them on the NPT.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to increase rates
for programming annually on the basis of projected increases in external costs
(inflation, costs for programming, franchise-related obligations, and changes in
the number of regulated channels) rather than on the basis of cost increases
incurred in the preceding quarter. Cable operators that elect not to recover all
of their accrued external costs and inflation pass-throughs each year may
recover them (with interest) in the subsequent year.
In December 1995, the FCC adopted final cost-of-service rate regulations
requiring, among other things, cable operators to exclude 34.0% of system
acquisition costs related to intangible and tangible assets used to provide
regulated services. The FCC also reaffirmed the industry-wide 11.25% after tax
rate of return on an operator's allowable rate base, but initiated a further
rulemaking in which it proposes to use an operator's actual debt cost and
capital structure to determine an operator's cost of capital or rate of return.
After a rate has been set pursuant to a cost-of-service showing, rate increases
for regulated services are indexed for inflation, and operators are permitted to
increase rates in response to increases in costs including increases in
programming, retransmission, franchise, copyright and FCC user fees and
increases in cable specific taxes and franchise related costs.
The 1996 Act amends the rate regulation provisions of the 1992 Cable Act.
The FCC has issued interim regulations implementing these amendments and has
requested comments on its proposed final regulations. Regulation of basic cable
service continues in effect until a cable television system becomes subject to
effective competition. In addition to the existing definition of effective
competition, a new effective
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competition test permits deregulation of both basic and CPS tier rates where a
telephone company offers cable service by any means (other than direct-to-home
satellite services) provided that such service is comparable to the services
provided in the franchise area by the unaffiliated cable operator. CPS rates
will be deregulated in all franchise areas on March 31, 1999. The 1996 Act
deregulated CPS rates of small cable operators where a small cable operator
serves 50,000 or fewer subscribers. A small cable operator is defined as a cable
operator that serves fewer than 1.0% of all subscribers and is not affiliated
with any entities whose gross annual revenues in the aggregate exceed $250.0
million. Subscribers are no longer permitted to file programming service
complaints with the FCC, and complaints may only be brought by a franchising
authority if, within 90 days after a rate increase becomes effective, it
receives more than one subscriber complaint. The FCC is required to act on such
complaints within 90 days. The uniform rate provision of the 1992 Cable Act is
amended to exempt bulk discounts to multiple dwelling units so long as a cable
operator that is not subject to effective competition does not charge predatory
prices to a multiple dwelling unit.
Carriage of Broadcast Television Signals -- Must Carry/Retransmission
Consent. The 1992 Cable Act contained new signal carriage requirements. The
FCC's regulations implementing these provisions allow commercial television
broadcast stations which are "local" to a cable system, i.e., the system is
located in the station's Area of Dominant Influence ("ADI"), to elect every
three years whether to require the cable system to carry the station, subject to
certain exceptions, or whether the cable system will have to negotiate for
"retransmission consent" to carry the station. The first such election by local
broadcast stations was made on June 17, 1993 and the second election must be
made by October 6, 1996. 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 systems are required to obtain retransmission consent for the
carriage of all "distant" commercial broadcast stations (except for certain
"superstations," i.e., commercial satellite-delivered independent stations such
as WTBS), commercial radio stations and certain low powered television stations
carried by such cable systems after October 5, 1993. Generally, a cable operator
is required to dedicate up to one-third of its activated channel capacity for
the carriage of commercial television broadcast stations, as well as additional
channels for non-commercial television broadcast stations. The Company currently
carries all broadcast stations pursuant to the FCC's must-carry rules and has
obtained permission from all broadcasters who elected retransmission consent.
The Company has not been required to pay cash compensation to broadcasters for
retransmission consent or been required by broadcasters to remove broadcast
stations from cable television channel lineups. The Company has, however, agreed
to carry some services (e.g. ESPN 2, Home & Garden TV, America's Talking and fX)
in specified markets pursuant to retransmission consent arrangements for which
it will pay monthly fees to the service providers (as it does with other
satellite delivered services).
Franchise Fees and Franchise Imposed Requirements. Although franchising
authorities may impose franchise fees under the 1984 Cable Act, such payments
cannot exceed 5.0% of a cable television system's annual gross revenues. In
those franchise areas in which franchise fees are required, the Company
typically pays franchise fees ranging between 3.0% to the maximum of 5.0% of
gross revenues. Franchising authorities are also empowered in awarding new
franchises or renewing existing franchises to require cable operators to provide
cable-related facilities and equipment and to enforce compliance with voluntary
commitments. In the case of franchises in effect prior to the effective date of
the 1984 Cable Act, franchising authorities may enforce requirements contained
in the franchise relating to facilities, equipment and services, whether or not
cable-related. Under the 1992 Cable Act, cable operators are permitted to
itemize the franchise fee and any costs pertaining to franchise-imposed
requirements on a subscriber's bill and may pass through such costs to
subscribers.
Franchise Procedures and Renewal. The 1984 Cable Act established renewal
procedures, standards and criteria designed to protect incumbent franchisees
against arbitrary denials of renewal. While these formal procedures are not
mandatory unless timely invoked by either the cable operator or the franchising
authority, they do provide substantial protection to incumbent franchisees. Even
after the formal renewal procedures are invoked, franchising authorities and
cable operators remain free to negotiate a renewal outside the formal process.
In addition to other criteria, the 1984 Cable Act requires that franchising
authorities consider a franchisee's past performance and renewal proposal on
their own merits in light of community needs and
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without comparison to competing applicants. In the franchise renewal process, a
franchising authority may impose new and more onerous requirements such as
upgrading facilities and equipment, although the municipality must take into
account the cost of meeting such requirements. The 1992 Cable Act made several
procedural changes to the process under which a cable operator seeks to enforce
its renewal right, including permitting franchising authorities to consider the
"level" of programming service provided by a cable operator in deciding whether
to renew, and proscribing a court's ability to reverse a denial of renewal based
on procedural violations found to be "harmless error."
Historically, franchises have been renewed for cable operators that have
provided satisfactory services and have complied with the terms of their
franchises. Nevertheless, under the 1992 Cable Act, cable operators are now
subject to minimum customer service and technical performance standards adopted
by the FCC. In addition, franchising authorities may establish or enforce
customer service requirements that are more stringent than those adopted by the
FCC. Management believes that it has generally met the terms of its franchises
and has provided quality levels of service, and it anticipates that its future
franchise renewal prospects generally will be favorable. Although the 1992 Cable
Act may subject the Company to increased scrutiny by franchising authorities
during the remaining terms of the franchises, historically the Company has never
had a franchise revoked or failed to have a franchise renewed. There can be no
assurance, however, that this will continue to be the case. See "-- State and
Local Regulation."
Designated Channels. In addition to the obligation to set aside certain
channels for public, educational and governmental access programming, the 1984
Cable Act also requires a cable television system with 36 or more channels to
designate a portion of its channel capacity for commercial leased access by
third parties to provide programming that may compete with services offered by
the cable operator. As required by the 1992 Cable Act, the FCC has adopted rules
regulating the maximum reasonable rate a cable operator may charge for
commercial use of the designated channel capacity and the terms and conditions
for commercial use of such channels. The FCC currently has these rules under
reconsideration.
Ownership. Prior to the enactment of the 1996 Act, the FCC rules and
federal law generally prohibited the direct or indirect common ownership,
operation, control or interest in a cable television system, on the one hand,
and a local television broadcast station whose television signal (predicted
grade B contour as defined under FCC regulations) reaches any portion of the
community served by the cable television system, on the other hand. For purposes
of the cross-ownership rules, "control" of licensee companies is attributed to
all 5.0% or greater stockholders, except for mutual funds, banks and insurance
companies which may own less than 10.0% without attribution of control. The FCC
has requested comment as to whether to raise the attribution criteria from 5.0%
to 10.0% and for passive investors from 10.0% to 20.0%, and whether it should
exempt from attribution certain widely held limited partnership interests where
each individual interest represents an insignificant percentage of total
partnership equity. The 1996 Act eliminates the statutory ban on the
crossownership of a cable system and a television station, and permits the FCC
to amend or revise its own regulations regarding the cross-ownership ban. The
FCC recently lifted its ban on the cross-ownership of cable television systems
by broadcast networks and revised its regulations to permit broadcast networks
to acquire cable television systems serving up to 10.0% of the homes passed in
the nation, and up to 50.0% of the homes passed in a local market. The local
limit would not apply in cases where the network-owned cable system competes
with another cable operator.
Finally, in order to encourage competition in the provision of video
programming, the FCC adopted a rule in 1993 prohibiting the common ownership,
affiliation, control or interest in cable television systems and MMDS facilities
having overlapping service areas, except in very limited circumstances. The 1992
Cable Act also codified this restriction and extended it to co-located SMATV
systems, except that a cable system may acquire a co-located SMATV system if it
provides cable service to the SMATV system in accordance with the terms of its
cable television franchise. Permitted arrangements in effect as of October 5,
1992 were grandfathered. The 1992 Cable Act permits states or local franchising
authorities to adopt certain additional restrictions on the transfer of
ownership of cable television systems. The 1996 Act amended the MMDS/SMATV
co-ownership ban to permit co-ownership of MMDS or SMATV systems and cable
television systems in areas where the cable operator is subject to effective
competition.
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The cross-ownership prohibitions would preclude investors from holding
ownership interests in the Company if they simultaneously served as officers or
directors of, or held an attributable ownership interest in, these other
businesses, and would also preclude the Company from acquiring a cable
television system when the Company's officers or directors served as officers or
directors of, or held an attributable ownership in, these other businesses which
were located within the same area as the cable system which was to be acquired.
The 1996 Act generally restricts common carriers from holding greater than
a 10.0% financial interest or any management interest in cable operators which
provide cable service within the carrier's telephone exchange service area or
from entering joint ventures or partnerships with cable operators in the same
market subject to four general exceptions which include population density and
competitive market tests. The FCC may waive the buyout restrictions if it
determines that, because of the nature of the market served by the cable
television system or the telephone exchange facilities, the cable operator or
LEC would be subject to undue economic distress by enforcement of the
restrictions, the system or LEC facilities would not be economically viable if
the provisions were enforced, the anticompetitive effects of the proposed
transaction clearly would be outweighed by the public interest in serving the
community, and the local franchising authority approves the waiver.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of
cable television systems which a single cable operator may own. In general, no
cable operator may hold an attributable interest in cable television systems
which pass more than 30.0% of all homes nationwide. Attributable interests for
these purposes include voting interests of 5.0% or more (unless there is another
single holder of more than 50.0% of the voting stock), officerships,
directorships and general partnership interests. The FCC also has adopted rules
which limit the number of channels on a cable television system that can be
occupied by programming in which the entity that owns the cable system has an
attributable interest. The limit is 40.0% of all activated channels.
Federal cross-ownership restrictions have previously limited entry into the
cable television business by potentially strong competitors such as telephone
companies. The 1996 Act repeals the cross-ownership ban and provides that
telephone companies may operate cable television systems within their own
service areas.
All the Bell Operating Companies (except Southwestern Bell) and most of the
major independent telephone companies initially requested authority from the FCC
to provide video dialtone service in certain portions of their service areas,
but generally these companies have postponed or withdrawn their video dialtone
proposals. The 1996 Act repeals the FCC's video dialtone rules, but does not
require the termination of any video dialtone system that the FCC had approved
prior to the enactment of the 1996 Act. However, such a video dialtone provider
must elect whether to provide video service as a cable operator, an OVS
operator, or a common carrier.
The 1996 Act will enable telephone companies to provide video programming
services as common carriers, cable operators or OVS operators. If OVS systems
become widespread in the future, cable television systems could be placed at a
competitive disadvantage because, unlike OVS operators, cable television systems
are required to obtain local franchises to provide cable television service and
must comply with a variety of obligations under such franchises. Under the 1996
Act, common carriers leasing capacity for the provision of video programming
services over cable systems or OVS operators are not bound by the
interconnection obligations of Title II of the Communications Act of 1934, as
amended, which otherwise would require the carrier to make capacity available on
a nondiscriminatory basis to any other person for the provision of cable service
directly to subscribers. Additionally, under the 1996 Act, common carriers
providing video programming are not required to obtain a Section 214
certification to establish or operate a video programming delivery system.
Common carriers that qualify as OVS operators are exempt from many of the
regulatory obligations that currently apply to cable operators. However, certain
restrictions and requirements that apply to cable operators will still be
applicable to OVS operations. Common carriers that elect to provide video
services over an OVS may do so upon obtaining certification by the FCC. The 1996
Act requires the FCC to adopt rules governing the manner in which OVS operators
provide video programming services. Among other requirements, the 1996 Act
prohibits OVS operators from discriminating in the provision of video
programming services and
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requires OVS operators to limit carriage of video services selected by the OVS
operator to one-third of the OVS's capacity. OVS operators must also comply with
the FCC's sports exclusivity, network nonduplication and syndicated exclusivity
restrictions, public, educational, and government channel use requirements, the
"must-carry" requirements of the 1992 Cable Act, and regulations that prohibit
anticompetitive behavior or discrimination in the prices, terms and conditions
of providing vertically integrated satellite-delivered programming. The U.S.
Copyright Office has pending a rulemaking proceeding to determine whether an OVS
operator may be treated as a cable operator for purposes of copyright liability.
Upon compliance with such requirements, an OVS operator will be exempt from
various statutory restrictions which apply to cable operators, such as
broadcast- cable ownership restrictions, commercial leased access requirements,
franchising, rate regulation, and consumer electronics compatibility
requirements. Although OVS operators are not subject to franchise fees, as
defined by the 1996 Act, they may be subject to fees charged by local
franchising authorities or other governmental entities in lieu of franchise
fees. Such fees may not exceed the rate at which franchise fees are imposed on
cable operators and may be itemized separately on subscriber bills.
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. Pursuant to the statute, the FCC has
adopted reporting and certification rules that apply to all cable system
operators with more than five full-time employees. Failure to comply with the
Equal Employment Opportunity 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 and Customer Service Standards. The 1984 Cable Act empowers the
FCC to set certain technical standards governing the quality of cable signals
and to preempt local authorities from imposing more stringent technical
standards. The 1992 Cable Act requires the FCC to establish minimum technical
standards relating to system technical operation and signal quality and to
update such standards periodically. A franchising authority may require that an
operator's franchise contain provisions enforcing such federal standards.
Pursuant to the 1992 Cable Act, the FCC has adopted new customer service
standards with which cable operators must comply, upon their adoption by a local
franchising authority. Franchising authorities may, through the franchising
process or state and/or local ordinance, impose more stringent customer service
standards.
Pole Attachments. The 1984 Cable Act requires the FCC to regulate the
rates, terms and conditions imposed by certain public utilities for cable
systems' use of utility pole and conduit space unless the Federal Pole
Attachment Act provides that state authorities can demonstrate that they
adequately regulate cable television pole attachment rates, terms and
conditions. In some cases utility companies have increased pole attachment fees
for cable systems that have installed fiber optic cables that are using such
cables for the distribution of non-video services. The FCC recently concluded
that, in the absence of state regulation, it has jurisdiction to determine
whether utility companies have justified their demand for additional rental
fees, and that the 1984 Cable Act does not permit disparate rates based on the
type of service provided over the equipment attached to the utility's pole.
Further, in the absence of state regulation, the FCC administers such pole
attachment rates through use of a formula which it has devised and from time to
time revises. The 1996 Act extends the regulation of rates, terms and conditions
of pole attachments to telecommunications service providers, and requires the
FCC to prescribe regulations to govern the charges for pole attachments used by
telecommunications carriers to provide telecommunications services when the
parties fail to resolve the dispute over such charges. The 1996 Act, among other
provisions, increases significantly future pole attachment rates for cable
systems which use pole attachments in connection with the provision of
telecommunications services as a result of a new rate formula charged to
telecommunications carriers for the non-useable space of each pole. These rates
are to be phased in after a five-year period.
MISCELLANEOUS PROVISIONS
Fines. The Communications Act specifically empowers the FCC to impose
fines upon cable television system operators for willful or repeated violation
of the FCC's rules and regulations.
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Consumer Equipment. The 1996 Act requires the FCC, in consultation with
industry standard-setting organizations, to adopt regulations which would
encourage commercial availability to consumers of all services offered by
multichannel video programming distributors. The regulations adopted may not
prohibit programming distributors from offering consumer equipment, so long as
the cable operator's rates for such equipment are not subsidized by charges for
the services offered. The rules also may not compromise the security of the
services offered, or the efforts of service providers to prevent theft of
service. The FCC may waive these rules so as not to hinder the development of
advanced services and equipment. The 1996 Act requires the FCC to examine the
market for closed captioned programming and prescribe regulations which ensure
that video programming, with certain exceptions, is fully accessible through
closed captioning.
Telephone and Cable Wiring. The FCC has initiated a rulemaking to
consider, among other issues, whether to adopt uniform regulations governing
telephone and cable inside wiring. The regulations ultimately adopted by the FCC
could affect the Company's ownership interests and access to inside wiring used
to provide telephony and video programming services. In a related rulemaking
proceeding, the FCC will consider the appropriate treatment of inside wiring in
multiple dwelling unit buildings. The outcome of that rulemaking could affect
cable operators' access to inside wiring in MDUs.
Deletion of Network and Syndicated 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 non-simultaneous 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 broadcast stations that have obtained exclusive distribution rights
for syndicated programming in their market to require a cable system to delete
or "black out" such programming from other television stations which are carried
by the cable system. The FCC also has commenced a proceeding to determine
whether to relax or abolish the geographic limitations on program exclusivity
contained in its rules, which would allow parties to set the geographic scope of
exclusive distribution rights entirely by contract, and to determine whether
such exclusivity rights should be extended to non-commercial educational
stations. It is possible that the outcome of these proceedings will increase the
amount of programming that cable operators are requested to black out.
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. State and/or local officials are
usually involved in franchisee selection, system design and construction,
safety, service rates and equipment charges, consumer relations, billing
practices and community related programming and services.
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local governmental 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 will be granted or that
renewals will be made on similar terms and conditions. Franchises usually call
for the payment of fees, often based on a percentage of the system's gross
customer revenues, to the granting authority. Upon receipt of a franchise, the
cable system owner usually is subject to a broad range of obligations to the
issuing authority directly affecting the business of the system. 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 what
many cable operators consider reasonable to what they consider highly
restrictive or burdensome. The 1984 Cable Act places certain limitations on a
franchising authority's ability to control the operation of a cable system
operator and the courts have from time to time reviewed the constitutionality of
several general franchise requirements, including franchise fees and access
channel requirements, often with inconsistent results. On the other hand, the
1992 Cable Act prohibits exclusive franchises, and allows franchising
authorities to exercise greater control over the operation of franchised cable
television systems, especially in the area of customer service and rate
regulation. The 1992 Cable Act also allows franchising authorities to operate
their own multi-channel video distribution system without having to obtain a
franchise and permits states or local franchising authorities to adopt certain
restrictions on the ownership of cable television systems. Moreover, under the
1992 Cable Act franchising authorities are immunized from monetary
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damage awards arising from regulation of cable television systems or decisions
made on franchise grants, renewals, transfers and amendments.
The specific terms and conditions of a franchise and the laws and
regulations under which it was granted directly affect the profitability of the
cable television system. Cable 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; system upgrade or rebuild requirements; public, educational and
governmental access channel requirements; use and occupancy of public streets;
and general construction and system specifications.
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request submitted after December 4, 1992 within 120 days after receipt
of all information required by FCC regulations and by the franchising authority,
if such information is specified in the franchise or a local ordinance or state
law. Approval is deemed to be granted if the franchising authority fails to act
within such period.
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.
COPYRIGHT LAWS
Cable television systems are subject to federal copyright licensing
requirements under the Copyright Act of 1976, as amended (the "Copyright Act"),
covering the carriage of broadcast signals. In exchange for filing certain
reports and making semi-annual payments (based upon a percentage of revenues) to
a federal copyright royalty pool, cable operators obtain a statutory blanket
license to retransmit copyrighted material on broadcast signals. The Federal
Copyright Royalty Tribunal, which made several adjustments in copyright royalty
rates, was eliminated by Congress in 1993. Any future adjustment to the
copyright royalty rates will be done through an arbitration process to be
supervised by the U.S. Copyright Office. Under the provisions of the Copyright
Act petitions were filed in December 1995 by parties seeking to raise and lower
the copyright royalty rates.
The Copyright Office has pending proceedings 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 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.
Various bills have been introduced in Congress over the past several years
that would eliminate or modify the cable television compulsory license. Without
the compulsory license, cable operators might need to negotiate rights from the
copyright owners for each program carried on each broadcast station in the
channel lineup. Such negotiated agreements could increase the cost to cable
operators of carrying broadcast signals. The 1992 Cable Act's retransmission
consent provisions expressly provide that retransmission consent agreements
between television broadcast stations and cable operators do not obviate the
need for cable operators to obtain a copyright license for the programming
carried on each broadcaster's signal.
Copyright music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and basic cable networks (such as
USA Network) has generally been licensed by the networks through private
agreements with the American Society of Composers and Publishers ("ASCAP") and
BMI, Inc. ("BMI"), the two major performing rights organizations in the United
States. ASCAP and BMI offer "through to the viewer" licenses to the cable
networks which cover the retransmission of the cable networks' programming by
cable television systems to their customers. The cable industry has just
concluded
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negotiations on licensing fees with BMI for the use of music performed in
programs locally originated by cable television systems, although no actual
agreements are in place; negotiations with ASCAP are ongoing. ASCAP has filed an
infringement suit against several cable operators as representatives of cable
systems using its music in the pay programming and cable programming networks
provided to subscribers.
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
requirements and, in many jurisdictions, state and local franchise requirements,
currently are the subject of a variety of judicial proceedings, legislative
hearings and administrative and legislative proposals which could change, in
varying degrees, the manner in which cable television systems operate. Neither
the outcome of these proceedings nor their impact upon the cable television
industry can be predicted at this time.
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MANAGEMENT
GENERAL PARTNER
ICM-IV, a California limited partnership, is the General Partner of ICP-IV.
Leo J. Hindery, Jr. has a controlling interest in ICM-IV. As general partner,
ICM-IV has responsibility for the overall management of the business and
operations of the Company. Pursuant to the terms of ICP-IV's limited partnership
agreement (the "Partnership Agreement"), ICM-IV receives an annual management
fee for services rendered as General Partner. The principal offices of ICM-IV
are located at 235 Montgomery Street, Suite 420, San Francisco, California 94104
and the telephone number is (415) 616-4600.
ADVISORY COMMITTEE
The Advisory Committee (as defined herein) of ICP-IV consults with and
advises ICM-IV with respect to the business and affairs of the Company. The
Advisory Committee consists of one representative of each of the seven limited
partners of ICP-IV with the largest aggregate limited partnership interests in
ICP-IV. For this purpose, the partnership interest of a limited partner includes
actual capital contributions by a limited partner and any capital contributions
by such limited partner's affiliate.
EXECUTIVES
ICP-IV has no employees. Pursuant to the Partnership Agreement, ICM-IV,
through its affiliate InterMedia Capital Management ("ICM"), provides day-to-day
management of the Company's business and operations. The six most senior
non-operating executives of ICM and IMI are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
Leo J. Hindery, Jr............... 48 Managing General Partner
Edon V. Hartley.................. 36 Chief Financial Officer and Treasurer
Derek Chang...................... 28 Assistant Treasurer and Director of Treasury
Operations
Rodney M. Royse.................. 30 Executive Director of Business Development
Thomas R. Stapleton.............. 42 Controller and Executive Director of
Financial Operations
Grace de Latour.................. 47 Executive Director of Human Resources
</TABLE>
The six officers of IPCC are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
Leo J. Hindery, Jr............... 48 President
Edon V. Hartley.................. 36 Chief Financial Officer and Treasurer
Derek Chang...................... 28 Secretary
Rodney M. Royse.................. 29 Vice President
Thomas R. Stapleton.............. 42 Vice President
Bruce J. Stewart................. 31 Vice President, Legal Affairs
</TABLE>
Leo J. Hindery, Jr. is the founder and Managing General Partner of ICM-IV
and ICM and President of IPCC. Mr. Hindery is also the founder and Managing
General Partner of IP-I and all of the other Related Intermedia Entities. Before
launching InterMedia Partners in 1988, Mr. Hindery was, from 1985 to 1988, Chief
Officer for Planning and Finance of The Chronicle Publishing Company of San
Francisco ("Chronicle Publishing"), which owns and operates substantial
newspaper and television broadcast properties and, at the time, cable television
properties. Prior to joining Chronicle Publishing, Mr. Hindery was, from 1983 to
1985, Chief Financial Officer and a Managing Director of Becker Paribas
Incorporated, a major New York-based investment banking firm. Mr. Hindery is on
the Board of Directors of the Home Shopping Network, Inc.,
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Netcom, Inc., the NCTA, the Cable Telecommunications Association, the
Cabletelevision Advertising Bureau, Inc., Cable in the Classroom and C-SPAN. He
earned a B.A. with honors from Seattle University and an M.B.A. with honors from
Stanford University's Graduate School of Business.
Edon V. Hartley is Chief Financial Officer and Treasurer of ICM, IMI and
IPCC. Ms. Hartley joined ICM in 1996. From 1993 to 1995, Ms. Hartley was Finance
Director for TCI. From 1990 to 1993, Ms. Hartley was Finance Counsel for TCI.
Ms. Hartley earned a B.S. with honors in accounting from the University of
Missouri and a J.D. with honors from the University of Denver.
Derek Chang is Assistant Treasurer and Director of Treasury Operations of
ICM, IMI and IPCC, and Secretary of IPCC. Mr. Chang joined ICM in 1994. From
1990 to 1992, Mr. Chang worked, as a financial analyst for The First Boston
Corporation in the Mergers and Acquisitions Group. Mr. Chang earned a B.A. from
Yale University and an M.B.A. from Stanford University's Graduate School of
Business.
Rodney M. Royse is Executive Director of Business Development of ICM, IMI
and IPCC, and Vice President of IPCC. Mr. Royse joined ICM in 1990. From 1988 to
1990, Mr. Royse was a financial analyst at Salomon Brothers Inc in the Corporate
Finance Group. Mr. Royse earned a B.A. in Economics from Stanford University.
Thomas R. Stapleton is Controller and Executive Director of Financial
Operations of ICM, IMI and IPCC, and Vice President of IPCC. Prior to joining
ICM in 1989, Mr. Stapleton was a Manager with Price Waterhouse LLP, the
Company's independent accountants. Mr. Stapleton was previously employed by Bank
of America in asset-based financing. Mr. Stapleton earned a B.S. degree with
honors in Business Administration from San Francisco State University.
Grace de Latour is the Executive Director of Human Resources of ICM, IMI
and IPCC. Ms. de Latour joined IMI in 1995. Prior to joining IMI, from 1994 to
1995, Ms. de Latour was Vice President of Human Resources for Expressly
Portraits. Before that, from 1972 to 1993, she was Corporate Vice President for
Human Resources for Carter Hawley Hale Stores, Inc. Ms. de Latour is on the
Board of Directors of the Independent Colleges of Northern California and the
Federated Employers of the Bay Area. Ms. de Latour earned a B.A. in sociology
from Trinity College in Washington, D.C.
KEY OPERATING MANAGEMENT
The following persons hold key operating management positions with ICM and
IMI:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------
<S> <C> <C>
Terry C. Cotten.................. 48 Executive Director of Operations
F. Steven Crawford............... 48 Chief Operating Officer
Julaine A. Smith................. 39 Operations Controller
Bruce J. Stewart................. 31 General Counsel and Executive Director of
Communications
Barbara J. Wood.................. 45 Executive Director of Budgets and Regulatory
Affairs
Kenneth A. Wright................ 40 Executive Director of Engineering and
Telecommunications
Donna K. Young................... 47 Development Executive Director of Marketing
and Ad Sales
</TABLE>
Terry C. Cotten is Executive Director of Operations for IMI. He has over 30
years of experience in the cable television industry. Prior to joining IMI in
1989, Mr. Cotten was, from 1988 to 1989, President of Western Communications'
cable system in Ventura County, serving approximately 65,000 subscribers in
Southern California. Prior to this position, Mr. Cotten was President of Western
Communications' cable system in South San Francisco from 1986 to 1988. Mr.
Cotten earned a B.S. in Management from St. Mary's College.
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F. Steven Crawford is the Chief Operating Officer for ICM. Prior to joining
ICM on October 1, 1996, Mr. Crawford was Senior Vice President of E. W. Scripps
Company from September 1992 to September 1996 and was Chief Operating Officer of
Scripps Cable serving approximately 750,000 subscribers. Mr. Crawford was Vice
President of Scripps Cable's operations in the Southeast from September 1990 to
September 1992. Mr. Crawford serves on the Board of Directors of the NCTA and
the Cable Advertising Bureau. Mr. Crawford earned a B.S. degree in business
management and a M.B.A. degree in finance from Valdosta State University.
Julaine A. Smith is Operations Controller of IMI. Ms. Smith joined IMI in
1994. Prior to joining IMI, Ms. Smith was, from 1993 to 1994, the Director of
Financial Reporting for Pacific Telesis Group. Ms. Smith also worked, from 1991
to 1992, as the Accounting Manager for the domestic cellular operations of
PacTel Corporation (now known as AirTouch Communications). Ms. Smith completed
her public accounting training at the San Francisco office of Price Waterhouse
LLP. Ms. Smith is a Certified Public Accountant and earned a B.S. in Business
Administration, Accounting from California State University at Hayward.
Bruce J. Stewart is General Counsel and Executive Director of
Communications of IMI. Mr. Stewart joined IMI as Counsel in January 1993, and
served in this position until August 1994, when he was appointed General
Counsel. Mr. Stewart is a member of the New York State Bar. Prior to joining
IMI, Mr. Stewart served as legal counsel from 1991 to 1993 at Scholastic
Productions, Inc., a subsidiary of Scholastic, Inc. located in New York City.
From 1990 to 1991, Mr. Stewart worked in New York with the Law Firm of Malcolm
A. Hoffman on commercial contract matters. Mr. Stewart earned a B.A from Holy
Cross College and a J.D. from Case Western Reserve University Law School.
Barbara J. Wood is the Executive Director of Budgets and Regulatory Affairs
of IMI. Ms. Wood has worked in the cable television industry since 1984. Prior
to joining IMI in 1992, she was, from 1991 to 1992, a regional financial manager
for Viacom handling budgeting, financial systems and internal controls. She was
in London with Videotron U.K. during its start-up from 1990 to 1991 as an
outside consultant managing the installation of financial cost accounting
systems and was a controller for Cox Communications from 1984 to 1989. Ms. Wood
is a Certified Public Accountant and earned an M.B.A. in Management from San
Diego State University.
Kenneth A. Wright is the Executive Director of Engineering and
Telecommunications Development of IMI. He is the Company's chief technologist
and directs the engineering of the Company's and Related InterMedia Entities'
cable systems. Prior to joining IMI in February 1995, Mr. Wright was, from 1991
to 1995, Director of Technology for Jones Intercable which manages cable systems
serving approximately 1.5 million subscribers. Before joining Jones Intercable,
Mr. Wright was Director of Engineering for the Western Division of United
Artists Cable which was comprised of systems in 11 states serving approximately
700,000 subscribers. Prior to that, he was a State Engineering Manager for
Centel Cable. Mr. Wright earned a B.S. from Western Michigan University and a
Master of Telecommunications and a Master level certificate in Global Business
and Culture from the University of Denver.
Donna K. Young is the Executive Director of Marketing and Ad Sales of IMI.
Ms. Young is responsible for national marketing programs, including customer
acquisition, customer retention and new product development. Prior to joining
IMI in November 1994, Ms. Young was Vice President for Business Development from
1989 to 1994 for KBLCOM, Inc., then an 800,000-subscriber MSO based in Houston.
Ms. Young is on the Board of Directors of the Cable Television Administration
and Markets Society. A native of Shelbyville, Tennessee, Ms. Young earned a
Ph.D. in educational and organizational psychology from the University of
Tennessee in Knoxville.
MANAGEMENT AND ADMINISTRATION AGREEMENTS
Pursuant to the Partnership Agreement, ICM-IV manages all aspects of the
day-to-day business and operations of the Company and in connection therewith
undertakes those activities and services that are customary in the cable
industry on behalf of the Company. For a more detailed description of the terms
in the Partnership Agreement concerning ICM-IV's management services, see
"Certain Relationships and Related Transactions -- Management by ICM-IV."
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Certain of ICP-IV's subsidiaries have entered into Administrative
Agreements with IMI, pursuant to which IMI provides accounting, operational,
marketing, engineering, legal, rate regulation and other administrative services
to the Company at cost. IMI is wholly owned by Mr. Hindery. IMI provides similar
services to all of the Related InterMedia Entities' operating companies. IMI
charges certain costs to the Company based on the Company's number of basic
subscribers as a percentage of total basic subscribers for all of the Related
InterMedia Entities' systems. See "Certain Relationships and Related
Transactions -- Services to be Rendered to the Company by IMI."
The Company believes that the terms in the Partnership Agreement concerning
ICM-IV's management services and the terms of the Administrative Agreements are
more favorable than the terms which could be obtained by unaffiliated third
parties in arm's-length negotiations with IMI or ICM-IV.
EXECUTIVE COMPENSATION
None of the employees of the Company are deemed to be executives or
officers of the Company. Services of the non-operating executives, key operating
management and other employees of ICM or IMI are provided to the Company in
exchange for fees pursuant to the Partnership Agreement and Administrative
Agreements. The executives, key operating management and other employees of ICM
or IMI who provide services to the Company are compensated by ICM or IMI and
therefore receive no compensation from the Company. No portion of the fees paid
by the Company is allocated to specific employees for the services performed by
ICM or IMI for the Company. See "Certain Relationships and Related
Transactions -- Management by ICM-IV" and "-- Services to be Rendered to the
Company by IMI."
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PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information concerning the
partnership interests in ICP-IV owned by each person known to ICP-IV to own
beneficially more than a five percent non-preferred equity interest and by the
executives of ICM-IV as a group.
<TABLE>
<CAPTION>
NAMES AND ADDRESSES OF BENEFICIAL OWNERS TYPE OF INTEREST PERCENTAGE
--------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Tele-Communications, Inc................................. Limited Partner 49.0%
5619 DTC Parkway, 11th Floor
Englewood, CO 80111
NationsBanc Investment Corp.............................. Limited Partner 9.0%(1)
NationsBank Corporate Center
100 North Tryon Street
Charlotte, NC 28255
IP Holdings L.P.......................................... Limited Partner 7.5%
c/o Centre Partners
30 Rockefeller Plaza, Suite 5050
New York, NY 10020
Mellon Bank, N.A., as Trustee for
Third Plaza Trust and Fourth Plaza Trust............... Limited Partner 6.3%(2)
1 Mellon Bank Center
Pittsburgh, PA 15258-0001
Sumitomo Corp............................................ Limited Partner 5.7%
Sumitomo Kanda Building
24-4, Kanda Nishikicho 3-chome
Chiyoda-ku, Tokyo 101, Japan
Executives of ICM-IV as a Group (6 persons).............. General Partner 1.1%(3)
</TABLE>
- ---------------
(1) Includes investments in ICP-IV by NationsBanc Investment Corp. and
affiliates thereof.
(2) Mellon Bank, N.A., acts as the trustee (the "Plaza Trustee") for each of
Third Plaza Trust and Fourth Plaza Trust (collectively, the "Trusts"), two
trusts under and for the benefit of certain employee benefit plans of
General Motors Corporation ("GM") and its subsidiaries. The limited
partnership interests may be deemed to be owned beneficially by General
Motors Investment Management Corporation ("GMIMCo"), a wholly owned
subsidiary of GM. GMIMCo's principal business is providing investment advice
and investment management services with respect to the assets of certain
employee benefit plans of GM and its subsidiaries and with respect to the
assets of certain direct and indirect subsidiaries of GM and associated
entities. GMIMCo is serving as the Trusts' investment manager with respect
to the limited partnership interests and in that capacity, it has the sole
power to direct the Plaza Trustee as to the voting and disposition of the
limited partnership interests. Because of the Plaza Trustee's limited role,
beneficial ownership of the limited partnership interests by the Plaza
Trustee is disclaimed.
(3) Leo J. Hindery, Jr., is the general partner and holds the controlling
interest in ICM-IV. No executive of ICM-IV or IPCC holds a direct interest
in ICP-IV.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE RELATED INTERMEDIA ENTITIES
The Related InterMedia Entities and the Company are a series of
partnerships and corporations founded by Leo J. Hindery, Jr. to own and operate
cable television systems in the United States. Mr. Hindery formed the first of
the Related InterMedia Entities, IP-I, in early 1988 with the financial backing
of TCI.
Although each of the Related InterMedia Entities and the Company are
distinct legal entities, they are operated as a cohesive group. Accordingly,
they enjoy significant operating efficiencies and reduced overhead from
centralization of certain common functions and shared economies of scale.
Clustering of the Company's operations by geographic location is also intended
to contribute significantly to operating efficiencies and revenue opportunities.
In order to achieve certain operating economies of scale and to allocate
certain administrative services equitably to all of the Related InterMedia
Entities and the Company, Mr. Hindery formed IMI. Mr. Hindery is the sole
shareholder of IMI, which performs the accounting, marketing, engineering,
administrative, operations, legal and rate regulation functions for all of the
Related InterMedia Entities and the Company at cost. Generally, IMI's costs are
allocated to each of the Related InterMedia Entities and the Company on a per
subscriber basis.
SERVICES TO BE RENDERED TO THE COMPANY BY IMI
Certain of ICP-IV's subsidiaries have entered into administrative
agreements with IMI, pursuant to which IMI provides accounting, operational,
marketing, engineering, legal, rate regulation and other administrative services
to the Company at cost.
IMI provides similar services to all of the Related InterMedia Entities'
operating companies. IMI charges certain costs to the Company primarily based on
the Company's number of basic subscribers as a percentage of total basic
subscribers for all of the Related InterMedia Entities' systems. In addition to
changes in IMI's cost of providing such services, changes in the number of the
Company's basic subscribers and/or changes in the number of basic subscribers of
the Related InterMedia Entities' operating companies will affect the level of
IMI costs charged to the Company. The Company believes that the terms of the
Administrative Agreements are more favorable than the terms that could be
obtained by unaffiliated third parties in arm's-length negotiations with IMI.
The Partnership Agreement requires that to the extent amounts paid to
affiliates, including ICM-IV, IMI or partners, exceed the amounts that would be
paid under terms afforded by unrelated third parties, such excess will result in
corresponding reductions in the Management Fee (as defined herein) payable to
ICM-IV. The payment to such affiliate of any such amount in excess of the ICM-IV
Management Fee will require the approval of 70.0% in interest of the limited
partners.
MANAGEMENT BY ICM-IV
ICM-IV manages the Company's cable systems pursuant to the Partnership
Agreement executed as of March 19, 1996. ICM-IV has assigned its rights and
obligations to ICM with regard to management of the Company's cable systems. The
Partnership Agreement provides that this management relationship continues in
effect with respect to each cable television system owned by the Company,
including the systems purchased by the Company pursuant to the Acquisitions.
ICM-IV is authorized to provide management services that include (i) entering
into contracts and performing the resulting obligations, (ii) managing the
assets of the Company and employing such personnel as may be necessary or
appropriate, (iii) controlling bank accounts and drawing orders for the payment
of money, (iv) collecting income and payments due, (v) keeping the books and
records, and hiring independent certified public accountants, (vi) paying
payables and other expenses, (vii) handling Company claims, (viii) administering
the financial affairs, making tax and accounting elections, filing tax returns,
paying liabilities and distributing profits to ICP-IV's partners, (ix) borrowing
money on behalf of the Company, (x) causing the Company to purchase and maintain
liability insurance, (xi) commencing or defending litigation that pertains to
the Company or any of its assets and investigating potential claims, (xii)
executing and filing fictitious business name statements and similar
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documents, (xiii) admitting additional limited partners and permitting
additional capital contributions as provided in the Partnership Agreement and
admitting an assignee of an existing limited partner's interest to be a
substituted limited partner and (xiv) terminating ICP-IV pursuant to the terms
of the Partnership Agreement.
The term of the Partnership Agreement is until December 31, 2007 unless
earlier dissolved under certain conditions specified in the Partnership
Agreement. For its services under the Partnership Agreement, ICM-IV receives a
fee (the "Management Fee") equal to 1.0% of the total non-preferred Contributed
Equity contributions that have been made to the Company determined as of the
beginning of each calendar quarter in each fiscal year; however, if the
acquisition of a cable television system is made with debt financing of more
than two-thirds of the purchase price of such cable television system, the
Partnership Agreement provides that capital contributions of one-third of such
purchase price will be deemed to have been made and the Management Fee will be
paid on such deemed contributions. When any such debt financing is replaced with
actual non-preferred capital contributions of the partners, the Partnership
Agreement provides that the Management Fee will be based on such actual capital
contributions rather than a deemed contribution for such amount. The Company
believes that the terms in the Partnership Agreement concerning ICM-IV's
management services are more favorable than the terms that could be obtained by
unaffiliated third parties in arm's-length negotiations.
Mr. Hindery is managing general partner of ICM-IV and holds the controlling
interest in ICM-IV.
CERTAIN OTHER RELATED TRANSACTIONS
IPWT. On July 30, 1996 pursuant to the IPWT Contribution Agreement, among
(i) ICP-IV, (ii) IP-I, formerly the 80.1% general partner and 9.9% limited
partner of IPWT and (iii) GECC, formerly the 10.0% limited partner of IPWT and
creditor as to a $55.8 million principal amount of debt owed by IPWT, ICP-IV
acquired the IPWT partnership interests and debt for total consideration of
$72.5 million. GECC transferred to the Company its $55.8 million note and
related interest receivables of approximately $3.4 million owed by IPWT to GECC
in exchange for (i) approximately $22.5 million in cash, (ii) a $25.0 million
Preferred Limited Partner Interest and (iii) a $11.7 million limited partnership
interest in ICP-IV. ICP-IV contributed the acquired partnership interests in
IPWT to the Operating Partnership, which, in turn, contributed a 1.0% limited
partnership interest in IPWT to IP-TN. See "The Acquisitions -- Primary
Acquisitions."
RMH. On July 30, 1996 the Operating Partnership acquired RMH and its
wholly owned subsidiary, RMG, pursuant to a stock purchase agreement between the
Operating Partnership and ICM-V, the general partner of IP-V. Prior to the
acquisition, IP-V owned the outstanding equity of RMH. The total transaction is
valued at approximately $376.3 million. As part of the acquisition of RMH,
TCID-IP V, Inc., which was the limited partner of IP-V and is an affiliate of
TCI, converted its outstanding loan to IP-V into a partnership interest and
received in dissolution thereof $12.0 million in RMH Preferred Stock and
approximately $0.037 million in RMH Class B Common Stock. See "The
Acquisitions -- Primary Acquisitions."
TCI Greenville/Spartanburg. The TCI Entities, which are wholly owned
subsidiaries of TCI, have contributed the Greenville/Spartanburg System to the
Company pursuant to the G/S Contribution Agreement for total consideration of
$238.9 million. The Company subsequently contributed these assets to IP-TN, a
subsidiary of ICP-IV. See "The Acquisitions -- Primary Acquisitions."
IP-I. Pursuant to a letter agreement, ICP-IV has agreed to provide IP-I
tag along rights if ICP-IV sells (i) substantially all of its assets in a single
transaction, or (ii) a portion of its assets constituting an identifiable cable
television system which has its primary headend site within fifty miles of the
primary headend site of a cable television system owned by IP-I, to an entity
not controlled by Leo J. Hindery, Jr.
ICM-IV. Pursuant to the Partnership Agreement, ICM-IV funded its capital
contributions of $3.8 million to ICP-IV with cash of $2.0 million and notes
payable to ICP-IV of $1.8 million. The promissory notes bear interest at a rate
of 8.0% per annum and mature at December 31, 1999.
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CERTAIN OTHER RELATIONSHIPS
The Company is a party to an agreement with SSI, an affiliate of TCI,
pursuant to which SSI provides certain cable programming to the Company at a
rate fixed as a percentage in excess of the rate available to TCI. Management
believes that these rates are at least as favorable as the rates that could be
obtained through arm's-length negotiations with third parties. For the year
ended December 31, 1995 and the six months ended June 30, 1996, the cable
television systems owned by IPWT and RMH paid SSI, in aggregate, approximately
$12.8 million and $7.0 million, respectively.
NationsBanc Capital Markets, Inc., one of the Initial Purchasers, is an
affiliate of NationsBanc Investment Corp. and certain of its affiliates, which
holds a 9.0% non-preferred limited partnership interest in ICP-IV. NationsBanc
Capital Markets, Inc. and its affiliates also provide or have provided banking,
advisory and other financial services for the Company and certain of its
affiliates in the ordinary course of business. Toronto Dominion Securities (USA)
Inc., one of the Initial Purchasers, is an affiliate of Toronto Dominion
Capital, which holds a 3.0% non-preferred limited partnership interest in
ICP-IV.
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THE PARTNERSHIP AGREEMENT
The following is a summary of certain material terms of the Partnership
Agreement. This summary is qualified in its entirety by reference to the full
text of the Partnership Agreement, a complete copy of which is included as an
exhibit to the Registration Statement.
ORGANIZATION
ICP-IV was formed as a limited partnership pursuant to the provisions of
the California Revised Limited Partnership Act, as amended, and a certificate of
limited partnership of ICP-IV was filed with the California Secretary of State
on March 19, 1996. The partners of IP-IV transferred their partnership interests
to ICP-IV in July 1996. The purpose of ICP-IV is to (i) directly or indirectly
make equity and debt investments in, including acting as a general partner
and/or a limited partner of, IP-IV and various operating partnerships, (ii)
operate cable television systems and (iii) engage in all necessary and
appropriate activities and transactions as ICM-IV may deem necessary,
appropriate or advisable other than investing, or maintaining offices outside
of, the United States.
DURATION
Under the Partnership Agreement, ICP-IV will be dissolved upon the earliest
of: (i) December 31, 2007, (ii) the bankruptcy, insolvency or appointment of a
trustee or receiver to manage the affairs of the General Partner, (iii) the
voluntary withdrawal of Mr. Hindery as general partner of ICM-IV if a successor
general partner has not been appointed in accordance with the Partnership
Agreement, (iv) the removal of ICM-IV as general partner of ICP-IV by 70.0% in
interest of the limited partners, unless a successor general partner is
appointed within 60 days, (v) dissolution being required by operation of law or
judicial decree, (vi) the determination to dissolve by the General Partner with
the affirmative consent of 70.0% in interest of the limited partners, (vii)
ICP-IV becoming taxable as a corporation for federal tax purposes or (viii) the
determination by the General Partner that ICP-IV would be required to register
as an investment company under the Investment Company Act, and there is no
reasonably practicable means of avoiding such requirement.
CONTROL OF OPERATIONS; ADVISORY COMMITTEE
The Partnership Agreement provides that the General Partner shall manage
the business affairs of the Company, IP-IV or any operating partnership subject
to the terms and provisions of the Partnership Agreement. The Partnership
Agreement provides for an advisory committee consisting of one designee from
each of the seven limited partners with the largest aggregate interests in
ICP-IV (the "Advisory Committee"). For purposes of the Partnership Agreement,
the determination of aggregate interests in ICP-IV is based on the aggregate
limited partner interests in ICP-IV held by a limited partner and any affiliates
thereof, which aggregate holdings entitle such limited partner and affiliates,
if any, to one representative on the Advisory Committee. The Partnership
Agreement also provides that the General Partner distribute to the Advisory
Committee monthly profit and loss statements of ICP-IV and other monthly
financial statements prepared for management personnel, as well as quarterly
financial statements and the Partnership's annual operating plan. The Advisory
Committee is to meet quarterly and consult with and advise the General Partner
with respect to the business of the Company and perform such other advisory
functions as requested by the General Partner.
PREFERRED LIMITED PARTNER
GECC is the preferred limited partner (the "Preferred Limited Partner")
with respect to a portion of its interest in ICP-IV. References to limited
partners of ICP-IV in this Prospectus include the Preferred Limited Partner
unless otherwise specified. Subject to certain provisions in the Partnership
Agreement, income and gain is allocated first to the Preferred Limited Partner
in the amount of any distributions. The Partnership Agreement provides that
distributions are to be made first to the Preferred Limited Partner in repayment
of its initial contribution of capital ("Capital Contribution") and in an amount
equal to 11.75%, per annum, compounded semi-annually, of its Capital
Contribution ("Preferred Return") until the Preferred Limited
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Partner has received distributions equal to its initial Capital Contribution and
accrued Preferred Return. Likewise, gain recognized upon the dissolution or
sale, exchange or other disposition of all or substantially all of the assets of
the Company is to be allocated first, to the Preferred Limited Partner, in an
amount sufficient to bring the balance in its capital account to an amount equal
to its initial Capital Contribution and accrued Preferred Return. The
Partnership Agreement provides that the Preferred Limited Partner's interest is
to be reduced by an amount necessary to offset any indemnification obligations
of GECC under the IPWT Contribution Agreement. See "Description of Other
Obligations -- Description of Preferred Equity Interests."
GECC, as the Preferred Limited Partner, is not entitled to consent on any
partnership matters unless required by law or the matter requires the unanimous
consent of the limited partners. GECC is not entitled to consent (whether as a
limited partner or a Preferred Limited Partner) on removal of the General
Partner unless the consent is for cause. For such matters, the required consent
shall be 70.0% in interest of the limited partners other than GECC.
LIMITED PARTNERS' RIGHT TO CONSENT
When a consent is required under the Partnership Agreement, each limited
partner is entitled to consent based upon that partner's percentage as set forth
in the Partnership Agreement. The Preferred Limited Partner is not entitled to
consent on any matters except as described above. The limited partners have a
right to consent only with respect to the following matters, which actions may
be taken only with the written consent of ICM-IV: (i) amendment of the
Partnership Agreement pursuant to the terms upon the affirmative consent of
70.0% in interest of the limited partners, (ii) amendment of the allocations and
distributions to the limited partners, other than as permitted by the
Partnership Agreement, upon the affirmative consent of each partner adversely
affected, (iii) admission of a new general partner, where there is an existing
general partner, upon the affirmative consent of 70.0% in interest of the
limited partners, (iv) the approval of a transaction in which the General
Partner or any of its affiliates has an actual or potential conflict of interest
with the Limited Partners or the Partnership, which is not expressly permitted
under the Partnership Agreement, upon the affirmative consent of 70.0% in
interest of the disinterested Limited Partners; provided however, that the
Acquisitions could be consummated without any further consent, (v) continuation
of ICP-IV to effect an orderly dissolution of ICP-IV in accordance with the
Partnership Agreement upon the affirmative consent of 70.0% in interest of the
limited partners, (vi) the agreement to enter into any operating partnership or
make any investments in excess of $15.0 million upon the affirmative consent of
70.0% in interest of the limited partners; provided however, any of the
Acquisitions could be consummated without any further consent, (vii) the merger
of or consolidation of ICP-IV with any other entity upon the affirmative consent
of each partner, (viii) the taking of any act that would make it impossible to
carry on the business of ICP-IV except upon the dissolution of ICP-IV in
accordance with the Partnership Agreement upon the affirmative consent of each
partner, (ix) confessing a judgment in excess of $150,000, or settling a
judgment in excess of $300,000, against ICP-IV, IP-IV or any operating
partnership upon the affirmative consent of each partner, (x) using any funds or
assets of ICP-IV other than for the benefit of ICP-IV upon the affirmative
consent of each partner, (xi) taking any action that would subject the limited
partners to personal liability as a general partner upon the affirmative consent
of each partner, (xii) the making of, execution of, or delivery of any general
assignment for the benefit of ICP-IV's creditors upon the affirmative consent of
each partner, (xiii) any matter in the partnership agreement of IP-IV or of any
operating partnership that requires the consent of the limited partners or of
the limited partner or a general partner other than the managing general partner
of IP-IV or an operating partnership; however, the consent required shall
require the approval of the applicable percentage of limited partners that would
have been required if such consent were required under the Partnership Agreement
or if no percentage is specified, 70.0%, and further, the amount or timing of
any distributions to ICP-IV from any operating entity or IP-IV cannot be changed
in a manner inconsistent with the amount or timing of distributions under the
Partnership Agreement without the unanimous consent of the all of the partners,
(xiv) approval of a transaction with TCI or any of its affiliates in an amount
greater than $500,000, or transactions less than $500,000 that exceed an
aggregate of $2.0 million in any twelve-month period, upon the affirmative
consent of a majority in interest of the limited partners (other than TCI or any
of its affiliates); however, purchases of programming and equipment on terms no
less favorable to the Partnership
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than arm's-length terms and in the ordinary course of business do not require
any approval, and each of the Acquisitions could be consummated without further
consent, (xv) the approval of any waiver of rights of ICP-IV under the IPWT
Contribution Agreement if such waiver would result in ICP-IV forgoing rights
valued in excess of 5.0% of the total consideration paid by ICP-IV for the
contribution of partnership interests and debt transferred under such agreement
and (xvi) the approval of a transaction in which ICM-IV or any of its affiliates
has an actual or potential conflict of interest with the limited partners or
ICP-IV and which is not permitted by the terms of this Agreement, upon the
affirmative consent of 70.0% in interest of the limited partners; however, any
of the Acquisitions could consummated without any further consent.
The Partnership Agreement provides that, in the event one limited partner
holds 70.0% of the interests of the limited partners, the 70.0% requirement then
increases to 75.0%. For purposes of the Partnership Agreement, a limited
partner's interest in ICP-IV is determined on the basis of such limited
partners' actual capital contributions.
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
The Partnership Agreement provides that, upon withdrawal or removal of
ICM-IV, a successor general partner must be selected by 70.0% in interest of the
limited partners within 60 days or the Company will be dissolved. The
Partnership Agreement further provides that withdrawal of ICM-IV occurs if (i)
Mr. Hindery dies or becomes disabled (unable to perform his duties as general
partner of ICM-IV for nine months) or otherwise ceases to control ICM-IV
directly or indirectly, (ii) bankruptcy, insolvency or appointment of a trustee
to manage the affairs of ICM-IV or Leo J. Hindery, Jr., or dissolution of
ICM-IV, (iii) for any reason that causes ICM-IV to cease to be the General
Partner or (iv) any event that causes ICM-IV to cease to be controlled directly
or indirectly through one or more intermediaries. Removal of ICM-IV on specific
grounds, including for cause, may be initiated by 70.0% in interest of the
limited partners. For this purpose the Partnership Agreement defines "cause" as
a material breach of the General Partner's fiduciary duties to the limited
partners or any act constituting willful misconduct, gross negligence or
reckless disregard of its duties or a material breach of the Partnership
Agreement.
SALE OF THE SYSTEMS
The Partnership Agreement provides that, any time after July 31, 1999,
partners (other than TCI) comprising 20.0% or more of the partnership interests
can petition the General Partner to review, report on and recommend (or not) a
sale of some or all of the Company's cable television systems.
At any time, the General Partner can elect to sell (i) all or substantially
all of the Company's cable television systems subject to obtaining the consent
of the partners (other than TCI) comprising a majority or more of the
partnership interests (other than interests held by TCI), provided that TCI is
to have a "right of first refusal," or (ii) sell some or all of the Company's
cable television systems subject to obtaining the consent of the partners
(including TCI) comprising 70.0% or more of the partnership interests unless the
sale is to TCI in which case the foregoing percentage is 75.0%.
Any time after July 31, 2001, (i) partners (other than TCI, the General
Partner or IP-I), comprising at least a majority of the partnership interests
(other than interests held by TCI, the General Partner or IP-I) can force a sale
of one or both of (x) the Nashville/Mid-Tennessee Cluster and (y) the
Knoxville/East Tennessee Cluster and the Greenville/Spartanburg Cluster,
provided that TCI is to have a "right of first offer," or (ii) partners
(including TCI, the General Partner and IP-I) comprising 70.0% or more of the
partnership interests can force a sale of some or all of the Company's cable
television systems unless the sale is to TCI in which case the foregoing
percentage is 75.0%.
The terms of the Partnership Agreement require that where TCI has a "right
of first offer" as described above, before ICP-IV offers to sell any of its
cable television systems, the General Partner must first deliver a notice to TCI
offering to sell all such assets to TCI and specifying the purchase price and
other terms on which the General Partner proposes to sell such assets to a third
party. Within 30 days after the receipt of such notice, TCI may, by giving
notice to the General Partner, elect to purchase all of such assets for the
purchase price and on the other terms specified in such notice and enter into an
agreement binding it to such purchase
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within 90 days of its election to purchase. TCI must then purchase the offered
assets on the date set for closing but not more than 360 days after the date of
such original notice.
Where TCI has a right of first refusal, if ICP-IV desires to sell any of
its cable systems to a third party pursuant to a bona fide written offer, then
ICP-IV must first offer to sell such cable systems to TCI at the price and on
the offer terms stated in such bona fide written offer. TCI shall have 30 days
from the date of receipt of such offer in which to accept it. If TCI fails to
accept the Partnership's offer within such period, ICP-IV will be free to sell
such cable systems for a period of 360 days after the end of the 30 day right of
refusal period, or such longer or shorter period as may be specified in the
original bona fide offer, but only at the price and on the terms not more
favorable to the purchaser than those contained in the bona fide offer. If TCI
timely accepts ICP-IV's offer, TCI must enter into an agreement binding it to
such purchase within 90 days after its acceptance of such offer and must
purchase such cable systems within 360 days after receipt of ICP-IV's offer, or
such longer or shorter period as may have been specified in the original bona
fide offer.
ASSIGNMENT OF PARTNERSHIP INTERESTS
The Partnership Agreement provides that, no limited partner may sell,
assign, mortgage, encumber, hypothecate or otherwise transfer, whether
voluntarily or involuntarily, any part of its interest in ICP-IV unless the
transferee or assignee meets the suitability requirements originally imposed
under the subscription agreement entered into by such limited partner with
respect to the Partnership Agreement, and such assignment or transfer will not
violate any of the provisions specified in the Partnership Agreement. The
Partnership Agreement also prohibits a transferee or assignee from becoming a
limited partner without the prior written consent of the General Partner which
consent shall not be unreasonably withheld so long as either all of the
transferring partner's interest is transferred or at least a portion of such
interest representing an initial capital contribution of at least $5,000,000 is
transferred.
OUTSIDE ACTIVITIES; INVESTMENT OPPORTUNITIES
The Partnership Agreement provides that, without the consent of 70.0% in
interest of the limited partners, ICM-IV (and its partners, employees, agents
and affiliates, including, but not limited to, Leo J. Hindery, Jr.) may not
begin the offer and sale of interests in other enterprises with the purpose of
investing in cable television systems until the earlier of July 31, 1997 or such
time as 66 2/3% of the committed capital contributions to ICP-IV have been
invested or committed for investment. Without the consent of a majority in
interest of the limited partners, ICM-IV (and its partners, employees, agents
and affiliates, including, but not limited to, Leo J. Hindery, Jr.) may not
begin to actively supervise the investment of capital of such other enterprises
or partnerships until the earlier of July 31, 1997 or such time as 95.0% of the
committed capital contributions to ICP-IV have been invested or committed for
investment.
The terms of the Partnership Agreement require that ICM-IV must first offer
any investment opportunities within the scope of ICP-IV's, IP-IV's and the
operating partnerships' business purpose and for which these entities have
adequate resources to take advantage, to ICP-IV, IP-IV and the operating
partnerships. If, after good faith consideration by ICM-IV, ICP-IV and the
operating partnerships do not invest in or take all of such opportunity, ICM-IV
may give or share such investment opportunity to or with one or more of the
following: any partner, any officer, director, shareholder, partner, employee or
affiliate of a partner, any enterprise or partnership in which ICM-IV has an
interest, or any nonaffiliated person.
Except as set forth in the Partnership Agreement, ICM-IV or its partners,
employees, agents or affiliates are not prohibited from engaging directly or
indirectly in other activities, or from directly or indirectly purchasing,
selling and holding securities or assets in cable television systems or
corporations for their account or for the accounts of others. Under the
Partnership Agreement, any limited partner (and their partners, employees,
agents and affiliates) may engage in any other enterprises, including
enterprises in competition or in conflict with ICP-IV.
Each limited partner has the right to transact business with ICP-IV, IP-IV
or the operating partnerships. Neither ICM-IV nor any of its affiliates may sell
securities or assets to or purchase securities or assets from ICP-IV without the
unanimous consent of the limited partners; however, the Acquisitions and the
Viacom
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Nashville Acquisition may be consummated without any further consent of the
limited partners. ICM-IV may, on behalf of ICP-IV or cable television systems of
IP-IV or any operating partnership, enter into cost and revenue sharing
agreements with cable systems adjacent to those owned by ICP-IV, IP-IV or any
operating partnership including those systems purchased by any enterprise or
partnership in which ICM-IV, any affiliate of ICM-IV or ICP-IV or any partner of
ICM-IV has an interest (the "Adjacent Systems"), to operate the Adjacent Systems
as a single system with the cable systems of ICP-IV, IP-IV or any operating
partnership with costs equitably allocated between the various systems as ICM-IV
and the owner or operator of such Adjacent System determine based on the
relative costs associated with such systems and, if determined to be in the best
interests of ICP-IV, IP-IV, the operating partnerships and the Adjacent Systems,
to sell such systems as a single system and allocate the sales revenues in an
appropriate manner based on the relative values of such systems; however, the
terms of any such arrangement must be disclosed to the limited partners and be
equivalent to terms and conditions that would be negotiated at arm's length.
CONTRACTS WITH ICM-IV, AFFILIATES AND LIMITED PARTNERS
The Partnership Agreement allows ICM-IV, on behalf of ICP-IV, IP-IV or the
operating partnerships, to enter into contracts with itself or any of its
partners, employees, agents or affiliates, including but not limited to IMI. The
Partnership Agreement, however, requires that, except to the extent proceeds
from contracts with ICM-IV, affiliates or limited partners offset but do not
exceed the Management Fee payable under the Partnership Agreement, such
transactions will be on terms no less favorable to ICP-IV than are generally
afforded by unrelated third parties or the approval of 70.0% in interest of the
limited partners must be obtained.
INDEMNIFICATION OF THE PARTNERS
Under the Partnership Agreement ICP-IV indemnifies and holds harmless
ICM-IV, any limited partner, any Advisory Committee member and any partner,
employee or agent of ICM-IV, and any employee or agent of ICP-IV and/or the
legal representatives of any of them, and each other person who may incur
liability as a general partner in connection with the management of ICP-IV or
any entity in which ICP-IV has an investment, against all liabilities and
expenses incurred in connection with any civil action or other proceeding, in
which he or it may be involved or threatened, by reason of being or having been
a general partner, or serving in another capacity, provided that the acts or
omissions alleged upon which the action or threatened action or proceeding is
based were not any matter which constitutes willful misconduct, bad faith, gross
negligence or reckless disregard of the duties of its office, or material breach
of the Partnership Agreement.
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DESCRIPTION OF OTHER OBLIGATIONS
THE BANK FACILITY
On July 30, 1996, the Operating Partnership entered into the Bank Facility
with The Bank of New York Company Inc. ("The Bank of New York"), NationsBank of
Texas, N.A. ("NationsBank of Texas"), and The Toronto-Dominion Bank as arranging
agents and The Bank of New York, as administrative agent. The Bank Facility
provides for an aggregate $475.0 million Revolving Credit Facility and a $220.0
million Term Loan. The Bank Facility was entered into concurrently with, and was
contingent upon (i) the consummation of the Private Offering, (ii) the
contribution of the Contributed Equity, (iii) the conversion of indebtedness of
IP-V into the $12.0 million RMH Redeemable Preferred Stock by TCI, (iv) the
consummation of certain of the Primary Acquisitions, (v) the refinancing and
repayment of all obligations under the Bridge Loan, (vi) the satisfaction of
RMG's obligations to effect the defeasance of the RMG Notes under the terms of
the indentures for the RMG Notes and (vii) the Operating Partnership and its
subsidiaries having a total consolidated leverage ratio not in excess of 7.5:1.
Repayment. Commencing January 1, 1999, (i) availability under the
Revolving Credit Facility will be permanently reduced by the following amounts
(in thousands) and (ii) the Term Loan will be amortized on the corresponding
dates as follows:
<TABLE>
<CAPTION>
REVOLVING CREDIT
FACILITY AMORTIZATION
------------------------
AMOUNT OF OUTSTANDING TERM LOAN
DATE REDUCTION COMMITMENT AMORTIZATION
- -------------------------------------------------- --------- ---------- ------------
(IN
(IN THOUSANDS) THOUSANDS)
<S> <C> <C> <C>
January 1, 1999................................... $ 25,000 $450,000 $ 500
July 1, 1999...................................... 22,500 427,500 500
January 1, 2000................................... 22,500 405,000 500
July 1, 2000...................................... 25,000 380,000 500
January 1, 2001................................... 22,500 357,500 500
July 1, 2001...................................... 37,500 320,000 500
January 1, 2002................................... 35,000 285,000 500
July 1, 2002...................................... 47,500 237,500 500
January 1, 2003................................... 47,500 190,000 500
July 1, 2003...................................... 47,500 142,500 500
January 1, 2004................................... 47,500 95,000 500
July 1, 2004...................................... 95,000 -0- 107,250
January 1, 2005................................... 107,250
------ -------
Total Reductions........................ $475,000 $220,000
====== =======
</TABLE>
Security; Guaranty. The obligations of the Operating Partnership under the
Bank Facility are secured by a first priority pledge of the capital stock and/or
partnership interests of the Operating Partnership and its subsidiaries, a
negative pledge on other assets of the Operating Partnership and its Restricted
Subsidiaries and a pledge of any inter-company notes. The obligations of the
Operating Partnership under the Bank Facility are guaranteed by the Operating
Partnership and its Restricted Subsidiaries.
Interest. At the Operating Partnership's election, the interest rates per
annum applicable to the Revolving Credit Facility and the Term Loan will be a
fluctuating rate of interest measured by reference either to (i) an adjusted
LIBOR plus a borrowing margin or (ii) the base rate of the administrative agent
for the Bank Facility (the "ABR") (which is based on the administrative agent's
published prime rate) plus a borrowing margin. The applicable borrowing margin
for the Revolving Credit Facility will range from LIBOR plus 0.75% to LIBOR plus
1.75% or ABR to ABR plus 0.50%, based upon the Operating Partnership's senior
leverage ratio. The applicable borrowing rate for the Term Loan is expected to
be LIBOR plus 2.375% or ABR plus 1.125%.
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Fees. The Operating Partnership has agreed to pay certain fees with
respect to the Bank Facility including (i) commitment fees of 0.375% per annum
on the unused portion of the Revolving Credit Facility when the senior leverage
ratio is greater than 4.0:1.0 and 0.25% when the senior leverage ratio is less
than or equal to 4.0:1.0, (ii) upfront facility fees and (iii) agent,
arrangement and other similar fees.
Covenants. The Bank Facility prohibits the Operating Partnership from,
among other things, (i) having a senior leverage ratio at closing in excess of
5.75:1, declining as follows: 5.5:1.0 from January 1, 1997 through December 31,
1997; 5.25:1.0 from January 1, 1998 through June 30, 1998; 5.0:1.0 from July 1,
1998 through June 30, 1999; 4.75:1.0 from July 1, 1999 through December 31,
1999; 4.5:1.0 from January 1, 2000 through June 30, 2000; 4.0:1.0 from July 1,
2000 through June 30, 2001; and 3.75: 1.0 from July 1, 2001 and thereafter, (ii)
having an interest coverage ratio of less than 2.0:1.0 through December 31,
2000, less than 2.25: 1.0 from January 1, 2001 through December 31, 2001 and
less than 2.5:1.0 from January 1, 2002 and thereafter, and (iii) having a ratio
of annualized cash flow to pro forma debt service for any fiscal quarter of less
than 1.10. In addition, the Bank Facility contains certain restrictions on the
Company and its Restricted Subsidiaries with respect to, among other things,
maintenance of ownership, the payment of distributions, the repurchase of stock,
the making of Restricted Payments, the making of investments, the creation of
liens, certain asset sales, guarantees, capital expenditures, management fees,
lines of business, hedging arrangements satisfactory to the Arranging Agents,
transactions with affiliates, the disposition of certain securities of its
Restricted Subsidiaries, and mergers and consolidations. With respect to
restrictions on the payment of distributions, the Bank Facility permits the
Operating Partnership to make distributions to ICP-IV sufficient to pay interest
on the Notes commencing February 1, 2000 provided there is no default or Event
of Default (as defined therein). The Bank Facility also contains customary
events of default, including, but not limited to payment, misrepresentation,
covenant compliance, bankruptcy and judgment. In addition, it will be an event
of default if TCI does not own beneficially 35.0% or more of ICP-IV's
non-preferred partnership interests.
DESCRIPTION OF PREFERRED EQUITY INTERESTS
Preferred Limited Partner Interest. Pursuant to the terms of the IPWT
Contribution Agreement, GECC holds a $25.0 million Preferred Limited Partner
Interest in ICP-IV. Under the terms of the Partnership Agreement, GECC is
entitled, as the Preferred Limited Partner, to a first priority in any
distributions in repayment of its initial capital contribution of $25.0 million,
and a preferred return of 11.75%, per annum, compounded semiannually, of its
capital contribution. ICP-IV does not expect to make distributions on its
preferred equity interest prior to substantial sales of assets. As the Preferred
Limited Partner, GECC is not entitled to consent, except on those matters
required by law or that require unanimous consent of the limited partners of
ICP-IV.
RMG Redeemable Preferred Stock. In conjunction with the acquisition of
RMH, a subsidiary of TCI received $12.0 million in RMH Redeemable Preferred
Stock. The RMH Redeemable Preferred Stock has an annual dividend of 10.0% and
participates in any dividends paid on the common stock based on a rate of 10.0%
of the dividend paid per share on the common stock. The RMH Redeemable Preferred
Stock bears a liquidation preference of $12.0 million plus any accrued but
unpaid dividends at the time of liquidation (the "Liquidation Preference") and
is mandatorily redeemable on September 30, 2006 at the Liquidation Preference.
If RMH does not satisfy its mandatory redemption requirements in full, the
holder of the RMH Redeemable Preferred Stock shall have the right on or after
March 31, 2007 to cause the holder of the RMH Class A Common Stock to purchase
any unredeemed RMH Redeemable Preferred Stock at the Liquidation Preference. RMH
also has the right, but not the obligation, to redeem in whole or in part the
RMH Redeemable Preferred Stock at the Liquidation Preference on or after
September 30, 2001. RMH has merged with and into RMG, with RMG as the surviving
corporation. As a result of the merger the RMH Redeemable Preferred Stock has
been converted into RMG mandatorily redeemable preferred stock with the same
terms.
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were issued and the Exchange Notes will be issued pursuant to
the Indenture among ICP-IV, IPCC, and the Bank of New York, N.A., as trustee
(the "Trustee"). The Notes will be secured by a portion of the proceeds of the
Private Offering pursuant to the pledge and escrow agreement, dated as of July
30, 1996 (the "Pledge Agreement"), between ICP-IV and The Bank of New York,
N.A., as collateral agent (the "Collateral Agent"). The Old Notes were issued in
a private transaction that was not subject to the registration requirements of
the Securities Act. See "The Exchange Offer -- Purpose and Effect of the
Exchange Offer."
The terms of the Notes include those stated in the Indenture and the Pledge
Agreement and those made part of the Indenture and the Pledge Agreement by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture, the Pledge Agreement and the Trust Indenture Act for
a statement thereof. The following summary of certain provisions of the
Indenture, the Pledge Agreement and the Registration Rights Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, the Pledge Agreement and the Registration Rights Agreement, including
the definitions therein of certain terms used below. Copies of the Indenture,
the Pledge Agreement and the Registration Rights Agreement are available as set
forth below under "-- Additional Information." The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions."
All of ICP-IV's Subsidiaries (as defined herein) are Restricted
Subsidiaries (as defined herein). Under certain circumstances, ICP-IV will be
able to designate current or future Subsidiaries as Unrestricted Subsidiaries
(as defined herein). See "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Indenture.
RANKING
The Notes will be general obligations of the Issuers ranking senior to all
future subordinated Indebtedness (as defined herein) of ICP-IV, if any, and pari
passu with all future senior unsecured Indebtedness of ICP-IV, if any. The Notes
will not be guaranteed by any of ICP-IV's Subsidiaries.
IPCC has no substantial assets and no operations of any kind and the
Indenture will limit IPCC's ability to acquire or hold any significant assets or
other properties or engage in any business activities. See "-- Certain
Covenants -- Limitation on Conduct of IPCC."
STRUCTURAL SUBORDINATION
ICP-IV's operations are conducted through its direct and indirect
Subsidiaries. As a holding company, ICP-IV has no independent operations and,
therefore, is dependent on the dividends and distributions from its Subsidiaries
and other entities to meet its own obligations, including the Obligations (as
defined herein) under the Notes. Because ICP-IV's Subsidiaries will not
guarantee the payment of principal of and interest on the Notes, the indirect
claims of Holders of the Notes effectively will be subordinated to the claims of
creditors of such Subsidiaries, including all borrowings under the Bank
Facility, which borrowings are secured by substantially all of ICP-IV's assets.
As of June 30, 1996, after giving effect to the Transactions, the total
Indebtedness of ICP-IV's Subsidiaries (including obligations under the Bank
Facility) that is structurally senior to the Notes, on an aggregate basis, would
have been approximately $558.0 million and the total trade payables and other
liabilities of ICP-IV's Subsidiaries would have been approximately $42.2
million, including $12.0 million in RMH Redeemable Preferred Stock. ICP-IV's
ability to obtain access to the cash flow of its Subsidiaries will be severely
limited by the provisions of the Bank Facility. See "Risk Factors -- Holding
Company Structure; Structural Subordination."
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PRINCIPAL, MATURITY AND INTEREST
The Notes will be general obligations of ICP-IV, limited in aggregate
principal amount at maturity to $292.0 million and will mature on August 1,
2006. Interest on the Notes will accrue at the rate per annum set forth on the
cover page of this Prospectus and will be payable in cash semi-annually in
arrears on February 1 and August 1 of each year, commencing on February 1, 1997,
to Holders of record on the immediately preceding January 15 and July 15,
respectively. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest on the Notes will be computed on the basis of a
360-day year consisting of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages, if any, on the Notes will be payable at the
office or agency of ICP-IV maintained for such purpose within the City and State
of New York or, at the option of ICP-IV, payment of interest and Liquidated
Damages, if any, may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments with respect to the Global Note (as defined herein)
and Certificated Securities (as defined herein), the Holders of which have given
wire transfer instructions to ICP-IV at least 10 business days prior to the
applicable payment date, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by ICP-IV, ICP-IV's office or agency in New York will
be the office of the Trustee maintained for such purpose. The Notes will be
issued in minimum denominations of $1,000 and integral multiples thereof.
SECURITY
ICP-IV purchased and pledged to the Trustee for the benefit of the Holders
of the Notes Pledged Securities consisting of U.S. government securities in the
amount of $88.8 million which is sufficient upon receipt of scheduled interest
and principal payments of such securities, in the opinion of a nationally
recognized firm of independent public accountants selected by ICP-IV, to provide
for payment in full of the first six scheduled interest payments due on the
Notes. The Pledged Securities were pledged by ICP-IV to the Trustee for the
benefit of the Holders of Notes pursuant to the Pledge Agreement and are held by
the Trustee in the Pledge Account (as defined herein). Pursuant to the Pledge
Agreement, immediately prior to an interest payment date on the Notes, ICP-IV
may either deposit with the Trustee from funds otherwise available to ICP-IV
cash sufficient to pay the interest scheduled to be paid on such date or ICP-IV
may direct the Trustee to release from the Pledge Account proceeds sufficient to
pay interest then due. In the event that ICP-IV exercises the former option, the
Pledge Agreement provides that ICP-IV may thereafter direct the Trustee to
release to ICP-IV proceeds or Pledged Securities from the Pledge Account in like
amount. A failure by the Issuers to pay interest on the Notes in a timely manner
through August 1, 1999 will constitute an immediate Event of Default under the
Indenture, with no grace or cure period.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by ICP-IV, to provide for
payment in full of the first six scheduled interest payments due on the Notes
(or, in the event an interest payment or payments have been made, an amount
sufficient to provide for payment in full of any interest payments remaining, up
to and including the sixth scheduled interest payment), the Trustee is permitted
to release to ICP-IV at ICP-IV's request any such excess amount. The Notes are
secured by a first priority security interest in the Pledged Securities and in
the Pledge Account and, accordingly, the Pledged Securities and the Pledge
Account also secure repayment of the principal amount of the Notes to the extent
of such security. At any time while the Pledge Agreement is in force, the Pledge
Agreement allows ICP-IV to substitute Marketable Securities (as defined in the
Indenture) for the U.S. government securities originally pledged as collateral;
provided, however, that the Marketable Securities so substituted must have a
fair market value (measured at the date of substitution), in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, at least equal to 125.0% of the amount of any of the first six
scheduled interest payments on the Notes that are unpaid (or the pro rata
portion of such interest payments equal to the percentage of such interest
payments to be secured by such Marketable Securities) as of the date such
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Marketable Securities are proposed to be substituted as security for the
Company's obligation under the Pledge Agreement.
Under the Pledge Agreement, assuming that the Issuers make the first six
scheduled interest payments on the Notes in a timely manner, all of the Pledged
Securities will have been released from the Pledge Account and thereafter the
Notes will be unsecured.
OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at ICP-IV's
option prior to August 1, 2001. Thereafter, the Notes will be subject to
redemption at the option of ICP-IV at any time, in whole or in part, upon not
less than 30 nor more than 60 days' written notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
2001.............................................................. 105.625%
2002.............................................................. 103.750%
2003.............................................................. 101.875%
2004 and thereafter............................................... 100.000%
</TABLE>
In the event of a Public Equity Offering or a Strategic Equity Investment
prior to August 1, 1999, ICP-IV may use the proceeds therefrom to redeem up to
35.0% of the aggregate principal amount of Notes originally issued at a
redemption price equal to 111.25% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of redemption,
provided, however, that at least 65.0% of the aggregate principal amount of
Notes originally issued remains outstanding following such redemption and,
provided further, that such redemption occurs within 90 days of the closing of
such Public Equity Offering or Strategic Equity Investment.
MANDATORY REDEMPTION
ICP-IV will not be required to make any mandatory redemption or sinking
fund payments with respect to the Notes.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
such Notes for redemption will be made by the Trustee as provided in the
Indenture in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed, or, if such Notes
are not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided that no Notes of $1,000 or less will
be redeemed in part. Notices of redemption will be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note will state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, interest ceases to accrue on the Notes or portions of them
called for redemption.
CHANGE OF CONTROL OFFER
The Indenture provides that, within 30 days of the occurrence of a Change
of Control with respect to the Notes, ICP-IV will notify the Trustee in writing
of such occurrence and will make an offer to purchase (a "Change of Control
Offer") the Notes at a purchase price equal to 101.0% of the principal amount
thereof plus any accrued and unpaid interest and Liquidated Damages thereon, if
any, to the Change of Control
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Payment Date (as defined herein) (the "Change of Control Purchase Price"), in
accordance with the procedures set forth in the Indenture.
Within 50 days of the occurrence of a Change of Control with respect to the
Notes, ICP-IV also will (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) send by first-class mail, postage prepaid,
to the Trustee and to each registered Holder of Notes, at his address appearing
in the register of the Notes maintained by the Registrar, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment,
subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which shall
be a business day no earlier than 30 days and no later than 60 days
after the date on which such notice is mailed) (the "Change of Control
Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that unless ICP-IV defaults in the payment of the Change of Control
Purchase Price, any such Notes accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest after the Change
of Control Payment Date;
(5) that Holders accepting the offer to have their Notes purchased pursuant
to a Change of Control Offer will be required to surrender such Notes
to the paying agent at the address specified in the notice prior to the
close of business on the business day preceding the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their acceptance if the
paying agent receives, not later than the close of business on the
third business day preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of such Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such
Notes purchased;
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, provided that each Note purchased and each
such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof; and
(8) any other procedures that a Holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, ICP-IV will (i) accept for payment
the Notes or portions thereof tendered pursuant to the Change of Control Offer,
(ii) deposit with the paying agent money sufficient to pay the purchase price of
all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate (as defined herein) indicating the Notes or portions thereof
tendered to ICP-IV. The paying agent will promptly mail to each Holder of Notes
so accepted payment in an amount equal to the purchase price for such Notes, and
the Trustee will promptly authenticate and mail to such Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered;
provided that each such new Note shall be issued in an original principal amount
in denominations of $1,000 and integral multiples thereof.
The Issuers have agreed to comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Issuers have agreed to comply with the applicable
securities laws and regulations and will not be deemed to have breached their
obligations under the covenant described hereunder by virtue thereof.
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ICP-IV will not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture and purchases all Notes validly tendered
and not withdrawn under such Change of Control Offer.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require ICP-IV to repurchase
or redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
The Bank Facility currently prohibits, and future Indebtedness of ICP-IV or
its Subsidiaries may also prohibit, the repurchase of Notes upon the occurrence
of a Change of Control. Further, the Bank Facility does not permit ICP-IV's
Subsidiaries to pay dividends or distributions to ICP-IV in an amount that would
be sufficient to permit ICP-IV to honor its obligations under the Change of
Control covenant. See "Risk Factors -- Holding Company Structure; Structural
Subordination." Moreover, the exercise by the Holders of the Notes of their
right to require ICP-IV to repurchase the Notes could cause a default under the
terms of the agreements governing other Indebtedness of ICP-IV or its
Subsidiaries, even if the Change of Control itself does not, due to the
financial effect of such repurchase obligation on ICP-IV. Finally, ICP-IV's
ability to pay cash to the Holders of Notes following the occurrence of a Change
of Control may be limited by ICP-IV's then-existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of ICP-IV and its Subsidiaries taken as a whole. Although there is
a developing body of case law interpreting the phrase "substantially all," there
is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require ICP-IV to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of ICP-IV and its Subsidiaries taken
as a whole to another Person (as defined herein) or group may be uncertain.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture. The
Indenture provides that if, at any time, (i) the ratings assigned to the Notes
issued under the Indenture by both of the Rating Agencies (as defined herein)
are Investment Grade Ratings and (ii) no Default has occurred and is continuing
under such Indenture, ICP-IV and its Restricted Subsidiaries will thereafter
cease to be subject to the provisions of the Indenture described herein under
the captions "-- Limitation on Restricted Payments," "-- Limitation on
Incurrence of Indebtedness and Issuance of Preferred Equity," "-- Limitation on
Asset Sales," "-- Dividend and Other Payment Restrictions Affecting
Subsidiaries," "-- Limitation on Transactions with Affiliates," "-- Designation
of Restricted and Unrestricted Subsidiaries" and clause (iv) of "-- Merger,
Consolidation and Sale of Assets" (collectively, the "Suspended Covenants"). In
the event that ICP-IV 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 Ratings Agencies
withdraws its ratings or downgrades the ratings assigned to such Notes below the
required Investment Grade Ratings, then ICP-IV and its Restricted Subsidiaries
will thereafter again be subject to the Suspended Covenants for the benefit of
such Notes 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
"-- Limitation on Restricted Payments" as if such covenant had been in effect
during the entire period of time from the Issue Date.
Limitation on Restricted Payments. The Indenture provides that ICP-IV will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of the Equity Interests (as defined herein) of ICP-IV or
any of its Restricted Subsidiaries (including, without limitation, any payment
in connection with any merger or consolidation) or to the direct or indirect
holders of the Equity Interests of ICP-IV or any of its Restricted
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Subsidiaries in their capacity as such, other than dividends or distributions of
Equity Interests (other than Disqualified Stock (as defined herein)) of ICP-IV
or dividends or distributions payable to ICP-IV or any Restricted Subsidiary of
ICP-IV; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of ICP-IV or any Affiliate of ICP-IV; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except at final
maturity; (iv) make any Restricted Investment (as defined herein) or (v)
designate any Restricted Subsidiary to be an Unrestricted Subsidiary (all such
payments and other actions set forth in clauses (i) through (v) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made after the Closing Date (excluding
those permitted by clauses (x), (y) and (z) of the following paragraph)
would exceed, at the date of determination, an amount equal to the sum
of (1) the excess of (A) Cumulative EBITDA (as defined herein) from the
Closing Date (as defined herein) to the end of ICP-IV's most recently
ended full fiscal quarter for which consolidated financial statements
are available, taken as a single accounting period, over (B) the
product of 1.2 times the Company's Cumulative Interest Expense (as
defined herein) from the Closing Date to the end of ICP-IV's most
recently ended full fiscal quarter for which consolidated financial
statements are available, taken as a single accounting period, plus (2)
Capital Stock Proceeds (as defined herein), plus (3) to the extent that
any Restricted Investment that was made after the Closing Date is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A)
the cash return of capital with respect to such Restricted Investment
(less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment, plus (4) $10.0 million; and
(c) ICP-IV would, immediately after giving effect to such Restricted
Payment as if the same had occurred at the beginning of the most
recently ended full fiscal quarter of ICP-IV for which consolidated
financial statements are available, have been permitted to incur at
least $1.00 of additional Indebtedness (other than Permitted Debt (as
defined herein)) pursuant to the covenant described below under the
caption "-- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Equity."
Provided that no Event of Default shall have occurred and be continuing,
the foregoing provisions will not prohibit: (v) quarterly distributions in
respect of partners' income tax liability in an amount not to exceed the Tax
Amount (as defined herein); (w) the payment of any dividend or distribution
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (x) the payment of in-kind dividends on the RMH Redeemable Preferred
Stock in accordance with the terms thereof as in effect on the Closing Date; (y)
the redemption, repurchase, retirement or other acquisition of any Equity
Interests of ICP-IV in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of ICP-IV) of other
Equity Interests of ICP-IV (other than any Disqualified Stock), provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (b)(2) of the preceding paragraph; and (z) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Debt (as defined herein) or the
substantially concurrent sale (other than to a Subsidiary of ICP-IV) of Equity
Interests of ICP-IV (other than Disqualified Stock), provided that the amount of
any such net cash proceeds from sales of Equity Interests that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (b)(2) of the preceding paragraph.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors (as defined
herein) set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by
ICP-IV or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than the date of
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making any Restricted Payment, ICP-IV will deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant described herein
under the caption "Restricted Payments" were computed, which calculations may be
based upon ICP-IV's most recently available financial statements.
Limitation on Incurrence of Indebtedness and Issuance of Preferred
Equity. The Indenture provides that ICP-IV will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt (as defined herein)) and that ICP-IV will
not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of Preferred Equity, except the RMH Redeemable
Preferred Stock in an amount up to $12.0 million as of the date of the
Indenture; provided, however, that ICP-IV or any of its Restricted Subsidiaries
may incur Indebtedness (including Acquired Debt) and ICP-IV may issue
Disqualified Stock if ICP-IV's Leverage Ratio at the time of incurrence of such
Indebtedness or issuance of such Disqualified Stock, as applicable, after giving
pro forma effect to such incurrence or issuance as of such date and to the use
of proceeds therefrom as if the same had occurred at the beginning of the most
recently ended full fiscal quarter of ICP-IV for which consolidated financial
statements are available, would have been no greater than 8.0 to 1.0 if before
January 1, 1998 or 7.5 to 1.0 if on or after January 1, 1998.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by ICP-IV and its Restricted Subsidiaries of
Indebtedness (including all Obligations with respect thereto) under the
Revolving Credit Facility in an aggregate principal amount of up to $475.0
million with letters of credit being deemed to have a principal amount
equal to the maximum potential liability thereunder and less the aggregate
amount of all repayments of principal under the Revolving Credit Facility,
optional or mandatory (other than repayments that are immediately
reborrowed), that have been made since the Closing Date;
(ii) the incurrence by ICP-IV and its Restricted Subsidiaries of the
Notes and the Indebtedness outstanding on the Closing Date, including,
without limitation, the Term Loan;
(iii) the incurrence by ICP-IV or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(iv) the incurrence by ICP-IV or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among ICP-IV and any of its Restricted
Subsidiaries; provided, however, that (i) if ICP-IV is the obligor on such
Indebtedness, such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to all of the Notes and (ii)(A) any
subsequent issuance or transfer of Equity Interests (as defined herein)
that results in any such Indebtedness being held by a Person other than
ICP-IV or a Restricted Subsidiary and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either ICP-IV or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by ICP-IV or such Restricted Subsidiary, as the case may
be;
(v) the incurrence by ICP-IV or any of its Restricted Subsidiaries of
Hedging Obligations (as defined herein) that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding;
(vi) the incurrence by ICP-IV's Unrestricted Subsidiaries of
Non-Recourse Debt (as defined herein), provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
such event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of ICP-IV; and
(vii) the incurrence by ICP-IV or any of its Restricted Subsidiaries
of Indebtedness (in addition to Indebtedness permitted by any other clause
of this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $25.0 million.
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Limitation on Asset Sales. The Indenture provides that ICP-IV will not,
and will not permit any Restricted Subsidiary to, make any Asset Sale (as
defined herein) unless: (i) ICP-IV or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (as evidenced by a resolution of ICP-IV's Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of the
assets, or other property issued or sold or otherwise disposed of in the Asset
Sale; and (ii) at least 75.0% of such consideration is in the form of cash or
Cash Equivalents (as defined herein).
Notwithstanding the immediately preceding paragraph, ICP-IV and its
Restricted Subsidiaries are permitted to consummate an Asset Sale without
complying with such paragraph if (i) ICP-IV or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets or other property
sold, issued or otherwise disposed of (as evidenced by a resolution of ICP-IV's
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee), and (ii) at least 75.0% of the consideration for such Asset Sale
constitutes assets or other property of a kind usable by ICP-IV and its
Restricted Subsidiaries in the business of ICP-IV and its Restricted
Subsidiaries as conducted by ICP-IV and its Restricted Subsidiaries on the
Closing Date; provided that any consideration not constituting assets or
property of a kind usable by ICP-IV and its Restricted Subsidiaries in the
business conducted by them on the date of such Asset Sale received by ICP-IV or
any of its Restricted Subsidiaries in connection with any Asset Sale permitted
to be consummated under this paragraph shall constitute Net Proceeds (as defined
herein) subject to the provisions of the two succeeding paragraphs.
Within 180 days after any Asset Sale, ICP-IV may elect to apply the Net
Proceeds from such Asset Sale to (a) permanently reduce any Indebtedness of any
Restricted Subsidiary of ICP-IV under the Bank Facility and/or (b) commit in
writing to the Trustee to make an investment in or acquire assets or property of
a kind usable by ICP-IV and its Restricted Subsidiaries in the business
conducted by them on the date of such Asset Sale or a business reasonably
related thereto and consummate such investment or acquisition within 360 days
after such Asset Sale, provided, however, that if at any time any non-cash
consideration received by ICP-IV or any Restricted Subsidiary of ICP-IV, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such cash will be deemed to constitute Net
Proceeds and will be required to be applied in accordance with clauses (a)
and/or (b) above. Pending the final application of any such Net Proceeds, ICP-IV
may temporarily invest such Net Proceeds in any manner permitted by the
Indenture. Any Net Proceeds from an Asset Sale not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds."
The Indenture provides that, as soon as practical, but in no event later
than 180 days after any date that the aggregate amount of Excess Proceeds
exceeds $5.0 million (an "Asset Sale Offer Trigger Date"), ICP-IV will commence
an offer to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds (an "Asset Sale Offer"). Any Notes to be purchased
pursuant to an Asset Sale Offer will be purchased pro rata based on the
aggregate principal amount of Notes outstanding and all Notes will be purchased
at an offer price in cash in an amount equal to 100.0% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase in accordance with the procedures set forth in the
Indenture. To the extent that any Excess Proceeds remain after completion of an
Asset Sale Offer, ICP-IV may use the remaining amount for general corporate
purposes and the amount of Excess Proceeds will be reset at zero.
The Indenture provides that, within 10 days following any Asset Sale Offer
Trigger Date, ICP-IV will mail to each Holder of Notes at such Holder's
registered address a notice stating: (i) that an Asset Sale Trigger Date has
occurred and that ICP-IV is offering to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100.0% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, which date of purchase (the "Asset Sale Offer Purchase Date") will be
a business day, specified in such notice, that is not earlier than 30 days nor
later than 60 days from the date such notice is mailed; (ii) the amount of
accrued and unpaid interest, if any, as of the Asset Sale Offer Purchase Date;
(iii) that any Note subject to the Asset Sale Offer not tendered will continue
to accrue interest; (iv) that, unless ICP-IV defaults in the payment of the
purchase price for the Notes payable pursuant to the Asset Sale
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Offer, any such Notes accepted for payment pursuant to the Asset Sale Offer will
cease to accrue interest after the Asset Sale Offer Purchase Date; (v) the
procedures, consistent with the Indenture, to be followed by a Holder of Notes
subject to the Asset Sale Offer in order to accept such Asset Sale Offer or to
withdraw such acceptance; and (vi) such other information as may be required by
the Indenture and applicable laws and regulations.
On the Asset Sale Offer Purchase Date, ICP-IV will: (i) accept for payment
the maximum principal amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer that can be purchased out of the Excess Proceeds; (ii)
deposit with the paying agent the aggregate purchase price of all Notes or
portions thereof accepted for payment; and (iii) deliver or cause to be
delivered to the Trustee all Notes tendered pursuant to the Asset Sale Offer. If
less than all of the Notes tendered pursuant to the Asset Sale Offer are
accepted for payment by ICP-IV for any reason consistent with the Indenture,
selection of the Notes to be purchased by ICP-IV will be in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or by such method as the Trustee deems fair and appropriate; provided that Notes
accepted for payment in part will only be purchased in integral multiples of
$1,000. The paying agent will promptly mail to each Holder of Notes or portions
thereof accepted for payment an amount equal to the purchase price for such
Notes and the Trustee will promptly authenticate and mail to any such Holder of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Notes, and any Note not accepted for payment in whole
or in part will be promptly returned to the Holder of such Note. ICP-IV will
announce the results of the Asset Sale Offer to Holders of the Notes on or as
soon as practicable after the Asset Sale Offer Purchase Date. The Issuers have
agreed to comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act, and any other securities laws or regulations, in
connection with any Asset Sale Offer.
The Bank Facility currently prohibits, and future Indebtedness of ICP-IV or
its Subsidiaries may also prohibit, the repurchase of Notes upon the occurrence
of an Asset Sale. Further, the Bank Facility does not permit ICP-IV's
Subsidiaries to pay dividends to ICP-IV in an amount that would be sufficient to
permit ICP-IV to honor its obligations under the Asset Sale covenant. See "Risk
Factors -- Holding Company Structure; Structural Subordination." Moreover,
ICP-IV's obligation to repurchase Notes under the Asset Sale covenant could
cause a default under the terms of the agreements governing other Indebtedness
of ICP-IV or its Subsidiaries, even if the Asset Sale does not, due to the
financial effect of such repurchase obligation on ICP-IV. Finally, ICP-IV's
ability to pay cash to the Holders of Notes following the occurrence of an Asset
Sale may be limited by ICP-IV's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required repurchases.
Limitation on Liens. The Indenture provides that ICP-IV will not, and will
not permit any of its Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien (as defined herein) (other than Permitted
Liens (as defined herein)) upon any of its Property, or the Property of such
Subsidiaries whether now owned or hereafter acquired, or any interest therein or
any income or profits therefrom, unless it has made or will make effective a
provision whereby all payments due under the Indenture and the Notes will be
secured by such Lien equally and ratably with (or prior to) all other
Indebtedness of ICP-IV or such Subsidiary secured by such Lien for so long as
any such other Indebtedness of ICP-IV or such Subsidiary shall be so secured.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that ICP-IV will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any other
distributions to ICP-IV or any of its Restricted Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or measured
by, its profits, or (b) pay any Indebtedness owed to ICP-IV or any of its
Restricted Subsidiaries; (ii) make loans or advances to ICP-IV or any of its
Restricted Subsidiaries; or (iii) transfer any of its properties or assets to
ICP-IV or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Indebtedness as in effect on the
Closing Date, (b) the Bank Facility as in effect as of the Closing Date, and any
amendments, modifications, restatements, renewals, increases, supplements,
refund-
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ings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Bank
Facility as in effect on the Closing Date, (c) the Indenture and the Notes, (d)
applicable law, (e) any other Indebtedness permitted by the terms of the
Indenture to be incurred, provided that the restrictions contained in the
agreements governing such other Indebtedness are no more restrictive than those
contained in the Bank Facility, (f) customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices, or (g) Permitted Refinancing Debt, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Debt are no
more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
Limitation on Transactions with Affiliates. The Indenture provides that
ICP-IV will not, and will not permit any of its Restricted Subsidiaries 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 or the rendering of any service)
with, or for the benefit of, any Affiliate (an "Affiliate Transaction") unless:
(i) the terms of such Affiliate Transaction are in writing; (ii) such Affiliate
Transaction is in the best interest of ICP-IV or such Restricted Subsidiary, as
the case may be; (iii) such Affiliate Transaction is on terms at least as
favorable to ICP-IV or such Restricted Subsidiary, as the case may be, as 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;
(iv) with respect to each Affiliate Transaction involving aggregate payments or
consideration in excess of $5.0 million, ICP-IV delivers to the Trustee an
Officers' Certificate certifying that such Affiliate Transaction was approved by
an Executive Officer (as defined herein) of ICP-IV and that such Affiliate
Transaction complies with clauses (ii) and (iii) of this paragraph; and (v) with
respect to each Affiliate Transaction involving aggregate payments or
consideration in excess of $25.0 million, ICP-IV delivers to the Trustee, in
addition to those documents required by clause (iv) of this paragraph, an
opinion letter from an Independent Appraiser (as defined herein) to the effect
that such Affiliate Transaction is fair to the Holders from a financial point of
view.
Notwithstanding the foregoing limitation, ICP-IV may enter into or suffer
to exist the following: (i) any transaction pursuant to any contract in
existence on the Closing Date in accordance with the terms thereof as in effect
on the Closing Date, including contracts for the acquisition of cable television
programming and renewals, extensions and replacements thereof on terms no less
favorable to ICP-IV and its Restricted Subsidiaries than those in effect on the
Closing Date; (ii) any Restricted Payment permitted to be made pursuant to the
covenant described above under the caption "-- Limitation on Restricted
Payments"; (iii) any transaction or series of transactions between ICP-IV and
one or more of its Restricted Subsidiaries or between two or more of its
Restricted Subsidiaries (provided that no more than 10.0% of the equity interest
in any of such Restricted Subsidiaries is owned by an Affiliate that is not
itself a Restricted Subsidiary); (iv) the payment of compensation (including,
amounts paid pursuant to employee benefit plans) for the personal services of
officers, directors and employees of ICP-IV or any of its Restricted
Subsidiaries, or any consultant or advisor thereto, so long as the Board of
Directors of ICP-IV in good faith shall have approved the terms thereof and
deemed the services theretofore or thereafter to be performed for such
compensation or fees to be fair consideration therefor; (v) any sale of Equity
Interests of ICP-IV; and (vi) the D.D. Cable Transactions.
Designation of Restricted and Unrestricted Subsidiaries. The Indenture
provides that the Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary at any time; provided, however, that immediately
after giving effect to such designation on a pro forma basis as if the same had
occurred at the beginning of the most recently ended full fiscal quarter of
ICP-IV for which consolidated financial statements are available, (i) ICP-IV
would be permitted to incur at least $1.00 of additional Indebtedness (other
than Permitted Debt) pursuant to the covenant described above under the heading
"Limitation on Incurrence of Indebtedness or Issuance of Preferred Stock," (ii)
there exist no Liens (other than Permitted Liens) on the Property of ICP-IV or
its Restricted Subsidiaries and (iii) an Officers' Certificate with respect to
such designation is delivered to the Trustee within 75 days after the end of the
fiscal quarter of ICP-IV in which such designation is made (or, in the case of a
designation made during the last fiscal quarter of ICP-IV's fiscal year, within
120 days after the end of such fiscal year), which Officers'
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Certificate states the effective date of such designation; and provided,
further, that such designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of ICP-IV of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if no Default or Event of Default would be in existence following such
designation.
The Board of Directors may designate any Restricted Subsidiary, other than
IPCC, to be an Unrestricted Subsidiary if such designation would not cause a
Default; provided, however, that immediately after giving effect to such
designation on a pro forma basis, ICP-IV would be in compliance with the
covenant described above under the caption "-- Limitation on Restricted
Payments." For purposes of making such determination, all outstanding
Investments by ICP-IV and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated, whether made before or after
the Closing Date, will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments. All
such outstanding Investments will be deemed to constitute Investments in an
amount equal to the greatest of (i) the net book value of such Investments at
the time of such designation, (ii) the fair market value of such Investments at
the time of such designation and (iii) the original fair market value of such
Investments at the time they were made. Such designation will only be permitted
if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Payments for Consent. The Indenture provides that neither ICP-IV nor any
of its Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Note for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes, unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Merger, Consolidation and Sale of Assets. The Indenture provides that
ICP-IV may not consolidate with or merge with or into, or convey, sell,
transfer, lease or otherwise dispose of all or substantially all of its assets
(as an entirety or substantially as an entirety in one transaction or a series
of related transactions), to any Person unless: (i) ICP-IV will be the surviving
Person (the "Surviving Person"), or the Surviving Person (if other than ICP-IV)
formed by such consolidation or into which ICP-IV is merged or to which the
assets of ICP-IV are transferred, will be a corporation 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 ICP-IV) will expressly
assume, by supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all of the obligations of ICP-IV under the
Notes and such supplemental indenture, and the obligations under the Indenture
will remain in full force and effect; (iii) immediately before and immediately
after giving effect to such transaction, no Event of Default shall have occurred
and be continuing; and (iv) immediately after giving effect to such transaction
on a pro forma basis as if the same had occurred at the beginning of the most
recently ended full fiscal quarter of ICP-IV for which consolidated financial
statements are available (including any Indebtedness incurred or anticipated to
be incurred in connection with such transaction or series of transactions), the
Surviving Person would be permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Debt).
In connection with any consolidation, merger or transfer contemplated by
this provision, ICP-IV will 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 in the Indenture provided for
relating to such transaction or transactions have been complied with.
Notwithstanding the foregoing, ICP-IV is permitted to reorganize as a
corporation in accordance with the procedures established in the Indenture,
provided that ICP-IV shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that such
reorganization is not adverse to Holders of the Notes (it being recognized that
such reorganization shall not be deemed adverse to the Holders of the Notes
solely because (i) of the accrual of deferred tax liabilities resulting from
such reorganization or (ii) the successor or surviving corporation (a) is
subject to income tax as a corporate entity
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or (b) is considered to be an "includible corporation" of an affiliated group of
corporations within the meaning of the Code or any similar state or local law).
Ownership of the Operating Partnership. The Indenture provides that ICP-IV
will continue to own at least 99.99% of the outstanding Equity Interests of the
Operating Partnership or any successor to all or substantially all of the
Operating Partnership's assets.
Limitation on Conduct of IPCC. The Indenture provides that IPCC may not
acquire or hold any significant assets or other properties or engage in any
business activities; provided that IPCC may be a co-obligor with respect to
Indebtedness if ICP-IV is a primary obligor or guarantor with respect to such
Indebtedness and the net proceeds of such Indebtedness are loaned to ICP-IV.
Reports. The Indenture provides that, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding, ICP-IV
will furnish the following to the Trustee and to the Holders of Notes: (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if ICP-IV were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of ICP-IV and its Restricted Subsidiaries
and, with respect to the annual information only, a report thereon by ICP-IV's
certified independent accountants; and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if ICP-IV were required to
file such reports. In addition, whether or not required by the rules and
regulations of the Commission, ICP-IV will file a copy of all such information
and reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, for so long as any
of the Notes remain outstanding, each of the Issuers has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
The Indenture provides that each of the following constitutes an Event of
Default: (i) (a) default in the payment when due of interest on the Notes on any
day on or prior to August 1, 1999, or (b) default for 30 days in the payment
when due of interest on the Notes on any day thereafter; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
ICP-IV for 30 days after notice from the Trustee or the Holders of at least
25.0% in principal amount of the then outstanding Notes to comply with any of
its covenants or agreements in the Indenture or the Notes; (iv) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
ICP-IV or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by ICP-IV or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the Closing Date, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more, which Payment Default shall not
be cured or waived, or which acceleration shall not be rescinded or annulled,
within 10 days after written notice thereof; (v) failure by ICP-IV or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0
million, which judgments are not paid, discharged or stayed for a period of 30
consecutive days; and (vi) certain events of bankruptcy or insolvency with
respect to ICP-IV or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all such Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to ICP-IV or any of its Restricted
Subsidiaries, all outstanding Notes will become due
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and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of ICP-IV with the
intention of avoiding payment of the premium that ICP-IV would have had to pay
if ICP-IV then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of such Notes. If an Event of Default occurs prior to August 1,
2001 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of ICP-IV with the intention of avoiding the prohibition on redemption of
the Notes prior to August 1, 2001, then the premium specified in the Indenture
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of such Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Issuers will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and ICP-IV will be required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuers may, at their option and at any
time, elect to have all of their obligations discharged with respect to the
outstanding Notes ("Legal Defeasance") except for: (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest (including Liquidated Damages) on such Notes when such
payments are due from the trust referred to below; (ii) the Issuers' obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in trust; and
(iii) the rights, powers, trusts, duties and immunities of the Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance"), as the case may be, and
thereafter any omission to comply with such obligations will not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described above under the
caption "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes cash in U.S. dollars, non-callable Government
Securities (as defined herein), or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on such outstanding Notes on the stated maturity or on the redemption
date, as the case may be, and the Issuers must specify whether such Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Issuers shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to such Trustee confirming
that (a) ICP-IV has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the date of the Indenture, there has been
a change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of such outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal
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Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuers shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that the Holders of such
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit (or greater period of
time in which any such deposit of trust funds may remain subject to bankruptcy
or insolvency laws insofar as those apply to the deposit by the Issuers); (v)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument
(other than the Indenture) to which either Issuer or any of its Restricted
Subsidiaries is a party or by which either Issuer or any of its Restricted
Subsidiaries is bound; (vi) the Issuers must have delivered to the Trustee an
opinion of counsel to the effect that, as of the date of such opinion, (a) the
trust funds will not be subject to rights of holders of Indebtedness other than
the Notes and (b) assuming no intervening bankruptcy of either Issuer between
the date of deposit and the 91st day following the deposit (assuming no Holder
of Notes is an insider of either Issuer) or the day following the end of such
other preference period in effect at the time of such opinion (assuming a Holder
of Notes is an insider of either Issuer), as applicable, following the deposit,
the trust funds will not be subject to the effects of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
under any applicable United States or state law; (vii) each Issuer must deliver
to the Trustee an Officers' Certificate stating that the deposit was not made by
the Issuer with the intent of preferring the Holders of Notes over the other
creditors of either Issuer with the intent of defeating, hindering, delaying or
defrauding creditors of either Issuer or others; and (viii) each Issuer must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Pledge Agreement or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture, the Pledge
Agreement or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes as the case may be,
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, such Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the captions
"-- Change of Control Offer" and "-- Certain Cove-
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nants -- Limitation on Asset Sales"); (iii) reduce the rate of or change the
time for payment of interest on any Note; (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration); (v) make any Note payable
in money other than that stated in the Notes; (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes; (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
captions "-- Change of Control Offer" and "-- Certain Covenants -- Limitation on
Asset Sales"); (viii) release any Collateral from the Lien created by the Pledge
Agreement, except in accordance with the terms thereof; or (ix) make any change
in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuers and the Trustee may amend or supplement the Indenture, the Pledge
Agreement or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of ICP-IV's obligations to Holders of Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of ICP-IV, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which will not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
BOOK-ENTRY PROCEDURES, DELIVERY AND FORM
All of the Notes to be resold as set forth herein will initially be issued
in the form of one Global Note (the "Global Note"). Such Global Note will be
deposited with, or on behalf of, the Depositary Trust Company (the "Depository")
and registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as a "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
ICP-IV expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Initial Purchasers with portions
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of the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent. The Old Notes are subject to certain other
restrictions on transferability.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by a
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Issuers nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Issuers nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes (including principal, premium, if any, interest and Liquidated Damages,
if any). The Issuers believe, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depositary. Payments by the Depositary's Participants and the Depositary's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for the Notes in the form of definitive certificates ("Certificated
Securities"). Upon any issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Old Notes would be subject to the legend requirements described in the
Indenture. In addition, if (i) the Issuers notify the Trustee in writing that
the Depositary is no longer willing or able to act as a depositary with respect
to the Notes, and the Issuers are unable to locate a qualified successor within
90 days or (ii) either of the Issuers, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Notes in the form of
Certificated Securities under the Indenture, then, upon surrender by the Global
Note Holder of the Global Note, Notes in such form will be issued to each person
that the Global Note Holder and the Depositary identify as being the beneficial
owner of the related Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Issuers and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holders or the
Depositary for all purposes.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture, the
Pledge Agreement and the Registration Rights Agreement without charge by writing
to ICP-IV at 235 Montgomery Street, Suite 420, San Francisco, California 94104,
Attn: Edon V. Hartley, Chief Financial Officer and Treasurer.
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Under the terms of the Indenture, under which the Old Notes were issued,
and under which the Exchange Notes are to be issued, each of the Issuers has
agreed that, whether or not it is required to do so by the rules and regulations
of the Commission, for so long as any of the Notes remain outstanding, it will
furnish to the Holders of the Notes and file with the Commission (unless the
Commission will not accept such a filing) annual reports of ICP-IV 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. Such reports will contain a management's
discussion and analysis of financial condition and results of operation and each
such annual report will include summary subscriber information. In addition, for
so long as any of the Notes remain outstanding, ICP-IV has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
Upon consummation of the Exchange Offer, the Issuers will file reports and
other information in accordance with the informational reporting requirements of
the Exchange Act, with the Commission. Such reports and other information may be
inspected and copied at the public reference facilities of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the following Regional Offices: 7 World Trade Center, 14th Floor, New
York, New York 10048 and 500 West Madison Street -- Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Commission by
mail at prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Old Notes and the Exchange Notes will be considered collectively to be
a single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and repurchase offers, and for
purposes of this Description of Notes (except as described below under the
caption "Registration Rights; Liquidated Damages") all reference herein to
"Notes" shall be deemed to refer collectively to the Notes and any New Notes,
unless the context otherwise requires.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
On July 19, 1996 the Issuers and the Initial Purchasers entered into the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Issuers have filed with the Commission at the Company's expense an Exchange
Offer Registration Statement with respect to the Exchange Notes. Upon the
effectiveness of such Exchange Offer Registration Statement, the Issuers will
offer to the Holders of Transfer Restricted Securities (as defined herein) who
are able to make certain representations the opportunity, pursuant to the
Exchange Offer, to exchange their Transfer Restricted Securities for Exchange
Notes. If (i) ICP-IV is not required to file an Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Issuers on or prior to the
twentieth business day following consummation of the Exchange Offer that (A) it
is prohibited by law or Commission policy from participating in the Exchange
Offer or (B) it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales or (C) it is a broker-dealer and owns Old Notes acquired directly
from the Issuers or an affiliate of the Issuers, the Issuers will file with the
Commission a Shelf Registration Statement to cover resales of the Old Notes by
the Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Issuers
will use their best efforts to cause the registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Old Note until (i) the
date on which such Old Note has been exchanged by a person other than a
broker-dealer for a Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Old Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Old Note has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Old Note is distributed to the public pursuant to Rule 144 under
the Act.
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The Registration Rights Agreement provides that (i) the Issuers will file
an Exchange Offer Registration Statement with the Commission on or prior to 45
days following the original issuance of the Old Notes, (ii) the Issuers will use
their best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days following the original
issuance of the Old Notes, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy, the Issuers will commence the
Exchange Offer and use their best efforts to issue on or prior to 30 days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission, Exchange Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Issuers will use their best efforts to file
the Shelf Registration Statement with the Commission on or prior to 30 days
after such filing obligation arises and to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 60 days
after such obligation arises.
If (a) the Issuers fail to file any of the Registration Statements required
by the Registration Rights Agreement to be filed on or before the date specified
for such filing, (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), or (c) the Issuers fail to
consummate the Exchange Offer within 30 days of the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Issuers will pay
liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted
Securities. With respect to the first 90-day period immediately following the
occurrence of such Registration Default, Liquidated Damages will accrue on the
Notes over and above the stated interest (in addition to the accretion of
interest) at a rate of 0.50% of principal amount per annum. The amount of the
Liquidated Damages will increase by an additional 0.25% per annum with respect
to each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of Liquidated Damages of 1.0% per annum. All
accrued Liquidated Damages will be paid semiannually by ICP-IV in cash to the
Global Note Holder by wire transfer of immediately available funds or by federal
funds check and to Holders of Certificated Securities by mailing checks to their
registered addresses. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to ICP-IV
(as described in the Registration Rights Agreement) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person; and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
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ownership of voting securities, by agreement or otherwise; providedthat
beneficial ownership of 10.0% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means: (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback or
similar arrangement) other than in the ordinary course of business; provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the assets of ICP-IV and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under the
caption "-- Merger, Consolidation and Sale of Assets" and not by the provisions
of the Asset Sale covenant; and (ii) the issue or sale by ICP-IV or any of its
Restricted Subsidiaries of Equity Interests of any of ICP-IV's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$1.0 million or (b) for aggregate net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, none of the following will be deemed to be an
Asset Sale: (x) a transfer of assets by ICP-IV to a Restricted Subsidiary or by
a Restricted Subsidiary to ICP-IV or to another Restricted Subsidiary; (y) an
issuance of Equity Interests by a Restricted Subsidiary to ICP-IV or to another
Restricted Subsidiary; or (z) any Restricted Payment or Permitted Investment
that is permitted by the covenant described above under the caption
"-- Limitation on Restricted Payments."
"Bank Facility" means that certain Bank Facility, dated as of the Closing
Date, by and among the Operating Partnership, as borrower, and The Bank of New
York, NationsBank of Texas and The Toronto Dominion Bank as arranging agents and
The Bank of New York as administrative agent, providing for (i) a term loan of
$220.0 million (the "Term Loan") and (ii) a revolving credit facility for up to
$475.0 million (the "Revolving Credit Facility"), including, in each case, any
related notes, guarantees, collateral documents and other agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Board of Directors" means (i) for so long as ICP-IV is a partnership, the
managing general partner of ICP-IV and (ii) otherwise, the board of directors of
ICP-IV.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means: (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or other membership
interests; and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Capital Stock Proceeds" means an amount equal to the net cash proceeds
received by ICP-IV from the sale of Equity Interests after the Closing Date
(other than (i) Disqualified Stock, (ii) Equity Interests sold to any of
ICP-IV's Subsidiaries and (iii) any Equity Interests issued to finance all or a
portion of the cost of the Viacom Nashville Acquisition).
"Cash Equivalents" means: (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the Bank Facility
or with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of "B" or better; (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above; and (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and, in each
case, maturing within six months after the date of acquisition.
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"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of ICP-IV and its Restricted Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals and their Related Parties; (ii) the
adoption of a plan relating to the liquidation or dissolution of ICP-IV; (iii)
the consummation of any transaction (including, without limitation, any merger
or consolidation) the result of which is that any person (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person will be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of Equity Interests of ICP-IV
representing the right to receive more than 50.0% of the income and profits of
ICP-IV; (iv) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that (a) any of the
Principals or any Related Party or any person (as defined above) that includes
at least one Principal or Related Party, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person will be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event or
otherwise), directly or indirectly, of Equity Interests representing the right
to receive more than 50.0% of the income and profits of ICP-IV and (b) there is
a Rating Decline with respect to the Notes; or (v) the first day on which TCI
and its Subsidiaries fail to own, in the aggregate, Equity Interests of ICP-IV
representing the right to receive more than 35.0% of the income and profits of
ICP-IV.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means cash in the Pledge Account, the Pledged Securities and
the proceeds thereof.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum of: (i) the total amount of Indebtedness of such
Person and its Restricted Subsidiaries; plus (ii) the total amount of other
Indebtedness shown on the balance sheet of the primary obligor on such
Indebtedness, to the extent that such Indebtedness has been Guaranteed by such
Person or one or more of its Restricted Subsidiaries; plus (iii) the aggregate
liquidation value of all Disqualified Stock of such Person and all Preferred
Equity of Restricted Subsidiaries of such Person (other than the RMH Redeemable
Preferred Stock), in each case, determined on a consolidated basis in accordance
with GAAP, less (iv) the fair market value of the Pledged Securities then held
by the Trustee as determined in good faith by an Officer of ICP-IV.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the sum of: (i) the amount of interest in respect of Indebtedness
(including amortization of original issue discount, fees payable in connection
with financings, including commitment, availability and similar fees, and
amortization of debt issuance costs, capitalized interest, 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); (ii) the amount of Redeemable Dividends of
such Person; (iii) the amount of Preferred Equity dividends in respect of all
Preferred Equity of Restricted Subsidiaries held by Persons other than the
referent Person or a Restricted Subsidiary thereof, commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; and (iv) the interest component of rentals in respect of
any Capital Lease Obligation, in each case, that was 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 Capital Lease Obligation will be deemed to accrue at an interest
rate reasonably determined by the referent Person to be the rate of interest
implicit in such Capital Lease Obligation in accordance with GAAP consistently
applied.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the net income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP and prior to
any reduction in respect of dividends or other distributions in respect of any
series of
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Preferred Equity of such Person, provided that such Consolidated Net Income
shall exclude: (i) the net income or loss of any Person that is not a Restricted
Subsidiary, except that ICP-IV's equity in the net income of any such Person for
such period will be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to ICP-IV
or a Restricted Subsidiary as a dividend or other distribution; (ii) the net
income or loss of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition; (iii) any after-tax gain or
loss realized upon the sale or other disposition of any property, plant or
equipment of ICP-IV or its consolidated Restricted Subsidiaries that is not sold
or otherwise disposed of in the ordinary course of business and any after-tax
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person; (iv) in the case of ICP-IV, the incurrence by ICP-IV of one-time
expenses in order to conform any of the systems acquired pursuant to the
Acquisitions or the Viacom Nashville Acquisition to the MIS systems of ICP-IV,
provided that such one-time expenses with respect to each such acquisition are
incurred within the first twelve months of the completion of such acquisition
and, provided further, that such expenses do not exceed $5.0 million in the
aggregate; and (v) the cumulative effect of a change in accounting principles.
"Cumulative EBITDA" means at any date of determination the cumulative
EBITDA of ICP-IV from and after the Closing Date to the end of the most recently
ended full fiscal quarter of ICP-IV immediately preceding the date of
determination for which consolidated financial statements are available or, if
such cumulative EBITDA for such period is negative, minus the amount 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 ICP-IV from the Closing Date to the end of the most
recently ended full fiscal quarter of ICP-IV immediately preceding the date of
determination for which consolidated financial statements are available,
determined on a consolidated basis in accordance with GAAP.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"EBITDA" means, with respect to any Person for any period, an amount equal
to: (i) the sum (without duplication) of (a) Consolidated Net Income for such
period; plus (b) 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 sub-clause (a) hereof; (c) Consolidated Interest Expense for such
period; (d) depreciation for such period on a consolidated basis; (e)
amortization of intangibles for such period on a consolidated basis; (f) any
other non-cash items reducing Consolidated Net Income for such period; and (g)
any expense resulting from an extraordinary item; minus (ii) (a) all non-cash
items increasing Consolidated Net Income for such period (other than any
non-cash charge that represents an accrual or reserve in respect of a cash
payment in a future period), and (b) any item of revenue or gain attributable to
an extraordinary item, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied, except that with respect to ICP-IV
each of the foregoing items will be determined on a consolidated basis with
respect to ICP-IV and its Restricted Subsidiaries only.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500.0 million or its equivalent
in foreign currency, whose debt (or the debt of whose holding company) is rated
"A" (or higher) according to Standard and Poor's Rating Group or "A2" (or
higher) by Moody's Investors Service, Inc. at the time as of which any
investment or rollover therein is made.
"Equity Interests" means, collectively, Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
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"Equity Market Capitalization" means, with respect to any Person, the
aggregate market value of the outstanding Equity Interests (other than Preferred
Equity and excluding any such Equity Interests held in treasury by such Person)
of such Person. For purposes of this definition, the "market value" of any such
Equity Interests will be: (i) the average of the high and low sale prices, or if
no sales are reported, the average of the closing bid and ask prices, as
reported in the composite transactions or the principal national securities
exchange on which such Equity Interest is listed or admitted to trading or, if
such Equity Interest is not listed or admitted to trading on a national
securities exchange, as reported by Nasdaq for each trading day in a
20-consecutive-day period ending not more than 45 days prior to the date such
Person commits to make an investment in the Equity Interest of ICP-IV; or (ii)
if such Equity Interest is not listed as admitted for trading on any national
securities exchange or Nasdaq, the fair market value of the common equity
capital of such Person as determined by the written opinion of an investment
banking firm of national standing delivered to the Trustee.
"Executive Officer" means, for any Person, the chief financial officer,
chief operating officer or chief executive officer of such Person.
"fair market value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and a willing buyer under no
compulsion to buy; provided, that with respect to the Pledged Securities, the
fair market value thereof shall be net of the accrued and unpaid interest, if
any, on the Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, that 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
Capital Lease Obligations; (ii) Indebtedness of any other Person secured by a
Lien to which the property or assets owned or held by the referent 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 assets or the amount of the Indebtedness so
secured); (iii) Guarantees of Indebtedness of any other Person; (iv) any
Disqualified Stock; (v) all obligations of such Person in respect of letters of
credit, bankers' acceptance 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 described in this definition) 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; (vi) in the case of
ICP-IV, Preferred Equity of its Restricted Subsidiaries; and (vii) obligations
of any such Person under any Hedging Obligation applicable to
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any of the foregoing. 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 with non-investment grade debt underwriting experience or any third
party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of ICP-IV.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) and BBB- (or the equivalent) by Moody's Investors Service, 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.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
ICP-IV for consideration consisting of common equity securities of ICP-IV shall
not be deemed to be an Investment. If ICP-IV or any Restricted Subsidiary of
ICP-IV sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of ICP-IV such that, after giving effect to any
such sale or disposition, such Person is no longer a Subsidiary of ICP-IV,
ICP-IV shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"IPSE" means InterMedia Partners Southeast, a California general
partnership and a Subsidiary of ICP-IV.
"Issue Date" means the date on which the Notes are initially issued.
"Leverage Ratio" means, with respect to any Person as of any date of
determination, the ratio of (i) the Consolidated Indebtedness of such Person as
of such date calculated on a pro forma basis to give effect to the transaction
with respect to which the Leverage Ratio is being calculated, to (ii) the
product of such Person's Pro Forma EBITDA for the most recently ended fiscal
quarter of such Person for which consolidated financial statements are available
multiplied by four.
"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 Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Marketable Securities" means: (i) Government Securities or, for purposes
of determining whether such Government Securities may serve as substitute
Pledged Securities, Government Securities having a maturity date on or before
the date on which the payments of interest (or principal) on the Notes to which
such Government Securities are pledged occur; (ii) any certificate of deposit
maturing not more than 270 days after the date of acquisition issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper maturing not more
than 270 days after the date of acquisition issued by a corporation (other than
an Affiliate of the Company) with a rating at the time as of which any
investment therein is made, of "A-1" (or higher) according to Standard and
Poor's Rating Group or "P-1" (or higher) according to Moody's Investors Service,
Inc.; (iv) any banker's acceptances or money market deposit accounts issued or
offered by an Eligible Institution; and (v) any fund investing exclusively in
investments of the types described in clauses (i) through (iv) above.
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"Net Proceeds" means the aggregate cash proceeds received by ICP-IV or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, sales commissions and legal,
accounting and investment banking fees) and any relocation expenses incurred as
a result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither ICP-IV nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of ICP-IV or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of ICP-IV or
any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means the General Partner, Managing General Partner, President,
Chief Financial Officer, Treasurer or any Executive Vice President or Vice
President of ICP-IV or IPCC, as applicable.
"Officers' Certificate" means a certificate signed by two Officers at least
one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of ICP-IV or IPCC, as applicable.
"Operating Partnership" means InterMedia Partners IV, L.P., a California
limited partnership and a Subsidiary of ICP-IV.
"Permitted Investments" means: (i) any Investment in ICP-IV or in a
Restricted Subsidiary of ICP-IV; (ii) any Investment in Cash Equivalents; (iii)
any Investment by ICP-IV or any Subsidiary of ICP-IV in a Person, if as a result
of such Investment (a) such Person becomes a Restricted Subsidiary of ICP-IV or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
ICP-IV or a Restricted Subsidiary of ICP-IV; (iv) any Investment in ICM-IV not
to exceed $1.85 million; (v) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"-- Certain Covenants -- Limitation on Asset Sales"; and (vi) any Permitted
Joint Venture Investment, provided that after giving pro forma effect to such
Permitted Joint Venture Investment as if the same had occurred at the beginning
of the most recently ended full fiscal quarter of ICP-IV for which consolidated
financial statements are available, ICP-IV would have been able to incur at
least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to
the covenant described above under the caption "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness and Issuance of Preferred
Equity."
"Permitted Joint Venture Investment" means any Investment by ICP-IV or any
Restricted Subsidiary of ICP-IV in a joint venture or other enterprise if: (i)
substantially all of the income and profits of such joint venture or other
enterprise are derived from operating or owning a license to operate one or more
cable television systems or telephone systems in the United States and any other
activity reasonably related to such activities; (ii) ICP-IV and its Restricted
Subsidiaries have operating control of such joint venture or other enterprise;
and (iii) ICP-IV and its Restricted Subsidiaries own, in the aggregate, Equity
Interests of such joint venture or other enterprise representing the right to
receive more than 40.0% of the income and profits thereof.
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"Permitted Liens" means: (i) Liens on the Property of ICP-IV or any of its
Subsidiaries that existed on the Closing Date; (ii) Liens on the Property of
ICP-IV or any of its Subsidiaries under the Bank Facility; (iii) Liens securing
Indebtedness of Subsidiaries permitted by the Indenture to be incurred; (iv)
Liens on the Property of ICP-IV or any of its Subsidiaries for taxes,
assessments or governmental charges or levies on the Property of ICP-IV or any
of its 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 carriers',
warehousemen's and mechanics' Liens, and other similar Liens on the Property of
ICP-IV or any of its Subsidiaries arising in the ordinary course of business
that 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 ICP-IV or any of its Subsidiaries in favor of issuers of performance
bonds and surety or appeal bonds; (vii) Liens on Property at the time ICP-IV or
any of its Subsidiaries acquired such Property, including any acquisition by
means of a merger or consolidation with or into ICP-IV or such Subsidiary;
provided, however, that such Lien shall not have been incurred in anticipation
or in connection with such transaction or series of related transactions
pursuant to which such Property was acquired by ICP-IV or such Subsidiary;
(viii) other Liens on the Property of ICP-IV or any of its Subsidiaries
incidental to the conduct of any of their businesses or the ownership of or any
of their Properties that were not created in connection with the incurrence of
Indebtedness or the obtaining of advances or credit and that 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 ICP-IV or any of its Subsidiaries under
workmen's 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 ICP-IV or any of its
Subsidiaries is a party, or deposits to secure public or statutory obligations
of ICP-IV or any of its Subsidiaries, or deposits for the payment of rent, in
each case incurred in the ordinary course of business; (x) utility easements,
building restrictions and such other encumbrances or charges against real
property as are or a nature generally existing with respect to properties of a
similar character; (xi) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; and (xii) Liens securing
Indebtedness or other obligations not to exceed $1.0 million in aggregate
principal amount.
"Permitted Refinancing Debt" means any Indebtedness of ICP-IV or any of its
Restricted Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of ICP-IV or any of its Restricted Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Debt does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Debt has a period until
its final maturity date no shorter than the final maturity date of, and has a
Weighted Average Life to Maturity no shorter than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Debt has a final maturity date later than
the final maturity date of, and is subordinated in right of payment to, such
Notes on terms at least as favorable to the Holders of such Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by (a) ICP-IV or (b) ICP-IV or the Restricted Subsidiary that
was the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, company (including limited
liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Pledge Account" means an account established with the Collateral Agent
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Issuers with a portion of the net proceeds from the
Private Offering.
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"Preferred Equity" means any Capital Stock of a Person, however designated,
that entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Principals" means Leo J. Hindery, Jr., TCI and TCI's Subsidiaries.
"Pro Forma EBITDA" means, with respect to any Person, for any period, the
EBITDA of such Person for such period as determined on a consolidated basis in
accordance with GAAP consistently applied after giving effect to the following,
as if the same had occurred at the beginning of such period: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have sold or
otherwise disposed of any assets outside of the ordinary course of business in
any single transaction or series of related transactions for consideration in
excess of $1.0 million, Pro Forma EBITDA of such Person and its Subsidiaries for
such period will be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets that were sold or otherwise
disposed of for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period; and (ii) if,
during or after such period, such Person or any of its Subsidiaries completes an
acquisition of any Person or business that 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 will be computed so as to give pro
forma effect to the acquisition of such Person or business; provided, however,
that, with respect to ICP-IV, all of the foregoing references to "Subsidiary" or
"Subsidiaries" are deemed to refer only to the "Restricted Subsidiaries" of
ICP-IV.
"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, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such Person).
"Public Equity Offering" means the consummation of an offering of Equity
Interests (other than Disqualified Stock) by ICP-IV to the public pursuant to a
registration statement filed with the Commission, the net proceeds of which
exceed $25.0 million.
"Rating Agencies" means Standard and Poor's Rating Group, a division of
McGraw Inc., and Moody's Investors Service, Inc., or any successor to the
respective rating agency businesses thereof.
"Rating Date" means the date that is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of ICP-IV to effect a Change of Control.
"Rating Decline" means, with respect to the Notes, the occurrence of the
following on, or within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by ICP-IV to effect a
Change of Control (which period shall be extended so long as the rating of such
Notes is under publicly announced consideration for possible downgrade by either
of the Rating Agencies): (i) in the event the Notes are assigned an Investment
Grade Rating by either of the Rating Agencies on the Rating Date, the rating of
the Notes by both of the Rating Agencies shall be below an Investment Grade
Rating; or (ii) in the event the Notes are rated below an Investment Grade
Rating by both of the Rating Agencies on the Rating Date, the rating of the
Notes by either of the Rating Agencies shall be decreased by one or more
gradations (including gradations within rating categories as well as between
rating categories).
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Stock, 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 Stock.
"Related Party" means, with respect to any Principal, (i) any controlling
stockholder, 80.0% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Restricted Investment" means an Investment other than a Permitted
Investment.
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"Restricted Subsidiary" means, with respect to any Person, any Subsidiary
of such Person that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" has the meaning assigned to it in the
definition of "Bank Facility."
"RMH Redeemable Preferred Stock" means the preferred stock of RMH to be
outstanding on the Closing Date and the capital stock of RMG, with substantially
the same terms as the RMH Redeemable Preferred Stock, into which the RMH
Redeemable Preferred Stock will be converted as a result of the merger of RMH
into RMG, together with all additional shares thereof issued in payment of
dividends thereon in accordance with the terms thereof in effect on the Closing
Date.
"Shelf Registration Statement" means a "shelf" registration statement of
the Issuers, which covers some or all of the Old Notes or Exchange Notes, as
applicable, on an appropriate form under Rule 415 under the Act, or any similar
rule that may be adopted by the Commission, amendments and supplements to such
registration statement, including post effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Strategic Equity Investment" means the issuance and sale of Equity
Interests (other than Disqualified Stock) of ICP-IV for net cash proceeds of at
least $25.0 million to a Person engaged primarily in the business of
transmitting video, voice or data over cable television or telephone facilities
or any business reasonably related thereto that has an Equity Market
Capitalization of at least $750.0 million.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50.0% of the total
voting power of shares of Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person, (b) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof) or (c) such Person owns, alone or together with ICP-IV, a
majority of the partnership interests.
"Tax Amount" means, with respect to any Person for any period, the combined
federal, state and local income taxes that would be paid by such Person if it
were a Delaware corporation filing separate tax returns with respect to its
Taxable Income for such Period; provided, however, that in determining the Tax
Amount, the effect thereon of any net operating loss carryforwards or other
carryforwards or tax attributes, such as alternative minimum tax carryforwards,
that would have arisen if such Person were a Delaware corporation shall be taken
into account. Notwithstanding anything to the contrary, Tax Amount shall not
include taxes resulting from such Person's reorganization as or change in the
status to a corporation.
"Tax Distribution" means a distribution in respect of taxes to the partners
of ICP-IV pursuant to clause (v) of the second paragraph of the covenant
described above under the caption "Certain Covenants -- Limitation on Restricted
Payments."
"Taxable Income" means, with respect to any Person for any period, the
taxable income or loss of such Person for such period for federal income tax
purposes; provided, that (i) all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss, (ii) any basis adjustment made in
connection with an election under Section 754 of the Code shall be disregarded
and (iii) such taxable income shall be increased or such taxable loss shall be
decreased by the amount of any interest expense incurred by such Person that is
not treated as deductible for federal income tax purposes by a partner or member
of such Person.
"TCIC" means TCI Communications, Inc.
"TCIC Loan" means that certain $297.0 million nonrecourse bridge loan to
IPSE made by TCI of Houston, Inc. pursuant to the loan agreement, dated May 8,
1996, by and between TCI of Houston, Inc. and IPSE in order to fund 99.0% of the
purchase price of the Prime Houston Systems.
"Term Loan" has the meaning assigned to it in the definition of "Bank
Facility."
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"Unrestricted Subsidiary" means any Subsidiary, other than IPCC, that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Resolution of the Board of Directors, but only to the extent that such
Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not
party to any agreement, contract, arrangement or understanding with ICP-IV or
any Restricted Subsidiary of ICP-IV unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to ICP-IV or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of ICP-IV; (iii) is a Person with respect to which
neither ICP-IV nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (iv) has not Guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of ICP-IV or
any of its Restricted Subsidiaries; and (v) in the case of a Subsidiary that is
a corporation, such Subsidiary has at least one director on its board of
directors that is not a director or executive officer of ICP-IV or any of its
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of ICP-IV or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "Certain
Covenants -- Limitation on Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of ICP-IV as of such
date (and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described above under the caption "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness and Issuance of Preferred
Equity," ICP-IV shall be in default of such covenant).
"Viacom Nashville Acquisition" means the acquisition by a subsidiary of
ICP-IV of certain cable television assets in and near Nashville, Tennessee from
TCIC pursuant to an exchange agreement as described elsewhere in this
Prospectus.
"Voting Stock" means, with respect to any specified Person, Capital Stock
with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
exchanging Old Notes for Exchange Notes pursuant to the Exchange Offer is based
upon current provisions of the Internal Revenue Code of 1986, as amended,
existing and proposed regulations thereunder, and current administrative rulings
and court decisions. All of the foregoing are subject to change, possibly on a
retroactive basis, and no ruling has been or will be sought from the Internal
Revenue Service. This discussion does not address any of the federal income tax
consequences of owning or disposing of Exchange Notes, nor does it address the
applicability or effect of any state, local or foreign tax laws. Each holder
should consult such holder's own tax advisor concerning the application of
federal income tax laws, as well as the laws of any state, local or foreign
taxing jurisdiction, to the holder's particular situation.
Since the terms of the Exchange Notes are identical to those of the Old
Notes, the exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer should not be treated as a taxable "exchange" for federal income tax
purposes because the Exchange Notes will not differ materially either in kind or
extent from the Old Notes exchanged therefor. As a result, there should be no
federal income tax consequences to holders exchanging Old Notes for Exchange
Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. Each of the
Issuers has agreed that, starting on the Expiration Date and ending on the close
of business on the 180th day following the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition until , 199 , all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any broker-
dealers) against certain liabilities, including liabilities under the Securities
Act.
152
<PAGE> 161
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Issuers by Pillsbury Madison & Sutro LLP, San Francisco,
California. Certain members of Pillsbury Madison & Sutro LLP own limited
partnership interests in ICM-IV, the general partner of ICP-IV.
EXPERTS
The consolidated balance sheet of InterMedia Capital Partners, IV, L.P. as
of December 31, 1995 included in this Prospectus has been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The balance sheet of InterMedia Capital Management, IV, L.P. as of December
31, 1995 included in this Prospectus has been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The combined financial statements of the Previously Affiliated Entities as
of December 31, 1994 and 1995 and for each of the three years in the period
ended December 31, 1995 included in this Prospectus has been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The consolidated statements of Robin Media Holdings, Inc. as of December
31, 1994 and 1995 and for each of the three years in the period ended December
31, 1995 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of InterMedia Partners of West Tennessee, L.P. as
of December 31, 1994 and 1995 and for each of the three years in the period
ended December 31, 1995 included in this Prospectus has been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The combined financial statements of TeleCable -- South Carolina Group as
of December 31, 1994 and January 26, 1995 and for the year and the twenty-six
days in the period ended January 26, 1995 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of VSC Cable Inc. as of December 31, 1994 and 1995
and for each of the three years in the period ended December 31, 1995 included
in this Prospectus has been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements of Warner Cable Communications -- Kingport,
Tennessee Division, a division of Time Warner Entertainment Company, L.P. as of
December 31, 1995 and January 31, 1996 and for the year and the month in the
period ended January 31, 1996 included in this Prospectus have been so included
in reliance on the report of Ernst & Young LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The combined balance sheet of TCI of Greenville, Inc., Spartanburg, Inc.,
and TCI of Piedmont, Inc. (indirect wholly-owned subsidiaries of TCI
Communications, Inc.) as of December 31, 1995, and the related combined
statements of operations and accumulated deficit and cash flows for the period
from January 27, 1995 to December 31, 1995, have been included herein in
reliance on the report, dated March 1, 1996, of KPMG Peat Marwick LLP,
independent certified public accountants, included herein, and upon the
authority of said firm as experts in auditing and accounting.
153
<PAGE> 162
GLOSSARY
The following is a description of certain terms used in this Prospectus.
1984 Cable Act -- The Cable Communications Policy Act of 1984.
1992 Cable Act -- The Cable Television Consumer Protection and Competition
Act of 1992.
1993 Acquisitions -- RMH's acquisitions of cable television systems during
February, March and December 1993 that served, at the time, approximately 1,400,
15,600 and 30,300 basic subscribers, respectively, in the Greenville/Spartanburg
Cluster and Nashville/Mid-Tennessee Cluster.
1995 Combination -- The accounting combination of results of operations for
the Greenville/Spartanburg System from January 27, 1995 with results of
operations for IPWT and RMH.
1996 Act -- The Telecommunications Act of 1996.
Accredited investor -- An accredited investor (within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D of the Securities Act) able to bear
the economic risk of an investment in the Notes.
Acquisitions -- The Primary Acquisitions and the Miscellaneous Acquisitions
taken together.
ADI -- Area of Dominant Influence.
Administrative Agreements -- Agreements pursuant to which IMI provides
accounting, operational, marketing, engineering, legal, regulatory compliance
and other administrative services to the Company and the Related InterMedia
Entities or their subsidiaries at cost.
Advisory Committee -- The advisory committee of ICP-IV, consisting of one
representative from each of the seven limited partners with the largest
aggregate interests in ICP-IV.
A la carte -- The purchase of individual basic or expanded basic
programming services on a per-channel basis.
Annox System -- The cable television assets purchased from Annox by the
Company in January 1996, which served approximately 2,000 basic subscribers as
of June 30, 1996.
Bandwidth -- A general term used to describe the overall capacity of a
communications system or the frequency needed to transmit a given signal.
Bank Facility -- The Revolving Credit Facility for $475.0 million and the
Term Loan for $220.0 million to the Operating Partnership from the Bank of New
York, NationsBank of Texas and The Toronto Dominion Bank as arranging agents and
The Bank of New York as administrative agent. See "Description of Other
Obligations -- The Bank Facility."
Basic penetration -- The measurement of the take-up of basic cable service
expressed by calculating the number of basic subscribers outstanding on such
date as a percentage of the total number of homes passed in the system.
Basic service -- A package of over-the-air broadcast and
satellite-delivered cable television services.
Basic subscriber -- A subscriber to a cable or other television
distribution system who receives the basic level of television service and who
is usually charged a flat monthly rate for a number of channels.
Bridge Loan -- A loan, repaid with the proceeds of the Private Offering,
for up to $130.0 million from The Bank of New York, NationsBank of Texas and
Toronto-Dominion (Texas) Inc. to IP-TN used to fund, among other things, certain
acquisitions and a loan to RMH to pay a $15.0 million interest payment. See
"Description of Other Obligations -- Indebtedness Repaid with the Proceeds of
the Financing Plan."
Cable plant -- A network of co-axial and/or fiber optic cables that
transmit multiple channels carrying images, sound and/or data between a central
facility and an individual customer's television set. Networks may allow one-way
(from a headend to a residence and/or business) or two-way (from a headend to a
residence and/or business with a data return path to the headend) transmission.
154
<PAGE> 163
CAGR -- Compound Annual Growth Rate.
Capital Improvement Program -- The Company's plan to comprehensively
upgrade its cable television systems, which is based in large part on TCI's
specifications and which has already commenced in some of the Systems. The
Capital Improvement Program is designed to (i) deploy fiber optic cable, (ii)
consolidate and upgrade headends, (iii) increase the use of addressable
technology, (iv) install two-way transmission capability and (v) introduce
digital compression capability.
Channel capacity -- The number of video programming channels that can be
carried over a communications system.
Clustering -- A general term used to describe the strategy of operating
cable television systems in a specific geographic region, thus allowing for the
achievement of economies of scale and operating efficiencies in such areas as
system management, marketing and technical functions.
Coaxial cable -- Cable consisting of a central conductor surrounded by and
insulated from another conductor. It is the standard material used in
traditional cable systems. Signals are transmitted through it at different
frequencies, giving greater channel capacity than is possible with twisted pair
copper wire, but less than is possible with optical fiber.
Communications Act -- The Communications Act of 1934, as amended.
Company -- InterMedia Capital Partners IV, L.P. ("ICP-IV") and its
subsidiaries.
Completed Acquisitions -- The Company's acquisitions of the Kingsport
System from Time Warner and of the ParCable System from ParCable for an
aggregate purchase price of $92.6 million.
Contributed Equity -- Capital contributions to ICP-IV by its partners.
Cost of service -- A general term used to refer to the regulation of prices
charged to a customer. Existing prices are set and price increases are regulated
by allowing a company to earn a reasonable rate of return, as determined by the
regulatory authority.
CPS -- Cable programming service.
Digital compression -- The conversion of the standard analog video signal
into a digital signal, and the compression of that signal so as to facilitate
multiple channel transmission through a single channel's bandwidth.
Direct broadcast satellite (DBS) -- A service by which packages of
television programming are transmitted to individual homes, each serviced by a
single satellite dish.
DMA -- Designated Market Area, a term developed by A.C. Neilson Company, a
national media ratings service, and used to describe a geographically distinct
market.
DTH -- Low-power, direct-to-the-home satellite service.
EBI -- Effective Buying Income, which is defined as personal income less
personal tax and certain nontax payments, also referred to as "disposable" or
"after tax" income.
Exchange Agreement -- The Exchange Agreement dated December 16, 1995
between IPSE and TCIC, providing for the exchange of the Prime Houston Systems
and the Viacom Nashville System.
Expanded basic service -- A package of satellite-delivered cable
programming services available only for additional subscription over and above
the basic level of television service.
FCC -- Federal Communications Commission.
Financing Plan -- The capitalization of the Company, utilizing funds from
the Private Offering, the Bank Facility and the Contributed Equity.
GAAP -- Generally accepted accounting principles.
155
<PAGE> 164
G/S Contribution Agreement -- A contribution agreement dated March 4, 1996
between ICP-IV and the TCI Entities pursuant to which the TCI Entities
transferred their interests in the Greenville/Spartanburg System to the Company
in exchange for consideration valued at $240.0 million (subject to certain
adjustments).
Greenville/Spartanburg Cluster -- Systems serving, as of June 30, 1996,
approximately 147,499 basic subscribers in the Greenville/Spartanburg
metropolitan area and in northeastern Georgia.
Greenville/Spartanburg Metropolitan Market -- The five counties
(Greenville, Spartanburg, Cherokee, Union and Pickens) that encompass the
combined metropolitan area of Greenville/Spartanburg, South Carolina.
Greenville/Spartanburg System -- The cable television systems in the
Greenville/Spartanburg Cluster that affiliates of TCI contributed to the
Company.
Headend -- A collection of hardware, typically including satellite
receivers, modulators, amplifiers and video cassette playback machines within
which signals are processed and then combined for distribution within the cable
network.
Homes passed -- Homes that can be connected to a cable distribution system
without further extension of the distribution network.
Indenture -- Indenture under which the Old Notes were issued and the
Exchange Notes will be issued, dated as of July 30, 1996, by and among ICP-IV
and IPCC as issuers and The Bank of New York, N.A. as Trustee.
IPWT Contribution Agreement -- A contribution agreement dated April 30,
1996 between ICP-IV, IP-I and GECC pursuant to which the Company acquired the
partnership interests and debt of IPWT.
Kingsport System -- The cable television assets acquired by the Company
from Time Warner in February 1996, which served approximately 31,955 basic
subscribers as of June 30, 1996.
Knoxville/East Tennessee Cluster -- Systems serving, as of June 30, 1996,
approximately 97,406 basic subscribers in eastern Tennessee including suburban
Knoxville.
Knoxville Metropolitan Market -- The four counties (Blount, Knox, Loudon
and Sevier) that encompass the Knoxville, Tennessee metropolitan area, and rural
areas west and south of Knoxville.
LAN(s) -- Local area networks used by businesses, government offices or
schools to connect with multiple outside locations.
LEC(s) -- Local exchange carriers, also known as local telephone companies.
MDU(s) -- Multiple dwelling units such as condominiums, apartment
complexes, hospitals, hotels and other commercial complexes.
Miscellaneous Acquisitions -- The Company's acquisitions of the cable
television assets that in aggregate served approximately 6,020 basic subscribers
as of June 30, 1996 in central and eastern Tennessee from Annox, Tellico,
Rochford and Prime Cable.
MMDS -- Multipoint multichannel distribution service. A one-way radio
transmission of television channels over microwave frequencies from a fixed
station transmitting to multiple receiving facilities located at fixed points.
MSA -- Metropolitan Statistical Area.
MSO -- Multiple system operator; a cable television provider that serves
more than one system.
156
<PAGE> 165
Nashville/Mid-Tennessee Cluster -- The cluster of Systems in Nashville, the
Nashville suburbs and surrounding areas that served approximately 324,808 basic
subscribers as of June 30, 1996.
Nashville Metropolitan Market -- The seven contiguous counties (Robertson,
Sumner, Wilson, Rutherford, Williamson, Cheatham and Davidson) that encompass
the city of Nashville, Tennessee, and its suburbs.
New Product Tiers ("NPT") -- A general term used to describe unregulated
cable television services.
NVOD -- Near Video on Demand.
OID -- Original issue discount.
Operating Partnership -- InterMedia Partners IV, L.P. ("IP-IV"), a
California limited partnership.
Overbuild -- The construction of a second cable television system in an
area in which such a system had previously been constructed.
OVS -- Open video systems.
ParCable System -- The cable television assets acquired by the Company from
ParCable in February 1996, which served approximately 21,975 basic subscribers
as of June 30, 1996.
Partnership Agreement -- The Agreement of Limited Partnership of ICP-IV,
dated as of March 29, 1996.
Pay-per-view -- Payment made for individual movies, programs or events as
opposed to a monthly subscription for a whole channel or group of channels.
PCS -- Personal communications services.
Premium penetration -- The measurement of the take-up of premium cable
service expressed by calculating the number of premium units outstanding on such
a date as a percentage of the total number of basic service subscribers.
Premium service units -- The number of subscriptions to individual cable
programming service available only for additional subscription over and above
the basic or expanded basic levels of television service and paid for on an
individual basis.
Previously Affiliated Entities -- The former owners of IPWT, RMH and the
Greenville/Spartanburg System.
Primary Acquisitions -- Acquisitions of cable television assets by the
Company from Time Warner, ParCable, IPWT, RMH, TCI and Viacom that in aggregate
served approximately 569,713 basic subscribers as of June 30, 1996 in Tennessee,
South Carolina and Georgia.
Prime Cable System -- The cable television assets the Company acquired from
Prime Cable and which served approximately 1,160 basic subscribers as of June
30, 1996.
Related InterMedia Entities -- Refers, collectively, to InterMedia
Partners, a California limited partnership, InterMedia Partners II, L.P.,
InterMedia Partners III, L.P., InterMedia Partners V, L.P., and their
consolidated subsidiaries, that are affiliated with the Company.
Revolving Credit Facility -- A revolving credit facility to the Operating
Partnership under the Bank Facility for up to $475.0 million.
Rochford System -- The cable television assets purchased by the Company
from Rochford in July 1996, which served approximately 1,359 basic subscribers
as of June 30, 1996.
SMATV -- Satellite master antenna television system. A video programming
delivery system to multiple dwelling units utilizing satellite transmissions.
Systems -- The cable television operations owned by the Company.
Telephony -- The provision of telephone service.
157
<PAGE> 166
Tellico System -- The cable television assets purchased by the Company from
Tellico in May 1996, which served approximately 1,501 basic subscribers as of
June 30, 1996.
Term Loan -- A term loan to the Operating Partnership under the Bank
Facility for $220.0 million.
Transactions -- The Acquisitions together with the Financing Plan.
Viacom Nashville Acquisition -- The Company's acquisition of cable
television assets in Nashville, which served approximately 149,362 basic
subscribers as of June 30, 1996, pursuant to an exchange agreement between IPSE
and TCIC.
Viacom Nashville System -- The cable television assets of Viacom in
Nashville, which served approximately 149,362 basic subscribers as of June 30,
1996.
Video dialtone -- A general term used to describe a video programming
delivery system through telephone lines.
158
<PAGE> 167
LIST OF ENTITIES
The following is a list of certain entities referred to in this Prospectus.
<TABLE>
<S> <C>
Annox................................... Annox, Inc.
Company................................. ICP-IV and its subsidiaries
GECC.................................... General Electric Capital Corp.
ICM-IV.................................. InterMedia Capital Management IV, L.P.
ICP-IV.................................. InterMedia Capital Partners IV, L.P.(1)
IMI..................................... InterMedia Management, Inc.
IP-I.................................... InterMedia Partners, a California limited
partnership
IP-II................................... InterMedia Partners II, L.P.
IP-III.................................. InterMedia Partners III, L.P.
IP-IV................................... InterMedia Partners IV, L.P.
IP-V.................................... InterMedia Partners V, L.P.
IPCC.................................... InterMedia Partners IV Capital Corp.(1)
IPSE.................................... InterMedia Partners Southeast
IP-TN................................... InterMedia Partners of Tennessee
IPWT.................................... InterMedia Partners of West Tennessee, L.P.
Operating Partnership................... IP-IV
Prime Cable............................. Prime Cable Partners, Inc.
Related Intermedia Entities............. IP-I, IP-II, IP-III, IP-V and their consolidated
subsidiaries
RMG..................................... Robin Media Group, Inc.
RMH..................................... Robin Media Holdings, Inc.
Rochford................................ Rochford Realty and Construction Company, Inc.
SSI..................................... Satellite Services, Inc.
TCI..................................... Tele-Communications, Inc.
TCI Entities............................ TCI of Greenville, Inc., TCI of Piedmont, Inc., and
TCI of Spartanburg, Inc.
TCIC.................................... TCI Communications, Inc.
TeleCable............................... TeleCable Corporation
Tellico................................. Tellico Cable, Inc.
Time Warner............................. Time Warner Entertainment Co., L.P.
Viacom.................................. Viacom, Inc.
</TABLE>
- ---------------
(1) Registrants.
159
<PAGE> 168
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INDEX TO FINANCIAL STATEMENTS (1)
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ISSUERS:
INTERMEDIA CAPITAL PARTNERS IV, L.P.
Report of Independent Accountants.................................................. F-3
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996
(unaudited)..................................................................... F-4
Consolidated Statement of Operations for the six months ended June 30, 1996
(unaudited)..................................................................... F-5
Consolidated Statement of Changes in Partners' Capital (unaudited)................. F-6
Consolidated Statement of Cash Flow for the six months ended June 30, 1996
(unaudited)..................................................................... F-7
Notes to Consolidated Financial Statements......................................... F-8
GENERAL PARTNER:
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
Report of Independent Accountants.................................................. F-16
Balance Sheet as of December 31, 1995.............................................. F-17
Notes to Balance Sheet............................................................. F-18
PREDECESSOR BUSINESSES:
PREVIOUSLY AFFILIATED ENTITIES
Report of Independent Accountants.................................................. F-22
Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)..................................................................... F-23
Combined Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 (unaudited) and 1996
(unaudited)..................................................................... F-24
Combined Statement of Changes in Equity for the years ended December 31, 1993, 1994
and 1995, and for the six months ended June 30, 1996 (unaudited)................ F-25
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 (unaudited) and 1996
(unaudited)..................................................................... F-26
Notes to Combined Financial Statements............................................. F-27
ROBIN MEDIA HOLDINGS, INC.
Report of Independent Accountants.................................................. F-41
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)..................................................................... F-42
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995
and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)..... F-43
Consolidated Statement of Shareholder's Deficit for the years ended December 31,
1993, 1994 and 1995, and for the six months ended June 30, 1996 (unaudited)..... F-44
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and for the six months ended June 30, 1995 (unaudited) and 1996
(unaudited)..................................................................... F-45
Notes to Consolidated Financial Statements......................................... F-46
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
Report of Independent Accountants.................................................. F-55
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)...... F-56
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and
for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)......... F-57
Statement of Changes in Partners' Capital for the years ended December 31, 1993,
1994 and 1995, and for the six months ended June 30, 1996 (unaudited)........... F-58
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)......... F-59
Notes to Financial Statements...................................................... F-60
</TABLE>
- ---------------
(1) Financial statements of InterMedia Partners IV, Capital Corp. have not been
included because it was formed in April 1996 in contemplation of the Private
Offering and its financial position and results of operations are
insignificant.
F-1
<PAGE> 169
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
TCI OF GREENVILLE, INC., TCI OF SPARTANBURG, INC.
AND TCI OF PIEDMONT, INC.
Independent Auditors' Report......................................................... F-67
Combined Balance Sheets as of December 31, 1995 and June 30, 1996 (unaudited)...... F-68
Combined Statement of Operations and Accumulated Deficit for the period from
January 27, 1995 to December 31, 1995 and for the period from January 27, 1995
to June 30, 1995 (unaudited) and for the six months ended June 30, 1996
(unaudited)..................................................................... F-69
Combined Statements of Cash Flows for the period from January 27, 1995 to December
31, 1995 and for the period from January 27, 1995 to June 30, 1995 (unaudited)
and for the six months ended June 30, 1996 (unaudited).......................... F-70
Notes to Combined Financial Statements............................................. F-71
TELECABLE-SOUTH CAROLINA GROUP
Report of Independent Accountants.................................................. F-75
Combined Statements of Income and Retained Earnings for the year ended December 31,
1994 and for the 26-day period ended January 26, 1995........................... F-76
Combined Balance Sheets as of December 31, 1994 and January 26, 1995............... F-77
Combined Statements of Cash Flows for the year ended December 31, 1994 and for the
26-day period ended January 26, 1995............................................ F-78
Notes to Combined Financial Statements............................................. F-79
OTHER BUSINESSES ACQUIRED:
WARNER CABLE COMMUNICATIONS-KINGSPORT, TENNESSEE DIVISION
Report of Independent Auditors..................................................... F-84
Statements of Assets, Liabilities and Divisional Equity as of December 31, 1995 and
January 31, 1996................................................................ F-85
Statements of Revenues and Expenses and Changes in Divisional Equity for the year
ended December 31, 1995 and for the month ended January 31, 1996................ F-86
Statements of Cash Flows for the year ended December 31, 1995 and for the month
ended January 31, 1996.......................................................... F-87
Notes to Financial Statements...................................................... F-88
VSC CABLE INC.
Statements of Operations and Retained Earnings for the six months ended June 30,
1995 (unaudited) and 1996 (unaudited)........................................... F-91
Balance Sheets as of December 31, 1995 and June 30, 1996 (unaudited)............... F-92
Statements of Cash Flows for the six months ended June 30, 1995 (unaudited) and
1996 (unaudited)................................................................ F-93
Notes to Financial Statements...................................................... F-94
VSC CABLE INC.
Report of Independent Accountants.................................................. F-98
Statements of Operations and Retained Earnings for the years ended December 31,
1993, 1994 and 1995............................................................. F-99
Balance Sheets as of December 31, 1994 and 1995.................................... F-100
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995...... F-101
Notes to Consolidated Financial Statements......................................... F-102
</TABLE>
F-2
<PAGE> 170
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of InterMedia
Capital Partners IV, L.P.
In our opinion, the accompanying consolidated balance sheet presents
fairly, in all material respects, the financial position of InterMedia Capital
Partners IV, L.P. and its subsidiaries at December 31, 1995 in conformity with
generally accepted accounting principles. This consolidated balance sheet is the
responsibility of the Partnership's management; our responsibility is to express
an opinion on this consolidated balance sheet based on our audit. We conducted
our audit of this statement in accordance with generally accepted auditing
standards which require that we plan and perform an 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 consolidated balance sheet, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall consolidated balance sheet presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
June 28, 1996
F-3
<PAGE> 171
INTERMEDIA CAPITAL PARTNERS IV, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash............................................................... $ $ 739
Accounts receivable, net of allowance for doubtful accounts of $177
at June 30, 1996................................................. 1,734
Inventory.......................................................... 153
Prepaids........................................................... 71
------ ------
Total current assets..................................... 2,697
Note receivable from affiliate..................................... 15,347
Intangible assets, net............................................. 707 82,850
Property and equipment, net........................................ 14,559
Other assets....................................................... 31
------ ------
Total assets............................................. $ 707 $115,484
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities........................... $ 265 $ 3,530
Payable to affiliates.............................................. 1,067 1,875
Deferred revenue................................................... 1,065
Accrued interest................................................... 172
Note payable....................................................... 114,000
------ ------
Total current liabilities................................ 1,332 120,642
Commitments and contingencies
PARTNERS' CAPITAL
General partner.................................................... (7) (57)
Limited partners................................................... (618) (5,101)
------ ------
Total partners' capital.................................. (625) (5,158)
------ ------
Total liabilities and partners' capital.................. $ 707 $115,484
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 172
INTERMEDIA CAPITAL PARTNERS IV, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, 1996
---------------------
(UNAUDITED)
<S> <C>
Basic and cable services.................................. $ 6,108
Pay services.............................................. 1,199
Other services............................................ 627
-------
7,934
-------
Program fees.............................................. 1,581
Other direct expenses..................................... 902
Depreciation and amortization............................. 4,735
Selling, general and administrative expenses.............. 1,601
-------
8,819
-------
Loss from operations...................................... (885)
-------
Other income (expense):
Interest and other income............................... 451
Interest expense........................................ (4,002)
-------
(3,551)
-------
Net loss.................................................. $(4,436)
=======
Net loss allocation:
General partner......................................... $ (49)
Limited partners........................................ (4,387)
-------
$(4,436)
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 173
INTERMEDIA CAPITAL PARTNERS IV, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -------
<S> <C> <C> <C>
Syndication costs.............................................. $ (7) $ (618) $ (625)
----- -------- -------
Balance at December 31, 1995................................... (7) (618) (625)
Net loss (unaudited)........................................... (49) (4,387) (4,436)
Syndication costs (unaudited).................................. (1) (96) (97)
------- -------- -------
Balance at June 30, 1996 (unaudited)........................... $ (57) $ (5,101) $(5,158)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 174
INTERMEDIA CAPITAL PARTNERS IV, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, 1996
---------------------
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (4,436)
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization........................ 5,216
Changes in assets and liabilities:
Accounts receivable................................ (617)
Related party interest receivable.................. (347)
Prepaids........................................... (51)
Inventory.......................................... 87
Accounts payable and accrued liabilities........... 3,086
Other assets....................................... (13)
Deferred revenue................................... 32
Payable to affiliates.............................. 808
Accrued interest................................... 172
--------
Cash flows from operating activities...................... 3,937
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of cable systems.............................. (98,598)
Intangible assets....................................... (765)
Property and equipment.................................. (584)
Related party note receivable........................... (15,000)
--------
Cash flows from investing activities...................... (114,947)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on note payable.............................. 114,000
Debt issue costs........................................ (2,154)
Syndication costs....................................... (97)
--------
Cash flows from financing activities...................... 111,749
--------
Net change in cash and cash equivalents................... 739
--------
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period.................. $ 739
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 175
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. THE COMPANY AND BASIS OF PRESENTATION
InterMedia Capital Partners IV, L.P., a California limited partnership
("ICP-IV" or the "Partnership"), was formed on March 19, 1996, as a successor to
InterMedia Partners IV, L.P. ("IP-IV" or "Predecessor") for the purpose of
consolidating various cable television systems owned by affiliated entities and
acquiring new cable television systems located in the southeastern United States
(see Note 8 -- Subsequent Events).
InterMedia Capital Management IV, L.P., a California limited partnership
("ICM-IV"), is the 1.1% general partner of ICP-IV. As of June 28, 1996, ICP-IV
has obtained capital commitments from limited and general partners of $360,000,
including commitments to contribute cash, cable television properties and debt
and equity interests in InterMedia Partners of West Tennessee, L.P. ("IPWT"), an
affiliated entity. The limited partner commitments are from various
institutional investors and include a preferred limited partner interest of
$25,000, which General Electric Capital Corporation will receive in exchange for
a portion of its note receivable from IPWT.
The cable television properties (the "Greenville/Spartanburg System") are
to be contributed by affiliates of Tele-Communications, Inc. ("TCI") in exchange
for a 49% limited partner interest in ICP-IV. These properties serve
approximately 115,500 basic subscribers located in the Greenville/Spartanburg,
South Carolina metropolitan area.
The Partnership is in the process of obtaining long-term debt financing.
Proceeds from capital contributions and issuance of the new debt will be used to
repay existing debt incurred subsequent to December 31, 1995 and to fund planned
acquisitions of cable television properties, including the acquisition of a
majority of the outstanding voting interests in Robin Media Holdings, Inc.
("RMH"), an affiliated entity, and the acquisition of IPWT. An affiliate of TCI
holds substantial indirect interests in both RMH and IPWT.
Because of TCI's substantial continuing ownership interests in RMH, IPWT
and the Greenville/Spartanburg System after consummation of the proposed
acquisitions, the transfers of these systems will be accounted for on an
historical cost basis. All other planned acquisitions are from unaffiliated
entities and are expected to be accounted for as purchases at fair market value.
Results of operations for the proposed acquisitions will be included only from
the respective acquisition dates.
ICP-IV is the successor partnership to IP-IV. Upon formation of ICP-IV, the
previous general and limited partners of IP-IV became the general and limited
partners of ICP-IV. Simultaneously, ICP-IV became the 99.99% limited partner of
IP-IV and ICM-IV became the .01% general partner of IP-IV. The accompanying
balance sheet represents the assets, liabilities and equity of the Predecessor
as of December 31, 1995.
The Consolidated Balance Sheet as of June 30, 1996, the Consolidated
Statement of Operations for the six month period ended June 30, 1996 and the
Consolidated Statement of Cash Flows for the six month period ended June 30,
1996 have been prepared by the Partnership without audit. In the opinion of
Management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at June 30, 1996 and the
results of operations and cash flows for the six month period ended June 30,
1996 have been made.
The Partnership's acquisitions were structured as leveraged transactions
and a significant portion of the assets acquired are intangible assets which are
being amortized on a straight-line basis over one to twelve years. Therefore, as
was planned, the Partnership has incurred a substantial book loss which has
resulted in a net Partners' Capital deficit as of June 30, 1996 (see Note 8).
F-8
<PAGE> 176
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated balance sheet includes the accounts of ICP-IV, and its
majority owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.
Cash equivalents
The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Revenue recognition
Cable television service revenue is recognized in the period in which the
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
Inventory
Inventory consists primarily of supplies and is stated at the lower of cost
or market determined by the first-in, first-out method.
Property and equipment
Additions to property and equipment, including new customer installations,
are recorded at cost. Self constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Capitalized
plant is written down to recoverable values whenever recoverability through
operations or sale of the system becomes doubtful.
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Cable television plant.............................. 5-10
Buildings and improvements.......................... 10
Furniture and fixtures.............................. 3-7
Equipment and other................................. 3-10
</TABLE>
Intangible assets
The Partnership has franchise rights to operate cable television systems in
various towns and political subdivisions. Franchise rights are being amortized
over the lesser of the remaining lives of the franchises or the base twelve-year
term of ICP-IV which expires on December 31, 2007. Remaining franchise lives
range from one to thirteen years.
Goodwill represents the excess of acquisition cost over the fair value of
net tangible and franchise assets acquired and liabilities assumed and is being
amortized on a straight line basis over the twelve-year term of ICP-IV.
Debt issue costs of $3 and $2,157 (unaudited) are included in intangible
assets at December 31, 1995 and June 30, 1996 and are being amortized over the
terms of the related debt. Accumulated amortization of debt issue costs at June
30, 1996 is $481 (unaudited).
Cost associated with potential acquisitions are initially deferred. For
acquisitions which are completed, related costs are capitalized as part of the
acquisition costs. For those acquisitions not completed, related costs are
expensed in the period the acquisition is abandoned.
F-9
<PAGE> 177
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the system becomes doubtful. Each
year, the Partnership evaluates the recoverability of the carrying value of its
intangible assets by assessing whether the projected cash flows, including
projected cash flows from sale of the systems, is sufficient to recover the
unamortized costs of these assets.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Accrued program costs....................... $ $ 85
Accrued franchise fees...................... 266
Accrued legal fees.......................... 196 1,530
Accrued accounting fees..................... 16 644
Other accrued liabilities................... 53 1,005
---- ------
$265 $ 3,530
==== ======
</TABLE>
Income taxes
No provision or benefit for income taxes is reported in ICP-IV's financial
statements because, as a partnership, the tax effects of ICP-IV's results of
operations accrue to the partners.
Partners' capital
Syndication costs incurred to raise capital have been included in partners'
capital.
Allocation of profits and losses
Profits and losses are allocated in accordance with the provisions of
ICP-IV's partnership agreement, generally as follows:
Losses are allocated first to the partners to the extent of and in
accordance with relative capital contributions; second, to the partners
which loaned money to the Partnership to the extent of and in accordance
with relative loan amounts; and third, to the partners in accordance with
relative capital contributions, except that losses are allocated to the
preferred limited partner to the extent of its capital account balance only
until such balance has been reduced to zero.
Profits are allocated first to the preferred limited partner in an
amount sufficient to yield an 11.75% return compounded semi-annually on its
capital contributions; second, to the partners which loaned money to the
Partnership to the extent of and proportionate to previously allocated
losses relating to such loans; third, among the partners, other than the
preferred limited partner, in accordance with relative capital
contributions, in an amount sufficient to yield a pre-tax return of 15% per
annum on their capital contributions; and fourth, 20% to the general
partner and 80% to the limited and general partners, other than the
preferred limited partner, in accordance with relative capital
contributions.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-10
<PAGE> 178
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Franchise rights.......................... $ $77,112
Goodwill.................................. 5,852
Debt issue cost........................... 3 2,157
Other..................................... 704 1,469
-------- -------
707 86,590
Accumulated amortization.................. (3,740)
-------- -------
$ 707 $82,850
======== =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C>
Cable television plant................................. $ 14,527
Furniture and fixtures................................. 300
Equipment and other.................................... 690
Construction in progress............................... 518
-----------
16,035
Accumulated depreciation............................... (1,476)
-----------
$ 14,559
=========
</TABLE>
5. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect the Partnership and the cable television
industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in connection with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and require refunds measured from the date a
complaint is filed in some circumstances or retroactively for up to one year in
other circumstances. Management believes it has made a fair interpretation of
the 1992 Act and related FCC regulations in determining regulated cable
television rates and other fees based on the information currently available.
F-11
<PAGE> 179
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Many aspects of regulation at the federal and local levels are currently
the subject of judicial review and administrative proceedings. In addition, the
FCC is required to conduct rulemaking proceedings over the next several months
to implement various provisions of the 1996 Act. It is not possible at this time
to predict the ultimate outcome of these reviews or proceedings or their effect
on the Partnership.
6. COMMITMENTS AND CONTINGENCIES
The Partnership is committed to provide cable television services under
franchise agreements with remaining terms of up to thirteen years. Franchise
fees of up to 5% of gross revenues are payable under these agreements.
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. The Partnership has entered into long-term retransmission agreements
with all applicable stations in exchange for in-kind and/or other consideration.
The Partnership is subject to litigation and other claims in the ordinary
course of business. In the opinion of management, the ultimate outcome of any
existing litigation or other claims will not have a material adverse effect on
the Partnership's financial condition or results of operations.
7. RELATED PARTY TRANSACTIONS
InterMedia Capital Management ("ICM"), InterMedia Capital Management III,
L.P. ("ICM-III") and ICM-IV have the same managing general partner and certain
limited partners in common. Payable to affiliates at December 31, 1995 and June
30, 1996, include $223 and $618 (unaudited), respectively, of amounts
outstanding to ICM for costs paid by ICM on behalf of the Partnership.
ICM-IV will manage the business of the Partnership and its majority owned
investees for a per annum fee of 1% of the Partnership's total capital
contributions.
InterMedia Partners III, L.P. ("IP-III") has ICM-III as its general partner
and has certain limited partners in common with ICP-IV. Payable to affiliates at
December 31, 1995 includes $224 of deferred acquisition costs and $605 of
syndication costs paid by IP-III on behalf of ICP-IV. Payable to affiliates at
June 30, 1996, includes $605 (unaudited) of syndication costs paid by IP-III on
behalf of ICP-IV. These costs relate to acquisitions that previously were to be
consummated by IP-III and are now expected to be consummated by ICP-IV and to
equity commitments that have been transferred from IP-III to ICP-IV.
InterMedia Management, Inc. ("IMI") is wholly owned by the managing general
partner of ICM-IV. IMI provides accounting and administrative services at cost
to all of ICP-IV's operating entities. IMI also provides such services to other
cable systems which are affiliates of the Partnership. Payable to affiliates at
December 31, 1995 and June 30, 1996, include $15 and $299 (unaudited),
respectively, for administration fees charged by IMI and operating expenses paid
by IMI on behalf of ICP-IV.
As an affiliate of TCI, ICP-IV is able to purchase programming services
from a subsidiary of TCI. Management believes that the overall programming rates
made available through this relationship are lower than ICP-IV could obtain
separately. The TCI subsidiary is under no obligation to continue to offer such
volume rates to ICP-IV, and such rates may not continue to be available in the
future should TCI's ownership in ICP-IV significantly decrease or if TCI or the
programmers should otherwise decide not to offer such participation to ICP-IV.
Programming fees charged by the TCI subsidiary for the six months ended June 30,
1996 amounted to $1,300 (unaudited). Payable to affiliates include programming
fees payable to the TCI subsidiary of $266 (unaudited) at June 30, 1996.
F-12
<PAGE> 180
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. SUBSEQUENT EVENTS
Subsequent to December 31, 1995, the Partnership acquired several cable
television systems (the "Completed Acquisitions") which serve approximately
56,300 basic subscribers primarily in Tennessee for total acquisition costs of
$98,598 (unaudited). The acquisitions have been accounted for as purchases and
the results of operations of the acquired systems have been included in the
consolidated financial statements of the Partnership only from their respective
acquisition dates. The Partnership's preliminary allocation of the acquisition
costs of these systems, pending receipt of final appraisals, to tangible and
intangible assets are as follows (unaudited):
<TABLE>
<S> <C>
Cash paid on closing................................... $ 98,074
Other acquisition costs................................ 524
-----------
Total acquisition costs................................ 98,598
Liabilities assumed.................................... 57
Costs assigned to tangible assets...................... (15,451)
-----------
Costs attributed to intangible assets.................. $ 83,204
=========
</TABLE>
The acquired systems had total revenues of $18,928 (unaudited) and net
income of $4,786 (unaudited) for the year ended December 31, 1995.
The unaudited pro forma combined condensed balance sheet of the Partnership
and the acquired entities as of December 31, 1995 after giving effect to certain
pro forma adjustments is as follows:
<TABLE>
<S> <C>
ASSETS
Current assets......................................... $ 2,623
Intangible assets...................................... 84,212
Property and equipment................................. 15,451
-----------
Total assets................................. $ 102,286
=========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities.................................... $ 3,411
Long-term debt......................................... 99,500
-----------
Total liabilities............................ 102,911
Total partners' capital................................ (625)
-----------
Total liabilities and partners' capital...... $ 102,286
=========
</TABLE>
The unaudited pro forma combined results of operations of the Partnership
and the acquired entities for the year ended December 31, 1995 after giving
effect to certain pro forma adjustments and as if the acquisitions had occurred
on January 1, 1995 are as follows:
<TABLE>
<S> <C>
Revenues............................................... $ 18,928
=========
Net loss............................................... $ (10,172)
=========
</TABLE>
In addition to the Completed Acquisitions, on May 8, 1996, InterMedia
Partners Southeast, L.P. ("IPSE"), a subsidiary of the Partnership, acquired
certain cable television systems in the Houston, Texas area (the "Prime Houston
System") from affilates of Prime Cable, Inc. for approximately $300 million.
IPSE funded this acquisition by obtaining a $297 million nonrecourse loan from
TCI and a $3 million nonrecourse loan from Bank of America ("BA"). Both loans
mature on December 31, 1996 and are secured by IPSE's investment in the Prime
Houston Systems. Pursuant to an assignment and assumption agreement with TCI
F-13
<PAGE> 181
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
dated December 18, 1995, IPSE plans to exchange the Prime Houston System for a
TCI system of similar value. In the event that the exchange is not completed by
October 1, 1996, TCI will be obligated to purchase the Prime Houston System from
IPSE.
Given that IPSE's obligations under the TCI and BA loans are nonrecourse
and its ownership of the Prime Houston is expected to be temporary, the Prime
Houston Systems' financial statements have not been included in unaudited pro
forma combined condensed balance sheets or the unaudited pro forma combined
results of operations. Management believes the Partnership bears no substantive
financial risk during this temporary ownership and does not expect to recognize
any revenues or expenses in relation thereto.
Interim Debt Agreement:
On January 29, 1996, InterMedia Partners of Tennessee ("IPTN"), a
wholly-owned subsidiary of ICP-IV, entered into a bank revolving loan agreement
(the "Bridge Loan"). The Bridge Loan provides for borrowings up to $130,000 and
will terminate on September 30, 1996. The Bridge Loan has been or will be used
to fund (i) the Completed Acquisitions, (ii) additional acquisitions with an
aggregate purchase price of approximately $5,500, (iii) a $15,000 loan by IPTN
to Robin Media Holdings, Inc., an affiliated entity, and (iv) an amount for
general corporate purposes.
At June 30, 1996, $114,000 (unaudited) was outstanding under the Bridge
Loan. Borrowings under the bridge loan generally bear interest at the bank's
reference rate plus 1% or at LIBOR plus 2.25%. Interest periods corresponding to
interest rate options are generally specified as one, two or three months for
LIBOR loans. The loan agreement requires quarterly interest payments, or more
frequent interest payments if a shorter period is selected under the LIBOR
option. The Bridge Loan is guaranteed by ICP-IV and secured by the assets and
limited partnership interests in ICP-IV. Additionally, under the terms of the
Bridge Loan, the lenders have the right to require ICP-IV's partners to make
their respective capital contributions.
The Bridge Loan requires IPTN to pay a commitment fee of 0.5% per year,
payable quarterly, on the unused portion of available credit.
During the term of the Bridge Loan, ICP-IV is prohibited from entering into
any acquisition agreements other than those discussed herein, without consent
from the lenders. The Bridge Loan contains certain restrictive covenants,
including prohibitions on further indebtedness, maintenance of certain financial
ratios and restrictions on mergers, transactions with affiliates and sales of
assets.
As discussed below, management is in the process of obtaining long-term
financing which, in part, will be used to repay amounts outstanding under the
Bridge Loan due on September 30, 1996. In the event that planned financing is
not completed by the Bridge Loan due date, management believes that existing
capital commitments and the borrowing capacity of the Partnership, after giving
effect to the Completed Acquisitions, will be sufficient to repay amounts
outstanding under the Bridge Loan.
Planned Acquisitions:
The Partnership has entered into agreements to acquire additional cable
television systems serving approximately 514,000 subscribers located in
Tennessee, South Carolina and Georgia. The estimated fair value of the cable
television system assets to be acquired is $1,004,000. The acquisitions are
subject to certain third party and government approvals (see Note 11).
Planned Financing:
The Partnership is in the process of obtaining additional financing through
a bank term loan and revolving credit agreement for borrowings up to $695,000
and the issuance of $292,000 in senior notes (see Note 11).
F-14
<PAGE> 182
INTERMEDIA CAPITAL PARTNERS IV, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
During the six months ended June 30, 1996, the Partnership paid interest of
$3,349 (unaudited).
As described in Note 8, during the six months ended June 30, 1996 the
Partnership acquired several cable television systems located in Tennessee. In
conjunction with the acquisitions, assets acquired and liabilities assumed were
as follows (unaudited):
<TABLE>
<S> <C>
Fair value of assets acquired.......................... $ 98,655
Liabilities assumed.................................... (57)
-----------
Cash paid.............................................. $ 98,598
=========
</TABLE>
10. EMPLOYEE BENEFIT PLAN
The Partnership and its subsidiaries participate in the InterMedia Partners
Tax Deferred Savings Plan which covers all full-time employees who have
completed at least one year of employment with the Partnership or an acquired
business. The plan provides for a base employee contribution of 1% and a maximum
of 15% of compensation. The Partnership's matching contributions under the plan
are at the rate of 50% of the employee's contribution, up to a maximum of 3% of
compensation.
11. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
On July 30, 1996 and August 1, 1996, the Partnership obtained additional
financing through a bank term loan and revolving credit agreement for borrowings
up to $695,000 and the issuance of $292,000 in senior notes. Also in July and
August 1996, the Partnership completed its planned acquisitions of cable
television systems serving approximately 514,000 subscribers (see Note 8).
F-15
<PAGE> 183
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of InterMedia
Capital Management IV, L.P.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of InterMedia Capital Management IV,
L.P. at December 31, 1995, in conformity with generally accepted accounting
principles. This balance sheet is the responsibility of the Partnership's
management; our responsibility is to express an opinion on this balance sheet
based on our audit. We conducted our audit of this statement in accordance with
generally accepted auditing standards, which require that we plan and perform an
audit to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
June 28, 1996
F-16
<PAGE> 184
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
BALANCE SHEET
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Intangible assets.................................................................. $ 1
-------
Total assets..................................................................... $ 1
=======
LIABILITIES AND PARTNERS' CAPITAL
Payable to affiliates.............................................................. $ 1
-------
Total liabilities and partners' capital.......................................... $ 1
=======
</TABLE>
See accompanying notes to the balance sheet.
F-17
<PAGE> 185
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
NOTES TO BALANCE SHEET
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
1. THE COMPANY AND BASIS OF PRESENTATION
InterMedia Capital Management IV, L.P. ("ICM-IV" or the "Partnership"), a
California limited partnership, was organized on October 24, 1994 to manage the
business of InterMedia Capital Partners IV, L.P. ("ICP-IV"), a California
limited partnership formed for the purpose of consolidating various cable
television systems owned by affiliated entities and acquiring new cable
television systems located in the southeastern United States (see Note
5 -- Subsequent Events). ICM-IV is the general partner of ICP-IV and will
receive a per annum management fee of one percent of ICP-IV's contributed
capital.
Leo J. Hindery, Jr. and InterMedia Management, Inc. are the general
partners owning an 89% interest in the Partnership. All of the outstanding
common stock of InterMedia Management, Inc. is held by Leo J. Hindery, Jr.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Intangibles
Intangibles represent organization costs incurred in the formation of the
Partnership. Organization costs will be amortized on a straight-line basis over
the twelve year term of the Partnership.
Income taxes
No provision or benefit for income taxes is reported in the Partnership's
financial statements because, as a partnership, the tax effects of the
Partnership's results of operations accrue to the partners.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Allocation of profits and losses
In accordance with the terms of ICM-IV's partnership agreement, profits and
losses are allocated among the partners in accordance with their respective
percentage interests, except when the limited partners' capital accounts would
become negative. In that event, such losses are allocated to the general
partners in accordance with their respective percentage interests. Subsequent
profits are allocated first among the partners to offset previously allocated
losses and then among the partners in accordance with their respective
percentage interests.
3. RELATED PARTY TRANSACTIONS
The Partnership's payable to affiliate balance at December 31, 1995
represents amounts outstanding to InterMedia Partners III, L.P. ("IP-III") for
organization costs paid by IP-III on behalf of the Partnership.
4. EQUITY INVESTEE
The Partnership is the 1.1% general partner of ICP-IV. As of June 28, 1996,
ICP-IV has obtained capital commitments from limited and general partners of
$360,000, including commitments to contribute cash, cable television properties
and debt and equity interests in InterMedia Partners of West Tennessee, L.P.
("IPWT"), an affiliated entity. ICP-IV's commitments are from various
institutional investors and include a preferred limited partner interest of
$25,000, which General Electric Capital Corporation will receive in exchange for
a portion of its note receivable from IPWT.
F-18
<PAGE> 186
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
NOTES TO BALANCE SHEET (CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
The cable television properties (the "Greenville/Spartanburg System") are
to be contributed by affiliates of Tele-Communications, Inc. ("TCI") in exchange
for a 49% limited partner interest in ICP-IV. These properties serve
approximately 115,500 basic subscribers located in the Greenville/Spartanburg,
South Carolina metropolitan area.
ICP-IV is in the process of obtaining long-term debt financing. Proceeds
from capital contributions and issuance of the new debt will be used to repay
existing debt incurred subsequent to December 31, 1995 and to fund planned
acquisitions of cable television properties, including the acquisition of a
majority of the outstanding voting interests in Robin Media Holdings, Inc.
("RMH"), an affiliated entity, and the acquisition of IPWT. An affiliate of TCI
holds substantial indirect interests in both RMH and IPWT.
Because of TCI's substantial continuing ownership interests in RMH, IPWT
and the Greenville/Spartanburg System after consummation of the proposed
acquisitions, the transfers of these systems will be accounted for on an
historical cost basis. All other planned acquisitions are from unaffiliated
entities and are expected to be accounted for as purchases at fair market value.
Results of operations for the proposed acquisitions will be included only from
the respective acquisition dates.
ICP-IV is the successor partnership to InterMedia Partners IV, L.P.
("IP-IV"). Upon formation of ICP-IV, the general and limited partners of IP-IV
became the general and limited partners of ICP-IV. Simultaneously, ICP-IV became
the 99.99% limited partner of IP-IV and ICM-IV became the .01% general partner
of IP-IV. This investment is accounted for under the equity method. The
following major components of ICP-IV's consolidated balance sheet represents the
assets, liabilities and equity of IP-IV as of December 31, 1995:
<TABLE>
<S> <C>
Intangible assets.......................................... $ 707
------
TOTAL ASSETS............................................. $ 707
======
Account payable and accrued liabilities.................... $ 265
Payable to affiliates...................................... 1,067
------
TOTAL LIABILITIES........................................ 1,332
------
Partners' capital.......................................... (625)
------
TOTAL LIABILITIES AND PARTNERS' CAPITAL.................. $ 707
======
</TABLE>
ICP-IV's profits and losses are allocated in accordance with the provisions
of ICP-IV's partnership agreement, generally as follows:
Losses are allocated first to the partners to the extent of and in
accordance with relative capital contributions; second, to the partners which
loaned money to the Partnership to the extent of and in accordance with relative
loan amounts; and third, to the partners in accordance with relative capital
contributions, except that losses are allocated to the preferred limited partner
to the extent of its capital account balance only until such balance has been
reduced to zero.
Profits are allocated first to the preferred limited partner in an amount
sufficient to yield an 11.75% return compounded semi-annually on its capital
contributions; second, to the partners which loaned money to the Partnership to
the extent of and proportionate to previously allocated losses relating to such
loans; third, among the partners, other than the preferred limited partner, in
accordance with relative capital contributions, in an amount sufficient to yield
a pre-tax return of 15% per annum on their capital contributions; and fourth;
20% to ICM-IV and 80% to ICM-IV and the limited partners, other than the
preferred limited partner, in accordance with relative capital contributions.
F-19
<PAGE> 187
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
NOTES TO BALANCE SHEET (CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
5. SUBSEQUENT EVENTS OF INVESTEE
On January 26, 1996, InterMedia Partners of Tennessee ("IPTN"), a
wholly-owned subsidiary of ICP-IV, entered into a bank revolving credit
agreement (the "Bridge Loan"). The Bridge Loan provides for borrowings up to
$130,000 and will terminate on September 30, 1996. The Bridge Loan is guaranteed
by ICM-IV and ICP-IV and secured by the assets and limited partnership interests
in ICM-IV and ICP-IV. At June 30, 1996, $114,000 (unaudited) was outstanding
under the Bridge Loan.
ICP-IV management is in the process of obtaining long-term financing which,
in part, will be used to repay amounts outstanding under the Bridge Loan due on
September 30, 1996. In the event that planned financing is not completed by the
Bridge Loan due date, ICP-IV management believes that existing capital
commitments and the borrowing capacity of ICP-IV, after giving effect to the
completed acquisitions, will be sufficient to repay amounts outstanding under
the Bridge Loan.
Subsequent to December 31, 1995, ICP-IV acquired several cable television
systems (the "Completed Acquisitions") which serve approximately 56,300 basic
subscribers, primarily in Tennessee, for total acquisitions costs of $98,598
(unaudited). The acquisitions will be accounted for as purchases. Accordingly,
results of operations of the acquired systems will be included in the
consolidated financial statements of ICP-IV only from their respective
acquisition dates. The acquired systems had total revenues of $18,928
(unaudited) and net income of $4,786 (unaudited) for the year ended December 31,
1995.
The unaudited pro forma combined condensed balance sheet of ICP-IV and the
acquired entities as of December 31, 1995 after giving effect to certain pro
forma adjustments is as follows:
<TABLE>
<S> <C>
ASSETS
Current assets.......................................... $ 2,623
Intangible assets....................................... 84,212
Property and equipment.................................. 15,451
--------
Total assets.......................................... $102,286
========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities..................................... $ 3,411
Long-term debt.......................................... 99,500
--------
Total liabilities..................................... 102,911
Total partners' capital................................. (625)
--------
Total liabilities and partners' capital............... $102,286
========
</TABLE>
The unaudited pro forma combined results of operations of ICP-IV and the
acquired entities for the year ended December 31, 1995 after giving effect to
certain pro forma adjustments and as if the acquisition had occurred on January
1, 1995 are as follows:
<TABLE>
<S> <C>
Revenues.................................................. $ 18,928
========
Net loss.................................................. $(10,172)
========
</TABLE>
In addition to the Completed Acquisitions, on May 8, 1996, InterMedia
Partners Southeast, L.P. ("IPSE"), a subsidiary of ICP-IV, acquired certain
cable television systems in the Houston, Texas area (the "Prime Houston
Systems") from affiliates of Prime Cable, Inc. for approximately $300,000.
F-20
<PAGE> 188
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.
NOTES TO BALANCE SHEET (CONTINUED)
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
IPSE funded this acquisition by obtaining a $297 million nonrecourse loan from
TCI and a $3 million nonrecourse loan from Bank of America ("BA"). Both loans
mature on December 31, 1996 and are secured by IPSE's investment in the Prime
Houston Systems. Pursuant to an assignment and assumption agreement with TCI
dated December 18, 1995, IPSE plans to exchange the Prime Houston System with a
TCI system of similar value. In the event that the exchange is not completed by
October 1, 1996, TCI will be obligated to purchase the Prime Houston System from
IPSE.
Given that IPSE's obligations under the TCI and BA loans are nonrecourse
and its ownership of the Prime Houston is expected to be temporary, the Prime
Houston Systems' financial statements have not been included in unaudited pro
forma combined condensed balance sheets or the unaudited pro forma combined
results of operations. Management believes ICP-IV bears no substantive financial
risk during this temporary ownership and does not expect to recognize any
revenues or expenses in relation thereto.
Planned Acquisitions:
ICP-IV has entered into agreements to acquire additional cable television
systems serving approximately 514,000 subscribers located in Tennessee, South
Carolina and Georgia. The estimated fair value of the cable television system
assets to be acquired is $1,004,000. The acquisitions are subject to certain
third party and government approvals (see Note 6).
Planned Financing:
ICP-IV is in the process of obtaining additional financing through a bank
term loan and revolving credit agreement for borrowings up to $695,000 and the
issuance of $292,000 in senior notes (see Note 6).
6. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
On July 30, 1996 and August 1, 1996, ICP IV obtained additional financing
through a bank term loan and revolving credit agreement for borrowings up to
$695,000 and the issuance of $292,000 in senior notes. Also in July and August
1996, ICP IV completed its planned acquisitions of cable television systems
serving approximately 514,000 subscribers (see Note 5).
F-21
<PAGE> 189
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of InterMedia
Capital Partners IV, L.P.
In our opinion, based upon our audits and the report of other auditors, the
accompanying combined balance sheets and the related combined statements of
operations, of changes in equity and of cash flows present fairly, in all
material respects, the combined financial position of the Previously Affiliated
Entities, which are comprised of Robin Media Holdings, Inc., InterMedia Partners
of West Tennessee, L.P., TCI of Greenville, Inc., TCI of Spartanburg, Inc. and
TCI of Piedmont, Inc., at December 31, 1995 and 1994, except TCI of Greenville,
Inc., TCI of Spartanburg, Inc. and TCI of Piedmont, Inc. which are included at
December 31, 1995 and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, except TCI of
Greenville, Inc., TCI of Spartanburg, Inc. and TCI of Piedmont, Inc. which are
included from January 27, 1995, in conformity with generally accepted accounting
principles. 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 did not audit the combined
financial statements of TCI of Greenville, Inc., TCI of Spartanburg, Inc. and
TCI of Piedmont, Inc., which statements reflect total assets of $361,812,000 at
December 31, 1995 and total revenues of $47,214,000 for the period from January
27, 1995 to December 31, 1995. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for TCI of Greenville, Inc., TCI
of Spartanburg, Inc. and TCI of Piedmont, Inc., is based solely on the report of
the other auditors. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
June 28, 1996
F-22
<PAGE> 190
PREVIOUSLY AFFILIATED ENTITIES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
--------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 3,250 $ 4,883 $ 5,115
Accounts receivable, net of allowance for doubtful
accounts of $382, $853 and $674......................... 5,575 8,330 8,441
Receivable from affiliates................................ 383 303 423
Prepaids.................................................. 352 391 376
Inventory................................................. 1,719 2,940 4,541
Other current assets...................................... 93 223 571
--------- -------- --------
Total current assets............................ 11,372 17,070 19,467
Intangible assets, net.................................... 189,562 468,713 446,943
Property and equipment, net............................... 67,098 102,668 108,120
Investments............................................... 435 795 795
Note receivable........................................... 5,569
Deferred income taxes..................................... 4,777
Other assets.............................................. 1,022 1,248 1,289
--------- -------- --------
Total assets.................................... $ 275,058 $590,494 581,391
========= ======== ========
LIABILITIES AND EQUITY
Current portion of long-term debt......................... $ 3,882 $ 4,043 $
Accounts payable and accrued liabilities.................. 5,462 10,692 10,332
Deferred revenue.......................................... 3,800 3,963 4,117
Payable to affiliates..................................... 2,441 2,124 2,324
Accrued interest.......................................... 9,634 10,086
--------- -------- --------
Total current liabilities....................... 25,219 30,908 16,773
Accrued interest.......................................... 9,386
Long-term debt............................................ 399,618 407,176 408,996
Note payable to affiliate................................. 15,347
Deferred income taxes..................................... 17,198 115,161 107,618
--------- -------- --------
Total liabilities............................... 442,035 553,245 558,120
--------- -------- --------
Commitments and contingencies
Equity.................................................... (166,977) 37,249 23,271
--------- -------- --------
Total liabilities and equity.................... $ 275,058 $590,494 $581,391
========= ======== ========
</TABLE>
See accompanying notes to the combined financial statements.
F-23
<PAGE> 191
PREVIOUSLY AFFILIATED ENTITIES
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and cable services............ $ 43,138 $ 52,829 $ 85,632 $ 42,097 $ 48,374
Pay services........................ 8,699 12,043 23,942 11,325 12,207
Other services...................... 5,848 8,177 19,397 8,073 8,744
-------- -------- -------- -------- --------
57,685 73,049 128,971 61,495 69,325
-------- -------- -------- -------- --------
Program fees........................ 9,376 13,189 24,684 11,842 14,680
Other direct expenses............... 7,801 9,823 16,851 8,119 8,355
Depreciation and amortization....... 66,940 68,216 70,154 34,533 31,364
Selling, general and administrative
expenses.......................... 12,414 15,852 30,509 13,741 16,888
Management and consulting fees...... 465 585 815 473 341
-------- -------- -------- -------- --------
96,996 107,665 143,013 68,708 71,628
-------- -------- -------- -------- --------
Loss from operations................ (39,311) (34,616) (14,042) (7,213) (2,303)
-------- -------- -------- -------- --------
Other income (expense):
Interest and other income......... 8,898 1,442 1,172 574 154
Gain (loss) on disposal of fixed
assets......................... (1,967) (1,401) (63) 27 (14)
Interest expense.................. (44,760) (44,278) (48,835) (24,161) (36,970)
Other expense..................... (508) (194) (644) (645) (98)
-------- -------- -------- -------- --------
(38,337) (44,431) (48,370) (24,205) (36,928)
-------- -------- -------- -------- --------
Loss before income tax benefit...... (77,648) (79,047) (62,412) (31,418) (39,231)
Income tax benefit.................. 21,656 19,020 17,502 8,459 12,320
-------- -------- -------- -------- --------
Net loss............................ $(55,992) $(60,027) $(44,910) $(22,959) $(26,911)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the combined financial statements.
F-24
<PAGE> 192
PREVIOUSLY AFFILIATED ENTITIES
COMBINED STATEMENT OF CHANGES IN EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1992...................................................... $(73,808)
Net loss.......................................................................... (55,992)
--------
Balance at December 31, 1993...................................................... (129,800)
Capital contributions to InterMedia Partners of West Tennessee, L.P............... 22,850
Net loss.......................................................................... (60,027)
--------
Balance at December 31, 1994...................................................... (166,977)
January 27, 1995 combining with TCI of Greenville, Inc., TCI of Spartanburg, Inc.
and TCI of Piedmont, Inc........................................................ 249,136
Net loss.......................................................................... (44,910)
--------
Balance at December 31, 1995...................................................... 37,249
Contribution to TCI of Greenville, Inc., TCI of Spartanburg, Inc. and
TCI of Piedmont, Inc. (unaudited)............................................... 12,933
Net loss (unaudited).............................................................. (26,911)
--------
Balance at June 30, 1996 (unaudited).............................................. $ 23,271
========
</TABLE>
See accompanying notes to the combined financial statements.
F-25
<PAGE> 193
PREVIOUSLY AFFILIATED ENTITIES
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(55,992) $(60,027) $(44,910) $(22,959) $(26,911)
Adjustments to reconcile net loss to cash
flows from operating activities:
Depreciation and amortization.......... 67,122 68,644 70,278 35,156 31,431
Loss on sale of note receivable........ 376 258
Loss (gain) on disposal of fixed
assets............................... 1,967 1,401 63 (11) 14
Gain on sale of investment............. (4,338)
Deferred income taxes.................. (21,656) (19,020) (17,601) (8,459) (12,320)
Changes in assets and liabilities:
Accounts receivable.................. (1,836) (455) (282) 1,039 (111)
Receivable from affiliates........... (4,370) 8,148 80 (164) (12)
Interest receivable.................. (1,617) (726) 2,569 2,545
Prepaids............................. 331 7 (39) (40) 15
Inventory............................ (306) (216) (1,221) 100 (1,601)
Other assets......................... (289) 177 (212) (112) (389)
Accounts payable and accrued
liabilities....................... 1,289 116 2,589 (382) (360)
Deferred revenue..................... 633 202 163 170 154
Payable to affiliates................ (3,406) 1,531 (317) (402) 439
Accrued interest..................... 10,282 106 (3,429) (1,652) (2,722)
-------- -------- -------- -------- --------
Cash flows from operating activities........ (12,186) (112) 8,107 5,087 (12,373)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (11,334) (12,432) (26,301) (8,146) (15,127)
Proceeds from the sale of property and
equipment.............................. 44
Investments............................... 18,317 (414) (360) (240)
Collections and proceeds from sale of
notes receivable....................... 40,459 17,764 2,624 2,624
Other assets and intangibles.............. 64 (47) (621) (496)
Purchases of cable television systems..... (78,344)
-------- -------- -------- -------- --------
Cash flows from investing activities........ (30,838) 4,871 (24,614) (6,258) (15,127)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity on revolving credit note
payable................................ 13,000 (2,600) 11,600 3,000 (201)
Note payable to affiliate................. 15,000
Repayment on long-term debt............... (22,073)
Capital contributions..................... 20,050 6,484 (987) 12,933
Debt issue costs.......................... (308) (161) (18) (573)
-------- -------- -------- -------- --------
Cash flows from financing activities........ 12,692 (4,784) 18,066 1,440 27,732
-------- -------- -------- -------- --------
Net change in cash and cash equivalents..... (30,332) (25) 1,559 269 232
Cash and cash equivalents, beginning of
period.................................... 33,607 3,275 3,324 3,324 4,883
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period.... $ 3,275 $ 3,250 $ 4,883 $ 3,593 $ 5,115
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the combined financial statements.
F-26
<PAGE> 194
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The combined financial statements include the financial statements of Robin
Media Holdings, Inc. ("Holdings"), InterMedia Partners of West Tennessee, L.P.
("IPWT") and TCI of Greenville, Inc., TCI of Spartanburg, Inc. and TCI of
Piedmont, Inc. (collectively "TCI Greenville/Spartanburg"). Holdings, IPWT, and
TCI Greenville/Spartanburg are collectively referred to as the "Previously
Affiliated Entities." TeleCommunications, Inc. ("TCI") holds substantial direct
and indirect ownership interests in each of the entities that comprise the
Previously Affiliated Entities. The individual financial statements of the
Previously Affiliated Entities have been combined on a historical cost basis for
the years presented as if they had always been members of the same operating
group, except for the financial statements of TCI Greenville/Spartanburg, which
have been included from January 27, 1995, the date of acquisition by TCI. The
Previously Affiliated Entities own and operate cable television systems located
in Tennessee, South Carolina and Georgia.
The financial position and results of operations of the Previously
Affiliated Entities are being presented on a combined basis because of TCI's
substantial continuing ownership interests in the Previously Affiliated Entities
after the proposed acquisitions of the Previously Affiliated Entities by
InterMedia Capital Partners IV, L.P. ("ICP-IV") (see Note 17).
As disclosed in Note 4, certain accounting policies of Holdings and IPWT
are different from those of TCI Greenville/Spartanburg.
The combined Balance Sheet as of June 30, 1996, the combined Statements of
Operations for the six month periods ended June 30, 1995 and 1996 and the
combined Statements of Cash Flows for the six month periods ended June 30, 1995
and 1996 have been prepared by the Partnership without audit. In the opinion of
Management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at June 30, 1996 and the
results of operations and cash flows for the six months ended June 30, 1995 and
1996 have been made.
ROBIN MEDIA HOLDINGS, INC.
Holdings is a Nevada corporation which was organized on August 27, 1991. On
April 30, 1992, Holdings commenced operations with the acquisition of all the
outstanding common stock of Robin Media Group, Inc. ("RMG") from Jack Kent Cooke
Incorporated. Holdings is wholly owned by InterMedia Partners V, L.P. ("IP-V"),
a California limited partnership. TCI is a limited partner in IP-V. Holdings is
solely a holding company with no operations. Holdings' only asset is its
investment in RMG and it had no liabilities prior to April 1, 1996 (see Note 2).
The acquisition of RMG was structured as a leveraged transaction and a
significant portion of the assets acquired are intangible assets which are being
amortized over one to ten years. Therefore, as was planned, RMG has incurred
substantial book losses which have resulted in a net shareholder's deficit.
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
IPWT is a California limited partnership which was formed on April 11, 1990
for the purpose of investing in and operating cable television properties.
Under the terms of the original partnership agreement, InterMedia Partners
("IP"), a California limited partnership ("IP"), was the sole general partner,
owning an 89% interest in IPWT. The limited partners were IP and Robin Cable
Systems of Tucson, an Arizona limited partnership ("Robin-Tucson"), holding
interests in the Partnership of 10% and 1%, respectively. TCI is a limited
partnership in IP.
F-27
<PAGE> 195
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
On September 11, 1990 IPWT acquired the Western Tennessee properties of
U.S. Cable Partners, LP and its affiliates. Funding for this acquisition was
provided by General Electric Capital Corporation ("GECC") in the form of a
senior subordinated loan.
On October 3, 1994, IP sold its interests in Robin-Tucson to an affiliate
of TCI. IP contributed additional capital of $20,050 to IPWT from the net sales
proceeds and IPWT repaid $30,375 of the senior subordinated loan to GECC
including accrued interest. Under IPWT's Amended and Restated Agreement of
Limited Partnership entered into on October 3, 1994, GECC converted $2,800 of
its loan into a limited partnership interest in IPWT and restructured the
remaining balance of the loan (see Note 9). Under the amended partnership
agreement IP has an 80.1% general partner interest and a 9.9% limited partner
interest, and GECC has a 10% limited partner interest. Losses incurred prior to
October 3, 1994 were reallocated between the general and limited partners based
upon the change in ownership percentage resulting from the restructuring.
IPWT's acquisition of the West Tennessee cable television properties was
structured as a leveraged transaction and a significant portion of the assets
acquired were intangible assets which are being amortized over one to ten years.
Therefore, as was planned, IPWT has incurred substantial book losses, resulting
in negative partners' capital.
TCI OF GREENVILLE, INC., TCI OF SPARTANBURG, INC. AND TCI OF PIEDMONT, INC.
TCI Greenville/Spartanburg is an indirectly wholly owned subsidiary of TCI
Communications, Inc. ("TCIC") which is a wholly owned subsidiary of TCI.
TCI Greenville/Spartanburg was acquired by TCI from TeleCable Corporation
on January 27, 1995 and subsequently contributed to TCIC. These combined
financial statements include TCI Greenville/Spartanburg's assets, liabilities
and equity at December 31, 1995 and its results of operations for the period
from January 27, 1995, the date of TCI's acquisition, to December 31, 1995.
2. FINANCING PLAN
On April 1, 1996 Holdings obtained from ICP-IV, an affiliated entity, a
$15,000 loan which matures on September 30, 1996. Proceeds from the loan were
used to fund an additional equity contribution to RMG. RMG's debt agreements
contain restrictive covenants which preclude RMG from paying dividends or making
any distributions to Holdings. Because of these restrictions, Holdings will not
be able to repay the loan when due without additional funding from outside
sources.
IP-V has entered into an agreement with ICP-IV to sell, after
recapitalizing Holdings, a portion of its equity interest in Holdings. ICP-IV is
in the process of obtaining its initial equity contributions and debt financing.
Upon funding ICP-IV plans to make an intercompany loan to Holdings in an amount
sufficient for Holdings and RMG to repay all principal and interest outstanding
on its existing debt (see Note 18).
F-28
<PAGE> 196
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. ACQUISITIONS
During 1993 Holdings consummated the following acquisitions of cable
television properties:
<TABLE>
<CAPTION>
TOTAL
ACQUISITION ACQUISITION
CABLE TELEVISION ASSETS DATE COST
- ------------------------------------------------------------- ------------------ -----------
<S> <C> <C>
Royston, Georgia cable television assets of
Tritek -- Southern Communications, Ltd..................... February 26, 1993 $ 1,791
Middle Tennessee cable television assets of Daniels
Communications Partners Limited............................ March 22, 1993 23,499
Middle Tennessee cable television assets of American Cable TV
Investors 3................................................ December 1, 1993 53,054
-------
$78,344
=======
</TABLE>
The acquisitions of cable television properties noted above were accounted
for as purchases and results of operations have been included only since the
dates of acquisition. Holdings' costs to acquire these properties have been
allocated to tangible and intangible assets as follows:
<TABLE>
<S> <C>
Cash paid on closing...................................... $ 78,016
Other acquisition costs................................... 328
--------
Total acquisition costs................................... 78,344
Liabilities assumed....................................... 1,607
Costs assigned to tangible assets......................... (24,073)
--------
Costs attributable to intangible assets................... $ 55,878
========
</TABLE>
Had the 1993 acquisitions been completed as of January 1, 1993, revenues
and net loss for Holdings for the year ended December 31, 1993 would have been
$56,437 and $44,148, respectively, (unaudited).
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of combination
The combined financial statements include the accounts of Holdings, IPWT
and, from January 27, 1995, TCI Greenville/Spartanburg. All intercompany
accounts and transactions between Holdings and IPWT have been eliminated. There
are no intercompany accounts or transactions with TCI Greenville/Spartanburg.
Cash equivalents
The Previously Affiliated Entities consider all highly liquid investments
with original maturities of three months or less to be cash equivalents.
Revenue recognition
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
Inventory
Inventory consists primarily of supplies and is stated at the lower of cost
or market determined by the first-in, first-out method.
F-29
<PAGE> 197
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Property and equipment
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Holdings and
IPWT include gains and losses from disposals and retirements in earnings. TCI
Greenville/Spartanburg recognizes gains and losses only in connection with sales
of properties in their entirety. At the time of ordinary retirements, sales or
other dispositions of property, TCI Greenville/Spartanburg charges the original
cost and cost of removal of such property, net of any realized salvage value, to
accumulated depreciation. Capitalized plant is written down to recoverable
values whenever recoverability through operations or sale of a system becomes
doubtful.
Depreciation is computed using the double-declining balance method over the
following estimated useful lives for Holdings and IPWT:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Cable television plant....................................... 5-10
Buildings and improvements................................... 10
Furniture and fixtures....................................... 3-7
Equipment and other.......................................... 3-10
</TABLE>
Depreciation for TCI Greenville/Spartanburg is computed on a straight-line
basis using estimated useful lives of 3 to 15 years for cable distribution
systems and 3 to 40 years for buildings and support equipment.
Intangible assets
The Previously Affiliated Entities have franchise rights to operate cable
television systems in various towns and political subdivisions. Holdings' and
IPWT's franchise rights are being amortized on a straight-line basis over the
lesser of the remaining lives of the franchises or the base ten-year term of the
IP-V or IP partnership agreements (see Note 12). TCI Greenville/Spartanburg
amortizes franchise rights on a straight-line basis over 40 years. Remaining
franchise lives range from one to twenty-four years.
Goodwill represents the excess of acquisition cost over the fair value of
net tangible and franchise assets acquired and liabilities assumed for Holdings
and IPWT and is being amortized on a straight-line basis over the ten-year term
of IP-V and IP, respectively.
Debt issue costs are being amortized over the terms of the related debt.
Debt issue costs of $492 and $510 are stated net of accumulated amortization of
$124 and $248 at December 31, 1994 and 1995, respectively.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the system becomes doubtful. Each
year, the Previously Affiliated Entities evaluate the recoverability of the
carrying value of intangible assets by assessing whether the projected cash
flows, including projected cash flows from sale of the systems, is sufficient to
recover the unamortized cost of these assets.
F-30
<PAGE> 198
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
------ -------
<S> <C> <C>
Accounts payable.............................. $ 549 $ 463
Accrued program costs......................... 345 358
Accrued franchise fees........................ 1,571 3,545
Other accrued liabilities..................... 2,997 6,326
------ -------
$5,462 $10,692
====== =======
</TABLE>
Income taxes
Holdings and TCI Greenville/Spartanburg account for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." The asset and liability approach used in SFAS 109
requires the recognition of deferred tax assets and liabilities for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
A tax sharing agreement (the "Tax Sharing Agreement") among TCIC and
certain other subsidiaries of TCI was implemented effective July 1, 1995. The
Tax Sharing Agreement formalizes certain elements of the pre-existing tax
sharing arrangement and contains additional provisions regarding the allocation
of certain consolidated income tax attributes and the settlement procedures with
respect to the intercompany allocation of current tax attributes. Accordingly,
all tax attributes generated by TCIC's operations (which include TCI
Greenville/Spartanburg) after the effective date including, but not limited to,
net operating losses, tax credits, deferred intercompany gains, and the tax
basis of assets are inventoried and tracked for the entities comprising TCIC.
For the period January 27, 1995 to December 31, 1995, TCI
Greenville/Spartanburg was included in the consolidated federal income tax
return of TCI. The income tax benefit for TCI Greenville/Spartanburg is based on
those items in the consolidated calculation applicable to TCI
Greenville/Spartanburg. For tax reporting purposes, the basis in the underlying
assets of TCI Greenville/Spartanburg were carried over at their historical
basis.
No provision or benefit for income taxes is recorded for IPWT because, as a
Partnership, the tax effects of IPWT's results of operations accrue to the
partners. IPWT is registered with the Internal Revenue Service as a tax shelter
under Internal Revenue Code Section 6111(b).
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-31
<PAGE> 199
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Franchise rights....................................... $251,176 $578,445
Goodwill and other intangible assets................... 103,770 104,260
-------- --------
354,946 682,705
Accumulated amortization............................... (165,384) (213,992)
-------- --------
$189,562 $468,713
======== ========
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Land................................................... $ 539 $ 1,118
Cable television plant................................. 101,370 148,960
Buildings and improvements............................. 838 866
Furniture and fixtures................................. 1,476 1,683
Equipment and other.................................... 6,044 10,810
Construction in progress............................... 2,590 4,140
-------- --------
112,857 167,577
Accumulated depreciation............................... (45,759) (64,909)
-------- --------
$ 67,098 $102,668
======== ========
</TABLE>
7. INVESTMENTS
Holdings has a 49% limited partnership interest in InterMedia Partners II,
L.P. ("IP-II"), an affiliated entity, which is accounted for under the equity
method. Holdings' original investment in IP-II was reduced to zero in 1992 as a
result of its equity in the net loss of IP-II. Holdings received distributions
from IP-II of $417 and $406 for the years ended December 31, 1994 and 1995,
respectively, which are included in interest and other income in the
accompanying Combined Statements of Operations.
Holdings has a 15% limited partner interest in AVR of Tennessee, L.P.,
doing business as Hyperion of Tennessee, which is accounted for under the cost
method. During 1994 and 1995, Holdings contributed $435 and $360, respectively,
to Hyperion of Tennessee. Holdings is committed to fund additional capital
contributions to Hyperion of Tennessee of $755 and to make term loan advances to
Hyperion of Tennessee. The term loan advances are required to fund leasing
arrangements for access to fiber optic distribution owned by the respective
partners. Management does not believe commitments for the term loan advances
will be significant.
On October 6, 1993, Holdings' investment in a preferred limited partner
interest, acquired prior to Holdings' acquisition of RMG, was redeemed by the
investee for $18,338, resulting in a gain of $4,338.
F-32
<PAGE> 200
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. NOTES RECEIVABLE
Notes receivable were issued to Holdings in connection with previous sales
of cable television systems. In June 1995, Holdings sold its only remaining note
receivable including related accrued interest. At the time of the sale the note
had a balance of $5,980 which included $411 of interest earned in 1995. The sale
of the note resulted in a loss of $376 which is included in other expense.
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
HOLDINGS:
Revolving credit note payable, $30,000 commitment,
interest at LIBOR plus 1.5% payable quarterly,
due February 28, 1997........................... $ 13,000 $ 25,000
11 1/8% senior subordinated notes, interest payable
semi-annually, due April 1, 1997................ 271,400 271,400
11 5/8% subordinated debentures, interest payable
semi-annually, due April 1, 1999................ 35,050 35,050
IPWT:
GECC revolving credit; $7,000 commitment; interest
payable quarterly at prime plus 1% or LIBOR plus
2% per annum; matures June 30, 2001............. 2,400 2,000
GECC term loans payable; interest payable quarterly
at 7% per annum on $27,000 and at prime plus 1%
or LIBOR plus 2% per annum on $27,000; matures
June 30, 2001................................... 54,000 54,000
Debt restructuring credit.......................... 27,650 23,769
-------- --------
403,500 411,219
Less current portion............................... 3,882 4,043
-------- --------
$399,618 $407,176
======== ========
</TABLE>
HOLDINGS
RMG's bank revolving credit agreement provides $30,000 of available
credit and expires on February 28, 1997. Borrowings under the revolving
credit agreement generally bear interest either at the bank's reference
rate plus 0.5% or at LIBOR plus 1.5% and are secured by the stock of RMG.
Interest on outstanding borrowings is payable quarterly. At December 31,
1995, the interest rate on the revolving credit agreement was 7.5%.
The revolving credit agreement requires RMG to pay a commitment fee of
0.375% per year, payable quarterly, on the unused portion of available
credit. In addition, the agreement contains certain restrictive covenants,
including limitations on the payment of dividends.
The 11 1/8% senior subordinated notes (the "Notes") are redeemable at
the option of RMG, in whole or in part, at a current redemption price of
101.0% of the principal amount, together with accrued interest. The
redemption price will decline to 100% of the principal amount at April 1,
1997.
F-33
<PAGE> 201
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The 11 5/8% subordinated debentures (the "Debentures") are redeemable
at the option of RMG, in whole or in part, at a current redemption price of
101.4% of the principal amount, together with accrued interest. The
redemption price will decline to 100% of the principal amount at April 1,
1997.
The Debentures and the Notes are subordinated to the bank debt, and
the Debentures are subordinated to the Notes. The indentures with respect
to the Notes and the Debentures contain restrictive covenants on RMG,
including limitations on dividends, additional debt and mergers and
acquisitions.
Based on quoted market prices from recent limited trading of the Notes
and Debentures, their fair value approximates their recorded value.
Management also believes that the fair value of the bank debt outstanding
at variable interest rates approximates its recorded value.
IPWT
On October 3, 1994, in connection with IP's sale of Robin-Tucson, IPWT
restructured its subordinated loan payable to GECC. Under the terms of the
restructuring, GECC reduced the face amount of the debt outstanding to
$59,000. Because the total estimated future payments on the restructured
debt exceeded the carrying amount of the debt at the time of restructuring,
no gain has been recognized on the debt restructuring and no adjustments
have been made to the carrying amount of IPWT's debt. The difference of
$28,570 between the $59,000 refinanced and the amount of the note at the
time of the restructuring was recorded as a debt restructuring credit. A
portion of future debt service payments will be recorded as reductions of
the remaining debt restructuring credit of $23,769 at December 31, 1995.
At December 31, 1995, $56,000 is outstanding under the Amended and
Restated Loan Agreement with GECC which provides for a revolving credit
facility in the amount of $7,000 and term loans in the aggregate amount of
$54,000. Borrowings outstanding under the revolving credit facility and the
term loans generally bear interest either at the prime rate plus 1% or
LIBOR plus 2% and mature on June 30, 2001. On $27,000 of borrowings
outstanding under the term loans, the interest rate is fixed at 7% per
annum until October 3, 1997 when such borrowings become available under the
variable interest rate options just described.
Interest periods corresponding to interest rate options are generally
specified as one, two or three months for LIBOR loans. The loan agreement
requires quarterly interest payments, or more frequent interest payments if
a shorter period is selected under the LIBOR option, and quarterly payments
of .5% per annum on the unused commitment.
The loan agreement provides for contingent interest payments generally
at 11.11% of excess cash flow, as defined. Contingent interest payments may
be required upon sale of either the West Tennessee system or the
partnership interest in IPWT. No contingent interest has been accrued as of
December 31, 1995 (see Note 17) (see Note 18).
Excess cash flow for each year, after provision for contingent
interest payments, if any, must be used to prepay borrowings under the loan
agreement. Optional prepayments under the term loan permanently reduce
borrowings outstanding and may be made without penalty. Amounts outstanding
under the revolving credit facility and the term loan are secured by the
assets of IPWT.
IPWT has approximately $29,000 of debt outstanding at variable
interest rates. Management believes that the fair value of this debt
approximates its recorded value. Management estimates that the 7% stated
rate for fixed rate debt outstanding of $27,000 under the GECC term loan is
approximately 1% lower than the current market rate.
F-34
<PAGE> 202
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Holdings' and IPWT's debt agreements include covenants which restrict
the borrowers' ability to encumber assets, make investments or
distributions, retire partnership interests, pay management fees currently,
incur or guarantee additional indebtedness and purchase or sell assets. The
debt agreements include financial covenants which require minimum interest
and debt coverage ratios, require minimum cash flows and specify maximum
debt to cash flow ratios.
Annual maturities of long-term debt at December 31, 1995 of the
Previously Affiliated Entities are as follows:
<TABLE>
<S> <C>
1996............................................... $ 4,043
1997............................................... 300,532
1998............................................... 4,423
1999............................................... 39,552
2000............................................... 4,469
Thereafter......................................... 58,200
--------
$411,219
========
</TABLE>
10. EQUITY
The combined equity of the Previously Affiliated Entities of $(166,977) and
$37,249, at December 31, 1994 and 1995, respectively, consists of the following
components:
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
HOLDINGS: STOCK CAPITAL DEFICIT TOTAL
- ----------------------------------------------- ------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1992................... $100 $ 10,498 $ (38,529) $ (27,931)
Net loss....................................... (39,866) (39,866)
---- -------- --------- ---------
Balance at December 31, 1993................... 100 10,498 (78,395) (67,797)
Net loss....................................... (46,588) (46,588)
---- -------- --------- ---------
Balance at December 31, 1994................... 100 10,498 (124,983) (114,385)
Net loss....................................... (37,729) (37,729)
---- -------- --------- ---------
Balance at December 31, 1995................... $100 $ 10,498 $(162,712) (152,114)
==== ======== ========= ---------
<CAPTION>
GENERAL LIMITED
IPWT: PARTNER PARTNER TOTAL
- ----------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1992................... $ (40,831) $ (5,046) (45,877)
Net loss....................................... (14,352) (1,774) (16,126)
-------- --------- ---------
Balance at December 31, 1993................... (55,183) (6,820) (62,003)
Additional capital contributions............... 17,844 5,006 22,850
Adjustment to reallocate losses in connection
with the debt restructuring.................. 5,519 (5,519)
Net loss....................................... (10,765) (2,674) (13,439)
-------- --------- ---------
Balance at December 31, 1994................... (42,585) (10,007) (52,592)
Net loss....................................... (2,293) (569) (2,862)
-------- --------- ---------
Balance at December 31, 1995................... $ (44,878) $ (10,576) (55,454)
======== ========= ---------
</TABLE>
F-35
<PAGE> 203
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TCIC ACCUMULATED
TCI GREENVILLE/SPARTANBURG: INVESTMENT DEFICIT TOTAL
- ----------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
Balance at January 27, 1995.................... $ 242,652 $ 242,652
Increase in TCIC contribution.................. 6,484 6,484
Net loss....................................... (4,319) (4,319)
-------- --------- ---------
Balance at December 31, 1995................... $ 249,136 $ (4,319) 244,817
======== ========= ---------
Total combined equity at December 31, 1995... $ 37,249
=========
</TABLE>
On May 26, 1995, Holdings' Board of Directors approved (i) an increase in
the number of authorized shares of Holdings' common stock to 100,000,000 shares;
(ii) the issuance of up to 10,000,000 shares of Preferred Stock, par value of
$.01 per share, the rights, preferences and privileges of which to be determined
by the Board of Directors; and (iii) a 100,000 to 1 stock split in the form of a
stock dividend. As a result of the above actions, all share data included above
has been retroactively restated to give effect to these actions. At December 31,
1995, 10,000,000 shares of common stock were issued and outstanding and no
preferred stock was issued or outstanding.
11. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect the Previously Affiliated Entities and the
cable television industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 (the "1992 Act"), the
Telecommunications Act of 1996 (the "1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in connection with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and to require refunds received from the
date a complaint is filed in some circumstances or retroactively for up to one
year in other circumstances. Management believes it has made a fair
interpretation of the 1992 Act and related FCC regulations in determining
regulated cable television rates and other fees based on the information
currently available. However, complaints have been filed with the FCC on rates
for certain franchises and certain local franchise authorities have challenged
existing and prior rates. Further complaints and challenges could be
forthcoming, some of which could apply to revenue recorded in 1995. Management
believes, however, that the effect, if any, of these complaints and challenges
will not be material to the Previously Affiliated Entities' financial position
or results of operations.
Many aspects of regulation at the federal and local level are currently the
subject of judicial review and administrative proceedings. In addition, the FCC
is required to conduct rulemaking proceedings over the next several months to
implement various provisions of the 1996 Act. It is not possible at this time to
predict the ultimate outcome of these reviews or proceedings or their effect on
the Previously Affiliated Entities.
F-36
<PAGE> 204
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12. COMMITMENTS AND CONTINGENCIES
The Previously Affiliated Entities are committed to provide cable
television services under franchise agreements with remaining terms of up to
twenty-four years. Franchise fees of up to 5% of gross revenues are payable
under these agreements.
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. The Previously Affiliated Entities have entered into long-term
retransmission agreements with all applicable stations in exchange for in-kind
and/or other consideration.
The Previously Affiliated Entities are subject to litigation and other
claims in the ordinary course of business. In the opinion of management, the
ultimate outcome of any existing litigation or other claims will not have a
material adverse effect on the Previously Affiliated Entities' financial
condition or results of operations.
The Previously Affiliated Entities have entered into pole rental agreements
and lease certain of their facilities and equipment under non-cancelable
operating leases. Minimum rental commitments at December 31, 1995 for the next
five years and thereafter under these leases are as follows:
<TABLE>
<S> <C>
1996................................................ $ 695
1997................................................ 439
1998................................................ 161
1999................................................ 133
2000................................................ 125
Thereafter.......................................... 483
------
$2,036
======
</TABLE>
Rent expense, including pole rental agreements, was $1,756, $1,999, and
$2,856 for the years ended December 31, 1993, 1994 and 1995, respectively.
13. RELATED PARTY TRANSACTIONS
IP-V manages the business of Holdings for an annual management fee payable
in equal monthly installments. The annual management fee was $465 for each of
the years ended December 31, 1993 and 1994. Effective July 1, 1995, the annual
fee decreased to $200, resulting in fees of $333 for the full year of 1995.
Management fees payable of $77 and $40 are included in payable to affiliates at
December 31, 1994 and 1995, respectively.
InterMedia Capital Management, a California limited partnership ("ICM"), is
the general partner of IP. Beginning October 1994, ICM managed the business of
IPWT for an annual fee of $482. Included in payable to affiliates at December
31, 1994 and 1995 are $24 and $96, respectively, relating to the ICM annual fee.
InterMedia Management, Inc. ("IMI") is wholly owned by the managing general
partner of ICM and InterMedia Capital Management V, L.P., the general partners
of IP-V. IMI has entered into agreements with Holdings and IPWT to provide
accounting and administrative services at cost. During the years ended December
31, 1993, 1994 and 1995, administrative fees charged by IMI were $1,501, $2,566
and $3,009, respectively. Included in receivables from affiliates are advances
to IMI net of administrative fees charged by IMI and operating expenses paid by
IMI on behalf of Holdings and IPWT.
F-37
<PAGE> 205
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
IPWT payables to IP of $1,375 and $943 were outstanding at December 31,
1994 and 1995, respectively, primarily related to professional fees incurred by
IP on behalf of IPWT in connection with the acquisition of the West Tennessee
cable television system in 1990.
TCI and certain subsidiaries provide certain corporate general and
administrative services and are responsible for TCI Greenville/Spartanburg's
operations. Costs related to these services were allocated on a basis that is
intended to approximate TCI's incremental cost. The amount presented in the
combined statement of operations as management fees represents the allocated
expenses from January 27, 1995 to December 31, 1995. The amounts allocated by
TCI are not necessarily representative of the costs that TCI
Greenville/Spartanburg would have incurred as stand-alone systems.
As affiliates of TCI, the Previously Affiliated Entities are able to
purchase programming services from a subsidiary of TCI. Management believes that
the overall programming rates made available through this relationship are lower
than the Previously Affiliated Entities could obtain separately. The TCI
subsidiary is under no obligation to continue to offer such volume rates to the
Previously Affiliated Entities, and such rates may not continue to be available
in the future should TCI's ownership in the Previously Affiliated Entities
significantly decrease or if TCI or the programmers should otherwise decide not
to offer such participation to the Previously Affiliated Entities. TCI is also
an owner of ICP-IV, therefore the proposed transaction with ICP-IV is not
expected to affect the programming fees charged to the Previously Affiliated
Entities by the TCI affiliates (see Note 17). Programming fees charged by the
TCI subsidiary for the years ended December 31, 1993, 1994 and 1995 amounted to
$8,022, $11,127 and $19,545, respectively. Payable to affiliates includes
programming fees payable to the TCI subsidiary by Holdings and IPWT of $963 and
$1,045 at December 31, 1994 and 1995, respectively.
TCI Greenville/Spartanburg's contributed equity includes TCIC's funding of
current operations, as well as its initial contribution of capital. Interest
expense of $11,839 allocated by TCIC is based on actual interest costs incurred
by TCIC and, therefore, does not necessarily reflect the interest expense that
TCI Greenville/Spartanburg would have incurred on a stand alone basis. In
addition, certain of TCIC's debt is currently secured by the cash flows of
certain of its subsidiaries including TCI Greenville/Spartanburg.
Included in interest income is $2,182 of interest on Holdings' notes
receivable from affiliates in 1993.
14. INCOME TAXES
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Deferred federal tax benefit.............. $18,537 $16,192 $16,258
Deferred state tax benefit................ 3,119 2,828 1,244
------ ------ ------
$21,656 $19,020 $17,502
====== ====== ======
</TABLE>
F-38
<PAGE> 206
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred income taxes relate to temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Property and equipment................................. $ 12,757 $ 13,876
Intangible assets...................................... 17,082 125,762
Other.................................................. 638
------- --------
29,839 140,276
------- --------
Loss carryforwards..................................... (11,559) (23,570)
Other.................................................. (1,082) (1,545)
------- --------
(12,641) (25,115)
------- --------
$ 17,198 $115,161
======= ========
</TABLE>
At December 31, 1995, Holdings had net operating loss carryforwards for
federal income tax purposes aggregating $69,325 which expire through 2010.
Holdings is a loss corporation as defined in Section 382 of the Internal Revenue
Code. Therefore, if certain substantial changes in the Holdings' ownership
should occur, there could be a significant annual limitation on the amount of
loss carryforwards which can be utilized (see Note 17).
Holdings' management has not established a valuation allowance to reduce
the deferred tax assets related to its unexpired net operating loss
carryforwards. Due to an excess of appreciated asset value over the tax basis of
Holdings' net assets, management believes it is more likely than not that the
deferred tax assets related to the unexpired net operating losses will be
realized.
A reconciliation of the tax benefit computed at the statutory federal rate
and the tax benefit reported in the accompanying statements of operations is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Tax benefit at federal statutory rate......................... $27,177 $27,666 $21,844
Effect of non-taxable partnership loss........................ (5,644) (4,703) (1,001)
State taxes, net of federal benefit........................... 2,027 1,737 1,140
Goodwill amortization......................................... (3,355) (3,222) (2,914)
Other non-deductible expenses................................. (631)
Tax reserves and other........................................ 2,082 (2,458) (1,567)
------- ------- -------
$21,656 $19,020 $17,502
======= ======= =======
</TABLE>
15. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
During the years ended December 31, 1993, 1994 and 1995, the Previously
Affiliated Entities paid interest of approximately $34,296, $43,744 and $40,301,
respectively.
In conjunction with Holdings' acquisitions of cable television systems
during 1993, as described in Note 1, assets acquired and liabilities assumed
were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired............................. $ 79,951
Cash paid................................................. (78,344)
--------
Liabilities assumed....................................... $ 1,607
========
</TABLE>
16. EMPLOYEE BENEFIT PLAN
Holdings and IPWT participate in the InterMedia Partners Tax Deferred
Savings Plan, which covers all full-time employees who have completed at least
one year of employment. Such Plan provides for a base
F-39
<PAGE> 207
PREVIOUSLY AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
employee contribution of 1% and a maximum of 15% of compensation. Matching
contributions under such Plan are at the rate of 50% of the employee's
contributions, up to a maximum of 3% of compensation.
17. SUBSEQUENT EVENTS
ICP-IV is a newly created, affiliated entity, formed for the purpose of
acquiring cable television systems and consolidating various cable television
systems owned by other entities affiliated with the Previously Affiliated
Entities. ICP-IV has entered into contribution and purchase agreements with IP
and GECC, IPWT's parents; IP-V, Holdings' parent; and TCIC, TCI
Greenville/Spartanburg's parent. The agreements provide for (i) IP's and GECC's
contribution of their partnership interests in IPWT to ICP-IV in exchange for
limited partner interests in ICP-IV, (ii) IP-V's partial sale of Holdings to
ICP-IV, and (iii) TCIC's contribution of the assets of TCI
Greenville/Spartanburg to ICP-IV in exchange for a limited partner interest in
ICP-IV. The transactions contemplated by these agreements are expected to close
during the third quarter of 1996. Upon IP's and GECC's contribution of their
partnership interests in IPWT to ICP-IV, conditions will be met for an accrual
of approximately $3,000 of contingent interest under the terms of the loan
agreement with GECC and recognition of the remaining debt restructuring credit
as an extraordinary gain (see Note 9).
Because of TCI's continuing interest in Holdings, management does not
expect that the recapitalization of Holdings and the partial sale of the
recapitalized equity to ICP-IV will impair Holdings' ability to utilize its net
operating loss carryforwards.
18. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
In July and August, 1996, ICP IV closed the transactions contemplated by
the purchase and contribution agreements described in Note 17. As a result,
conditions have been met for the accrual by IPWT of approximately $3,000 of
contingent interest subsequently paid to GECC. In addition, ICP IV has made an
intercompany loan to RMH in an amount sufficient to repay all principal and
interest on its existing debt. Upon funding of the loan on July 30, 1996, RMH
repaid all amounts due on its outstanding debt. Accordingly, all outstanding
debt and related accrued interest as of June 30, 1996 have been presented as
non-current liabilities.
On August 1, 1996, Holdings sold a portion of its limited partner interest
in Hyperion of Tennessee which resulted in a gain of $286. Subsequent to the
sale, Holdings retained a 0.01% limited partner interest in Hyperion of
Tennessee. Holdings' commitments to fund additional capital contributions and
provide term loans to Hyperion of Tennessee have been reduced in proportion to
the reduction in its limited partner interest.
F-40
<PAGE> 208
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder
of Robin Media Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholder's deficit and of
cash flows present fairly, in all material respects, the financial position of
Robin Media Holdings, Inc. and its subsidiary at December 31, 1995 and 1994 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Francisco, California
June 28, 1996
F-41
<PAGE> 209
ROBIN MEDIA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 2,352 $ 1,832 $ 2,566
Accounts receivable, net of allowance for doubtful
accounts of $343, $392 and $206....................... 4,251 4,835 5,861
Receivable from affiliates.............................. 420 387 323
Prepaids................................................ 316 373 363
Inventory............................................... 1,505 2,751 4,382
Other current assets.................................... 93 223 571
--------- --------- ---------
Total current assets.......................... 8,937 10,401 14,066
Intangible assets, net.................................. 169,099 134,020 118,481
Property and equipment, net............................. 54,105 53,864 58,522
Investments............................................. 435 795 795
Note receivable......................................... 5,569
Deferred tax asset...................................... 4,777
Other assets............................................ 978 1,120 1,120
--------- --------- ---------
Total assets.................................. $ 239,123 $ 200,200 $ 197,761
========= ========= =========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Accounts payable and accrued liabilities................ $ 4,330 $ 5,817 $ 6,589
Deferred revenue........................................ 2,956 3,114 3,235
Payable to affiliates................................... 928 968 1,078
Accrued interest........................................ 8,646 9,043
--------- --------- ---------
Total current liabilities..................... 16,860 18,942 10,902
Accrued interest........................................ 8,721
Note payable to affiliate............................... 15,347
Long-term debt.......................................... 319,450 331,450 331,450
Deferred income taxes................................... 17,198 1,922
--------- --------- ---------
Total liabilities............................. 353,508 352,314 366,420
--------- --------- ---------
Commitments and contingencies
Shareholder's deficit:
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued
Common stock, $.01 par value; 100,000,000 shares
authorized, 10,000,000 shares issued and
outstanding........................................ 100 100 100
Additional paid-in capital............................ 10,498 10,498 10,498
Accumulated deficit................................... (124,983) (162,712) (179,257)
--------- --------- ---------
(114,385) (152,114) (168,659)
--------- --------- ---------
Total liabilities and shareholder's deficit... $ 239,123 $ 200,200 $ 197,761
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-42
<PAGE> 210
ROBIN MEDIA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and cable services............ $ 33,247 $ 42,910 $ 49,325 $ 24,244 $ 26,846
Pay services........................ 6,895 10,036 11,438 5,542 5,704
Other services...................... 4,397 6,347 6,050 2,809 3,109
-------- -------- -------- -------- --------
44,539 59,293 66,813 32,595 35,659
-------- -------- -------- -------- --------
Program fees........................ 7,099 10,667 12,620 6,139 6,978
Other direct expenses............... 6,168 7,887 8,358 4,157 4,380
Depreciation and amortization....... 55,316 57,562 47,514 23,882 21,336
Selling, general and administrative
expenses.......................... 9,397 12,623 14,904 7,265 7,669
Management and consulting fees...... 465 465 333 232 100
-------- -------- -------- -------- --------
78,445 89,204 83,729 41,675 40,463
-------- -------- -------- -------- --------
Loss from operations................ (33,906) (29,911) (16,916) (9,080) (4,804)
-------- -------- -------- -------- --------
Other income (expense):
Interest and other income......... 8,864 1,386 1,090 574 154
Gain (loss) on disposal of fixed
assets......................... (1,637) (1,344) (73) 11 (14)
Interest expense.................. (34,335) (35,545) (36,462) (18,438) (18,417)
Other expense..................... (508) (194) (644) (689) (163)
-------- -------- -------- -------- --------
(27,616) (35,697) (36,089) (18,542) (18,440)
-------- -------- -------- -------- --------
Loss before income tax benefit...... (61,522) (65,608) (53,005) (27,622) (23,244)
Income tax benefit.................. 21,656 19,020 15,276 7,806 6,699
-------- -------- -------- -------- --------
Net loss............................ $(39,866) $(46,588) $(37,729) $(19,816) $(16,545)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-43
<PAGE> 211
ROBIN MEDIA HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1992................... $100 $ 10,498 $ (38,529) $ (27,931)
Net loss....................................... (39,866) (39,866)
---- ------- --------- ---------
Balance at December 31, 1993................... 100 10,498 (78,395) (67,797)
Net loss....................................... (46,588) (46,588)
---- ------- --------- ---------
Balance at December 31, 1994................... 100 10,498 (124,983) (114,385)
Net loss....................................... (37,729) (37,729)
---- ------- --------- ---------
Balance at December 31, 1995................... 100 10,498 (162,712) (152,114)
Net loss (unaudited)........................... (16,545) (16,545)
---- ------- --------- ---------
Balance at June 30, 1996 (unaudited)........... $100 $ 10,498 $(179,257) $(168,659)
==== ======= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-44
<PAGE> 212
ROBIN MEDIA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................ $(39,866) $(46,588) $(37,729) $(19,816) $(16,545)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization........ 55,316 57,674 47,614 24,493 21,391
Loss on sale of note receivable...... 376 258
Loss (gain) on disposal of fixed
assets............................. 1,637 1,344 73 (11) 14
Gain on sale of investment........... (4,338)
Deferred income taxes................ (21,656) (19,020) (15,276) (7,806) (6,699)
Changes in assets and liabilities:
Accounts receivable................ (1,200) 129 (584) 45 (1,026)
Receivable from affiliates......... (135) (345) 33 (74) 64
Interest receivable................ (1,617) (726) 2,569 2,545
Prepaids........................... 106 11 (57) (51) 10
Inventory.......................... (275) (204) (1,246) 83 (1,631)
Other current assets............... (287) 194 (130) (69) (348)
Accounts payable and accrued
liabilities..................... 971 126 1,487 88 772
Deferred revenue................... 92 161 158 153 121
Payable to affiliates.............. (3,255) 334 40 22 457
Accrued interest 41 38 397 228 (322)
-------- -------- -------- -------- --------
Cash flows from operating activities...... (14,466) (6,872) (2,275) 88 (3,742)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..... (9,236) (11,156) (11,877) (4,475) (10,524)
Investments............................. 18,338 (435) (360) (240)
Collections of and proceeds from sale of
notes receivable..................... 40,459 17,764 2,624 2,624
Other assets and intangibles............ 64 (47) (621) (495)
Purchases of cable television systems... (78,344)
------- -------- -------- -------- --------
Cash flows from investing activities...... (28,719) 6,126 (10,234) (2,586) (10,524)
------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Activity on revolving credit note
payable.............................. 13,000 12,000 3,000
Note payable to affiliate............... 15,000
Debt issue costs........................ (308) (11) (566)
------- -------- -------- -------- --------
Cash flows from financing activities...... 12,692 11,989 2,434 15,000
------- -------- -------- -------- --------
Net change in cash and cash equivalents... (30,493) (746) (520) (64) 734
Cash and cash equivalents, beginning of
period.................................. 33,591 3,098 2,352 2,352 1,832
-------- -------- -------- -------- --------
Cash and cash equivalents, end of
period.................................. $ 3,098 $ 2,352 $ 1,832 $ 2,288 $ 2,566
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-45
<PAGE> 213
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. THE COMPANY AND BASIS OF PRESENTATION
Robin Media Holdings, Inc., a Nevada corporation (the "Company"), was
organized on August 27, 1991. On April 30, 1992, the Company commenced
operations with the acquisition of all the outstanding common stock of Robin
Media Group, Inc. ("RMG") from Jack Kent Cooke Incorporated. The Company is
wholly owned by InterMedia Partners V, L.P. ("IP-V"), a California limited
partnership. The Company's only asset is its investment in RMG and it had no
liabilities prior to April 1, 1996 (see Note 2). Therefore, the Company's
consolidated balance sheets for all periods presented reflect only RMG's assets
and liabilities and its consolidated statements of operations reflect only the
results of RMG's operations. RMG owns and operates cable television systems in
Tennessee and Georgia.
The Company's acquisition of RMG was structured as a leveraged transaction
and a significant portion of the assets acquired are intangible assets which are
being amortized on a straight-line basis over one to ten years. Therefore, as
was planned, the Company has incurred substantial book losses which have
resulted in a net shareholder's deficit. Of the cumulative pre-tax losses of
$232,240 since May 1, 1992, non-cash charges have aggregated $208,313. These
charges consist of $41,512 of depreciation of property and equipment, $161,901
of amortization of intangible assets, predominantly related to franchise rights
and goodwill, and $4,900 of equity in net loss of investments accounted for
under the equity method.
The Consolidated Balance Sheet as of June 30, 1996, the Consolidated
Statements of Operations for the six month periods ended June 30, 1995 and 1996
and the Consolidated Statements of Cash Flows for the six month periods ended
June 30, 1995 and 1996 have been prepared by the Company without audit. In the
opinion of Management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at June 30, 1996
and the results of operations and cash flows for the six months ended June 30,
1995 and 1996 have been made.
2. FINANCING PLAN
As discussed in Note 17, on April 1, 1996, the Company obtained from
InterMedia Capital Partners IV, L.P. ("ICP-IV"), an affiliated entity, a $15,000
loan which matures on September 30, 1996. Proceeds from the loan were used to
fund an additional equity contribution to RMG. RMG's debt agreements contain
restrictive covenants which preclude RMG from paying dividends or making any
distributions to the Company. Because of these restrictions, the Company will
not be able to repay the loan when due without additional funding from outside
sources.
IP-V has entered into an agreement with ICP-IV to sell, after
recapitalizing the Company, a portion of its equity interest in the Company.
ICP-IV is in the process of obtaining its initial equity contributions and debt
financing. Upon funding ICP-IV plans to make an intercompany loan to the Company
in an amount sufficient for the Company and RMG to repay all principal and
interest outstanding on its existing debt (see Note 18).
3. ACQUISITIONS
During 1993 RMG consummated the following acquisitions of cable television
properties:
<TABLE>
<CAPTION>
TOTAL
ACQUISITION
CABLE TELEVISION ASSETS ACQUISITION DATE COST
----------------------------------------------- ------------------ -----------
<S> <C> <C>
Royston, Georgia cable television assets of
Tritek--Southern Communications, Ltd......... February 26, 1993 $ 1,791
Middle Tennessee cable television assets of
Daniels Communications Partners Limited...... March 22, 1993 23,499
Middle Tennessee cable television assets of
American Cable TV Investors 3................ December 1, 1993 53,054
-------
$78,344
=======
</TABLE>
F-46
<PAGE> 214
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The acquisitions of cable television properties noted above were accounted
for as purchases and results of operations have been included only since the
dates of acquisition. RMG's costs to acquire these properties have been
allocated to tangible and intangible assets as follows:
<TABLE>
<S> <C>
Cash paid on closing............................................... $78,016
Other acquisition costs............................................ 328
-------
Total acquisition costs............................................ 78,344
Liabilities assumed................................................ 1,607
Costs assigned to tangible assets.................................. (24,073)
-------
Costs attributable to intangible assets............................ $55,878
=======
</TABLE>
Had the 1993 acquisitions been completed as of January 1, 1993, revenues
and net loss for the year ended December 31, 1993 would have been $56,437 and
$44,148, respectively, (unaudited).
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary RMG. All intercompany accounts and transactions
have been eliminated.
Cash equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Revenue recognition
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
Inventory
Inventory consists primarily of supplies and is stated at the lower of cost
or market determined by the first-in, first-out method.
Property and equipment
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Gains and
losses from disposals and retirements are included in earnings. Capitalized
plant is written down to recoverable values whenever recoverability through
operations or sale of the system becomes doubtful.
F-47
<PAGE> 215
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Cable television plant............................... 5-10
Buildings and improvements........................... 10
Furniture and fixtures............................... 3-7
Equipment and other.................................. 3-10
</TABLE>
Intangible assets
RMG has franchise rights to operate cable television systems in various
towns and political subdivisions. Franchise rights are being amortized on a
straight-line basis over the lesser of the remaining lives of the franchises or
the base ten-year term of IP-V which expires on December 31, 2002. Remaining
franchise lives range from one to seventeen years.
Goodwill represents the excess of acquisition cost over the fair value of
net tangible and franchise assets acquired and liabilities assumed and is being
amortized on a straight-line basis over the ten-year term of IP-V.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the system becomes doubtful. Each
year, the Company evaluates the recoverability of the carrying value of its
intangible assets by assessing whether the projected cash flows, including
projected cash flows from sale of the systems, is sufficient to recover the
unamortized cost of these assets.
Debt issue costs are being amortized over the term of the related debt.
Debt issue costs of $347 and $358 are stated net of accumulated amortization of
$119 and $231 at December 31, 1994 and 1995, respectively.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Accounts payable........................................... $ 477 $ 179
Accrued program costs...................................... 260 315
Accrued franchise fees..................................... 1,346 1,615
Other accrued liabilities.................................. 2,247 3,708
------ ------
$4,330 $5,817
====== ======
</TABLE>
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-48
<PAGE> 216
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Franchise rights....................................... $202,566 $202,573
Goodwill............................................... 92,515 92,978
Other.................................................. 350 370
-------- --------
295,431 295,921
Accumulated amortization............................... (126,332) (161,901)
-------- --------
$169,099 $134,020
======== ========
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Land................................................... $ 401 $ 407
Cable television plant................................. 73,135 81,667
Buildings and improvements............................. 644 659
Furniture and fixtures................................. 1,211 1,391
Equipment and other.................................... 4,301 5,251
Construction in progress............................... 2,517 4,035
--------- ---------
82,209 93,410
Accumulated depreciation............................... (28,104) (39,546)
--------- ---------
$ 54,105 $ 53,864
========= =========
</TABLE>
7. INVESTMENTS
RMG has a 49% limited partnership interest in InterMedia Partners II, L.P.
("IP-II"), an affiliated entity, which is accounted for under the equity method.
RMG's original investment in IP-II was reduced to zero in 1992 as a result of
its equity in the net loss of IP-II. The Company received distributions from
IP-II of $417 and $406 for the years ended December 31, 1994 and 1995,
respectively, which are included in interest and other income in the
accompanying Consolidated Statements of Operations.
RMG has a 15% limited partner interest in AVR of Tennessee, L.P., doing
business as Hyperion of Tennessee, which is accounted for under the cost method.
During 1994 and 1995, RMG contributed $435 and $360, respectively, to Hyperion
of Tennessee. RMG is committed to fund additional capital contributions to
Hyperion of Tennessee of $755 and to make term loan advances to Hyperion of
Tennessee. The term loan advances are required to fund leasing arrangements for
access to fiber optic distribution owned by the respective partners. Management
does not believe commitments for the term loan advances will be significant.
On October 6, 1993, RMG's investment in a preferred limited partner
interest, acquired prior to the Company's acquisition of RMG, was redeemed by
the investee for $18,338, resulting in a gain of $4,338.
F-49
<PAGE> 217
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. NOTES RECEIVABLE
Notes receivable were issued to RMG in connection with previous sales of
cable television systems. In June 1995, RMG sold its only remaining note
receivable including related accrued interest. At the time of the sale the note
had a balance of $5,980 which included $411 of interest earned in 1995. The sale
of the note resulted in a loss of $376 which is included in other expense.
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Revolving credit note payable, $30,000 commitment,
interest at LIBOR plus 1.5% payable quarterly,
due February 28, 1997................................ $ 13,000 $ 25,000
11 1/8% senior subordinated notes, interest payable
semi-annually, due April 1, 1997..................... 271,400 271,400
11 5/8% subordinated debentures, interest payable
semi-annually, due April 1, 1999..................... 35,050 35,050
-------- --------
$319,450 $331,450
======== ========
</TABLE>
RMG's bank revolving credit agreement provides $30,000 of available credit
and expires on February 28, 1997. Borrowings under the revolving credit
agreement generally bear interest either at the bank's reference rate plus 0.5%
or at LIBOR plus 1.5% and are secured by the stock of RMG. Interest on
outstanding borrowings is payable quarterly. At December 31, 1995, the interest
rate on the revolving credit agreement was 7.5% (see Note 18).
The revolving credit agreement requires RMG to pay a commitment fee of
0.375% per year, payable quarterly, on the unused portion of available credit.
In addition, the agreement contains certain restrictive covenants on the Company
and RMG, including limitations on the payment of dividends. RMG's obligations
under the credit agreement are guaranteed by the Company.
The 11 1/8% senior subordinated notes (the "Notes") are redeemable at the
option of RMG, in whole or in part, at a current redemption price of 101.0% of
the principal amount, together with accrued interest. The redemption price will
decline to 100% of the principal amount at April 1, 1997 (see Note 18).
The 11 5/8% subordinated debentures (the "Debentures") are redeemable at
the option of RMG, in whole or in part, at a current redemption price of 101.4%
of the principal amount, together with accrued interest. The redemption price
will decline to 100% of the principal amount at April 1, 1997 (see Note 18).
The Debentures and the Notes are subordinated to the bank debt, and the
Debentures are subordinated to the Notes. The indentures with respect to the
Notes and the Debentures contain restrictive covenants on RMG, including
limitations on dividends, additional debt and mergers and acquisitions.
Annual maturities of long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1997.............................................. $296,400
1998..............................................
1999.............................................. 35,050
--------
$331,450
========
</TABLE>
F-50
<PAGE> 218
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Based on quoted market prices from recent limited trading of the Notes and
Debentures, their fair value approximates their recorded value. Management also
believes that the fair value of the bank debt outstanding at variable interest
rates approximates its recorded value.
10. COMMON STOCK
On May 26, 1995, the Company's Board of Directors approved (i) an increase
in the number of authorized shares of the Company's common stock to 100,000,000
shares; (ii) the issuance of up to 10,000,000 shares of Preferred Stock, par
value of $.01 per share, the rights, preferences and privileges of which are to
be determined by the Board of Directors; and (iii) a 100,000 to 1 stock split in
the form of a stock dividend. As a result of the above actions, all share and
per share data included in the consolidated financial statements has been
retroactively restated to give effect to these actions.
11. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect RMG and the cable television industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in connection with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and require refunds measured from the date a
complaint is filed in some circumstances or retroactively for up to one year in
other circumstances. Management believes it has made a fair interpretation of
the 1992 Act and related FCC regulations in determining regulated cable
television rates and other fees based on the information currently available.
However, complaints have been filed with the FCC on rates for certain franchises
and certain local franchise authorities have challenged existing and prior
rates. Further complaints and challenges could be forthcoming, some of which
could apply to revenue recorded in 1995. Management believes, however, that the
effect, if any, of these complaints and challenges will not be material to the
Company's financial position or results of operations.
Many aspects of regulation at the federal and local level are currently the
subject of judicial review and administrative proceedings. In addition, the FCC
is required to conduct rulemaking proceedings over the next several months to
implement various provisions of the 1996 Act. It is not possible at this time to
predict the ultimate outcome of these reviews or proceedings or their effect on
the Company.
12. COMMITMENTS AND CONTINGENCIES
RMG is committed to provide cable television services under franchise
agreements with remaining terms of up to seventeen years. Franchise fees of up
to 5% of gross revenues are payable under these agreements.
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. RMG has entered into long-term retransmission agreements with all
applicable stations in exchange for in-kind and/or other consideration.
F-51
<PAGE> 219
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company is subject to litigation and other claims in the ordinary
course of business. In the opinion of management, the ultimate outcome of any
existing litigation or other claims will not have a material adverse effect on
the Company's financial condition or results of operations.
RMG has entered into pole rental agreements and leases certain of its
facilities and equipment under noncancelable operating leases. Minimum rental
commitments at December 31, 1995 for the next five years and thereafter under
these leases are as follows:
<TABLE>
<S> <C>
1996................................................ $ 537
1997................................................ 334
1998................................................ 118
1999................................................ 114
2000................................................ 110
Thereafter.......................................... 458
------
$1,671
======
</TABLE>
Rent expense, including pole rental agreements, was $1,339, $1,612, and
$1,821 for the years ended December 31, 1993, 1994 and 1995, respectively.
13. RELATED PARTY TRANSACTIONS
IP-V manages the business of RMG for an annual management fee payable in
equal monthly installments. During 1993 and 1994, the annual management fee was
$465. Effective July 1, 1995, the annual fee decreased to $200, resulting in
fees of $333 for the full year of 1995. Management fees payable of $77 and $40
are included in payable to affiliates at December 31, 1994 and 1995,
respectively.
InterMedia Management, Inc. ("IMI") is wholly owned by the managing general
partner of InterMedia Capital Management V, L.P. IMI has entered into an
agreement with RMG to provide accounting and administrative services at cost.
During the years ended December 31, 1993, 1994 and 1995, administrative fees
charged by IMI were $1,109, $2,000 and $2,385, respectively. Receivables from
affiliates represent advances to IMI net of administration fees charged by IMI
and operating expenses paid by IMI on behalf of RMG.
As an affiliate of TCI, RMG is able to purchase programming services from a
subsidiary of TCI. Management believes that the overall programming rates made
available through this relationship are lower than RMG could obtain separately.
The TCI subsidiary is under no obligation to continue to offer such volume rates
to RMG, and such rates may not continue to be available in the future should
TCI's ownership in RMG significantly decrease or if TCI or the programmers
should otherwise decide not to offer such participation to RMG (see Note 17).
Programming fees charged by the TCI subsidiary for the years ended December 31,
1993, 1994 and 1995 amounted to $5,979, $8,977 and $10,206, respectively.
Payable to affiliates includes programming fees payable to the TCI subsidiary of
$784 and $836 at December 31, 1994 and 1995, respectively.
Included in interest income is $2,182 of interest on notes receivable from
affiliates in 1993.
Also see Note 17 -- Subsequent Events.
F-52
<PAGE> 220
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
14. INCOME TAXES
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Deferred federal tax benefit.................. $18,537 $16,192 $14,324
Deferred state tax benefit.................... 3,119 2,828 952
------- ------- -------
$21,656 $19,020 $15,276
======= ======= =======
</TABLE>
Deferred income taxes relate to temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Property and equipment............................... $ 12,757 $ 10,461
Intangible assets.................................... 17,082 16,412
-------- -------
29,839 26,873
-------- -------
Loss carryforwards................................... (11,559) (23,570)
Other................................................ (1,082) (1,381)
-------- -------
(12,641) (24,951)
-------- -------
$ 17,198 $ 1,922
======== =======
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes aggregating $69,325 which expire through 2010. The
Company is a loss corporation as defined in section 382 of the Internal Revenue
Code. Therefore, if certain substantial changes in the Company's ownership
should occur, there could be a significant annual limitation on the amount of
loss carryforwards which can be utilized (see Note 17).
The Company's management has not established a valuation allowance to
reduce the deferred tax assets related to its unexpired net operating loss
carryforwards. Due to an excess of appreciated asset value over the tax basis of
the Company's net assets, management believes it is more likely than not that
the deferred tax assets related to the unexpired net operating losses will be
realized.
A reconciliation of the tax benefit computed at the statutory federal rate
and the tax benefit reported in the accompanying statements of operations is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Tax benefit at federal statutory rate....... $21,533 $22,963 $18,552
State taxes, net of federal benefit......... 2,027 1,737 950
Goodwill amortization....................... (3,355) (3,222) (2,914)
Other non-deductible expenses............... (631)
Tax reserves and other...................... 2,082 (2,458) (1,312)
------- ------- -------
$21,656 $19,020 $15,276
======= ======= =======
</TABLE>
F-53
<PAGE> 221
ROBIN MEDIA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
15. SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH FLOWS
During the years ended December 31, 1993, 1994 and 1995, the Company paid
interest of approximately $34,294, $35,395 and $35,965, respectively.
In conjunction with acquisitions of cable television systems during 1993,
assets acquired and liabilities assumed were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired........................... $ 79,951
Cash paid............................................... (78,344)
--------
Liabilities assumed..................................... $ 1,607
========
</TABLE>
16. EMPLOYEE BENEFIT PLAN
The Company participates in the InterMedia Partners Tax Deferred Savings
Plan, which covers all full-time employees who have completed at least one year
of employment. Such Plan provides for a base employee contribution of 1% and a
maximum of 15% of compensation. The Company's matching contributions under the
Plan are at the rate of 50% of the employee's contributions, up to a maximum of
3% of compensation.
17. SUBSEQUENT EVENTS
ICP-IV is a newly created, affiliated entity, formed for the purpose of
acquiring cable television systems and consolidating various cable television
systems owned by other affiliated entities. ICP-IV is in the process of
obtaining its initial equity contributions and debt financing. ICP-IV has
entered into a purchase agreement with IP-V to purchase a portion of the
Company. The transaction contemplated by this agreement is expected to close
during the third quarter of 1996.
Because of TCI's continuing interest in Holdings, management does not
expect that the partial sale of Holdings to ICP-IV will impair Holding's ability
to utilize its net operating loss carryforwards (see Note 14) or to take
advantage of the favorable programming rates available through its relationship
with TCI (see Note 13).
On April 1, 1996, the Company obtained a $15,000 loan from ICP-IV, which is
due September 30, 1996. The loan proceeds were used to fund an additional equity
contribution to RMG, which it used to pay interest on its Notes and Debentures
on April 1, 1996.
18. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
On July 30, 1996, ICP IV purchased a portion of the Company and has made an
intercompany loan to the Company in an amount sufficient to repay all principal
and interest on the Company's outstanding debt. Upon funding on July 30, 1996 of
the loan, the Company repaid all amounts due on its outstanding debt.
Accordingly, all outstanding debt and related accrued interest as of June 30,
1996 have been presented as non-current liabilities (see Note 17).
On August 1, 1996, the Company sold a portion of its limited partner
interest in Hyperion of Tennessee which resulted in a gain of $286. Subsequent
to the sale, the Company retained a 0.01% limited partner interest in Hyperion
of Tennessee. The Company's commitments to fund additional capital contributions
and provide term loans to Hyperion of Tennessee have been reduced in proportion
to the reduction in its limited partner interest.
F-54
<PAGE> 222
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of InterMedia Partners
of West Tennessee, L.P.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in partners' capital and of cash flows present fairly,
in all material respects, the financial position of InterMedia Partners of West
Tennessee, L.P. at December 31, 1995 and 1994, 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. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Francisco, California
April 15, 1996
F-55
<PAGE> 223
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 898 $ 1,115 $ 865
Accounts receivable, net of allowance for doubtful
accounts of $39, $33 and $48............................ 1,324 924 929
Receivable from affiliates................................ 63 24 100
Prepaids.................................................. 36 18 13
Inventory................................................. 214 189 159
------- ------- -------
Total current assets............................ 2,535 2,270 2,066
Intangible assets, net.................................... 20,463 14,930 12,790
Property and equipment, net............................... 12,993 11,344 10,635
Other assets.............................................. 44 46 46
------- ------- -------
Total assets.................................... $ 36,035 $ 28,590 $ 25,537
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current portion of long-term debt......................... $ 3,882 $ 4,043 $
Accounts payable and accrued liabilities.................. 1,132 1,119 980
Deferred revenue.......................................... 844 849 882
Payable to affiliates..................................... 1,613 1,264 1,246
Accrued interest.......................................... 988 1,043
------- ------- -------
Total current liabilities....................... 8,459 8,318 3,108
Accrued interest.......................................... 665
Long-term debt............................................ 80,168 75,726 77,546
------- ------- -------
Total liabilities............................... 88,627 84,044 81,319
------- ------- -------
Commitments and contingencies
PARTNERS' CAPITAL
General partner........................................... (42,585) (44,878) (45,140)
Limited partner........................................... (10,007) (10,576) (10,642)
------- ------- -------
Total partners' capital................................... (52,592) (55,454) (55,782)
------- ------- -------
Total liabilities and partners' capital......... $ 36,035 $ 28,590 $ 25,537
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-56
<PAGE> 224
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------------- ------------------
1993 1994 1995 1995 1996
-------- -------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and cable services................ $ 9,891 $ 9,919 $10,830 $ 5,409 $5,809
Pay services............................ 1,804 2,007 2,263 1,117 1,109
Other services.......................... 1,451 1,830 1,851 933 862
-------- -------- ------- ------- ------
13,146 13,756 14,944 7,459 7,780
-------- -------- ------- ------- ------
Program fees............................ 2,277 2,522 2,980 1,493 1,613
Other direct expenses................... 1,633 1,936 1,897 901 1,014
Depreciation and amortization........... 11,624 10,654 8,501 4,659 3,401
Selling, general and administrative
expenses.............................. 3,017 3,229 3,504 1,823 1,836
Management and consulting fees.......... 120 482 241 241
-------- -------- ------- ------- ------
18,551 18,461 17,364 9,117 8,105
-------- -------- ------- ------- ------
Loss from operations.................... (5,405) (4,705) (2,420) (1,658) (325)
-------- -------- ------- ------- ------
Other income (expense):
Gain (loss) on disposal of fixed
assets............................. (330) (57) 10 16
Interest expense...................... (10,425) (8,733) (534) (277) (68)
Other income.......................... 34 56 82 44 65
-------- -------- ------- ------- ------
(10,721) (8,734) (442) (217) (3)
-------- -------- ------- ------- ------
Net loss................................ $(16,126) $(13,439) $(2,862) $(1,875) $ (328)
======== ======== ======= ======= ======
Net loss allocation
General partner....................... $(14,352) $(10,765) $(2,293) $(1,502) $ (262)
Limited partner....................... (1,774) (2,674) (569) (373) (66)
-------- -------- ------- ------- ------
$(16,126) $(13,439) $(2,862) $(1,875) $ (328)
======== ======== ======= ======= ======
</TABLE>
See accompanying notes to the financial statements.
F-57
<PAGE> 225
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNER TOTAL
-------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1992............................... $(40,831) $ (5,046) $(45,877)
Net loss................................................... (14,352) (1,774) (16,126)
-------- -------- --------
Balance at December 31, 1993............................... (55,183) (6,820) (62,003)
Additional capital contributions........................... 17,844 5,006 22,850
Adjustment to reallocate losses in connection
with the debt restructuring (see Note 5)................. 5,519 (5,519)
Net loss................................................... (10,765) (2,674) (13,439)
-------- -------- --------
Balance at December 31, 1994............................... (42,585) (10,007) (52,592)
Net loss................................................... (2,293) (569) (2,862)
-------- -------- --------
Balance at December 31, 1995............................... (44,878) (10,576) (55,454)
Net loss (unaudited)....................................... (262) (66) (328)
-------- -------- --------
Balance at June 30, 1996 (unaudited)....................... $(45,140) $(10,642) $(55,782)
======== ======== ========
</TABLE>
See accompanying notes to the financial statements.
F-58
<PAGE> 226
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................. $(16,126) $(13,439) $(2,862) $(1,875) $ (328)
Adjustments to reconcile net loss to
cash flows from operating
activities:
Depreciation and amortization..... 11,806 10,970 8,525 4,671 3,413
Loss (gain) on disposal of fixed
assets.......................... 330 57 (10)
Changes in assets and liabilities:
Accounts receivable............. (636) (584) 400 446 (5)
Receivable from affiliates...... (4,235) 8,493 39 (90) (76)
Prepaids........................ 225 (4) 18 11 5
Inventory....................... (31) (12) 25 17 30
Other assets.................... (2) (17) (2)
Accounts payable and accrued
liabilities.................. 318 (10) (13) (233) (139)
Deferred revenue................ 541 41 5 17 33
Payable to affiliates........... (151) 1,197 (349) (424) (18)
Accrued interest and debt
restructuring credit......... 10,241 68 (3,826) (1,880) (2,400)
-------- -------- ------- ------- -------
Cash flows from operating activities... 2,280 6,760 1,950 660 515
-------- -------- ------- ------- -------
Cash flows from investing activities:
Purchases of property and
equipment......................... (2,098) (1,276) (1,370) (748) (564)
Proceeds from sale of property and
equipment......................... 44
Other assets......................... (21) 21 (1)
-------- -------- ------- ------- -------
Cash flows from investing activities... (2,119) (1,255) (1,326) (749) (564)
-------- -------- ------- ------- -------
Cash flows from financing activities:
Activity on revolving credit note
payable........................... (2,600) (400) (201)
Debt issue costs..................... (161) (7) (7)
Repayment on long-term debt.......... (22,073)
Capital contributions................ 20,050
-------- -------- ------- ------- -------
Cash flows from financing activities... (4,784) (407) (7) (201)
-------- -------- ------- ------- -------
Net change in cash and cash
equivalents.......................... 161 721 217 (96) (250)
Cash and cash equivalents, beginning of
period............................... 16 177 898 898 1,115
-------- -------- ------- ------- -------
Cash and cash equivalents, end of
period............................... $ 177 $ 898 $ 1,115 $ 802 $ 865
======== ======== ======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-59
<PAGE> 227
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. THE COMPANY AND BASIS OF PRESENTATION
InterMedia Partners of West Tennessee, L.P. (the "Partnership"), a
California limited partnership, was formed on April 11, 1990 for the purpose of
investing in and operating cable television properties. The Company owns and
operates cable television properties located in Tennessee.
Under the terms of the original partnership agreement, InterMedia Partners,
a California limited partnership ("IP"), was the sole general partner, owning an
89% interest in the Partnership. The limited partners were IP and Robin Cable
Systems of Tucson, an Arizona limited partnership ("Robin-Tucson"), holding
interests in the Partnership of 10% and 1%, respectively.
On September 11, 1990 the Partnership acquired the Western Tennessee
properties of U.S. Cable Partners, LP and its affiliates. Funding for this
acquisition was provided by General Electric Capital Corporation ("GECC") in the
form of a senior subordinated loan.
On October 3, 1994, IP sold its interest in Robin-Tucson to an affiliate of
Tele-Communications, Inc. ("TCI"). IP contributed additional capital of $20,050
from the net sales proceeds and the Partnership repaid $30,375 of the senior
subordinated loan to GECC including accrued interest. Under an Amended and
Restated Agreement of Limited Partnership entered into on October 3, 1994, GECC
converted $2,800 of its loan into a limited partnership interest in the
Partnership, and restructured the remaining balance of the loan (see Note 5).
Under the revised partnership agreement IP has an 80.1% general partner and 9.9%
limited partner interest, and GECC has a 10% limited partner interest. Losses
incurred prior to October 3, 1994 were reallocated between the general and
limited partners based upon the change in ownership percentage resulting from
the restructuring.
The Partnership's acquisition of the West Tennessee cable television
properties was structured as a leveraged transaction and a significant portion
of the assets acquired were intangible assets which are being amortized over one
to ten years. Therefore, as was planned, the Partnership has incurred
substantial book losses, resulting in negative partners' capital. Of the
cumulative losses since inception of $78,304, non-cash charges aggregated
$67,123. These charges consisted of $45,549 of amortization of intangibles,
predominantly related to franchise rights, $21,140 of depreciation of property
and equipment, and $434 of loss on disposal of fixed assets. While the
Partnership expects to incur significant book losses during 1996 and beyond,
management believes cash flows from operations and presently available borrowing
arrangements will be adequate to meet funding requirements.
The Balance Sheet as of June 30, 1996, the Statements of Operations for the
six month periods ended June 30, 1995 and 1996 and the Statements of Cash Flows
for the six month periods ended June 30, 1995 and 1996 have been prepared by the
Partnership without audit. In the opinion of Management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position at June 30, 1996 and the results of operations and cash flows
for the six months ended June 30, 1995 and 1996 have been made.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents
The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Revenue recognition
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue represents revenue billed
in advance and deferred until cable service is provided.
Inventory
Inventory consists primarily of supplies and is stated at the lower of cost
or market determined by the first-in, first-out method.
F-60
<PAGE> 228
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Property and equipment
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Gains and
losses from disposals and retirements are included in earnings. Capitalized
plant is written down to recoverable values whenever recoverability through
operations or sale of the system becomes doubtful.
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Cable television plant................................ 5-10
Buildings and improvements............................ 10
Furniture and fixtures................................ 3-7
Equipment and other................................... 3-10
</TABLE>
Intangible assets
The Partnership has franchise rights to operate cable television systems in
various towns and political subdivisions. Franchise rights are being amortized
on a straight-line basis over the lesser of the remaining lives of the
franchises or the base ten-year term of the IP partnership agreement which
expires in July 1998. Remaining franchise lives range from one to nineteen
years.
Goodwill represents the excess of acquisition cost over the fair value of
net tangible and franchise assets acquired and liabilities assumed and is being
amortized on a straight-line basis over the ten-year term of IP.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the system becomes doubtful. Each
year, the Partnership evaluates the recoverability of the carrying value of its
intangible assets by assessing whether the projected cash flows, including
projected cash flows from sale of the systems, is sufficient to recover the
unamortized cost of these assets.
Debt issue costs are being amortized over the terms of the related debt.
Debt issue costs of $145 and $152 are stated net of accumulated amortization of
$5 and $29 at December 31, 1994 and 1995, respectively.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------ ------
<S> <C> <C>
Accounts payable........................................... $ 72 $ 14
Accrued program costs...................................... 85 43
Accrued franchise fees..................................... 225 208
Other accrued liabilities.................................. 750 854
------ ------
$1,132 $1,119
====== ======
</TABLE>
Income taxes
No provision or benefit for income taxes is reported in the accompanying
financial statements because, as a partnership, the tax effects of the
Partnership's results of operations accrue to the partners. The Partnership
F-61
<PAGE> 229
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
is registered with the Internal Revenue Service as a tax shelter under Internal
Revenue Code Section 6111(b).
Allocation of profits and losses
In accordance with the terms of the Partnership's partnership agreement,
profits and losses generally are allocated proportionately with each partner's
percentage interest in the Partnership. The percentage interest of the general
partner is 80.1%, and that of the limited partners is 19.9%.
Reclassifications
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform to the 1995 presentation.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Franchise rights..................................... $ 48,610 $ 48,610
Goodwill and other assets............................ 10,905 10,912
-------- --------
59,515 59,522
Accumulated amortization............................. (39,052) (44,592)
-------- --------
$ 20,463 $ 14,930
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Land................................................. $ 138 $ 138
Cable television plant............................... 28,235 28,742
Buildings and improvements........................... 194 207
Furniture and fixtures............................... 265 292
Equipment and other.................................. 1,743 1,971
Construction in progress............................. 73 105
-------- --------
30,648 31,455
Accumulated depreciation............................. (17,655) (20,111)
-------- --------
$ 12,993 $ 11,344
======== ========
</TABLE>
F-62
<PAGE> 230
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
GECC revolving credit; $7,000 commitment; interest payable quarterly at
prime plus 1% or LIBOR plus 2% per annum; matures June 30, 2001...... $ 2,400 $ 2,000
GECC term loan payable; interest payable quarterly at 7% per annum on
$27,000 and at prime plus 1% or LIBOR plus 2% per annum on $27,000;
matures June 30, 2001................................................ 54,000 54,000
Debt restructuring credit.............................................. 27,650 23,769
------- -------
Total debt and debt restructuring credit............................... 84,050 79,769
Less current portion................................................... 3,882 4,043
------- -------
$80,168 $75,726
======= =======
</TABLE>
Annual maturities of long-term debt for the next five years and thereafter
are as follows:
<TABLE>
<S> <C>
1996..................................................... $ 4,043
1997..................................................... 4,132
1998..................................................... 4,423
1999..................................................... 4,502
2000..................................................... 4,469
Thereafter............................................... 58,200
-------
$79,769
=======
</TABLE>
On October 3, 1994, in connection with the sale of Robin-Tucson, the
Partnership restructured its subordinated loan payable to GECC. Under the terms
of the restructuring, GECC reduced the face amount of the debt outstanding to
$59,000. Because the total estimated future payments on the restructured debt
exceeded the carrying amount of the debt at the time of restructuring, no gain
has been recognized on the debt restructuring and no adjustments have been made
to the carrying amount of the Partnership's debt. The difference of $28,570
between the $59,000 refinanced and the amount of the note at the time of the
restructuring was recorded as a debt restructuring credit. A portion of future
debt service payments will be recorded as reductions of the remaining debt
restructuring credit of $23,769 at December 31, 1995.
At December 31, 1995, $56,000 is outstanding under the Amended and Restated
Loan Agreement with GECC which provides for a revolving credit facility in the
amount of $7,000 and term loans in the aggregate amount of $54,000. Borrowings
outstanding under the revolving credit facility and the term loans generally
bear interest either at the prime rate plus 1% or LIBOR plus 2% and mature on
June 30, 2001. On $27,000 of borrowings outstanding under the term loans, the
interest rate is fixed at 7%, per annum until October 3, 1997 when such
borrowings become available under the variable interest rate options just
described.
Interest periods corresponding to interest rate options are generally
specified as one, two or three months for LIBOR loans. The loan agreement
requires quarterly interest payments, or more frequent interest payments if a
shorter period is selected under the LIBOR option, and quarterly payments of .5%
per annum on the unused commitment.
The loan agreement provides for contingent interest payments generally at
11.11% of excess cash flow, as defined. Contingent interest payments may be
required upon sale of either the West Tennessee system or the partnership
interest in the Partnership. No contingent interest has been accrued as of
December 31, 1995 (see Note 11) (see Note 12).
F-63
<PAGE> 231
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Excess cash flow for each year, after provision for contingent interest
payments, if any, must be used to prepay borrowings under the loan agreement.
Optional prepayments under the term loan permanently reduce borrowings
outstanding and may be made without penalty. Amounts outstanding under the
revolving credit facility and the term loan are secured by the assets of the
Partnership.
The loan agreements include covenants which restrict the borrower's ability
to encumber assets, make investments or distributions, retire partnership
interests, pay management fees currently, incur or guarantee additional
indebtedness and purchase or sell assets. The loan agreements include financial
covenants which require minimum interest and debt coverage ratios, require
minimum cash flows and specify maximum debt to cash flow ratios.
The Partnership has approximately $29,000 of debt outstanding at variable
interest rates. Management believes that the fair value of this debt
approximates its recorded value. Management estimates that the 7% stated rate
for fixed rate debt outstanding of $27,000 under the GECC term loan is
approximately 1% lower than the current market rate.
6. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect the Partnership and the cable television
industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in connection with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and require refunds measured from the date a
complaint is filed in some circumstances or retroactively for up to one year in
other circumstances. Management believes it has made a fair interpretation of
the 1992 Act and related FCC regulations in determining regulated cable
television rates and other fees based on the information currently available. No
complaints have been filed with the FCC on rates for expanded basic services and
local franchise authorities have not challenged existing and prior rates.
Complaints and challenges could be forthcoming, some of which could apply to
revenue recorded in 1995. Management believes, however, that the effect, if any,
of such complaints and challenges will not be material to the Partnership's
financial position or results of operations.
Many aspects of regulation at the federal and local level are currently the
subject of judicial review and administrative proceedings. In addition, the FCC
is required to conduct rulemaking proceedings over the next several months to
implement various provisions of the 1996 Act. It is not possible at this time to
predict the ultimate outcome of these reviews or proceedings or their effect on
the Partnership.
F-64
<PAGE> 232
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. COMMITMENTS AND CONTINGENCIES
The Partnership is committed to provide cable television services under
franchise agreements with remaining terms of up to twenty-four years. Franchise
fees of up to 5% of gross revenues are payable under these agreements.
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. The Partnership has entered into long-term retransmission agreements
with all applicable stations in exchange for in-kind and/or other consideration.
The Partnership is subject to litigation and other claims in the ordinary
course of business. In the opinion of management, the ultimate outcome of any
existing litigation or other claims will not have a material adverse effect on
the Partnership's financial condition or results of operations.
The Partnership has entered into pole rental agreements and leases certain
of its facilities and equipment under non-cancelable operating leases. Minimum
rental commitments at December 31, 1995 for the next five years and thereafter
under these leases are as follows:
<TABLE>
<S> <C>
1996.......................................................... $ 63
1997.......................................................... 41
1998.......................................................... 25
1999.......................................................... 19
2000.......................................................... 15
Thereafter.................................................... 25
----
$188
====
</TABLE>
Rent expense, including pole rental agreements, was $417, $387 and $525 for
the years ended December 31, 1993, 1994 and 1995, respectively.
8. RELATED PARTY TRANSACTIONS
InterMedia Capital Management, a California limited partnership ("ICM"), is
the general partner of IP. Beginning October 1994, ICM managed the business of
the Partnership for an annual fee of $482. Included in payable to affiliates at
December 31, 1994 and 1995 are $24 and $96, respectively, relating to the ICM
annual fee.
InterMedia Management, Inc. ("IMI") is wholly owned by the managing general
partner of ICM. IMI has entered into an agreement with the Partnership to
provide accounting and administrative services at cost. During the years ended
1993, 1994 and 1995, administrative fees charged by IMI were $392, $566 and
$625, respectively. Receivables from affiliates represent advances to IMI net of
administrative fees charged by IMI and operating expenses paid by IMI on behalf
of the Partnership.
As an affiliate of TCI, the Partnership is able to purchase programming
services from a subsidiary of TCI. Management believes that the overall
programming rates made available through this relationship are lower than the
Partnership could obtain separately. The TCI subsidiary is under no obligation
to continue to offer such volume rates to the Partnership, and such rates may
not continue to be available in the future should TCI's ownership in the
Partnership significantly decrease or if TCI or the programmers should otherwise
decide not to offer such participation to the Partnership (see Note 11).
Programming fees charged by the TCI subsidiary for the years ended December 31,
1993, 1994 and 1995 amounted to $2,043, $2,150 and $2,573, respectively. Payable
to affiliates includes programming fees payable to the TCI subsidiary of $179
and $209 at December 31, 1994 and 1995, respectively.
F-65
<PAGE> 233
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Payables to IP of $1,375 and $943 were outstanding at December 31, 1994 and
1995, respectively, primarily related to professional fees incurred by IP on
behalf of IPWT in connection with the acquisition of the West Tennessee cable
television system in 1990.
9. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
During the years ended December 31, 1993, 1994 and 1995, the Partnership
paid interest of approximately $2, $8,349 and $4,336, respectively.
10. EMPLOYEE BENEFIT PLAN
The Partnership participates in the InterMedia Partners Tax Deferred
Savings Plan, which covers all full-time employees who have completed at least
one year of employment. Such Plan provides for a base employee contribution of
1% and a maximum of 15% of compensation. The Partnership's matching
contributions under such Plan are at the rate of 50% of the employee's
contributions, up to a maximum of 3% of compensation.
11. SUBSEQUENT EVENT
IP and GECC are currently negotiating an agreement to contribute the
Partnership to InterMedia Capital Partners IV, L.P. ("ICP-IV") in exchange for
limited partnership interests in ICP-IV. ICP-IV is a newly created, affiliated
entity, formed for the purpose of acquiring cable television systems and
consolidating various cable television systems owned by entities affiliated with
IP. Consummation of the transaction is expected during the third quarter of
1996. Upon completion of the transaction, conditions will be met for an accrual
of approximately $3,000 of contingent interest under the terms of the loan
agreement with GECC and recognition of the remaining debt restructuring credit
as an extraordinary gain (see Note 5). Because TCI will also be an owner of
ICP-IV, the contributions of the Partnership to ICP-IV are not expected to
affect the favorable rates available to the Partnership through its relationship
with TCI (see Note 8).
12. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
On July 30, 1996, IP and GECC contributed their partner interests in the
Partnership to ICP IV. As a result, conditions have been met for the accrual of
approximately $3,000 of contingent interest. Accordingly, all outstanding debt
and related accrued interest as of June 30, 1996 have been presented as
non-current liabilities.
F-66
<PAGE> 234
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TCI of Greenville, Inc.,
TCI of Spartanburg, Inc., and
TCI of Piedmont, Inc.:
We have audited the accompanying combined balance sheet of TCI of
Greenville, Inc., TCI of Spartanburg, Inc., and TCI of Piedmont, Inc. (the
"Systems") (indirect wholly-owned subsidiaries of TCI Communications, Inc.) as
of December 31, 1995, and the related combined statements of operations and
accumulated deficit and cash flows for the period from January 27, 1995 to
December 31, 1995. These combined financial statements are the responsibility of
the Systems' management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of TCI of Greenville,
Inc., TCI of Spartanburg, Inc., and TCI of Piedmont, Inc. as of December 31,
1995, and the results of their operations and their cash flows for the period
from January 27, 1995 to December 31, 1995 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
March 1, 1996
F-67
<PAGE> 235
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Cash................................................................... $ 1,684 $ 1,936
Trade and other receivables, net of allowance for doubtful accounts
of $420,000 and $426,000............................................. 1,651 2,571
Property and equipment, at cost:
Land................................................................. 573 573
Cable distribution systems........................................... 41,036 38,551
Support equipment and buildings...................................... 5,091 3,588
-------- --------
46,700 42,712
Less accumulated depreciation........................................ (7,737) (5,252)
-------- --------
38,963 37,460
-------- --------
Franchise costs........................................................ 327,262 327,262
Less accumulated amortization........................................ (11,590) (7,499)
-------- --------
315,672 319,763
-------- --------
Other assets........................................................... 123 82
-------- --------
$358,093 $361,812
======== ========
LIABILITIES AND PARENT'S INVESTMENT
Accounts payable....................................................... $ 166 $ 270
Accrued liabilities (note 2)........................................... 2,597 3,486
Deferred income taxes (note 4)......................................... 107,618 113,239
-------- --------
Total liabilities............................................ 110,381 116,995
-------- --------
Parent's investment:
Due to TCI Communications, Inc. (TCIC) (note 3)...................... 262,069 249,136
Accumulated deficit.................................................. (14,357) (4,319)
-------- --------
247,712 244,817
-------- --------
Commitments and contingencies (note 5)................................. $358,093 $361,812
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-68
<PAGE> 236
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
SIX MONTHS PERIOD FROM PERIOD FROM
EMDED JANUARY 27, JANUARY 27 TO
JUNE 30, 1995 TO DECEMBER 31,
1996 JUNE 30, 1995 1995
--------- --------------------- -------------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
Basic and cable services........................... $ 15,719 $ 12,444 $ 25,477
Pay services....................................... 5,394 4,666 10,241
Other services..................................... 4,773 4,331 11,496
------- ------ --------
25,886 21,441 47,214
Operating costs and expenses:
Program fees (note 3).............................. 6,089 4,210 9,084
Other direct expenses.............................. 2,961 3,061 6,596
Selling, general and administrative................ 6,416 4,117 10,483
Allocated general and administrative costs (note
3).............................................. 967 536 1,618
Amortization....................................... 4,091 3,271 7,499
Depreciation....................................... 2,536 2,721 6,640
------- ------ --------
23,060 17,916 41,920
------- ------ --------
Operating income........................... 2,826 3,525 5,294
Interest expense to TCIC (note 3).................... (18,485) (5,446) (11,839)
------- ------ --------
Loss before income tax benefit............. (15,659) (1,921) (6,545)
Income tax benefit (note 4).......................... 5,621 653 2,226
------- ------ --------
Net loss................................... (10,038) (1,268) (4,319)
Accumulated deficit:
Beginning of period................................ (4,319) -- --
------- ------ --------
End of period...................................... $ (14,357) $ (1,268) $ (4,319)
======= ====== ========
</TABLE>
See accompanying notes to combined financial statements.
F-69
<PAGE> 237
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 27, JANUARY 27 TO
1995 TO DECEMBER 31,
JUNE 30, 1995
1995 -------------
SIX MONTHS -----------
ENDED
JUNE 30, (UNAUDITED)
1996
------------
(UNAUDITED) (AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(10,038) $(1,268) $ (4,319)
Adjustments to reconcile net loss to net cash
provided
by operating activities:
Depreciation and amortization................... 6,627 5,992 14,139
Deferred tax benefit............................ (5,621) (653) (2,325)
Changes in assets and liabilities:
Change in receivables, net.................... 920 548 (98)
Change in other assets........................ (41) (43) (80)
Change in accounts payable.................... (104) (95) 150
Change in accrued liabilities................. (889) (142) 965
------- ------- --------
Net cash provided by (used in) operating
activities............................... (9,146) 4,339 8,432
------- ------- --------
Cash flows used in investing activities --
Capital expended for property and equipment........ (4,039) (2,923) (13,054)
------- ------- --------
Cash flows from financing activities --
Increase in due to TCIC............................ 12,933 (987) 6,484
------- ------- --------
Net increase (decrease) in cash................. (252) 429 1,862
Cash at beginning of period.......................... 1,936 74 74
------- ------- --------
Cash at end of period................................ $ 1,684 $ 503 $ 1,936
======= ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-70
<PAGE> 238
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The combined financial statements include the operations, assets and
liabilities of TCI of Greenville, Inc., TCI of Spartanburg, Inc., and TCI of
Piedmont, Inc. (the "Systems") which are indirect wholly-owned subsidiaries of
TCI Communications, Inc. ("TCIC" or "Parent") which is a subsidiary of
Tele-Communications, Inc. ("TCI"). The Systems develop and operate cable
television systems in South Carolina.
The Systems were acquired by TCI from TeleCable Corporation at the close of
business on January 26, 1995 and subsequently contributed to TCIC
($242,591,000). These combined financial statements include the Systems' results
of operations for the period from January 27, 1995 to December 31, 1995.
It is contemplated that during 1996, TCIC will contribute the Systems to a
newly formed limited partnership in exchange for an interest in InterMedia
Partners IV, L.P., ("IP-IV"). See note 6.
(b) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including acquisition costs
allocated to tangible assets acquired. Construction costs, including interest
during construction and applicable overhead, are capitalized. Interest
capitalized for the period from January 27, 1995 to December 31, 1995 was not
material.
Depreciation is computed on a straight-line basis using estimated useful
lives of 3 to 15 years for cable distribution systems and 3 to 40 years for
support equipment and buildings.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales, or other
dispositions of property, the original cost and cost of removal of such property
are charged to accumulated depreciation, and salvage, if any, is credited
thereto. Gains or losses are only recognized in connection with the sales of
properties in their entirety.
(c) FRANCHISE COSTS
Franchise costs include the difference between the cost of acquiring the
Systems and amounts allocated to the tangible assets. Franchise costs are
amortized on a straight-line basis over 40 years.
(d) INCOME TAXES
A tax sharing agreement (the "Tax Sharing Agreement") among TCIC and
certain other subsidiaries of TCI was implemented effective July 1, 1995. The
Tax Sharing Agreement formalizes certain elements of the pre-existing tax
sharing arrangement and contains additional provisions regarding the allocation
of certain consolidated income tax attributes and the settlement procedures with
respect to the intercompany allocation of current tax attributes. The Tax
Sharing Agreement encompasses U.S. Federal, state, local, and foreign tax
consequences and relies upon the U.S. Internal Revenue Code of 1986 as amended,
and any applicable state, local, and foreign tax law and related regulations.
Beginning on the July 1, 1995 effective date, TCIC was responsible to TCI for
its share of current consolidated income tax liabilities. TCI was responsible to
TCIC to the extent that TCIC's income tax attributes generated after the
effective date are utilized by TCI to reduce its consolidated income tax
liabilities. Accordingly, all tax attributes generated by TCIC's operations
(which include the Systems) after the effective date including, but not limited
to, net operating losses, tax credits,
F-71
<PAGE> 239
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
deferred intercompany gains, and the tax basis of assets are inventoried and
tracked for the entities comprising TCIC.
(E) ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(F) UNAUDITED FINANCIAL INFORMATION
In the opinion of management, the unaudited financial statements reflect
all adjustments necessary to present fairly the combined financial position of
the Systems at June 30, 1996 and the results of operations and cash flows for
the periods ended June 30, 1996 and 1995.
2. ACCRUED LIABILITIES
Accrued liabilities consists of the following at December 31, 1995 (amounts
in thousands):
<TABLE>
<S> <C>
Franchise fees payable...................................... $1,722
Property taxes payable...................................... 745
Salaries and benefits payable............................... 263
Sales taxes payable......................................... 187
Other....................................................... 569
-------
$3,486
=======
</TABLE>
3. TRANSACTIONS WITH RELATED PARTIES
Certain subsidiaries of TCIC provide certain corporate general and
administrative services and are responsible for the Systems' operations and
construction. Costs related to these services were allocated to TCIC's
subsidiaries on a per subscriber and gross revenue basis that is intended to
approximate TCI's proportionate cost of providing such services and are
presented in the combined statement of operations and accumulated deficit as
allocated general and administrative costs. The amounts allocated by TCIC are
not necessarily representative of the costs that the Systems would have incurred
on a stand-alone basis.
During the period from January 27, 1995 to December 31, 1995 the
Systems purchased, at TCIC's cost, certain pay television and other
programming through another TCIC subsidiary. Charges for such programming
were $6,766,000 for the period from January 27, 1995 to December 31, 1995
and are included in program fees.
The amount due to TCIC includes TCIC's funding of current operations
as well as the initial contribution of the Systems. The amount of interest
expense allocated by TCIC is based on the actual interest costs incurred by
TCIC and therefore, it does not necessarily reflect the interest expense
that each subsidiary would have incurred on a stand alone basis. In
addition, certain of TCIC's debt is secured by the assets of certain of its
subsidiaries, including the Systems.
F-72
<PAGE> 240
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
From January 27, 1995 to December 31, 1995, the Systems were included in
the consolidated Federal income tax return of TCI. Income tax benefit for the
Systems is based on those items in the consolidated calculation applicable to
the Systems. The income tax benefit during this period represents an
apportionment of tax expense or benefit (other than deferred taxes) among
subsidiaries of TCIC in relation to their respective amounts of taxable earnings
or losses. The payable arising from the allocation of taxes for the period has
been recorded as an increase to the due to TCIC account. For Federal income tax
purposes, the tax basis in the assets of the Systems were carried over at their
historical tax basis.
The Systems recognize deferred tax assets and liabilities for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Income tax benefit (expense) for the period from January 27, 1995 to
December 31, 1995 consists of (amounts in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Intercompany tax allocation...................... $ (87) $2,021 $1,934
State and local.................................. (12) 304 292
---- ----- ------
$ (99) 2,325 2,226
==== ===== ======
</TABLE>
Income tax benefit attributable to earnings differs from the amount
computed by applying the Federal income tax rate of 35% as a result of the
following (amounts in thousands):
<TABLE>
<S> <C>
Computed "expected" tax benefit............................. $2,291
State and local income taxes, net of Federal income tax
benefit................................................... 190
Other....................................................... (255)
------
$2,226
======
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 are presented below (amounts in thousands):
<TABLE>
<S> <C>
Deferred tax assets, primarily related to accounts
receivable.............................................. $ 164
Deferred tax liabilities:
Franchise costs......................................... 109,350
Property and equipment.................................. 3,415
Other................................................... 638
--------
Gross deferred tax liabilities....................... 113,403
--------
Net deferred tax liabilities......................... $113,239
========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
As a result of the Cable Television Consumer Protection and Competition Act
of 1992 (the "1992 Cable Act"), the Systems' basic and tier service rates and
its equipment and installation charges (the "Regulated
F-73
<PAGE> 241
TCI OF GREENVILLE, INC.,
TCI OF SPARTANBURG, INC., AND
TCI OF PIEDMONT, INC.
(INDIRECT WHOLLY-OWNED SUBSIDIARIES OF TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Services") are subject to the jurisdiction of local franchising authorities and
the FCC. Basic and tier service rates are evaluated against competitive
benchmark rates as published by the FCC, and equipment and installation charges
are based on actual costs.
The Systems believe that they have complied in all material respects with
the provisions of the 1992 Cable Act, including its rate setting provisions.
However the Systems' rates for Regulated Services are subject to review by the
FCC, if a complaint has been filed, or the appropriate franchise authority, if
such authority has been certified. If, as a result of the review process, a
system cannot substantiate its rates, it could be required to retroactively
reduce its rates to the appropriate benchmark and refund the excess portion of
rates received. Any refunds of the excess portion of tier service rates would be
retroactive to the date of complaint. Any refunds of the excess portion of all
other Regulated Service rates would be retroactive to the later of September 1,
1993 or one year prior to the certification date of the applicable franchise
authority. The amount of refunds, if any, which could be payable by the Systems
in the event that the Systems' rates are successfully challenged by franchising
authorities or the FCC is not considered to be material.
The Systems have entered into pole rental agreements and use other
equipment under lease arrangements. Rental expense under these arrangements was
$510,000 for the period from January 27, 1995 to December 31, 1995. Future
minimum lease payments under noncancelable operating leases are as follows
(amounts in thousands):
<TABLE>
<S> <C>
1996................................................... $95
1997................................................... 64
1998................................................... 18
</TABLE>
6. SUBSEQUENT EVENT -- UNAUDITED
On July 30, 1996, TCI consummated an agreement with IP-IV to contribute the
Systems into a newly-formed limited partnership in exchange for a 49% limited
partnership interest in IP-IV. Management of the Systems' operations was assumed
by InterMedia Capital Management IV, L.P., the general partner of IP-IV as of
that date.
F-74
<PAGE> 242
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
TeleCable of Piedmont, Inc.,
TeleCable of Spartanburg, Inc. and
TeleCable of Greenville, Inc.
(collectively TeleCable -- South Carolina Group)
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the combined financial position of
TeleCable -- South Carolina Group at January 26, 1995 and December 31, 1994 and
the results of its operations and its cash flows for the 26-day period ended
January 26, 1995 and the year ended December 31, 1994 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of TeleCable -- South Carolina Group's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1, TeleCable Corporation, parent company of the
TeleCable -- South Carolina Group entities, merged with and into TCI
Communications, Inc., a wholly owned subsidiary of Tele-Communications, Inc., on
January 26, 1995, in accordance with the related Agreement and Plan of Merger
dated August 8, 1994. The accompanying financial statements include the accounts
of TeleCable -- South Carolina Group at their historical basis immediately
preceding the merger and do not include any adjustments to record the new
owner's basis.
PRICE WATERHOUSE LLP
San Francisco, California
March 8, 1996
F-75
<PAGE> 243
TELECABLE -- SOUTH CAROLINA GROUP
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 DAY PERIOD
YEAR ENDED ENDED
DECEMBER 31, JANUARY 26,
1994 1995
------------- -------------
<S> <C> <C>
Basic and expanded cable services................................. $26,034 $ 1,835
Pay services...................................................... 11,046 783
Other services.................................................... 8,819 499
------- -------
45,899 3,117
------- -------
Program fees...................................................... 14,076 795
Other direct expenses............................................. 9,929 720
Depreciation and amortization..................................... 7,332 618
Selling, general and administrative expenses...................... 8,069 589
------- -------
39,406 2,722
------- -------
Income from operations.......................................... 6,493 395
------- -------
Other income (expense):
Interest income................................................. 1,278
Interest expense................................................ (2,150) (161)
------- -------
(872) (161)
Income before provision for income taxes........................ 5,621 234
Income tax expense................................................ 2,118 88
------- -------
Net income...................................................... 3,503 146
Retained earnings, beginning of the period........................ 10,967 14,470
------- -------
Retained earnings, end of the period.............................. $14,470 $14,616
======= =======
</TABLE>
See notes to combined financial statements.
F-76
<PAGE> 244
TELECABLE -- SOUTH CAROLINA GROUP
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 26,
1994 1995
------------- ------------
<S> <C> <C>
Cash and cash equivalents........................................... $ 320 $ 74
Accounts receivable, net of allowance for doubtful accounts of
$195 and $199..................................................... 2,493 2,545
Prepaid expenses and other assets................................... 94 76
Inventory........................................................... 74 75
------- -------
Total current assets...................................... 2,981 2,770
Intangible assets, net of accumulated amortization of $8,435 and
$8,499............................................................ 2,807 2,743
Property and equipment, net......................................... 44,301 44,132
Receivable from affiliates.......................................... 16,344
Other assets........................................................ 36 36
------- -------
Total assets.............................................. $66,469 $ 49,681
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable trade.............................................. $ 120 $ 120
Accrued liabilities................................................. 3,340 2,554
Deferred revenue.................................................... 50 72
Notes and other payables to affiliates.............................. 20,467 4,280
------- -------
Total current liabilities................................. 23,977 7,026
Deferred income taxes............................................... 7,553 7,570
Other liabilities................................................... 74 74
------- -------
Total liabilities......................................... 31,604 14,670
------- -------
Commitments and contingencies
Shareholder's equity................................................ 34,865 35,011
------- -------
Total liabilities and shareholder's equity................ $66,469 $ 49,681
======= =======
</TABLE>
See notes to combined financial statements.
F-77
<PAGE> 245
TELECABLE -- SOUTH CAROLINA GROUP
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 DAY
YEAR PERIOD
ENDED ENDED
DECEMBER 31, JANUARY 26,
1994 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net income........................................................ $ 3,503 $ 146
Adjustments to reconcile net income to cash provided by (used for)
operating activities:
Depreciation................................................... 6,561 554
Amortization................................................... 771 64
Deferred income taxes.......................................... 468 17
(Increase) decrease in current assets:
Accounts receivable.......................................... (1,096) (52)
Income taxes receivable...................................... (437) 12
Prepaid expenses............................................. 133 6
Inventory.................................................... 44 (1)
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities..................... 787 (786)
Deferred revenue............................................. (7) 22
-------- -----
Net cash provided by (used for) operating activities...... 10,727 (18)
-------- -----
Cash flows from investing activities:
Purchases of property and equipment............................... (11,032) (385)
-------- -----
Net cash used for investing activities.................... (11,032) (385)
-------- -----
Cash flows from financing activities:
Receipts (payments) of amounts due from (to) affiliates, net...... (94) 157
-------- -----
Net cash provided by (used for) financing activities...... (94) 157
-------- -----
Net decrease in cash and cash equivalents........................... (399) (246)
Cash and cash equivalents at beginning of period.................... 719 320
-------- -----
Cash and cash equivalents at end of period.......................... $ 320 $ 74
======== =====
Supplemental disclosure of cash flow information:
Cash paid for income taxes........................................ $ 602 $ --
======== =====
</TABLE>
See notes to combined financial statements.
F-78
<PAGE> 246
TELECABLE -- SOUTH CAROLINA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND MERGER WITH TCI COMMUNICATIONS, INC.
The accompanying combined financial statements include the accounts of
TeleCable of Piedmont, Inc., TeleCable of Spartanburg, Inc. and TeleCable of
Greenville, Inc., which collectively represent the combined South Carolina cable
television and advertising operations of TeleCable Corporation ("TeleCable") and
are referred to herein as the TeleCable -- South Carolina Group and/or the
Combined Group.
On January 26, 1995, pursuant to the Agreement and Plan of Merger dated
August 8, 1994, TeleCable and its subsidiaries merged with and into TCI
Communications, Inc. ("TCIC"), a wholly owned subsidiary of Tele-Communications,
Inc. ("TCI") (the Merger), with TCIC as the surviving corporation of the Merger.
Upon consummation of the Merger, TeleCable ceased to exist as a separate
corporation.
The accompanying combined financial statements have been prepared to
present financial position and results of operations of the TeleCable -- South
Carolina Group on a historical basis of accounting and do not reflect TCIC's
basis in the assets and liabilities of the TeleCable -- South Carolina Group.
Under a proposed agreement, TCI will contribute the TeleCable -- South Carolina
Group to a new entity in exchange for cash and a limited partnership interest in
the new entity during 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Combined Group considers all highly liquid debt instruments, with an
original maturity of three months or less, to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are recorded at cost and depreciated over
their estimated useful lives using accelerated and straight-line methods for tax
and financial reporting purposes, respectively. The asset cost and related
accumulated depreciation are eliminated from the accounts when assets are fully
depreciated.
Maintenance, repairs and minor renewals are charged to operations as
incurred. Major renewals and betterments are capitalized.
Estimated lives used to compute depreciation are:
<TABLE>
<S> <C>
Distribution plant and other equipment.................. 8-12 years
Building and improvements............................... 8-25 years
Vehicles................................................ 5 years
</TABLE>
INTANGIBLE ASSETS
Costs associated with developing and acquiring cable television franchises
are capitalized and amortized on a straight-line basis over the term of the
franchises. Remaining terms of the Combined Group's franchises are 6 to 12
years.
INCOME TAXES
The Combined Group follows Statement of Financial Accounting Standards No.
109 (FAS 109), "Accounting for Income Taxes," which uses an asset and liability
method to recognize the deferred income tax effects of transactions which are
reported in different periods for financial reporting and income tax return
purposes. Under this approach, deferred income tax balance sheet amounts are
measured using currently enacted tax rates applied to the differences between
the carrying amounts of assets and liabilities for financial
F-79
<PAGE> 247
TELECABLE -- SOUTH CAROLINA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
reporting purposes and their related tax basis. The deferred income tax
provision is the difference between such beginning and ending deferred income
tax balance sheet amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Such estimates affect the reported amounts of revenues and expenses
during current and subsequent reporting periods, and actual results could differ
from such estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and short-term debt
approximated fair value at January 26, 1995 and December 31, 1994 because of the
short maturity of these instruments.
3. INCOME TAXES
For federal tax purposes, the results of operations of TeleCable -- South
Carolina Group are included in the TeleCable consolidated federal income tax
filings. TeleCable allocates current and deferred taxes to the Combined Group
under the separate return method as prescribed by FAS 109. Current federal
income tax expense flows through the payable to affiliate.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
26-DAY PERIOD
YEAR ENDED ENDED
DECEMBER 31, JANUARY 26,
1994 1995
------------- --------------
<S> <C> <C>
Current
Federal............................... $ 1,429 $ 62
State................................. 221 9
------ ---
1,650 71
------ ---
Deferred:
Federal............................... 405 15
State................................. 63 2
------ ---
468 17
------ ---
$ 2,118 $ 88
====== ===
</TABLE>
Deferred tax liabilities (assets) relate to the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 26,
1994 1995
------------- -----------
<S> <C> <C>
Property and equipment.................... $ 7,636 $ 7,640
Intangible assets......................... 361 363
Other, net................................ (444) (433)
------ ------
$ 7,553 $ 7,570
====== ======
</TABLE>
F-80
<PAGE> 248
TELECABLE -- SOUTH CAROLINA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The provision for income taxes differs from the amount of income tax
computed by applying the statutory federal tax rate to income before income
taxes as follows:
<TABLE>
<CAPTION>
26-DAY PERIOD
YEAR ENDED ENDED
DECEMBER 31, JANUARY 26,
1994 1995
------------- --------------
<S> <C> <C>
Income tax computed at 34%...................... $ 1,911 $ 80
State income taxes, net of federal tax
benefit....................................... 185 8
Other........................................... 22
------ ---
$ 2,118 $ 88
====== ===
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 26,
1994 1995
------------- ------------
<S> <C> <C>
Distribution, plant and equipment................. $ 78,783 $ 79,163
Land, buildings and improvements.................. 2,081 2,081
Vehicles.......................................... 1,749 1,754
-------- --------
82,613 82,998
Less -- accumulated depreciation.................. (38,312) (38,866)
-------- --------
$ 44,301 $ 44,132
======== ========
</TABLE>
Depreciation expense was $6,561 and $554 for the year ended December 31,
1994 and the 26-day period ended January 26, 1995, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company leases utility poles and certain other facilities used in their
operations. Total rent expense was $550 for the year ended December 31, 1994 and
$45 for the 26-day period ended January 26, 1995.
6. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect the Company and the cable television
industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 ("the 1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer service and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act will eliminate rate regulation on the
expanded basic tier effective March 31, 1999.
Current regulations issued in connection with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and require refunds measured from the date a
complaint is filed in some circumstances or retroactively for up to one year
F-81
<PAGE> 249
TELECABLE -- SOUTH CAROLINA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
in other circumstances. Management believes it has made a fair interpretation of
the 1992 Act and related FCC regulations in determining regulated cable
television rates and other fees based on the information currently available.
However, complaints have been filed with the FCC on rates for certain franchises
and certain local franchise authorities have challenged existing and prior
rates. Further complaints and challenges could be forthcoming, some of which
could apply to revenue recorded in 1995. Management believes, however, the
effect, if any, of these complaints and challenges will not be material to the
Company's financial position or results of operations.
Many aspects of regulation at the federal and local level are currently the
subject of judicial review and administrative proceedings. In addition, the FCC
is required to conduct rulemaking proceedings over the next several months to
implement various provisions of the 1996 Act. It is not possible at this time to
predict the ultimate outcome of these review or proceedings or their effect on
the Company.
7. RELATED PARTY TRANSACTIONS
Included in notes and other payables to affiliates are notes payable to
Televester, Inc., a wholly-owned subsidiary of TeleCable which total $20,467 and
$3,048 at December 31, 1994 and January 26, 1995, respectively. The notes bear
interest at prime plus 2%, compounded quarterly, and are payable on demand.
The receivable from affiliate at December 31, 1994 and payable to affiliate
at January 26, 1995 represent a net receivable/payable as a result of daily cash
management transactions and other operating activities between the Combined
Group and TeleCable. The Combined Group charges/pays interest on the
receivable/payable at prime. Certain programming fee discounts granted to
TeleCable for volume purchases are recorded at the corporate level and
therefore, have not been allocated to the Combined Group.
During the 26-day period ended January 26, 1995, the Company exchanged
$17,554 of its receivable from affiliate to satisfy one of the notes payable to
Televester, Inc.
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 26,
1994 1995
------------ -----------
<S> <C> <C>
Accrued franchise taxes............................... $1,623 $ 736
Accrued real estate and personal property taxes....... 754 818
Accrued payroll....................................... 466 411
Other................................................. 497 589
------ -------
$3,340 $ 2,554
====== =======
</TABLE>
F-82
<PAGE> 250
TELECABLE -- SOUTH CAROLINA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. SHAREHOLDER'S EQUITY
Shareholder's equity for each of the entities included in these combined
financial statements is as follows:
<TABLE>
<CAPTION>
JANUARY 26, 1995
-----------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
TeleCable of Piedmont, Inc........................ $1 $ $ (4,500) $ (4,499)
TeleCable of Spartanburg, Inc..................... -- 11,031 3,904 14,935
TeleCable of Greenville, Inc...................... -- 9,363 15,212 24,575
-- -------- --------
$1 $ 20,394 $ 14,616 $ 35,011
== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
TeleCable of Piedmont, Inc........................ $1 $ $ (4,573) $ (4,572)
TeleCable of Spartanburg, Inc..................... -- 11,031 3,924 14,955
TeleCable of Greenville, Inc...................... -- 9,363 15,119 24,482
-- -------- -------- --------
$1 $ 20,394 $ 14,470 $ 34,865
== ======== ======== ========
</TABLE>
10. RETIREMENT PLANS
EMPLOYEE SAVINGS PLAN
TeleCable sponsors an employee savings plan which covers substantially all
employees of the Combined Group. TeleCable makes annual contributions of an
amount which, when added to forfeitures, equals 50% of employee contributions up
to 4% of compensation. The total expenses for the Combined Group were $100 for
the year ended December 31, 1994 and $9 for the 26-day period ended January 26,
1995
DEFINED BENEFIT PLAN
The Combined Group participated in the TeleCable defined benefit pension
plan covering substantially all employees. The plan provides retirement benefits
to eligible employees based primarily on years of service and career
compensation. TeleCable's annual funding policy was to contribute no less than
the minimum required by the Employee Retirement Income Security Act of 1974 and
no more than the maximum which can be deducted under relevant IRS regulations.
Separate information regarding the defined benefit plan is not available at the
subsidiary level.
For financial reporting purposes, pension expense allocated to the Combined
Group was $119 for the year ended December 31, 1994. In conjunction with the
Merger, the benefits under the defined benefit plan were frozen January 26,
1995. There was no pension expense for the 26-day period ended January 26, 1995.
The weighted average discount rate used to measure the projected benefit
obligation was 7.0% at December 31, 1994. In addition, the rate of increase in
future compensation levels was 4.5% at December 31, 1994. The weighted-average
expected long-term rate of return on assets was 8.0% for 1994.
F-83
<PAGE> 251
REPORT OF INDEPENDENT AUDITORS
Time Warner Entertainment Company, L.P.
Stamford, Connecticut
We have audited the accompanying statements of assets, liabilities and
divisional equity of Warner Cable Communications -- Kingsport, Tennessee
Division, a division of Time Warner Entertainment Company, L.P., as of January
31, 1996 and December 31, 1995, and the related statements of revenues and
expenses and changes in divisional equity and cash flows for the month ended
January 31, 1996 and the year ended December 31, 1995. These financial
statements are the responsibility of the Division'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 assets, liabilities and divisional equity of Warner
Cable Communications -- Kingsport, Tennessee Division, a division of Time Warner
Entertainment Company, L.P., at January 31, 1996 and December 31, 1995, and its
revenues and expenses and changes in divisional equity and cash flows for the
month ended January 31, 1996 and the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
May 11, 1996
F-84
<PAGE> 252
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
STATEMENT OF ASSETS, LIABILITIES AND DIVISIONAL EQUITY
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
Cash.............................................................. $ 143,807 $ 104,400
Accounts receivable, net of allowance for doubtful accounts of
$55,004 and $46,841 at January 31, 1996 and December 31, 1995,
respectively.................................................... 732,070 945,566
Prepaid expenses.................................................. 1,262 5,814
Inventory......................................................... 10,476 12,168
---------- ----------
Total current assets.............................................. 887,615 1,067,948
Property, plant and equipment, at cost:
Land, building and improvements................................... 183,309 183,309
Distribution system............................................... 13,644,838 13,672,378
Vehicles and other equipment...................................... 956,326 956,326
Construction in progress.......................................... 19,217 1,720
---------- ----------
14,803,690 14,813,733
Less accumulated depreciation..................................... (7,663,043) (7,604,199)
---------- ----------
Net property, plant and equipment................................. 7,140,647 7,209,534
Intangible assets, less accumulated amortization of
$1,180,777 and $1,180,248 as of January 31, 1996
and December 31, 1995, respectively............................. 93,594 94,123
Other assets...................................................... 12,906 13,606
---------- ----------
$ 8,134,762 $ 8,385,211
========== ==========
LIABILITIES AND DIVISIONAL EQUITY
Accounts payable.................................................. $ 70,993 $ 149,380
Deferred revenue.................................................. 393,792 411,952
Subscriber advance payments....................................... 207,309 270,881
Accrued franchise fees............................................ 176,400 213,199
Other accrued liabilities......................................... 659,808 696,075
---------- ----------
Total current liabilities......................................... 1,508,302 1,741,487
Divisional equity:
Accumulated earnings.............................................. 14,276,472 14,084,350
Less accumulated payments to Time Warner Entertainment
Company, L.P.................................................... (7,650,012) (7,440,626)
---------- ----------
Total divisional equity........................................... 6,626,460 6,643,724
---------- ----------
$ 8,134,762 $ 8,385,211
========== ==========
</TABLE>
See accompanying notes.
F-85
<PAGE> 253
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
STATEMENT OF REVENUES AND EXPENSES AND CHANGES IN DIVISIONAL EQUITY
<TABLE>
<CAPTION>
MONTH ENDED YEAR ENDED
JANUARY 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
REVENUES:
Basic service..................................................... $ 736,157 $ 8,427,035
Pay service....................................................... 99,919 1,192,580
Other service..................................................... 100,932 1,294,804
----------- -----------
937,008 10,914,419
EXPENSES:
Programming....................................................... 211,329 2,219,227
Other direct expenditures......................................... 133,164 1,425,956
Selling, general and administrative............................... 223,194 2,057,796
Depreciation and amortization..................................... 87,243 1,086,516
----------- -----------
654,930 6,789,495
----------- -----------
Operating income.................................................. 282,078 4,124,924
Interest expense.................................................. 89,956 856,287
----------- -----------
Net revenues over expenses........................................ 192,122 3,268,637
Accumulated earnings at beginning of period....................... 14,084,350 10,815,713
Less accumulated payments to Time Warner Entertainment Company,
L.P. at beginning of period..................................... (7,440,626) (4,247,376)
----------- -----------
Net divisional equity at beginning of period...................... 6,643,724 6,568,337
Payments to Time Warner Entertainment Company, L.P., net.......... (209,386) (3,193,250)
----------- -----------
Net divisional equity at end of period............................ $ 6,626,460 $ 6,643,724
=========== ===========
</TABLE>
See accompanying notes.
F-86
<PAGE> 254
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
MONTH ENDED YEAR ENDED
JANUARY 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net revenues over expenses......................................... $ 192,122 $ 3,268,637
Adjustments to reconcile net revenues over expenses to net cash
provided by operating activities:
Depreciation and amortization...................................... 87,243 1,086,516
Changes in cash due to:
Accounts receivable, prepaid expenses, inventory and other
assets........................................................... 220,440 (232,171)
Accounts payable................................................... (78,387) (63,126)
Deferred revenue................................................... (18,160) 36,371
Subscriber advance payments........................................ (63,572) 52,816
Accrued franchise fees............................................. (36,799) 14,533
Accrued liabilities................................................ (36,267) 145,766
--------- -----------
Net cash provided by operating activities.......................... 266,620 4,309,342
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net.................... (17,827) (1,107,827)
Refranchising cost................................................. -- 233
--------- -----------
Net cash used in investing activities.............................. (17,827) (1,107,594)
FINANCING ACTIVITIES
Net payments to Time Warner Entertainment Company, L.P............. (209,386) (3,193,250)
--------- -----------
Net increase in cash............................................... 39,407 8,498
Cash at beginning of period........................................ 104,400 95,902
--------- -----------
Cash at end of period.............................................. $ 143,807 $ 104,400
========= ===========
</TABLE>
See accompanying notes.
F-87
<PAGE> 255
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS
Warner Cable Communications -- Kingsport, Tennessee Division (the
Division), a division of Time Warner Entertainment Company, L.P. (TWE), is
principally engaged in the cable television business. Such operations consist
primarily of selling video programming which is distributed to subscribers for a
monthly fee through a network of coaxial cables. The Division operates in
several cities and surrounding areas under nonexclusive franchise agreements.
Franchise fees of up to 5% of either gross revenues or gross receipts are
payable under these agreements. The agreements are as follows:
<TABLE>
<CAPTION>
FRANCHISING AREA FRANCHISE AGREEMENT EXPIRATION
----------------------------------- ------------------------------
<S> <C>
City of Kingsport.................. 7/09/07
Sullivan County.................... 8/07/95
Town of Church Hill................ 7/30/02
Town of Mt. Carmel................. 12/27/04
</TABLE>
The Division has operated under a verbally extended franchise agreement for
Sullivan County since August 7, 1995.
The Division has no separate legal status or existence. The Division's
resources and existence are at the disposal of TWE management, subject to
contractual commitments by TWE to perform in accordance with certain long-term
contracts within the present divisional structure. The Division's assets are
legally available for the satisfaction of debts of TWE, not solely those
appearing in the accompanying statements, and its debts may result in claims
against assets not appearing therein. The Division is one of several divisions
and affiliates of TWE, and transactions and the terms thereof may be arranged by
and among members of the affiliated group.
Cable television is regulated by the federal government, some state
governments and most local governments. Existing federal regulations, copyright
licensing, and state and local franchise requirements currently are the subject
of a variety of judicial proceedings, legislative hearings and administrative
and legislative proposals which could change, in varying degrees, the manner in
which cable television systems operate. Neither the outcome of these proceedings
nor their impact on the cable television industry or the Division can be
predicted at this time.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles which require the use of management's estimates
and assumptions. Actual results could differ from these estimates.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Building and improvements............................... 10-25 years
Distribution system..................................... 3-15 years
Vehicles and other equipment............................ 3-10 years
</TABLE>
F-88
<PAGE> 256
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996 AND DECEMBER 31, 1995
FRANCHISE COSTS
The Division has deferred costs incurred to acquire the franchise.
Amortization of these costs is provided on the straight-line basis over the
terms of the franchise agreement.
REVENUE RECOGNITION
Substantially all revenue is recognized when service is provided, with
appropriate provision for uncollectible accounts.
DEFERRED REVENUE
Deferred revenue represents subscriber monthly fees billed in advance.
INCOME TAXES
As a U.S. partnership, TWE is not subject to federal and state income
taxation. As a result, a provision for income taxes has not been included in the
financial statements.
3. RELATED PARTY TRANSACTIONS
Interest is allocated to the Division from TWE. The amount is computed by
multiplying the Division's estimated debt based on average divisional equity
balances by the TWE average effective interest rate. The TWE average effective
interest rate for the month ended January 31, 1996 and the year ended December
31, 1995 was 7.7%. Interest allocated to the Division aggregated $89,956 and
$856,287 for the month ended January 31, 1996 and the year ended December 31,
1995, respectively.
The Division records charges for a portion of TWE's selling, general and
administrative expenses ($63,536 and $856,114 for the month ended January 31,
1996 and the year ended December 31, 1995, respectively), which are allocated by
TWE to its divisions and affiliates based upon subscriber levels.
The statement of revenues and expenses and changes in divisional equity
includes charges for programming and promotional services provided by Home Box
Office and other affiliates of TWE. These charges are based upon customary
rates.
4. LEASES
Rent expense for all operating leases, principally pole attachments and
office rent, for the month ended January 31, 1996 and the year ended December
31, 1995, amounted to $25,466 and $248,233, respectively. The Division has no
significant noncancelable rental commitments.
5. BENEFIT PLANS
The Division participates in a noncontributory defined benefit pension plan
(the Pension Plan) which is maintained by TWE and covers substantially all
employees. Benefits under the Pension Plan are determined based on formulas
which reflect the employees' years of service and average compensation for the
highest five consecutive years of the last ten years of service. Total pension
cost for the month ended January 31, 1996 and the year ended December 31, 1995
was $6,148 and $49,871, respectively.
Prior to April 1, 1995, the Division participated in a defined contribution
plan maintained by TWE (The Time Warner Cable Employees' Savings Plan).
Effective April 1, 1995, this plan was amended, restated and
F-89
<PAGE> 257
WARNER CABLE COMMUNICATIONS -- KINGSPORT, TENNESSEE DIVISION
A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996 AND DECEMBER 31, 1995
renamed the Cable Employees' Savings Plan (the Savings Plan). The Savings Plan
covers substantially all employees. The Division's contributions to the Savings
Plan can amount to up to 6.67% of the employee's eligible compensation during
the plan year. The plan sponsor has the right in any year to set the maximum
amount of the Division's contribution. Defined contribution plan expense totaled
$3,120 and $28,729 for the month ended January 31, 1996 and the year ended
December 31, 1995, respectively.
6. SALE OF THE DIVISION
Effective at the close of business on January 31, 1996, TWE sold all of the
assets of the Division for $62,000,000.
F-90
<PAGE> 258
VSC CABLE INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED; DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------------
1995 1996
------- -------
<S> <C> <C>
Basic and cable services............................................... $18,168 $20,527
Pay services........................................................... 5,373 6,025
Other services (Note 3)................................................ 6,293 6,741
------- -------
Total revenue................................................ 29,834 33,293
------- -------
Program fees (Note 3).................................................. 6,595 7,872
Other direct expenses.................................................. 4,188 4,546
Selling, general and administrative expenses (Note 2).................. 7,785 8,882
Depreciation and amortization.......................................... 4,605 5,657
------- -------
Total operating expenses..................................... 23,173 26,957
------- -------
Operating income....................................................... 6,661 6,336
Other expenses:
Interest expense (Note 2)............................................ (2,458) (2,436)
Other expense, net................................................... (61) (41)
------- -------
Income before income taxes............................................. 4,142 3,859
Provision for income taxes............................................. (2,319) (2,125)
------- -------
Net income............................................................. 1,823 1,734
------- -------
Retained earnings, beginning of period................................. 14,670 18,463
------- -------
Retained earnings, end of period....................................... $16,493 $20,197
======= =======
</TABLE>
See accompanying notes to financial statements.
F-91
<PAGE> 259
VSC CABLE INC.
BALANCE SHEETS
(UNAUDITED; DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- ----------
<S> <C> <C>
ASSETS
Accounts receivable, net of allowance for doubtful accounts of $271
(1995) and $265 (1996) (Note 3)................................... $ 2,463 $ 2,081
Prepaid expenses.................................................... 219 312
------- -------
Total current assets...................................... 2,682 2,393
------- -------
Property and equipment:
Land.............................................................. 1,301 1,434
Buildings......................................................... 2,636 2,658
Distribution systems.............................................. 69,919 82,133
Equipment and other............................................... 24,335 24,407
------- -------
98,191 110,632
Less accumulated depreciation..................................... (35,933) (40,676)
------- -------
Net property and equipment................................ 62,258 69,956
Intangible assets, less accumulated amortization of $15,189 (1995)
and
$16,092 (1996).................................................... 52,258 51,558
------- -------
Total assets.............................................. $ 117,198 $123,907
======= =======
LIABILITIES AND OWNER'S EQUITY
Accounts payable.................................................... $ 1,350 $ 1,439
Accrued product costs (Note 3)...................................... 1,215 1,277
Accrued compensation................................................ 405 320
Accrued taxes....................................................... 475 408
Accrued rental expense.............................................. 565 507
Deferred revenue (Note 3)........................................... 120 130
Other current liabilities........................................... 237 282
------- -------
Total current liabilities................................. 4,367 4,363
------- -------
Deferred lease revenue (Note 3)..................................... 345 480
Deferred income taxes............................................... 6,849 7,942
------- -------
Total liabilities......................................... 11,561 12,785
------- -------
Commitments and contingencies (Note 4)
Owner's equity:
Common stock; no par value; 1,000 shares authorized, issued and
outstanding................................................... 1 1
Viacom International Inc. investment and advances.............. 87,173 90,924
Retained earnings.............................................. 18,463 20,197
------- -------
Total liabilities and owner's equity...................... $ 117,198 $123,907
======= =======
</TABLE>
See accompanying notes to financial statements.
F-92
<PAGE> 260
VSC CABLE INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED; DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
---------------------
1995 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 1,823 $ 1,734
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 4,605 5,657
Change in assets and liabilities:
Decrease in accounts receivable............................... 502 382
Increase (decrease) in current liabilities.................... 1,073 (4)
Increase in deferred income taxes............................. 6,226 1,093
Other, net.................................................... (120) 38
-------- --------
Net cash flow from operating activities.................... 14,109 8,900
-------- --------
INVESTING ACTIVITIES:
Capital expenditures............................................... (10,470) (12,480)
Other, net......................................................... 210 (171)
-------- --------
Net cash flow used in investing activities................. (10,260) (12,651)
-------- --------
FINANCING ACTIVITIES:
Distributions from (to) Viacom International Inc................... (3,849) 3,751
-------- --------
Net cash flow from (used in) financing activities.......... (3,849) 3,751
-------- --------
Change in cash..................................................... $ -- $ --
======== ========
</TABLE>
See accompanying notes to financial statements.
F-93
<PAGE> 261
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED; DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION:
Until August 1, 1996, VSC Cable Inc. ("VSC"), doing business as Viacom
Cable, was a wholly owned subsidiary of Tele-Vue Systems, Inc., which was a
wholly owned subsidiary of Viacom International Inc. Viacom International Inc.
provided cable television service through VSC within the Metropolitan Government
of Nashville and Davidson County, the Cities of Goodlettsville and Brentwood,
and Williamson County, Tennessee.
On October 13, 1995, a subsidiary of Tele-Communications, Inc. ("TCI Sub")
(as buyer) and Prime Cable of Fort Bend and Prime Cable Income Partners, LP (as
sellers) executed asset and stock purchase and sale agreements providing for the
sale of certain cable television systems serving the greater Houston
Metropolitan Area for a total base purchase price of $301 million, subject to
adjustments. On December 18, 1995, TCI Sub assigned all of its rights, remedies,
title and interest in, to and under such agreements to a majority-owned investee
of InterMedia Partners Southeast IV, LP ("IMP"). On May 8, 1996, IMP consummated
the transactions under the Houston purchase agreements. On August 1, 1996, IMP's
majority-owned investee swapped its Houston cable system for VSC. The swap is
intended to qualify as a like-kind exchange under Section 1031 of the Internal
Revenue Code.
On July 24, 1995, Viacom Inc. ("Viacom"), Viacom International Inc. (after
giving effect to the First Distribution as defined below, "VII Cable"), a wholly
owned subsidiary of Viacom, and Viacom International Services Inc. ("New VII"),
a wholly owned subsidiary of VII Cable, entered into certain agreements (the
"Transaction Agreements") with Tele-Communications, Inc. ("TCI") and TCI Sub,
providing for, among other things, the conveyance of Viacom International Inc.'s
non-cable assets and liabilities to New VII, the distribution of all of the
common stock of New VII to Viacom (the "First Distribution"), the Exchange Offer
(as defined below) and the issuance to TCI Sub of all of the Class B Common
Stock of VII Cable. On June 24, 1996, Viacom commenced an exchange offer
pursuant to which Viacom shareholders had the option to exchange shares of
Viacom Class A or Class B Common Stock for a total of 6,257,961 shares of VII
Cable Class A Common Stock (the "Exchange Offer"). The Exchange Offer expired on
July 22, 1996, with a final exchange ratio of .4075 shares of VII Cable Class A
Common Stock for each share of Viacom Common Stock accepted for exchange.
Prior to the consummation of the Exchange Offer, Viacom International Inc.
entered into a $1.7 billion credit agreement. Proceeds from such credit
agreement were transferred by Viacom International Inc. to New VII as part of
the First Distribution. On July 31, 1996, TCI Sub, through a capital
contribution of $350 million in cash, purchased all of the shares of Class B
Common Stock of VII Cable immediately following the consummation of the Exchange
Offer. At that time, VII Cable was renamed TCI Pacific Communications, Inc. and
the VII Cable Class A Common Stock shares were converted into shares of
cumulative redeemable exchangeable preferred stock (the "Preferred Stock")
having an annual dividend of 5% of its $100 par value. The Preferred Stock will
be exchangeable after the fifth anniversary of issuance at the holders' option
for TCI Class A Common Stock.
National Amusements, Inc., which owns approximately 25% of Viacom Inc.
Class A and Class B Common Stock on a combined basis as of June 30, 1996, did
not participate in the Exchange Offer.
For the purposes of these financial statements, the statements of
operations and balance sheets have been presented in the customary reporting
format of IMP, and as a result, the classifications used in the statements of
operations and balance sheets are different from the classifications used in the
VSC audited financial statements submitted annually to the Metropolitan
Government of Nashville and Davidson County. In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments, consisting
of only normal and recurring adjustments, necessary for a fair statement of the
financial position, results of
F-94
<PAGE> 262
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED; DOLLARS IN THOUSANDS)
operations and cash flows of VSC. These unaudited financial statements should be
read in conjunction with the audited financial statements of VSC for the three
years ended December 31, 1995. These financial statements are not necessarily
indicative of results that would have occurred if VSC had been a separate
stand-alone entity during the periods presented or of future results of VSC.
NOTE 2 -- EXPENSES ALLOCATED TO VSC:
Viacom International Inc. funds the working capital requirements of its
businesses based upon a centralized cash management system. Viacom International
Inc. investment and advances includes any payables and receivables due to/from
Viacom International Inc. resulting from cash paid or received on behalf of VSC
and other intercompany activity.
To reflect the services provided to VSC, common benefits derived from
incurred costs and the utilization of borrowed funds to finance capital
expenditures and operations, the accompanying financial statements include
allocations for certain corporate administrative expenses and interest. Such
allocations, as a matter of practice, are not recorded in the accounting records
of VSC. Management believes that the methodologies used to allocate these
charges are reasonable. Allocations for administrative expenses and interest
(including interest subsequently capitalized) are summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------
1995 1996
------ ------
<S> <C> <C>
Administrative expenses.................................. $1,094 $1,336
Interest................................................. 2,673 2,617
</TABLE>
For the purposes of these financial statements, allocations of
administrative services are based on VSC's and Viacom International Inc.'s
operating results. The allocation of interest is based on a percentage of VSC's
average net assets to Viacom International Inc.'s average net assets.
NOTE 3 -- OTHER RELATED PARTY TRANSACTIONS:
VSC, through the normal course of business, is involved in transactions
with companies owned by or affiliated with Viacom International Inc. VSC has
agreements to distribute television programs of such companies, including
Showtime Networks Inc., MTV Networks Inc., Comedy Central, USA Networks, Sci-Fi
Channel, and Viewer's Choice. The agreements require VSC to pay license fees
based primarily upon the number of customers receiving the service. Program
license fees incurred under these agreements for the six months ended June 30,
1995 and 1996 were $1,955 and $2,570, respectively, and are included in program
fees. Related party liabilities, included in accrued product costs, were $434
and $408 at December 31, 1995 and June 30, 1996, respectively.
On November 15, 1993, Viacom Telecom Inc., a wholly owned subsidiary of
Tele-Vue Systems, Inc. entered into a limited partnership, AVR of Tennessee, LP
(the "Partnership"), for the purposes of providing voice, data and video access
services for long-distance carriers, and for commercial, governmental and other
non-residential users in and around Nashville, Tennessee. As a result of the
formation of the Partnership, Viacom International Inc. is committed to
construct the facilities required to conduct the Partnership business within its
cable television franchise area. VSC leases the primary transmission facilities
to the Partnership under noncancellable operating leases at rates calculated to
recover actual construction and financing costs. Lease access revenues for the
six months ended June 30, 1995 and 1996 were $93 and $188, respectively, and are
included in other services. Deferred lease access revenues were $435 and $610 at
December 31, 1995 and June 30, 1996, respectively. Of these amounts, $90 and
$130 were included as deferred revenue in
F-95
<PAGE> 263
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED; DOLLARS IN THOUSANDS)
current liabilities at December 31, 1995 and June 30, 1996, respectively.
Receivables from the Partnership were $281 and $70 at December 31, 1995 and June
30, 1996, respectively.
NOTE 4 -- COMMITMENTS AND CONTINGENCIES:
In response to the Cable Television Consumer Protection and Competition Act
of 1992 (the "Cable Act"), the Federal Communications Commission (the "FCC")
issued regulations (the "Rate Regulations") with an effective date of September
1, 1993, to govern the basic service tier, cable programming service tiers
("CPST"), leasing of certain customer equipment, and cable service installation
rates of cable systems not subject to effective competition (collectively the
"Combined Rates"). The FCC significantly amended the Rate Regulations on March
30, 1994. The Rate Regulations cover a significant portion of VSC's cable
television revenues and a variety of other less significant matters. The Rate
Regulations empower the FCC and/or local franchise authorities to order
reductions of existing rates which exceed the maximum permitted levels and to
require refunds measured from the date a complaint is filed in some
circumstances or retroactively for up to one year in other circumstances. Even
though the Rate Regulations have been effective since September 1, 1993, many of
the rules have been subjected to only limited regulatory interpretation by the
FCC. Also, there are a number of pending and threatened judicial challenges to
various provisions of the Cable Act and related Rate Regulations.
Management believes it has made a reasonable interpretation of the Cable
Act and related Rate Regulations in determining the Combined Rates based on the
information currently available. Complaints have been filed with the FCC on
VSC's rates for certain franchises and certain local franchise authorities have
challenged the existing and prior rates. Additionally, in November 1994 the FCC
issued an opinion and order which would require a refund of a portion of the
CPST rates from February 1994 to May 1994. VSC filed an appeal to the FCC on
this order. Further challenges could be forthcoming, some of which would also
apply to revenue recorded for the six months ended June 30, 1996 and prior.
Management believes that based on its interpretation of the Cable Act and
related Rate Regulations, any liabilities in regard to existing and prior rates
will not have a material effect on VSC's financial condition, results of
operations or cash flows.
On February 8, 1996, the Telecommunications Act of 1996 (the "Act") was
signed into law. The Act eases regulation of the cable and telephone businesses
while opening each of them to increased competition. The Act deregulates the
CPST after March 31, 1999. It expands the existing definition of "effective
competition" which, when it occurs with respect to a particular cable system,
results in the deregulation of that cable system's rates. The Act repeals the
statutory ban against telephone companies and certain utility companies from
providing video programming in their own service areas as either cable systems,
common carriers or newly created "open video systems". Additionally, the Act
substantially preempts state and local regulations barring cable operators and
others from providing local telephone services and requires telephone companies
to negotiate with new telephone service providers with respect to the
interoperationality of each of their systems.
The Cable Act and related FCC regulations require cable television system
operators to obtain permission to retransmit television signals from local
commercial broadcast stations electing retransmission consent status.
Accordingly, VSC has entered into retransmission consent agreements with all
applicable stations.
VSC and Viacom International Inc. are involved in various claims and
lawsuits arising in the ordinary course of business, none of which, in the
opinion of management, will have a material adverse effect on VSC's financial
position, results of operations or cash flows.
F-96
<PAGE> 264
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED; DOLLARS IN THOUSANDS)
In the ordinary course of business, VSC enters into long-term affiliation
agreements with programming services which require that VSC continues to carry
and pay for programming and meet certain performance requirements.
VSC is committed to providing cable television services under franchise
agreements with remaining terms of up to 14 years. Franchise fees of up to 5%
are payable on revenues as defined in these agreements.
F-97
<PAGE> 265
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Viacom International Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of VSC Cable Inc. (a wholly-owned
subsidiary of Viacom International Inc.) at December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Viacom International Inc.'s management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in the notes to the financial statements, effective January 1,
1993, VSC Cable Inc. adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
PRICE WATERHOUSE LLP
San Jose, California
April 5, 1996
F-98
<PAGE> 266
VSC CABLE INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Basic and cable services...................................... $35,683 $33,498 $37,243
Pay services.................................................. 9,389 9,623 11,575
Other services (Note 4)....................................... 8,347 11,527 13,224
------- ------- -------
Total revenue....................................... 53,419 54,648 62,042
------- ------- -------
Program fees (Note 4)......................................... 8,375 9,624 13,894
Other direct expenses......................................... 8,032 8,355 8,954
Selling, general and administrative expenses (Note 3)......... 16,141 16,598 16,144
Depreciation and amortization (Note 2)........................ 8,010 8,368 9,655
------- ------- -------
Total operating expenses............................ 40,558 42,945 48,647
------- ------- -------
Operating income.............................................. 12,861 11,703 13,395
Interest expense (Note 3)..................................... (3,043) (3,599) (4,819)
Other expense, net............................................ (75) (91) (124)
------- ------- -------
Total other expenses................................ (3,118) (3,690) (4,943)
------- ------- -------
Income before income taxes.................................... 9,743 8,013 8,452
Provision for income taxes (Note 5)........................... (282) (1,705) (4,659)
------- ------- -------
Net income.................................................... 9,461 6,308 3,793
------- ------- -------
Retained earnings (accumulated deficit), beginning of year.... (1,099) 8,362 14,670
------- ------- -------
Retained earnings, end of year................................ $ 8,362 $14,670 $18,463
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE> 267
VSC CABLE INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Accounts receivable, net of allowance for doubtful accounts of $190
(1994)
and $271 (1995) (Note 4)............................................. $ 2,078 $ 2,463
Prepaid expenses....................................................... 200 219
-------- --------
Total current assets......................................... 2,278 2,682
-------- --------
Property and equipment:
Land................................................................. 1,300 1,301
Buildings............................................................ 2,637 2,636
Distribution systems................................................. 55,536 69,919
Equipment and other.................................................. 18,677 24,335
-------- --------
78,150 98,191
Less accumulated depreciation........................................ 29,650 35,933
-------- --------
Net property and equipment................................... 48,500 62,258
Intangible assets, less accumulated amortization of $13,408 (1994)
and $15,189 (1995)................................................... 53,359 52,258
Other assets........................................................... 50 --
-------- --------
Total assets................................................. $104,187 $117,198
======== ========
LIABILITIES AND OWNER'S EQUITY
Accounts payable....................................................... $ 707 $ 1,350
Accrued product costs (Note 4)......................................... 929 1,215
Accrued compensation................................................... 461 405
Accrued taxes (Note 5)................................................. 1,178 475
Accrued rental expense................................................. -- 565
Deferred revenue (Note 4).............................................. 76 120
Other current liabilities.............................................. 145 237
-------- --------
Total current liabilities.................................... 3,496 4,367
-------- --------
Deferred lease revenue (Note 4)........................................ 190 345
Deferred income taxes (Note 5)......................................... 1,019 6,849
-------- --------
Total liabilities............................................ 4,705 11,561
-------- --------
Commitments and contingencies (Note 6)
Owner's equity:
Common stock; no par value; 1,000 shares authorized, issued and
outstanding....................................................... 1 1
Viacom International Inc. investment and advances.................... 84,811 87,173
Retained earnings.................................................... 14,670 18,463
-------- --------
Total liabilities and owner's equity......................... $104,187 $117,198
======== ========
</TABLE>
See accompanying notes to financial statements.
F-100
<PAGE> 268
VSC CABLE INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net income............................................... $ 9,461 $ 6,308 $ 3,793
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 8,010 8,368 9,655
Increase in property and equipment resulting from
change in accounting principle (Note 2)............. (2,905) -- --
Change in assets and liabilities:
Increase in accounts receivable..................... (531) (345) (385)
Increase in current liabilities..................... 970 275 871
Increase in deferred income taxes................... -- 1,019 5,830
Other, net.......................................... 29 137 165
-------- -------- --------
Net cash flow from operating activities.......... 15,034 15,762 19,929
-------- -------- --------
Investing activities:
Capital expenditures..................................... (9,688) (22,827) (22,958)
Other, net............................................... (347) 1,012 667
-------- -------- --------
Net cash flow used in investing activities....... (10,035) (21,815) (22,291)
-------- -------- --------
Financing activities:
Distributions from (to) Viacom International Inc......... (4,999) 6,053 2,362
-------- -------- --------
Net cash flow from (used in) financing
activities..................................... (4,999) 6,053 2,362
-------- -------- --------
Change in cash........................................... $ -- $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-101
<PAGE> 269
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASIS OF PRESENTATION:
VSC Cable Inc. (VSC), doing business as Viacom Cable, is a wholly-owned
subsidiary of Tele-Vue Systems, Inc., which is a wholly-owned subsidiary of
Viacom International Inc. Viacom International Inc. provides cable television
service through VSC within the Metropolitan Government of Nashville and Davidson
County, the Cities of Goodlettsville and Brentwood, and Williamson County,
Tennessee.
Substantially all of VSC's revenues are earned from subscriber fees for
primary and premium subscription services, the rental of converters and remote
control devices, and installation fees. Additional revenues are derived from the
sale of advertising, pay-per-view programming fees, payments received from
revenue-sharing arrangements in respect of products sold through home shopping
services, and the leasing of fiber optic capacity in the franchise area to a
partnership (in which Viacom International Inc. has an equity interest) engaged
in the provision of competitive access telephone services.
On October 13, 1995, a subsidiary of Tele-Communications, Inc. (TCI Sub)
(as buyer) and Prime Cable of Fort Bend and Prime Cable Income Partners, LP (as
sellers) executed asset and stock purchase and sale agreements providing for the
sale of certain cable television systems serving the greater Houston
Metropolitan Area for a total base purchase price of $301 million, subject to
adjustments. On December 18, 1995, TCI Sub assigned all of its rights, remedies,
title and interest in, to and under such agreements to a majority-owned investee
of Intermedia Partners IV, LP (IMP). After consummation of the Exchange Offer
(as defined herein), IMP's majority-owned investee intends to swap its Houston
cable system for VSC. The swap is intended to qualify as a like-kind exchange
under Section 1031 of the Internal Revenue Code.
On July 24, 1995, Viacom Inc. (Viacom), Viacom International Inc. (after
giving effect to the First Distribution as defined below, VII Cable), a
wholly-owned subsidiary of Viacom, and Viacom International Services Inc. (New
VII), a wholly-owned subsidiary of VII Cable, entered into certain agreements
(the Transaction Agreements) with Tele-Communications, Inc. (TCI) and TCI Sub,
providing for, among other things, the conveyance of Viacom International Inc.'s
non-cable assets and liabilities to New VII, the distribution of all of the
common stock of New VII to Viacom (the First Distribution), the Exchange Offer
(as defined below) and the issuance to TCI Sub of all of the Class B Common
Stock of VII Cable. Viacom will commence an exchange offer (the Exchange Offer)
pursuant to which Viacom shareholders may exchange shares of Viacom Class A or
Class B Common Stock for shares of VII Cable Class A Common Stock. The First
Distribution will not occur until the date of consummation of the Exchange
Offer.
Prior to the consummation of the Exchange Offer, Viacom International Inc.
will enter into a $1.7 billion credit agreement. Proceeds from such credit
agreement will be transferred by Viacom International Inc. to New VII as part of
the First Distribution. Viacom also entered into a definitive agreement with TCI
under which TCI Sub, through a capital contribution of $350 million in cash,
will purchase all of the shares of Class B Common Stock of VII Cable immediately
following the consummation of the Exchange Offer. At that time, the shares of
Class A Common Stock of VII Cable will convert into shares of cumulative
redeemable exchangeable preferred stock (the Preferred Stock). The Preferred
Stock will be exchangeable after the fifth anniversary of issuance at the
holders' option for TCI Class A Common Stock.
National Amusements, Inc. (NAI), which owns approximately 25% of Viacom
Class A and Class B Common Stock on a combined basis, will not participate in
the Exchange Offer. The Exchange Offer and related transactions are subject to
several conditions, including regulatory approvals, receipt of a tax ruling and
consummation of the Exchange Offer.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-102
<PAGE> 270
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
reported amounts of revenues and expenses during the reporting period. Actual
results could subsequently differ from those estimates.
For the purposes of these financial statements, the statements of
operations and balance sheets have been presented in the customary reporting
format of IMP, and as a result, the classifications used in the statement of
operations and balance sheets are different from the classifications used in the
VSC financial statements submitted to the Metropolitan Government of Nashville
and Davidson County. These financial statements are not necessarily indicative
of results that would have occurred if VSC had been a separate stand-alone
entity during the periods presented or of future results of VSC.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
Cable television service revenue is recognized in the period in which
services are provided to customers.
Lease access revenue (see Note 4) is recognized over the life of the lease.
PROVISION FOR DOUBTFUL ACCOUNTS
The provision for doubtful accounts charged to expense was $1,282 (1993),
$990 (1994) and $1,303 (1995).
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Inventory, which consists
primarily of construction material, is stated at the lower of weighted average
cost or market. Construction-in-progress and inventory are included in equipment
and other. VSC capitalizes interest costs associated with certain qualifying
assets. The total amount of interest costs capitalized was $36 (1993), $170
(1994) and $437 (1995). Repairs and maintenance are charged to operations, and
renewals and additions are capitalized. Normal retirements of distribution
system components are charged at cost to accumulated depreciation with no effect
on income. For all other retirements or dispositions, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in income.
Depreciation expense is computed using the straight-line method over
estimated useful lives of 9 to 15 years for distribution systems, 3 to 10 years
for machinery and equipment and 28 to 30 years for buildings. Depreciation
expense was $6,236 (1993), $6,687 (1994) and $7,874 (1995).
INTANGIBLE ASSETS
Intangible assets primarily consist of the cost of acquired businesses in
excess of the fair value of tangible assets and liabilities acquired
attributable to the NAI leveraged buyout of Viacom International Inc. in June
1987. Such assets are amortized on a straight-line basis over an estimated
useful life of 40 years. In addition, VSC has franchise rights to operate cable
television systems in various towns and political subdivisions within its
service areas. The cost of successful franchise applications are capitalized and
amortized over the life of the related franchise agreement. Franchise lives
generally range from 6 to 15 years with various dates of expiration. VSC
evaluates the realizability of intangibles on an ongoing basis in light of
changes in business conditions, events or circumstances that may indicate the
potential impairment of intangible assets. The remainder of intangible assets,
consisting of covenants not to compete and rights of entry, are being amortized
using the straight-line method over 3 to 20 years.
F-103
<PAGE> 271
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
INCOME TAXES
VSC is included in the consolidated federal tax returns filed by Viacom.
Viacom does not allocate income taxes to its subsidiaries; however, for
financial reporting purposes, VSC provides for income taxes as if a separate
federal tax return were filed. VSC files a separate tax return for state
purposes.
The current income tax liabilities for the periods presented have been
satisfied by Viacom. In connection with the transactions described in Note 1,
Viacom has agreed to indemnify VSC against income tax assessments, if any,
arising from federal, state or local tax audits for periods in which VSC was a
member of Viacom's consolidated tax group.
During the first quarter of 1993, VSC adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes" on a
prospective basis. SFAS 109 requires, among other things, that deferred income
taxes be provided for temporary differences between the financial reporting
basis and the tax basis of VSC's assets and liabilities. Additionally, SFAS 109
establishes criteria for determining whether a valuation allowance should be
established for any deferred tax assets for which realization is uncertain. On
the implementation of SFAS 109, assets acquired in prior years' business
combinations had to be adjusted from net of tax amounts to pre-tax amounts. The
effect of this adjustment was to gross-up property and equipment and record a
deferred tax liability of $2,905 as of January 1, 1993. The implementation of
SFAS 109 had no effect on net income.
VSC has restated retained earnings at January 1, 1993 to reverse benefits
taken in prior years for the utilization of net operating loss carryforwards and
other tax credits derived from pre-acquisition operations. These benefits have
been used to reduce goodwill associated with the Viacom acquisition of VSC. This
resulted in a reduction in retained earnings and intangible assets at January 1,
1993 of $3,495.
RECENT ACCOUNTING PRONOUNCEMENT
During 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which VSC will
be required to adopt in 1996. SFAS 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. VSC has evaluated the impact
of SFAS 121 and it will not have a significant effect on VSC's financial
position or results of operations.
NOTE 3 -- EXPENSES ALLOCATED TO VSC:
Viacom International Inc. funds the working capital requirements of its
businesses based upon a centralized cash management system. Viacom International
Inc. investment and advances includes any payables and receivables due to/from
Viacom International Inc. resulting from cash paid or received on behalf of VSC
and other intercompany activity.
To reflect the services provided to VSC, common benefits derived from
incurred costs and the utilization of borrowed funds to finance capital
expenditures and operations, the accompanying financial statements include
allocations for certain corporate administrative expenses and interest. Such
allocations, as a matter of practice, are not recorded in the accounting records
of VSC. Management believes that the methodologies
F-104
<PAGE> 272
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
used to allocate these charges are reasonable. Allocations for administrative
expenses and interest (including interest subsequently capitalized) are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Administrative expenses.......................... $3,560 $3,270 $2,220
Interest......................................... 3,079 3,748 5,256
</TABLE>
For the purposes of these financial statements, allocations of
administrative services are based on VSC's and Viacom International Inc.'s
operating results. The allocation of interest is based on a percentage of VSC's
average net assets to Viacom International Inc.'s average net assets.
NOTE 4 -- OTHER RELATED PARTY TRANSACTIONS:
VSC, through the normal course of business, is involved in transactions
with companies owned by or affiliated with Viacom International Inc. VSC has
agreements to distribute television programs of such companies, including
Showtime Networks Inc., MTV Networks Inc., Comedy Central, USA Networks, Sci-Fi
Channel, Viewer's Choice and Lifetime (prior to its sale by Viacom on April 1,
1994). The agreements require VSC to pay license fees based primarily upon the
number of customers receiving the service. Program license fees incurred under
these agreements were $2,638 (1993), $3,372 (1994), and $4,431 (1995), and are
included in program fees. Related party liabilities, included in accrued product
costs, were $308 and $434 at December 31, 1994 and 1995, respectively.
On November 15, 1993, Viacom Telecom Inc., a wholly-owned subsidiary of
Tele-Vue Systems, Inc. entered into a limited partnership, AVR of Tennessee, LP
(the Partnership), for the purposes of providing voice, data and video access
services for long-distance carriers, and for commercial, governmental and other
non-residential users in and around Nashville, Tennessee. As a result of the
formation of the Partnership, Viacom International Inc. is committed to
construct the facilities required to conduct the Partnership business within its
cable television franchise area. VSC leases the primary transmission facilities
to the Partnership under noncancellable operating leases at rates calculated to
recover actual construction and financing costs. Lease access revenue was $0
(1993), $82 (1994) and $285 (1995), and is included in other services. Deferred
lease access revenue was $234 and $435 at December 31, 1994 and 1995,
respectively. Of these amounts, $44 and $90 were included as deferred revenue in
current liabilities at December 31, 1994 and 1995, respectively. Receivables
from the Partnership were $332 and $281 at December 31, 1994 and 1995,
respectively.
NOTE 5 -- INCOME TAXES:
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1993 1994 1995
---- ------ ------
<S> <C> <C> <C>
Federal:
Current...................................... $282 $ 198 $2,076
Deferred..................................... -- 910 2,012
State and local:
Current...................................... -- 488 458
Deferred..................................... -- 109 113
---- ------ ------
Total provision for income taxes............... $282 $1,705 $4,659
==== ====== ======
</TABLE>
F-105
<PAGE> 273
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
A reconciliation of the U.S. Federal statutory tax rate to VSC's effective
tax rate on income before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Statutory U.S. tax rate............................. 35.0% 35.0% 35.0%
Amortization of goodwill............................ 5.7 7.8 7.4
State and local taxes, net of federal tax benefit... -- 4.8 4.4
Effect of increase (decrease) in the valuation
allowance......................................... (41.3) (27.8) 2.1
Alternative minimum tax............................. 2.9 2.5 6.6
Other, net.......................................... .6 (1.0) (.4)
----- ----- -----
Effective tax rate........................ 2.9% 21.3% 55.1%
===== ===== =====
</TABLE>
The following is a summary of the deferred tax accounts in accordance with
SFAS 109:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
------- ------
<S> <C> <C>
Current deferred tax assets:
Other, net............................................ $ -- $ (177)
Valuation allowance................................... -- 177
------- ------
Net current deferred tax assets......................... -- --
------- ------
Noncurrent deferred tax (assets) liabilities:
Fixed asset basis differences......................... 6,133 7,228
Investment tax credit carryforwards................... (3,706) --
Net operating loss carryforwards...................... (1,002) --
Amortization.......................................... (410) (425)
Other, net............................................ 4 46
------- ------
Net noncurrent deferred tax liabilities................. 1,019 6,849
------- ------
Deferred tax liabilities................................ $ 1,019 $6,849
======= ======
</TABLE>
A deferred tax asset valuation allowance was recorded at December 31, 1995
due to uncertainties surrounding the realization of deferred tax assets. In
addition, the deferred tax asset related to the investment tax credit was
transferred to Viacom during 1995 to reflect the utilization of this tax
attribute by the consolidated group.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES:
Minimum annual rental commitments at December 31, 1995 under noncancellable
operating leases are as follows:
<TABLE>
<S> <C>
1996.......................................................... $111
1997.......................................................... 84
1998.......................................................... 37
1999.......................................................... 21
2000.......................................................... 8
2001 and thereafter........................................... 17
----
$278
====
</TABLE>
F-106
<PAGE> 274
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Rent expense was $981 (1993), $921 (1994) and $1,049 (1995).
In response to the "Cable Television Consumer Protection and Competition
Act of 1992" (the Cable Act), the Federal Communications Commission (the FCC)
issued regulations (the Rate Regulations) with an effective date of September 1,
1993, to govern the basic service tier, cable programming service tiers (CPST),
leasing of certain customer equipment, and cable service installation rates of
cable systems not subject to effective competition (collectively the Combined
Rates). The FCC significantly amended the Rate Regulations on March 30, 1994.
The Rate Regulations cover a significant portion of VSC's cable television
revenues and a variety of other less significant matters. The Rate Regulations
empower the FCC and/or local franchise authorities to order reductions of
existing rates which exceed the maximum permitted levels and to require refunds
measured from the date a complaint is filed in some circumstances or
retroactively for up to one year in other circumstances. Even though the Rate
Regulations have been effective since September 1, 1993, many of the rules have
been subjected to only limited regulatory interpretation by the FCC. Also, there
are a number of pending and threatened judicial challenges to various provisions
of the Cable Act and related Rate Regulations.
Management believes it has made a reasonable interpretation of the Cable
Act and related Rate Regulations in determining the Combined Rates based on the
information currently available. Complaints have been filed with the FCC on
VSC's rates for certain franchises and certain local franchise authorities have
challenged the existing and prior rates. Additionally, in November 1994 the FCC
issued an opinion and order which would require a refund of a portion of the
CPST rates from February 1994 to May 1994. VSC filed an appeal to the FCC on
this order. Further challenges could be forthcoming, some of which would also
apply to revenue recorded in 1995 and prior. Management believes that, based on
its interpretation of the Cable Act and related Rate Regulations, any
liabilities in regard to existing and prior rates will not have a material
effect on VSC's financial condition, results of operations or cash flows.
On February 8, 1996, the "Telecommunications Act of 1996" (the Act) was
signed into law. The Act eases regulation of the cable and telephone businesses
while opening each of them to increased competition. The Act deregulates the
CPST after March 31, 1999. It expands the existing definition of "effective
competition" which, when it occurs with respect to a particular cable system,
results in the deregulation of that cable system's rates. The Act repeals the
statutory ban against telephone companies and certain utility companies from
providing video programming in their own service areas as either cable systems,
common carriers or newly created "open video systems". Additionally, the Act
subsequently preempts state and local regulations barring cable operators and
others from providing local telephone services and requires telephone companies
to negotiate with new telephone service providers with respect to the
interoperationality of each of their systems.
The Cable Act and related FCC regulations require cable television system
operators to obtain permission to retransmit television signals from local
commercial broadcast stations electing retransmission consent status.
Accordingly, VSC has entered into retransmission consent agreements with all
applicable stations.
VSC and Viacom International Inc. are involved in various claims and
lawsuits arising in the ordinary course of business, none of which, in the
opinion of management, will have a material adverse effect on VSC's financial
position, results of operations or cash flows.
In the ordinary course of business, VSC enters into long-term affiliation
agreements with programming services which require that VSC continues to carry
and pay for programming and meet certain performance requirements.
VSC is committed to providing cable television services under franchise
agreements with remaining terms of up to 14 years. Franchise fees of up to 5%
are payable on revenues as defined in these agreements.
F-107
<PAGE> 275
VSC CABLE INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7 -- PENSION PLANS:
Viacom has contributory and noncontributory pension plans covering
substantially all of its employees, including the employees assigned to VSC.
Viacom's policy is to fund amounts in accordance with the Employee Retirement
Income Security Act of 1974. The benefits are based primarily on years of
service and employees' pay near retirement. Employees are vested after five
years of service. VSC is charged for pension expense by Viacom as an element of
a composite fringe benefit charge. Information on the amount of the actuarial
present value of vested and nonvested accumulated plan obligations, the plan's
net assets, the net pension cost, and the assumed rates of return is not
provided as such information is not maintained separately for employees of
Viacom operating divisions. The obligations for pension benefits earned prior to
the consummation of the Exchange Offer will be retained by Viacom. All employees
of VSC will be fully vested upon the Exchange Offer.
F-108
<PAGE> 276
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY 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 THE INITIAL
PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 1
Summary Supplemental Historical and
Pro Forma Financial Data............ 15
Summary Historical Financial and
Operating Data...................... 17
Risk Factors.......................... 23
The Exchange Offer.................... 29
Use of Proceeds....................... 37
Capitalization........................ 37
Pro Forma Financial Information....... 38
Selected Financial Information and
Operating Data...................... 51
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 58
The Acquisitions...................... 78
Business.............................. 82
Legislation and Regulation............ 97
Management............................ 109
Principal Security Holders............ 113
Certain Relationships and Related
Transactions........................ 114
The Partnership Agreement............. 117
Description of Other Obligations...... 122
Description of the Notes.............. 124
Certain Federal Income Tax
Consequences........................ 152
Plan of Distribution.................. 152
Legal Matters......................... 153
Experts............................... 153
Glossary.............................. 154
Index to Financial Statements......... F-1
- ---------------------------------------------
- ---------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
$292,000,000
INTERMEDIA CAPITAL
PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV,
CAPITAL CORP.
OFFER TO EXCHANGE THEIR
11 1/4% SENIOR NOTES
DUE 2006
FOR
11 1/4% SENIOR NOTES
DUE 2006
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
------------------------
PROSPECTUS
------------------------
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 277
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits IPCC's board of
directors to indemnify any person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his being or having
been a director, officer, employee or agent of IPCC, in terms sufficiently broad
to permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities Act
of 1933, as amended (the "Act"). The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of indemnification
to which a person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
IPCC's Certificate of Incorporation provides for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by law.
Article 6 of ICP-IV's Agreement of Limited Partnership provides as follows:
ARTICLE 6 --CONFLICTS OF INTEREST; INDEMNIFICATION; EXCULPATION
6.3 Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the General Partner, any Limited Partner, any Advisory
Committee member and any partner, employee or agent of the General Partner,
any Limited Partner or any Advisory Committee member and any employee or
agent of the Partnership and/or the legal representatives of any of them,
and each other person who may incur liability as a general partner in
connection with the management of the Partnership or any corporation or
other entity in which the Partnership has an investment, against all
liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, and as counsel fees) reasonably incurred by him
or it in connection with the defense or disposition of any civil action,
suit or other proceeding, in which he or it may be involved or with which
he or it may be threatened, while a general partner or serving in such
other capacity or thereafter, by reason of its being or having been a
general partner, or by serving in such other capacity, except with respect
to any matter which constitutes willful misconduct, bad faith, gross
negligence or reckless disregard of the duties of its office, or material
breach of this Agreement. The Partnership shall advance, in the sole
discretion of the General Partner, to the General Partner, any Limited
Partner, any Advisory Committee member and any partner, employee or agent
of the General Partner, any Limited Partner, any Advisory Committee member
or the Partnership reasonable attorneys' fees and other costs and expenses
incurred in connection with the defense of any such action or proceeding.
The General Partner hereby agrees, and each employee or agent of the
General Partner and the Partnership shall agree in writing prior to any
such advancement, that in the event he or it receives any such advance,
such indemnified party shall reimburse the Partnership for such fees, costs
and expenses to the extent that it shall be determined that he or it was
not entitled to indemnification under this Section. The rights accruing to
a General Partner, any Limited Partner and each partner, employee or agent
of the General Partner, any Limited Partner or the Partnership under this
paragraph shall not exclude any other right to which it or they may be
lawfully entitled; provided, that any right of indemnity or reimbursement
granted in this paragraph or to which any indemnified party may be
otherwise entitled may only be satisfied out of the assets of the
Partnership, and no withdrawn General Partner, and no Limited Partner,
shall be personally liable with respect to any such claim for indemnity or
reimbursement. Notwithstanding any of the foregoing to the contrary, the
provisions of this Section 6.3 shall not be construed so as to provide for
the indemnification of the General Partner, any Limited Partner, and
Advisory Committee member or any employee or agent of the General Partner,
any Limited Partner or Advisory Committee member for any liability to the
extent (but only to the extent) that such indemnification would be in
violation of applicable law or such liability may not be waived, modified
or limited under applicable law, but shall be construed so as to effectuate
the provisions of this Section 6.3 to the fullest extent permitted by law.
II-1
<PAGE> 278
The Company has obtained directors and officers' liability insurance that
may cover, among other things, liabilities under the federal securities laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement, dated as of July 19, 1996 by and among InterMedia Capital
Partners IV, L.P., InterMedia Partners IV, Capital Corp., NationsBanc Capital
Markets, Inc. and Toronto Dominion Securities (USA) Inc. (Annexes omitted. The
Registrants agree to furnish a copy of any annex to the Commission upon
request.)
2.1 Asset Purchase and Sale Agreement dated as of October 25, 1995 by and between
ParCable, Inc. and InterMedia Partners of Tennessee, L.P. and amendment
thereto. (Exhibits and schedules omitted. The Registrants agree to furnish a
copy of any exhibit or schedule to the Commission upon request).
2.2 Asset Purchase Agreement dated October 18, 1995 between Time Warner
Entertainment Company, L.P. and InterMedia Partners of Tennessee, L.P. and
amendment thereto. (Exhibits and schedules omitted. The Registrants agree to
furnish a copy of any exhibit or schedule to the Commission upon request).
2.3 Stock Purchase Agreement dated as of July 26, 1996 between InterMedia Capital
Management V, L.P. and InterMedia Partners IV, L.P.
2.4 Contribution Agreement dated as of April 30, 1996 by and between InterMedia
Capital Partners IV, L.P., InterMedia Partners and General Electric Capital
Corporation and amendments thereto. (Schedules omitted. The Registrants agree
to furnish a copy of any schedule to the Commission upon request.)
2.5 Contribution Agreement dated as of April 30, 1996 by and between InterMedia
Partners IV, L.P., TCI of Greenville, Inc., TCI of Piedmont, Inc. and TCI of
Spartanburg, Inc. and amendments thereto. (Exhibits and schedules omitted. The
Registrants agree to furnish a copy of any exhibit or schedule to the
Commission upon request).
2.6 Exchange Agreement dated as of December 18, 1995 by and between TCI
Communications, Inc. and InterMedia Partners Southeast and amendment thereto.
(Exhibits and schedules omitted. The Registrants agree to furnish a copy of any
exhibit or schedule to the Commission upon request).
3.1 Certificate of Incorporation of InterMedia Partners IV, Capital Corp.
3.2 Bylaws of InterMedia Partners IV, Capital Corp.
3.3 Agreement of Limited Partnership of InterMedia Capital Partners IV, L.P. dated
as of March 19, 1996 by and among InterMedia Capital Management IV, L.P. and
the various limited partners. (Exhibits omitted. The Registrants agree to
furnish a copy of any exhibit to the Commission upon request.)
4.1 Registration Rights Agreement dated as of July 19, 1996 by and among InterMedia
Capital Partners IV, L.P., InterMedia Partners IV, Capital Corp., NationsBanc
Capital Markets, Inc. and Toronto Dominion Securities (USA) Inc.
4.2 Indenture dated as of July 30, 1996 by and among InterMedia Capital Partners
IV, L.P., InterMedia Partners IV, Capital Corp. and The Bank of New York, as
trustee, including the form of Global Note.
</TABLE>
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<PAGE> 279
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------------------------------------------------------------------------------
<C> <S>
4.3 Pledge and Escrow Agreement dated as of July 30, 1996 by and among InterMedia
Capital Partners IV, L.P., InterMedia Partners IV, Capital Corp., NationsBanc
Capital Markets, Inc. and The Bank of New York, as trustee and as collateral
agent. (Annex I omitted. The Registrants agree to furnish a copy of Annex I to
the Commission upon request.)
4.4 Form of Senior Notes (included in Exhibit 4.2).
*5.1 Opinion of Pillsbury Madison & Sutro LLP as to the securities to be issued.
10.1 Revolving Credit and Term Loan Agreement dated as of July 30, 1996 among
InterMedia Partners IV, L.P. and The Bank of New York, as Administrative Agent,
and The Bank of New York, NationsBank of Texas, N.A., Toronto Dominion (Texas),
Inc., as Arranging Agents, and NationsBank of Texas, N.A. and Toronto Dominion
(Texas), Inc., as Syndication Agents, and the Financial Institution Parties
thereto.
10.2 Security and Hypothecation Agreement dated as of July 30, 1996 by InterMedia
Partners of West Tennessee, L.P. in favor of The Bank of New York in its
capacity as Agent for the benefit of the Lenders. (InterMedia Partners IV,
L.P., InterMedia Capital Partners IV, L.P., InterMedia Partners of Tennessee,
InterMedia Partners Southeast, Robin Media Holdings, Inc. and Robin Media Group
each have entered into agreements which are substantially identical in all
material respects to Exhibit 10.2).
10.3 General Guarantee dated July 30, 1996 by and among InterMedia Partners of West
Tennessee, L.P. in favor of The Bank of New York, as agent to the financial
institutions. (InterMedia Capital Partners IV, L.P., InterMedia Partners
Southeast, InterMedia Partners of Tennessee, Robin Media Holdings, Inc. and
Robin Media Group each have entered into agreements which are substantially
identical in all material respects to Exhibit 10.3).
**10.4 Satellite Services, Inc. Programming Supply Agreement dated January 28, 1996,
by and between Satellite Services, Inc. and InterMedia Partners IV, L.P.
10.5 Administration Agreement dated as of March 19, 1996 by and among InterMedia
Management, Inc., InterMedia Capital Partners IV, L.P. and InterMedia Partners
IV, L.P.
10.6 Administration Agreement dated as of July 30, 1996 by and between InterMedia
Management, Inc. and InterMedia Partners Southeast.
10.7 Administration Agreement dated as of January 19, 1995 by and between InterMedia
Management, Inc. and InterMedia Partners of Tennessee.
10.8 Administration Agreement dated as of April 30, 1992 by and between InterMedia
Management, Inc. and Robin Media Group, Inc.
10.9 Amended and Restated Administration Agreement dated as of December 27, 1990 by
and between InterMedia Management, Inc. and InterMedia Partners of West
Tennessee, L.P.
10.10 Management Agreement dated as of July 30, 1996 by and between InterMedia
Capital Management IV, L.P. and InterMedia Partners of West Tennessee, L.P.
10.11 Management Agreement dated as of July 30, 1996 by and between InterMedia
Capital Management IV, L.P. and Robin Media Group, Inc.
11.1 Computation of Ratios.
21.1 List of Subsidiaries of InterMedia Capital Partners IV, L.P.
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Ernst & Young LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1)
</TABLE>
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<PAGE> 280
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------------------------------------------------------------------------------
<C> <S>
24.1 Power of Attorney (included on pages II-6 and II-7)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of
The Bank of New York
27.1 Schedule of Financial Data for InterMedia Capital Partners IV, L.P.
27.2 Schedule of Financial Data for the Previously Affiliated Entities
99.1 Form of Letter of Transmittal
99.2 Form of Exchange Agent Agreement
99.3 Form of Guaranteed Delivery Procedures
</TABLE>
- ---------------
* To be filed by Amendment.
** Confidential portions have been omitted pursuant to Rule 406 and filed
separately with the Commission.
(b) Financial Statement Schedules of ICP-IV and IPCC.
All schedules are omitted because they are not applicable or the required
information is shown in the respective financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
(1) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(2) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(3) The undersigned registrants hereby undertake: (i) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (A) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (B) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement); and (C) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; (ii) that,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and (iii) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event
II-4
<PAGE> 281
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-5
<PAGE> 282
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 San Francisco, State of
California, on September 11, 1996.
INTERMEDIA PARTNERS IV, CAPITAL CORP.
By /s/ LEO J. HINDERY, JR.
------------------------------------
Leo J. Hindery, Jr.
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Leo J. Hindery, Jr. and Edon V. Hartley, and each
of them, his true and lawful attorneys-in-fact and agents, each with full power
of substation and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, 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 he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ LEO J. HINDERY, JR. President September 11, 1996
- ------------------------------------------
Leo J. Hindery, Jr.
/s/ EDON V. HARTLEY Chief Financial Officer and September 11, 1996
- ------------------------------------------ Treasurer
Edon V. Hartley
/s/ THOMAS R. STAPLETON Vice President September 11, 1996
- ------------------------------------------
Thomas R. Stapleton
</TABLE>
II-6
<PAGE> 283
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 San Francisco, State of
California, on September 11, 1996.
INTERMEDIA CAPITAL PARTNERS IV, L.P.
By: InterMedia Capital Management IV,
L.P., its General Partner
By: InterMedia Management, Inc., its
General Partner
By: /s/ LEO J. HINDERY, JR.
------------------------------------
Leo J. Hindery, Jr.
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Leo J. Hindery, Jr. and Edon V. Hartley, and each
of them, his true and lawful attorneys-in-fact and agents, each with full power
of substation and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, 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 he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ LEO J. HINDERY, JR. President, Chief Executive September 11, 1996
- ------------------------------------------ Officer and Sole Director of
Leo J. Hindery, Jr. InterMedia Management, Inc.
/s/ EDON V. HARTLEY Chief Financial Officer of September 11, 1996
- ------------------------------------------ InterMedia Management, Inc.
Edon V. Hartley
/s/ THOMAS R. STAPLETON Vice President of InterMedia September 11, 1996
- ------------------------------------------ Management, Inc.
Thomas R. Stapleton
</TABLE>
II-7
<PAGE> 284
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGES
------- ------------------------------------------------------------------ --------------
<C> <S> <C>
1.1 Purchase Agreement, dated as of July 19, 1996 by and among
InterMedia Capital Partners IV, L.P., InterMedia Partners IV,
Capital Corp., NationsBanc Capital Markets, Inc. and Toronto
Dominion Securities (USA) Inc. (Annexes omitted. The Registrants
agree to furnish a copy of any annex to the Commission upon
request.).........................................................
2.1 Asset Purchase and Sale Agreement dated as of October 25, 1995 by
and between ParCable, Inc. and InterMedia Partners of Tennessee,
L.P. and amendment thereto. (Exhibits and schedules omitted. The
Registrants agree to furnish a copy of any exhibit or schedule to
the Commission upon request)......................................
2.2 Asset Purchase Agreement dated October 18, 1995 between Time
Warner Entertainment Company, L.P. and InterMedia Partners of
Tennessee, L.P. and amendment thereto. (Exhibits and schedules
omitted. The Registrants agree to furnish a copy of any exhibit or
schedule to the Commission upon request)..........................
2.3 Stock Purchase Agreement dated as of July 26, 1996 between
InterMedia Capital Management V, L.P. and InterMedia Partners IV,
L.P...............................................................
2.4 Contribution Agreement dated as of April 30, 1996 by and between
InterMedia Capital Partners IV, L.P., InterMedia Partners and
General Electric Capital Corporation and amendments thereto.
(Schedules omitted. The Registrants agree to furnish a copy of any
schedule to the Commission upon request.).........................
2.5 Contribution Agreement dated as of April 30, 1996 by and between
InterMedia Partners IV, L.P., TCI of Greenville, Inc., TCI of
Piedmont, Inc. and TCI of Spartanburg, Inc. and amendments
thereto. (Exhibits and schedules omitted. The Registrants agree to
furnish a copy of any exhibit or schedule to the Commission upon
request)..........................................................
2.6 Exchange Agreement dated as of December 18, 1995 by and between
TCI Communications, Inc. and InterMedia Partners Southeast and
amendment thereto. (Exhibits and schedules omitted. The
Registrants agree to furnish a copy of any exhibit or schedule to
the Commission upon request)......................................
3.1 Certificate of Incorporation of InterMedia Partners IV, Capital
Corp..............................................................
3.2 Bylaws of InterMedia Partners IV, Capital Corp....................
3.3 Agreement of Limited Partnership of InterMedia Capital Partners
IV, L.P. dated as of March 19, 1996 by and among InterMedia
Capital Management IV, L.P. and the various limited partners.
(Exhibits omitted. The Registrants agree to furnish a copy of any
exhibit to the Commission upon request.)..........................
4.1 Registration Rights Agreement dated as of July 19, 1996 by and
among InterMedia Capital Partners IV, L.P., InterMedia Partners
IV, Capital Corp., NationsBanc Capital Markets, Inc. and Toronto
Dominion Securities (USA) Inc. ...................................
4.2 Indenture dated as of July 30, 1996 by and among InterMedia
Capital Partners IV, L.P., InterMedia Partners IV, Capital Corp.
and The Bank of New York, as trustee, including the form of Global
Note..............................................................
</TABLE>
<PAGE> 285
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGES
------- ------------------------------------------------------------------ --------------
<C> <S> <C>
4.3 Pledge and Escrow Agreement dated as of July 30, 1996 by and among
InterMedia Capital Partners IV, L.P., InterMedia Partners IV,
Capital Corp., NationsBanc Capital Markets, Inc. and The Bank of
New York, as trustee and as collateral agent. (Annex I omitted.
The Registrants agree to furnish a copy of Annex I to the
Commission upon request.).........................................
4.4 Form of Senior Notes (included in Exhibit 4.2)....................
*5.1 Opinion of Pillsbury Madison & Sutro LLP as to the securities to
be issued.........................................................
10.1 Revolving Credit and Term Loan Agreement dated as of July 30, 1996
among InterMedia Partners IV, L.P. and The Bank of New York, as
Administrative Agent, and The Bank of New York, NationsBank of
Texas, N.A., Toronto Dominion (Texas), Inc., as Arranging Agents,
and NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc.,
as Syndication Agents, and the Financial Institution Parties
thereto...........................................................
10.2 Security and Hypothecation Agreement dated as of July 30, 1996 by
InterMedia Partners of West Tennessee, L.P. in favor of The Bank
of New York in its capacity as Agent for the benefit of the
Lenders. (InterMedia Partners IV, L.P., InterMedia Capital
Partners IV, L.P., InterMedia Partners of Tennessee, InterMedia
Partners Southeast, Robin Media Holdings, Inc. and Robin Media
Group each have entered into agreements which are substantially
identical in all material respects to Exhibit 10.2)...............
10.3 General Guarantee dated July 30, 1996 by and among InterMedia
Partners of West Tennessee, L.P. in favor of The Bank of New York,
as agent to the financial institutions. (InterMedia Capital
Partners IV, L.P., InterMedia Partners Southeast, InterMedia
Partners of Tennessee, Robin Media Holdings, Inc. and Robin Media
Group each have entered into agreements which are substantially
identical in all material respects to Exhibit 10.3)...............
**10.4 Satellite Services, Inc. Programming Supply Agreement dated
January 28, 1996, by and between Satellite Services, Inc. and
InterMedia Partners IV, L.P. .....................................
10.5 Administration Agreement dated as of March 19, 1996 by and among
InterMedia Management, Inc., InterMedia Capital Partners IV, L.P.
and InterMedia Partners IV, L.P. .................................
10.6 Administration Agreement dated as of July 30, 1996 by and between
InterMedia Management, Inc. and InterMedia Partners Southeast.....
10.7 Administration Agreement dated as of January 19, 1995 by and
between InterMedia Management, Inc. and InterMedia Partners of
Tennessee.........................................................
10.8 Administration Agreement dated as of April 30, 1992 by and between
InterMedia Management, Inc. and Robin Media Group, Inc. ..........
10.9 Amended and Restated Administration Agreement dated as of December
27, 1990 by and between InterMedia Management, Inc. and InterMedia
Partners of West Tennessee, L.P. .................................
10.10 Management Agreement dated as of July 30, 1996 by and between
InterMedia Capital Management IV, L.P. and InterMedia Partners of
West Tennessee, L.P. .............................................
10.11 Management Agreement dated as of July 30, 1996 by and between
InterMedia Capital Management IV, L.P. and Robin Media Group,
Inc. .............................................................
11.1 Computation of Ratios.............................................
</TABLE>
<PAGE> 286
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGES
------- ------------------------------------------------------------------ --------------
<C> <S> <C>
21.1 List of Subsidiaries of InterMedia Capital Partners IV, L.P. .....
23.1 Consent of Price Waterhouse LLP...................................
23.2 Consent of Price Waterhouse LLP...................................
23.3 Consent of Ernst & Young LLP......................................
23.4 Consent of KPMG Peat Marwick LLP..................................
23.5 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit
5.1)..............................................................
24.1 Power of Attorney (included on pages II-6 and II-7)...............
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on
Form T-1 of The Bank of New York..................................
27.1 Schedule of Financial Data for InterMedia Capital Partners IV,
L.P. .............................................................
27.2 Schedule of Financial Data for the Previously Affiliated
Entities..........................................................
99.1 Form of Letter of Transmittal.....................................
99.2 Form of Exchange Agent Agreement..................................
99.3 Form of Guaranteed Delivery Procedures............................
</TABLE>
- ---------------
* To be filed by Amendment.
** Confidential portions have been omitted pursuant to Rule 406 and filed
separately with the Commission.
<PAGE> 1
EXHIBIT 1.1
EXECUTION COPY
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV CAPITAL CORP.
$292,000,000
11 1/4% SENIOR NOTES DUE 2006
PURCHASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Representations and Warranties................................................................ 2
(a) No Untrue Statement or Material Omission............................................. 2
(b) No Stop Orders....................................................................... 3
(c) No Action Requiring Registration of the Notes........................................ 3
(d) Exemption from Registration.......................................................... 3
(e) PORTAL Market........................................................................ 3
(f) Investment Company Act............................................................... 3
(g) Financial Statements................................................................. 4
(h) No Material Adverse Change in Business............................................... 4
(i) Good Standing, Etc................................................................... 4
(j) Capitalization....................................................................... 5
(k) No Existing Defaults................................................................. 5
(l) Possession of Licenses and Permits................................................... 5
(m) Absence of Proceedings............................................................... 6
(n) Title to Property.................................................................... 6
(o) Authority of the Issuers............................................................. 6
(p) Authorization of this Agreement...................................................... 9
(q) Authorization of the Indenture....................................................... 9
(r) Authorization of the Notes........................................................... 9
(s) Authorization of the New Notes....................................................... 9
(t) Authorization of the Registration Rights Agreement................................... 10
(u) Authorization of the Pledge Agreement................................................ 10
(v) Authorization of the Bank Facility and the Bank Facility Security
Agreements........................................................................... 10
(w) Authorization of the Partnership Agreement........................................... 10
(x) Authorization of the Subscription Agreements......................................... 11
(y) Authorization of the Acquisition Agreements.......................................... 11
(z) The Transaction Documents............................................................ 11
(aa) No Conflicts......................................................................... 11
(ab) Independent Accountants.............................................................. 12
(ac) Maintenance of Records............................................................... 12
(ad) Possession of Intellectual Property.................................................. 12
(ae) Insurance............................................................................ 12
(af) Doing Business with Cuba............................................................. 13
(ag) Employee Pension or Benefit Plans.................................................... 13
(ah) Environmental Laws................................................................... 13
(ai) Description of Certain Transactions.................................................. 13
(aj) D.D. Cable........................................................................... 14
(ak) Absence of Labor Dispute............................................................. 14
(al) Taxes................................................................................ 14
(am) Restriction on the Issuance of Securities............................................ 14
(an) Registration Rights.................................................................. 14
(ao) Absence of Unlawful Contribution..................................................... 14
(ap) Different Class of Securities........................................................ 14
(aq) No Sale, General Solicitation or Integrated Offering................................. 15
(ar) No Stabilization or Manipulation of Price............................................ 15
(as) Board of Governors of the Federal Reserve Regulation................................. 15
(at) Officer's Certificates............................................................... 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2. Purchase and Sale............................................................................. 15
3. Delivery and Payment.......................................................................... 15
4. Offering of Notes............................................................................. 16
5. Agreements of Each of the Issuers............................................................. 16
6. Conditions to the Obligation of the Initial Purchasers........................................ 18
7. Payment and Reimbursement of Expenses......................................................... 32
8. Indemnification and Contribution.............................................................. 33
9. Default by an Initial Purchaser............................................................... 35
10. Termination................................................................................... 35
11. Representations and Indemnities to Survive.................................................... 36
12. Notices....................................................................................... 36
13. Successors.................................................................................... 37
14. Applicable Law................................................................................ 37
15. Business Day.................................................................................. 38
16. Counterparts.................................................................................. 38
17. Amendments.................................................................................... 38
18. Submission to Jurisdiction.................................................................... 38
19. Headings; Title Page and Table of Contents.................................................... 39
ANNEX I Form of Registration Rights Agreement................................................A-1
ANNEX II Subscription Agreements..............................................................A-2
ANNEX III Acquisition Agreements...............................................................A-4
ANNEX IV Plan of Distribution Table...........................................................A-5
ANNEX V Form of Non-Distribution Letter for Purchasers.......................................A-6
ANNEX VI Opinion Agreements ..................................................................A-9
</TABLE>
ii
<PAGE> 4
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV CAPITAL CORP.
$292,000,000
11 1/4% SENIOR NOTES DUE 2006
PURCHASE AGREEMENT
July 19, 1996
NationsBanc Capital Markets, Inc.
Toronto Dominion Securities (USA) Inc.
c/o NationsBanc Capital Markets, Inc.
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
InterMedia Capital Partners IV, L.P., a California limited partnership
("ICP-IV"), and InterMedia Partners IV Capital Corp., a Delaware corporation and
wholly owned subsidiary of ICP-IV ("IPCC" and, together with ICP-IV, the
"Issuers"), jointly and severally propose to issue and sell to you (the "Initial
Purchasers") $292,000,000 principal amount of their 11 1/4% Senior Notes Due
2006 (the "Notes") under the terms and conditions outlined in this purchase
agreement (this "Purchase Agreement"). The Notes are to be issued under an
indenture (the "Indenture") dated as of the Closing Date (as defined herein)
among the Issuers and The Bank of New York, as trustee (the "Trustee").
The sale of the Notes to the Initial Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. You have advised the Issuers that the
Initial Purchasers will offer and sell the Notes purchased by them hereunder in
accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Issuers have prepared a
preliminary offering memorandum, dated July 2, 1996 (including any and all
exhibits thereto, and as modified by the supplement (the "Supplement") thereto
dated July 17, 1996, the "Preliminary Memorandum") and a final offering
memorandum, dated July 19, 1996 (including any and all exhibits thereto, the
"Final Memorandum" and, together with the Preliminary Memorandum, the "Offering
Memorandum") (the "Offering"). The Offering Memorandum sets forth certain
information concerning the Issuers and the Notes. The Issuers hereby confirm
that they have authorized the use of the Offering Memorandum, and any amendment
or supplement thereto, in connection with the offer and sale of the Notes by the
Initial Purchasers. Unless stated to the contrary, all references herein to the
Final Memorandum are to the Final Memorandum at the Execution Time (as defined
below) and are not meant to include any amendment or supplement, or any
information incorporated by reference therein, subsequent to the Execution Time
and any references herein to the terms "amend," "amendment" or "supplement" with
respect to the Final Memorandum shall be deemed to refer to and include any
information subsequent to the Execution Time that is incorporated by reference
therein.
The Initial Purchasers and their direct and indirect transferees will be
entitled to the benefits of the registration rights agreement, in the form
attached hereto as Annex I (the "Registration Rights Agreement"), pursuant to
1
<PAGE> 5
which the Issuers will file a registration statement (a "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the New Notes (as defined in the Offering Memorandum) under the
Securities Act.
At or prior to the Closing Date, ICP-IV will complete a series of transactions
described in the Offering Memorandum under the headings "The Financing Plan" and
"Acquisitions" and may consummate the Viacom Nashville Acquisition as described
in the Offering Memorandum under the heading "The Viacom Nashville Acquisition."
As part of these transactions, (i) ICP-IV will receive an aggregate of $360.0
million of cash and in-kind contributions of new equity from its partners, (ii)
InterMedia Partners IV, L.P., a California limited partnership (the "Operating
Partnership") will enter into a revolving credit facility for an aggregate of
$475.0 million and a term loan from an aggregate of $220.0 million, (iii) ICP-IV
and its subsidiaries will consummate the acquisition of certain cable television
assets as described in the Offering Memorandum, (iv) the Initial Purchasers will
purchase the Notes in a private placement as contemplated hereunder, and (v)
ICP-IV will use the net proceeds of the sale of the Notes hereunder as described
in the Offering Memorandum under the heading "Use of Proceeds." As used herein,
the term "Transactions" shall mean the occurrence of all of the events described
in this paragraph (except the Viacom Nashville Acquisition) and the other
transactions related thereto described in the Offering Memorandum.
1. Representations and Warranties. The Issuers jointly and severally
represent and warrant to each Initial Purchaser as set forth below:
(a) No Untrue Statement or Material Omission. The Preliminary
Memorandum, at the date thereof, did not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except for
the changes occasioned by the restructuring of the Notes as
described in the Supplement. The Final Memorandum, at the date
hereof, does not, and at the Closing Date will not (and any
amendment or supplement thereto, at the date thereof and at the
Closing Date, will not), contain any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Issuers
make no representation or warranty as to the information contained
in or omitted from the Offering Memorandum, or any amendment or
supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Issuers by or on behalf of
the Initial Purchasers specifically for inclusion therein. The
information provided by the Issuers pursuant to Section 5(f) hereof
will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) No Stop Orders. No stop order preventing the use of the
Offering Memorandum or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by this
Purchase Agreement are subject to the registration requirements of
the Securities Act, has been issued or threatened and no proceedings
for that purpose have been instituted or are pending or, to the
knowledge of either of the Issuers, are contemplated by the
Commission or any other federal or state securities commission or
regulatory authority.
(c) No Action Requiring Registration of the Notes. Neither of
the Issuers, nor any of their affiliates (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) (each, an
"Affiliate"), nor any Subsidiary (as defined in the Indenture) of
ICP-IV, other than IPSE and IPSE's subsidiaries, giving effect to
the Acquisitions (collectively, the "Subsidiaries" and,
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<PAGE> 6
individually, a "Subsidiary"), nor any person acting on their
behalf has, directly or indirectly, made offers or sales of any
security, or solicited offers to buy any security, under
circumstances that would require the registration of the Notes under
the Securities Act or the qualification of the Indenture in respect
of the Notes under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Issuers have not paid or agreed to pay
to any person any compensation for soliciting another to purchase
any securities of the Issuers (except as contemplated by this
Purchase Agreement).
(d) Exemption from Registration. Assuming the Notes are
issued, sold and delivered under the circumstances contemplated by
the Offering Memorandum and this Purchase Agreement, that the
representations and warranties of the Initial Purchasers contained
in Section 4 hereof are true, correct and complete, and that the
Initial Purchasers comply with their covenants in Section 4 hereof,
(i) registration under the Securities Act of the Notes or
qualification of the Indenture in respect of the Notes under the
Trust Indenture Act is not required in connection with the offer and
sale of the Notes to the Initial Purchasers or by the Initial
Purchasers in the manner contemplated by the Offering Memorandum or
this Purchase Agreement, and (ii) initial resales of the Notes by
the Initial Purchasers on the terms and in the manner set forth in
the Offering Memorandum and Section 4 hereof are exempt from the
registration requirements of the Securities Act. No form of general
solicitation or general advertising (within the meaning of
Regulation D) was used by either of the Issuers or any of their
respective representatives (other than the Initial Purchasers, as to
whom each of the Issuers makes no representation) in connection with
the offer and sale of the Notes, including but not limited to,
articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television
or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. The
Notes satisfy the eligibility requirements of Rule 144A(d)(3) under
the Securities Act.
(e) PORTAL Market. The Issuers have been advised by the
National Association of Securities Dealers, Inc. Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market
that the Notes have been designated PORTAL eligible securities in
accordance with the rules and regulations of the National
Association of Securities Dealers, Inc.
(f) Investment Company Act. Neither of the Issuers are now,
nor will be after the sale of the Notes to be sold by the Issuers
hereunder and the application of the net proceeds from such sale as
described in the Offering Memorandum under the caption "Use of
Proceeds," an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(g) Financial Statements. The financial statements (including
the related notes) included in the Offering Memorandum present
fairly the financial condition and results of operations of the
entities purported to be shown thereby, at the dates and for the
periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as disclosed in the
Offering Memorandum. The pro forma financial information included in
the Offering Memorandum (the "Pro Forma Information") is fairly
presented and has been prepared on a basis consistent with
the audited historical financial statements of each of the
Issuers and each of the Subsidiaries included in the Offering
Memorandum, except for the pro forma adjustments specified therein,
and give effect to assumptions made on a reasonable basis to give
effect to historical and proposed transactions and events described
in the Offering Memorandum. To the knowledge of each of ICP-IV and
IPCC, the statistical data included in the Offering Memorandum are
true and correct in all material respects. The Offering Memorandum
contains all financial information that would be required to be
contained in a registration statement on
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<PAGE> 7
Form S-1 and all such financial statements comply in all material
respects as to form with the accounting requirements of the
Securities Act applicable to a registration statement on Form S-1.
(h) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (i) there has been
no change or development involving, or that may reasonably be
expected to involve, a material adverse change in the condition,
financial or otherwise, earnings or affairs of ICP-IV and the
Subsidiaries considered as a whole, whether or not arising in the
ordinary course of business, and (ii) there have been no material
transactions entered into by ICP-IV or any of the Subsidiaries other
than those in the ordinary course of business.
(i) Good Standing, Etc. Each of InterMedia Capital Management
IV, L.P. ("ICM- IV") and ICP-IV has been duly formed and is validly
existing as a limited partnership in good standing under the laws of
the State of California, with full power and authority to own, lease
and operate its properties and to conduct its business as described
in the Offering Memorandum. Each of ICM-IV and ICP-IV is duly
qualified or registered to do business as a foreign limited
partnership and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify does not have a material adverse
effect on the condition, financial or otherwise, business,
properties, net worth or result of the operations of ICP-IV and the
Subsidiaries taken as a whole. Each of ICP-IV's Subsidiaries that is
a limited partnership has been duly formed and is validly existing
as a limited partnership in good standing under the laws of the
state of its certification, with full power and authority to own,
lease and operate its properties and to conduct its business as
described in the Offering Memorandum. Each of ICP-IV's Subsidiaries
that is a limited partnership is duly qualified or registered to do
business as a foreign limited partnership and is in good standing in
each jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure to so register or qualify does not have a
material adverse effect on the condition, financial or otherwise,
business, properties, net worth or result of the operations of
ICP-IV and the Subsidiaries taken as a whole. Each of ICP-IV's
Subsidiaries that is a corporation has been duly organized and is
validly existing as a corporation in good standing under the laws of
the state of its incorporation, with full power and authority to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum. Each of ICP-IV's Subsidiaries
that is a corporation is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify does not have a material adverse
effect on the condition, financial or otherwise, business,
properties, net worth or result of the operations of ICP-IV and the
Subsidiaries taken as a whole.
(j) Capitalization. ICP-IV has the authorized capitalization
as set forth in the Offering Memorandum under the caption
"Capitalization." All of the issued partnership interests of each of
ICM-IV and ICP-IV have been duly and validly authorized and issued.
All of the issued partnership interests of each of ICP-IV's
Subsidiaries that is a limited partnership have been duly and
validly authorized and issued. ICP-IV owns or will own as of the
consummation of the Offering (the "Closing"), directly or
indirectly, such partnership interests of each
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<PAGE> 8
of the Subsidiaries that is a limited partnership as set forth
in the Offering Memorandum, free and clear of all liens,
encumbrances, equities or claims, except for those that will be
removed at the Closing. All of the issued shares of capital stock of
each of the Subsidiaries that is a corporation have been duly and
validly authorized and issued and are fully paid and non-assessable
and free of any preemptive or similar rights. Except for directors'
qualifying shares, ICP-IV owns directly or indirectly such shares of
capital stock of each of the Subsidiaries that is a corporation as
set forth in the Offering Memorandum, free and clear of all liens,
encumbrances, equities or claims, except for those that will be
removed at the Closing.
(k) No Existing Defaults. Except as specifically described in
the Offering Memorandum, neither of the Issuers nor any of the
Subsidiaries: (i) is in violation of its partnership agreement,
charter or bylaws, as applicable; (ii) is in default in any material
respect, and no event has occurred that, with notice or lapse of
time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or
by which it is bound or to which any of its properties or assets is
subject; or (iii) is in violation in any material respect of any
law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject or has failed to
obtain any material license, permit, certificate, franchise or other
governmental authorization or permit, including but not limited to
Federal Communications Commission ("FCC") or other federal, state or
local franchise authority licenses, consents, permits or ordinances
necessary to the ownership of its property or to the conduct of its
business, which in the cases of clauses (ii) and (iii), violation or
default would have or could reasonably be expected to have a
material adverse effect on the condition, financial or otherwise,
business, properties, net worth or results of operations of the
Issuers and the Subsidiaries taken as a whole.
(l) Possession of Licenses and Permits. Each of the Issuers
and each of the Subsidiaries possesses, or will possess as of the
respective consummations of each of the Acquisitions and the Viacom
Nashville Acquisition, such certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory
agencies or bodies that are necessary to conduct the business now
operated by them or that will be operated by them following the
completion of each of the respective Acquisitions and the Viacom
Nashville Acquisition as described in the Offering Memorandum,
including but not limited to FCC or other federal, state or local
franchise authority licenses, consents, permits or ordinances,
except where the failure to possess such certificates,
authorizations or permits would not have a material adverse effect
on the consolidated financial position, stockholders (if
applicable), equity, results of operations or business of either of
the Issuers or any of the Subsidiaries and neither of the Issuers
nor any of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit that, singularly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could have a
material adverse effect on the consolidated financial position,
stockholders (if applicable), equity, results of operations or
business of either of the Issuers or any of the Subsidiaries.
(m) Absence of Proceedings. Except as set forth in the
Offering Memorandum, there is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign,
now pending or, to the knowledge of either of the Issuers,
threatened against or affecting ICP-IV or any of the Subsidiaries,
that might result in any material adverse change in the condition,
financial or otherwise, earnings, affairs or business of ICP-IV or
any of the Subsidiaries considered as a whole, or that might
materially and adversely affect the properties or assets thereof or
that might materially and adversely affect the offering of the
Notes.
(n) Title to Property. Upon consummation of the Transactions,
ICP-IV and each of the Subsidiaries will have good and marketable
title in fee simple to all material real property and good and
marketable title to all personal property owned by it and necessary
in the conduct of the business of ICP-IV or such Subsidiary, in each
case free and clear of all liens, encumbrances and defects except
(i) those incurred to secure obligations under workers'
compensation, social security or similar laws, or under unemployment
insurance, (ii) minor imperfections of title on real estate,
provided such
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<PAGE> 9
imperfections do not render title unmarketable, (iii) that do
not materially adversely affect the value of such property to ICP-IV
and its Subsidiaries taken as a whole, and do not interfere with the
use made and proposed to be made of such property by ICP-IV or such
Subsidiary to an extent that such interference would have a material
adverse effect on ICP-IV and its Subsidiaries taken as a whole, (iv)
that arise in the ordinary course of business in favor of landlords
of real property leases to the extent of assets of ICP-IV or a
Subsidiary actually located on the premises, (v) arising out of the
security documents entered into on the Closing Date (the "Bank
Facility Security Agreements") related to that certain Revolving
Credit and Term Loan Agreement to be entered into on the Closing
Date (the "Bank Facility") among the Operating Partnership, as
borrower, The Bank of New York, as administrative agent and
arranging agent, NationsBank of Texas, N.A. and The Toronto-Dominion
Bank, each as arranging agent and syndication agent, and the lenders
party thereto, (vi) arising out of that certain loan agreement,
dated as of May 8, 1996 (the "TCIC Loan") by and between InterMedia
Partners Southeast, L.P. ("IPSE") and TCI of Houston, Inc.
("TCI-Houston"), (vii) arising out of that certain Pledge and
Security Agreement, dated as of May 8, 1996 (the "TCIC Pledge
Agreement") by and among ICM-IV, the Operating Partnership and
TCI-Houston, (viii) arising out of that certain Pledge and Security
Agreement, dated as of May 8, 1996 (the "BA Loan"), by and among
ICM-IV, IPSE and the Bank of America NT & SA and (ix) arising out of
that certain Pledge and Escrow Agreement, dated as of the Closing
Date (the "Pledge Agreement"), among the Issuers and the Trustee
with respect to the Notes. All material real property and buildings
held under lease by either of the Issuers or any of the Subsidiaries
are held by them under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and buildings
by ICP-IV or any of the Subsidiaries.
(o) Authority of the Issuers. Each of the Issuers and, as
appropriate, each of the Subsidiaries, has all of the requisite
power and authority to execute and deliver each of the following
documents (the "Transaction Documents") to which it is a party and
to perform its obligations thereunder:
(i) this Purchase Agreement;
(ii) the Indenture;
(iii) the Notes;
(iv) the New Notes (as defined in the Offering
Memorandum);
(v) the Registration Rights Agreement;
(vi) the Pledge Agreement;
(vii) the Bank Facility;
(viii) the Bank Facility Security Documents;
(ix) the Partnership Agreement of ICP-IV (the
"Partnership Agreement");
(x) the subscription agreements to the Partnership
Agreement listed on Annex II hereto (collectively,
the "Subscription Agreements");
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<PAGE> 10
(xi) the Contribution Agreement, dated as of April 30,
1996 (the "IPWT Contribution Agreement"), by and
among ICP-IV, InterMedia Partners, a California
limited partnership ("IP-I") and General Electric
Capital Corp. ("GECC");
(xii) the first amendment to the IPWT Contribution
Agreement, dated as of June 26, 1996, among ICP-IV,
IP-I and GECC;
(xiii) the second amendment to the IPWT Contribution
Agreement, dated as of the Closing Date, among
ICP-IV, IP-I and GECC;
(xiv) the stock exchange agreement, dated as of July 26,
1996 (the "RMH Acquisition Agreement"), by and
among InterMedia Partners V, L.P ("IP-V"),
InterMedia Capital Management V, L.P., ("ICM-V"),
Robin Media Holdings, Inc. ("RMH"), the Operating
Partnership, ICM-IV and TCID-IP V, Inc.;
(xv) the Contribution Agreement, dated March 4, 1996
(the "G/S Contribution Agreement"), by and
among ICP-IV, TCI of Greenville, Inc.
("TCI-Greenville"), TCI of Piedmont, Inc.
("TCI-Piedmont") and TCI of Spartanburg, Inc.
("TCI-Spartanburg" and, together with
TCI-Greenville and TCI-Piedmont, the "TCI
Entities");
(xvi) the Amendment to the G/S Contribution Agreement,
dated March 26, 1996, by and among and the
Operating Partnership and the TCI Entities (the
"Amendment to the G/S Contribution Agreement"); and
(xvii) the Assignment and Assumption Agreement, dated as
of ________, 1996, between IP-IV and ICP-IV,
pursuant to which IP-IV assigns, and ICP-IV
assumes, all rights and obligations under the G/S
Contribution Agreement (the "G/S Assignment and
Assumption Agreement").
(p) Authorization of this Purchase Agreement. This Purchase
Agreement has been duly authorized, executed and delivered by each
of the Issuers and constitutes a valid and binding agreement of each
of the Issuers enforceable against each of them in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable remedies
and general principles of equity, regardless of whether considered
in a proceeding in equity or at law, or an implied covenant of good
faith and fair dealing.
(q) Authorization of the Indenture. The Indenture has been
duly authorized and, when duly executed by the proper
representatives of each of the Issuers and delivered by each of the
Issuers, will (assuming due authorization, execution and delivery of
the Indenture by the Trustee) constitute a valid and binding
agreement of each of the Issuers enforceable against each of the
Issuers in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
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<PAGE> 11
(r) Authorization of the Notes. The Notes have been duly
authorized by each of the Issuers and (assuming due authorization,
execution and delivery of the Indenture by the Trustee), when duly
executed, authenticated, issued and delivered as provided in the
Indenture, will be duly and validly issued and outstanding, and will
constitute valid and binding obligations of each of the Issuers
entitled to the benefits of the Indenture and enforceable against
each of them in accordance with their terms, subject to the effects
of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(s) Authorization of the New Notes. The New Notes have been
duly authorized by each of the Issuers and, when issued in the
Exchange Offer contemplated by the Registration Rights Agreement,
will be duly and validly issued and outstanding, and will constitute
valid and binding obligations of each of the Issuers entitled to the
benefits of the Indenture and enforceable against each of the
Issuers in accordance with their terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(t) Authorization of the Registration Rights Agreement. The
Registration Rights Agreement has been duly authorized by each of
the Issuers and (assuming due authorization, execution and delivery
by each of the Initial Purchasers), when duly executed and delivered
by each of the Issuers, will constitute a valid and binding
agreement of each of the Issuers enforceable against each of the
Issuers in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(u) Authorization of the Pledge Agreement. The Pledge
Agreement has been duly authorized by each of the Issuers and
(assuming due authorization, execution and delivery by each of the
other parties thereto), when duly executed and delivered by each of
the Issuers will constitute a valid and binding agreement of the
Issuers enforceable against each of the Issuers in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable remedies
and general principles of equity, regardless of whether considered
in a proceeding in equity or at law, or an implied covenant of good
faith and fair dealing.
(v) Authorization of the Bank Facility and the Bank Facility
Security Agreements. Each of (i) the Bank Facility has been duly
authorized by the Operating Partnership and (assuming due
authorization, execution and delivery of each of the other parties
thereto), when duly executed and delivered by the Operating
Partnership, will constitute a valid and binding agreement of the
Operating Partnership enforceable against it in accordance with its
terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws
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<PAGE> 12
affecting or relating to the rights of creditors generally, and the
rules governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing; and (ii)
the Bank Facility Security Agreements has been duly authorized by
each of IP-TN, InterMedia Partners of West Tennessee, L.P. ("IPWT"),
Robin Media Group, Inc. ("RMG"), RMH and IPSE (collectively, the
"Bank Facility Guarantors") that is a party thereto, and (assuming
due authorization, execution and delivery of each of the other
parties to each respective Bank Facility Security Agreement), when
duly executed and delivered by each of the Bank Facility Guarantors
that is a party thereto, will constitute a valid and binding
agreement of each such Bank Facility Guarantor enforceable against
it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(w) Authorization of the Partnership Agreement. The
Partnership Agreement has been duly authorized, executed and
delivered by each of InterMedia Partners, a California limited
partnership ("IP-I"), and ICM-IV and constitutes a valid and binding
agreement of each of IP-I and ICM-IV, enforceable against each of
IP-I and ICM-IV in accordance with its terms, subject to the effects
of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(x) Authorization of the Subscription Agreements. Each of the
Subscription Agreements has been duly authorized, executed and
delivered by ICM-IV and (assuming due authorization, execution and
delivery by each of the other parties thereto) constitutes a valid
and binding agreement of ICM-IV enforceable against ICM-IV in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the
rights of creditors generally, and the rules governing the
availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of
whether considered in a proceeding in equity or at law, or an
implied covenant of good faith and fair dealing.
(y) Authorization of the Acquisition Agreements. Each of the
agreements pursuant to which each of the Threshold Acquisitions (as
defined in the Offering Memorandum) and the Viacom Nashville
Acquisition will be consummated has been duly authorized, executed
and delivered by each of ICP-IV and its Subsidiaries, as applicable,
(and assuming due authorization, execution and delivery by each of
the other parties thereto) constitutes a valid and binding agreement
of each of each of ICP-IV and its Subsidiaries, as applicable,
enforceable against each of them that is a party thereto in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the
rights of creditors generally, and the rules governing the
availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of
whether considered in a proceeding in equity or at law, or an
implied covenant of good faith and fair dealing.
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<PAGE> 13
(z) The Transaction Documents. Each of the Transaction
Documents: (i) has been, or will be no later than Closing Date,
delivered to you in final executed form; (ii) conforms in all
material respects to the description thereof contained in the
Offering Memorandum; and (iii) has not been amended since the date
of the final executed form thereof referred to in clause (i) above.
(aa) No Conflicts. The execution, delivery and performance of
each of the Transaction Documents by each of the Issuers that is a
party thereto, and the issuance, authentication, sale and delivery
of the Notes, and compliance with the terms thereof, and the
consummation of the transactions contemplated hereby or thereby,
will not conflict with or result in a material breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which either of the Issuers or any of the
Subsidiaries is a party or by which either of the Issuers or any of
the Subsidiaries is bound or to which any of the property or assets
of either of the Issuers or any of the Subsidiaries is subject, nor
will such actions result in any violation of the provisions of the
partnership agreement, charter or by-laws, as applicable, of either
of the Issuers or any of the Subsidiaries or any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over either of the Issuers or any of the
Subsidiaries or any of their respective property or assets, which
default or violation would have or could reasonably be expected to
have a material adverse effect on ICP-IV and the Subsidiaries taken
as a whole; and except such consents, approvals, authorizations,
registrations or qualifications as may be required under the
applicable state securities laws in connection with the purchase and
distribution of the Notes by the Initial Purchasers and such other
approvals as have been obtained, no consent, approval, authorization
or order of, or filing (other than filings solely for information
purposes or to obtain action that is not a subject of governmental
discretion) or registration with, any such court or governmental
agency or body is required for the execution, delivery and
performance of any of the Transaction Documents, the issuance,
authentication, sale and delivery of the Notes, and compliance with
the terms thereof, and the consummation by each of the Issuers of
the transactions contemplated thereby.
(ab) Independent Accountants. Each of Price Waterhouse LLP,
San Francisco, Price Waterhouse LLP, San Jose, KPMG Peat Marwick,
LLP and Ernst & Young, LLP, each of whom has certified certain
financial statements of the Issuers and the Subsidiaries, whose
reports appear in the Offering Memorandum and who has delivered its
initial letter referred to in Section 6(n) hereof, is an independent
public accountant as required under Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and its interpretations and rulings during
the periods covered by the financial statements on which it reported
contained in the Offering Memorandum.
(ac) Maintenance of Records. ICP-IV and each of the
Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions
are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(ad) Possession of Intellectual Property. ICP-IV and each of
the Subsidiaries owns or otherwise possesses the right to use all
patents, trademarks, service marks, trade names and copyrights, all
applications and registrations for each of the foregoing, and all
other proprietary rights
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and confidential information used by them or necessary for or
material to the conduct of their respective businesses as currently
conducted; and neither ICP-IV nor any of the Subsidiaries has
received any notice of, or is otherwise aware of, any infringement
of or conflict with the rights of any third party with respect to
any of the foregoing that, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have or
could reasonably be expected to have a material adverse effect on
ICP-IV.
(ae) Insurance. Upon the consummation of each of the
Transactions, ICP-IV and each of the Subsidiaries will be insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither ICP-IV nor any of the
Subsidiaries has been refused any insurance coverage sought or
applied for, and neither ICP-IV nor any of the Subsidiaries has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a material
adverse effect on ICP-IV and the Subsidiaries taken as a whole.
(af) Doing Business with Cuba. ICP-IV and each of the
Subsidiaries has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida), relating to
doing business with the Government of Cuba or with persons or
affiliates located in Cuba.
(ag) Employee Pension or Benefit Plans. Each of the Issuers
and each of the Subsidiaries is in compliance in all material
respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder (collectively,
"ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which
either of the Issuers or any of the Subsidiaries would have any
liability; each of the Issuers and each of the Subsidiaries has not
incurred and does not expect to incur liability under (i) Title IV
of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue
Code of 1986, as amended, including the regulations and published
interpretations thereunder (collectively, the "Code"); and each
"pension plan" for which either of the Issuers or any of the
Subsidiaries would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, that would cause the loss of such qualification.
(ah) Environmental Laws. To the knowledge of ICP-IV or any
Subsidiary, there has been no: (i) storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances by either of the Issuers or any of the
Subsidiaries (or, to the knowledge of either of the Issuers or any
of the Subsidiaries, by any of its predecessors-in-interest) at,
upon or from any of the property now or previously owned or leased
by either of the Issuers or any of the Subsidiaries in violation of
any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or that would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree
or permit, except for any violation or remedial action that would
not have, or could not be reasonably likely to have, singularly or
in the aggregate with all such violations and remedial actions, a
material adverse effect on the general affairs, management,
financial position, stockholders (if applicable), equity or results
of operations of either of the Issuers or any of the Subsidiaries;
nor any (ii) material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes,
medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by either of the Issuers or any of the
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<PAGE> 15
Subsidiaries or with respect to which either of the Issuers or any
of the Subsidiaries has knowledge, except for any such spill,
discharge, leak, emission, injection, escape, dumping or release
that would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a
material adverse effect on the general affairs, management,
financial position, stockholders (if applicable), equity or results
of operations of either of the Issuers or any of the Subsidiaries.
The terms "toxic wastes," "medical wastes," "solid wastes,"
"hazardous wastes" and "hazardous substances" as used in either
clause (i) or (ii) above shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations
with respect to environmental protection.
(ai) Description of Certain Transactions. No relationship,
direct or indirect, exists between or among either of the Issuers or
any of the Subsidiaries on the one hand, and (as applicable) the
partners, directors, officers, stockholders, affiliates, customers
or suppliers of either of the Issuers or any of the Subsidiaries on
the other hand, that would be required to be described in a
registration statement on Form S-1 and that is not so described in
the Offering Memorandum.
(aj) D.D. Cable. The only material asset owned by IP-II as of
the Closing Date is its interest in D.D. Cable Partners, L.P.
(ak) Absence of Labor Dispute. No labor disturbance by the
employees of either of the Issuers or any of the Subsidiaries exists
or, to the knowledge of either of the Issuers or any of the
Subsidiaries, is imminent that could have a material adverse effect
on the consolidated financial position, stockholders (if
applicable), equity, results of operations or business of either of
the Issuers or any of the Subsidiaries.
(al) Taxes. Each of the Issuers and each of the Subsidiaries
has filed all material federal, state and local income and franchise
tax returns required to be filed through the date hereof and has
paid all taxes due thereon, and no tax deficiency has been
determined adversely to either of the Issuers or any of the
Subsidiaries that has had (nor does either of the Issuers or any of
the Subsidiaries have any knowledge of any tax deficiency that, if
determined adversely to either of the Issuers or any of the
Subsidiaries, could have) a material adverse effect on the
consolidated financial position, stockholders (if applicable),
equity, results of operations or business of either of the Issuers
or any of the Subsidiaries.
(am) Restriction on the Issuance of Securities. Since the date
as of which information is given in the Offering Memorandum through
the date hereof, and except as may otherwise be disclosed in the
Offering Memorandum, neither of the Issuers and none of the
Subsidiaries has (i) issued or granted any securities, (ii) incurred
any liability or obligation, direct or contingent, other than
liabilities and obligations that were incurred in the ordinary
course of business, (iii) entered into any transaction not in the
ordinary course of business or (iv) declared or paid any
distributions or any dividend on any capital stock.
(an) Registration Rights. Except as set forth in the
Registration Rights Agreement, there are no contracts, agreements or
understandings between either of the Issuers and any person granting
such person the right to require such Issuer to file a registration
statement under the Securities Act with respect to any securities of
such Issuer owned or to be owned by such person or to require such
Issuer to include such securities in any securities being registered
pursuant to any registration statement filed by either of the
Issuers under the Securities Act.
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<PAGE> 16
(ao) Absence of Unlawful Contribution. Neither of the Issuers
and none of the Subsidiaries, nor any partner, director, officer,
agent, employee or other person associated with or acting on behalf
of either of the Issuers or any of the Subsidiaries, has (i) used
any partnership or corporate funds, as applicable, for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee
from partnership or corporate funds, as applicable; (iii) violated
or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(ap) Different Class of Securities. No securities of the same
class (within the meaning of Rule 144A(d)(3) under the Securities
Act) as the Notes are listed on any national securities exchange,
registered under Section 6 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or quoted on an automated
interdealer quotation system.
(aq) No Sale, General Solicitation or Integrated Offering.
Neither of the Issuers nor any Affiliate has directly, or through
any agent (provided that no representation is made as to the Initial
Purchasers or any person acting on their behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) that is or will
be integrated with the offering and sale of the Notes in a manner
that would require the registration of the Notes under the
Securities Act or (ii) engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D) in
connection with the offering of the Notes.
(ar) No Stabilization or Manipulation of Price. Neither of the
Issuers nor any Affiliate thereof has taken, nor will take, directly
or indirectly, any action designed to, or that could reasonably be
expected to, cause or result in stabilization or manipulation of the
price of the Notes.
(as) Board of Governors of the Federal Reserve Regulation.
Neither the issuance or sale of the Notes nor the application of the
proceeds thereof by the Issuers as set forth in the Offering
Memorandum will violate Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System or analogous foreign laws
and regulations.
(at) Officer's Certificates. Any certificate signed by one or
more of the following: the Managing General Partner, the President,
the Treasurer or any Executive Vice President or Vice President
(each, an "Officer") of either of the Issuers or any of the
Subsidiaries and delivered to the Initial Purchasers or to counsel
for the Initial Purchasers shall be deemed a representation and
warranty by each of the Issuers to each of the Initial Purchasers as
to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Issuers
agree to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Issuers the principal amount of
Notes set forth opposite such Initial Purchaser's name in Annex IV hereto.
3. Delivery and Payment. Delivery of and payment for the Notes shall
be made at 10:00 a.m. New York City time on July 30, 1996, or such later date
(not later than August 5, 1996) as the Initial Purchasers shall designate, which
date and time may be postponed by agreement between the Initial Purchasers and
the Issuers or as provided in Section 9 hereof (such date and time of delivery
and payment for the Notes being herein called the "Closing Date"). Delivery of
the Notes shall be made to the Initial Purchasers against payment by the Initial
Purchasers of the purchase price thereof to or upon the order of the Issuers by
wire transfer to the account of the Issuers or such other manner of payment as
may be agreed by the Issuers and
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<PAGE> 17
the Initial Purchasers. Delivery of the Notes shall be made at such location as
the Initial Purchasers shall reasonably designate at least one business day in
advance of the Closing Date and payment for the Notes shall be made at the
office of Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San Francisco,
California 94104. Certificates for the Notes shall be registered in such names
and in such denominations as the Initial Purchasers may request not less than
two full business days in advance of the Closing Date.
The Issuers agree to have the Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York not later
than 1:00 p.m. New York City time on the business day prior to the Closing Date.
4. Offering of Notes. Each Initial Purchaser, severally and not
jointly, represents and warrants to and agrees with the Issuers that:
(a) It has not offered or sold, and will not offer or sell,
any Notes except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities
Act) and that, in connection with each such sale, it has taken or
will take reasonable steps to ensure that the purchaser of such
Notes is aware that such sale is being made in reliance on Rule
144A, or (ii) to other institutional "accredited investors" (as
defined in Rule 501(a) (1), (2), (3) or (7) of Regulation D) who
provide to it and to the Issuers a letter in the form of Annex V
hereto.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Notes by means of any form of
general solicitation or general advertising (within the meaning of
Regulation D).
5. Agreements of Each of the Issuers.
Each of the Issuers jointly and severally agrees:
(a) To advise you promptly (and, if requested by you, confirm
such advice in writing) of the issuance by any state securities
commission of any stop order suspending the qualification or
exemption from qualification of any Notes for offering or sale in
any jurisdiction, or the initiation of any proceeding for such
purpose by the Commission or any state securities commission or
other regulatory authority. Each of the Issuers shall use its best
efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of the Notes under any
state securities or Blue Sky laws and, if at any time any state
securities commission shall issue any stop order suspending the
qualification or exemption of the Notes under any state securities
or Blue Sky laws, each of the Issuers shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to each Initial Purchaser and to Latham &
Watkins, without charge during the period referred to in paragraph
(d) below, such reasonable number of copies of the Final Memorandum
and any amendments and supplements thereto as it may request. The
Issuers shall pay the expenses of printing or other production of
all documents relating to the Offering.
(c) Not to amend or supplement the Final Memorandum without
the prior written consent of the Initial Purchasers.
(d) If at any time prior to the completion of the sale of the
Notes by the Initial Purchasers, any event occurs as a result of
which the Final Memorandum, as then amended or
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<PAGE> 18
supplemented, would include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, or if it should be necessary to amend or
supplement the Final Memorandum to comply with applicable law, the
Issuers shall promptly notify the Initial Purchasers of the same
and, subject to the requirements of paragraph (c) of this Section 5,
shall prepare and provide to the Initial Purchasers pursuant to
paragraph (b) of this Section 5 an amendment or supplement that will
correct such statement or omission or effect such compliance.
(e) To provide to you every proposed form of letter, notice,
circular or other written communication proposed to be distributed
to potential purchasers and not to distribute any such letter,
notice, circular or other communication without your prior written
consent.
(f) So long as the Notes are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which either of the Issuers
is not subject to Section 13 or 15(d) of the Exchange Act, to
furnish to holders or beneficial owners of the Notes and prospective
purchasers of Notes designated by such holders or beneficial owners,
upon request of such holders or such beneficial owners or such
prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
(g) Whether or not required by the rules and regulations of
the Commission, so long as any of the Notes or New Notes are
outstanding, ICP-IV will furnish the following to you: (i) all
quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K
if ICP-IV were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" that describes the financial condition and
results of operations of ICP-IV and its Restricted Subsidiaries (as
defined in the Indenture) and, with respect to the annual
information only, a report thereon by ICP-IV's certified independent
accountants; and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if ICP-IV were required to
file such reports.
(h) To arrange for the qualification of the Notes for sale by
the Initial Purchasers under the securities or Blue Sky laws of such
jurisdiction as the Initial Purchasers may designate and will
maintain such qualifications in effect as long as required for the
sale of the Notes. The Issuers shall promptly advise the Initial
Purchasers of the receipt by the Issuers of any modification with
respect to the suspension of the qualification of the Notes for sale
in any jurisdiction or the initiation or threatening of any
proceeding for such purpose.
(i) Not to, and to cause its Affiliates not to, resell any
Notes that have been acquired by any of them.
(j) Not to, and to cause its Affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect
of any Security (as defined in the Securities Act) in any
transaction that could be integrated with the sale of the Notes in a
manner that would require the registration under the Securities Act
of such Notes.
(k) Except following the effectiveness of the Exchange
Registration Statement (as defined in the Registration Rights
Agreement), not to, and to cause its Affiliates not to, solicit any
offer to buy or offer to sell the Notes by means of any form of
general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) or in any manner involving
a public offering within the meaning of Section 4(2) of the
Securities Act.
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<PAGE> 19
(l) To use its best efforts to permit the Notes to be
designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL market and to permit
the Notes to be eligible for clearance and settlement through The
Depository Trust Company ("DTC").
(m) Not to, until 60 days following the Closing Date, without
the prior written consent of the Initial Purchasers, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly,
or announce the offering of, any debt securities issued or
guaranteed by the Issuers (other than the New Notes).
(n) To apply the net proceeds from the sale of the Notes as
set forth in the Offering Memorandum.
(o) To take such steps as shall be necessary to ensure that
neither of the Issuers nor any of the Subsidiaries shall become an
"investment company" within the meaning of such term under the
Investment Company Act.
(p) To comply with its agreements in the Registration Rights
Agreement, and all agreements set forth in the representation
letters of each of the Issuers to the DTC relating to the approval
of the Notes by the DTC for "book-entry" transfer.
(q) To comply with the terms and conditions of each of the
Transaction Documents and to consummate the transactions
contemplated thereby.
(r) Not to claim voluntarily, and will actively resist any
attempts to claim, the benefit of any usury laws against the holders
of the Notes.
(s) To do all things necessary to satisfy the closing
conditions set forth in Section 6 hereof.
6. Conditions to the Obligation of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Notes shall be subject to
the accuracy of the representations and warranties on the part of the Issuers
contained herein at the date and time that this Purchase Agreement is executed
and delivered by the parties hereto (the "Execution Time") and the Closing Date,
to the accuracy of the statements of the Issuers made in any certificates
pursuant to the provisions hereof, to the performance by the Issuers of their
obligations hereunder and to the following additional conditions:
(a) The Issuers shall have entered into a Registration Rights
Agreement with the Initial Purchasers of even date herewith.
(b) No Initial Purchaser shall have discovered and disclosed
to ICP-IV on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact that, in the reasonable opinion of Latham &
Watkins, counsel for the Initial Purchaser, is material or omits to
state a fact that, in the reasonable opinion of Latham & Watkins, is
material and is required to be stated therein or is necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) All partnership and corporate proceedings, as applicable,
and other legal matters incident to the authorization, form and
validity of each of the Transaction Documents and all other
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<PAGE> 20
legal matters relating to the Transaction Documents and the
transactions contemplated thereby shall be satisfactory in all
material respects to the Initial Purchasers, and the Issuers shall
have furnished to Latham & Watkins all documents and information
that Latham & Watkins may reasonably request to enable it to pass
upon such matters.
(d) Each of the conditions to the consummation of the
Threshold Acquisitions shall have been satisfied or waived and the
Threshold Acquisitions shall have been consummated substantially in
accordance with the terms thereof and as described in the Offering
Memorandum.
(e) The Issuers shall deliver to the Initial Purchasers on the
Closing Date the following duly authorized, validly existing and
fully executed documents, in each case, as amended to and including
the Closing Date:
(i) The Partnership Agreement;
(ii) The Subscription Agreements;
(iii) The Partnership Agreement of ICM-IV;
(iv) The G/S Contribution Agreement;
(v) The Amendment to the G/S Contribution Agreement;
(vi) The G/S Assignment and Assumption Agreement;
(vii) The Bills of Sale and Assignment, each dated as of
the Closing Date, (i) by TCI-Greenville in favor of IP-IV; (ii)
by TCI-Piedmont in favor of IP-IV; (iii) by TCI-Spartanburg in
favor of IP-IV; and (iv) by IP-TN in favor of IP-IV, evidencing
the consummation of the Greenville/Spartanburg Acquisition
substantially in accordance with the terms of the G/S
Contribution Agreement and as described in the Offering
Memorandum;
(viii) Certification that all approvals and consents of
local franchising authorities required for the consummation of
the Greenville/Spartanburg Acquisition substantially in
accordance with the terms of the G/S Contribution Agreement and
as described in the Offering Memorandum have been received or
waived;
(ix) The Bill of Sale and Assignment, dated as of the
Closing Date, by IPWT in favor of ICP-IV, evidencing the
consummation of the IPWT Acquisition substantially in accordance
with the terms of the IPWT Contribution Agreement and as
described in the Offering Memorandum;
(x) Certification that all approvals and consents by
any local franchising authority required for the consummation of
the IPWT Acquisition substantially in accordance with the terms
of the IPWT Contribution Agreement and as described in the
Offering Memorandum have been received or waived;
(xi) A copy of the share certificate or certificates
representing the outstanding shares of common stock of RMH and
RMG delivered to ICP-IV by RMH, evidencing
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<PAGE> 21
consummation of the RMH Acquisition substantially in accordance
with the terms of the RMH Agreement and as described in the
Offering Memorandum;
(xii) Certification that all approvals and consents of
local franchising authorities required for the consummation of
the RMH Acquisition substantially in accordance with the terms
of the RMH Agreement and as described in the Offering Memorandum
have been received or waived;
(xiii) Evidence satisfactory to the Initial Purchasers of
the defeasance of RMG's obligations under the indenture (the
"RMG Senior Subordinated Note Indenture") relating to the 11
1/8% Senior Subordinated Deferred Interest Notes Due 1997 (the
"RMG Senior Subordinated Notes") of RMG, which was formerly
known as Cooke Media Group Incorporated ("Cooke Media") through:
(i) ICP-IV's irrevocable commitment to the trustee under such
indenture to issue within two business days of the Closing Date
a redemption notice published in a nationally circulated
newspaper and mailed to holders of such notes; and (ii) ICP-IV's
irrevocable deposit in trust with the trustee thereof (on terms
satisfactory to the Initial Purchasers) of sufficient funds to
pay the redemption price of and accrued interest on all such
notes to be redeemed on the redemption date, substantially in
accordance with the terms of the RMG Senior Subordinated Note
Indenture and as described in the Offering Memorandum;
(xiv) Evidence satisfactory to the Initial Purchasers of
the defeasance of RMG's obligations under the indenture (the
"RMG Subordinated Debenture Indenture" and, together with the
RMG Subordinated Note Indenture, the "RMG Indentures") relating
to the 11 5/8% Subordinated Debentures Due 1999 (the "RMG
Subordinated Debentures") through: (i) ICP-IV's irrevocable
commitment to the trustee under such indenture to issue within
two business days of the Closing Date a redemption notice
published in a nationally circulated newspaper and mailed to
holders of such debentures; and (ii) ICP-IV's irrevocable
deposit in trust with the trustee thereof (on terms satisfactory
to the Initial Purchasers) of sufficient funds to pay the
redemption price of and accrued interest on all such debentures
to be redeemed on the redemption date, substantially in
accordance with the terms of the RMG Subordinated Debenture
Indenture and as described in the Offering Memorandum;
(xv) Evidence satisfactory to the Initial Purchasers of
the repayment in full of the outstanding principal balance under
the Bridge Loan substantially in accordance with the terms of
the Bridge Loan and as described in the Offering Memorandum; and
(f) The Issuers shall have delivered to the Initial Purchasers
the Bank Facility and the Bank Facility Security Agreements, which
shall be reasonably acceptable to the Initial Purchasers.
(g) The Issuers shall have furnished to the Initial Purchasers
the opinion of Pillsbury Madison & Sutro LLP, counsel for the Issuers,
dated the Closing Date substantially to the effect that:
(i) No Untrue Statement or Material Omission. Such counsel
has acted as counsel to the Issuers with respect to the
Acquisitions (as defined in the Offering Memorandum) and
participated in the preparation of the Offering Memorandum and,
although such counsel did not undertake to investigate or verify
independently, and did not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained
in the Memorandum, on the basis of the foregoing (relying as to
materiality to a
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large extent upon the officers and other representatives of the
Company), nothing has come to such counsel's attention that
leads such counsel to believe that the Preliminary Offering
Memorandum, as of its date, contained an untrue statement of
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, except for the changes occasioned by the
restructuring of the Notes as described in the Supplement, or
that the Supplement, as of its date, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading, or that the Final
Memorandum, as of its date and as of the Closing Date, contained
or contains an untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such
counsel need not express any opinion as to the financial
statements and schedules and other financial and statistical
data contained in the Offering Memorandum or as to FCC laws or
regulations (or similar laws or regulations) or local franchise
authority licenses, consents, permits or ordinances.
(ii) No Stop Orders. To such counsel's knowledge, no
stop order preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that any
of the transactions contemplated by the Offering Memorandum or
this Purchase Agreement are subject to the registration
requirements of the Securities Act, has been issued or
threatened and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission
or any other federal or state securities commission or
regulatory authority;
(iii) Exemption from Registration. Assuming the Notes
are issued, sold and delivered under the circumstances
contemplated by the Offering Memorandum and this Purchase
Agreement, that the representations and warranties of the
Initial Purchasers contained in Section 4 hereof are true,
correct and complete, and that the Initial Purchasers comply
with their covenants in Section 4 hereof, (i) registration under
the Securities Act of the Notes or qualification of the
Indenture in respect of the Notes under the Trust Indenture Act
is not required in connection with the offer and sale of the
Notes to the Initial Purchasers or by the Initial Purchasers in
the manner contemplated by the Offering Memorandum or this
Purchase Agreement, and (ii) initial resales of the Notes by the
Initial Purchasers on the terms and in the manner set forth in
the Offering Memorandum and Section 4 hereof are exempt from the
registration requirements of the Securities Act. To such
counsel's knowledge, no form of general solicitation or general
advertising (within the meaning of Regulation D) was used by
either of the Issuers or any of their respective representatives
(other than the Initial Purchasers, as to whom each of the
Issuers makes no representation) in connection with the offer
and sale of the Notes, including but not limited to, articles,
notices or other communications published in any newspaper,
magazine or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. The
Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act; and the Offering Memorandum, and each
amendment or supplement thereto, contains the information
specified in, and meets the requirements of, Rule 144A(d)(4) of
the Securities Act;
(iv) Investment Company Act. Neither of the Issuers
are now, nor will be after the sale of the Notes to be sold by
the Issuers hereunder and the application of the net proceeds
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from such sale as described in the Offering Memorandum under the
caption Use of Proceeds," an "investment company" within the
meaning of the Investment Company Act;
(v) Good Standing, Etc. Each of ICM-IV and ICP-IV has
been duly formed and is validly existing as a limited
partnership in good standing under the laws of the State of
California, with full power and authority to own, lease and
operate its properties and to conduct its business as described
in the Offering Memorandum. Each of ICM-IV and ICP-IV is duly
qualified or registered to do business as a foreign limited
partnership and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its
business requires such registration or qualification, except
where the failure to so register or qualify does not have a
material adverse effect on the condition, financial or
otherwise, business, properties, net worth or result of the
operations of ICP- IV and the Subsidiaries taken as a whole.
Each of the Subsidiaries that is a limited partnership has been
duly organized and is validly existing as a limited partnership
in good standing under the laws of the state of its
certification, with full power and authority to own, lease and
operate its properties and to conduct its business as described
in the Offering Memorandum. Each of the Subsidiaries that is a
limited partnership is duly qualified or registered to do
business as a foreign limited partnership and is in good
standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such
registration or qualification, except where the failure to so
register or qualify does not have a material adverse effect on
the condition, financial or otherwise, business, properties, net
worth or result of the operations of ICP-IV and the Subsidiaries
taken as a whole. Each of the Subsidiaries that is a corporation
has been duly organized and is validly existing as a corporation
in good standing under the laws of the state of its
incorporation, with full power and authority to own, lease and
operate its properties and to conduct its business as described
in the Offering Memorandum. Each of the Subsidiaries that is a
corporation is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its
business requires such registration or qualification, except
where the failure to so register or qualify does not have a
material adverse effect on the condition, financial or
otherwise, business, properties, net worth or result of the
operations of ICP-IV and the Subsidiaries taken as a whole.
(vi) Capitalization. ICP-IV has the authorized
capitalization as set forth in the Offering Memorandum under the
caption "Capitalization." All of the issued partnership
interests of ICM-IV and ICP-IV have been duly and validly
authorized and issued. All of the issued partnership interests
of each of ICP-IV's Subsidiaries that is a limited partnership
have been duly and validly authorized and issued. ICP-IV owns
directly or indirectly such partnership interests of each of
ICP-IV's Subsidiaries that is a limited partnership as set forth
in the Offering Memorandum. All of the issued shares of capital
stock of each of ICP-IV's Subsidiaries that is a corporation
have been duly and validly authorized and issued and are fully
paid and non-assessable and, to such counsel's knowledge, are
free and clear of any preemptive or similar rights. Except for
directors' qualifying shares, ICP-IV owns directly or indirectly
such shares of capital stock of each of ICP-IV's Subsidiaries
that is a corporation as set forth in the Offering Memorandum;
(vii) No Existing Defaults. Except as specifically
described in the Offering Memorandum, neither of the Issuers nor
any of the Subsidiaries: (i) to such counsel's knowledge is in
violation of its partnership agreement, charter or bylaws, as
applicable; (ii) to such counsel's knowledge, is in default in
any material respect, and such counsel's
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knowledge, no event has occurred that, with notice or lapse of
time, or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any of the agreements certified to such counsel as
the material agreements of the Issuers (the "Material
Agreements") to which it is a party or by which it is bound or
to which any of its properties or assets is subject; or (iii) to
such counsel's knowledge, is in violation in any material
respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be
subject, which in the cases of clauses (ii) and (iii), violation
or default would have or could reasonably be expected to have a
material adverse effect on the condition, financial or
otherwise, business, properties, net worth or results of
operations of the Issuers and Subsidiaries taken as a whole;
provided, however, that such counsel need not express any
opinion regarding FCC laws or regulations (or similar laws or
regulations) or local franchise authority licenses, consent,
permits or ordinances;
(viii) Absence of Proceedings. Except as set forth in
the Offering Memorandum, to such counsel's knowledge, there is
no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or
threatened against or affecting ICP-IV or any of the
Subsidiaries, that might result in any material adverse change
in the condition, financial or otherwise, earnings, affairs or
business of ICP-IV or any of the Subsidiaries taken as a whole,
or might materially and adversely affect the properties or
assets thereof or might materially and adversely affect the
offering of the Notes;
(ix) Authority of Each of the Issuers. Each of the
Issuers has all of the requisite power and authority to execute
and deliver each of the agreements set forth on Annex VI hereto
(the "Opinion Agreements") to which it is a party and to perform
its obligations thereunder;
(x) Authorization of this Purchase Agreement. This
Purchase Agreement has been duly authorized, executed and
delivered by each of the Issuers and (assuming due
authorization, execution and delivery by the Initial Purchasers)
constitutes a valid and binding agreement of each of the Issuers
enforceable against each of them in accordance with its terms,
subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law, or an implied
covenant of good faith and fair dealing and the effect of any
provisions for indemnification against claims arising under
provisions of applicable securities laws;
(xi) Authorization of the Indenture. The Indenture
has been duly authorized, executed and delivered by each of the
Issuers and (assuming due authorization, execution and delivery
of the Indenture by the Trustee) constitutes a valid and binding
agreement of each of the Issuers enforceable against each of
them in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting
or relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in
equity or at law, or an implied covenant of good faith and fair
dealing;
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<PAGE> 25
(xii) Authorization of the Notes. The Notes have been
duly authorized by each of the Issuers and (assuming due
execution, authentication, issuance and delivery by each of the
Issuers as provided in the Indenture, and assuming due
authorization, execution and delivery of the Indenture by the
Trustee) is duly and validly issued and outstanding, and
constitutes valid and binding obligations of each of the Issuers
entitled to the benefits of the Indenture and enforceable in
accordance with their terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting
or relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in
equity or at law, or an implied covenant of good faith and fair
dealing;
(xiii) Authorization of the New Notes. The New Notes
have been duly authorized by each of the Issuers and, when
issued in the Exchange Offer contemplated by the Registration
Rights Agreement, will be duly and validly issued and
outstanding, and will constitute valid and binding obligations
of each of the Issuers entitled to the benefits of the Indenture
and enforceable in accordance with their terms, subject to the
effects of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting
or relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in
equity or at law, or an implied covenant of good faith and fair
dealing;
(xiv) Authorization of the Registration Rights
Agreement. The Registration Rights Agreement has been duly
authorized, executed and delivered by each of the Issuers and
(assuming due authorization, execution and delivery by each of
the Initial Purchasers) constitutes a valid and binding
agreement of each of the Issuers enforceable against each of
them in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting
or relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in
equity or at law, or an implied covenant of good faith and fair
dealing and the effect of any provisions for indemnification
against claims outstanding under provisions of applicable
securities laws;
(xv) Authorization of the Pledge Agreement. The
Pledge Agreement has been duly authorized, executed and
delivered by the Issuers and (assuming due authorization,
execution and delivery by each of the other parties thereto)
constitutes a valid and binding agreement of the Issuers
enforceable against each of them in accordance with its terms,
subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law, or an implied
covenant of good faith and fair dealing.
(xvi) Authorization of the Bank Facility and the Bank
Facility Security Agreements. Each of (A) the Bank Facility has
been duly authorized, executed and delivered by ICP-IV and the
Operating Partnership and (assuming due authorization, execution
and
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<PAGE> 26
delivery by each of the other parties thereto) constitutes a
valid and binding agreement of each of ICP-IV and the Operating
Partnership enforceable against each of them in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law, or an implied
covenant of good faith and fair dealing; and (ii) the Bank
Facility Security Agreements has been duly authorized by each of
the Bank Facility Guarantors that is a party thereto, and
(assuming due authorization, execution and delivery of each of
the other parties to each respective Bank Facility Security
Agreement), when duly executed and delivered by each of the Bank
Facility Guarantors that is a party thereto, will constitute a
valid and binding agreement of each such Bank Facility Guarantor
enforceable against each of them in accordance with its terms,
subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law, or an implied
covenant of good faith and fair dealing.
(xvii) Authorization of the Partnership Agreement.
The Partnership Agreement has been duly authorized, executed and
delivered by each of IP-I and ICM-IV and (assuming due
authorization, execution and delivery by each of the other
parties thereto) constitutes a valid and binding agreement of
each of IP-I and ICM-IV, enforceable against each of IP-I and
ICM-IV in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting
or relating to the rights of creditors generally, and the rules
governing the availability of specific performance, injunctive
relief or other equitable remedies and general principles of
equity, regardless of whether considered in a proceeding in
equity or at law, or an implied covenant of good faith and fair
dealing;
(xviii) Authorization of the Subscription Agreements.
Each of the Subscription Agreements has been duly authorized,
executed and delivered by ICM-IV and (assuming due
authorization, execution and delivery by each of the other
parties thereto) constitutes a valid and binding agreement of
ICM-IV, enforceable against ICM-IV in accordance with its terms,
subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief or other equitable
remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law, or an implied
covenant of good faith and fair dealing;
(xix) Authorization of Acquisition Agreements. Each
of the Acquisition Agreements set forth on Annex III attached
hereto has been duly authorized, executed and delivered by
ICP-IV or, where applicable, each Subsidiary that is a party
thereto, and (assuming due authorization, execution and delivery
by each of the other parties thereto) constitutes a valid and
binding agreement of each of ICP-IV or its Subsidiaries, as
applicable, subject to the effects of bankruptcy, insolvency,
reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of
creditors generally, and the rules governing the availability of
specific performance, injunctive relief
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or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at
law, or an implied covenant of good faith and fair dealing.
(xx) No Conflicts. The execution, delivery and
performance of each of the Opinion Agreements by each of the
Issuers that is a party thereto, and the issuance,
authentication, sale and delivery of the Notes, and compliance
with the terms thereof, and the consummation of the transactions
contemplated thereby, will not conflict with or result in a
material breach or violation of any of the terms or provisions
of, or constitute a default under, any of the Material
Agreements, nor will such actions result in any violation of the
provisions of the partnership agreement, charter or by-laws, as
applicable, of either of the Issuers or any of the Subsidiaries
or any statute or any order, rule or regulation (other than
ordinances and regulations of counties and political
subdivisions thereof) known to such counsel of any court or
governmental agency or body having jurisdiction over either of
the Issuers or any of the Subsidiaries or any of their
properties or assets, which default or violation would have or
could reasonably be expected to have a material adverse effect
on ICP-IV and its Subsidiaries taken as a whole; and, except for
such consents, approvals, authorizations, registrations or
qualifications as may be required under the applicable state
securities laws in connection with the purchase and distribution
of the Notes by the Initial Purchasers, no consent, approval,
authorization or order of, or filing (other than filings solely
for information purposes or to obtain action that is not the
subject of governmental discretion) or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of any of the Opinion
Agreements by each of the Issuers and the consummation of the
transactions contemplated thereby;
(xxi) Different Class of Securities. No securities of
the Issuers of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Notes are listed on
any national securities exchange registered under Section 6 of
the Exchange Act or quoted on an automated interdealer quotation
system; and
(xxii) Board of Governors of the Federal Reserve
Regulation. Neither the issuance or sale of the Notes nor the
application of the proceeds thereof by each of the Issuers as
set forth in the Offering Memorandum will violate Regulations G,
T, U or X of the Board of Governors of the Federal Reserve
System or analogous foreign laws and regulations.
In rendering such opinion, such counsel will opine as to the of
laws of the State of New York, the State of California, the General
Corporate Law of the State of Delaware or the laws of the United
States, and may rely as to matters of fact, to the extent it deems
proper, on certificates of responsible Officers of the Issuers and
public officials.
(h) Dow, Lohnes & Albertson shall have furnished to the Initial
Purchasers its written opinion, as regulatory counsel to the Issuers,
addressed to you and dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, to the effect that:
(i) No approval of the FCC is required in connection with
the issuance and sale of the Notes;
(ii) The execution and delivery and performance of each of
the Transaction Documents, the issuance of the Notes, the actions
contemplated by the Indenture and the Offering described in the
Offering Memorandum do not violate any statute, regulation or
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<PAGE> 28
other law of the United States relating specifically to the cable
communications industry (except as otherwise explicitly set forth in
the Offering Memorandum) or, to such counsel's knowledge, any order,
judgement or decree of any court or governmental body of the United
States relating specifically to the cable communications industry and
applicable to each of the Issuers and each of the Subsidiaries and
which violation would have or could be reasonably expected to have a
material adverse effect on the business or financial condition of the
Issuers and the Subsidiaries taken as a whole;
(iii) The statements in the Offering Memorandum under the
captions "Risk Factors--Competition in Cable Television Industry; Rapid
Technological Change," "Risk Factors--Regulation of the Cable
Television Industry," "Business--Competition" and "Legislation and
Regulation," insofar as such statements constitute a summary of legal
matters, documents, statutes, regulations or proceedings referred to
therein, are accurate in all material respects; and
(iv) Such counsel does not know of any proceedings pending
before the FCC to which the Issuers or any of the Subsidiaries is a
party or involving the cable communications properties, licenses or
authorizations of the Issuers and the Subsidiaries, or of any cable
communications law or regulation relevant thereto required to be
described in the Offering Memorandum that is not described therein.
In rendering such opinion, such counsel may rely (A) as to
matters of law, solely on the 1934 Communications Act, the 1984 Cable Act, the
1992 Cable Act, the 1996 Act, and the rules and regulations of the FCC. Such
counsel need not conduct an independent field investigation of each of the
Issuers' and each of the Subsidiaries' cable systems, and need not examine the
actual day-to-day operations of such systems; and (B) as to the matters of fact,
to the extent it deems proper, on certificates of responsible Officers of the
Issuers and public officials. Such counsel shall also have furnished to the
Initial Purchasers a written statement, addressed to the Initial Purchasers and
dated the Closing Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that based on the foregoing, no facts have come to the
attention of such counsel in preparing the opinions set forth in clauses (i)
through (iv) above that leads it to believe that the sections entitled "Risk
Factors--Competition in Cable Television Industry; Rapid Technological Change,"
"Risk Factors--Regulation of the Cable Television Industry,"
"Business--Competition" and "Legislation and Regulation" in the Preliminary
Memorandum or the Final Memorandum, as of their respective dates and as of the
Closing Date, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(i) Bruce J. Stewart, Esq. shall have furnished to the Initial Purchasers
his written opinion, as General Counsel of each of the Issuers, addressed to you
and dated the Closing Date, in form and substance satisfactory to the Initial
Purchasers, to the effect that:
(i) Title to Property. ICP-IV and each of the Subsidiaries
has good and marketable title in fee simple to all material real
property and good and marketable title to all material personal
property owned by it, in each case free and clear of all liens,
encumbrances and defects except (i) those incurred to secure
obligations under workers' compensation, social security or
similar laws, or under employment insurance, (ii) minor
imperfections of title on real estate, provided such
imperfections do not render title unmarketable, (iii) that do
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<PAGE> 29
not materially adversely affect the value of such property to
ICP-IV and its Subsidiaries taken as a whole, and do not
interfere with the use made and proposed to be made of such
property by ICP-IV or such Subsidiary to an extent that such
interference would have a material adverse effect on ICP-IV
and its Subsidiaries taken as a whole; (iv) that arise in the
ordinary course of business in favor of landlords of real
property leases to the extent of assets of ICP-IV or a
Subsidiary actually located on the premises, (v) arising out
of the Bank Facility Security Agreements, (vi) arising out of
the TCIC Loan, (vii) the TCIC Pledge Agreement, (viii) arising
out of the BA Loan and (ix) arising out of the Pledge
Agreement. All Material real property and buildings held under
lease by either of the Issuers or any of the Subsidiaries are
held by them under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by ICP-IV or any of the Subsidiaries;
(ii) Possession of Licenses and Permits. Each of the
Issuers and each of the Subsidiaries possesses, or will
possess as of the respective consummations of each of the
Acquisitions, such certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory
agencies or bodies that are necessary to conduct the business
now operated by them or will be operated by them following the
completion of the Acquisitions in the manner described in the
Offering Memorandum, including but not limited to FCC, state
or local franchise authority licenses, consents, permits or
ordinances, except where the failure to possess such
certificates, authorizations or permits would not have a
material adverse effect on the consolidated financial
position, stockholders (if applicable), equity, results of
operations or business of either of the Issuers or any of the
Subsidiaries and neither of the Issuers nor any of the
Subsidiaries has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit which, singularly or in the aggregate,
if the subject of an unfavorable decision, ruling, or finding,
would have a material adverse effect on the consolidated
financial position, stockholders (if applicable), equity,
results of operations or business of either of the Issuers or
any of the Subsidiaries; and
(iii) Absence of Proceedings. Except as set forth in
the Offering Memorandum, to such counsel's knowledge there is
no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending
or, to the knowledge of the Issuers, threatened against or
affecting ICP-IV or any of the Subsidiaries, which might
result in any material adverse change in the condition,
financial or otherwise, earnings, affairs or business of
ICP-IV or any of the Subsidiaries considered as a whole, or
might materially and adversely affect the properties or assets
thereof or might materially and adversely affect the offering
of the Notes.
(iv) Orders, Writs or Decrees. To such counsel's
knowledge, there is no state or local franchise authority
order, writ, injunction or decree that has been issued against
the ongoing operations of any of ICP-IV's or any of the
Subsidiaries' cable television systems, nor is such counsel
aware of any state or local franchise authority action, suit
or proceeding against any of such systems.
In rendering such opinion, such counsel may: (A)
state that his opinion is limited to matters governed by the laws of
the United States and the laws of the State of New York, the State of
California, the State of Tennessee, the State of Kentucky, the State of
South Carolina and the State
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<PAGE> 30
of Georgia, and may assume that the respective local laws of each such
state are the same or similar to the laws of the State of New York; and
(B) in giving the opinion referred to in Section 6(j)(i), state that no
examination of record titles for the purpose of such opinion has been
made, and that he is relying upon a general review of the titles of
each of the Issuers and each of the Subsidiaries, and abstracts,
reports and policies of title companies rendered or issued at or
subsequent to the time of acquisition of such property by either of the
Issuers, or any of the Subsidiaries, and, in respect of matters of
fact, upon certificates of the appropriate representatives of either of
the Issuers or any of the Subsidiaries, provided that such counsel
shall state that it believes that both the Initial Purchasers and such
counsel are justified in relying upon such abstracts, reports, policies
and certificates. Such counsel shall also have furnished to the Initial
Purchasers a written statement, addressed to the Initial Purchasers and
dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers, to the effect that (x) such counsel is the General
Counsel of each of the Issuers, and (y) based on the foregoing, no
facts have come to the attention of such counsel that leads him to
believe that the Preliminary Memorandum, as of its date, the
Supplement, as of its date, or the Final Memorandum, as of its date and
as of the Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(j) The Initial Purchasers shall have received from Latham &
Watkins such opinion or opinions, dated the Closing Date, with respect
to the issuance and sale of the Notes, the Final Memorandum (as amended
or supplemented as the Closing Date) and other related matters as the
Initial Purchasers may reasonably require, and the Issuers shall have
furnished to Latham & Watkins such documents as it requests for the
purpose of enabling it to pass upon such matters.
(k) ICP-IV shall have furnished to the Initial Purchasers a
certificate, signed by its Managing General Partner, dated the Closing
Date, to the effect that the signer of such certificate has carefully
examined the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Purchase Agreement and that:
(i) The representations and warranties of ICP-IV in
this Purchase Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, and ICP-IV has complied with all
the agreements contained herein and satisfied all the
conditions set forth in Section 6 hereof at or prior to the
Closing Date;
(ii) Since the date of the most recent financial
statements included in the Final Memorandum, there has been no
material adverse change in the condition (financial or
otherwise), earnings, business or properties of ICP-IV and
each of the Subsidiaries, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereto); and
(iii) (A) as of the date hereof, the Final Memorandum
did not include any untrue statement of a material fact and
did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (B) since such date no event has occurred that
should have been set forth in a supplement or amendment to the
Final Memorandum.
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(l) IPCC shall have furnished to the Initial Purchasers a
certificate, signed by an Officer of IPCC, dated the Closing Date, to
the effect that the signer of such certificate has carefully examined
the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Purchase Agreement and that:
(i) The representations and warranties of IPCC in
this Purchase Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, and IPCC has complied with all
the agreements contained herein and satisfied all the
conditions set forth in Section 6 at or prior to the Closing
Date;
(ii) Since the date of the most recent financial
statements included in the Final Memorandum, there has been no
material adverse change in the condition (financial or
otherwise), earnings, business or properties of ICP-IV and
each of the Subsidiaries, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereto); and
(iii) (A) as of the date hereof, the Final Memorandum
did not include any untrue statement of a material fact and
did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (B) since such date no event has occurred that
should have been set forth in a supplement or amendment to the
Final Memorandum.
(m) On the date hereof, each of Price Waterhouse LLP, San
Francisco, Price Waterhouse LLP, San Jose, KPMG Peat Marwick, LLP and
Ernst & Young, LLP shall have furnished to the Initial Purchasers a
comfort letter and dated respectively as of the Execution Time, in form
and substance satisfactory to the Initial Purchasers as previously
agreed, and on the Closing Date shall have furnished to the Initial
Purchasers a bring-down comfort letter dated as of the Closing Date, in
form and substance satisfactory to the Initial Purchasers as previously
agreed.
(n) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Final Memorandum, there shall
not have been: (i) any change or decrease specified in the letter or
letters referred to paragraph (m) of this Section 6 or (ii) any change
or any development involving a prospective change, in or affecting the
business or properties of ICP-IV or any of the Subsidiaries, the effect
of which, in any case referred to in clause (i) or (ii) above, is, in
the judgment of the Initial Purchasers, so material and adverse as to
make it impractical or inadvisable to market the Notes as contemplated
by the Final Memorandum.
(o) At the Closing Date, after giving effect to the
consummation of the transactions contemplated by this Purchase
Agreement, the Registration Rights Agreement and the Indenture, there
shall exist no default or event of default pursuant to the Indenture or
the Bank Facility.
(p) Except as otherwise set forth in the Offering Memorandum
or such as are not material to the assets, properties, business,
results of operations or condition (financial or otherwise) of each of
the Issuers, at the Closing Date, each of the Issuers shall have good
and marketable title, free and clear of all liens, claims, encumbrances
and restrictions, except liens for taxes not yet due and payable, to
all property and assets described in the Offering Memorandum as being
owned by it. With such exceptions as do not materially interfere with
the use made by each of the Issuers, at the Closing Date, all leases to
which any of the Issuers and the Subsidiaries is a party shall be valid
and binding,
28
<PAGE> 32
no default will have occurred or be continuing thereunder, and each of
the Issuers and the Subsidiaries will enjoy peaceful and undisturbed
possession under all such leases to which it is a party as a lessee.
(q) (i) Neither of the Issuers nor any of the Subsidiaries
shall have sustained, since the date of the latest audited financial
statements thereof included in the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Memorandum or (ii)
since such date, there shall not have been any change in the equity or
long-term debt of either of the Issuers or any of the Subsidiaries or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders (if applicable), equity, or results of operations of
either of the Issuers or any of the Subsidiaries, otherwise than as set
forth or contemplated in the Offering Memorandum, the effect of which,
in any case described in clause (i) or (ii), is, in the judgment of the
Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the Offering or the delivery of the
Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(r) Between the Execution Time and the Closing Date, there
shall not have been any decrease in the rating of any of ICP-IV's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 486(g) under the
Securities Act) or any notice given by such rating agency, of any
intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change.
(s) Subsequent to the execution and delivery of this Purchase
Agreement, there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market, or trading
in any securities of either of the Issuers on any exchange or in the
over-the-counter market, shall have been suspended or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction; (ii) a banking moratorium
shall have been declared by Federal or state authorities; (iii) the
United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or
there shall have been a declaration of a national emergency or war by
the United States; or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in
the United States shall be such) as to make it, in the judgment of a
majority in interest of the several Initial Purchasers, impracticable
or inadvisable to proceed with the offering or delivery of the Notes on
the terms and in the manner contemplated in the Offering Memorandum.
(t) Prior to the Closing Date, ICP-IV shall have furnished to
the Initial Purchasers such other information, certificates and
documents as the Initial Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Purchase Agreement, or if any of the opinions and certificates mentioned above
or elsewhere in this Purchase Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Initial Purchasers and
Counsel for the Initial Purchasers, this Purchase Agreement and all obligations
of the Initial Purchasers hereunder may be canceled at, or at any time prior to,
the Closing Date by the Initial Purchasers. Notice of such cancellation shall be
given the Issuers in writing or by telephone or telegraph confirmed in writing.
29
<PAGE> 33
The documents required to be delivered by this Section 6 shall
be delivered at the offices of Pillsbury Madison & Sutro LLP, 235 Montgomery
Street, San Francisco, California 94104, on the Closing Date.
7. Payment and Reimbursement of Expenses.
(a) Each of the Issuers agrees to pay the fees, disbursements
and out-of-pocket costs: (i) incident to the authorization, issuance,
sale and delivery of the Notes and any taxes payable in that
connection, (ii) incident to the preparation and printing of the
Offering Memorandum and any amendments or supplements thereto, (iii) of
distributing the Offering Memorandum and any amendments or supplements
thereto, (iv) of reproducing and distributing this Purchase Agreement,
the Registration Rights Agreement and the Indenture, (v) the costs
incident to the preparation, printing and delivery of the certificates
representing the Notes, including but not limited to capital duties and
stamp duties, payable upon issuance of any of the Notes, (vi) of each
of the Issuers' counsel and accountants, (vii) charged by rating
agencies for rating the Notes, (viii) of qualifying the Notes under
securities laws of the several jurisdictions as provided in Section
5(h) hereof and of preparing, printing and distributing a Blue Sky
memorandum (including related fees and expenses of counsel to the
Initial Purchasers), (ix) of the Trustee and any paying agent
(including related fees and expenses of their respective counsel), (x)
in connection with the application for quotation of the Notes on the
PORTAL market, (xi) each of the Issuers (including reasonable fees and
expenses of counsel) of in connection with approval of the Notes by DTC
for "book-entry" transfer, and (xii) all other reasonable costs and
expenses incident to the performance of each of the Issuers'
obligations hereunder that are not otherwise specifically provided for
in this section.
(b) If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of either of the Issuers to
perform any agreement herein or comply with any provision hereof other
than by reason of default by any of the Initial Purchasers in payment
for the Notes on the Closing Date, the Issuers shall reimburse the
Initial Purchasers severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and
sale of the Notes.
8. Indemnification and Contribution.
(a) The Issuers jointly and severally agree to indemnify and
hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who
controls either Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which
they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto arise out of or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Memorandum, the Final Memorandum or
any information provided by the Issuers to any holder or prospective
purchaser of Notes pursuant to Section 5(f) hereof, or in any amendment
or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
and agree to reimburse each such indemnified party, as incurred, for
any legal or other expenses reasonably incurred by it in connection
with investigating or defending any
30
<PAGE> 34
such loss, claim, damage, liability or action; provided, however, that
the Issuers shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Offering Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and conformity with
written information furnished to the Issuers by or on behalf of any
Initial Purchasers specifically for inclusion therein. The foregoing
indemnity with respect to any untrue statement contained in or any
omission from the Preliminary Memorandum shall not inure to the benefit
of any Initial Purchaser (or any director, officer, employee or agent
of such Initial Purchaser or any person controlling such Initial
Purchaser) from whom the person asserting any such loss, claim, damage
or liability purchased any of the Notes that are the subject thereof if
the Issuers shall sustain the burden of proving that such person was
not sent or given a copy of the Final Memorandum (or the Final
Memorandum as amended or supplemented) at or prior to the written
confirmation of the sale of such Notes to such person and the untrue
statement contained in and the omission from the Preliminary Memorandum
was corrected in the Final Memorandum (or in the Final Memorandum as
amended or supplemented). This indemnity agreement shall be in addition
to any liability that the Issuers may otherwise have.
(b) Each Initial Purchaser, severally and not jointly, agrees
to indemnify and hold harmless the Issuers, their partners, directors,
officers, and each person who controls the Issuers within the meaning
of either the Securities Act or the Exchange Act, to the same extent as
the foregoing indemnity from the Issuers to each Initial Purchaser, but
only with reference to written information relating to such Initial
Purchaser furnished to the Issuers by or on behalf of such Initial
Purchaser specifically for inclusion in the Offering Memorandum (or in
any amendment or supplement thereto). This indemnity agreement shall be
in addition to any liability that any Initial Purchaser may otherwise
have. The Issuers acknowledge that the statements set forth in the last
paragraph of the cover page and under the heading "Plan of
Distribution" in the Offering Memorandum constitute the only
information furnished in writing by or on behalf of the Initial
Purchasers for inclusion in the Offering Memorandum (or any amendment
or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party: (i) shall not relieve it from liability under
paragraph (a) or (b) of this Section 8 unless and to the extent it did
not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) of this Section 8. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification
is sought (in which the indemnifying party shall not thereafter be
responsible for the fees and expense of any separate counsel retained
by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if: (i)
the named parties to any such action, claim or proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party; and such indemnified party shall have been advised
in writing by counsel that a conflict of interest may exist if such
counsel represents such indemnified party and the indemnifying party;
(ii) the actual or
31
<PAGE> 35
potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties that are different
from or additional to those available by the indemnifying party; (iii)
the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action; or (iv)
the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An
indemnifying party shall not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of
any judgement with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such
settlement compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Issuers and the
Initial Purchasers agree to contribute the aggregate loss, claim,
damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively, "Losses") to which the Issuers and one or more of the
Initial Purchasers may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Issuers and by the
Initial Purchasers from the offering of the Notes; provided, however,
that in no case shall any Initial Purchaser (except as may be provided
in any agreement among the Initial Purchasers relating to the offering
of the Notes) be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by such
Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Issuers and the Initial Purchasers shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also
the relative fault of the Issuers and of the Initial Purchasers in
connection with the statements or omissions that resulted in such
losses as well as any other relevant equitable considerations. Benefits
received by the Issuers shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits
received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions received by the Initial
Purchasers from the Issuers in connection with the purchase of the
Notes hereunder. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information
provided by the Issuers or the Initial Purchasers. The Issuers and the
Initial Purchasers agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method
of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Initial Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer,
employee and agent of an Initial Purchaser shall have the same rights
to contribution as such Initial Purchaser, and each person who controls
the Issuers within the meaning of either the Securities Act or the
Exchange Act and each partner, officer and director of the Issuers
shall have the same rights to contribution as the Issuers, subject in
each case to the applicable terms and conditions of this paragraph (d).
9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall purchase and pay for any of the Notes agreed to be purchased by
such Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Purchase
Agreement, the
32
<PAGE> 36
remaining Initial Purchasers shall be obligated severally to take up and pay for
(in the respective proportions that the principal amount of Notes set forth
opposite their names in Schedule I hereto bears to the aggregate principal
amount of Notes set forth opposite the name of all the remaining Initial
Purchasers) the Notes that the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; provided, however, that in the event
that the aggregate principal amount of Notes that the defaulting Initial
Purchaser or Initial Purchaser agreed but failed to purchase shall exceed 10% of
the aggregate principal amount of Notes set forth in Annex IV hereto, the
remaining Initial Purchasers shall have the right to purchase all, but shall not
be under any obligation to purchase any, of the Notes, and if such
non-defaulting Initial Purchasers do not purchase all the Notes, this Purchase
Agreement shall terminate without liability to any non-defaulting Initial
Purchaser or the Issuers. In the event of a default by any Initial Purchaser as
set forth this Section 9, the Closing Date shall be postponed for such period,
not exceeding seven days, as the Initial Purchasers shall determine in order
that the required changes in the Final Memorandum or in any other documents or
arrangements may be effected. Nothing contained in this Purchase Agreement shall
relieve any defaulting Initial Purchaser of its liability, if any, to the
Issuers or any non-defaulting Initial Purchaser for damages occasioned by its
default hereunder.
10. Termination.
(a) This Purchase Agreement shall be subject to termination in
the absolute discretion of the Initial Purchasers, by notice given to
the Issuers prior to delivery of and payment for the Notes, if prior to
such time: (i) trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall
have been established on such exchange; (ii) a banking moratorium shall
have been declared either by Federal or New York State authorities; or
(iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency
or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the judgment of the Initial
Purchasers, impracticable or inadvisable to proceed with the Offering
or delivery of the Notes as contemplated by the Final Memorandum.
(b) If either of the Issuers shall fail to tender the Notes
for delivery to the Initial Purchasers for any reason permitted under
this Purchase Agreement or the Initial Purchasers shall decline to
purchase the Notes for any reason permitted under this Purchase
Agreement (including the termination of this Purchase Agreement
pursuant to Section 10(a) hereof), each of the Issuers shall reimburse
the Initial Purchasers for the reasonable fees and expenses of their
counsel and for such other out-of-pocket expenses as shall have been
incurred by them in connection with this Purchase Agreement and the
proposed purchase of the Notes, and upon demand each of the Issuers
shall pay the full amount thereof to the Initial Purchasers.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Issuers or their officers and of the Initial Purchasers set forth in or made
pursuant to this Purchase Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Initial Purchasers
or the Issuers or any of the officers, directors or controlling persons referred
to in Section 8 hereof, and shall survive delivery of and payment for the Notes.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Purchase Agreement.
12. Notices. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. Each of the Issuers shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Initial Purchasers by NationsBanc Capital Markets, Inc.
All statements, requests, notices and agreements hereunder shall be in writing,
and:
33
<PAGE> 37
(a) if to the Initial Purchasers, shall be delivered or sent
by mail, telex or facsimile transmission to them as follows:
c/o NationsBanc Capital Markets, Inc.
100 North Tryon St., 20th Floor
Charlotte, North Carolina 28255
Attention: J. Scott Holmes
(Fax: 704-386-6453);
with a copy to:
Kirk A. Davenport, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
(Fax: 212-751-4864);
provided, however, that any notice to an Initial Purchaser pursuant to
Section 8(c) shall be delivered or sent by mail, telex or facsimile
transmission to such Initial Purchaser at,
if to NationsBanc Capital Markets, Inc.:
100 North Tryon Street, 20th Floor
Charlotte, North Carolina 28255
Attention: J. Scott Holmes
(Fax: 704-386-6453);
and if to Toronto Dominion Securities (USA) Inc.:
31 West 52nd Street
New York, New York 10019
Attention: Mark C. Bush
(Fax: 212-586-0631).
with a copy to:
Kirk A. Davenport, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
(Fax: 212-751-4864);
(b) if to either of the Issuers, shall be delivered or sent by
mail, telex or facsimile transmission to the address of each of the
Issuers as follows,
InterMedia Partners
235 Montgomery Street, Suite 420
San Francisco, California 94104
Attention: Edon V. Hartley
(Fax: 415-397-3978);
34
<PAGE> 38
with a copy to:
Gregg F. Vignos, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
(Fax: 415-983-1200).
13. Successors. This Purchase Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons thereof referred to in Section 8
hereof, and, except as expressly set forth in Section 5(f) hereof, no other
person shall acquire or have any right or obligation under or by virtue of this
Purchase Agreement.
14. Applicable Law. This Purchase Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
15. Business Day. For purposes of this Purchase Agreement, "business
day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in the City of New York, New York are
authorized or obligated by law, executive order or regulation to close.
16. Counterparts. This Purchase Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
17. Amendments. No amendment or waiver of any provision of this
Purchase Agreement, nor any consent or approval to any departure therefrom,
shall in any event be effective unless the same shall be in writing and signed
by each of the parties hereto.
18. Submission to Jurisdiction. Each of the Issuers hereby irrevocably
and unconditionally:
(a) Submits itself and its property in any legal action or
proceeding relating to this Purchase Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
jurisdiction of the courts of the State of New York and the courts of
the United States of America for the Southern District of New York, and
appellate courts thereof, and consents and agrees to such action or
proceeding being brought in such courts as you may elect.
(b) Waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same.
(c) Designates and directs CSC Networks with offices on the
date hereof at New York, New York, as its agent to receive service of
any and all process and documents on its behalf in any legal action or
proceeding referred to in paragraph (a) of this Section 18 in the State
of New York and agrees that service upon such agent shall constitute
valid and effective service upon each of the Issuers and that failure
of CSC Networks to give any notice of such service to such parties
shall not affect or impair in any way the validity of such service or
of any judgment rendered in any action or proceeding based thereon.
35
<PAGE> 39
(d) Agrees to notify each of the Initial Purchasers promptly
by registered or certified mail if any such agent in the City of New
York shall cease to act as agent and, in such event, promptly to
designate another agent in the City of New York to receive service in
place of such agent and deliver to each of the Initial Purchasers
written evidence of such substitute agent's acceptance of such
designation.
(e) Agrees as an alternate means of service to service of
process in any such legal action or proceeding by mailing of copies
thereof (by registered or certified mail, if practicable) postage
prepaid, or by telex, to the then-active agent or each of the Issuers
at the address of each of the Issuers as set forth in Section 12 hereof
or at such other address of which you shall have been notified pursuant
thereto, and agrees that failure to receive such copy or notice shall
not affect or impair the validity of such service or of any judgment
rendered in any action or proceeding based thereon.
(f) Agrees that nothing herein shall affect your right to
effect service of process in any other manner permitted by law, and
that you shall have the right to bring any legal proceedings (including
a proceeding for enforcement of a judgment entered by any of the
aforementioned courts) against either of the Issuers in such courts or
in any other court or jurisdiction in accordance with applicable law.
19. Headings; Title Page and Table of Contents. The headings herein and
the title page and table of contents hereof have been inserted for convenience
of reference only and are not intended to be part of, or affect the meaning or
interpretation of, this Purchase Agreement.
[signature page follows]
36
<PAGE> 40
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Purchase Agreement and your acceptance shall represent a binding
agreement between the Issuers and the Initial Purchasers.
Very truly yours,
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By: INTERMEDIA CAPITAL MANAGEMENT IV, L.P.,
a California limited partnership,
as general partner of InterMedia Capital
Partners IV, L.P.
By: /s/ Leo J. Hindery, Jr.
-----------------------------------------
Leo J. Hindery, Jr.,
Managing General Partner
INTERMEDIA PARTNERS IV CAPITAL CORP.,
a Delaware corporation
By: /s/ Leo J. Hindery, Jr.
-----------------------------------------
Leo J. Hindery, Jr.,
President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Gary Wolfe
------------------------
Gary Wolfe,
Vice President
TORONTO DOMINION SECURITIES (USA) INC.
By: /s/ Gordon Paris
------------------------
Gordon Paris,
Managing Director
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
DATED AS OF OCTOBER 25, 1995
BY AND BETWEEN
PARCABLE, INC.
AS SELLER
AND
INTERMEDIA PARTNERS OF TENNESSEE, L.P.
AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 Definitions............................................................................... 1
1.1 Accounts Receivable....................................................................... 1
1.2 Affiliate................................................................................. 1
1.3 Agreement................................................................................. 1
1.4 Annualized Revenue........................................................................ 1
1.5 Assumed Contracts......................................................................... 2
1.6 Assets.................................................................................... 2
1.7 Authorities............................................................................... 2
1.8 Basic Subscriber.......................................................................... 2
1.9 Basic Subscriber Rate..................................................................... 3
1.10 Business.................................................................................. 3
1.11 Business Day.............................................................................. 3
1.12 Buyer..................................................................................... 3
1.13 Code...................................................................................... 3
1.14 Communications Act........................................................................ 3
1.15 Contracts................................................................................. 3
1.16 Current Assets............................................................................ 3
1.17 Current Liabilities....................................................................... 4
1.18 Equipment................................................................................. 4
1.19 Excluded Assets........................................................................... 4
1.20 FCC....................................................................................... 4
1.21 Final Order............................................................................... 4
1.22 Franchises................................................................................ 4
1.23 Franchise Areas........................................................................... 5
1.24 GAAP...................................................................................... 5
1.25 Governmental Authority.................................................................... 5
1.26 Holdback Amount........................................................................... 5
1.27 Homes Passed.............................................................................. 5
1.28 Intangibles............................................................................... 5
1.29 Legal Rules............................................................................... 6
1.30 Pay Subscriber............................................................................ 6
1.31 Prime Rate................................................................................ 6
1.32 Prorated Items............................................................................ 6
1.33 Real Property............................................................................. 7
1.34 Required Consents......................................................................... 7
1.35 Revenues.................................................................................. 7
1.36 Rules and Regulations..................................................................... 7
1.37 Seller.................................................................................... 7
1.38 Signals................................................................................... 7
1.39 Subscriber................................................................................ 7
1.40 Subscriber Shortfall...................................................................... 7
1.41 System.................................................................................... 8
1.42 Taxes..................................................................................... 8
1.43 Other Definitions......................................................................... 8
ARTICLE 2 Purchase and Sale......................................................................... 9
2.1 Purchase and Sale of Assets............................................................... 9
2.2 Assumed and Excluded Obligations.......................................................... 9
2.3 Purchase Price and Payment.............................................................. 10
2.4 Preliminary and Final Adjustments....................................................... 11
2.5 Disputed Liabilities.................................................................... 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
2.6 Completion of Purchase and Sale......................................................... 13
ARTICLE 3 Representations and Warranties of Seller................................................ 13
3.1 Organization and Qualification.......................................................... 13
3.2 Authority............................................................................... 13
3.3 Enforceability.......................................................................... 14
3.4 Approvals............................................................................... 14
3.5 Compliance with Laws.................................................................... 14
3.6 Compliance with Other Instruments....................................................... 14
3.7 Complete System......................................................................... 15
3.8 Title and Encumbrances.................................................................. 15
3.9 Homes Passed, Subscribers and Revenues.................................................. 16
3.10 Franchises.............................................................................. 16
3.11 Authorities............................................................................. 17
3.12 Contracts............................................................................... 17
3.13 Real Property........................................................................... 18
3.14 Environmental Laws...................................................................... 19
3.15 Condition of Assets..................................................................... 21
3.16 Vehicles................................................................................ 21
3.17 Accounts Receivable..................................................................... 21
3.18 Inventory............................................................................... 21
3.19 Carriage of Signals and Channel Capacity................................................ 21
3.20 FCC and Copyright....................................................................... 22
3.21 Commitments............................................................................. 23
3.22 Financial Statements.................................................................... 23
3.23 Litigation.............................................................................. 24
3.24 Taxes................................................................................... 24
3.25 Insurance............................................................................... 24
3.26 Employees and Employee Benefits......................................................... 24
3.27 Commissions............................................................................. 25
ARTICLE 4 Representations and Warranties of Buyer................................................. 25
4.1 Organization and Qualification.......................................................... 26
4.2 Authority............................................................................... 26
4.3 Enforceability.......................................................................... 26
4.4 Approvals............................................................................... 26
4.5 Effect of Agreement..................................................................... 26
4.6 Compliance with Other Instruments....................................................... 26
4.7 Commissions............................................................................. 27
ARTICLE 5 Covenants of Seller..................................................................... 27
5.1 Access to System........................................................................ 27
5.2 Continuity and Maintenance of Operations................................................ 27
5.3 Compliance with Contracts and Laws...................................................... 28
5.4 Cumulative Leakage Index................................................................ 29
5.5 Maintenance of Insurance................................................................ 29
5.6 Employees and Compensation.............................................................. 29
5.7 Additional Transactions................................................................. 29
5.8 Adverse Changes......................................................................... 30
5.9 Taxes................................................................................... 30
5.10 Franchise and Lease Renewal and Extension............................................... 31
5.11 Title Insurance......................................................................... 31
5.12 Covenant Not To Compete................................................................. 32
</TABLE>
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ARTICLE 6 Mutual Covenants........................................................................ 33
6.1 Confidentiality......................................................................... 33
6.2 HSR Notification........................................................................ 34
6.3 Required Consents and Estoppel Certificates............................................. 34
6.4 MDU Agreements.......................................................................... 35
6.5 Title Commitments and Surveys........................................................... 35
6.6 Distant Broadcast Signals............................................................... 35
6.7 Letter to Programmers................................................................... 35
6.8 Employee Matters........................................................................ 36
6.9 Form 394................................................................................ 39
ARTICLE 7 Conditions Precedent to Obligations of Buyer............................................ 39
7.1 Conditions Precedent.................................................................... 39
7.2 Waiver.................................................................................. 41
ARTICLE 8 Conditions Precedent to Obligations of Seller........................................... 41
8.1 Conditions Precedent.................................................................... 41
8.2 Waiver.................................................................................. 41
ARTICLE 9 Closing................................................................................. 42
9.1 Closing................................................................................. 42
9.2 Closing Documents....................................................................... 42
9.3 Confirmation of Closing................................................................. 44
ARTICLE 10 Indemnification......................................................................... 45
10.1 Indemnification by Seller............................................................... 45
10.2 Indemnification by Buyer................................................................ 46
10.3 Notice and Right To Defend Third-Party Claims........................................... 47
10.4 Limitations and Termination of Programming
Agreements.............................................................................. 48
10.5 Mitigation.............................................................................. 49
10.6 Treatment of Indemnification Payments................................................... 49
ARTICLE 11 Termination............................................................................. 49
11.1 Termination by Mutual Agreement......................................................... 49
11.2 Termination for Failure of Conditions................................................... 49
11.3 Risk of Loss............................................................................ 50
11.4 Condemnation............................................................................ 50
11.5 Manner of Exercise...................................................................... 50
11.6 Effect of Termination................................................................... 50
ARTICLE 12 General................................................................................. 51
12.1 Covenant Not To Sue and Nonrecourse to
Partners................................................................................ 51
12.2 Assignment.............................................................................. 52
12.3 Parties in Interest..................................................................... 52
12.4 Time of Essence......................................................................... 52
12.5 Severability............................................................................ 52
12.6 Amendment............................................................................... 53
12.7 Terms................................................................................... 53
12.8 Headings................................................................................ 53
12.9 Entire Understanding.................................................................... 53
12.10 Counterparts............................................................................ 53
12.11 Applicable Law.......................................................................... 53
</TABLE>
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12.12 Notices................................................................................. 53
12.13 Further Acts............................................................................ 54
12.14 Expenses................................................................................ 54
12.15 Judicial Proceedings.................................................................... 55
</TABLE>
EXHIBITS
Exhibit A Covenant Not To Compete
Exhibit B Franchise Consent Form
Exhibit C Assignment, Assumption & Consent - Leases
Exhibit D Assignment, Assumption & Consent - Contracts
Exhibit E MDU Agreement
Exhibit F Letter to Programmers
Exhibit G Novation Agreement
Exhibit H [intentionally omitted]
Exhibit I Receipt
Exhibit J Bill of Sale
Exhibit K Affidavit - Title Insurance
Exhibit L FIRPTA Certificate
Exhibit M Certificate of Seller
Exhibit N1 Opinion of Seller's Counsel
Exhibit N2 Opinion of Seller's FCC Counsel
Exhibit O [intentionally omitted]
Exhibit P Assumption Agreement
Exhibit Q Opinion of Buyer's Counsel
Exhibit R Certificate of Buyer
Exhibit S Escrow Agreement
SCHEDULES
Schedule 1 The Business (including Rate Schedule)
Schedule 1.5 Assumed Contracts
Schedule 2.1 Excluded Assets
Schedule 2.2 Litigation
Schedule 3.4 Approvals
Schedule 3.8 Seller's Predecessors
Schedule 3.10 Franchises
Schedule 3.11 Authorities
Schedule 3.12 Contracts and Instruments
Schedule 3.13 Owned Real Property
Schedule 3.16 Owned Equipment and Vehicles
Schedule 3.17 Accounts Receivable
Schedule 3.18 Inventory
Schedule 3.19 Signals and Channel Capacities of the System
Schedule 3.22 [Intentionally Omitted]
Schedule 3.25 Insurance
Schedule 3.26 Employees
Schedule 5.10 Franchises and Contracts to be Extended
Schedule 7.1(e) Required Consents
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT is made as of October 25, 1995,
by and between PARCABLE, INC., a Delaware corporation ("Seller"), and INTERMEDIA
PARTNERS OF TENNESSEE, L.P., a California limited partnership ("Buyer").
RECITALS:
A. Seller, through its ownership and operation of various assets,
provides cable television and related services to subscribers located in the
vicinity of Hendersonville, Waverly and Monterey, Tennessee and Fort Campbell,
Kentucky.
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, subject to the terms and conditions contained in this Agreement,
substantially all of the assets, rights, privileges, interests, business and
properties owned, leased, held or utilized by Seller to operate and maintain the
System.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, Seller and Buyer
agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
1.1 Accounts Receivable. All accounts receivable of the Seller
representing amounts owed to the Seller in connection with its operation of the
Business.
1.2 Affiliate. With respect to any person or entity, any other person
or entity owning a majority interest in or controlling such person or entity, or
owned or controlled by or under common ownership or control with such person or
entity, where "control" (and its corollaries) includes ownership of interests
representing a majority of total voting power in an entity, and "ownership" (and
its corollaries) includes ownership of a majority of the equity interests in an
entity.
1.3 Agreement. This Asset Purchase and Sale Agreement dated as of
October 25, 1995 between Seller and Buyer, as the same may be amended from time
to time.
1.4 Annualized Revenue. The sum of the Revenue (excluding
any Revenue from the Fort Campbell, Kentucky Franchise Area) for
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the three (3) months prior to the date of determination multiplied by four.
1.5 Assumed Contracts. All contracts of the Business
assumed by Buyer as set forth on SCHEDULE 1.5.
1.6 Assets. All of Seller's right, title and interest in all
properties, privileges, rights, interests and claims, real and personal,
tangible and intangible, of every type and description that are owned, leased,
held or used in the Business in which Seller has any right, title or interest or
in which Seller acquires any right, title or interest on or before the Closing,
including Authorities, Intangibles, Contracts, Equipment and Real Property, but
excluding any Excluded Assets.
1.7 Authorities. Any and all approvals, consents, rights, certificates,
orders, franchises, determinations, permissions, licenses, permits, easements,
registrations, qualifications, leases, authorities or grants issued, noticed,
declared, designated or promulgated by any Governmental Authority; excluding,
however, the Franchises.
1.8 Basic Subscriber. As of any date and for each Franchise Area served
by the System, without duplication: (A) an amount of subscribers equal to: (x)
the sum of the gross billings by the System solely for the provision of basic
and tier cable television service (such services together called "Basic
Service") (excluding any Nonstandard Charges (as defined below)) from active
subscribers, each at the respective regular basic or tier monthly subscription
rate for a single household subscriber, each of whom has rendered payment in
full in cash, without discount (except that the first month's rate for a new
subscriber may reflect a fifty percent (50%) discount (resulting from internal
marketing efforts)), for the basic and/or tier service charge, for a minimum of
one (1) month's service, divided by: (y) the Basic Subscriber Rate for the
respective Franchise Area; less (B) an amount of subscribers equal to: (x) an
amount of subscribers equal to: (i) the number of subscribers who subscribe to
the basic cable television service and who have been subscribers for less than
thirty (30) days, plus (ii) the number of subscribers who owe the Seller, for
amounts currently due (i.e., excluding the amount just billed for the next month
of service), more than sixty (60) days' worth of all of their respective
currently provided services; plus (C) an amount of subscribers equal to: (i)(x)
the respective Franchise Area's monthly basic and tier or bulk (BK BASIC) gross
billings (exclusive of any Nonstandard Charges (as defined below)) for
commercial or bulk billed accounts (apartment complexes, hotels, motels,
condominiums, etc.) ("Commercial Accounts"), divided by: (y) the Basic
Subscriber Rate for the respective Franchise Area, less (ii) the number of
Commercial Accounts who owe the Seller for amounts currently due (i.e. excluding
the amount just billed for the next month of service), more than sixty (60)
days' worth of all of their respective currently provided services ((A), (B)
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and (C) are all as of the date of billing for the billing closest to the date
Basic Subscribers are being calculated, for which all billing reports for the
System have been run (which for purposes of measurement on the Closing shall not
be more than thirty-one (31) days prior to the Closing Date)). The term
"Nonstandard Charges" means any billing from separate charges for taxes,
additional outlets, installation fees, deposits and other non-recurring items
and any billings for charges for the rental of converters, remote control
devices and other like charges for equipment. Component sources/parts of the
Basic Subscriber Rate, such as charges for additional channels, governmental
fees and franchise fees, shall not be considered as Nonstandard Charges.
1.9 Basic Subscriber Rate. For each Franchise Area, the sum of the
monthly fees and charges for the provision of (a) "basic service" and (b) "tier
service" (as such terms are customarily used in the cable television industry
and by the Seller and excluding any Nonstandard Charges) charged to customers
served by the respective Franchise Area, as of the date of billing for the
billing closest to the date such Basic Subscriber Rate is being determined, for
which all billing reports for the System have been run.
1.10 Business. The cable television business conducted by Seller on the
date of this Agreement through the System in and around the Franchise Areas as
described on SCHEDULE 1.
1.11 Business Day. Any day other than Saturday, Sunday or a day on
which banking institutions in San Francisco, California or New York, New York
are required or authorized to be closed.
1.12 Buyer. InterMedia Partners of Tennessee, L.P., a
California limited partnership.
1.13 Code. The Internal Revenue Code of 1986, as amended.
1.14 Communications Act. The Communications Act of 1934, as amended,
including, but not limited to, by the Cable Communication Policy Act of 1984 and
by the Cable Television Consumer Protection and Competition Act of 1992, and the
rules and regulations promulgated thereunder.
1.15 Contracts. Any and all leases of real and personal property,
private easements, rights-of-way, rights of access, contracts for easements,
pole line or joint line agreements, underground conduit agreements, wire or
cable crossing agreements, contracts with subscribers, bulk and commercial
service agreements relating to the System, and any other agreements with third
parties relating to the System other than programming agreements not expressly
assumed by Buyer.
1.16 Current Assets. The sum of the Accounts Receivable related to
services rendered by Seller on or prior to the
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Closing, excluding, however, any such accounts (i) any portion of which is sixty
(60) days or more past due on the Closing Date and (ii) of subscribers whose
accounts are inactive or whose service is pending disconnection for any reason
as of the Closing; and all amounts prepaid by Seller with respect to Prorated
Items which amounts accrue after the Closing and will inure to the benefit of
Buyer.
1.17 Current Liabilities. Liabilities to Subscribers for services for
which Seller has been paid on or prior to the Closing but will be performed
after the Closing; Subscriber security deposits; and the Prorated Items which
have accrued but have not been paid on or prior to the Closing.
1.18 Equipment. All electronic devices, trunk and distribution coaxial
and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, Subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business.
1.19 Excluded Assets. All (a) programming contracts (unless expressly
assumed by Buyer); (b) insurance policies and rights and claims thereunder
(except as otherwise provided in Sections and ); (c) bonds, letters of credit,
surety instruments, notes and other similar items; (d) cash and cash
equivalents; (e) Seller's rights under any agreement governing or evidencing an
obligation of Seller for borrowed money; (f) Seller's rights under any contract,
license, authorization, agreement or commitment other than those creating or
evidencing Assumed Contracts; (g) all claims, rights and interests in and to any
refunds for federal, state or local franchise, income or other taxes or fees
(including, without limitation, copyright fees) of any nature whatsoever
relating to such taxes or fees payable for taxable periods, or portions thereof,
ending on or prior to the Closing; (h) any assets or properties owned by Seller
that are unrelated to the Business; (i) assets of any employee plan or
arrangement, except as expressly provided in Section ; and (j) the assets
described on SCHEDULE 2.1.
1.20 FCC. The Federal Communications Commission or any successor
agency.
1.21 Final Order. An order of the FCC approving the assignment of
Seller's FCC licenses to Buyer when the time for reconsideration, review or
appeal has expired.
1.22 Franchises. Any and all Authorities and Contracts which confer
upon Seller the privilege of delivering cable
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television and related services to residents in the Franchise Areas.
1.23 Franchise Areas. The areas in which Seller is authorized to
provide cable television service under the Franchises and the areas served by
the System in which Seller provides cable television service without a
Franchise, all as set forth on SCHEDULE 1.
1.24 GAAP. Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
1.25 Governmental Authority. Any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.26 Holdback Amount. Three hundred thousand dollars ($300,000) which
shall be withheld from the Purchase Price as set forth in Section 2.3.
1.27 Homes Passed. The total, to the Seller's actual knowledge, of each
single-family residence, townhouse, condominium or dwelling unit in a building
containing multiple dwelling units (wherein Seller does not serve such a unit
pursuant to a contract applicable to all units in the building, whereby each
unit is not responsible for paying for its own cable television services
directly to the Seller) that to Seller's knowledge is located within two hundred
(200) feet of an activated trunk or feeder cable of the Franchise Areas of the
System. It being expressly understood that Seller's knowledge, for all but Homes
Passed in the Hendersonville, Tennessee and Sumner County, Tennessee Franchise
Areas, is based on the amount of Homes Passed stated by the previous owners to
be in existence, adjusted for changes known to the Seller since then. It also
being expressly understood that Seller's knowledge in the Hendersonville,
Tennessee and Sumner County, Tennessee Franchise Areas is based on a count by
the Seller's Regional Manager of the Homes Passed from as-built maps of the
respective Franchise Areas, which count was as of February 1994, adjusted for
changes known to the Seller since then. Units in a building to which the System
does not have a right of access may not be included in the computation of Homes
Passed.
1.28 Intangibles. All intangible assets, including subscriber lists,
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
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1.29 Legal Rules. The requirements of all federal, state, municipal or
local laws, codes, statutes, ordinances, orders, judgments, decrees,
injunctions, determinations, approvals, rules, regulations, permits, licenses
and authorizations, of all Governmental Authorities.
1.30 Pay Subscriber. As of any date and for each Franchise Area served
by the System, without duplication, shall mean: (A) an amount of subscribers
equal to the number of active subscribers, each billed at the respective regular
pay monthly subscription rate for a single household subscriber or the
applicable retail rate for any combined multiple pay purchases (such as a
discounted rate for purchasing both HBO and Showtime) (the "Multiple Pay
Discount"), each of whom has rendered payment in full in cash, without discount
(except for any Multiple Pay Discount and except that the first month's rate for
a new subscriber may reflect a 50% discount (resulting from internal marketing
efforts)), for the respective pay service charge, for a minimum of one (1)
month's service; less (B) the number of subscribers who subscribe to a pay
service and who have been a pay subscriber to a pay service for less than 30
days; plus (C) an amount of subscribers equal to: (x) the System's monthly gross
pay billings (exclusive of any Nonstandard Charges (as defined above)) for
Commercial Accounts, divided by: the respective regular pay monthly service rate
for a single household subscriber for the respective Franchise Area ((A), (B)
and (C) are all as of the date of billing for the billing closest to the date
pay subscribers are being calculated for which all billing reports for the
System have been run (which, for purposes of measurement on the Closing shall
not be more than thirty-one (31) days prior to the Closing Date)). A subscriber
billed at the pay service rates described above for more than one such pay
service shall be counted as one (1) Pay Subscriber for each such pay service
(whether such pay service was billed separately or as part of a combined
multiple pay purchase at a single discounted rate) to which such subscriber
subscribes. A subscriber billed at the service rate described above for a
duplicate pay service, for which the pay service provider charges the Seller one
rate (such as the service: HBO1 and HBO2), shall be counted as one (1) Pay
Subscriber for each such duplicate pay service to which such subscriber
subscribes.
1.31 Prime Rate. The per annum prime rate of interest from time to time
of The Bank of New York at its New York Office. For all purposes of this
Agreement, interest at the Prime Rate shall be calculated on the basis of the
actual number of days elapsed in the relevant period over a year of 365 or 366
days, as applicable.
1.32 Prorated Items. All working capital accounts (as defined by GAAP),
including but not limited to, pole rental fees; rental or other charges payable
in respect of the Real Property and Assumed Contracts; programming fees; sales
and use taxes payable with respect to cable television service and
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equipment, which shall not include sales or use taxes arising out of the
consummation of the transaction contemplated hereunder; power and utility
charges; real and personal property taxes and assessments levied against the
Assets; applicable franchise, copyright or other fees; sales and service
charges; and wages, payroll taxes and payroll expenses (including accrued
vacation pay and sick leave) of employees of Seller, if any, who are employed by
Buyer on the Closing Date; provided, however, inventory shall not be included.
1.33 Real Property. All real property described on SCHEDULE 3.13,
including appurtenances, improvements and fixtures located on such realty, and
any other interests in real property, including leasehold interests and
easements, interests under any rights-of-way or other real property rights that
are used by Seller in the Business but excluding any Excluded Assets.
1.34 Required Consents. All franchises, licenses, authorizations,
approvals and consents required under Authorities, Contracts or otherwise for
(a) Seller to transfer the Assets and the Business to Buyer, (b) Buyer to
conduct the Business and to own, lease, use and operate the Assets at the places
and in the manner in which the Business is conducted as of the date of this
Agreement and on the Closing and (c) Buyer to assume and perform the Authorities
and Contracts.
1.35 Revenues. The gross consolidated operating revenues of the
Business (excluding, without limitation, interest, investment, affiliate and
other non-operating revenue) determined in accordance with GAAP.
1.36 Rules and Regulations. Rules and Regulations of the FCC, as in
effect from time to time.
1.37 Seller. ParCable, Inc., a Delaware corporation.
1.38 Signals. The transmissions, except radio signals (whether
television, satellite or otherwise), of video programming or other information
that the System makes available to all Subscribers generally.
1.39 Subscriber. Basic Subscriber or Pay Subscriber.
1.40 Subscriber Shortfall. An amount (not to be less than zero) equal
to the product of (x) one thousand six hundred forty dollars ($1,640) and (y)
the difference between fifteen thousand two hundred fifty (15,250) and (if less)
the actual number of Basic Subscribers as of the most recent date of billing
closest to the Closing for which all billing reports for the System have been
run (which shall not be more than thirty-one (31) days prior to the Closing
Date) in all Franchise Areas other than the Fort Campbell, Kentucky Franchise
Area.
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1.41 System. The cable television reception and distribution system
operated in the conduct of the Business, consisting of one or more headends,
subscriber drops and associated electronic and other equipment, and which is, or
is capable of being without modification, operated as an independent system
without interconnections to other systems.
1.42 Taxes. Any and all governmental or quasi-governmental fees
(including, without limitation, license, filing and registration fees), taxes
(including, without limitation, income, gross receipts, franchise, sales, use,
property, real or personal, tangible or intangible taxes), interest equalization
and stamp taxes, assessments, levies, imposts, duties, charges, required
contributions or withholdings of any kind or nature whatsoever, together with
any and all penalties, fines or interest thereon.
1.43 Other Definitions. In addition, the following terms
have the meanings given them in the following sections:
Term Section
Adjustment Time 2.3(d)
Buyer's DC Plan 6.8(a)
Buyer's Welfare Plans 6.8(a)
Cable Act 3.10(c)
CLI 3.20(b)
Closing 2.6
Closing Date 9.3
COBRA 6.8(a)
Competing Business 5.12(a)
Copyright Act 3.19(a)
Employee Plans 3.26(c)(i)
Environmental Law 3.14(d)
ERISA 3.26(c)(i)
ERISA Affiliate 6.8(a)
Final Adjustments Report 2.4(b)
Fixtures 3.13(e)
Hazardous Substance 3.14(e)
HSR Act 6.2
Indemnifiable Damages 10.1(a)
Indemnitee 10.3(a)
Indemnitor 10.3(a)
Lien 3.8(a)
MDS 3.10(c)(iii)
MMDS 3.10(c)(iii)
Nonrecourse 12.1(b)
Permitted Liens 3.8(a)
Preliminary Adjustments Report 2.4(a)
Purchase Price 2.3(a)
Seller's DC Plan 3.26(c)(iii)
Seller's Welfare Plans 6.8(a)
SMATV 3.10(c)(iii)
Taking 11.4
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Transaction Document 12.1(a)
ARTICLE 2
Purchase and Sale
2.1 Purchase and Sale of Assets. Subject to the terms and conditions
hereinafter set forth, Buyer hereby agrees to purchase from Seller, and Seller
hereby agrees to sell to Buyer, the Assets. Seller will retain, and Buyer hereby
does not purchase, the Excluded Assets.
2.2 Assumed and Excluded Obligations.
(a) Concurrently with the purchase described in Section
and subject to the terms and conditions hereinafter set forth, Buyer shall
assume and agree to pay when due, and perform, those obligations, but only those
obligations, that (i) constitute the Current Liabilities (for which Buyer has
received an adjustment in the Purchase Price as set forth in Section 2.3), (ii)
arise after the Closing under all Franchises and Assumed Contracts, (iii) arise
out of its ownership and operation of the Assets after the Closing, or (iv)
relate to employees of the Business and are expressly assumed by Buyer pursuant
to Section 6.8.
(b) Except as set forth in Section 2.2(a), Buyer shall not be liable
for any debts, liabilities, obligations or contracts of Seller of any kind and
nature, including, without limitation:
(i) any amount owed to Subscribers (whether past
or present) for refunds of rates charged by the System
for periods on or prior to the Closing;
(ii) any liabilities, obligations or costs relating to events
that occurred on or prior to the Closing resulting from any claim,
demand, action, lawsuit or other proceeding relating to the Assets, or
naming Seller or any predecessor or successor thereof as a party
arising out of events, transactions or circumstances related to the
Assets, the System or the Business occurring or existing on or prior to
the Closing, including, without limitation, the lawsuits and
proceedings described on SCHEDULE 2.2;
(iii) any liability based, in whole or in part, upon the
failure to comply with laws applicable to bulk sale transfers;
(iv) any Taxes arising out of or resulting from
the sale of the Assets hereunder or any transaction of
Seller subsequent to the Closing;
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(v) any attorneys', accountants', brokers' or finder's fees or
other costs or expenses of Seller incurred in connection with this
Agreement or the transactions contemplated hereby;
(vi) any liabilities, obligations or costs relating to events
that occurred on or prior to the Closing resulting by reason of or
arising out of claims for unclaimed and abandoned refunds and deposits
from former Subscribers to the System; or
(vii) subject to Section 10.4 hereof, any liabilities,
obligations or costs resulting or arising out of violations of pole
attachment agreements which violations exist as of the Closing for
which (A) Seller was notified to correct such violation on or prior to
the Closing or (B) an audit of the relevant poles was commenced on or
prior to the Closing or scheduled on or prior to the Closing to
commence within six (6) months after the Closing and such audit results
in Seller or Buyer being notified to correct such violation.
2.3 Purchase Price and Payment.
(a) The consideration to be paid for the Assets shall be thirty million
dollars ($30,000,000), adjusted as hereinafter provided (the "Purchase Price"),
from which the Holdback Amount shall be withheld by Buyer as security for
Seller's obligations as provided in Section 2.3(c). Notwithstanding the
foregoing, in the event that after the adjustments the Purchase Price is less
than twenty-eight million dollars ($28,000,000), at Seller's option this
Agreement may be terminated prior to Closing and, if so terminated, the parties
shall have no further rights or obligations hereunder, except for the respective
obligations of the parties under Sections 6.1 and 12.14.
(b) On the Closing, the Purchase Price shall be:
(i) either
(A) decreased by the excess, if any, of
Current Liabilities over Current Assets or
(B) increased by the excess, if any, of
Current Assets over Current Liabilities;
(ii) decreased by the Subscriber Shortfall; and
(iii) decreased by the amount of any deductible under the
casualty insurance policies insuring the Assets if clause (x) of
Section 11.3 is applicable.
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(c) On the Closing,the Holdback Amount shall be deposited in an escrow
account (the "Escrow") pursuant to the terms of the Escrow Agreement attached
hereto as EXHIBIT S. Seller hereby grants a security interest in the Holdback
Amount and all products and proceeds thereof, which shall be withheld by Buyer
pursuant to Section 2.3(a), to secure Seller's obligations to Buyer under this
Agreement, which security interest shall be perfected by Buyer's retention of
said amount until the later of one hundred twenty (120) days after the Closing
Date or the determination of the adjustments described in Section 2.4, at which
time Buyer shall, subject to Section 2.4, pay Seller said amount, plus interest
thereon at a rate per annum equal to the Prime Rate plus two percent (2%);
provided, however, if Buyer shall be entitled to indemnification hereunder,
Buyer shall not be obligated to agree to release from Escrow to Seller any
amount necessary to pay such indemnification.
(d) All revenues and all expenses arising from the operations of the
System until 12:01 a.m. on the Closing (the "Adjustment Time"), including, but
not limited to, the Prorated Items and other prepaid and deferred items shall be
prorated between Buyer and Seller as of the Adjustment Time in accordance with
GAAP and the principle that Seller shall receive all revenues (other than with
respect to Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time; provided that nothing herein shall be deemed to
expand the liabilities to be assumed by Buyer or retained by Seller hereunder as
specified in Section 2.2.
2.4 Preliminary and Final Adjustments. Preliminary and
final adjustments to the Purchase Price will be determined as
follows:
(a) At least ten (10) Business Days prior to the Closing Date, Seller
will deliver to Buyer a report (the "Preliminary Adjustments Report"), prepared
in good faith and on a reasonable basis, setting forth in reasonable detail a
pro forma determination as of the Closing of the adjustments and prorations set
forth in Section 2.3. The Preliminary Adjustments Report shall: (i) contain all
information reasonably necessary to determine such adjustments and prorations
and such other information as may be reasonably requested by Buyer; (ii) be
prepared in accordance with GAAP if feasible or if not, under sound accounting
principals consistently applied; and (iii) be certified by an authorized officer
of Seller to be true, correct and complete as of the date thereof. Within five
(5) days after receipt of such report, Buyer shall give Seller written notice of
any objections. If Buyer makes any such objections, the parties shall agree on
the amount, if any, which is not in dispute within two (2) Business Days after
Seller's receipt of
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Buyer's objections thereto. Any undisputed amounts shall be paid by the
responsible party therefor to the other party upon the Closing, and the
remaining disputed amounts shall be determined after the Closing pursuant to
Sections 2.4(b) through (d).
(b) Within sixty (60) days after the Closing, Buyer shall deliver to
Seller a report (the "Final Adjustments Report"), prepared in good faith and on
a reasonable basis, setting forth in reasonable detail the final determination
of all adjustments that were not calculated as of the Closing and containing any
corrections to the Preliminary Adjustments Report. The Final Adjustments Report
shall (i) contain all information reasonably necessary to determine such
adjustments and prorations and such other information as may be reasonably
requested by Seller; (ii) be prepared in accordance with GAAP if feasible or if
not, under sound accounting principles consistently applied; and (iii) be
certified by an authorized representative of Buyer to be true, correct and
complete as of the date thereof.
(c) Within thirty (30) days after receipt of the Final Adjustments
Report, Seller shall notify Buyer of its objections, if any. Any amount which is
not in dispute shall, within five (5) Business Days of the expiration of the
review period, be paid in cash by wire or interbank transfer in immediately
available funds as follows: (i) if the Purchase Price calculated based on the
Final Adjustments Report is greater than the Purchase Price calculated based on
the Preliminary Adjustments Report, Buyer shall pay such difference to Seller,
or (ii) if the Purchase Price is less, Seller shall pay such difference to
Buyer. In the event any payment required by this Section 2.4(c) is not made when
due, Seller or Buyer, as appropriate, shall make the payment required by this
Section 2.4(c) with interest accruing from the date such payment was due at the
Prime Rate. For fifteen (15) days, Buyer and Seller shall use their best efforts
to resolve any remaining disputes.
(d) After the fifteen (15) day period provided for above, any disputed
amounts will be determined within forty-five (45) days thereafter by an
accounting firm to be selected by Price Waterhouse and KPMG Peat Marwick, which
has or has had no material relationship with Buyer or Seller, whose
determination will be conclusive. Seller and Buyer will bear equally the fees
and expenses payable to such firm in connection with such determination. The
payment required after determination of all disputed amounts will be made by the
responsible party by wire transfer of immediately available funds to the other
party within three (3) Business Days after the final determination. In the event
any payment required by this Section 2.4(d) is not made when due, Seller or
Buyer, as appropriate, shall make the payment required by this Section 2.4(d)
with interest accruing from the date such payment is due at the Prime Rate.
2.5 Disputed Liabilities. If a proration or adjustment to
the Purchase Price is made in Buyer's favor for any liability
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assumed by Buyer but is in good faith being contested by Seller as of the
Closing, and if Buyer is relieved of this liability, Buyer shall pay to Seller
or its designee in cash (by means of wire or interbank transfer in immediately
available funds) an amount equal to the unpaid portion of this liability within
five (5) Business Days after the date Buyer is relieved of this liability. In
the event any payment required by this Section 2.5 is not made by Buyer when
due, Buyer shall make the payment required by this Section 2.5 with interest
accruing from the date such payment was due at the Prime Rate.
2.6 Completion of Purchase and Sale. The purchase and sale of the
Assets shall be completed in accordance with Article (the "Closing"). Within
three (3) days after all conditions set forth in Articles and have been
satisfied or waived, Seller shall give Buyer a notice setting the date for the
Closing which shall be not less than ten (10) nor more than fifteen (15) days
from the date of the notice; provided, however, in the event that in accordance
with the foregoing the Closing would be required to be held prior to January 2,
1996, in Seller's sole discretion, the Closing may be delayed until the date
specified in Section 11.2. The Closing shall take place in the offices of
Pillsbury Madison & Sutro, 235 Montgomery Street, San Francisco, California
94104 at 1:00 P.M. or such other place and time as the parties may mutually
agree.
ARTICLE 3
Representations and Warranties of Seller
As a material inducement to Buyer to enter into this Agreement, Seller
represents and warrants to Buyer the following:
3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and use the
Assets as they are currently owned, leased and used and to conduct the Business
as it is currently conducted. Seller is duly qualified or licensed to do
business and is in good standing under the laws of each jurisdiction in which
the character of the properties owned, leased or operated by it or the nature of
the activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the Assets, the System or
the Business or on the validity, binding effect or enforceability of this
Agreement.
3.2 Authority. Seller has the corporate right, power, legal capacity
and authority to execute, deliver and (subject to the receipt of the Required
Consents) perform its obligations
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under this Agreement and the documents, instruments and certificates to be
executed and delivered by Seller pursuant to this Agreement. The execution and
delivery of, and performance of the obligations contained in, this Agreement by
Seller and the transactions contemplated hereby have been, and all documents,
instruments and certificates have been or as of the Closing will be, duly
authorized by all necessary action on the part of Seller.
3.3 Enforceability. The terms and provisions of this Agreement and all
documents, instruments and certificates made or delivered from time to time by
Seller hereunder and thereunder constitute valid and legally binding obligations
of Seller, enforceable against Seller in accordance with the terms hereof and
thereof, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
3.4 Approvals. SCHEDULE 3.4 sets forth all Required Consents. Except
for the Required Consents and compliance with the HSR Act, the execution,
delivery and performance of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby do not require any consent which
has not been made, given or otherwise accomplished and satisfactory evidence
thereof has been delivered to Buyer.
3.5 Compliance with Laws. Seller is in compliance with all Legal Rules
applicable to the Business, the Assets or the System imposed by any Governmental
Authority having jurisdiction over Seller, the Assets or the System, and of any
jurisdiction in which the System is being operated or conducted, including, but
not limited to, the Communications Act, except for such failures to comply as
would not have a material adverse effect on the Assets, the Business or the
System.
3.6 Compliance with Other Instruments.
(a) The execution and delivery of this Agreement and (subject to the
receipt of the Required Consents) the consummation of the transactions
contemplated hereunder do not and will not result in a breach or violation of
any term or provision of, or result in the imposition of any Lien upon any
Assets or any properties of Seller pursuant to, or constitute a breach or
default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under Seller's articles of
incorporation or bylaws, or under any contract, agreement, Authority, Legal
Rule, license, lease, indenture, mortgage, loan agreement or note, as to which
Seller is a party or by which any of the Assets may be affected, except for such
breaches or violations as would not have a material adverse effect on the
Business, the Assets or the System or materially impair the ability of Seller to
perform its obligations under this Agreement.
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(b) Seller has complied with all provisions of and is not in breach or
default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under its articles of incorporation
or bylaws or any contract, lease, instrument affecting any parcel of real
property, authority or franchise, or obligation to which it is a party or by
which it is or any of the Assets may be bound or affected, except for such
breaches or defaults as would not have a material adverse effect on the
Business, the Assets or the System or materially impair the ability of Seller to
operate the Business as presently operated.
3.7 Complete System. The Assets constitute fully operational cable
television systems with all assets, properties, franchises, licenses, permits,
consents, certificates, authorities, operating rights, leases, easements,
licenses, rights-of-way, contracts, agreements, commitments and arrangements
necessary to operate lawfully and maintain the same as operated and maintained
on the date hereof. The Assets are all of the assets utilized by Seller for the
operation and maintenance of the Business, except the Excluded Assets, and all
of the Assets are utilized by Seller for the construction, maintenance or
operation of the Business.
3.8 Title and Encumbrances.
(a) Seller has good title to and possession of all of the Assets, free
and clear of all Liens, except for the Permitted Liens. A "Lien" is any interest
in property securing an obligation, whether such interest is based on common
law, statute or contract, and including, but not limited to, any security
interest or lien arising from a mortgage, claim, encumbrance, pledge, charge,
easement, servitude, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term "Lien" shall also
include reservations, exceptions, covenants, conditions, restrictions, leases,
subleases, licenses, occupancy agreements, pledges, equities, charges,
assessments, covenants, reservations, defects in title, encroachments and other
burdens, and other title exceptions and encumbrances affecting property of any
nature, whether accrued or unaccrued, or absolute or contingent. "Permitted
Liens" are (i) Liens for taxes not yet due and payable; (ii) any carrier's,
warehousemen's, mechanic's, materialmen's, repairmen's or other like lien
arising in the ordinary course of business if the amount of the liability
secured by the lien which is attributable to services performed on or prior to
the Closing is included as a Proration Item under Section 2.3 with Buyer
receiving a credit therefor; (iii) easements, rights-of-way, restrictions, minor
encroachments and other similar nonmonetary encumbrances (A) incurred in the
ordinary course of business; and (B) which do not render the Asset subject
thereto unusable for the purpose intended, materially detract from the value of
the Asset or interfere with the ordinary use of the Asset in the ordinary course
of
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business; (iv) in the case of leased real property leased to Seller, the rights
of the fee owner and any lien encumbering the fee interest in such property; (v)
Liens pursuant to existing pole leases; (vi) in the case of real property
interests held by Seller under any easements, rights of way, rights of access or
other Contracts, the rights of the fee owner of such property and any Liens
encumbering the fee interest in such property; and (vii) any commercial leased
access of channel capacity pursuant to the Communications Act.
(b) The names of all of Seller's predecessors are listed
on SCHEDULE 3.8.
3.9 Homes Passed, Subscribers and Revenues. To Seller's knowledge, the
number of Homes Passed by the System other than in the Fort Campbell, Kentucky
Franchise Area is at least eighteen thousand (18,000). The number of Basic
Subscribers served by the System other than in the Fort Campbell, Kentucky
Franchise Area is at least fifteen thousand (15,000), the number of Pay
Subscribers served by the System other than in the Fort Campbell, Kentucky
Franchise Area is at least five thousand seven hundred (5,700) and the
Annualized Revenues for the System other than in the Fort Campbell, Kentucky
Franchise Area are at least four million seven hundred fifty thousand dollars
($4,750,000).
3.10 Franchises.
(a) PART I OF SCHEDULE 3.10 lists (i) each Franchise held by Seller in
connection with the operation or maintenance of the System; (ii) the coverage
area serviced thereby; (iii) the grantor thereof; (iv) the date on which such
Franchise was granted; and (v) the expiration date for such Franchise.
(b) Each Franchise (i) was validly issued and obtained by or validly
transferred to and accepted by Seller in accordance with and as required by the
terms thereof and according to all material applicable Legal Rules; (ii) is
validly held by Seller as duly authorized grantee or transferee thereof; and
(iii) is in full force and effect and has not been revoked, canceled or
encumbered and Seller is in compliance therewith in all material respects.
(c) Except as set forth on SCHEDULE 3.10, (i) for any Franchise which
has an unexpired term of less than three (3) years from the date hereof, a
request for renewal thereof has been filed under section 626(a) of the Cable
Communication Policy Act of 1984, as amended with the proper Governmental
Authority, within thirty (30) to thirty-six (36) months prior to the expiration
date thereof; (ii) no other Franchise is required by law in connection with the
operation and maintenance of the System; and (iii) to the Seller's knowledge
there are no operating cable television systems providing television programming
(other than the System), a multi-point distribution system
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("MDS"), a multi-channel multi-joint distribution system ("MMDS") or a satellite
master antennae television system ("SMATV") as those terms are customarily used
in the cable television industry in any Franchise Area.
3.11 Authorities. Except as set forth on SCHEDULE 3.11, Seller has all
Authorities that are necessary to carry on the business of the System as
conducted on the date hereof, except for such Authorities, the failure of which
to obtain would not have a material adverse effect on the System. Each such
Authority is in full force and effect; no proceeding to revoke, cancel, encumber
or adversely affect in any material manner any such Authority has been
initiated, or to Seller's knowledge is threatened; and Seller is in material
compliance therewith.
3.12 Contracts.
(a) PART I OF SCHEDULE 3.12 contains a complete and accurate list of
all presently effective Contracts pursuant to which Seller provides cable
television to any multiple dwelling unit located in the System. PART II OF
SCHEDULE 3.12 contains a complete and accurate list of all presently effective
contracts and instruments pursuant to which Seller provides service to its
commercial or bulk-billed accounts. PART III OF SCHEDULE 3.12 contains a
complete and accurate list of all presently effective contracts and instruments
pursuant to which Seller leases or allows the use of any of its channels on any
portion of the System. PART IV OF SCHEDULE 3.12 contains a complete and accurate
list of all presently effective personal property leases to which Seller is a
party and relating to personal property located in or used in connection with
the operation or maintenance of the System. PART V OF SCHEDULE 3.12 contains a
complete and accurate list of all real property leases relating to or used in
connection with the operation or maintenance of the System to which Seller is a
party. PART VI OF SCHEDULE 3.12 contains a complete and accurate list of all
material easements, licenses, use permits and rights-of-way under which Seller
holds an interest or which are necessary for the operation, maintenance, repair
or replacement or current location of any cables, lines, towers, equipment and
other facilities used by Seller in connection with the System. PART VII OF
SCHEDULE 3.12 contains a complete and accurate list of all presently effective
Contracts relating to the System which are not described in PARTS I THROUGH VI
OF SCHEDULE 3.12 that are material to the operation of the Business other than
the Franchises. SCHEDULE 3.12 correctly describes, with respect to each such
contract and instrument, the date thereof and the other party or parties
thereto. Seller has, or by the Closing will have, delivered to Buyer or provided
Buyer access to true and complete copies of all agreements listed on SCHEDULE
3.12.
(b) Other than the Required Consents set forth on SCHEDULE 3.4, (i)
none of the real or personal property leases included in the Contracts should,
in accordance with GAAP, be
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reported as capital leases on Seller's financial statements; (ii) the real
property and personal property which are the subject of such leases are
currently used in the construction, operation or maintenance of the System; and
(iii) Seller has, and on the Closing will have, possession of the real property
and personal property which is the subject of such leases and with respect to
such leases pursuant to which real property is leased, the right to occupy the
real property which is the subject of such leases, subject to the terms of such
leases, and with respect to the personal property leases, the right to possess
and use such personal property.
(c) Each of the Contracts has not been amended or modified except as
set forth on SCHEDULE 3.12. Neither Seller nor, to Seller's knowledge, any other
party thereto is in material default thereunder, nor, to Seller's knowledge, is
there any event which with notice or lapse of time or both would constitute a
material default thereunder. Seller has not received written notice that any
party intends to cancel, terminate or refuse to renew any of the Contracts or to
exercise or decline to exercise any option or other right thereunder. Except as
disclosed on SCHEDULE 3.12, all make-ready fees or other charges under pole
agreements with respect to which Seller has received a bill, invoice or other
demand for payment have been paid or will be paid before the Closing.
(d) Each Contract is in full force and effect and constitutes a valid
and binding obligation of the Seller except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting generally the enforcement of creditors' rights and by general
principles of equity.
3.13 Real Property.
(a) SCHEDULE 3.13 contains a complete and accurate list of all Real
Property owned in fee by Seller, which is used for, headend equipment, microwave
equipment and satellite earth receiving stations and related facilities, tower
and antenna sites and office facilities in connection with the System.
(b) The Real Property and the improvements located thereon and the
conduct of business presently being conducted thereon are in material compliance
with all Legal Rules.
(c) Each parcel of the Real Property described on SCHEDULE 3.13 and the
improvements thereon (i) have direct and unobstructed access for purposes of
ingress and egress to public roads or streets or to private roads over which
Seller has a valid right-of-way; (ii) are served by utilities and services
necessary for the normal and intended use of such real property in connection
with the Business or System; and (iii) do not encroach in any material manner
upon the property of others.
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(d) Except as otherwise disclosed on SCHEDULE 3.13, Seller holds good,
marketable title in fee simple to the Real Property described on SCHEDULE 3.13
and the valid and enforceable right to use and possess such Real Property,
subject only to the Permitted Liens.
(e) Except as set forth on SCHEDULE 3.11, all Fixtures, wherever placed
or located, are placed and maintained, to the extent required, pursuant to a
valid Franchise, Contract, Authority, or other such authorization, which
authorization is in full force and effect authorizing such placement and the
continued maintenance thereof in the manner presently placed and maintained by
Seller. "Fixtures" means all fixtures of the System, including, without
limitation, all leasehold improvements, headend equipment and facilities,
satellite earth receiving stations and facilities, towers, antennas,
transmitting equipment, transformers, power supplies, amplifiers, microwave
equipment connectors, couplers, filters, traps, modulators, cable, conduit,
hookups, pole attachments, poles, anchors and guys.
3.14 Environmental Laws.
(a) Except as disclosed on SCHEDULE 3.14 (i) All Real Property
identified on SCHEDULE 3.13 complies in all material respects with all
applicable Environmental Laws; (ii) none of Seller's operations thereon is
subject to any judicial or administrative proceeding alleging the violation of
any Environmental Law; (iii) to the best of Seller's knowledge none of the Real
Property identified on SCHEDULE 3.13 is the subject of any federal or state
investigation concerning any use or release of any Hazardous Substance; (iv)
neither Seller nor, to the best of Seller's knowledge, any predecessor-in-title
to the Real Property identified on SCHEDULE 3.13 has filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a hazardous waste or reporting a spill or release of a Hazardous Substance
into the environment; (v) to the best of Seller's knowledge, Seller has no
material contingent liability in connection with any release of any Hazardous
Substance into the environment and no release which could require material
remediation has occurred at any of the Real Property identified on SCHEDULE
3.13; (vi) none of Seller's or, to the best of Seller's knowledge any other
person's operations on the Real Property identified on SCHEDULE 3.13 involves
the generation, transportation, treatment, storage or disposal of Hazardous
Waste that would give rise to liability under any Environmental Law; (vii) to
the best of Seller's knowledge, except in material accordance with all Legal
Rules, Seller has not disposed of any Hazardous Substance in, on or about the
Real Property identified on SCHEDULE 3.13, and no lessee, prior owner or other
person has disposed of any Hazardous Substance in, on or about the Real Property
identified on SCHEDULE 3.13 in a manner that would give rise to liability under
any Environmental Law; and (viii) to the best of Seller's
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knowledge, no Lien in favor of any Governmental Authority for (A) any liability
under Environmental Laws, or (B) damages arising from or costs incurred in
response to a release of any Hazardous Substance into the environment has been
filed or attached to any of the Real Property except for any such Lien which
will not have a material adverse effect on the Assets, the Business or the
System.
(b) Seller has provided, and prior to Closing will provide, Buyer with
complete and correct copies of (i) all studies, reports, surveys or other
materials in Seller's possession relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the Real Property, (ii) all notices or
other materials in Seller's possession that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (iii) all materials in Seller's possession
relating to any claim, allegation or action by any private third party under any
Environmental Law with respect to the Real Property.
(c) To the best of Seller's knowledge, (i) no underground storage tanks
are currently or have been located on any Real Property identified on SCHEDULE
3.13, and (ii) no Real Property identified on SCHEDULE 3.13 has been used at any
time as a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes. To
the best of Seller's knowledge, there are no incinerators, septic tanks or
cesspools on the Real Property identified on SCHEDULE 3.13 and all waste is
discharged into a public sanitary sewer system.
(d) "Environmental Law" means a Legal Rule pertaining to Hazardous
Substances, land use, air, soil, surface water, groundwater (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, including, without
limitation, the following laws as the same may be amended from time to time up
to and including the Closing: (i) Clean Air Act (42 U.S.C. Section 7401, et
seq.); (ii) Clean Water Act (33 U.S.C. Section 1251, et seq.); (iii) Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); (iv)
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601, et seq.); (v) Safe Drinking Water Act (42 U.S.C. Section 300f, et
seq.); (vi) Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.);
(vii) Rivers and Harbors Act (33 U.S.C. Section 401, et seq.); (viii) Endangered
Species Act (16 U.S.C. Section 1531, et seq.); and (ix) Occupational Safety and
Health Act (29 U.S.C. Section 651, et seq.).
(e) "Hazardous Substance" means any matter that is labeled or regulated
as a pollutant, contaminant or hazardous or toxic substance, material,
constituent or waste under any Legal Rule
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or by any Governmental Authority and includes, without limitation- , asbestos
and asbestos-containing materials and any material or substance that is: (i)
designated as a "hazardous substance" pursuant to section 307 of the Federal
Water Pollution Control Act, 33 U.S.C. section 1251, et seq. (33 U.S.C. Section
1317); (ii) defined as a "hazardous waste" pursuant to section 1004 of the
Federal Solid Waste Disposal Act, 42 U.S.C. section 6901, et seq. (42 U.S.C.
Section 6903); (iii) defined as a "hazardous substance" pursuant to section 101
of the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. section 9601, et seq. (42 U.S.C. Section 9601).
3.15 Condition of Assets. All of the Real Property described on
SCHEDULE 3.13, including all the buildings, structures, fixtures, trade fixtures
and improvements located in or on any of such real property, together with all
Equipment located thereon and necessary for the operation of such buildings are
in satisfactory operating condition and repair for their current use subject to
ordinary wear and tear.
3.16 Vehicles. Vehicles and other personal property for which a
Governmental Authority issues a document of title and which are owned, leased or
used by Seller in the construction, operation and maintenance of the System are
described on SCHEDULE 3.16 by the year, manufacturer, model and vehicle
identification number, and are in satisfactory operating condition and repair
for their current use subject to ordinary wear and tear.
3.17 Accounts Receivable. SCHEDULE 3.17 is a schedule of the subscriber
Accounts Receivable of Seller with respect to the System, showing amounts and
aging as of the most recent date of billing for the billing closest to the date
hereof for which billing reports have been run (which for purposes of
measurement on the execution date shall not be more than thirty-one (31) days
prior to the execution date). Such receivables were incurred in the ordinary
course of business by Seller in its operation of the Business.
3.18 Inventory. Seller's inventories are (a) in good condition and (b)
at levels consistent with past practice. A list of Seller's inventory as of
December 31, 1994 is set forth on SCHEDULE 3.18.
3.19 Carriage of Signals and Channel Capacity.
(a) PART I OF SCHEDULE 3.19 completely and accurately sets forth each
of the Signals carried by the System. Seller has the legal right and authority,
including (without limitation) all necessary authority from the FCC and the
requisite compulsory copyright license under section 111 of Title 17 of the
United States Code, as amended, and all rules and regulations promulgated
thereunder, as amended (the "Copyright Act"), to carry and
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use in the conduct of the Business all of the Signals. Other than requests for
network nonduplication and syndex protection, no written notices have been
received by Seller from the FCC, the United States Copyright Office, any local
or other television station or system or from any other person or entity,
station or Governmental Authority challenging or questioning the right of Seller
or the System to carry or furnish, or not carry or furnish, any of the Signals
or any other station or service to any Subscriber, except as set forth on PART I
OF SCHEDULE 3.19.
(b) Part II of SCHEDULE 3.19 sets forth the channel capacities of the
System. The System provides reception on all such channels through which signals
are currently being carried in compliance with the requirements of the FCC, the
Franchises and the Rules and Regulations except for channels not presently in
use.
3.20 FCC and Copyright.
(a) The Seller has no knowledge that the System does not have the
capacity of carrying the number of channels (6 Mhz bandwidth each) now in use at
each respective headend over one hundred percent (100%) of the plant miles of
the System served by such headend. The System meets, in accordance with usual
industry standards, in all material respects the technical standards of the
Rules and Regulations whether or not such standards otherwise are legally
required to be met by the System.
(b) Seller has Cumulative Leakage Index, as defined by the Rules and
Regulations ("CLI") monitoring equipment which is required by the Rules and
Regulations, and has in connection with its CLI obligations under the Rules and
Regulations (i) maintained appropriate log books and other recordkeeping and
(ii) corrected any System radiation leakage discovered by Seller in connection
with its monitoring obligations under the Rules and Regulations.
(c) (i) Seller has made all submissions (including, without limitation,
registration statements, annual reports and aeronautical frequency filings)
required under the Communications Act and the Rules and Regulations. (ii) Seller
has delivered to Buyer complete and correct copies of all reports and filings
(other than filings made in rulemakings) made or filed with the FCC or any
franchise authority pursuant to the Communications Act with respect to the
System for the last three years, completed Forms 393, 1200, 1205, 1210, 1215,
1220 or 1225 (collectively "Rate Justification Filing"), for each Franchise Area
for which such Forms have been required to have been submitted to a Governmental
Authority, and all notices alleging noncompliance with the Communications Act or
the Franchises received by Seller from any Governmental Authority or cable
subscriber, including, without limitation, subscriber rate
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complaints, rate accounting orders, rate prescription or rate refund orders.
(iii) Seller has provided all notices to subscribers and/or Governmental
Authorities as required and maintains all public files that comply in all
material respects with the requirements of the Communications Act. (iv) Seller
is certified as in compliance with the FCC's equal employment opportunity rules
through 1994. Seller has filed all appropriate FCC EEO reports for 1995, but FCC
review has not been completed. (v) The System is in compliance with all "must
carry" requirements and has received all retransmission consents.
(d) Seller has deposited with the United States Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the United States
Copyright Office required under the Copyright Act with respect to the business
and operations of the System for each accounting period during which Seller has
operated the System.
(e) Seller and the System are in compliance with the Copyright Act,
except as to potential copyright liability arising from the performance,
exhibition or carriage of any music on the System. Seller has not been found
guilty of copyright infringement with respect to the System, has no copyright
infringement claim pending or, to its knowledge, threatened, has no unanswered
inquires from the United States Copyright Office with respect to statements of
account or royalty payments, and knows of no basis for any such claims or
inquiries.
(f) The carriage, transmission or use of the Signals has not and does
not subject the System or Seller to any FCC or other sanctions or any suits or
actions, including, without limitation, suits or actions for copyright
infringement.
3.21 Commitments. In any Franchise Area for which a rate justification
filing has been required to have been submitted, Seller has not been ordered by
the FCC or any Governmental Authority to prospectively reduce regulated cable
television service or equipment rates or provide refunds to Subscribers pursuant
to the Rules and Regulations.
3.22 Financial Statements.
(a) From and after the date hereof, the financial records of Seller
relating to the System shall be open for inspection by Buyer during normal
business hours. The financial records, as reflected in Seller's profit and loss
statements and balance sheets of the Franchise Areas, contain a full and
complete record and account of the financial affairs of the System, are
maintained in accordance with GAAP, consistently applied, and are accurate and
complete in all material respects.
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(b) Since December 31, 1994 to the date hereof, there has been no
material adverse change in the financial condition, results of operations,
assets or liabilities (contingent or otherwise) of the System except matters of
general applicability to the cable television industry or affecting the cable
television industry generally.
3.23 Litigation. Except as set forth on SCHEDULE 2.2, (a) there is no
claim, grievance, action, proceeding or governmental investigation pending or,
to Seller's knowledge, threatened against Seller or affecting any of the Assets
or the System; and (b) there is no outstanding or unsatisfied judgment, order or
decree to which Seller is a party or which involves the transactions
contemplated herein.
3.24 Taxes.
(a) None of the Assets is property that is required to be treated as
being owned by any other person pursuant to the so-called safe harbor lease
provisions of former section 168(f)(8) of the Code.
(b) None of the Assets directly or indirectly secures any debt the
interest on which is tax-exempt under section 103(a) of the Code.
(c) None of the Assets is "tax-exempt use property" within
the meaning of section 168(h) of the Code.
3.25 Insurance. SCHEDULE 3.25 sets forth a true and complete list of
all insurance policies held by Seller covering the System and the Assets.
3.26 Employees and Employee Benefits.
(a) Employment Agreements. SCHEDULE 3.26 contains a list of all written
employment agreements between the Seller and any employee of the System. The
consummation of the transaction contemplated hereby will not result in Buyer
becoming obligated to incur any severance liabilities with respect to any
employee of the System.
(b) Collective Bargaining Agreements. Except as set out in SCHEDULE
3.26, Seller is not a party to any material labor or employment dispute and is
not bound by or a party to any collective bargaining agreement relating to
employees of the System and no trade union, council of trade unions, employee
bargaining agent or affiliated bargaining agent for any of the employees (i)
holds bargaining rights with respect to any of the employees by way of
certification, interim certification, voluntary recognition, designation or
successor rights; or (ii) has applied or indicated an intention to apply to be
certified as the bargaining agent of any of the employees.
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(c) Employee Benefit Plans/ERISA.
(i) SCHEDULE 3.26 lists each stock option, stock purchase, disability,
vacation pay, incentive bonus, severance pay, deferred compensation,
supplemental income or other employee benefit plan, policy or arrangement or
agreement, including each "employee benefit plan" within the meaning of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by or contributed to by the Seller, including all
amendments thereto (collectively referred to as "Employee Plans") covering
current or former employees of the System or their dependents or survivors.
Seller has provided or, upon Buyer's request, will provide to Buyer prior to the
Closing summaries of each Employee Plan.
(ii) Seller is currently a participating company in a
defined-contribution retirement plan that is intended to qualify under section
401(a) of the Code ("Seller's DC Plan"). Seller's DC Plan is in substantial
compliance with all applicable laws and regulatory requirements, and Seller
knows of no disqualifying defect under section 401(a) of the Code with respect
to Seller's DC Plan. Seller's DC Plan has been administered substantially in
accordance with its terms. To the knowledge of Seller, no liens under Code
section 412(n) or ERISA section 4069(a), nor liabilities under ERISA section
4069(a) or 4201(a), exist with respect to any Employee Plan or any employee
benefit plan (within the meaning of section 3(3) of ERISA) of Seller or any of
Seller's ERISA Affiliates which would have a material adverse effect on the
Assets, nor do any facts which are reasonably likely to result in the assertion
of any such liens or liabilities.
(d) Immigration. Seller has in all material respects properly verified
the identity and authorization to work in the United States and has completed
and retained INS forms I-9 for all employees where required by the Immigration
Reform and Control Act of 1986 and related statutes. Seller has made available
to Buyer true and complete copies of such forms.
3.27 Commissions. Seller has entered into no agreement, commitment or
obligation with regard to any brokerage commission or finder's fee which would
be payable by Buyer arising out of the execution, delivery or performance of
this Agreement or the transactions contemplated hereby.
ARTICLE 4
Representations and Warranties of Buyer
As a material inducement to Seller to enter into this Agreement, Buyer
represents and warrants to Seller the following for the benefit of Seller:
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4.1 Organization and Qualification. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
California and, prior to Closing, will be authorized to transact business in all
states in which the Assets are located. Buyer has all necessary partnership
power and authority to own, lease and utilize its properties and assets and to
engage in the business or businesses in which it is presently engaged and in the
places where such property and assets are now owned, leased or utilized or as
such business is now conducted.
4.2 Authority. Buyer has the partnership right, power, legal capacity
and authority to execute, deliver and perform its obligations under this
Agreement and the documents, instruments and certificates to be executed and
delivered by Buyer pursuant to this Agreement. The execution, delivery and
performance of this Agreement by Buyer and the transactions contemplated hereby
have been, and all documents, instruments and certificates have been or as of
the Closing will be, duly authorized by all necessary partnership action on the
part of Buyer and its partners.
4.3 Enforceability. The terms and provisions of this Agreement and all
documents, instruments and certificates made or delivered from time to time by
Buyer hereunder and thereunder constitute valid and legally binding obligations
of Buyer enforceable as against Buyer in accordance with the terms hereof and
each thereof, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
4.4 Approvals. Except for compliance with the HSR Act, the execution,
delivery and performance of this Agreement by Buyer and the consummation by
Buyer of the transactions contemplated hereby do not require any consent which
has not been made, given or otherwise accomplished and satisfactory evidence
thereof has been delivered to Seller.
4.5 Effect of Agreement. Except for the Required Consents, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any Legal Rule involving Buyer or
conflict with the terms, conditions or provisions of the partnership agreement
of Buyer.
4.6 Compliance with Other Instruments.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereunder do not and will not result in a
breach or violation of any term or provision of, Buyer's Agreement of Limited
Partnership, or under any contract, agreement, Authority, Legal Rule, license,
lease, indenture, mortgage, loan agreement or note, as to which Buyer
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is a party, except for such breaches or violations as would not materially
impair the ability of Buyer to perform its obligations under this Agreement.
(b) Buyer has complied with all provisions of and is not in breach or
default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under its Agreement of Limited
Partnership or any contract, lease, instrument affecting any parcel of real
property, authority or franchise, or obligation to which it is a party or by
which it is bound or affected, except for such breaches or defaults as would not
materially impair the ability of Buyer to operate the Business as presently
operated.
4.7 Commissions. Buyer has entered into no agreement, commitment or
obligation with regard to any brokerage commission or finder's fee which would
be payable by Seller arising out of the execution, delivery or performance of
this Agreement or the transactions contemplated hereby.
ARTICLE 5
Covenants of Seller
5.1 Access to System. Prior to the Closing, Seller shall give Buyer's
employees and representatives, during normal business hours and with reasonable
prior notice, access to all of the properties, books, accounts, records,
contracts, agreements, commitments, arrangements and documents of or relating to
the Assets and the System, and shall permit the making of copies or extracts
thereof. Prior to the Closing, Seller shall furnish to Buyer and its
representatives such existing documentation concerning the operation and
financial condition of the Assets and the System as Buyer or any such
representative shall reasonably request. Promptly after the preparation thereof,
Seller shall deliver to Buyer true and complete copies of monthly profit and
loss statements of the Franchise Areas prepared in the same manner as Exhibit 19
in the Seller's information package of September 1994 and any other financial
reports, subscriber counts or other operational data reasonably requested by
Buyer; provided that Seller shall not be required to make and shall not be
deemed to make any representation or warranty concerning the accuracy of the
contents of any such information delivered to Buyer. Prior to the Closing,
Seller shall also provide Buyer on a periodic basis with reports of capital
expenditures made with respect to the System.
5.2 Continuity and Maintenance of Operations. Except as to actions
which Buyer has been advised and to which it has consented in writing and except
as specifically permitted or required by this Agreement or required by any Legal
Rule, Seller shall, from the date hereof to and including the Closing:
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(a) Operate the Business in the ordinary course consistent with past
practices, use reasonable efforts to preserve any beneficial business
relationships with customers, suppliers and others having business dealings with
it that are material to the Business and use reasonable efforts to keep
available to Buyer the services of present employees of the System;
(b) Keep all of its business books, records and files in the ordinary
course of business in accordance with past practices;
(c) Continue to implement its procedures for disconnection and
discontinuance of service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(d) Not change the rate charged for any services without the consent of
Buyer unless required to do so pursuant to the Rules and Regulations or the
order of any Governmental Authority;
(e) Not add or delete any programming services or change the channel
line-up without the consent of Buyer unless required to do so pursuant to the
Rules and Regulations;
(f) Continue to give all customary notices to Subscribers after Buyer
has approved the text thereof; provided that any text required by the Rules and
Regulations shall not be subject to Buyer's approval;
(g) Not sell, transfer or assign any Assets or permit the creation of
any Lien on any Asset, in each case, except in the ordinary course of business;
(h) Not enter into any contract or commitment or incur any indebtedness
or other liability or obligation of any kind relating to the System or the
Business involving an expenditure in excess of $20,000 (individually or in
related transactions) other than in the ordinary course or with the consent of
Buyer which shall not be unreasonably withheld; and
(i) Not take or omit to take any action that would cause Seller to be
in breach of any of its representations or warranties in this Agreement in any
material respect.
5.3 Compliance with Contracts and Laws.
(a) From the date hereof to and including the Closing, Seller shall
keep in full force and effect and shall comply in all material respects with all
Franchises, all licenses, permits, consents, certificates, authorities and
operating rights, all leases, contracts, agreements, commitments and
arrangements, and all rights, privileges and interests (including, without
limitation, the Authorities and material
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Contracts), to which it is a party or by which it or the Assets may be bound or
affected and which are material to the Business.
(b) From the date hereof to and including the Closing, Seller shall
comply in all material respects with applicable Legal Rules, including, without
limitation, the Communications Act and the Copyright Act, and make all filings
and submissions and pay all fees, assessments and costs arising in connection
with the construction, operation and maintenance of the System, including,
without limitation, franchise and copyright fees.
5.4 Cumulative Leakage Index. From the date hereof to and including the
Closing, Seller shall in connection with its CLI obligations under the Rules and
Regulations (a) maintain adequate CLI monitoring equipment; (b) maintain
appropriate log books and other recordkeeping; and (c) correct any System
radiation leakage discovered by Seller in connection with its monitoring
obligations under the Rules and Regulations; provided that any such monitoring
and corrections need be conducted only according to general industry custom in
anticipation of the effective date of the CLI part of the Rules and Regulations.
5.5 Maintenance of Insurance. From the date hereof to and including the
Closing, Seller shall carry and maintain in full force and effect casualty and
liability insurance at such levels as are consistent with the past practices of
Seller.
5.6 Employees and Compensation. From the date hereof to and including
the Closing, Seller shall not, with respect to employees, sales agents and
representatives employed by Seller with respect to the System, do any of the
following:
(a) Grant any increase in compensation payable to or to become payable
by it to any such person, other than usual and ordinary compensation increases
in accordance with historical practices of Seller or provided under any
collective bargaining agreement identified on SCHEDULE 3.26.
(b) Increase benefits payable to any such person under any existing, or
introduce or announce the introduction of any new, bonus, pension, profit
sharing, retirement, credit union, deferred compensation, group health, major
medical or life insurance plan or other similar plan, contract or commitment
providing benefits to the employees, other than any bonus payments payable or to
become payable to any of the employees of the System in conjunction with this
transaction where the cost thereof is borne by Seller.
(c) Enter into any collective bargaining agreement.
5.7 Additional Transactions. From the date hereof to and
including the Closing, Seller shall not do or agree to do any of
the following:
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(a) Modify, amend, cancel, terminate, forfeit, fail to renew, assign or
encumber in any material manner, other than in the ordinary course of business,
any Contracts or Authorities included in or applicable to the Assets.
(b) Take or cause to be taken any action which would cause or tend to
cause the conditions to the obligations of either party to consummate the
transactions contemplated by this Agreement not to be fulfilled.
(c) Change any accounting method or practice without the consent of
Buyer unless required to do so to conform to GAAP, IRS standards or as a result
of the Rules and Regulations.
(d) Merge or consolidate with any other entity or acquire all or
substantially all of the stock of the business or assets of any other person,
corporation or business organization.
5.8 Adverse Changes. From the date hereof to and including the Closing,
Seller shall promptly notify Buyer in writing of any material adverse
developments affecting the System which become known to Seller, including,
without limitation: (a) any material adverse change in the condition, financial
or otherwise, of the System; (b) any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting any of the Assets or the
System; (c) any material notice of violation, forfeiture or complaint under any
Franchise; or (d) anything which, if not corrected prior to the Closing, will
prevent Seller from fulfilling any condition precedent described in Section 7.1.
5.9 Taxes.
(a) Seller agrees to timely file all sales or transfer tax returns with
respect to the sale of Assets hereunder and Seller shall timely pay all sales or
transfer taxes applicable to the sales reported on such tax returns; provided
that Buyer cooperates, to the extent required, in the preparation and execution
of such tax returns and related filings.
(b) Seller shall be responsible for all Taxes of Seller attributable to
all taxable periods (or portions thereof) ending on or prior to the Closing.
(c) Seller and Buyer covenant and agree that $5,000 of the Purchase
Price shall be allocated to the covenant set forth in Section 5.12. Seller and
Buyer shall file all necessary income tax returns and execute such elections
and/or agreements as may be required by federal, state and local taxing
authorities in a manner consistent with such allocation to the extent permitted
or required by law.
(d) Seller and Buyer shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection
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with any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Seller and Buyer agree (i) to retain all books
and records with respect to Tax matters pertinent to the Assets relating to the
Periods until the statute of limitations (including any extensions) as to any
taxable year that may be affected thereby shall have run, (ii) to abide by all
record retention agreements entered into with any governmental authority, and
(iii) to give the other party reasonable written notice prior to destroying or
discarding any such books and records and, if one party so requests, shall allow
the requesting party to take possession of such books and records proposed for
destruction or discard.
(e) No new elections with respect to Taxes or any changes in current
elections with respect to Taxes affecting the Assets shall be made after the
date of this Agreement without the prior written consent of Buyer.
(f) As a condition precedent to the consummation of the transactions
contemplated by this Agreement, Seller shall provide Buyer with a clearance
certificate or similar document(s) that may be required by any state taxing
authority in order to relieve Buyer of any obligation to withhold any portion of
the Purchase Price.
(g) Seller shall furnish Buyer an affidavit, stating, under penalty of
perjury, the transferor's United States taxpayer identification number and that
the transferor is not a foreign person, pursuant to section 1445(b)(2) of the
Code.
5.10 Franchise and Lease Renewal and Extension. Prior to the Closing,
Seller agrees to deliver to the appropriate persons a letter, in form mutually
agreeable to Buyer and Seller, requesting renewals or extensions of the terms of
the Franchises and Contracts listed on SCHEDULE 5.10, as necessary, so that all
will have unexpired terms for at least five (5) years from the date of this
Agreement if the other parties to such Franchises and Contracts sign such
renewals or extensions; provided that such renewals or extensions shall be upon
terms reasonably satisfactory to Buyer. Seller agrees to take such further
action as is reasonably requested in writing by Buyer in order to attempt to
obtain and deliver such renewals and extensions; provided, however, that Seller
shall not be obligated to incur any expense in the form of a fee charged in
order to attempt to obtain and deliver such renewals and extensions.
5.11 Title Insurance. Seller will cooperate with Buyer if Buyer elects
to obtain title insurance policies on parcels of Real Property owned in fee or
leased, it being understood that
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Buyer shall have the sole responsibility for obtaining and paying for such
policies.
5.12 Covenant Not To Compete.
(a) In order to assure Buyer the complete benefit of the ownership of
the Assets, for a period of five (5) years after the Closing, Seller agrees that
neither it nor its Affiliates shall, directly or indirectly: (i) engage in the
business of constructing, operating or managing a cable television system or a
MDS, MMDS, SMATV or similar type or related business (each, a "Competing
Business") in any portion of any Franchise Area or in any county adjacent to any
Franchise Area; (ii) acquire a greater than five percent (5%) interest in any
entity which is engaged in a Competing Business in any portion of any Franchise
Area or in any county adjacent to any Franchise Area; or (iii) assist any other
person or entity to be so engaged.
(b) In order to assure Buyer the complete benefit of the ownership of
the Assets, for a period extending until five (5) years after the Closing,
Seller shall cause its officers, directors and Affiliates to agree that none of
them will associate in any capacity whatsoever, whether as promoter, owner,
officer, director, employee, partner, lessee, lessor, lender, agent, consultant
or otherwise, with any person or entity engaged in a Competing Business in any
portion of any Franchise Area or in any county adjacent to any Franchise Area
except the ownership of five percent (5%) or less of a Competing Business; and
Seller shall have such persons execute and deliver to Buyer a Covenant Not To
Compete, substantially in the form of EXHIBIT A hereto.
(c) Seller acknowledges that Buyer will be irreparably injured if the
provisions of this Section 5.12 are not specifically enforced. If Seller fails
to keep and perform every covenant of this Section 5.12, Buyer may specifically
enforce against Seller the same by injunction in equity in addition to any other
remedies Buyer may have. If any portion of this Section 5.12 shall be invalid or
unenforceable, such invalidity or unenforceability shall in no way affect the
validity or enforceability of any other portion of this Section 5.12 or the
validity or enforceability of this Agreement. If any court in which Buyer seeks
to have the provisions of this Section 5.12 specifically enforced determines
that the time or the area herein specified is too broad, such court may
determine a reasonable time or geographic area in lieu of such time or area and
shall specifically enforce this Section 5.12 for such time and geographic area.
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ARTICLE 6
Mutual Covenants
6.1 Confidentiality.
(a) Neither of the parties hereto shall make any public announcement
regarding the transactions contemplated in this Agreement without the prior
consent of the other party.
(b) Each party shall keep strictly confidential any and all information
furnished to it or to its agents or representatives in the course of
negotiations relating to this Agreement or any transaction contemplated by this
Agreement, and the business and financial reviews and investigation conducted by
such party in connection with this Agreement. Each party has instructed its
officers, employees and other representatives having access to such information
of such party's obligation of confidentiality.
(c) If this Agreement is terminated, each party shall promptly deliver
to the other party or certify as to the destruction of all originals and copies
(including all notes, extracts and computer tapes) of documents, work papers and
other written material concerning or obtained from such other party or its
agents, employees or representatives in connection with such negotiations and
business and financial reviews and investigations, whether so obtained before or
after the execution hereof. Neither party shall use any information so obtained
except in connection with the transactions contemplated by this Agreement or
disclose or divulge such information to any other person, and each party will
keep confidential any information so obtained.
(d) Notwithstanding the foregoing, either party may disclose any
information which such party is obligated under this Section to keep
confidential after consultation with the other party as follows:
(i) to which the other party consents in writing;
(ii) to representatives, agents, consultants and attorneys of
the disclosing party who need to know such confidential information for
the purpose of assisting or advising such party, provided that the
disclosing party informs each such representative, agent, consultant
and attorney of the confidential nature of such information;
(iii) to third parties whose consent or approval is required
for consummating the transactions contemplated herein;
(iv) in compliance with applicable Legal Rules;
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(v) in order to use such information as evidence in or in
connection with any pending or threatened litigation related to this
Agreement or any transaction contemplated hereunder;
but in each case only to the extent such disclosure is necessary in connection
with the purpose for which disclosure is permitted. The obligations of
confidentiality set forth herein shall not apply to information generally
available to the public or in the possession of the receiving party on a
nonconfidential basis prior to its disclosure under this Agreement or the
Confidentiality Agreement dated September 22, 1994 between Buyer and Seller (the
"Confidentiality Agreement") or that is given to the receiving party by another
person other than in breach of obligations of confidentiality owed by such
person to the disclosing party under this Agreement or the Confidentiality
Agreement.
6.2 HSR Notification. As soon as practicable, if required by applicable
Legal Rules, Seller and Buyer shall complete and file, or cause to be completed
and filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Buyer will notify Seller of the need for any such HSR filing within sixty
(60) days following the execution hereof. Each of the parties will take or cause
to be taken any additional action that may be necessary, proper or advisable,
will cooperate to prevent inconsistencies between their respective filings and
will furnish to each other such necessary information and reasonable assistance
as the other may reasonably request in connection with its preparation of
necessary filings or submissions under the HSR Act. Buyer and Seller shall use
commercially reasonable efforts (including the filing of a request for early
termination) to obtain the early termination of the waiting period under the HSR
Act. Buyer and Seller shall bear their own filing fees in connection therewith.
6.3 Required Consents and Estoppel Certificates. Prior to the Closing,
Seller will use reasonable commercial efforts to obtain, at its expense, all the
Required Consents, in form and substance reasonably satisfactory to Buyer;
provided, however, that Seller shall not be obligated to incur any expense in
the form of a fee charged for any Required Consents so obtained. Required
Consents will be deemed to be satisfactory to Buyer if they are substantially
similar in all material respects to the applicable form attached as EXHIBIT B, C
OR D. Seller will notify Buyer in advance of and give Buyer an opportunity to
participate in all material contacts with, and provide copies of all
correspondence to or from, any franchising authorities in connection with the
Franchises. Buyer will cooperate with Seller to obtain all Required Consents,
but Buyer will not be required to agree to any material adverse changes in, or
the imposition of any material condition to the transfer to Buyer of, any
Contract or Governmental Permit as a condition to
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obtaining any Required Consent. Seller also will use reasonable commercial
efforts to obtain such estoppel certificates or similar documents from lessors
and other Persons who are parties to Contracts as Buyer may reasonably request.
6.4 MDU Agreements. Prior to the Closing, Seller agrees to deliver to
the appropriate persons a letter, in form mutually agreeable to Buyer and
Seller, requesting delivery of a fully executed MDU Agreement for each multiple
unit dwelling project listed on Schedule 5.10 hereto substantially similar in
all material respects to the form attached to this Agreement as EXHIBIT E and
having a term running at least five (5) years after the Closing. Seller agrees
to take such further action as is reasonably requested in writing by Buyer in
order to attempt to obtain and deliver such MDU Agreements; provided, however,
that Seller shall not be obligated to incur any expense in the form of a fee
charged for any such MDU Agreement.
6.5 Title Commitments and Surveys. Within ten (10) days after the
execution of this Agreement, Buyer, at its option, may order at its expense
commitments for owner's title insurance policies on all Real Property owned by
Seller and a survey on each such parcel of Real Property. The title commitments
will evidence a commitment to issue a title insurance policy insuring good,
marketable fee simple title to each parcel of the owned Real Property for such
amount as Buyer directs and will contain no exceptions except for Permitted
Liens and items that in Buyer's reasonable opinion do not adversely affect
(other than in an immaterial way as to any individual parcel) the good and
marketable title to such Real Property.
6.6 Distant Broadcast Signals. If requested by Buyer and permitted
under the Rules and Regulations, Seller will delete prior to the Closing any
distant broadcast signals that Buyer determines will result in liability on the
part of Buyer for copyright payments after Closing in excess of those payable by
Seller with respect to carriage of such signals; provided that Buyer Provides
Seller with such advance notice as is sufficient to allow Seller to comply with
Rules and Regulations regarding Subscriber or other notification prior to such
deletion; and provided further that no such deletion shall be required if
prohibited by a must carry or retransmission consent agreement between Seller
and the station. Buyer hereby expressly acknowledges that any such deletions may
require a downward adjustment in rates charged Subscribers pursuant to the Rules
and Regulations and hereby consents to any such downward rate adjustments.
6.7 Letter to Programmers. Not later than ten (10) days before the
Closing, Seller will transmit a letter in the form of EXHIBIT F to all
programmers from which Seller purchases programming and for which Buyer has not
expressly agreed to assume the programming agreement.
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6.8 Employee Matters.
(a) Employment. Within thirty (30) days of the date hereof, Seller
shall provide to Buyer a list of all active employees of the System as of a
recent date, showing then-current positions and rates of compensation. Within
thirty (30) days after receipt of this list, Buyer will notify Seller in writing
which employees ("Prospective Employees") it intends to provide with offers of
employment. Subject to Subsections (b) and (c), prior to the Closing Buyer shall
offer employment immediately following the Closing to all Prospective Employees
who are then actively employed (whether or not actively at work on the Closing).
Prospective Employees who accept Buyer's offer of employment and become
employees of Buyer within two (2) weeks of the Closing are referred to herein as
"New Employees" and all other employees of the System are referred to as
"Nontransferring Employees." Buyer shall indemnify and hold Seller and its
Affiliates harmless from and against all claims, expenses (including reasonable
attorneys' fees), loss and liability arising either (i) out of Seller's
submission of personnel records or information to Buyer about the employees of
the System, or (ii) with respect to the New Employees' employment with Buyer
after the Closing. Except as otherwise specifically provided in this Agreement,
Seller shall indemnify and hold Buyer and its Affiliates harmless from and
against all claims, expenses (including reasonable attorneys' fees), loss and
liability arising out of the New Employees' and Nontransferring Employees'
employment with Seller or its Affiliates prior to the Closing or, if later, the
date any such individual becomes an employee of Buyer.
(b) Prospective Employees on Family, Military or Short-Term Disability
Leave. Any Prospective Employee who, as of the Closing, is receiving or entitled
to receive benefits under the Seller's short-term disability plan or is on
family leave or military leave shall only be offered employment by the Buyer in
accordance with Subsection (a) at the time such disability or leave terminates,
provided that such Prospective Employee returns to work prior to the
commencement of long-term disability benefits. Buyer shall notify any such
Prospective Employee of Buyer's intent to offer any such Prospective Employee
employment as provided in this Subsection (b). Any Prospective Employee who
accepts Buyer's offer of employment under this Subsection (b) and becomes an
employee of Seller within two (2) weeks of the offer is also referred to herein
as a New Employee. Buyer shall have no responsibility or liability for payment
of any leave benefits or short-term disability benefits of any such Prospective
Employee with respect to any period before such Prospective Employee becomes a
New Employee. If any such Prospective Employee becomes a New Employee, Buyer and
Seller shall use reasonable efforts to cause the other provisions of this
Section 6.8 to apply to such individual to the extent practicable, taking into
account the timing of such New Employee's change of employment from Seller to
Buyer.
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(c) Prospective Employees on Long-Term Disability Leave. Buyer shall
have no obligation to offer employment to any Prospective Employee who, as of
the Closing, is receiving or entitled to receive benefits under Seller's
long-term disability plan. Buyer shall have no responsibility or liability for
payment of any long-term disability benefits of any such Seller employee.
(d) Service Credit for New Employees. Subject to the provisions of this
Section as to any particular benefit, Buyer shall recognize all prior service of
New Employees with the Seller and any Affiliate that is aggregated with the
Seller under section 414(b), 414(c) or 414(m) of the Code ("ERISA Affiliate")
for all benefit plan purposes, other than benefit accrual under a defined
benefit plan, at least to the extent recognized under the comparable Seller
employee benefit plan as in effect on the Closing, but without regard to any
amendment increasing such service adopted or made effective less than 12 months
prior to the Closing. On or before the Closing, Seller shall provide Buyer with
a list setting forth the service accrued by each Prospective Employee. Seller
agrees that Buyer shall be under no obligation to and shall not assume
sponsorship of any Employee Plan.
(e) Qualified Defined Contribution Plan. The New Employees shall not
accrue any benefits under Seller's DC Plan as of any date after the Closing
(unless reemployed by Seller or its ERISA Affiliates). There will be no asset
transfer from Seller's DC Plan to any employee benefit plan of the Buyer on
account of the transaction contemplated hereby. Buyer will permit New Employees
to roll over distributions from Seller's DC Plan to the InterMedia Partners
Tax-Deferred Savings Plan ("Buyer's DC Plan") in accordance with the generally
applicable rules of Buyer's DC Plan concerning rollover contributions.
(f) Welfare Plans. (i) Each New Employee shall be eligible for coverage
as of the later of the Closing or the date on which he or she becomes a New
Employee (the "Employment Transfer Date") under medical, dental, vision,
prescription drug, life insurance and other welfare benefit plans (within the
meaning of section 3(1) of ERISA) maintained by Buyer for its employees as of
the Closing ("Buyer's Welfare Plans). Buyer agrees to (A) waive any waiting
periods and preexisting condition limitations in Buyer's Welfare Plans, except
to the extent coverage would have been denied or restricted on a similar basis
under the welfare benefit plans for employees of the System ("Seller's Welfare
Plans") and (B) coordinate deductibles, maximum benefit restrictions and
"out-of-pocket" maximums so that (1) New Employees receive credit toward any
deductibles under Buyer's Welfare Plans for deductibles paid under the Seller's
Welfare Plans during the coverage year of the Buyer's Welfare Plans in which the
Employment Transfer Date occurs and (2) New Employees receive credit for
eligible claims incurred under the Seller's Welfare Plans during the coverage
year of the Buyer's Welfare
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Plans in which the Employment Transfer Date occurs toward any "out-of-pocket"
maximums under Buyer's Welfare Plans. As soon as reasonably practicable after
the Closing, Seller shall prepare and deliver to Buyer Schedule 6.8, setting
forth the information needed for Buyer to comply with the preceding sentence.
Seller will be responsible for providing continuation health care ("COBRA")
coverage to the extent required by section 4980B of the Code and sections
601-608 of ERISA to or with respect to any Seller employee who incurs a
"qualifying event" prior to the Employment Transfer Date, including a qualifying
event that occurs as a result of the transaction contemplated by this Agreement.
Buyer will be responsible for providing COBRA coverage to or with respect to any
New Employee who incurs a "qualifying event" after the Employment Transfer Date.
(ii) With respect to each New Employee (including any beneficiary or
dependent thereof), Seller shall retain all liabilities and obligations arising
under any medical, dental or similar arrangement (including any workers'
compensation arrangement) to the extent that such liability or obligations
relate to claims incurred prior to such New Employee's Employment Transfer Date.
Buyer shall assume all such liabilities and obligations to the extent they
relate to claims incurred on or after such New Employee's Employment Transfer
Date. For purposes of this Paragraph, a claim is deemed to have been incurred
when the medical, dental or similar services giving rise to such claim are
performed.
(g) Vacation. On or before the Closing or promptly thereafter, Seller
shall provide payment to each New Employee for any vacation pay accrued under
the Seller's vacation policy that is not taken before the Closing.
(h) Sick Leave. On or before the Closing or promptly thereafter, Seller
shall provide payment to each New Employee for any sick leave pay accrued under
the Seller's sick leave policy that is not taken before the Closing.
(i) General. Seller and Buyer shall give any notices required by law
and take whatever other actions with respect to the plans described in this
Section as may be necessary to carry out the arrangements described in this
Section 6.8. Seller and Buyer shall provide each other with such plan documents
and descriptions, employee data and other information as may reasonably be
required to carry out the arrangements described in this Section . If any of the
arrangements in this Section are determined by the Internal Revenue Service or
other applicable governmental authority, or by a court of competent
jurisdiction, to be prohibited by law, Seller and Buyer shall modify such
arrangements to as closely as possible retain the intent of the parties as
reflected herein in a manner that is not so prohibited.
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6.9 Form 394. Form 394's (or amendments to Form 394's) shall be
prepared for each of the Franchises and shall be in form and substance
acceptable to Buyer and delivered to Buyer within twenty (20) business days from
the date hereof. Each Form 394 shall contain resolutions in form reasonably
acceptable to Buyer.
ARTICLE 7
Conditions Precedent to Obligations of Buyer
7.1 Conditions Precedent. The obligations of Buyer to consummate the
transactions contemplated on the Closing are subject to the satisfaction, on or
before the Closing, of all the following conditions:
(a) If required under applicable Legal Rules, all filings required
under the HSR Act shall have been made and the applicable waiting period shall
have expired or been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement.
(b) Seller shall have performed and complied in all material respects
with all covenants, conditions and obligations required by this Agreement to be
performed or complied with by Seller on or before the Closing.
(c) The representations and warranties of Seller, including, without
limitation, those made to the knowledge of Seller, contained in this Agreement,
the Schedules, or in any document, instrument or certificate that shall be
delivered by Seller to Buyer under this Agreement shall, if specifically
qualified by materiality, be true, correct and complete in all respects and, if
not so qualified, be true, correct and complete in all material respects on and
as though made on the Closing.
(d) During the period from the date of this Agreement through and
including the Closing, (i) there shall not have occurred any material adverse
change affecting the Assets or the System, excluding troop movements from Fort
Campbell, Kentucky and except for matters of general applicability to the cable
television industry or affecting the cable television industry generally; and
(ii) the performance by Buyer of its obligations shall not have been rendered,
by a change in any Legal Rule, or by actions of a Governmental Authority,
impossible, illegal, or capable of accomplishment on terms and conditions which
require Buyer to incur substantially greater costs or burdens than Buyer
reasonably anticipated as of the date of this Agreement except for matters of
general applicability to the cable television industry or affecting the cable
television industry generally.
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(e) Seller shall have obtained and delivered to Buyer all Required
Consents listed on SCHEDULE 7.1(e) hereto substantially in the form of the
appropriate Exhibit hereto or in such other form as Buyer has consented to,
which consent shall not be unreasonably withheld.
(f) Buyer shall have entered into or received a valid assignment of a
retransmission consent agreement where Seller's retransmission agreement
requires such consent to assignment with each broadcaster whose signal is
carried on the System at the Closing who did not make a so-called "must carry"
election and for which a transmission consent agreement is required under the
Communications Act, on terms and conditions reasonably acceptable to Buyer.
(g) With respect to any violations as to which Seller has received
notice that such violation must be corrected by Seller, Seller shall have either
cured all violations subject to such notice relating to license agreements for
pole attachments listed on PART VII OF SCHEDULE 3.12 or compensated Buyer
therefor.
(h) To the extent required, Seller shall have obtained and delivered to
Buyer a waiver of the anti-trafficking provisions of the Rules and Regulations
with respect to the transaction contemplated by this Agreement.
(i) Seller shall have delivered to Buyer an amended lease of that
certain headend site located in Hendersonville, Tennessee so that the term
thereof shall expire on a date that is two (2) years after the Closing Date.
(j) Seller shall have delivered to Buyer an updated SCHEDULE 3.18
reflecting Seller's inventory as of a date not more than thirty (30) days prior
to the Closing Date.
(k) As of the Closing, no action or proceeding shall be completed,
pending or threatened in writing against Buyer that has or may result in a
judgment, decree or order that would prevent or make unlawful the consummation
of the transactions under this Agreement or have a material adverse effect on
the System and there shall be in effect no order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement nor any
proceedings pending with respect thereto.
(l) Seller shall have tendered to Buyer all documents which Seller is
required by Section 9.2 (a) to deliver to Buyer, and such other deeds, bills of
sale, assignments and other good and sufficient instruments of conveyance as
shall be effective to vest in Buyer good and marketable title and interest in
and to the Assets, including the right to collect for the account of Buyer all
receivables of any character and to endorse with the name of Seller any checks
or drafts received on account of any such receivables or other items.
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7.2 Waiver. Buyer may waive any or all of the conditions
set forth in Section 7.1 hereof in whole or in part.
ARTICLE 8
Conditions Precedent to Obligations of Seller
8.1 Conditions Precedent. The obligations of Seller to consummate the
transactions contemplated on the Closing are subject to the satisfaction, on or
before the Closing, of all the following conditions:
(a) If required under applicable Legal Rules, all filings required
under the HSR Act shall have been made and the applicable waiting period shall
have expired or been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement.
(b) Buyer shall have performed and complied in all material respects
with all covenants, conditions and obligations required by this Agreement to be
performed or complied with by Buyer on or before the Closing.
(c) The representations and warranties made by Buyer, including,
without limitation, those made to the knowledge of Buyer, contained in this
Agreement, the Schedules or in any document, instrument or certificate that
shall be delivered by Buyer to Seller under this Agreement shall be true,
correct and complete in all material respects at and as of the Closing as though
made on such date.
(d) Seller shall have obtained all Required Consents listed on
SCHEDULE 7.1(e).
(e) As of the Closing, no action or proceeding shall be completed,
pending or threatened in writing against Seller or Buyer that has or is likely
to result in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement and there shall be in
effect no order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect thereto.
(f) Buyer shall have tendered to Seller the Purchase Price and all
documents which Buyer is required by Section 9.2(b) to deliver to Seller.
8.2 Waiver. Seller may waive any or all of such conditions in whole
or in part.
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ARTICLE 9
Closing
9.1 Closing. The Closing shall take place on the Closing at the time
and place provided in Section 2.6. All documents which Seller or Buyer shall
deliver pursuant to this Article 9 which are executed by any person other than
a public official, to the extent requested by the other party, shall be
acknowledged on a form of acknowledgment which conforms to California Civil Code
section 1189.
9.2 Closing Documents.
(a) On or before the Closing, Seller shall deliver to Buyer all of the
following:
(i) copies of the resolutions of the Board of Directors of the
Seller, authorizing the execution, delivery and performance of this
Agreement, the articles of incorporation and bylaws of Seller and the
incumbency of the persons executing this Agreement and other documents
on behalf of Seller, all certified by officers of Seller;
(ii) a covenant not to compete, substantially in the form of
EXHIBIT A, duly executed and delivered by each party described in
Section 5.12(b);
(iii) a copy of each instrument pursuant to which a
Governmental Authority (other than the United States) or other person
consents to the transfer of the Franchise which it issued,
substantially in the form of EXHIBIT B;
(iv) for each franchise issued by a department of the United
States Government, (1) a novation agreement, substantially in the form
of EXHIBIT G, with such changes as are required by the contracting
officer responsible for such Franchise as have been consented to by
Buyer (such consent not to be unreasonably withheld) or other evidence
of approval of the transfer of each such franchise in such form as
Buyer shall reasonably approve; (2) an opinion of Seller's counsel
addressed to the contracting officer responsible for such franchise if
required by such Department of the United States Government and in form
reasonably satisfactory to such Department; and (3) copies of such of
Seller's financial statements and other documents which are required to
consummate a novation of such franchise;
(v) a copy of each Final Order;
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(vi) wire transfer instructions for the Purchase Price and,
upon the exchange of money, a receipt, substantially in the form of
EXHIBIT I, for the Purchase Price;
(vii) a bill of sale, substantially in the form of EXHIBIT J;
(viii) for each parcel of Real Property listed on SCHEDULE
3.13, (1) a deed in the form customarily used in the jurisdiction where
the real property is located and (2) an affidavit concerning present
improvements, substantially in the form of EXHIBIT K or otherwise
satisfactory to an insurer of the title to the Real Property;
(ix) Seller's Certification of Nonforeign Status pursuant to
section 1.1445-2(b)(2) of the United States Treasury Income Tax
Regulations, substantially in the form of EXHIBIT L;
(x) for each lease of real property listed on PART V OF
SCHEDULE 3.12 for which consent to assignment is required, an
assignment, assumption and consent, substantially in the form of
EXHIBIT C, duly executed by Seller and the third party whose consent is
required for the assignment of such lease;
(xi) for each Contract the assignment of which requires a
Required Consent, as listed in SCHEDULE 7.1(e), an assignment
assumption and consent substantially in the form of EXHIBIT D, or in
another form required by the third party to such Contract, subject to
Buyer's consent, which shall not be unreasonably withheld, duly
executed by Seller and the third party to such Contract;
(xii) documents of title for any motor vehicles included
within the Assets;
(xiii) a certificate of Seller, substantially in the form of
EXHIBIT M;
(xiv) a written opinion, dated the Closing Date, from Seller's
counsel in the forms annexed hereto as EXHIBITS N1 AND N2;
(xv) documents which under any Legal Rule must be filed with a
Governmental Authority for recording any deed, transferring a trade
name or trademark, obtaining clearance from a Governmental Authority
for taxes imposed upon the transfer of any of the Assets or otherwise
required for consummating the sale of the Assets transferred;
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(xvi) [intentionally omitted];
(xvii) all data, books and records which relate primarily to
the System and the Assets as Buyer shall reasonably request at least
ten (10) days prior to Closing;
(xviii) a Certificate of Good Standing of Seller certified to
by the Secretary of State of Delaware and a Certificate of
Qualification certified to by each of the Secretary of State of the
states of Tennessee and Kentucky; and
(xix) such other documents and certificates as Buyer may
reasonably request.
(b) At the Closing, Buyer shall deliver to Seller the following
documents:
(i) a Certificate of Good Standing of Buyer certified to by
the Secretary of State of the State of California and a Certificate of
Qualification of Buyer certified to by the Secretary of State of the
States of Tennessee and Kentucky.
(ii) a Certificate of Buyer that all appropriate action
authorizing the execution, performance and delivery of this Agreement
has been taken;
(iii) an assumption agreement, substantially in the form of
EXHIBIT P and an executed counterpart of each assignment, assumption
and consent delivered by Seller pursuant to and in accordance with
Section 9.2(a) hereof;
(iv) a written opinion dated the Closing Date, from Pillsbury
Madison & Sutro, counsel to Buyer, in the form annexed hereto as
EXHIBIT Q;
(v) a certificate of Buyer, substantially in the form of
EXHIBIT R;
(vi) a wire transfer of the Purchase Price pursuant to
instructions received from Seller; and
(vii) such other documents and certificates as Seller may
reasonably request.
9.3 Confirmation of Closing. Upon receipt of the Purchase Price,
Seller shall deliver a certificate to Buyer setting forth the date (the "Closing
Date") and time of receipt. The Closing will be effective as of such date and
time.
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ARTICLE 10
Indemnification
10.1 Indemnification by Seller.
(a) Seller agrees to indemnify Buyer and its Affiliates, partners,
agents and employees against and hold each of them harmless from any and all
losses, liabilities, claims, suits, proceedings, demands, judgments, damages,
expenses and costs, including, without limitation, reasonable counsel fees and
disbursements, expert fees and costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity (collectively, the
"Indemnifiable Damages") which any such indemnified party may suffer or incur by
reason of (i) the inaccuracy of any representation or warranty of Seller
contained in this Agreement or any certificate or agreement delivered pursuant
hereto and executed by Seller; (ii) the breach by Seller of any covenant made by
it in this Agreement; (iii) the failure of Seller to comply with the applicable
provisions of any applicable bulk sales laws in effect in any jurisdiction in
which the System is located; (iv) any violations relating to license agreements
for pole attachments listed on Part VII of SCHEDULE 3.12 if (a) Seller was
notified to correct such violation on or prior to the Closing or (b) an audit of
the relevant poles was commenced prior to the Closing or scheduled on or prior
to the Closing to commence within six (6) months of the Closing and such audit
results in Seller or Buyer being notified to correct such violation; or (v) the
ownership, operation or transfer of the Assets or the System on or prior to the
Closing and any liabilities relating to the System not assumed by Buyer, except
that any liability for pole attachments is limited by the conditions in
subparagraph (iv) above. The foregoing obligation of Seller shall be subject to
and limited by each of the qualifications set forth in this Article 10.
(b) Except as set forth in subparagraphs (i), (ii), (iii), (iv) and (v)
below or with respect to bona fide and valid claims for which notice has been
given prior to the date eighteen (18) months from the Closing Date, each
representation, warranty and covenant made by Seller in this Agreement or
pursuant hereto and the indemnity obligations set forth in this Section 10.1
shall survive until the date eighteen (18) months from the Closing Date, and
thereafter all such representations, warranties, covenants and indemnity
obligations and any liability thereunder shall be extinguished:
(i) the representations, warranties and covenants made by
Seller in Sections 3.24 and 5.9 (Taxes) shall survive until the end of
any statutory limitation period with respect thereto;
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(ii) the representations, warranties and covenants made by
Seller in Section 3.8 (title) shall survive indefinitely;
(iii) the representations and warranties made by Seller in
Section 3.14 (Hazardous Materials and environmental claims) shall
survive until the date ten (10) years from the Closing Date;
(iv) the right of Buyer to assert claims for Indemnifiable
Damages suffered as a result of third-party claims arising out of the
ownership, operation or transfer of the Assets or the System on or
prior to the Closing and for liabilities of Seller not assumed by Buyer
shall survive indefinitely; and
(v) the representations, warranties and covenants made by
Seller in Section 5.12 shall survive until the date eighteen (18)
months following the fifth (5th) anniversary of the Closing Date.
(c) The indemnity obligations of Seller hereunder shall not apply to
the extent that Buyer or any Affiliate is compensated for the same loss under
Buyer's or any Affiliate's insurance policies in the absence of any indemnity
hereunder if the insurers under such policy waive their rights of subrogation
with respect thereto.
10.2 Indemnification by Buyer.
(a) Buyer agrees to indemnify Seller and its Affiliates, officers,
directors, agents and employees against and hold each of them harmless from any
and all Indemnifiable Damages which any such indemnified party may suffer or
incur by reason of or in connection with (i) the inaccuracy of any
representation or warranty of Buyer contained in this Agreement or any
certificate or agreement delivered pursuant hereto and executed by Buyer; (ii)
the breach by Buyer of any covenant made by it in this Agreement; (iii) the
ownership and operation of the Assets or the System after the Closing; and (iv)
any obligation or liability assumed by Buyer hereunder or under any certificate
or agreement delivered pursuant hereto and executed by Buyer. The foregoing
obligation of Buyer shall be subject to and limited by each of the
qualifications set forth in this Article 10.
(b) Except as set forth in the next succeeding sentence, or with
respect to bona fide and valid claims for which notice has been given prior to
the date eighteen (18) months from the Closing Date, each representation,
warranty and covenant made by Buyer in this Agreement or pursuant hereto and the
indemnity obligations set forth in this Section shall survive until the date
eighteen (18) months from the Closing Date, and thereafter all such
representations, warranties, covenants and indemnity obligations and any
liability thereunder shall be
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extinguished. The right of Seller to assert claims for Indemnifiable Damages
arising out of the ownership or operation of the Assets or the System after the
Closing and any obligation or liability assumed by Buyer hereunder or pursuant
hereto shall survive indefinitely.
(c) The indemnity obligations of Buyer hereunder shall not apply to the
extent that Seller or any Affiliate is compensated for the same loss under
Seller's or any Affiliate's insurance policies in the absence of any indemnity
hereunder if the insurers under such policy waive their rights of subrogation
with respect thereto.
10.3 Notice and Right To Defend Third-Party Claims.
(a) Upon receipt of written notice of any claim, demand or assessment
or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought on account of an indemnity agreement contained in this
Article, the party seeking indemnification (the "Indemnitee") shall promptly,
but in no event later than twenty (20) days prior to the date a response or
answer thereto is due (unless a response or answer is due within fewer than
twenty (20) days from the date of Indemnitee's receipt of notice thereof),
inform the party against whom indemnification is sought (the "Indemnitor") in
writing thereof. The failure, refusal or neglect of such Indemnitee to notify
the Indemnitor within the time period specified above of any such claim or
action shall relieve such Indemnitor from any liability which it may have to
such Indemnitee in connection therewith, if the effect of such failure, refusal
or neglect is to prejudice materially the rights of the Indemnitor in defending
against the claim or action.
(b) In case any claim, demand or assessment shall be asserted or suit,
action or proceeding commenced against an Indemnitee, and such Indemnitee shall
have timely and properly notified the Indemnitor of the commencement thereof,
the Indemnitor will be entitled to participate therein, and, to the extent that
it may wish, to assume the defense, conduct or settlement thereof, with counsel
selected by the Indemnitor. After notice from the Indemnitor to the Indemnitee
of its election to assume the defense, conduct or settlement thereof, the
Indemnitor will not be liable to the Indemnitee for expenses incurred by
Indemnitee in connection with the defense, conduct or settlement thereof, except
for such expenses as may be reasonably required to enable the Indemnitor to take
over such defense, conduct or settlement.
(c) The Indemnitee will at its own expense cooperate with the
Indemnitor in connection with any such claim, make personnel, witnesses, books
and records relevant to the claim available to the Indemnitor at no cost, and
grant such authorizations or powers of attorney to the agents, representatives
and counsel
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of the Indemnitor as the Indemnitor may reasonably request in connection with
the defense or settlement of any such claim.
(d) In the event that the Indemnitor does not wish to assume the
defense, conduct or settlement of any claim, demand or assessment, the
Indemnitee shall have the exclusive right to prosecute, defend, compromise,
settle or pay the claim in its sole discretion and pursue its rights under this
Agreement; provided that, before settling any claim hereunder, the Indemnitee
shall give ten (10) Business Days' notice to the Indemnitor to allow the
Indemnitor to reject the settlement, in which case the Indemnitor shall defend
the claim.
(e) Notwithstanding the foregoing in this Section 10.3, the Indemnitee
shall have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be its fees and expenses unless (i) the Indemnitor has
agreed to pay such fees and expenses, (ii) the Indemnitor has failed to assume
the defense of such action, claim or proceeding or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties) include
both the Indemnitor and the Indemnitee and the Indemnitee has been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnitor (in which
case, if the Indemnitee informs the Indemnitor in writing that it elects to
employ separate counsel at the expense of the Indemnitor, the Indemnitor shall
not have the right to assume the defense of such action, claim or proceeding on
behalf of the Indemnitee, it being understood, however, that the Indemnitor
shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the Indemnitee, which firm shall be
designated in writing by the Indemnitee).
10.4 Limitations and Termination of Programming Agreements.
(a) No claim for indemnification shall be made by any party pursuant to
Section 10.1(a)(i), (ii), (iii) or (iv) or Section 10.2(a)(i) or (ii) hereof
until the Indemnifiable Damages that would be recoverable hereunder by such
party aggregate in excess of seventy-five thousand dollars ($75,000), after
which event the Indemnitee shall be entitled to be indemnified for only such
Indemnifiable Damages as are in excess of seventy-five thousand dollars
($75,000). Notwithstanding anything to the contrary in this Agreement, the
liability of each of Seller and Buyer for Indemnifiable Damages shall not exceed
the Purchase Price.
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(b) Notwithstanding anything else set forth in this Section 10, to the
extent Seller incurs any damages in connection with the termination of any of
Seller's programming agreements relating to the System, Seller agrees that it
will be fully liable up to a maximum of twenty-five thousand dollars ($25,000).
To the extent any such damages exceed twenty-five thousand dollars ($25,000),
Buyer agrees to reimburse Seller for one half of any excess expenses actually
paid by Seller. Notwithstanding the foregoing, to the extent that Seller is
required to repay all or any portion of any upfront or launch incentive payments
received by Seller or its Affiliates from any programmer or in connection with
any programming agreement, Seller shall be solely responsible for the repayment
of any such amounts and such payment by Seller shall not be counted as damages
for purposes of this Section 10.4(b) relating to termination of programming
agreements.
10.5 Mitigation. Nothing herein contained shall affect a party's legal
duty to mitigate damages.
10.6 Treatment of Indemnification Payments. Buyer and Seller agree to
treat any payment made by either of them to or for the benefit of the other
under this Article as adjustments to Purchase Price to the extent permitted by
law.
10.7 Exclusive Remedy. This Article 10 shall be the sole and exclusive
basis of any remedy that each party may have against the other party for an
inaccuracy or breach of a representation, warranty or covenant under this
Agreement or any agreement contemplated hereby, and each party hereby waives any
claim (other than under this Article 10) it may have against the other party
with respect to the inaccuracy or breach of any such representation, warranty or
covenant.
ARTICLE 11
Termination
11.1 Termination by Mutual Agreement. This Agreement may be terminated
at any time prior to the Closing by mutual written agreement of Buyer and
Seller.
11.2 Termination for Failure of Conditions. Either party may terminate
this Agreement by giving written notice to the other if the Closing has not
occurred on or before the date which is the earlier to occur of (i) seven (7)
months following the execution hereof or (ii) six (6) months from the date Buyer
waives in writing its right to assignment pursuant to Section 12.2 hereof, or if
notice of the date of Closing has been given pursuant to Section 2.6 but the
Closing has not occurred on such date due to a failure of conditions precedent
not due to a default by either party.
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11.3 Risk of Loss. Any loss or damage on or prior to the Closing due to
fire, explosion, earthquake, windstorm, accident, flood, act of God, war,
seizure or any other casualty, whether similar or dissimilar, occurring to any
of the Assets or the System shall, whether or not covered by insurance, be the
responsibility of Seller. If such loss or damage is sufficiently substantial to
preclude the resumption of normal operations or a substantially complete
restoration of any substantial part of the System prior to the earlier to occur
of (a) the Closing or (b) thirty (30) days following the occurrence of the event
or casualty, or if such loss or damage materially and adversely affects the
value of the Assets or the System, Seller shall immediately notify Buyer in
writing, and Buyer, at any time within fifteen (15) days of such notice or such
shorter period prior to the Closing, may elect to either (x) receive a reduction
in the Purchase Price equal to the amount of the deductible under the casualty
insurance policies insuring the Assets and accept the proceeds of any insurance
coverage, whether paid by the insurer before or after the Closing, and
consummate the transactions contemplated by this Agreement, or (y) terminate
this Agreement.
11.4 Condemnation. If, on or prior to the Closing, any part of a
material Asset or an interest in a material Asset is taken or condemned as a
result of the exercise of the power of eminent domain, or if a Governmental
Authority having such power informs Seller or Buyer that it intends to condemn
all or any part of a material Asset (such event being referred to, in either
case, as a "Taking"), then Seller shall immediately notify Buyer in writing of
such Taking or proposed Taking, and within fifteen (15) days of such notice or
such shorter period prior to the Closing, Buyer may terminate this Agreement by
giving written notice to Seller. If Buyer does not elect to terminate this
Agreement then (a) if the Closing occurs, Buyer shall have the sole right, in
the name of Seller, if Buyer so elects, to negotiate for, claim, contest and
receive all damages with respect to the Taking, (b) Seller shall be relieved of
its obligation to convey to Buyer the Asset or interests that are the subject of
the Taking, and (c) at the Closing Seller shall assign to Buyer all of Seller's
rights (including the right to receive payment of damage) with respect to such
Taking and shall pay to Buyer all damages previously paid to Seller with respect
to the Taking.
11.5 Manner of Exercise. In the event of the termination of this
Agreement by either Buyer or Seller, pursuant to Article 11, notice thereof
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereunder shall be abandoned without further
action by Buyer or Seller.
11.6 Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article 11 and prior to the Closing, this Agreement
shall become void and of no further
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force or effect, except for the provisions of Sections 6.1 and 12.14; provided,
however, that neither party shall have any liability in respect of a termination
of this Agreement pursuant to Section 11.1 or 11.2 except to the extent that
failure to satisfy the conditions precedent to the obligations of Buyer or
Seller set forth herein results from the intentional or willful violation of, or
willful misstatement contained in, the representations, covenants or agreements
of such party under this Agreement. InterMedia Partners III, L.P., a California
limited partnership, agrees to be jointly and severally liable with Buyer to
Seller for any obligation of Buyer in the event of the termination of this
Agreement prior to the Closing.
ARTICLE 12
General
12.1 Covenant Not To Sue and Nonrecourse to Partners.
(a) Seller agrees that notwithstanding any other provision in this
Agreement, any agreement, instrument, certificate or document entered into
pursuant to or in connection with this Agreement or the transactions
contemplated herein or therein (each a "Transaction Document") and any rule of
law or equity to the contrary, to the fullest extent permitted by law, Buyer's
obligations and liabilities under all Transaction Documents and in connection
with the transactions contemplated therein shall be nonrecourse to all direct
and indirect general and limited partners of Buyer.
(b) "Nonrecourse" means that the obligations and liabilities are
limited in recourse solely to the assets of Buyer (for those purposes, any
capital contribution obligations of the general and limited partners of Buyer or
any negative capital account balances of such partners shall not be deemed to be
assets of Buyer) and are not guaranteed directly or indirectly by, or the
primary obligations of, any general or limited partner of Buyer, and neither
Buyer nor any general or limited partner or any officer, director, partner,
employee or agent of Buyer or any general or limited partner of any successor
partnership, either directly or indirectly, shall be personally liable in any
respect (except to the extent of their respective interests in the assets of
Buyer) for any obligation or liability of Buyer under any Transaction Document
or any transaction contemplated therein.
(c) "Direct" partners include all general and limited partners of
Buyer, and "indirect" partners include all general and limited partners of each
direct partner and all general and limited partners of each such indirect
partner and all such further indirect partners thereof and each such indirect
partner.
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(d) Seller hereby covenants for itself, its successors and assigns that
it, its successors and assigns will not make, bring, claim, commence, prosecute,
maintain, cause or permit any action to be brought, commenced, prosecuted,
maintained, either at law or equity, in any court of the United States or any
state thereof against any direct or indirect general or limited partner of Buyer
or any officer, director, partner, employee or agent of Buyer or any direct or
indirect general or limited partner of Buyer for (i) the payment of any amount
or the performance of any obligation under any Transaction Document or (ii) the
satisfaction of any liability arising in connection with any such payment or
obligation or otherwise, including without limitation, liability arising in law
for tort (including, without limitation, for active and passive negligence,
negligent misrepresentation and fraud), equity (including, without limitation,
for indemnification and contribution) and contract (including, without
limitation, monetary damages for the breach of representation or warranty or
performance of any of the covenants or obligations contained in any Transaction
Document or with the transactions contemplated herein or therein).
12.2 Assignment. As part of the application to, any franchisor for
approval of this transaction, Buyer may, at any time within thirty (30) days
following the execution of this Agreement, request the right to assign its
rights and obligations under, and grant a security interest in, this Agreement
to any party controlled directly or indirectly by Leo J. Hindery, Jr., and upon
consummating such an assignment, Buyer shall be released from all obligations
and liabilities hereunder. Upon such assignment or grant of security interest,
Buyer shall notify Seller thereof. Seller may not assign its rights or
obligations hereunder without the consent of Buyer.
12.3 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether herein
so expressed or not. Except as provided in Sections 10.1, 10.2, and 12.1, no
person other than Buyer and Seller may rely upon any provision of this
Agreement or any agreement, instrument, certificate or document executed
pursuant to this Agreement.
12.4 Time of Essence. Time is of the essence in each and every
provision in this Agreement.
12.5 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
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12.6 Amendment. Buyer and Seller may amend, modify or supplement this
Agreement at any time, but only in writing duly executed by the parties.
12.7 Terms. Defined terms used herein are equally applicable to the
singular and plural forms as appropriate. Unless otherwise expressly stated
herein, references to Articles and Sections are to articles and sections of this
Agreement and references to parties, Exhibits and Schedules are to the parties,
and the exhibits and schedules attached, to this Agreement.
12.8 Headings. The headings preceding the text of Sections of this
Agreement are for convenience only and shall not be deemed a part hereof.
12.9 Entire Understanding. The terms set forth in this Agreement
including its Schedules and Exhibits are intended by the parties as a final,
complete and exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms. The Schedules
and Exhibits attached to this Agreement are made a part of this Agreement.
12.10 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.11 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
12.12 Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by overnight courier, next day delivery or deposited in the mail, postage
prepaid, sent certified or registered, return receipt requested, and addressed
as set forth below or to such other address as either party shall have
previously designated by such a notice. Any notice so delivered personally shall
be deemed to be received on the date of delivery; any notice so sent by
overnight courier shall be deemed to be received one (1) Business Day after the
date sent; and any notice so mailed shall be deemed to be received on the date
stamped on the receipt (rejection or other refusal to accept or inability to
deliver because of a change of address of which no notice was given shall be
deemed to be receipt of the notice).
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If to Buyer:
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Attention: Mr. Leo J. Hindery, Jr.
Telephone: (415) 616-4600
Copy to:
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attention: Gregg F. Vignos, Esq.
Telephone: (415) 983-1649
If to Seller:
ParCable, Inc.
250 West 57th Street, Room 1321
New York, NY 10107
Attention: Mr. Michael Grannon
Telephone: (212) 541-6793
Copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Peter L. Felcher, Esq.
Telephone: (212) 373-3000
12.13 Further Acts. If, at any time before, on or after the Closing,
any further action by either party is necessary or desirable to carry out the
purposes of this Agreement, such party shall take all such necessary or
desirable action or use such party's reasonable best efforts to cause such
action to be taken. Without limiting the generality of the foregoing, on or
after the Closing, and without further consideration, Seller shall execute and
deliver to Buyer such further instruments of conveyance and take such other
action as Buyer may reasonably request in order to more effectively convey,
transfer and assign to Buyer any and all of the Assets or for aiding and
assisting and collecting and reducing to possession and exercising rights with
respect thereto.
12.14 Expenses.
(a) Seller shall bear all expenses incurred by Seller in connection
with the negotiation, preparation or execution of this Agreement (including, but
not limited to, the fees of any attorneys', accountants', brokers', finders' and
investment bankers' fees) and Buyer shall bear all expenses incurred by it in
connection with this Agreement (including, but not limited
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to, attorneys', accountants', brokers', finders' and investment
bankers' fees).
(b) Any sales or use tax assessed or imposed in connection with the
transfer of the Assets hereunder shall be borne by Seller.
12.15 Judicial Proceedings. Each party consents to the jurisdiction
over it of the courts of the State of California in the City and County of San
Francisco, and of the United States Courts in the Northern District of
California and the courts of the State of New York in the City and County of New
York, and of the United States Courts in the Southern District of New York and
agrees that personal service of all process may be made by registered or
certified mail pursuant to the provisions of Section 12.12.
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
SELLER:
PARCABLE, INC.
By /s/ Rea S. Hederman
_______________________________________
Its President
BUYER:
INTERMEDIA PARTNERS OF TENNESSEE,
L.P.
By InterMedia Capital Management
IV, L.P.
Its General Partner
By InterMedia Management, Inc.
Its General Partner
By /s/ Leo J. Hindery, Jr.
____________________________________
Leo J. Hindery, Jr.
President
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<PAGE> 61
For purposes of Section 11.6
only:
INTERMEDIA PARTNERS III, L.P.
By InterMedia Capital
Management III, L.P.
Its General Partner
By /s/ Leo J. Hindery, Jr.
____________________________________
Leo J. Hindery, Jr.
Managing General Partner
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<PAGE> 62
ASSIGNMENT AND ASSUMPTION AGREEMENT AND
AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT AND AMENDMENT TO ASSET
PURCHASE AND SALE AGREEMENT is made and entered into as of November 14, 1995
(the "Agreement"), by and among INTERMEDIA PARTNERS OF TENNESSEE, L.P., a
California limited partnership ("InterMedia L.P."), INTERMEDIA PARTNERS OF
TENNESSEE, a California general partnership ("InterMedia G.P.") and PARCABLE,
INC., a Delaware corporation ("ParCable"),
W I T N E S S E T H:
WHEREAS, InterMedia L.P. and ParCable are parties to that certain Asset
Purchase and Sale Agreement dated as of October 25, 1995 (the "Purchase
Agreement"); and
WHEREAS, InterMedia L.P. desires to assign all of its rights, interests
and obligations under the Purchase Agreement to InterMedia G.P. pursuant to
Section 12.2 of the Purchase Agreement; and
WHEREAS, InterMedia G.P. desires to assume from InterMedia L.P. all of
its rights, interests and obligations under the Purchase Agreement; and
WHEREAS, InterMedia L.P., InterMedia G.P. and ParCable wish to amend
the Purchase Agreement to reflect the aforementioned assignment and assumption:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
1.1 Assignment of Purchase Agreement. InterMedia L.P. hereby assigns,
transfers and sets over to InterMedia G.P. all of its rights, interests and
obligations under the Purchase Agreement.
1.2 Assumption of Purchase Agreement. InterMedia G.P. hereby accepts
the assignment, transfer and setting over by InterMedia L.P. of all of its
rights, interests and obligations under the Purchase Agreement and agrees to
assume the duties and obligations of InterMedia L.P. thereunder.
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ARTICLE II
2.1 Amendment to Certain References. All references in the Purchase
Agreement to (i) "InterMedia Partners of Tennessee, L.P." are hereby amended to
read "InterMedia Partners of Tennessee" and (ii) "InterMedia Partners of
Tennessee, L.P., a California limited partnership" are hereby amended to read
"InterMedia Partners of Tennessee, a California general partnership".
2.2 Amendment to Sections 4.1 and 4.6. In Section 4.1 of the Purchase
Agreement the reference "limited partnership" is hereby deleted and the
following substituted therefor "general partnership" and in Section 4.6 the
reference to "Agreement of Limited Partnership" is hereby deleted and the
following substituted therefor "Partnership Agreement".
2.3 Amendment to Schedule 7.1(e). Item 16 in Schedule 7.1(e) is hereby
deleted.
ARTICLE III
3.1 Full Force and Effect. Except as expressly amended hereby, all
other terms of the Purchase Agreement shall remain in full force and effect.
3.2 Representation. InterMedia G.P. is indirectly controlled by Leo J.
Hindery, Jr.
3.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
3.4 Governing Law. The validity, performance, and enforcement of this
Agreement shall be governed by the laws of the State of California without
giving effect to the principles of conflicts of law of such state.
3.5 Survival of Covenants. The acknowledgments, covenants, agreements
and obligations hereunder of each of the parties hereto shall survive until
satisfied in full.
3.6 Binding Nature; Assignments. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned by any of the parties
hereto without prior written consent of the other parties.
3.7 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
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Agreement or the Purchase Agreement or affecting the validity or enforceability
of any of the terms or provisions of this Agreement or the Purchase Agreement in
any other jurisdiction.
3.8 Further Documents and Action. The parties agree to execute and
deliver all such further documents or instruments and take all action as may be
reasonably necessary or appropriate to carry out the purposes of this Agreement.
IN WITNESS WHEREOF, InterMedia L.P., InterMedia G.P. and ParCable have
executed this Agreement as of the date first written above.
INTERMEDIA PARTNERS OF
TENNESSEE, L.P., a California
limited partnership
By InterMedia Capital Management
IV, L.P., its general partner
By InterMedia Management, Inc.
general partner
By /s/ Leo J. Hindery, Jr.
________________________________
Leo J. Hindery, Jr.,
President
PARCABLE, INC.
a Delaware corporation
By /s/ Rea S. Hederman
__________________________________
Its President
_________________________________
Title: President
______________________________
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INTERMEDIA PARTNERS OF TENNESSEE,
a California general partnership
By InterMedia Capital Management
IV, L.P., its managing general
partner
By InterMedia Management, Inc.
general partner
By /s/ Leo J. Hindery, Jr.
______________________________
Leo J. Hindery, Jr.,
President
For purpose of Section
11.6 of the Purchase
Agreement only:
INTERMEDIA PARTNERS III, L.P.
By InterMedia Capital Management
III, L.P., its general partner
By /s/ Leo J. Hindery, Jr.
________________________________
Leo J. Hindery, Jr.,
Managing General Partner
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EXHIBIT 2.2
1
ASSET PURCHASE AGREEMENT
dated October 18, 1995
between
TIME WARNER ENTERTAINMENT COMPANY, L.P.
and
INTERMEDIA PARTNERS OF TENNESSEE, L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 CERTAIN DEFINITIONS............................................................................ 1
ARTICLE 2 PURCHASE AND SALE.............................................................................. 7
Section 2.1 Covenant of Purchase and Sale.......................................... 7
(a) Tangible Personal Property............................................. 7
(b) Real Property.......................................................... 8
(c) Franchises............................................................. 8
(d) Licenses............................................................... 8
(e) Contracts.............................................................. 8
(f) Accounts Receivable.................................................... 8
(g) Books and Records...................................................... 8
Section 2.2 Excluded Assets........................................................ 8
Section 2.3 Assumed and Excluded Obligations....................................... 9
Section 2.4 Purchase Price......................................................... 9
Section 2.5 Preliminary and Final Settlements...................................... 11
ARTICLE 3 RELATED MATTERS................................................................................ 12
Section 3.1 Rate Refunds........................................................... 12
Section 3.2 HSR Act Compliance..................................................... 13
Section 3.3 Use of Names and Logos................................................. 14
Section 3.4 Bulk Sales............................................................. 14
Section 3.5 Transfer Taxes......................................................... 14
ARTICLE 4 BUYER'S REPRESENTATIONS AND WARRANTIES......................................................... 14
Section 4.1 Organization of Buyer.................................................. 14
Section 4.2 Authority.............................................................. 15
Section 4.3 No Conflict: Required Consents........................................ 15
Section 4.4 Taxpayer Identification Number......................................... 15
ARTICLE 5 SELLER'S REPRESENTATIONS AND WARRANTIES........................................................ 16
Section 5.1 Organization and Qualification of Seller............................... 16
Section 5.2 Authority.............................................................. 16
Section 5.3 No Conflict: Required Consents........................................ 16
Section 5.4 Title to Assets........................................................ 17
Section 5.5 Vehicles............................................................... 17
Section 5.6 System Franchises...................................................... 17
Section 5.7 System Licenses........................................................ 18
Section 5.8 System Contracts....................................................... 18
Section 5.9 Real Property.......................................................... 19
Section 5.10 Carriage of Signals.................................................... 20
Section 5.11 Employees.............................................................. 20
Section 5.12 Employee Benefits...................................................... 20
Section 5.13 Commissions............................................................ 21
Section 5.14 Creditor Claims........................................................ 21
Section 5.15 Litigation............................................................. 22
Section 5.16 Taxes.................................................................. 22
Section 5.17 FCC and Copyright...................................................... 23
Section 5.18 System Information..................................................... 24
</TABLE>
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<TABLE>
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Section 5.19 Bonds.................................................................. 24
Section 5.20 Environmental Laws..................................................... 24
Section 5.21 Financial and Operational Information.................................. 26
Section 5.22 Accounts Receivable.................................................... 26
Section 5.23 No Changes............................................................. 26
Section 5.24 Inventory.............................................................. 27
Section 5.25 Commitments............................................................ 27
Section 5.26 Social Contract with FCC............................................... 27
ARTICLE 6 COVENANTS...................................................................................... 27
Section 6.1 Certain Affirmative Covenants of
Seller................................................................. 27
Section 6.2 Certain Negative Covenants of Seller................................... 29
Section 6.3 Certain Covenants of Buyer............................................. 30
Section 6.4 Confidentiality........................................................ 31
Section 6.5 Supplements to Exhibits................................................ 31
Section 6.6 Bonds To Remain in Effect.............................................. 32
Section 6.7 Taxes.................................................................. 32
Section 6.8 Capital Leases......................................................... 33
Section 6.9 Satisfaction of Conditions............................................. 33
Section 6.10 MDU Agreements......................................................... 33
Section 6.11 Distant Broadcast Signals.............................................. 34
Section 6.12 Letter to Programmers.................................................. 34
ARTICLE 7 CONDITIONS PRECEDENT........................................................................... 34
Section 7.1 Conditions to Buyer's Obligations...................................... 34
(a) Accuracy of Representations and Warranties............................. 34
(b) Performance Of Agreements.............................................. 34
(c) Legal Proceedings...................................................... 34
(d) HSR Act Compliance..................................................... 34
(e) Seller's Counsel Opinion............................................... 35
(f) Seller's FCC Counsel Opinion........................................... 35
(g) Required Consents...................................................... 35
(h) Retransmission Consents................................................ 35
(i) Pole Attachment Agreements............................................. 35
(j) Inventory.............................................................. 35
(k) Material Adverse Change................................................ 35
(l) Franchise Terms........................................................ 35
Section 7.2 Conditions to Seller's Obligations..................................... 36
(a) Accuracy of Representations and Warranties............................. 36
(b) Performance of Agreements.............................................. 36
(c) Legal Proceedings...................................................... 36
(d) HSR Act Compliance..................................................... 36
(e) Buyer's Counsel Opinion................................................ 36
(f) Required Consents...................................................... 36
ARTICLE 8 CLOSING........................................................................................ 36
Section 8.1 Closing: Time and Place............................................... 36
</TABLE>
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<TABLE>
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Section 8.2 Seller's Obligations................................................... 37
(a) Bill of Sale........................................................... 37
(b) Noncompetition Agreement............................................... 37
(c) Deeds.................................................................. 37
(d) Secretary's Certificates............................................... 37
(e) Affidavit for Title Insurance.......................................... 37
(f) FIRPTA Certificate..................................................... 38
(g) Lease Assignments...................................................... 38
(h) Assignments and Assumption............................................. 38
(i) Vehicle Titles......................................................... 38
(j) Certificates of Good Standing.......................................... 38
(k) Receipt................................................................ 38
(l) Transfer Filings....................................................... 38
(m) Other.................................................................. 38
Section 8.3 Buyer's Obligations.................................................... 38
(a) Purchase Price......................................................... 38
(b) Certificates of Good Standing.......................................... 38
(c) Secretary's Certificates............................................... 39
(d) Assumption Agreement................................................... 39
(e) Lease Assignments...................................................... 39
(f) Assignment and Assumption Agreements................................... 39
(g) Other.................................................................. 39
ARTICLE 9 TERMINATION.................................................................................... 39
Section 9.1 Termination Events..................................................... 39
Section 9.2 Effect of Termination.................................................. 40
Section 9.3 Risk of Loss to Assets................................................. 40
Section 9.4 Condemnation........................................................... 40
ARTICLE 10 REMEDIES....................................................................................... 41
Section 10.1 Specific Performance; Remedies
Cumulative............................................................. 41
Section 10.2 Attorneys' Fees........................................................ 41
ARTICLE 11 INDEMNIFICATION................................................................................ 41
Section 11.1 Indemnification by Seller.............................................. 41
Section 11.2 Indemnification by Buyer............................................... 42
Section 11.3 Indemnified Third-Party Claim.......................................... 42
Section 11.4 Determination of Indemnification
Amounts and Related Matters............................................ 43
Section 11.5 Time and Manner of Certain Claims...................................... 43
Section 11.6 Other Indemnification.................................................. 44
ARTICLE 12 MISCELLANEOUS PROVISIONS....................................................................... 44
Section 12.1 Covenant Not To Sue and Nonrecourse to Partners........................ 44
Section 12.2 Expenses............................................................... 45
Section 12.3 Brokerage.............................................................. 45
Section 12.4 Assignment............................................................. 46
Section 12.5 Waivers................................................................ 46
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Section 12.6 Notices................................................................ 46
Section 12.7 Entire Agreement: Amendments.......................................... 47
Section 12.8 Binding Effect: Benefits.............................................. 47
Section 12.9 Headings, Schedules and Exhibits....................................... 48
Section 12.10 Counterparts........................................................... 48
Section 12.11 Publicity.............................................................. 48
Section 12.12 Governing Law.......................................................... 48
Section 12.13 Third Parties; Joint Ventures.......................................... 48
Section 12.14 Construction........................................................... 48
Section 12.15 Further Acts........................................................... 49
Section 12.16 Time of Essence........................................................ 49
Section 12.17 Severability........................................................... 49
</TABLE>
Schedule 1 - Franchise Areas
Schedule 2.1(a) - Tangible Personal Property
Schedule 2.1(b) - Real Property
Schedule 2.1(c) - System Franchises
Schedule 2.1(d) - Licenses
Schedule 2.1(e) - Contracts
Schedule 2.2 - Excluded Assets
Schedule 4.3 - Buyer's Required Consents
Schedule 5.3 - Seller's Required Consents
Schedule 5.4 - Permitted Liens
Schedule 5.5 - Vehicles
Schedule 5.6 - Seller's System Franchises
Schedule 5.11 - Employees
Schedule 5.12 - Employee Matters
Schedule 5.15 - Litigation
Schedule 5.16 - Taxes
Schedule 5.18 - System Information
Schedule 5.19 - Bonds
Schedule 5.22 - Accounts Receivable
Schedule 6.11 - Distant Broadcast Signals
Schedule 7.1(h) - Retransmission Consents
Exhibit 7.1(e) - Seller's Counsel Opinion
Exhibit 7.1(f) - Seller's FCC Counsel Opinion
Exhibit 7.2(e) - Buyer's Counsel Opinion
Exhibit 8.2(a) - Bill of Sale
Exhibit 8.2(b) - Noncompetition Agreement
Exhibit 8.2(e) - Affidavit for Title Insurance
Exhibit 8.2(f) - FIRPTA Certificate
Exhibit 8.2(g) - Lease Assignments
Exhibit 8.2(h) - Assignments and Assumption
Exhibit 8.2(k) - Receipt
Exhibit 8.3(d) - Buyer's Assumption Agreement
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<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of October, 1995, by and between INTERMEDIA PARTNERS OF
TENNESSEE, L.P., a California limited partnership ("Buyer"), whose U.S. Taxpayer
Identification Number is 94-3231868, and TIME WARNER ENTERTAINMENT COMPANY,
L.P., a Delaware limited partnership ("Seller"), whose U.S. Taxpayer
Identification Number is 13-3666692, through its division, Time Warner Cable
Ventures.
RECITALS:
A. Seller owns and operates cable television systems which are
franchised or hold other operating authority and operate in and around
Kingsport, Tennessee (collectively, the "System").
B. Seller is willing to convey to Buyer, and Buyer is willing to
purchase from Seller, certain of the tangible and intangible assets comprising
the System, upon the terms and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth herein,
Buyer and Seller agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Accounts Payable" means the book value of all accounts payable of the
System relating to the conduct of the Business determined as of the Closing Time
in accordance with GAAP on a basis consistent with the application of such
principles in the preparation of the P&L Statements (as hereinafter defined).
"Accounts Receivable" means all accounts receivable of Seller
representing amounts owed to Seller in connection with its operation of the
Business.
"Affiliate" means, with respect to any person or entity, any other
person or entity owning an interest in or controlling such person or entity, or
owned or controlled by or under common ownership or control with such person or
entity, where "control" (and its corollaries) includes ownership of interests
representing a majority of total voting power in an entity, and
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<PAGE> 7
"ownership" (and its corollaries) includes ownership of a majority of the equity
interests in an entity.
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given
in Section 2.3.
"Basic Subscriber Rate" means $22.35 for the Church Hill and Hawkins
County Franchise Areas and $21.99 for the Sullivan County, Kingsport, Mt. Carmel
and Blountville Franchise Areas.
"Business" means the cable television business conducted by Seller on
the date of this Agreement through one or more Systems in and around the
Franchise Areas.
"Closing" has the meaning given in Section 8.1.
"Closing Time" means 11:59 P.M., eastern time, on the date
of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended, and rules
and regulations promulgated thereunder, or any subsequent legislative enactment
thereof, as in effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended,
and rules and regulations promulgated thereunder.
"Consent" means any registration with, consent or approval of, notice
to or action by any Person or Governmental Authority.
"Contract" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certif icate, option, warrant,
right, or other instrument, document, obligation or agreement.
"Copyright Act" means the Copyright Act of 1976, as amended, and rules
and regulations promulgated thereunder.
"Current Assets" means the sum of (A) 100% of the face amount of all
Accounts Receivable that are current or thirty or fewer days past due as of the
Closing Time, plus 95% of the face amount of Accounts Receivable that are fewer
than sixty but more than thirty days past due as of the Closing Time, net of any
credit balances owed to subscribers, excluding (i) any such accounts any portion
of which is aged sixty (60) days or more based on the billing date and (ii) all
debit balances of subscribers whose accounts are inactive or whose service is
pending disconnection for any reason as of the Closing Time; and (B) Prepaid
Expenses. For purposes of making "past due" calculations under this paragraph,
the monthly billing
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<PAGE> 8
statements of Seller shall be deemed to be due and payable on the date of
invoice.
"Current Liabilities" means the sum of (A) Accounts Payable, (B)
Deferred Revenue and (C) Other Current Liabilities.
"Deferred Revenue" means liabilities to subscribers representing
advance billings for services to be performed by Buyer after the Closing Time.
"Equivalent Basic Subscriber" means, as of any date and for each
Franchise Area, without duplication, any of the following: (a) private
residential customer accounts which are receiving Preferred Tier Service (as
defined in Schedule 5.18) provided by the System and up to one thousand (1,000)
private residential customer accounts which are only receiving Basic Service (as
defined in Schedule 5.18) provided by the System and, for each of the foregoing,
that are billed by individual unit (regardless of whether such accounts are in
single family homes or in individually billed units in apartment houses and
other multi-unit buildings) (excluding "second connects" or "additional
outlets," as such terms are commonly understood in the cable television
industry), each of which shall be counted as one "Equivalent Basic Subscriber";
and (b) without duplication of (a) above, private residential customer accounts
that are only receiving Basic Service (as defined in Schedule 5.18) provided by
the System and all commercial, bulk-billed and other accounts not billed by
individual unit, such as hotels, motels, apartment houses and multi-family
homes; provided that the number of "Equivalent Basic Subscribers" serviced by
each such account shall be deemed to be an amount equal to the quotient of (x)
the aggregate monthly Basic and Preferred Tier Services revenue derived by the
System from such accounts (excluding any Nonstandard Charges), in each case for
the last calendar month preceding the date of such determination, divided by (y)
the Basic Subscriber Rate. Notwithstanding the foregoing, the term "Equivalent
Basic Subscriber" shall not include any residential subscriber who is receiving
Preferred Tier Service provided by the System below the Basic Subscriber Rate,
or any commercial, residential or other subscriber who (A) has not been
receiving such service for at least thirty (30) consecutive days, (B) has not
paid for at least one (1) month's consecutive service, (C) is more than sixty
(60) days delinquent from the date of billing on any amount due to Seller, or
(D) is pending disconnection from the service provided by the System for any
reason.
"Excluded Assets" has the meaning given in Section 2.2.
"FCC" means the Federal Communications Commission.
"Franchises" means any and all authorities and contracts which confer
upon Seller the privilege of delivering television
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<PAGE> 9
programming and cable-related services to residents in the Franchise Area.
"Franchise Areas" means the areas in which Seller is authorized to
provide cable television service under the Franchises and the areas served by
the System in which Seller provides cable television service without a
Franchise, all as described on Schedule 1.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means the government of the United States of
America or any foreign nation, any state, common wealth, territory, or
possession thereof and any political sub division or quasi-governmental
authority of any of the same, and any agency or instrumentality of any of the
foregoing, including any court, tribunal, department, bureau, commission or
board.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improve ments Act of
1976, as amended.
"Indemnitee" has the meaning given in Section 11.3(a).
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice or magistrate.
"Leased Real Property" has the meaning given in Section
2.1(b).
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including without limitation
Judgments and System Franchises.
"Lien" means any interest in property securing an obliga tion, whether
such interest is based on common law, statute or contract, and including, but
not limited to, any security inter est or lien arising from a mortgage, claim,
encumbrance, pledge, charge, easement, servitude, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes, and reservations, exceptions, covenants, con ditions,
restrictions, leases, subleases, licenses, occupancy agreements, pledges,
equities, charges, assessments, covenants, reservations, defects in title,
encroachments and other burdens, and other title exceptions and encumbrances
affecting property
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<PAGE> 10
of any nature, whether accrued or unaccrued, or absolute or contingent.
"Litigation" means any demand, claim, action, suit, pro ceeding,
arbitration, investigation, hearing, or other activity or procedure that could
result in a Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses (including but not limited to counsel fees and
disbursements, expert fees, and costs incurred in any investigation, defense or
settlement of any claims), but shall in no event include incidental or
consequential damages.
"Noncompetition Agreement" has the meaning given in Section 8.2(b).
"Nonstandard Charges" means any charges for taxes, second connects,
additional outlets, installation fees, deposits and other non-recurring items
and any charges for the rental of converters, remote control devices and other
like charges for equipment.
"Operational Information" has the meaning given in Section 5.21.
"Other Current Liabilities" means all current liabilities (including,
but not limited to, accrued vacation pay of employees of Seller, subscriber
security deposits and customer advance payments, but excluding (i) Accounts
Payable and (ii) Deferred Revenue) of the System relating to the conduct of the
Business determined as of the Closing Time in accordance with GAAP on a basis
consistent with the application of such principles in the preparation of the P&L
Statements.
"Owned Real Property" has the meaning given in Section 2.1(b).
"P&L Statements" has the meaning given in Section 5.21.
"Permitted Liens" means (i) liens for Taxes, assessments and
governmental charges not yet due or payable, (ii) zoning laws, ordinances and
similar governmental regulations, (iii) rights reserved to any Governmental
Authority to regulate the affected property, (iv) as to Owned Real Property,
Liens that do not in any material respect, individually or in the aggregate,
affect or impair the value or use thereof as it is currently being used by
Seller in the ordinary course of business, (v) as to leased Assets, interests of
the lessors thereof and Liens affecting the interests of the lessors thereof
that do not in any material respect, individually or in the aggregate, affect or
impair the value or use thereof as it is currently being used by Seller in the
ordinary course of business, (vi) any materialmen's, mechanics', workmen's,
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<PAGE> 11
repairmen's or other like liens arising in the ordinary course of business,
(vii) any Liens to be released at or prior to Closing, and (viii) the Liens
described on Schedule 5.4.
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, limited
liability company, or unincorporated entity of any kind.
"Prepaid Expenses" means the book value of prepaid expenses and
miscellaneous prepaids (in each case, only to the extent constituting a current
asset) of the System with respect to the Business determined as of the Closing
Time in accordance with GAAP on a basis consistent with the application of such
principles in the preparation of the P&L Statements, to the extent that such
prepaid expenses will accrue to the benefit of Buyer upon and after the Closing
Time.
"Prime Rate" means the per annum rate of interest published as such
from time to time in the Money Rates column of The Wall Street Journal (Western
Edition). For all purposes of this Agreement, interest at the Prime Rate shall
be calculated on the basis of the actual number of days elapsed in the relevant
period over a year of 365 or 366 days, as applicable.
"Proceeding" means any investigation, proceeding or other process by
the FCC, a court of competent jurisdiction or any Governmental Authority that
relates in whole or in part to rates charged to subscribers.
"Purchase Price" has the meaning given in Section 2.4.
"Real Property" has the meaning given in Section 2.1(b).
"Refund" means a refund or credit made by the System pursuant to a
Refund Order for any overpayment or excess charge paid by subscribers during the
period prior to and including the date of the Closing for any basic service or
related equipment, or any other regulated tier of service or related equipment
or any other charge for service or equipment.
"Refund Order" means a decision, order, finding, ruling or other
determination by the FCC, a court of competent jurisdic tion or any Governmental
Authority requiring any System to make a Refund to a Subscriber.
"Required Consents" shall mean the Consents designated as such on
Schedules 4.3 and 5.3.
"Rules and Regulations" shall mean the rules and regulations
promulgated by the FCC, as amended.
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<PAGE> 12
"Signal" means the transmission, except radio signals (whether
television, satellite or otherwise), of video program ming or other information
that the System makes available to all Equivalent Basic Subscribers generally.
"Social Contract" has the meaning given in Section 5.26.
"Subscriber Shortfall" means an amount (not to be less than zero) equal
to the product of (x) one thousand nine hundred eighty-four dollars ($1,984) and
(y) the difference between thirty-one thousand (31,000) and (if less) the actual
number of Equivalent Basic Subscribers as of the last billing period immediately
preceding the Closing.
"System" has the meaning given in Recital A.
"System Contracts" has the meaning given in Section 2.1(e).
"System Employees" has the meaning given in Section 5.11.
"System Franchises" has the meaning given in Section 2.1(c).
"System Licenses" has the meaning given in Section 2.1(d).
"Taxes" means all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, together with any interest and penalties,
addi tions to tax or additional amounts with respect thereto.
"To Seller's knowledge" means to the actual knowledge of Jeff Elberson,
Craig Perica, Janice Waggoner or Grant Evans.
ARTICLE 2
PURCHASE AND SALE
Section 2.1 Covenant of Purchase and Sale. Subject to the terms and
conditions set forth in this Agreement, at Closing Seller shall convey, assign,
and transfer to Buyer, and Buyer shall acquire from Seller, for the Purchase
Price, free and clear of all Liens (except Permitted Liens), all right, title
and interest of Seller in all of the assets and properties, real and personal,
tangible and intangible, owned or leased by Seller and used by Seller in its
operation of the System (the "Assets"), including but not limited to the
following:
(a) Tangible Personal Property. All tangible personal property,
including but not limited to towers, tower equipment, antennae, aboveground and
underground cable, distribution sys-
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<PAGE> 13
tems, C-Cor amplifier modules, headend amplifiers, line amplifiers, earth
satellite receive stations and related equipment, FM or broadcast antennae,
microwave equipment, con verters, testing equipment, office equipment,
furniture, fixtures, supplies, inventory, and other physical assets used by
Seller in its operation of the System, as described on Schedule 2.1(a).
(b) Real Property. The interests in real property ("Real Property")
described on Schedule 2.1(b) owned by Seller ("Owned Real Property") or leased
by Seller ("Leased Real Property") under leases described in paragraph 2.1(e).
(c) Franchises. The franchises and similar authorizations
or permits described on Schedule 2.1(c) (the "System
Franchises").
(d) Licenses. The intangible cable television (CATV) channel
distribution rights, cable television relay service (CARS), business radio,
domestic satellite receive only (TVRO) and other licenses, authorizations, or
permits described on Schedule 2.1(d) (the "System Licenses").
(e) Contracts. The leases of real and personal property, private
easements or rights of access, contractual rights to easements, pole line or
joint line agreements, underground con duit agreements, crossing agreements,
bulk and commercial ser vice agreements, and other Contracts described on
Schedule 2.1(e) (the "System Contracts").
(f) Accounts Receivable. All accounts receivable of the
Business.
(g) Books and Records. All engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and processes, and all files of
correspondence, lists, records, and reports concerning subscribers and
prospective subscribers of the System, signal and program carriage, and dealings
with Governmental Authorities, including but not limited to all reports filed by
or on behalf of Seller with the FCC and state ments of account filed by or on
behalf of Seller with the U.S. Copyright Office.
Section 2.2 Excluded Assets. Notwithstanding the provi sions of Section
2.1, the Assets shall not include the follow ing, which shall be retained by
Seller (the "Excluded Assets"): (i) programming Contracts; (ii) insurance
policies and rights and claims thereunder; (iii) bonds, letters of credit,
surety instruments, notes and other similar items; (iv) cash and cash
equivalents; (v) subject to Section 3.3, Seller's trademarks, trade names,
service marks, service names, logos, and similar proprietary rights; and (vi)
the rights, assets, and properties described on Schedule 2.2.
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<PAGE> 14
Section 2.3 Assumed and Excluded Obligations. After Closing, Buyer
shall assume, pay, discharge, and perform the following (the "Assumed
Obligations and Liabilities"): (i) those obligations and liabilities
attributable to periods after the Closing Time under the System Contracts,
System Franchises and System Licenses; (ii) other obligations and liabilities of
Seller to the extent that there shall be an adjustment in favor of Buyer with
respect thereto pursuant to Section 2.5; and (iii) all obligations and
liabilities arising out of Buyer's ownership of the Assets or operation of the
System after Closing. All obligations and liabilities arising out of or relating
to the Assets or the System other than the Assumed Obligations and Liabilities
shall remain and be the obligations and liabilities solely of Seller. Buyer
shall not be liable for any other debts, liabilities, obligations or contracts
of Seller of any kind and nature, including but not limited to any of the
following:
(a) any Losses resulting from any Litigation relating to the Assets, or
naming Seller or any predecessor or successor thereof as a party, in either case
arising out of events, transactions or circumstances occurring or existing prior
to the Closing Time, including but not limited to the Litigation described on
Schedule 5.15;
(b) any liability based, in whole or in part, upon the failure to
comply with Legal Requirements applicable to bulk sale transfers;
(c) any transaction of Seller subsequent to the Closing
Time;
(d) any Losses resulting by reason of or arising out of claims for
current and noncurrent portions of refunds and deposits from former Equivalent
Basic Subscribers for which there is not an adjustment in Buyer's favor made
pursuant to Section
below; or
(e) any Losses resulting from Seller's termination of any of its
employees rendering service in connection with the System, including but not
limited to severance payments.
Section 2.4 Purchase Price.
(a) The consideration for the Assets and the Noncompetition Agreement
shall be sixty-two million dollars ($62,000,000), adjusted as hereinafter
provided (the "Purchase Price"), and shall be payable to Seller at Closing by
wire transfer of immediately available funds.
(b) On and as of the Closing date, the Purchase Price
shall be:
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(i) either
(A) decreased by the excess, if any, of
Current Liabilities over Current Assets; or
(B) increased by the excess, if any, of
Current Assets over Current Liabilities;
(ii) decreased by the Subscriber Shortfall, if any, provided,
however, that Seller shall be entitled to an adjustment (offsetting the
reduction in Purchase Price but in no event in excess of the amount the
Purchase Price was previously reduced for the Subscriber Shortfall) in
the Final Adjustments Report in favor of Seller in the amount of one
thousand nine hundred eighty-four dollars ($1,984) for each subscriber
that would have been an Equivalent Basic Subscriber but for its failure
to have subscribed to the cable television service provided by the
System for thirty (30) consecutive days as of the date of Closing (each
a "Potential Subscriber") if such Potential Subscriber shall be a
subscriber on the date which is sixty (60) days after the date of
Closing, and, on such date, such subscriber shall be in compliance with
all other requirements set forth in the definition of Equivalent Basic
Subscriber;
(iii) increased by the cost of maintenance of
bonds and letters of credit after the Closing Time
pursuant to Section 6.6; and
(iv) decreased by the amount of any deductible under the
casualty insurance policies insuring the Assets if clause (x) of
Section 9.3 is applicable.
(c) As of the Closing Time, the following expenses shall be prorated to
the proper periods in accordance with GAAP. All such expenses for periods prior
to the Closing Time shall be for the account of Seller, and all such expenses
for periods after the Closing Time shall be for the account of Buyer:
(i) all payments and charges under the System
Franchises, the System Licenses, and the System
Contracts;
(ii) Taxes (other than income Taxes) levied or assessed
against any of the Assets or payable with respect to cable television
service and related sales to System subscribers;
(iii) charges for utilities and other goods or
services furnished to the System;
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(iv) copyright fees based on signal carriage by
the System; and
(v) all other items of expense relating to the
System;
provided, however, that Seller and Buyer shall not prorate any items of expense
payable under or with respect to any Excluded Assets, all of which shall remain
and be solely for the account of Seller.
Section 2.5 Preliminary and Final Settlements. Prelimi-
nary and final adjustments to the Purchase Price will be
determined as follows:
(a) At least ten (10) business days prior to the Closing, Seller will
deliver to Buyer a report (the "Preliminary Adjustments Report"), prepared in
good faith and on a reasonable basis and in a manner consistent with the P&L
Statements, setting forth in reasonable detail a pro forma determination as of
the Closing Time of the adjustments and prorations set forth in Section . The
Preliminary Adjustments Report shall: (i) contain all information reasonably
necessary to determine such adjustments and prorations and such other
information as may be reasonably requested by Buyer; and (ii) be certified by an
authorized officer of Seller to be true, correct and complete as of the date
thereof. Within five (5) business days after receipt of such report, Buyer shall
give Seller written notice of any objections. If Buyer makes any such
objections, the parties shall agree on the amount, if any, which is not in
dispute within two (2) business days after Seller's receipt of Buyer's
objections thereto. Any undisputed amounts shall be paid by the Buyer to the
Seller upon the Closing, and the remaining disputed amounts shall be determined
in the Final Adjustments Report.
(b) Within sixty (60) days after the Closing, Seller shall deliver to
Buyer a report (the "Final Adjustments Report"), prepared in good faith and on a
reasonable basis and similarly certified by Seller, setting forth in reasonable
detail the final determination of all adjustments that were not calculated or
were disputed as of the Closing Time (including the adjustment provided in
Section 2.4(b)(ii)) and containing any corrections to the Preliminary
Adjustments Report.
(c) Within thirty (30) days after receipt of the Final Adjustments
Report, Buyer shall notify Seller of its objections, if any. Any amount which is
not in dispute shall, within five (5) business days of the expiration of the
review period, be paid in cash by wire or interbank transfer in immediately
available funds as follows: (i) if the Purchase Price calculated based on the
Final Adjustments Report is greater than the Purchase Price calculated based on
the Preliminary Adjustments
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<PAGE> 17
Report, Buyer shall pay such difference to Seller, or (ii) if the Purchase Price
is less, Seller shall pay such difference to Buyer. In the event any payment
required by this Section 2.5(c)is not made when due, Seller or Buyer, as
appropriate, shall make the payment required by this Section 2.5(c) with
interest accruing from the date such payment was due at the Prime Rate.
(d) Any disputed amounts will be determined within one hundred twenty
(120) days after the Closing by an accounting firm mutually agreeable to Seller
and Buyer, whose determination will be conclusive. Seller and Buyer will bear
equally the fees and expenses payable to such firm in connection with such
determination. The payment required after determination of all disputed amounts
will be made by the responsible party by wire transfer of immediately available
funds to the other party within three (3) business days after the final
determination.
ARTICLE 3
RELATED MATTERS
Section 3.1 Rate Refunds.
(a) If a Refund Order is issued or a Proceeding is commenced with
respect to a potential Refund Order prior to the third anniversary of the
Closing requiring that a Refund be made to subscribers and such Refund is made
by Buyer, whether in the form of cash, credit or otherwise, then Seller shall be
obligated to pay Buyer an amount (the "Refund Amount") equal to, after taking
into account any Taxes actually payable by Buyer as a result of such payment,
the portion of the Refund required to be paid to subscribers that is
attributable to the period on or prior to the Closing Time, including any
penalties, interest, forfeiture or other payment ordered by such Refund Order
insofar as the same are attributable to the period on or prior to the Closing
Time and any reasonable payment associated therewith and other associated
reasonable costs (including any and all reasonable costs in connection with any
investigation or proceeding resulting in such Refund or subsequent proceeding or
appeal or appeals thereof).
(b) Buyer will promptly notify Seller of any Proceeding commencing
after the Closing and prior to the third anniversary of the Closing. Buyer shall
have the right to control the defense and settlement of any such Proceeding at
the expense of Seller; provided that Buyer shall (i) keep Seller apprised of the
progress of any Proceeding and (ii) consider in good faith all comments and
requests of Seller in connection with any Proceeding. Prior to the Closing,
without the written consent of Buyer, Seller will not agree to the imposition of
any Refund Order or fail to diligently prosecute all appeals of any Refund Order
that are not final and unappealable. Buyer and Seller
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<PAGE> 18
agree to use reasonable commercial efforts and act in good faith to defend any
Proceeding and resolve such Proceeding in a manner that minimizes any Refund and
future adverse impact on Buyer and, in the event any Refund Order is rendered,
after consultation with each other, to seek to obtain a stay of any such Refund
Order (that has not become final and unappealable) prior to the time any part of
the required Refund must be made.
(c) (i) No later than fifteen (15) days prior to the date a Refund must
be made pursuant to a Refund Order that Buyer believes Seller is responsible for
pursuant to this Section 3.1, Buyer will determine the Refund Amount, if any,
and shall notify Seller of such determination. Two (2) business days prior to
the time such Refund must be paid (whether in the form of cash or otherwise),
Seller will pay Buyer any amounts payable under this Section 3.1 with respect to
such Refund. In the event that Seller does not make any payment of a Refund
Amount when due, Seller will owe Buyer interest on the Refund Amount from the
date due until paid at the Prime Rate plus any costs and expenses incurred by
Buyer in collecting such amount.
(ii) Any dispute as to payments to be made under this Section
3.1 that cannot be resolved in a timely manner by Seller and Buyer will be
settled by arbitration in accordance with the arbitration rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. Seller and Buyer will
bear equally the fees and expenses payable in connection with such arbitration.
The amounts in dispute will be paid to the appropriate party in accordance with
the settlement within five (5) business days after such settlement.
Section 3.2 HSR Act Compliance.
(a) As soon as reasonably practicable, and in any event within thirty
(30) days after the date of this Agreement, Seller and Buyer shall prepare and
file proper Premerger Notification and Report Forms and related affidavits in
compliance with the HSR Act.
(b) If a request for additional information is made by the United
States Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") in
connection with such filing (a "Second
Request"):
(i) If Buyer and Seller mutually determine such Second Request
to be appropriate, lawful, and acceptable, each shall use all
reasonable efforts to prepare and submit all necessary filings in
response to such Second Request; or
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(ii) If either Buyer or Seller, in its good faith judgment and
sole discretion, determines that the Second Request is inappropriate,
unlawful or otherwise unacceptable, such party (the "Objecting Party")
shall use all reasonable efforts to seek, with the cooperation of the
other party, to have FTC and/or DOJ narrow or modify such Second
Request to the extent necessary to make it satisfactory to the
Objecting Party, in its good faith judgment and sole discretion (a
"Modified Second Request").
(c) If an Objecting Party seeks a Modified Second Request, the other
party may, at its sole option and in its sole discretion, delay any filings
relating to its Second Request until the Objecting Party receives such Modified
Second Request.
(d) If, in the sole judgment of an Objecting Party, an acceptable
Modified Second Request has been received from the FTC and/or the DOJ, it shall
use all reasonable efforts to prepare and submit all necessary filings in
response to such Modified Second Request.
Section 3.3 Use of Names and Logos. For a period of sixty (60) days
after Closing, Buyer shall be entitled to use the trademarks, trade names,
service marks, service names, logos, and similar proprietary rights of Seller to
the extent incorporated in or on the Assets, provided that Buyer shall exercise
efforts to remove all such names, marks, logos, and similar proprietary rights
from the Assets as soon as reasonably practicable following Closing.
Section 3.4 Bulk Sales. Buyer and Seller each waives compliance by the
other with bulk sales Legal Requirements applicable to the transactions
contemplated hereby.
Section 3.5 Transfer Taxes. All sales, use, and similar transfer Taxes
arising from or payable by reason of the transactions contemplated by this
Agreement shall be shared equally by Buyer and Seller, and each shall reimburse
the other to the extent the other has paid more than one-half of any such Taxes.
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller, as of the date of this
Agreement and as of Closing, as follows:
Section 4.1 Organization of Buyer. Buyer is a limited partnership
duly organized, validly existing, and in good standing under the laws of the
State of California, and has all
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requisite partnership power and authority to own and lease the properties and
assets it currently owns and leases and to conduct its activities as such
activities are currently conducted. Buyer is duly qualified to do business as a
foreign limited partnership and is in good standing in all jurisdictions in
which the ownership of its assets or the conduct of its activities requires it
to be so qualified, and the failure to be so qualified in which could have an
adverse effect on its ability to perform its obligations hereunder.
Section 4.2 Authority. Buyer has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and consummate the
transactions contemplated hereby. InterMedia Capital Management IV ("ICM IV")
has all requisite partnership power and authority to execute, deliver, and
perform this Agreement and consummate the transactions contemplated hereby as a
general partner of Buyer. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby on the
part of Buyer and ICM IV as a general partner of Buyer have been duly and
validly authorized by all necessary action on the part of Buyer and ICM IV. This
Agreement has been duly and validly executed and delivered by Buyer and ICM IV
as a general partner of Buyer, and is the valid and binding obligation of Buyer
and ICM IV as a general partner of Buyer, enforceable against Buyer and ICM IV
as a general partner of Buyer, respectively, in accordance with its terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditor's rights generally and
subject as to enforceability to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 4.3 No Conflict: Required Consents. Except as described on
Schedule 4.3, the execution, delivery, and performance by Buyer and ICM IV of
this Agreement do not and will not: (a) conflict with or violate any provision
of the partnership agreement or certificate of limited partnership of Buyer or
ICM IV; (b) violate any provision of any Legal Requirements; or (c) conflict
with, violate, result in a breach of, or constitute a default under any Contract
to which Buyer or ICM IV is a party or by which Buyer or ICM IV or the assets or
properties owned or leased by either of them are bound or affected; or (d)
require any Consent.
Section 4.4 Taxpayer Identification Number. Buyer's U.S.
Taxpayer Identification Number is as set forth in the
introductory paragraph of this Agreement.
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ARTICLE 5
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, as of the date of this
Agreement and as of Closing, as follows:
Section 5.1 Organization and Qualification of Seller. Seller is a
limited partnership duly organized, validly existing, and in good standing under
the laws of the State of Delaware, and has all requisite partnership power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities as such activities are currently conducted.
American Television and Communications Corporation ("ATC") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Seller and ATC is duly qualified to do business as a foreign
limited partnership, or corporation, respectively, and is in good standing in
all jurisdictions in which the ownership of its assets or the conduct of its
activities require it to be so qualified, and the failure to be so qualified in
which could have an adverse effect on its ability to perform its obligations
hereunder.
Section 5.2 Authority. Seller has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and consummate the
transactions contemplated hereby. ATC has all requisite corporate power and
authority to execute, deliver and perform this Agreement and consummate the
transactions contemplated hereby as a general partner of Seller. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby on the part of Seller and ATC as a general
partner of Seller have been duly and validly authorized by all necessary action
on the part of Seller and ATC. This Agreement has been duly and validly executed
and delivered by Seller and ATC as a general partner of Seller, and is the valid
and binding obligation of Seller and ATC as a general partner of Seller,
enforceable against Seller and ATC as a general partner of Seller, respectively,
in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting creditor's rights generally and subject as to enforceability to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 5.3 No Conflict: Required Consents. Except as described on
Schedule 5.3, the execution, delivery, and performance by Seller and ATC as a
general partner of Seller of this Agreement do not and will not: (a) conflict
with or violate any provision of the partnership agreement or certificate of
limited partnership of Seller or the certificate of incorporation or bylaws of
ATC; (b) violate any provision of
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any Legal Requirements; (c) conflict with, violate, result in a material breach
of, or constitute a default under any Contract to which Seller or ATC is a party
or by which Seller or ATC or the assets or properties owned or leased by either
of them are bound or affected; (d) require any Consent; or (e) result in the
imposition of any Lien upon any assets (including the Assets) or properties of
Seller or ATC.
Section 5.4 Title to Assets. Seller has good and marketable title to
and possession of all of the Assets, free and clear of all Liens, except
Permitted Liens. At Closing, Buyer will receive from Seller title to all Assets,
free and clear of all Liens, except for Permitted Liens. The Assets, including
all the buildings, structures, fixtures, trade fixtures and improvements located
in or on any of the Owned Real Property, together with all machinery and
equipment located thereon and necessary for the operation of such buildings, are
in good operating condition, ordinary wear excepted.
Section 5.5 Vehicles. Vehicles and other personal property for which a
Governmental Authority issues a document of title and which are owned, leased or
used by Seller in the construction, operation and maintenance of the System are
described on Schedule 5.5 by the year, manufacturer, model and vehicle
identification number, and except as described on Schedule 5.5 are in good
condition, less ordinary wear and tear.
Section 5.6 System Franchises.
(a) Schedule 2.1(c) lists (i) each franchise or similar authorization
held by Seller in connection with the operation or maintenance of the System;
(ii) the service area covered by each System Franchise; (iii) the identities of
the grantors thereof; (iv) the date on which each System Franchise was granted;
and (v) the expiration date for each System Franchise.
(b) Each System Franchise (i) was validly issued and obtained by or
validly transferred to and accepted by Seller in accordance with and as required
by the terms thereof and, to Seller's knowledge, according to all applicable
Legal Requirements; (ii) to Seller's knowledge is validly held by Seller as duly
authorized grantee or transferee thereof; and (iii) is, except as set forth in
Schedule 2.1(c), in full force and effect and has not been revoked or canceled.
(c) Except as set forth in Schedule 2.1(c), (i) for any System
Franchise which has an unexpired term of less than three (3) years from the date
hereof, a request for renewal thereof has been filed under section 626(a) of the
Cable Communication Policy Act of 1984, as amended with the proper Governmental
Authority, within thirty (30) to thirty-six (36) months prior to the expiration
date thereof; and (ii) no other franchise is
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required by law in connection with the operation and maintenance
of the System.
(d) Seller has delivered to Buyer true and complete copies of each of
the System Franchises. Except as described in Schedule 5.6, Seller is in
substantial compliance with each of the System Franchises.
(e) Except as set forth in Schedule 5.6, there are to Seller's
knowledge no currently operating cable television systems (other than the
System) providing television programming, multi-point distribution or
multi-channel multi-point distribution or satellite master antenna television
systems in any of the Franchise Areas.
Section 5.7 System Licenses. Seller holds all CATV distribution rights,
cable television relay service, domestic satellite receive only, business radio
and other licenses, authorizations, or permits necessary to carry on the
business of the System as conducted on the date hereof, each of which is
described in Schedule 2.1(d). Each such right, license, authorization or permit
is in full force and effect and has not been revoked or cancelled.
Section 5.8 System Contracts.
(a) Part I of Schedule 2.1(e) lists all presently effective Contracts
pursuant to which Seller provides cable television to any multiple dwelling unit
served by the System. Part II of Schedule 2.1(e) lists all presently effective
Contracts pursuant to which Seller leases or allows the use of any of the
System's channels. Part III of Schedule 2.1(e) lists all presently effective
personal property leases to which Seller is a party for property used in the
operation or maintenance of the System. Part IV of Schedule 2.1(e) lists all
presently effective material Contracts to which Seller is a party or by which it
is bound and which relate to the System, which are not Excluded Assets or System
Franchises and which are not described in Parts I through III of Schedule 2.1(e)
or in Schedule 2.2.
(b) Each of the System Contracts has not been amended or modified,
except as set forth in Schedule 2.1(e), and as of Closing will not be amended or
modified except in compliance with Section 6.2. Neither Seller nor, to Seller's
knowledge, any other party thereto is in default thereunder, nor, to Seller's
knowledge, is there any event which with notice or lapse of time or both would
constitute a default thereunder. Except as set forth in Schedule 2.1(e), Seller
has not received written notice that any party intends to cancel, terminate or
refuse to renew any of the System Contracts or to exercise or decline to
exercise any option or other right thereunder. Except as disclosed in Schedule
2.1(e), all make-ready fees or other charges under pole agreements with respect
to which Seller
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has received a bill, invoice or other demand for payment have been paid or will
be paid before the Closing Time.
(c) (i) Other than the Consents set forth on Schedule 5.3, no
consents are necessary for the assignment of the System Contracts to Buyer; (ii)
the real property and personal property which are the subject of the real or
personal property leases included in the System Contracts are currently used in
the construction, operation or maintenance of the System; and (iii) Seller has,
and at the Closing Time will have, possession of the real property and personal
property which is the subject of such leases and with respect to the Real
Property leases, the right to occupy the real property which is the subject of
such leases and with respect to the personal property leases, the right to
possess and use such personal property.
(d) Except as described on Schedules 2.1(c) and 2.1(e), each material
System Contract and each System Franchise is in full force and effect and
constitutes a valid and binding obligation of the parties thereto except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting generally the enforcement of creditors' rights and
by general principles of equity.
Section 5.9 Real Property.
(a) The Owned Real Property and the Leased Real Property are the only
parcels of real property used by Seller for all headend equipment, microwave
equipment and satellite earth receiving stations and related facilities, tower
and antenna sites and office facilities included in the Assets. Other than the
Owned Real Property and the Leased Real Property, Seller has no fee or
possessory interest in any real property located in the Franchise Areas.
(b) To Seller's knowledge, except as will not have a material adverse
effect on the operation of the System, all rights-of-way and easements used by
the System are "dedicated for compatible uses" within the meaning of 47 U.S.C.
Section 541(a)(2) or granted to Seller for its use for the purpose for which
currently used by Seller.
(c) The Owned Real Property and Leased Real Property, including the
improvements located thereon, are in substantial compliance with applicable
Legal Requirements relating to zoning.
(d) Each parcel of the Real Property and the improvements thereon (i)
have direct and unobstructed access for purposes of ingress and egress to public
roads or streets or to private roads over which Seller has a valid right-of-way;
(ii) are served by utilities and services necessary for the normal and
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intended use of such real property; and (iii) do not encroach in any material
way upon the property of others.
Section 5.10 Carriage of Signals. Schedule 5.18 completely and
accurately sets forth each of the Signals of the System. Seller has the legal
right and authority, including but not limited to all necessary authority from
the FCC and the requisite compulsory copyright license under Section 111 of the
Copyright Act, to carry and use in the conduct of the business of the System all
of the Signals. Other than requests for network nonduplication and syndicated
exclusivity protection, no written notices have been received by Seller from the
FCC, the United States Copyright Office, any local or other television station
or system or from any other Person or Governmental Authority challenging or
questioning the right of Seller or the System to carry or furnish, or not carry
or furnish, any of the Signals or any other station or service to any
subscriber.
Section 5.11 Employees.
(a) Schedule 5.11 identifies all individuals employed by Seller that
render services primarily in connection with the System as of May 31, 1995
("System Employees"), and the position and base compensation paid or payable to
each. Except as described in Schedule 5.11, Seller is not party to any written
employment Contract (or, to the knowledge of Seller, any other employment
Contract) with any individual identified in Schedule 5.11.
(b) Except as stated in Schedule 5.11, (i) Seller is not party to or
subject to any pending labor union or collective bargaining agreement or
arrangement in connection with the System, and (ii) to Seller's knowledge Seller
is not party to any labor or employment dispute. Schedule 5.11 lists employees
whose terms and conditions of employment are governed by a collective bargaining
agreement or belong to a labor union described on Schedule 5.11. Seller has
provided Buyer with a copy of the collective bargaining agreements or
arrangements described on Schedule 5.11. Buyer will have and assume no
obligation or liability under any collective bargaining agreement of Seller with
System Employees.
(c) Seller has in all material respects properly verified the identity
and authorization to work in the United States and has completed and retained
INS forms I-9 for all employees identified on Schedule 5.11, where required by
the Immigration Reform and Control Act of 1986 and related statutes. Seller has
made available to Buyer true and complete copies of such forms.
Section 5.12 Employee Benefits.
(a) Schedule 5.12 lists each pension benefit, welfare benefit, stock
option, stock purchase, disability, vacation pay,
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incentive bonus, severance pay, deferred compensation, supplemental income or
other employee benefit plan, policy or arrangement or agreement, including each
"employee benefit plan" or "multi-employer plan" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by or contributed to by the Seller and its affiliates (collectively
referred to as "Employee Plans") covering current or former employees of the
System or their dependents or survivors. Seller has provided or, upon Buyer's
reasonable request, will provide or make available to Buyer prior to the Closing
Time complete, accurate and current copies of the plan document(s) of each
Employee Plan, summary plan descriptions and other descriptive materials
provided to employees and, in the case of an Employee Plan intended to qualify
under section 401(a) of the Code, a copy of the most recent Internal Revenue
Service determination letter of such Employee Plan's qualified status.
(b) Neither Seller nor any Employee Benefit Plan (as defined in ERISA)
maintained by Seller is in violation of ERISA; no reportable event, within the
meaning of Section 4043(c) of ERISA, has occurred and is continuing with respect
to any such Employee Plan; and no prohibited transaction, within the meaning of
Title I of ERISA, has occurred with respect to any such Employee Plan.
(c) All claims and obligations under, compensation or benefits payable
to any employee pursuant to or in connection with any welfare, medical,
insurance, disability, vacation or sick pay or other employee benefit plans of
Seller or arising under any Legal Requirement affecting employees of Seller
incurred on or before the Closing Time will remain the responsibility of Seller,
whether or not such employees are hired by Buyer after the Closing. Buyer will
have and assume no obligation or liability under or in connection with any such
plan or Legal Requirement. Seller agrees that all System Employees will be
terminated as of the date of Closing except for employees to whom Seller will
offer employment elsewhere. Seller warrants that there are no contractual or
other legal impediments to this action and that Seller has the legal right to
take this action.
Section 5.13 Commissions. Seller has entered into no agreement,
commitment or obligation with regard to any brokerage commission or finder's fee
which would be payable by Buyer arising out of the execution, delivery or
performance of this Agreement or the transactions contemplated hereby.
Section 5.14 Creditor Claims. As of the Closing, (a) to Seller's
knowledge, no creditor of Seller shall be entitled to claim that the transfer of
any Asset to Buyer is, or would be, ineffective, void or voidable upon or after
the consummation of the transactions contemplated herein; and (b) Buyer shall
not
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incur any liability to any creditor of Seller as a result of the transfer of the
Assets to Buyer, except for the obligations assumed pursuant to Sections and .
Section 5.15 Litigation. Except as set forth in Schedule 5.15, there
is no Litigation pending or, to Seller's knowledge, threatened, against Seller
or the Assets which will adversely affect the financial condition or operations
of the System or the ability of Seller to perform its obligations under this
Agreement, or which seeks or could result in the modification, revocation,
termination, suspension, or other limitation of any of the System Franchises or
System Licenses.
Section 5.16 Taxes. (a) Except as set forth on Schedule 5.16 and
except where the failure to file, pay, collect, withhold or remit any Taxes does
not result in a Lien on the Assets or in the imposition of transferee or other
liability on Buyer for the payment of Taxes, Seller has accurately and timely
filed all federal, state, local and foreign tax returns and other tax reports
that are required to be filed; and all Taxes of any nature, with respect to
taxable periods, or portions thereof, of Seller (or any partnership in which
Seller is a partner) ending on or before the Closing Time, have been accurately,
on a timely basis, reported and duly paid, collected or withheld and remitted to
the appropriate Governmental Authority, except for current Taxes not due and
payable on or prior to the Closing Time (such Taxes to be paid when due). Seller
has received no notice of any notice of deficiency or assessment of proposed
deficiency or assessment from any taxing Governmental Authority pertaining to
the System, nor is Seller aware of any proposal to issue such a notice. Seller
has no knowledge of any facts that if known to any taxing authority would result
in additional liability for Taxes except where such liability could not result
in a Lien on the Assets or the imposition of transferee or other liability on
Buyer for payment of Taxes.
(b) None of the Assets is property that is required to be treated as
being owned by any other person pursuant to the so-called safe harbor lease
provisions of former section 168(f)(8) of the Code.
(c) None of the Assets directly or indirectly secures any debt the
interest on which is tax-exempt under section 103(a) of the Code.
(d) None of the Assets is "tax-exempt use property" within the
meaning of section 168(h) of the Code.
(e) Seller is not a person other than a United States person within the
meaning of the Code.
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Section 5.17 FCC and Copyright.
(a) As set forth on Schedule 5.18, the System has the capacity of
carrying the stated number of channels (6 Mhz bandwidth each) over one hundred
percent (100%) of the plant miles of the System. The System meets, in accordance
with usual industry standards, in all material respects the technical standards
of the Rules and Regulations which are applicable to the System.
(b) Seller has Cumulative Leakage Index, as defined by the Rules and
Regulations ("CLI") monitoring equipment which is required by the Rules and
Regulations, and has in connection with its CLI obligations under the Rules and
Regulations (i) maintained appropriate log books and other recordkeeping, (ii)
corrected any System radiation leakage discovered by Seller in connection with
its monitoring obligations under the Rules and Regulations, and (iii) filed all
annual FCC Form 320s with the FCC.
(c) (i) Seller has made all submissions (including, without limitation,
registration statements) required under the Communications Act. (ii) Seller has
delivered to Buyer complete and correct copies of all reports and filings for
the past three years made or filed pursuant to the Communications Act with
respect to the System, a completed and accurate Forms 393, Form 1200 Series or
other FCC rate documents for the System, and all notices alleging noncompliance
with the Communications Act or the Franchises. (iii) Seller has made all filings
required to be made with the FCC (including cable television registration
statements, annual reports and aeronautical frequency usage notices). (iv)
Seller has all FCC licenses necessary to operate the System and operates such
licensed facilities in conformance with the terms and conditions of such
licenses. (v) Seller has obtained or has verified that all necessary Federal
Aviation Administration ("FAA") approvals for all towers owned or upon which
Seller operates have been obtained and that said towers are at the location and
meet the height specifications of such FAA approvals. (vi) Seller has provided
all notices to subscribers and maintained all public files required under the
Communications Act. (vii) The System is certified as in compliance with the
FCC's equal employment opportunity rules. (viii) The System is in compliance
with all "must carry" requirements and has received all retransmission consents.
(d) Seller has deposited with the United States Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the United States
Copyright Office required under the Copyright Act with respect to the business
and operations of the System as are required to obtain, hold and maintain the
compulsory copyright license for cable television systems prescribed in section
111 of the Copyright Act.
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(e) Seller and the System are in compliance with the Copyright Act,
except as to potential copyright liability arising from the performance,
exhibition or carriage of any music on the System. Seller and the System are
entitled to hold and do now hold the compulsory copyright license described in
section 111 of the Copyright Act, which compulsory copyright license is in full
force and effect and has not been revoked, cancelled, encumbered or adversely
affected in any manner.
(f) The carriage, transmission or use of the Signals has not and does
not subject the System or Seller to any FCC or other sanctions or any suits or
actions, including, without limitation, suits or actions for copyright
infringement.
Section 5.18 System Information. Schedule 5.18 sets forth a materially
true and accurate description of the following information as of October 6, 1995
(or September 23, 1995 in the case of Subsection (b)):
(a) the number of miles of plant included in the Assets;
(b) the number of subscribers served by the System as of September 23,
1995 as reflected in Seller's billing reports;
(c) the channel capacity of the System;
(d) a description of basic and optional or tier services available from
the System and the rates charged by Seller for each; and
(e) the stations and Signals carried by the System and the channel
position of each such Signal and station.
Section 5.19 Bonds. Except as set forth in Schedule 5.19, there are no
franchise, construction, fidelity, performance, or other bonds posted or
required to be posted by Seller or any other Person in connection with the
System or the Assets.
Section 5.20 Environmental Laws.
(a) (i) All Real Property complies in all material respects with all
applicable Environmental Laws; (ii) none of Seller's operations thereon is
subject to any pending judicial or administrative proceeding alleging the
violation of any Environmental Law; (iii) none of the Real Property is the
subject of any "Superfund" evaluation or investigation or any federal or state
investigation concerning any use or release of any Hazardous Substance, except
for any such evaluation or investigation conducted entirely without notice to
Seller without entry to any facility of Seller's and of which Seller has no
knowledge; (iv) neither Seller nor, to Seller's knowledge, any predecessor-
in-title to the Real Property has filed any notice under any federal or state
law indicating past or present treatment,
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storage or disposal of a hazardous waste or reporting a spill or release of a
Hazardous Substance into the environment; (v) to its knowledge, Seller has no
contingent liability in connection with any release of any Hazardous Substance
from the Real Property into the environment and no release of any Hazardous
Substance from or on the Real Property which could require remediation has
occurred since the date Seller acquired an interest in such property; (vi) none
of Seller's or, to Seller's knowledge, any other person's operations on the Real
Property involves the generation, transportation, treatment, storage or disposal
of Hazardous Substances; (vii) except in accordance with all Legal Requirements,
Seller has not disposed of any Hazardous Substance in, on or about the Real
Property, and, to Seller's knowledge, neither has any lessee, prior owner or
other person; and (viii) no Lien in favor of any Governmental Authority for (A)
any liability under Environmental Laws, or (B) damages arising from or costs
incurred in response to a release of any Hazardous Substance into the
environment has been filed or attached to any of the Real Property.
(b) Seller has provided, or prior to Closing will provide, Buyer with
complete and correct copies of (i) all studies, reports, surveys or other
materials, if any, in Seller's possession relating to the presence or alleged
presence of Hazardous Substances at, on or affecting the Real Property, (ii) all
notices or other materials, if any, in Seller's possession that were received
from any Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property and (iii) all materials, if
any, in Seller's possession relating to any claim, allegation or action by any
private third party under any Environmental Law with respect to the Real
Property.
(c) To Seller's knowledge, (i) no underground storage tanks are
currently or have been located on any Real Property, (ii) no Real Property has
been used at any time as a gasoline service station or any other facility for
storing, pumping, dispensing or producing gasoline or any other petroleum
products or wastes, (iii) no building or other structure on any Real Property
contains asbestos, and (iv) there are no incinerators, septic tanks or cesspools
on the Real Property and all waste is discharged into a public sanitary sewer
system.
(d) "Environmental Law" means a Legal Requirement pertaining to land
use, air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (i) Clean Air Act (42 U.S.C.
Section 7401, et seq.); (ii) Clean Water Act (33 U.S.C. Section 1251, et seq.);
(iii) Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.);
(iv) Comprehensive
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Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601,
et seq.); (v) Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.); (vi)
Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.); (vii) Rivers and
Harbors Act (33 U.S.C. Section 401, et seq.); (viii) Endangered Species Act (16
U.S.C. Section 1531, et seq.); and (ix) Occupational Safety and Health Act (29
U.S.C. Section 651, et seq.); together with any other foreign or domestic laws
(federal, state, provincial or local) relating to emissions, discharges,
releases or threatened releases of any Hazardous Substance into ambient air,
land, surface water, groundwater, personal property or structures, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of any Hazardous Substance.
(e) "Hazardous Substance" means any matter that is labeled or regulated
as a pollutant, contaminant, hazardous or toxic substance, material, constituent
or waste or pollutant under any Environmental Law or by any Governmental
Authority and includes, without limitation, asbestos and asbestos-containing
materials and any material or substance that is: (i) designated as a "hazardous
substance" pursuant to section 307 of the Federal Water Pollution Control Act,
33 U.S.C. section 1251, et seq. (33 U.S.C. Section 1317); (ii) defined as a
"hazardous waste" pursuant to section 1004 of the Federal Solid Waste Disposal
Act, 42 U.S.C. section 6901, et seq. (42 U.S.C. Section 6903); (iii) defined as
a "hazardous substance" pursuant to section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. section 9601,
et seq. (42 U.S.C. Section 9601); or (iv) so designated or defined under any
other applicable Legal Requirement.
Section 5.21 Financial and Operational Information. Seller has
delivered to Buyer unaudited statements of profit and loss of the System for the
twelve (12) month period ended December 31, 1994 and the six (6) month period
ended June 30, 1995 (the "P&L Statements") and other operations and budgeted
financial information relating to the System (the "Operational Information").
The P&L Statements fairly present the results of operations of the System for
the periods indicated.
Section 5.22 Accounts Receivable. Schedule is a schedule of the
subscriber Accounts Receivable of Seller with respect to the System, showing
amounts and aging as of September 30, 1995. Such receivables were incurred in
the ordinary course of business by Seller in its operation of the Business.
Section 5.23 No Changes. Since June 30, 1995, there has been no
material adverse change in the results of operations of the System, and Seller
has not done any of the following without Buyer's written consent:
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(a) increased the Basic Subscriber Rate or other charges to
Subscribers, except for increases which have been budgeted or which are allowed
by applicable Legal Requirements;
(b) suffered any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the Assets as a whole or the
results of operations of System;
(c) entered into any other transaction, Contract or commitment other
than in the ordinary course of business which would have a material adverse
effect on the System; or
(d) agreed to do any of the things described in the preceding clauses
(a) through (c).
Section 5.24 Inventory. Seller's inventories are of a quality and
quantity consistent with past practices.
Section 5.25 Commitments. Except for obligations under the System
Franchises and Contracts, and in connection with the Real Property, Seller has,
with respect to the System, no unfulfilled promise or commitment which requires
an expenditure in an aggregate amount over time of twenty-five thousand dollars
($25,000).
Section 5.26 Social Contract with FCC. Seller anticipates entering into
a contract with the FCC which sets forth certain understandings between the
parties with respect to rate regulation and liabilities resulting from
rate-related disputes (the "Social Contract"). The terms of any such Social
Contract shall not be binding in any respect on Buyer as a result of this
Agreement or the transactions contemplated hereby. After the Closing, the rates
charged by Buyer with respect to the Systems will not be affected by any such
Social Contract.
ARTICLE 6
COVENANTS
Section 6.1 Certain Affirmative Covenants of Seller. Except as Buyer
may otherwise consent in writing, between the date of this Agreement and Closing
Seller shall:
(a) (i) operate the System in the ordinary course of business and in
accordance with past practices, (ii) maintain the tangible Assets in their
current condition and repair, ordinary wear excepted, (iii) maintain the
employment of the System's employees consistent with past practices, (iv)
continue to make capital expenditures and marketing expenditures substantially
consistent with Seller's reestimated 1995 budget or the then current 1996
budget, as applicable, (v) perform all of its obligations under all of the
System Franchises, System
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Licenses and System Contracts without material breach or default and (vi)
replace subscriber drops which do not comply with the current provisions of the
National Electrical Safety Code in the ordinary course consistent with past
practices.
(b) upon reasonable advance notice, give to Buyer and its counsel,
accountants, and other representatives, access during normal business hours to
the System, the Real Property, the other tangible Assets and Seller's books and
records relating to the System; provided that such access will not disrupt the
normal business operations of the System and that Buyer will use commercially
reasonable efforts to limit the number of access requests;
(c) as soon as practicable after the date of this Agreement make all
filings, and exercise commercially reasonable efforts to obtain in writing all
Consents described on Schedule , and deliver to Buyer copies thereof promptly
upon receiving them;
(d) promptly deliver to Buyer copies of true and complete copies of any
cash flow statements, financial reports, subscriber counts and other reports
with respect to the operation of the System regularly prepared by Seller at any
time from the date hereof until Closing;
(e) preserve inventory at customary levels and preserve existing
relationships with customers, suppliers and others having business relationships
with it in connection with the System;
(f) promptly notify Buyer in writing of any adverse developments
affecting the System, or any event or condition the occurrence or existence of
which might reasonably be expected to prevent the satisfaction of any of the
conditions to Buyer's or Seller's obligations stated in Sections 7.1 and 7.2,
which become known to Seller, including but not limited to: (i) any material
adverse change in the operations of the System; (ii) any damage, destruction or
loss (whether or not covered by insurance) materially and adversely affecting
any material Assets; or (iii) notice of material violation, forfeiture or
complaint under any System Franchise; provided, however, that Seller shall incur
no liability or obligation for its failure to perform its obligations under this
paragraph, nor shall any such failure constitute a breach of Seller's
obligations hereunder for purposes of Sections 7.1 or 11.1;
(g) provide to any title insurance company retained by Buyer to issue a
title insurance commitment with respect to the Owned Real Property any
information with respect thereto reasonably requested by it;
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(h) continue to carry and maintain in full force and effect casualty
and liability insurance as is reasonable and customary in the cable television
industry through and including the date of the Closing;
(i) use all commercially reasonable efforts to obtain an
extension or renewal of the System Franchise issued for Sullivan
County for a term of at least five years;
(j) within five (5) days of the execution of this Agreement, Seller
will begin to implement an increase to the Basic Subscriber Rate to reflect
inflation and external cost adjustments permitted under applicable Legal
Requirements in the amount of at least $0.50, and will cause such rate increase
to be effective for as many System subscribers as possible by December 1, 1995
and as to all System subscribers by December 31, 1995; and
(k) make no representations to any employee as to Buyer's
intentions with respect to employment.
Section 6.2 Certain Negative Covenants of Seller. Except as Buyer may
otherwise consent in writing, which consent Buyer may withhold in its sole
discretion, or as contemplated by this Agreement, between the date of this
Agreement and the Closing Time Seller shall not:
(a) except as set forth in Section 6.1(j), change the Basic Subscriber
Rate or other charges to subscribers without the consent of Buyer, unless such
changes have been budgeted or are otherwise permitted under applicable law;
provided, however, that the proposed increase in the Basic Subscriber Rate
pursuant to the terms of the Social Contract shall not occur prior to February
1, 1996;
(b) add or delete any programming services or change the channel
line-up;
(c) materially modify, terminate, renew, suspend, or abrogate any
System Franchise, System License or System Contract other than in the ordinary
course of business;
(d) materially increase the number of System Employees;
(e) enter into any lease, contract, agreement, commitment, arrangement,
or transaction, other than in the usual and ordinary course of business;
(f) sell, lease, assign, hypothecate or otherwise transfer or dispose
of any of the Assets, other than in the usual and ordinary course of business;
provided that the foregoing shall not apply to the replacement of existing
Assets which are
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expended, rendered obsolete or retired if replaced with assets of comparable or
better quality;
(g) take, cause to be taken or, to the extent reasonably within its
control, permit or suffer to be taken any action which would cause any of
Seller's representations and warranties in this Agreement to be untrue or
inaccurate in any material respect;
(h) materially modify or increase the compensation of, or benefits
provided by Seller to, System Employees, or enter into any collective bargaining
agreement not described on Schedule 5.11; or
(i) transfer any inventory from the System to any other system or
business owned or operated by Seller or otherwise.
Section 6.3 Certain Covenants of Buyer.
(a) Buyer shall as soon as practicable make all filings, and exercise
commercially reasonable efforts to obtain in writing as promptly as practicable
all Consents described on Schedule 4.3, and deliver to Seller copies thereof.
(b) Buyer may, but will have no obligation to, offer employment to any
or all of the System Employees as of the date of Closing. Not later than 45 days
after the date hereof, Buyer shall deliver to Seller a written notice containing
the names, if any, of the System Employees whom Buyer intends to hire on the
date of Closing. Not later than 60 days after the date hereof, Buyer shall
notify those employees whom Buyer intends to hire on the date of Closing; the
form and manner of such notification shall be reasonably satisfactory to, and
approved in advance by, Seller. Notwithstanding anything to the contrary in this
Agreement, Buyer shall recognize the term of service with Seller of any former
System Employee of Seller hired by Buyer in determining such employee's (i)
amount of accrued vacation under Buyer's vacation plan, and (ii) eligibility and
vesting for purposes of participation in Buyer's tax-qualified plan. Buyer
either shall permit any former System Employee of Seller who is hired by Buyer
to take any accrued vacation earned while in Seller's employ at whatever times
the employee would have been entitled to take such vacation had such employee
not left the employ of Seller or shall pay such employee for any such accrued
vacation time that such employee is not able to take under Buyer's vacation
plan; provided, however, Seller shall reimburse Buyer with respect to all such
accrued vacation in accordance with Section 2.4. Buyer shall also permit any
former employee of Seller hired by Buyer to participate in Buyer's group health
plan without imposing any waiting period or pre-existing condition limitations.
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(c) In order to permit Seller to make distributions to any former
System Employee of Seller hired by Buyer of the balance of such employee's
401(k) account in Seller's tax-qualified plan as soon as legally permitted,
Buyer shall notify Seller of the date of the termination of each such employee's
employment with Buyer for any reason. Buyer shall provide this information to
Seller in writing not later than thirty (30) days following the date of
termination of such employee's termination.
(d) For a period ending six (6) months after the date of Closing, Buyer
shall not transfer all or substantially all of the Assets unless the transferee
agrees to assume Buyer's obligations hereunder.
(e) Buyer will deliver Schedules 6.11 and 7.1(h) to Seller within
thirty (30) days of the date hereof.
(f) Prior to the date of Closing, Buyer shall notify the FCC that it
does not intend to assume the Social Contract.
Section 6.4 Confidentiality. Any non-public information that either
party may obtain from the other party in connection with this Agreement with
respect to such other party or, in the case of information obtained by Buyer,
the System, shall be confidential and, unless and until Closing shall occur,
such party shall not disclose any such information to any third party (other
than its directors, officers and employees, and representatives of its advisers
and lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use such information to
the detriment of the other party; provided that (i) such party may use and
disclose any such information once it has been publicly disclosed (other than by
such party in breach of its obligations under this Section) or which rightfully
has come into the possession of such party (other than from the other party),
and (ii) to the extent that such party may become compelled by Legal
Requirements to disclose any of such information, such party may disclose such
information if it shall have used all reasonable efforts, and shall have
afforded the other party the opportunity, to obtain an appropriate protective
order, or other satisfactory assurance of confidential treatment, for the
information compelled to be disclosed. In the event of termination of this
Agreement, each party shall use all reasonable efforts to cause to be delivered
to the other party, and retain no copies of, any documents, work papers and
other materials obtained by such party or on its behalf from the other party,
whether so obtained before or after the execution hereof.
Section 6.5 Supplements to Exhibits. Each of Seller and Buyer shall,
from time to time prior to Closing, supplement the Exhibits to this Agreement
with additional information that, if existing or known to it on the date of this
Agreement, would have been required to be included in one or more Exhibits to
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this Agreement. For purposes of Paragraphs 7.1(a), 7.2(a), 11.1(a) and 11.2(a),
the Exhibits to this Agreement shall be deemed to include only (a) the
information contained therein on the date of this Agreement, and (b) any
information added to the Exhibits by written supplements to this Agreement
delivered prior to Closing by the party making such amendment which (i) is
accepted in writing by the other party, or (ii) which reflects actions permitted
by this Agreement to be taken by the parties between the date of this Agreement
and Closing.
Section 6.6 Bonds To Remain in Effect. Seller shall maintain in force
all bonds and letters of credit required to be maintained under the System
Franchises until the earlier of (a) the expiration of thirty (30) days after the
Closing Time, or (b) the replacement of such bonds and letters of credit by
Buyer. Buyer shall reimburse Seller, as part of the adjustment to the Purchase
Price pursuant to Section 2.4(b), for the costs of maintenance of such bonds and
letters of credit after the Closing Time and Buyer shall indemnify, defend and
hold Seller harmless from and against any and all losses, costs, damages or
expenses (including, without limitation, reasonable attorneys' fees and court
costs) arising from or out of any claim against such bonds or letters of credit
after the Closing Time with regard to matters arising after the Closing Time.
Section 6.7 Taxes.
(a) Seller agrees to timely file all sales or transfer tax returns with
respect to sales occurring on or before the Closing Time, in connection with the
System, and Seller shall timely pay all sales or transfer taxes applicable to
the sales reported on such tax returns.
(b) Seller shall be responsible for all Taxes attributable to taxable
periods or portions thereof ending at or prior to the Closing Time (the
"Periods") of Seller or any Affiliate for which the taxability of such Affiliate
was determined on a consolidated or combined basis with Seller.
(c) Seller and Buyer shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Seller and Buyer agree (i) to retain all books and
records with respect to Tax matters pertinent to the Assets relating to the
Periods until the statute of limitations (including any extensions) as to any
taxable year that may be affected thereby shall have run, (ii) to abide by all
record retention agreements entered into
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with any governmental authority, and (iii) to give the other party reasonable
written notice prior to destroying or discarding any such books and records and,
if one party so requests, shall allow the requesting party to take possession of
such books and records proposed for destruction or discard.
(d) No new elections with respect to Taxes affecting the Assets or any
changes in current elections with respect to Taxes affecting the Assets shall be
made after the date of this Agreement without the prior written consent of
Buyer.
(e) As a condition precedent to the consummation of the transactions
contemplated by this Agreement, Seller shall provide Buyer with a clearance
certificate or similar document(s) that may be required by any state taxing
authority in order to relieve Buyer of any obligation to withhold any portion of
the Purchase Price.
(f) Seller shall furnish Buyer an affidavit, stating, under penalty of
perjury, the transferor's United States taxpayer identification number and that
the transferor is not a foreign person, pursuant to section 1445(b)(2) of the
Code.
Section 6.8 Capital Leases. Seller shall pay the remaining balance of
any capital lease for equipment, if any, used in the Business and deliver the
title to such equipment free and clear of all Liens (other than Permitted Liens)
to the Buyer at the Closing.
Section 6.9 Satisfaction of Conditions. Seller shall take, cause to be
taken, or, to the extent reasonably within its control, permit or suffer to be
taken any action which would cause or tend to cause (a) the conditions to the
obligations of the parties hereto to consummate the transactions contemplated by
this Agreement to be fulfilled; (b) any of the covenants contained in this
Agreement to be performed; and (c) any of the representations and warranties of
Seller to be true and correct.
Section 6.10 MDU Agreements. Promptly after the execution of this
Agreement, Buyer and Seller will prepare a list which will set forth each
multiple unit dwelling project that is subject to common ownership and that
currently receives cable television service from the Business (an "MDU Area")
without a written MDU Agreement and for which Buyer desires to obtain an
executed MDU Agreement (the "MDU List"). Within thirty (30) days after the
execution of this Agreement, Seller will deliver a letter and a proposed MDU
Agreement, each in a form acceptable to Buyer, requesting delivery of a fully
executed MDU Agreement for each of the multiple unit dwelling projects which
appear on the MDU List. Seller agrees to take such further action as is
reasonably requested by Buyer in order to attempt to obtain and deliver such
executed MDU Agreements.
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Section 6.11 Distant Broadcast Signals. If requested by Buyer, Seller
will delete prior to the Closing distant broadcast signals set forth on Schedule
6.11.
Section 6.12 Letter to Programmers. Not later than the Closing Date,
Seller will transmit a letter in a form acceptable to Buyer to all programmers
from which Seller purchases programming and for which Buyer has not expressly
agreed to assume the programming agreement.
ARTICLE 7
CONDITIONS PRECEDENT
Section 7.1 Conditions to Buyer's Obligations. The obligations of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the following conditions, which may be waived by Buyer:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Seller in this Agreement shall be true and accurate in all
material respects at and as of Closing with the same effect as if made at and as
of Closing, except for changes contemplated under this Agreement and except for
representations and warranties made only at and as of a certain date.
(b) Performance Of Agreements. Seller shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement to be performed and complied with
by it at or before Closing, and shall have tendered to Buyer all documents which
Seller is required by Section 8.2 hereof to deliver to Buyer at Closing.
(c) Legal Proceedings. There shall be no Legal Requirement, and no
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement, there shall be no Litigation pending or
threatened seeking, or which if successful would have the effect of, any of the
foregoing, and the Attorney General of the State of Tennessee shall not have
objected to the consummation of the transactions contemplated hereby and not
withdrawn its objection.
(d) HSR Act Compliance. All waiting periods under the HSR Act
applicable to the transactions contemplated hereby shall have expired or been
terminated.
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(e) Seller's Counsel Opinion. Buyer shall have received an opinion of
Linda Weiler, Esq., counsel to Seller, dated as of Closing, in the form of
Exhibit 7.1(e).
(f) Seller's FCC Counsel Opinion. Buyer shall have received an opinion
of Bryan Cave, special communications counsel to Seller, dated as of Closing, in
the form of Exhibit 7.1(f).
(g) Required Consents. Buyer shall have received evidence, in form and
substance reasonably satisfactory to it, that there have been made or obtained
all Required Consents required for the consummation of the transactions
contemplated hereby; provided, however, that to the extent such Required
Consents relate to consents by the FCC to assignments of the System Licenses,
this condition shall be deemed met if such consents to assignment have been
requested prior to Closing and Buyer is entitled to operate such System Licenses
pursuant to conditional use authorizations until the FCC's consent is received.
(h) Retransmission Consents. Buyer shall have received a valid
assignment of a retransmission consent agreement with each broadcaster whose
signal is carried on the System at the Closing who did not make a so-called
"must carry" election under the Communications Act, and which is listed on
Schedule 7.1(h).
(i) Pole Attachment Agreements. With respect to any material violations
as to which Seller or Buyer has received notice that such violation must be
corrected, Seller shall have either cured all violations subject to such notice
relating to license agreements for pole attachments or compensated Buyer
therefor.
(j) Inventory. Seller shall have delivered to Buyer at Closing the
C-Cor amplifier modules in quantities and description not differing materially
from that listed on Schedule 2.1(a);
(k) Material Adverse Change. There shall have occurred no material
adverse change in the operations of the System, other than matters affecting the
cable television industry generally.
(l) Franchise Terms. The System Franchise for Sullivan County shall
have a term remaining of at least five (5) years after the date of the Closing
and shall be on terms not materially different from the current terms of such
Franchise.
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Section 7.2 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, which may be waived by Seller:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Buyer in this Agreement shall be true and accurate in all material
respects at and as of Closing with the same effect as if made at and as of
Closing, except for changes contemplated under this Agreement and except for
representations and warranties made only at and as of a certain date.
(b) Performance of Agreements. Buyer shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement to be performed and complied with
by it at or before Closing, and Buyer shall have tendered to Seller all
documents which Buyer is required by Section 8.3 hereof to deliver to Seller at
Closing.
(c) Legal Proceedings. There shall be no Legal Requirement, and no
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated hereby, there shall be no Litigation pending or threatened seeking
or which if successful would have the effect of, any of the foregoing, and the
Attorney General of the State of Tennessee shall not have objected to the
consummation of the transactions contemplated hereby and not withdrawn its
objection.
(d) HSR Act Compliance. All waiting periods under the HSR Act
applicable to the transactions contemplated hereby shall have expired or been
terminated.
(e) Buyer's Counsel Opinion. Seller shall have received an opinion of
Pillsbury Madison & Sutro, counsel to Buyer, dated as of Closing, in the form of
Exhibit 7.2(e).
(f) Required Consents. Seller shall have received evidence, in form and
substance reasonably satisfactory to it, that there have been obtained all
Required Consents required for the consummation of the transactions contemplated
hereby.
ARTICLE 8
CLOSING
Section 8.1 Closing: Time and Place. The closing of the
transactions contemplated by this Agreement ("Closing") shall
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take place in the offices of Pillsbury Madison & Sutro, 235 Montgomery Street,
San Francisco, California 94104 at 9:00 A.M. as soon as possible after all
conditions precedent to Closing set forth in Article 7 hereof have been
satisfied or waived, but in no event later than April 30, 1996 (the "Outside
Closing Date"). Notwithstanding the foregoing sentence, Buyer and Seller may
mutually agree to extend the Outside Closing Date to July 31, 1996; provided,
however, that if as of April 30, 1996 Seller has met each of the conditions set
forth in Section 7.1 excluding only subparagraph (l) thereof, Seller may elect
to terminate the Agreement upon which event Buyer shall pay Seller a breakup fee
in the amount of twenty-five thousand dollars ($25,000.00). If (i) Buyer and
Seller shall have elected to extend the Outside Closing Date to July 31, 1996
and the Closing has not occurred by such date and (ii) Seller has met each of
the conditions set forth in Section 7.1 excluding only subparagraph (l) thereof,
Seller may elect to terminate the Agreement upon which event Buyer shall pay
Seller a breakup fee in the amount of fifty thousand dollars ($50,000.00).
All documents which Seller or Buyer shall deliver pursuant to this
Article 8 and are executed by any person other than a public official shall be
acknowledged on a form of acknowledgment which conforms to California Civil Code
section 1189.
Section 8.2 Seller's Obligations. At Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
(a) Bill of Sale. An executed Bill of Sale and Assignment in the form
of Exhibit 8.2(a);
(b) Noncompetition Agreement. An executed Noncompetition Agreement in
the form of Exhibit 8.2(b), duly executed and delivered by TWI;
(c) Deeds. Special warranty deeds conveying to Buyer each parcel of the
Owned Real Property;
(d) Secretary's Certificates. Certified copies of resolutions of
Seller's governing board authorizing the execution, delivery and performance of
this Agreement, and an incumbency certificate as to the officers authorized by
ATC to execute and deliver the agreements, instruments and documents on behalf
of ATC, as general partner of Seller;
(e) Affidavit for Title Insurance. For each parcel of Real Property, an
affidavit concerning present improvements, substantially in the form of Exhibit
8.2(e) or otherwise reasonably satisfactory to an insurer of the title to the
Owned Real Property;
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(f) FIRPTA Certificate. Seller's Certification of Nonforeign Status
pursuant to section 1.1445-2(b)(2) of the United States Treasury Income Tax
Regulations, substantially in the form of Exhibit 8.2(f);
(g) Lease Assignments. For each real property lease included in the
System Contracts, executed counterparts of an Assignment and Assumption
substantially in the form of Exhibit 8.2(g) (the "Lease Assignments");
(h) Assignments and Assumption. For each Contract the assignment of
which requires a Required Consent, an assignment assumption and consent
substantially in the form of Exhibit 8.2(h) (the "Assignment and Assumption"),
duly executed by Seller and the third party to such Contract;
(i) Vehicle Titles. Documents of title for any motor vehicles included
within the Assets;
(j) Certificates of Good Standing. A Certificate of Good Standing of
Seller certified to by the Secretary of State of the State of Delaware and a
Certificate of Existence - Limited Partnership certified to by the Secretary of
State of the State of Tennessee, and a Certificate of Good Standing of ATC
certified by the Secretaries of State of the States of Delaware and Tennessee;
(k) Receipt. An executed receipt for the Purchase Price, substantially
in the form of Exhibit 8.2(k); and
(l) Transfer Filings. All documents which under any Legal Requirements
are required to be filed with a Governmental Authority for recording any deed,
obtaining Governmental Authority clearance for Taxes imposed upon the transfer
of any Assets, or other documents required to be filed to consummate the sale
and transfer of the Assets at Closing.
(m) Other. Such other documents and instruments as shall be necessary
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
Section 8.3 Buyer's Obligations. At Closing Buyer shall deliver or
cause to be delivered to Seller the following:
(a) Purchase Price. The Purchase Price, adjusted in accordance with the
terms of this Agreement.
(b) Certificates of Good Standing. A Certificate of Good Standing of
Buyer certified to by the Secretary of State of the State of California, a
Certificate of Existence - Limited Partnership certified to by the Secretary of
State of the State of Tennessee, and a Certificate of Good Standing of
InterMedia
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Management, Inc. certified to by the Secretary of State of the states of
California and Tennessee;
(c) Secretary's Certificates. Certified copies of the resolutions of
the Board of Directors of InterMedia Management, Inc. and Buyer's governing
board, authorizing the execution, delivery and performance of this Agreement,
and an incumbency certificate as to the officers of Buyer to execute and deliver
the agreements, instruments and documents on behalf of InterMedia Management,
Inc. as general partner of ICM IV, as general partner of Buyer;
(d) Assumption Agreement. An assumption agreement, substantially in the
form of Exhibit 8.3(d);
(e) Lease Assignments. Executed counterparts of each of the Lease
Assignments.
(f) Assignment and Assumption Agreements. Executed counterparts of each
Assignment and Assumption.
(g) Other. Such other documents and instruments as shall be necessary
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
ARTICLE 9
TERMINATION
Section 9.1 Termination Events. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of the Buyer and Seller;
(b) by either Buyer or Seller upon written notice to the other, if the
adjustment to the Purchase Price pursuant to Section 2.4(b) causes the Purchase
Price to fall below fifty-six million eight hundred thousand dollars
($56,800,000);
(c) by either Buyer or Seller upon written notice to the other, if any
conditions to its obligations set forth in Sections 7.1 and 7.2, respectively,
shall not have been satisfied on or before the Outside Closing Date, for any
reason other than a breach or default by such party of its respective covenants,
agreements, or other obligations hereunder, or any of its representations herein
not being true and accurate when made or when otherwise required by this
Agreement to be true and accurate; or
(d) as otherwise provided herein.
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Section 9.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 9.1, all obligations of the parties hereunder
shall terminate, except for the obligations set forth in Sections 6.4, 10.1,
10.2, 12.1, 12.2, 12.10 and 12.11.
Section 9.3 Risk of Loss to Assets. Any loss or damage prior to Closing
due to fire, explosion, earthquake, windstorm, accident, flood, act of God, war,
seizure or any other casualty, whether similar or dissimilar, occurring to any
of the Assets of the System shall, whether or not covered by insurance, be the
responsibility of Seller. If such loss or damage is sufficiently substantial to
preclude the resumption of normal operations or a substantially complete
restoration of any substantial part of the System prior to the earlier to occur
of (a) the date of Closing or (b) the date that is sixty days following the
occurrence of the event or casualty, or if such loss or damage materially and
adversely affects the value of the Assets or the System taken as a whole, Seller
shall promptly notify Buyer in writing, and Buyer, at any time within fifteen
days after receipt of such notice or such shorter period prior to the date of
the Closing, may elect to either (x) receive a reduction in the Purchase Price
equal to the amount of the deductible under the casualty insurance policies
insuring the assets and accept the proceeds of any insurance coverage, whether
paid by the insurer before or after the Closing, and consummate the transactions
contemplated by this Agreement, or (y) terminate this Agreement upon delivery of
written notice to Seller, and in the latter event all parties shall stand fully
released and discharged of any and all obligations under this Agreement.
Section 9.4 Condemnation. If, prior to the Closing, any part of a
material Asset or an interest in a material Asset is taken or condemned as a
result of the exercise of the power of eminent domain, or if a Governmental
Authority having such power informs Seller or Buyer that it intends to condemn
all or any part of a material Asset (such event being referred to, in either
case, as a "Taking"), then Seller shall immediately notify Buyer in writing of
such Taking or proposed Taking, and within fifteen (15) days of such notice or
such shorter period prior to the Closing Time, Buyer may terminate this
Agreement by giving written notice to Seller. If Buyer does not elect to
terminate this Agreement then (a) if the Closing occurs, Buyer shall have the
sole right, in the name of Seller, if Buyer so elects, to negotiate for, claim,
contest and receive all damages with respect to the Taking, (b) Seller shall be
relieved of its obligation to convey to Buyer the Asset or interests that are
the subject of the Taking and (c) at the Closing Seller shall assign to Buyer
all of Seller's rights (including the right to receive payment of damage) with
respect to such Taking and shall pay to Buyer all damages previously paid to
Seller with respect to the Taking.
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ARTICLE 10
REMEDIES
Section 10.1 Specific Performance; Remedies Cumulative. Seller and
Buyer acknowledge that, if either is in material breach or default of its
covenants, agreements or obligations hereunder, the other would be irreparably
damaged by such breach or default and that, in addition to the other remedies
that may be available at law or in equity, the other party shall be entitled to
specific performance of this Agreement and injunctive relief. All rights and
remedies under this Agreement are cumulative of, and not exclusive of, any
rights or remedies otherwise available, and the exercise of any of such rights
or remedies shall not bar the exercise of any other rights or remedies.
Section 10.2 Attorneys' Fees. In the event of any Litigation between
Seller and Buyer with respect to this Agreement or the transactions contemplated
hereby, the party prevailing under such Litigation shall be entitled, as part of
the Judgment rendered in such Litigation, to recover from the other party its
reasonable attorneys' fees and costs and expenses in such litigation.
ARTICLE 11
INDEMNIFICATION
Section 11.1 Indemnification by Seller. From and after Closing, Seller
shall indemnify and hold harmless Buyer from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by Seller in this Agreement
not being true and accurate in all material respects when made or when required
by this Agreement to be true and accurate;
(b) any material breach or default by Seller in the performance of its
covenants, agreements, or obligations in this Agreement;
(c) all liabilities and obligations arising out of or relating to the
operation or ownership of the System prior to and including the date of the
Closing;
(d) all liabilities and obligations incurred either before or after the
Closing which arise out of or relate to any increase in the Basic Subscriber
Rate between the date hereof and the Closing;
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(e) all liabilities and obligations relating to the System not assumed
by Buyer; and
(f) any failure by Seller to comply with applicable provisions of any
bulk sales laws applicable to the sale of the Assets.
Section 11.2 Indemnification by Buyer. From and after Closing, Buyer
shall indemnify and hold harmless Seller from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by Buyer in this Agreement
not being true and accurate in all material respects when made or when required
by this Agreement to be true and accurate;
(b) any material breach or default by Buyer in the performance of its
covenants, agreements, or obligations in this Agreement; and
(c) the Assumed Obligations and Liabilities.
Section 11.3 Indemnified Third-Party Claim.
(a) If any Person not a party to this Agreement shall make any demand
or claim or file or threaten to file or continue any Litigation with respect to
which Buyer or Seller is entitled to indemnification pursuant to Sections 11.1
or 11.2, respectively, then within ten business days after notice (the "Notice")
by the party entitled to such indemnification (the "Indemnitee") to the other
(the "Indemnitor") of such demand, claim or Litigation, the Indemnitor shall
have the option, at its sole cost and expense, to retain counsel for the
Indemnitee (which counsel shall be reasonably satisfactory to the Indemnitee),
to defend any such Litigation. The failure, refusal or neglect of the Indemnitee
to notify the Indemnitor within the time period specified above of any such
Litigation shall not relieve such Indemnitor from any liability which it may
have to the Indemnitee in connection therewith, unless the effect of such
failure, refusal or neglect is to prejudice materially the rights of the
Indemnitor in defending against the Litigation. The Indemnitee shall be
permitted to participate in such defense undertaken by the Indemnitor at its own
expense, provided that, if the named parties to any such Litigation (including
any impleaded parties) include both the Indemnitor and the Indemnitee or, if the
Indemnitor proposes that the same counsel represent both the Indemnitee and the
Indemnitor and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, then
the Indemnitee shall have the right to retain its own counsel at the cost and
expense of the Indemnitor. If the Indemnitor shall fail to respond within ten
days after receipt of the Notice, the Indemnitee may retain counsel and conduct
the
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defense of such Litigation as it may in its sole discretion deem proper, at the
sole cost and expense of the Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to the
Indemnitor and provide access to its books, records and personnel as the
Indemnitor reasonably requests in connection with the investigation or defense
of the indemnified Losses. The Indemnitor shall promptly upon receipt of
reasonable supporting documentation reimburse the Indemnitee for out-of-pocket
costs and expenses incurred by the latter in providing the requested assistance.
(c) With regard to Litigation of third parties for which Buyer or
Seller is entitled to indemnification under Sections 11.1 or 11.2, such
indemnification shall be paid by the indemnifying party upon: (i) the entry of a
Judgment against the Indemnitee and the expiration of any applicable appeal
period; (ii) the entry of an unappealable Judgment or final appellate Judgment
against the Indemnitee; or (iii) a settlement with the consent of the
Indemnitor, which consent shall not be unreasonably withheld, provided that no
such consent need be obtained if the Indemnitor fails to respond to the Notice
as provided in paragraph 11.3(a). Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, expenses of
counsel to the Indemnitee shall be reimbursed on a current basis by the
Indemnitor if such expenses are a liability of the Indemnitor.
Section 11.4 Determination of Indemnification Amounts and Related
Matters.
(a) Seller shall not be liable for (i) the first $250,000 of total
Losses for which Seller is liable under paragraph 11.1(a), except Losses
thereunder arising with respect to Seller's representations and warranties
stated in Sections 5.4 and 5.16, and (ii) any Losses for which Seller is
otherwise liable under paragraph 11.1(a) which exceed the amount of the Purchase
Price.
(b) In calculating amounts payable to an Indemnitee hereunder, the
amount of the indemnified Losses shall be reduced by the amount of any insurance
proceeds (net of Taxes thereon) paid to the Indemnitee for such Losses.
(c) Subject to the provisions of Section 11.3, all amounts payable by
the Indemnitor to the Indemnitee in respect of any Losses under Sections 11.1 or
11.2 shall be payable by the Indemnitor as incurred by the Indemnitee.
Section 11.5 Time and Manner of Certain Claims. The representations and
warranties of Buyer and Seller in this Agreement shall survive Closing;
provided, however, that neither Seller nor Buyer shall have any liability under
paragraphs
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11.1(a) or 11.2(a), respectively, unless a claim for Losses for which
indemnification is sought thereunder is asserted by the party seeking
indemnification thereunder by written notice to the party from whom
indemnification is sought within:
(a) twelve (12) months after Closing, in the case of Seller's
representations and warranties stated in Section 5.18.
(b) fifteen (15) years after Closing, in the case of Seller's
representations and warranties stated in Section 5.20;
(c) the period of the applicable statute of limitations, in the case of
Seller's representations and warranties stated in Sections 5.4 and 5.16; and
(d) twenty-four (24) months after closing, in all other cases.
Section 11.6 Other Indemnification. The provisions of Sections 11.3 and
11.4 shall be applicable to any claim for indemnification made under any other
provision of this Agreement, and all references in Sections 11.3 and 11.4 to
Sections 11.1 and 11.2 shall be deemed to be references to such other
provisions of this Agreement.
ARTICLE 12
MISCELLANEOUS PROVISIONS
Section 12.1 Covenant Not To Sue and Nonrecourse to Partners.
(a) Seller agrees that notwithstanding any other provision in this
Agreement, any agreement, instrument, certificate or document entered into
pursuant to or in connection with this Agreement or the transactions
contemplated herein or therein (each a "Transaction Document") and any rule of
law or equity to the contrary, to the fullest extent permitted by law, Buyer's
obligations and liabilities under all Transaction Documents and in connection
with the transactions contemplated therein (other than Buyer's obligations under
Section 6.3(d) hereof) shall be nonrecourse to all direct and indirect general
and limited partners of Buyer.
(b) "Nonrecourse" means that the obligations and liabilities are
limited in recourse solely to the assets of Buyer (for those purposes, any
capital contribution obligations of the general and limited partners of Buyer or
any negative capital account balances of such partners shall not be deemed to be
assets of Buyer) and are not guaranteed directly or indirectly by, or the
primary obligations of, any general or limited partner of Buyer, and neither
Buyer nor any general or limited
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partner or any officer, director, partner, employee or agent of Buyer or any
general or limited partner of any successor partnership, either directly or
indirectly, shall be personally liable in any respect (except to the extent of
their respective interests in the assets of Buyer) for any obligation or
liability of Buyer under any Transaction Document or any transaction
contemplated therein.
(c) "Direct" partners include all general and limited partners of
Buyer, and "indirect" partners include all general and limited partners of each
direct partner and all general and limited partners of each such indirect
partner and all such further indirect partners thereof and each such indirect
partner.
(d) Except for actions based on Buyer's default in the performance of
its obligations under Section 6.3(d) hereof, Seller hereby covenants for itself,
its successors and assigns that it, its successors and assigns will not make,
bring, claim, commence, prosecute, maintain, cause or, to the extent within its
control, permit any action to be brought, commenced, prosecuted, maintained,
either at law or equity, in any court of the United States or any state thereof
against any direct or indirect general or limited partner of Buyer or any
officer, director, partner, employee or agent of Buyer or any direct or indirect
general or limited partner of Buyer for (i) the payment of any amount or the
performance of any obligation under any Transaction Document or (ii) the
satisfaction of any liability arising in connection with any such payment or
obligation or otherwise, including without limitation, liability arising in law
for tort (including, without limitation, for active and passive negligence,
negligent misrepresentation and fraud), in equity (including, without
limitation, for indemnification and contribution) and under contract (including,
without limitation, monetary damages for the breach of representation or
warranty or performance of any of the covenants or obligations contained in any
Transaction Document or with the transactions contemplated herein or therein).
Section 12.2 Expenses. Each of the parties shall pay its own costs and
expenses, including without limitation, fees and expenses of its legal counsel,
accountants, financial advisors, brokers or finders, consultants and other
experts incurred in connection with this Agreement and the transactions
contemplated herein, whether or not the transactions contemplated herein occur.
Section 12.3 Brokerage. Seller shall indemnify and hold Buyer harmless
from and against any and all Losses arising from any employment by it of, or
services rendered to it by, any finder, broker, agency, or other intermediary,
in connection with the transactions contemplated hereby, or any allegation of
any such employment or services. Buyer shall indemnify and hold
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Seller harmless from and against any and all Losses arising from any employment
by it of, or services rendered to it by, any finder, broker, agency, or other
intermediary, in connection with the transactions contemplated hereby, or any
allegation of any such employment or services.
Section 12.4 Assignment. Subject to Section 6.3(d) hereof, Buyer may
assign its rights and obligations (i) to purchase the System pursuant to this
Agreement, (ii) to assume liabilities relating thereto as provided in Section
2.3, and (iii) to indemnify Seller as provided in Section 11.2 without the
consent of Seller; provided, however, that such assignee must be an Affiliate of
Buyer and must have the financial ability to fully perform such rights and
obligations (a "Qualified Assignee"). Effective upon such assignment to a
Qualified Assignee, Buyer shall be released and Seller shall thereby release
Buyer from all obligations and liabilities with respect thereto. Upon such
assignment Buyer shall notify Seller thereof. After the Closing, Seller may
assign its rights and obligations under this Agreement to an Affiliate of Seller
which has the financial ability to fully perform such rights and obligations (a
"Qualified Seller Assignee"). Effective upon such assignment to a Qualified
Seller Assignee, Seller shall be released and Buyer shall thereby release Seller
from all obligations and liabilities with respect thereto. Upon such assignment,
Seller shall notify Buyer thereof.
Section 12.5 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any party of any of the conditions precedent
to its obligations under this Agreement shall not preclude it from seeking
redress for breach of this Agreement other than with respect to the condition so
waived.
Section 12.6 Notices. All notices, requests, demands, applications,
services of process, and other communications which are required to be or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if sent by facsimile transmission, delivered by overnight or other
courier service, or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:
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To Seller: Time Warner Entertainment Company, L.P.
300 First Stamford Place
Stamford, CT 06902-6732
Attn: Jeffrey D. Elberson
Telecopy: (203) 328-4828
Copies: Holland & Hart
P.O. Box 8749
555 17th Street, Suite 2900
Denver, CO 80201-8749 (Mail)
80202 (Delivery)
Attn: Davis O. O'Connor, Esq.
Telecopy: (303) 295-8261
To Buyer: InterMedia Partners of Tennessee, L.P.
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Attn: Leo J. Hindery, Jr.
Rodney M. Royse
Telecopy: (415) 397-3978
Copies: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Gregg F. Vignos, Esq.
Telecopy: (415) 983-1200
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(a) if delivered by courier service or by facsimile transmission, upon actual
receipt by the intended recipient, or (b) if mailed, upon the date of delivery
as shown on the return receipt therefor.
Section 12.7 Entire Agreement: Amendments. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
Section 12.8 Binding Effect: Benefits. This Agreement shall inure to
the benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns. Except as set
forth in Section 12.4, neither Buyer nor Seller shall assign this Agreement or
delegate any of its duties hereunder (other than by operation of law provided
such assignee has the financial capacity to meet assignor's obligations
hereunder) to any other Person without the prior written consent of the other.
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Section 12.9 Headings, Schedules and Exhibits. The section and other
headings contained in this Agreement are for reference purposes only and will
not affect the meaning of interpretation of this Agreement. Reference to
Exhibits shall, unless otherwise indicated, refer to the Exhibits attached to
this Agreement, which shall be incorporated in and constitute a part of this
Agreement by such reference.
Section 12.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together will be deemed to be one and the same
instrument.
Section 12.11 Publicity. Seller and Buyer shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements, and any oral or written statements to
Seller's employees concerning this Agreement and the transactions contemplated
hereby. Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which shall not be
unreasonably withheld or delayed; provided, however, that Seller or Buyer may at
any time make any announcement required by Legal Requirements so long as such
party, promptly upon learning of such requirement, notifies the other of such
requirement and consults with the other in good faith with respect to the
wording of such announcement.
Section 12.12 Governing Law. The validity, performance, and enforcement
of this Agreement and all transaction documents, unless expressly provided to
the contrary, shall be governed by the laws of the State of Delaware, without
giving effect to the principles of conflicts of law of such state.
Section 12.13 Third Parties; Joint Ventures. This Agreement constitutes
an agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies,
obligations, or liabilities, legal or equitable, including any right of
employment, on any Person (including but not limited to any employee or former
employee of Seller) other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third-party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
Section 12.14 Construction. This Agreement has been negotiated by Buyer
and Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
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Section 12.15 Further Acts. If, at any time before, on or after the
date of the Closing, any further action by any of the parties to this Agreement
is necessary or desirable to carry out the purposes of this Agreement, such
party shall take all such necessary or desirable action or use commercially
reasonable efforts to cause such action to be taken. Without limiting the
generality of the foregoing, on or after the date of the Closing, and without
further consideration, Seller shall execute and deliver to Buyer such further
instruments of conveyance, in form and content reasonably acceptable to Buyer
and Seller, as Buyer may reasonably request in order to more effectively convey,
transfer and assign to Buyer any and all of the Assets.
Section 12.16 Time of Essence. Time is of the essence in each and every
provision in this Agreement.
Section 12.17 Severability. Any provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining provisions of this Agreement or
affecting the validity or enforceability of any provision of this Agreement in
any other jurisdiction.
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<PAGE> 55
Buyer and Seller have executed this Agreement as of the date first
written above.
BUYER:
INTERMEDIA PARTNERS OF
TENNESSEE, L.P.
By InterMedia Capital Management
IV, L.P., its general partner
By InterMedia Management, Inc.
Its general partner
By /s/ Leo J. Hindery, Jr.
________________________________
Leo J. Hindery, Jr.,
President
SELLER:
TIME WARNER ENTERTAINMENT
COMPANY, L.P., a Delaware limited
partnership
By American Television and
Communications Corporation,
its general partner
By /s/ David E. O'Hayre
________________________________
Name: David E. O'Hayre
_____________________________
Title: Sr. Vice President
____________________________
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<PAGE> 56
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT is made and entered into as
of November 1, 1995 (the "Amendment"), by and among INTERMEDIA PARTNERS OF
TENNESSEE, L.P., a California limited partnership ("InterMedia L.P."),
INTERMEDIA PARTNERS OF TENNESSEE, a California general partnership ("InterMedia
G.P.") and TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware limited
partnership ("Time Warner"),
W I T N E S S E T H:
WHEREAS, InterMedia L.P. and Time Warner are parties to that certain
Asset Purchase Agreement dated as of October 18, 1995 (the "Agreement"); and
WHEREAS, InterMedia L.P. desires to assign all of its rights, interests
and obligations under the Agreement to InterMedia G.P.; and
WHEREAS, InterMedia G.P. desires to assume from InterMedia L.P. all of
its rights, interests and obligations under the Agreement; and
WHEREAS, InterMedia L.P., InterMedia G.P. and Time Warner wish to amend
the Agreement to reflect the aforementioned assignment and assumption:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Amendment to General Partnership. All references in the Agreement to
"InterMedia Partners of Tennessee, L.P." are hereby amended to read "InterMedia
Partners of Tennessee".
2. Amendment to Certain References. All references in the Agreement to
"InterMedia Partners of Tennessee, L.P., a California limited partnership" are
hereby amended to read "InterMedia Partners of Tennessee, a California general
partnership".
3. Amendment to Sections 4.1, 4.3 and 8.3(b). In Section 4.1, 4.3 and
8.3(b) the text "limited partnership" is hereby deleted and the following
substituted therefor "general partnership".
4. Full Force and Effect. Except as expressly amended hereby, all other
terms of the Agreement shall remain in full force and effect. If any of the
terms of this Amendment
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<PAGE> 57
conflict with any of the terms of the Agreement, the terms of this Amendment
shall control.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
6. Governing Law. The validity performance, and enforcement of this
Amendment shall be governed by the laws of the State of Delaware without giving
effect to the principles of conflicts of law of such state.
IN WITNESS WHEREOF, InterMedia L.P., InterMedia G.P. and Time Warner
have executed this Amendment as of the date first written above.
INTERMEDIA PARTNERS OF
TENNESSEE, L.P., a California
limited partnership
By InterMedia Capital Management
IV, L.P., its general partner
By InterMedia Management, Inc.
Its general partner
By /s/ Leo J. Hindery, Jr.
______________________________________
Leo J. Hindery, Jr.,
President
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<PAGE> 58
TIME WARNER ENTERTAINMENT
COMPANY, L.P., a Delaware limited
partnership
By American Television and
Communications Corporation,
its general partner
By /s/ David E. O'Hayre
____________________________________
Name: David E. O'Hayre
_________________________________
Title: Sr. Vice President
________________________________
INTERMEDIA PARTNERS OF TENNESSEE,
a California general partnership
By InterMedia Capital Management
IV, L.P., its managing general
partner
By InterMedia Management, Inc.
Its general partner
By /s/ Leo J. Hindery, Jr.
____________________________________
Leo J. Hindery, Jr.,
President
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<PAGE> 1
EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
Between
InterMedia Capital Management V, L.P.,
and
InterMedia Partners IV, L.P.
Dated as of
July 26, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS......................................... 1
Section 1.1 Certain Defined Terms............................... 1
ARTICLE II PURCHASE AND SALE................................... 2
Section 2.1 Purchase and Sale of the Shares..................... 2
Section 2.2 Purchase Price...................................... 2
Section 2.3 Closing............................................. 2
ARTICLE III REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
SELLER.............................................. 2
Section 3.1 Organization and Authority of Seller and RMHI....... 3
Section 3.2 Capital Structure................................... 3
Section 3.3 Equity Investments.................................. 4
Section 3.4 Ownership........................................... 4
Section 3.5 No Conflict......................................... 4
Section 3.6 Absence of Litigation............................... 4
Section 3.7 Brokers............................................. 5
Section 3.8 Debt................................................ 5
Section 3.9 Undisclosed Liabilities............................. 5
ARTICLE IV REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
PURCHASER........................................... 5
Section 4.1 Organization and Authority of Purchaser............. 5
Section 4.2 No Conflict......................................... 5
Section 4.3 Absence of Litigation............................... 6
Section 4.4 Brokers............................................. 6
ARTICLE V ADDITIONAL AGREEMENTS............................... 6
Section 5.1 Further Action...................................... 6
Section 5.2 No Other Representations or Warranties.............. 6
ARTICLE VI CONDITIONS TO CLOSING............................... 7
Section 6.1 Conditions to Obligations of Seller................. 7
Section 6.2 Conditions to Obligations of Purchaser.............. 8
ARTICLE VII TERMINATION AND WAIVER.............................. 8
Section 7.1 Termination......................................... 8
Section 7.2 Effect of Termination............................... 9
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.3 Waiver.............................................. 9
ARTICLE VIII GENERAL PROVISIONS.................................. 9
Section 8.1 Survival............................................ 10
Section 8.2 Expenses............................................ 10
Section 8.3 Notices............................................. 10
Section 8.4 Public Announcements................................ 11
Section 8.5 Headings............................................ 11
Section 8.6 Severability........................................ 11
Section 8.7 Entire Agreement.................................... 11
Section 8.8 Assignment.......................................... 11
Section 8.9 No Third Party Beneficiaries........................ 11
Section 8.10 Amendment........................................... 12
Section 8.11 Governing Law....................................... 12
Section 8.12 Specific Performance................................ 12
Section 8.13 Counterparts........................................ 12
Section 8.14 Knowledge........................................... 12
</TABLE>
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<PAGE> 4
PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is dated as of July
26, 1996 and is by and between INTERMEDIA PARTNERS IV, L.P., a California
limited partnership ("Purchaser") and INTERMEDIA CAPITAL MANAGEMENT V, L.P., a
California limited partnership ("Seller"),
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued outstanding shares of Class A
Common Stock of Robin Media Holdings, Inc., a Nevada corporation ("RMHI"), which
is the owner of all of the outstanding stock of Robin Media Group, Inc. ("RMG")
(the "Shares"); and
WHEREAS, Seller wishes to sell and assign to Purchaser, and Purchaser
wishes to purchase and assume from Seller, the Shares;
NOW, THEREFORE, Purchaser and Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Business Day" means any day which is not a Saturday or Sunday or which
in New York, New York and San Francisco, California is neither a legal holiday
nor a day on which banking institutions are authorized by law or regulation to
close.
"Closing" has the meaning specified in Section 2.3(a).
"Closing Date" has the meaning specified in Section 2.3(a).
"Governmental Authority" means any United States, federal, state or
local governmental, regulatory or administrative
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<PAGE> 5
authority, agency or commission, or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, requirement or rule of common law.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Purchase Price" has the meaning specified in Section 2.2 of this
Agreement.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Shares. Upon the terms and subject
to the conditions contained in this Agreement, at the Closing, Seller shall sell
and assign to Purchaser, and Purchaser shall purchase from Seller, the Shares.
Section 2.2 Purchase Price. Purchaser will pay to Seller for the Shares
the purchase price of three hundred twenty-eight thousand dollars ($328,000) in
cash (the "Purchase Price").
Section 2.3 Closing. (a) Subject to the terms and conditions of this
Agreement, the purchase and sale of the Shares contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San Francisco, California,
at 10:00 a.m. local time, on or before July __, 1996, following the satisfaction
of the conditions set forth in Article hereof, or at such other place and time
or on such other date as the parties may agree (such date to be referred to as
the "Closing Date").
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<PAGE> 6
(b) At the Closing, Purchaser shall deliver to Seller (i) the Purchase
Price by wire transfer in immediately available federal funds to a bank account
to be designated by Seller and (ii) such instruments and documents of assumption
of the Shares and all obligations whatsoever relating thereto as Seller may
reasonably require to effectuate such assumption.
(c) At the Closing Seller shall deliver to Purchaser such instruments
and documents of assignment of the Shares as Purchaser may reasonably require to
effectuate such assignment.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
AGREEMENTS OF SELLER
Seller hereby represents and warrants to and agrees with Purchaser as
follows:
Section 3.1 Organization and Authority of Seller and RMHI.
(a) Seller is a limited partnership, duly organized, validly existing
and in good standing under the laws of its state of formation and, has all
necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Seller, the performance by
Seller of its obligations hereunder and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all requisite
partnership action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and (assuming due authorization, execution and delivery
by Purchaser) constitutes a valid and binding obligation of Seller enforceable
against Seller in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditor's rights generally and subject as to enforceability to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) RMHI is a corporation, duly organized, validly existing and in good
standing under the laws of Nevada, its state of formation.
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<PAGE> 7
Section 3.2 Capital Structure.
(a) The authorized capital stock of RMHI consists of 3,650 shares of
Common Stock and 12,000 shares of Preferred Stock. As of the date hereof: (i)
12,000 shares of Preferred Stock are issued and outstanding; (ii) 3,285 shares
of Class A Common Stock are issued and outstanding; and (iii) 365 shares of
Class B Common Stock are issued and outstanding.
All of the outstanding Class A and Class B Common Stock and Preferred
Stock of RMHI were issued in compliance with applicable federal and state
securities laws, and no further registration, qualification or other compliance
under such securities laws is required in connection with the sale of the
Shares. All of the Shares are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, RMHI's
Certificate of Incorporation or Bylaws or any agreement to which Seller or RMHI
is a party or is bound.
(b) Except as set forth in Section , there are no equity securities of
any class of RMHI, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. There are no
options, warrants, calls, rights, commitments or agreements of any character to
which RMHI is a party or by which it is bound obligating RMHI to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of RMHI or obligating RMHI to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no voting trusts,
proxies or other agreements or understandings with respect to the shares of
capital stock of RMHI.
Section 3.3 Equity Investments. RMHI owns directly all of the
outstanding capital stock of RMG. RMHI has pledged to certain banks all of the
Preferred Stock of RMG.
Section 3.4 Ownership. Seller has good title to the Shares and upon the
Closing, Purchaser will have good title to the Shares, free and clear of all
liens, claims and encumbrances and upon receipt by Seller of the Purchase Price
and delivery by Seller of the instruments and documents of assignment referred
to in Section , Purchaser will take all right, title and interest of Seller in
and to the Shares, free and clear of all
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<PAGE> 8
liens, claims and encumbrances other than created by or through Purchaser or any
of its affiliates.
Section 3.5 No Conflict. Except as may result from any facts or
circumstances relating solely to Purchaser, the execution, delivery and
performance of this Agreement by Seller do not and will not (a) conflict with or
violate any Law or Governmental Order applicable to Seller or RMHI, (b) conflict
with or violate any provision of the charter documents of Seller or RMHI or (c)
conflict with or violate any agreement to which Seller or RMHI is a party which
conflict or violation would reasonably be expected to result in Seller or RMHI
being prevented or restrained from performing its obligations hereunder or
result in any lien, claim, or encumbrance on the Shares.
Section 3.6 Absence of Litigation. There are no Actions by or against
Seller, RMHI or RMG or, to the knowledge of Seller, any of their respective
affiliates, pending before any Governmental Authority which, if determined
adversely, would materially adversely affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby. Except for filings pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, no consent of any Government Authority is
necessary for the sale of the Shares. Neither Seller, RMHI nor RMG nor, to the
knowledge of Seller, any of their respective affiliates, is subject to any
Governmental Order (nor, to the knowledge of Seller, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
relating to or affecting the Shares or which would materially adversely affect
the legality, validity or enforceability of this Agreement or the consummation
of the transactions contemplated hereby. To the knowledge of Seller, there are
no Actions by or against Seller, RMHI or RMG pending before any Governmental
Authority and RMHI and RMG are not subject to any Governmental Order and there
are no Governmental Orders threatened to be imposed by any Governmental
Authority against RMHI or RMG. During the period from the date hereof until the
Closing, Seller will apprise Purchaser of the institution or written threat of
any Actions referred to in this Section and known to Seller.
Section 3.7 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or
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<PAGE> 9
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller.
Section 3.8 Debt. Seller has not, independent of RMHI or RMG corporate
action, incurred any indebtedness for borrowed money on behalf of RMHI or RMG or
created any obligation on behalf of RMHI or RMG and Seller agrees that, between
the date hereof and the Closing Date, Seller will not, independent of RMHI
action, incur any indebtedness for borrowed money on behalf of RMHI or RMG or
create any obligation for which RMHI or RMG may be liable.
Section 3.9 Undisclosed Liabilities. To the knowledge of Seller, RMHI
and RMG do not have any liabilities, contingent or otherwise, not reflected on
the most recent financial statements of RMHI and RMG.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Authority of Purchaser. Purchaser is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of California and has all necessary power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Purchaser, the performance by Purchaser of its obligations
hereunder and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser
and (assuming due authorization, execution and delivery by Seller) constitutes a
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms, subject to the effect of any applicable bankruptcy
reorganization, insolvency, moratorium or other similar laws affecting
creditor's rights generally and subject as to enforceability to the effect of
general principles
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<PAGE> 10
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 4.2 No Conflict. Except as may result from any facts or
circumstances relating solely to Seller, the execution, delivery and performance
of this Agreement by Purchaser does not and will not (a) conflict with or
violate any Law or Governmental Order applicable to Purchaser, (b) conflict with
or violate any provision of Purchaser's certificate of incorporation or bylaws
or (c) conflict with or violate any agreement to which Purchaser is a party
which conflict or violation would reasonably be expected to result in Purchaser
being prevented or restrained from performing its obligations hereunder.
Section 4.3 Absence of Litigation. There are no Actions by or against
Purchaser or any of its affiliates pending before any Governmental Authority
which would, if adversely determined, materially adversely affect the legality,
validity or enforceability of this Agreement or the consummation of the
transactions contemplated hereby. Except for filings pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, no consent of any
Government Authority is necessary for the sale of the Shares. Purchaser is not
subject to any Governmental Order (nor, to the knowledge of Purchaser, are there
any such Governmental Orders threatened to be imposed by any Governmental
Authority) which would materially adversely affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby. During the period from the date hereof until the Closing,
Purchaser will apprise Seller and RMHI of the institution or written threat of
any Actions or Governmental Order referred to in this Section and known to
Purchaser.
Section 4.4 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.
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<PAGE> 11
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Further Action. Each of the parties hereto shall use all
reasonable efforts to take or cause to be taken all appropriate action, do or
cause to be done all things necessary, proper or advisable, and execute and
deliver such documents and other papers, as may be required to carry out the
provisions of this Agreement and consummate and make effective the transactions
contemplated by this Agreement.
Section 5.2 No Other Representations or Warranties. Purchaser hereby
acknowledges and agrees with Seller and RMHI as follows:
THE SHARES ARE BEING SOLD ON AN "AS IS" "WITH ALL FAULTS" BASIS, AND
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE
HEREOF, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WRITTEN OR ORAL, AND SELLER HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR
WARRANTY (INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OR WARRANTY
OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY
SELLER, ITS AFFILIATES, OR ANY OF THEIR AGENTS OR REPRESENTATIVES OR
ANY OTHER PERSON, WITH RESPECT TO THE SHARES OR THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO PURCHASER, ANY AFFILIATE
OF PURCHASER OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES OR ANY OTHER PERSON OF ANY DOCUMENT OR OTHER
INFORMATION BY SELLER, ANY OF ITS AFFILIATES, OR ANY OF THEIR OFFICERS,
PARTNERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER
PERSON WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contem-
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<PAGE> 12
plated by this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of the following conditions:
(a) Purchaser shall have delivered the Purchase Price and the
instruments and documents of assumption in accordance with Section 2.3(b)
hereof;
(b) the representations and warranties of Purchaser contained in this
Agreement shall have been true and correct in all material respects on the date
hereof and on the Closing Date, as if made on each such date;
(c) the covenants and agreements contained in this Agreement to be
complied with by Purchaser at or prior to the Closing shall have been complied
with in all material respects;
(d) as of the Closing Date, no Action shall have been completed,
pending or threatened against Seller or Purchaser that has or is likely to
result in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement and there shall be in
effect no Governmental Order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement nor any proceedings pending with
respect thereto;
(e) Seller shall have received all necessary regulatory consents for
the sale of the Shares;
(f) Seller shall have received a certificate signed by a senior
executive officer or general partner of Purchaser to the effect that the
requirements of clauses (b), (c) and (d) above have been satisfied; and
(g) Seller shall have received such other documents and certificates as
it may reasonably request.
Section 6.2 Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of the following
conditions:
(a) Seller shall have delivered the instruments and docu-
ments of assignment in accordance with Section 2.3(c) hereof;
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<PAGE> 13
(b) the representations and warranties of Seller contained in this
Agreement shall have been true and correct in all material respects on the date
hereof and on the Closing Date, as if made on each such date;
(c) the covenants and agreements contained in this Agreement to be
complied with by Seller at or prior to the Closing shall have been complied with
in all material respects;
(d) as of the Closing Date, no Action shall have been completed,
pending or threatened against Seller or Purchaser that has or is likely to
result in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement and there shall be in
effect no Governmental Order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement nor any proceedings pending with
respect thereto;
(e) Seller shall have received all necessary regulatory consents for
the sale of the Shares;
(f) Purchaser shall have received certificates signed by a senior
executive officer or the general partner of Seller to the effect that the
requirements of clauses (b), (d) and (e) above have been satisfied; and
(g) Purchaser shall have received such other documents and certificates
as it may reasonably request.
ARTICLE VII
TERMINATION AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Purchaser and Seller;
(b) by Purchaser or Seller in the event that the Closing has not
occurred by August 31, 1996;
(c) by Purchaser or Seller in the event that any Governmental Authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or
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<PAGE> 14
otherwise prohibiting the transactions contemplated by this Agreement and such
order decree, ruling or other action shall have become final and nonappealable;
(d) by Purchaser if between the date hereof and the time scheduled for
the Closing, Seller makes a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against Seller seeking to adjudicate
them bankrupt or insolvent, or seeking arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
(e) by Seller if, between the date hereof and the time scheduled for
the Closing, Purchaser makes a general assignment for the benefit of creditors,
or any proceeding shall be instituted by or against Purchaser seeking to
adjudicate it bankrupt or insolvent, or seeking arrangement, adjustment,
protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
Section 7.3 Waiver. Any party to this Agreement may (a) extend the time
for the performance of any of the obligations or other acts of any other party,
(b) waive any inaccuracies in the representations and warranties of any other
party contained herein or in any document delivered by such other party pursuant
hereto or (c) waive compliance with any of the agreements or conditions of any
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition or
a waiver of any other term or condition of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
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<PAGE> 15
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Survival. The representations and warranties of the parties
hereto contained in this Agreement shall terminate immediately following
completion of the Closing.
Section 8.2 Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
Section 8.3 Notices. All notices, requests, claims, demands,
applications, services of process and other communications which are required to
be or may be given under this Agreement will be in writing and will be deemed to
have been duly given if sent by telecopy or facsimile transmission, answer back
requested, or delivered by courier or mailed, certified first class mail,
postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
(a) if to Seller:
InterMedia Capital Management V, L.P.
235 Montgomery Street Suite 420
San Francisco, CA 94104
Attn: Mr. Rodney M. Royse
With a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn: Gregg Vignos, Esq.
Facsimile: (415) 983-1200
Telephone: (415) 983-1649
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<PAGE> 16
(b) if to Purchaser:
InterMedia Partners IV, L.P.
235 Montgomery Street Suite 420
San Francisco, CA 94104
Attn: Mr. Rodney M. Royse
Facsimile: (415) 397-3978
Telephone: (415) 616-4600
or to such other address as any party will have furnished to the others by
notice given in accordance with this Section . Such notice will be effective,
(i) if delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, when
confirmation is received, or (iii) if mailed, upon the date of delivery as shown
by the return receipt therefor (rejection or other refusal to accept or
inability to deliver because of a change of address of which no notice was given
shall be deemed to be receipt of notice).
Section 8.4 Public Announcements. Except as required by Law, no party
to this Agreement shall make, or cause to be made, any press release or public
announcement or otherwise communicate with any news media in respect of this
Agreement or the transactions contemplated hereby without the prior written
consent of the other parties which consent shall not be unreasonably withheld or
delayed; provided, however, that any party may at any time make announcements
which are required by applicable law so long as the party so required to make an
announcement promptly upon learning of such requirement notifies the other party
of such requirement and discusses with the other party in good faith the exact
wording of any such announcement.
Section 8.5 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 8.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
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<PAGE> 17
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
Section 8.7 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, between
Seller and Purchaser with respect to the subject matter hereof.
Section 8.8 Assignment. This Agreement may not be assigned by any party
without the express written consent of the other parties (which consent may be
granted or withheld in the sole discretion of such party).
Section 8.9 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and, except as otherwise expressly provided herein, nothing
herein is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 8.10 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, Seller and
Purchaser.
Section 8.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, applicable to
contracts executed in and to be performed entirely within that state.
Section 8.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity.
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<PAGE> 18
Section 8.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute an actual instrument.
Section 8.14 Knowledge. For the purposes of this Agreement, "knowledge"
of a party means the actual knowledge of key management personnel of such party.
The parties have executed this Agreement as of the day and year first
above written.
INTERMEDIA CAPITAL MANAGEMENT V,
L.P., a California limited
partnership
By INTERMEDIA MANAGEMENT, INC., a
California corporation, as
General Partner
By /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
President
INTERMEDIA PARTNERS IV, L.P., a
California limited partnership
By INTERMEDIA CAPITAL MANAGEMENT
IV, L.P., a California limited
partnership, as General Partner
By INTERMEDIA MANAGEMENT, INC., a
California corporation, as
General Partner
By /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
President
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<PAGE> 1
EXHIBIT 2.4
CONTRIBUTION AGREEMENT
by and between
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
INTERMEDIA PARTNERS
and
GENERAL ELECTRIC CAPITAL CORPORATION
April 30, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 Definitions...................................................................................1
1.1 Assets........................................................................................1
1.2 Closing.......................................................................................2
1.3 Closing Date..................................................................................2
1.4 Code..........................................................................................2
1.5 Communications Act............................................................................2
1.6 Contracts.....................................................................................2
1.7 Copyright Act.................................................................................2
1.8 Debt..........................................................................................2
1.9 Fair Market Value.............................................................................2
1.10 FCC...........................................................................................2
1.11 Franchises....................................................................................2
1.12 GAAP..........................................................................................2
1.13 Indemnifiable Damages.........................................................................2
1.14 Indemnitee....................................................................................2
1.15 Indemnitor....................................................................................2
1.16 IPWT Partnership Agreement....................................................................3
1.17 IPWT Partnership Interest.....................................................................3
1.18 IPWT Plans....................................................................................3
1.19 Leased Property...............................................................................3
1.20 Leases........................................................................................3
1.21 Licenses......................................................................................3
1.22 Lien..........................................................................................3
1.23 Net Cash Flow.................................................................................3
1.24 Owned Property................................................................................3
1.25 Permitted Liens...............................................................................3
1.26 Subscribers...................................................................................3
1.27 Systems.......................................................................................4
ARTICLE 2 Contribution to the Partnership...............................................................4
2.1 Contribution of IPWT Partnership Interest.....................................................4
2.2 Transfer of Debt..............................................................................4
2.3 Fair Market Value of IPWT Partnership Interest................................................4
ARTICLE 3 Closing.......................................................................................5
3.1 Place and Date................................................................................5
3.2 Additional Closing Adjustments................................................................5
3.3 Calculation of Current Asset Differential.....................................................5
ARTICLE 4 Representations and Warranties of IP..........................................................6
4.1 Organization, Power, et.......................................................................7
</TABLE>
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<TABLE>
<S> <C>
4.2 No Conflict; Required Consents................................................................7
4.3 Title, Condition and Sufficiency..............................................................7
4.4 Taxpayer Identification Number................................................................7
ARTICLE 5 Representations and Warranties of GECC........................................................8
5.1 Organization, Power, etc......................................................................8
5.2 No Conflict; Required Consents................................................................8
5.3 Title, Condition and Sufficiency..............................................................8
5.4 Taxpayer Identification Number................................................................9
ARTICLE 6 Representations and Warranties Concerning IPWT................................................9
6.1 Organization, Power, etc......................................................................9
6.2 Title, Condition and Sufficiency..............................................................9
6.3 Franchises, Licenses, Contracts, Owned Property
and Real Property Interests................................................................. 10
6.4 Employee Benefits........................................................................... 11
6.5 Litigation.................................................................................. 11
6.6 Tax Returns; Other Reports.................................................................. 11
6.7 Systems Information......................................................................... 12
6.8 Compliance with Requirements of Law......................................................... 12
6.9 Real Property............................................................................... 14
6.10 No Adverse Change; Financial Statements..................................................... 14
6.11 Employees................................................................................... 15
6.12 Environmental............................................................................... 15
6.13 Taxpayer Identification Number.............................................................. 16
6.14 Cash Flow for Systems....................................................................... 16
6.15 IPWT Partnership Interests.................................................................. 16
ARTICLE 7 Representations and Warranties of the
Partnership................................................................................. 16
7.1 Organization, Power, et..................................................................... 16
7.2 Approvals................................................................................... 17
7.3 No Conflicts................................................................................ 17
7.4 Commissions................................................................................. 17
ARTICLE 8 Covenants of IP............................................................................. 17
8.1 Access to Systems........................................................................... 18
8.2 Conduct of Business......................................................................... 18
8.3 Preservation of Business.................................................................... 18
8.4 Compliance With Contracts and Laws.......................................................... 18
8.5 Adverse Changes............................................................................. 18
8.6 Approvals................................................................................... 19
8.7 Sales Taxes................................................................................. 19
8.8 Closing Conditions.......................................................................... 19
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 9 Covenants of the Partnership................................................................ 19
9.1 Closing Conditions.......................................................................... 19
9.2 Cooperation To Obtain Approvals............................................................. 19
ARTICLE 10 Conditions Precedent to Obligations of the
Partnership................................................................................ 19
10.1 Conditions Precedent; Waiver................................................................ 19
10.2 Compliance With Agreement, Representations and
Warranties.................................................................................. 20
10.3 No Material Adverse Change.................................................................. 20
10.4 Approvals and Consents...................................................................... 20
ARTICLE 11 Conditions Precedent to Obligations of the
Contributors............................................................................... 21
11.1 Conditions Precedent; Waiver................................................................ 21
11.2 Compliance With Agreement, Representations and
Warranties.................................................................................. 21
11.3 Approvals and Consents...................................................................... 21
11.4 Payment of Contingent Interest.............................................................. 22
ARTICLE 12 Closing Documents........................................................................... 22
12.1 Closing Documents To Be Delivered by the
Contributors................................................................................ 22
12.2 Closing Documents To Be Delivered by the
Partnership................................................................................. 22
ARTICLE 13 Indemnification............................................................................. 23
13.1 Indemnification by the Contributors......................................................... 23
13.2 Indemnification by the Partnership.......................................................... 25
13.3 Notice and Right To Defend Third-Party Claims............................................... 25
13.4 Sole Remedies............................................................................... 27
13.5 Waiver of Contribution...................................................................... 27
13.6 Contribution Adjustment..................................................................... 27
ARTICLE 14 Termination................................................................................. 27
14.1 Termination................................................................................. 27
ARTICLE 15 General..................................................................................... 28
15.1 Amendment................................................................................... 28
15.2 Entire Understanding........................................................................ 28
15.3 Counterparts................................................................................ 28
15.4 Headings.................................................................................... 28
15.5 Applicable Law.............................................................................. 28
15.6 Notices..................................................................................... 28
15.7 Fees and Expenses........................................................................... 29
</TABLE>
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<TABLE>
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15.8 "Knowledge" Defined......................................................................... 29
</TABLE>
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CONTRIBUTION AGREEMENT
THIS AGREEMENT is made as of April 30, 1996, by and between INTERMEDIA
CAPITAL PARTNERS IV, L.P., a California limited partnership (the "Partnership"),
INTERMEDIA PARTNERS, a California limited partnership ("IP"), and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GECC"). IP and GECC are
collectively referred to herein as the "Contributors".
RECITALS:
A. IP owns a general partnership interest and a limited partnership
interest and GECC owns a limited partnership interest in Intermedia Partners of
West Tennessee, L.P., a California limited partnership ("IPWT"), which owns and
operates cable television systems providing television programming and other
cable-related services to subscribers located in the State of Tennessee (the
"Systems").
B. Each Contributor desires to contribute its general partnership
interest and limited partnership interests in IPWT to the Partnership, and the
Partnership desires to accept such contribution, on the terms and subject to the
conditions of this Agreement.
C. GECC desires to assign the Debt (as defined below) to
the Partnership and the Partnership desires to accept such Debt
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the Contributors and
the Partnership agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
1.1 Assets. Subject to the following sentence, all of the assets,
rights, privileges and interests, whether tangible or intangible, now or
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hereafter owned, leased, held or used in connection with the construction,
operation and maintenance of the Systems, including, without limitation, the
Real Property, the Personal Property, the Franchises, the Contracts, the
Authorities, subscriber security and other deposits, accounts receivable,
prepaid items, purchase and sales orders, sales and service data, customer
lists, prospect lists and other rights and privileges, and copies of all books
and records related to the Systems.
1.2 Closing. The completion of the contribution of the IPWT Partnership
Interest as described in Section 2.1.
1.3 Closing Date. The date of the Closing specified in Section 3.1.
1.4 Code. The Internal Revenue Code of 1986, as amended.
1.5 Communications Act. The federal Communications Act of 1934
including the Cable Communications Policy Act of 1984, each as amended, and
including all rules and regulations promulgated thereunder, as amended.
1.6 Contracts. The contracts and commitments described in Section 4.2.
1.7 Copyright Act. Title 17 of the United States Code, as amended, and
all rules and regulations promulgated thereunder, as amended.
1.8 Debt. All amounts outstanding under that certain Amended and
Restated Loan Agreement dated as of October 3, 1994 between IPWT and GECC (the
"Loan Agreement").
1.9 Fair Market Value. The fair market value of the Systems, as
determined pursuant to the method described in Section 2.3.
1.10 FCC. The Federal Communications Commission or any successor
agency.
1.11 Franchises. The authorizations required in connection with the
Systems described in Section 6.3(b).
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1.12 GAAP. Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
1.13 Indemnifiable Damages. The damages described in Section 13.1
covered by the indemnity obligations set forth in Article 13.
1.14 Indemnitee. The party claiming the right to be indemnified under
Article 13.
1.15 Indemnitor. The party claimed to be obligated to indemnify under
Article 13.
1.16 IPWT Partnership Agreement. The InterMedia Partners of West
Tennessee, L.P. Amended and Restated Agreement of Limited Partnership dated as
of October 3, 1994.
1.17 IPWT Partnership Interest. All of a Contributor's right, title and
interest in IPWT and under the IPWT Partnership Agreement.
1.18 IPWT Plans. The plans and agreements described in Section 6.4(a).
1.19 Leased Property. The real property interests described in Section
6.9.
1.20 Leases. The agreements described in Section 6.9.
1.21 Licenses. The rights, privileges and interests other than the
Franchises described in Section 6.3(b).
1.22 Lien. The meaning given it in Section 4.2.
1.23 Net Cash Flow. As applied to any of the Systems, the revenues of
such System, less operating expenses (including any management fee and related
expenses in connection with the Systems) and capital expenditures.
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1.24 Owned Property. The real property described in Section 6.9.
1.25 Permitted Liens. The meaning given it in Section 6.2.
1.26 Subscribers. Those customers of the Systems which: (i) are under
contract with IPWT or are located within a multiple dwelling unit for which the
owner or operator thereof is under written contract with IPWT; (ii) are
connected to and receiving services of the Systems; and (iii) are currently
being charged by and obligated to pay to IPWT the standard rates for such
services as are provided by IPWT or, in the case of a bulk-billed multiple
dwelling unit, the owner or operator thereof is being charged by and is
obligated to pay to IPWT the rates for such services as are provided by IPWT. In
the case of occupants receiving services in bulk-billed multiple dwelling units,
such occupants shall be counted as Subscribers on an equivalency basis as
follows: the Systems' total aggregate bulk-billed charges for the calendar month
immediately prior to the Closing Date for a particular class of cable service
(which shall not include more than one (1) month's billing for any account and
which shall exclude installation and other nonrecurring charges) shall be
divided by the monthly standard (nondiscounted) service charge to individual
residential subscribers for that class of cable service for the calendar month
immediately prior to the Closing Date. Subscribers shall not include any person
receiving service from IPWT for which IPWT assess no charges.
1.27 Systems. The cable television systems operated by IPWT described
in Recital A.
ARTICLE 2
Contribution to the Partnership
2.1 Contribution of IPWT Partnership Interest. Pursuant to the
provisions of the InterMedia Capital Partners IV, L.P. Agreement of Limited
Partnership of the Partnership dated as of March 19, 1996, as amended (the "IP
IV Partnership Agreement"), and subject to the terms and conditions hereinafter
set forth, each Contributor, as a contribution in kind to the capital of the
Partnership, hereby undertakes to transfer pursuant to this Agreement all of
such Contributor's right, title and interest in
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and to its IPWT Partnership Interest and the Partnership agrees to accept the
same as a capital contribution in kind from each Contributor, subject to the
terms and conditions hereinafter set forth. The IPWT Partnership Interests shall
be transferred to the Partnership free and clear of all mortgages, liens,
charges, claims or restrictions. In return for such capital contributions, each
of IP and GECC shall receive on the Closing Date a credit on its capital account
in the Partnership equal to twelve million dollars ($12,000,000) and one million
three hundred thirty-three thousand five hundred dollars ($1,333,500),
respectively, of the Fair Market Value of the IPWT Partnership Interests. IP
hereby waives any and all transfer restrictions applicable to GECC pursuant to
section 8.3 of the IPWT Partnership Agreement.
2.2 Transfer of Debt. Subject to the terms and conditions hereinafter
set forth, GECC hereby agrees to assign all of its right, title and interest in
and to the Debt to the Partnership which agrees to assume the Debt from GECC.
The Debt shall be transferred to the Partnership free and clear of all
mortgages, liens, charges, claims or restrictions. In return for such transfer,
GECC or its designee shall receive on the Closing Date the following: (i) a
preferred limited partnership interest in the Partnership in an amount equal to
twenty-five million dollars ($25,000,000) in accordance with the IP IV
Partnership Agreement, (ii) a credit to its capital account in the Partnership
in an amount equal to eleven million six hundred sixty-six thousand five hundred
dollars ($11,666,500) in accordance with the IP IV Partnership Agreement, and
(iii) an amount equal to the sum of the outstanding principal balance of the
Debt plus all accrued and unpaid interest thereunder minus thirty-five million
dollars ($35,000,000), to be paid by the Partnership to GECC in immediately
available funds by wire to: Bankers Trust Company, Account Name: GECC CAF
Depository, Account No.: 50-232- 854, ABA No.: 021-001-033, Attention: Doris
Adams (212-250-8383) and Dolores Pennino (212-250-6767).
2.3 Fair Market Value of IPWT Partnership Interest. As of the date of
this Agreement, the Partnership and the Contributors agree that the fair market
value (the "Fair Market Value") of the IPWT Partnership Interests net of IPWT's
indebtedness is as follows:
<TABLE>
<S> <C>
General Partnership Interest $10,680,000
Limited Partnership Interest
</TABLE>
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<TABLE>
<S> <C>
IP 1,320,000
GECC 1,333,500
Total $13,333,500
</TABLE>
ARTICLE 3
Closing
3.1 Place and Date. The closing of the contribution of the Partnership
Interests and the Debt (the "Closing") shall take place in the offices of
Pillsbury Madison & Sutro LLP in San Francisco, California at 10 A.M. on a date
selected by the Partnership not later than July 1, 1996 after all conditions set
forth in Articles 8 and 9 have been satisfied or waived (the "Closing Date"). At
the Closing, each of the parties shall take all action and deliver all
documents, certificates and other items as required under this Agreement in
order to perform, fulfill and observe all covenants, conditions and agreements
on its part to be performed, fulfilled and observed at or prior to the Closing
Date and cause all conditions precedent to the other party's obligations
hereunder to be satisfied in full.
3.2 Additional Closing Adjustments. On the Closing Date, the
Contributors and the Partnership shall make a determination, in accordance with
GAAP, of the difference between the current assets and the current liabilities
of the Systems (the "Current Asset Differential") as of the Closing. Promptly
following such determination the amount of such Current Asset Differential
shall, effective as of the Closing Date, (i) increase the Fair Market Value of
the IPWT Partnership Interests in the event that such Current Asset Differential
is a positive number, or (ii) decrease the Fair Market Value of the IPWT
Partnership Interests in the event that such Current Asset Differential is a
negative number. Such increase or decrease to the Fair Market Value of the IPWT
Partnership Interests shall be apportioned eighty percent (80%) to the Fair
Market Value of IP's IPWT Partnership Interest and twenty percent (20%) to the
Fair Market Value of GECC's IPWT Partnership Interest. There shall be no cash
payment by any of the parties for any adjustment to the Fair Market Value of the
IPWT Partnership Interests.
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3.3 Calculation of Current Asset Differential.
(a) The adjustments prescribed by Section 3.2 will be estimated in good
faith by the Contributors with respect to the Systems, and set forth, together
with a detailed statement of the calculation thereof, in a certificate (the
"Initial Adjustment Certificate") executed by an authorized officer of each
Contributor and delivered to the Partnership at least 10 days prior to the
Closing Date. The Initial Adjustment Certificate will be accompanied by
appropriate documentation for each System, in summary form, supporting the
adjustments proposed in such certificate. Within thirty (30) days after the
Closing Date, the Partnership will deliver to the Contributors a certificate
(the "Final Adjustment Certificate") showing in full detail the final
determination of the Current Asset Differential, which certificate will be
accompanied by appropriate documentation supporting the adjustments proposed in
such certificate. Each party will provide to the other reasonable access to all
records in its possession which were used in the preparation of its Initial and
Final Adjustment Certificates.
(b) The Contributors will review the Final Adjustment Certificate and
will give written notice to the Partnership of any objections they may have to
the calculations shown in such certificate within ten (10) days after their
receipt thereof. The Partnership and the Contributors will endeavor in good
faith to resolve any such objections within thirty (30) days after the receipt
of the Partnership's objections. If any objections or disputes have not been
resolved at the end of such 30-day period, the disputed portion of the Current
Asset Differential will be determined within the following thirty (30) days by a
partner in a major accounting firm with substantial cable television audit
experience which is not the auditor of either the Contributors or the
Partnership (or any affiliate of them) and the determination of such auditor
will be final and will be binding upon all parties. If the Contributors and the
Partnership cannot agree with respect to selection of an auditor, Price
Waterhouse LLP will select an auditor whose determination will be final and will
be binding upon all parties. The expenses arising in connection with any
determination of disputed amounts by an auditor's determination shall be
apportioned as follows: fifty percent (50%) payable by the Partnership, forty
percent (40%) payable by IP and ten percent (10%) payable by GECC.
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(c) Within five (5) days of the expiration of the review period or the
date of final determination, the Fair Market Value of the IPWT Partnership
Interests shall be increased or decreased in accordance with Section 3.2 and as
set forth in the Final Adjustment Certificate, as finally determined.
ARTICLE 4
Representations and Warranties of IP
To induce the Partnership to enter into this Agreement, IP represents
and warrants to the Partnership as follows:
4.1 Organization, Power, etc.
(a) IP is a partnership duly organized, validly existing and in good
standing under the laws of the state of its organization, and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as presently conducted.
(b) IP has all requisite power and authority to enter into and perform
this Agreement and the documents, instruments and certificates to be executed
and delivered by it pursuant to this Agreement. The execution, delivery and
performance of this Agreement and the performance of the obligations
contemplated hereby and thereby have been duly authorized by all requisite
partnership action. This Agreement will constitute the legal, valid and binding
obligation of IP enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and by general principles of
equity.
4.2 No Conflict; Required Consents. The execution, delivery and
performance by IP of this Agreement does not and will not: (i) conflict with or
violate any provision of IPWT's or IP's Certificate of Limited Partnership or
partnership agreement; (ii) violate any material requirements of any law; (iii)
conflict with, violate, result in a breach of, constitute a default under
(without regard to requirements of notice, lapse of time, or elections of other
persons, or any combination thereof), or accelerate or permit the acceleration
of the performance required by, any contract, commitment or agreement,
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written or oral (each a "Contract"), to which IP or IPWT is a party or by which
it or the assets or properties owned or leased by it are bound or affected; (iv)
result in the creation or imposition of any encumbrance, lien, mortgage, pledge,
security interest, right of first refusal, option to purchase, covenant or
restriction on the use of property or impediment to title (each a "Lien")
against or upon any of its assets or the Assets; or (v) require any consent,
approval, or authorization of, or filing of any certificate, notice,
application, report or other document with, any governmental authority or other
Person (including any anti-trafficking waivers from the FCC).
4.3 Title, Condition and Sufficiency.
IP has good and marketable title to its IPWT Partnership Interest, free
and clear of all Liens.
4.4 Taxpayer Identification Number.
IP's U.S. Taxpayer Identification Number is 94-3069241.
ARTICLE 5
Representations and Warranties of GECC
To induce the Partnership to enter into this Agreement, GECC represents
and warrants to the Partnership as follows:
5.1 Organization, Power, etc.
(a) GECC is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as presently conducted.
(b) GECC has all requisite power and authority to enter into and
perform this Agreement and the documents, instruments and certificates to be
executed and delivered by it pursuant to this Agreement. The execution, delivery
and performance of this Agreement and the performance of the obligations
contemplated hereby and thereby have been duly authorized by all requisite
corporate action. This Agreement will constitute the legal, valid and binding
obligation of GECC enforceable in accordance
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with its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting generally the enforcement of creditors'
rights and by general principles of equity.
5.2 No Conflict; Required Consents. The execution, delivery and
performance by GECC of this Agreement does not and will not: (i) conflict with
or violate any provision of GECC's articles of incorporation or bylaws; (ii)
violate any material requirements of any law; (iii) result in the creation or
imposition of any Lien, against or upon any of the Debt or its IPWT Partnership
Interest; or (iv) require any consent, approval, or authorization of, or filing
of any certificate, notice, application, report or other document with, any
governmental authority or other Person (including any anti-trafficking waivers
from the FCC).
5.3 Title, Condition and Sufficiency. GECC has good and marketable
title to its IPWT Partnership Interest and the Debt, in each case, free and
clear of all Liens. Notwithstanding the foregoing, GECC makes no representation,
and shall have no responsibility, with respect to (i) the legality, validity,
binding effect or enforceability of the Loan Agreement, the Notes (as defined in
the Loan Agreement), any of the Loan Documents (as defined in the Loan
Agreement) or any other document executed or delivered in connection therewith;
or (ii) the filing, recording or taking of any other action with respect to the
Loan Agreement, the Loan Documents or the Notes or any other document executed
or delivered in connection therewith.
5.4 Taxpayer Identification Number. GECC's U.S. taxpayer
Identification Number is 13-1500700.
ARTICLE 6
Representations and Warranties Concerning IPWT
To induce the Partnership to enter into this Agreement, IP represents
and warrants to the Partnership as follows:
6.1 Organization, Power, etc. IPWT is a limited partnership duly
organized and validly existing under the laws of the State of California and in
good standing under the laws
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of the states of California and Tennessee, and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. Neither the ownership of the Systems nor the nature of
the Systems' business requires IPWT to be qualified in any jurisdiction other
than California and Tennessee.
6.2 Title, Condition and Sufficiency.
(a) IPWT has good and marketable title to all of its owned Assets, in
each case, free and clear of all Liens, except Permitted Liens. In the case of
Assets leased by it from another Person, IPWT has valid leasehold interests in
the Assets. The material tangible personal property is in good condition and
repair, ordinary wear and tear excepted. A "Permitted Lien" is a (a) Lien for
taxes, assessments and governmental charges not yet due and payable, (b) zoning
laws and ordinances and similar requirements of law, (c) rights reserved to any
governmental authority to regulate the affected property, and (d) as to owned
property and interests in real property (including easements, rights-of-way,
servitude, permits, leases, conditions, covenants, restrictions and minor
imperfections or irregularities in title which are reflected in the public
records and which do not individually or in the aggregate interfere with the
right or ability to own, use, enjoy or operate the property owned by IPWT or
interests in real property or to convey good, marketable and indefeasible fee
simple title to the same; provided that "Permitted Liens" will not include any
Lien which could prevent or inhibit in any way the conduct of the business of
the Systems.
(b) The Assets constitute substantially all of the assets necessary to
permit IPWT to operate the Systems, substantially as they are being operated on
the date of this Agreement and in compliance with all applicable requirements of
law.
6.3 Franchises, Licenses, Contracts, Owned Property and Real Property
Interests.
(a) Except as described on Schedule 6.3, IPWT is not bound or affected
by any of the following: (i) leases of real property (other than described on
Schedule 6.9); (ii) leases of personal property for a term exceeding one year or
requiring payments of more than $25,000 in the aggregate; (iii) franchises
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for the construction or operation of cable television systems, or contracts of
substantially equivalent effect; (iv) licenses, authorizations, consents or
permits of the FCC; (v) other material licenses, authorizations, consents or
permits of any other governmental authority; (vi) material easements or rights
of access; (vii) pole line and joint line agreements, underground conduit
agreements, crossing agreements, or bulk or commercial service agreement, in
each case a material agreement; or (viii) contracts, written or oral, other than
those described in any other clause of this Section 6.3 which contemplate
payments by or to IPWT in any 12-month period exceeding $25,000 individually or
$250,000 in the aggregate.
(b) IPWT has delivered to the Partnership true and complete copies of
(i) the franchises, permits, licenses, resolutions, certificates and agreements
which authorize and are required for the operation or maintenance of the Systems
(the "Franchises"), (ii) any notices alleging non-compliance with the
requirements of any of its Franchises, (iii) other licenses, permits, consents,
certificates, authorities, agreements, arrangements and other rights from all
persons, including, without limitation the FCC (the "Licenses"), (iv) its
contracts, mortgages, deeds of trust, bonds, indentures, leases, licenses,
notes, franchises, certificates, options, warrants, rights or other agreements,
or other documents evidencing IPWT's interests in real property, including any
amendments thereto (or, in the case of oral contracts, true and complete written
summaries thereof) and each document evidencing its ownership of the property
owned by IPWT, and (v) all material correspondence with any local franchising
authority regarding customer service with respect to the Systems.
(c) Except as described in Schedule 6.3, (i) IPWT is in material
compliance with each of its Franchises and Licenses; (ii) IPWT has fulfilled
when due, or has taken all action necessary to enable it to fulfill when due,
all of its material obligations under each of IPWT's Contracts or instruments
pertaining to any of its interests in real property; and (iii) to IP's
knowledge, there has not occurred any material breach (without regard to lapse
of time or the giving of notice, or both) by any person under any of its
Franchises, Licenses, Contracts or interests in real property.
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6.4 Employee Benefits.
(a) Each employee benefit plan (as defined in section 3(3) of ERISA) or
any multiemployer plan (as defined in section 3(37) of ERISA) with respect to
which IPWT has any liability or in which any employees or agents, or any former
employees or agents, of IPWT participate is set forth in Schedule 6.4 (the "IPWT
Plans").
(b) IPWT and each ERISA Affiliate of it are not in material violation
of any provision of ERISA. No reportable event (as defined in section 4043 of
ERISA) has occurred and is continuing with respect to any IPWT Plan or any
employee benefit plan or multiemployer plan with respect to which any ERISA
Affiliate has any liability (together with the IPWT Plans, these plans are
referred to as the "IP Group Plans") and no prohibited transaction (as defined
in section 406 of ERISA) has occurred with respect to any IP Group Plan which
would result in material liability to IPWT or any ERISA Affiliate of IPWT. No
material accumulated funding deficiency (as defined in section 302 of ERISA)
exists with respect to any IP Group Plan.
6.5 Litigation. (a) There is no action or proceeding before any court,
tribunal or arbitrator or governmental official pending or, to such
Contributor's knowledge, threatened by or before any governmental authority or
private arbitration tribunal, against IPWT which could materially adversely
affect the financial condition or operations of the Systems, its Assets or could
result in the modification, revocation, termination, suspension or other
limitation of any of its Franchises, Licenses, Contracts or any interest in real
property; and (b) there is not in existence any order, decree, award or judgment
requiring IPWT to take any action of any kind with respect to the Assets or the
operation of the Systems, or to which IPWT, the Systems, or the Assets are
subject or by which they are bound or affected.
6.6 Tax Returns; Other Reports. Except as set forth in Schedule 6.6,
IPWT (a) has filed by any due date or extended due date in correct form all
federal, state, local and foreign Tax returns and other tax reports required to
be filed by any due date or extended due date, (b) has timely paid all taxes
which have become due and payable, except such amounts as are being contested
diligently and in good faith and are not material in amount, whether or not so
shown on any such return or report,
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the failure of which to be filed or paid could affect or result in transferee or
other liability on the Partnership or in the imposition of a Lien upon the
Assets, and (c) has not received notice of, nor does IP have any knowledge of,
any deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any taxing governmental authority which could affect or result in
transferee or other liability on the Partnership or in the imposition of a Lien
upon the Assets.
6.7 Systems Information. Schedule 6.7 sets forth a
materially true and accurate description of the following
information as of the date of this Agreement:
(a) the number of miles of plant in the Systems;
(b) the number of single family homes and residential dwelling
units passed by the Systems;
(c) a description of basic and optional or tier services
available from the Systems, the rates charged by IPWT for each, and the
number of Subscribers receiving each optional or tier service;
(d) the stations and signals carried by the Systems and the
channel position of each such signal and station; and
(e) the cities, towns, villages, boroughs and counties served
by the Systems.
6.8 Compliance with Requirements of Law.
(a) Except as set forth in Schedule 6.8, the operation of the Systems
as currently conducted does not violate or infringe in any material respect any
requirements of law currently in effect (other than requirements of law
described in subsections (c) and (d) below, as to which the representations and
warranties set forth in those subsections will apply). IPWT has not received any
notice of any violation by it or the Systems of any material requirement of law
applicable to the operation of the Systems as currently conducted and knows of
no basis for the allegation of any such violation.
(b) Except as set forth in Schedule 6.8 and for matters described in
subsections (c) and (d) below, as to which the
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representations and warranties set forth in those subsections will apply, and
without limiting the generality of representations in subsection (a) above IPWT
has submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices, that are
required under the rules and regulations of the FCC; the operation of the
Systems has been and is in material compliance with the rules and regulations of
the FCC, and IPWT has not received any notice from the FCC of any material
violation of its rules and regulations; IPWT is and since its acquisition of the
Systems has been in material compliance with the FCC's equal employment
opportunity rules; the Systems are in material compliance with all signal
leakage criteria prescribed by the FCC; and for each relevant semi-annual
reporting period, IPWT has timely filed with the United States Copyright Office
all required Statements of Account in true and correct form, has paid when due
all required copyright royalty fee payments in correct amount, relating to the
Systems' carriage of television broadcast signals and is otherwise in compliance
with all applicable rules and regulations of the Copyright Office. IPWT has
delivered to the Partnership of all reports and filings for the past year made
or filed pursuant to FCC and copyright rules and regulations by it and will make
available to the Partnership all other past reports and filings made or filed
pursuant to FCC and copyright rules and regulations. A request for renewal has
been timely filed under section 626(a) of the 1984 Cable Act with the proper
governmental authority with respect to each of its Franchises expiring within 36
months after the date of this Agreement.
(c) IPWT has used commercially reasonable efforts to comply in all
material respects with the provisions of the 1992 Cable Act and the FCC rules
and regulations promulgated thereunder as such requirements of law relate to the
operation of the Systems. IPWT has complied in all material respects with the
must carry and retransmission consent provisions of the 1992 Cable Act and the
FCC rules and regulations promulgated thereunder, including (i) duly and timely
notifying "local commercial television stations" of inadequate signal strength
or increased copyright liability, if applicable, (ii) duly and timely notifying
non-commercial educational stations of the location of the Systems' principal
headends, (iii) duly and timely notifying subscribers of changes in the channel
alignment on the Systems, (iv) duly and timely notifying "local commercial and
non-commercial television stations" of the broadcast signals carried
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on the Systems and their channel positions, (v) maintaining the requisite public
file identifying broadcast signal carriage, (vi) carrying the broadcast signals
after June 1, 1993, on the Systems for all "local commercial television
stations" which elected must carry status and, if required, up to two "qualified
low power stations" and (vii) obtaining retransmission consents for all
broadcast signals carried on the Systems after October 5, 1993, except for the
signals carried pursuant to a must carry election.
(d) IPWT has used commercially reasonable efforts to establish rates
charged to subscribers, effective as of September 1, 1993, that would be
allowable under rules and regulations promulgated by the FCC under the 1992
Cable Act, and any authoritative interpretation thereof, whether or not such
rates were subject to regulation at that date by any governmental authority,
including any local franchising authority and/or the FCC. Notwithstanding the
foregoing, no representation or warranty is made that either the rates charged
to subscribers would be allowable under any rules and regulations of the FCC, or
any authoritative interpretation thereof, promulgated after the date of the
Closing. IPWT has delivered to the Partnership complete and correct copies of
all FCC Forms 393, 1200, 1205, 1210, 1215, 1220 and 1240 filed, and FCC Forms
1240 prepared for filing, with the local franchising authority and/or the FCC
and will deliver as soon as available all such FCC forms that are prepared with
respect to the Systems, copies of all correspondence with any governmental
authority relating to rate regulation generally or specific rates charged to
subscribers of the Systems, including copies of any complaints filed with the
FCC with respect to any rates charged to subscribers of the Systems, and any
documentation supporting an exemption from the rate regulation provisions of the
1992 Cable Act claimed by IPWT.
(e) IPWT does not possess any patent, patent right, trademark or
copyright related to or material to the operation of the Systems and is not a
party to any license or royalty agreement with respect to any such patent,
trademark or copyright, except for licenses respecting program material and
obligations under the Copyright Act of 1976 applicable to cable television
systems generally. The Systems have been operated in such a manner so as not to
give rise to any rightful claim of any third party for copyright, trademark,
service mark, patent or license infringement
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or the like (excluding claims involving music performance rights).
6.9 Real Property. Except for leasehold interests described on Schedule
6.9 (the "Leases"), IPWT does not hold or use under lease or lease to others any
real property. Except for real property owned by it ("Owned Property") and
described on Schedule 6.9, IPWT has no other ownership interest in real
property. Except for routine repairs, all of the improvements, leasehold
improvements and the premises of its Owned Property and the premises demised
under its Leases (the "Leased Property") are in good operating condition and
repair and are suitable for the purposes used. IPWT's Leases have not been
modified since copies thereof have been delivered to the Partnership and are in
full force and effect and the parties are not in default thereunder. The current
use and occupancy of the Owned Property and Leased Property do not constitute
nonconforming uses under any applicable zoning requirements of law. Each parcel
of Owned Property and each parcel of Leased Property (i) has access to and over
public streets, or private streets for which IPWT has a valid right of ingress
and egress, (ii) conforms in its current use to all material zoning requirements
without reliance upon a variance issued by a local government or a
classification of the parcel in question as a nonconforming use and (iii)
conforms in its use to all restrictive covenants, if any, or other encumbrances
affecting all or part of such parcel.
6.10 No Adverse Change; Financial Statements.
(a) Since December 31, 1995, there has been no material adverse change
in the Assets, taken as a whole, or its financial condition or operations or the
Systems.
(b) A correct copy of the financial statements of IPWT as of December
31, 1995, including an unaudited income statement and balance sheet which fairly
present the financial conditions of IPWT, is attached as Schedule 6.10.
6.11 Employees.
(a) There are no collective bargaining agreements applicable to any
persons who are employed by IPWT, and it has no duty to bargain with any labor
organization with respect to any such persons. There are not pending any unfair
labor
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practice charges against IPWT, or any demand for recognition, or any other
request or demand from a labor organization for representative status with
respect to any persons employed by it.
(b) IPWT has complied in all material respects with all requirements of
law applicable to its employment of labor, including, without limitation, Worker
Adjustment and Retraining Notification Act (29 U.S.C. Section 2101, et. seq.),
ERISA, continuation coverage requirements of group health plans, and those
relating to wages, hours, collective bargaining, unemployment insurance,
worker's compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of taxes.
(c) IPWT has no employment agreements, either written or
oral, with any employee.
6.12 Environmental.
(a) Except as disclosed in Schedule 6.12, IPWT has not received any
notice that it is the subject of any "Superfund" evaluation or investigation, or
that it is the subject of any investigation or proceeding of any governmental
authority evaluating whether any remedial action is necessary to respond to any
release of Hazardous Substances on or in connection with its Owned Property or
its Leased Property. "Hazardous Substances" means (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 (RCRA) (42
U.S.C.A. Section 6901, et seq.), as amended, and the rules and regulations
promulgated thereunder; (b) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C.A. Section 9601, et seq.) (CERCLA), as amended, and the rules and
regulations promulgated thereunder; (c) any substance regulated by the Toxic
Substances Control Act (TSCA) (42 U.S.C. Section 2601, et seq.), as amended, and
the rules and regulations promulgated thereunder; (d) asbestos; (e)
polychlorinated biphenyls; (f) any substances regulated under the provisions of
Subtitle I of RCRA relating to underground storage tanks; (g) any substance the
presence, use, treatment, storage or disposal of which on Owned Property or
Leased Property is prohibited by any requirement of law; and (h) any other
substance which by any requirement of law requires special handling, reporting
or notification of any
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governmental authority in its collection, storage, use, treatment or disposal.
(b) Except as disclosed in Schedule 6.12, IPWT (i) is in compliance in
all material respects with all requirements of law with respect to pollution or
protection of the environment, including such requirements relating to actual or
threatened emissions, discharges or releases of Hazardous Substances into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, insofar as they relate to its
Owned Property or its Leased Property and (ii) has received no notice of, and it
has no knowledge of circumstances relating to, any past, present or future
events, conditions, circumstances, activities, practices or incidents (including
the presence, use, generation, manufacture, disposal, release or threatened
release of any Hazardous Substances from or on its Owned Property or its Leased
Property), which could interfere with or prevent continued compliance, or which
are reasonably likely to give rise to any liability, based upon or related to
the processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Substance from or attributable to its Owned
Property or its Leased Property.
6.13 Taxpayer Identification Number. IPWT's U.S. Taxpayer
Identification Number is 94-3113517.
6.14 Cash Flow for Systems. The aggregate total Net Cash Flow for the
Systems for 1995 was not less than $7,313,000.
6.15 IPWT Partnership Interests. The authorized partnership interests
of IPWT consists solely of a 80.1% general partnership interest and 9.9% limited
partnership interest owned by IP and a 10% limited partnership interest owned by
GECC. All such partnership interests are validly issued, fully paid and
nonassessable and such partnership interests have been so issued in full
compliance with all federal and state securities laws.
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ARTICLE 7
Representations and Warranties of the Partnership
To induce the Contributors to enter into this Agreement, the
Partnership represents and warrants to the Contributors as follows:
7.1 Organization, Power, etc.
(a) The Partnership is a partnership duly organized, validly existing
and in good standing under the laws of the State of California. The Partnership
has all necessary power and authority to own, lease and operate its properties
and to carry on its business as presently conducted.
(b) The Partnership has all requisite power and authority to enter into
and perform this Agreement and the documents, instruments and certificates to be
executed and delivered by it pursuant to this Agreement. The execution, delivery
and performance of this Agreement by the Partnership and all such documents,
instruments and certificates, and the transactions contemplated hereby and
thereby, have been duly authorized by all necessary partnership action on the
part of the Partnership and its partners.
(c) This Agreement will constitute the legal, valid and binding
obligation of the Partnership enforceable in accordance with its terms, except
as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights and by general
principles of equity.
7.2 Approvals. The execution and delivery of this Agreement by the
Partnership do not require any registration with, consent or approval of, notice
to, or action by any person or governmental authority which registration,
approval, consent, notice or action has not been made, given or otherwise
accomplished.
7.3 No Conflicts. The execution and delivery of this Agreement and any
other agreements contemplated hereunder by the Partnership and the consummation
of the transactions contemplated hereby and thereby will not (i) violate any
existing provision of any law, regulation, order, writ, judgment, injunction
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or decree involving the Partnership, (ii) violate the provisions of the
Partnership's partnership agreement or other organizational documents of the
Partnership, or (iii) conflict with, require a consent under or result in a
default under, or constitute an event which would permit early termination of
any material agreement to which the Partnership is a party or by which any of
its properties are bound.
7.4 Commissions. All activities of the Partnership relating to this
Agreement and the transactions contemplated hereunder have been carried on by
the Partnership in such a manner so as not to give rise to any valid claim by
any person against the Contributors for a finder's fee, brokerage commission or
other like expense.
ARTICLE 8
Covenants of IP
Unless the Contributors shall have received the prior written consent
of the Partnership to the contrary, from the date hereof to and including the
Closing Date, IP covenants to and agrees with the Partnership to cause IPWT,
unless otherwise stated, to do as follows:
8.1 Access to Systems. IPWT shall give the Partnership's employees and
representatives, during normal business hours and with reasonable prior notice,
access to all of the properties, books, accounts and documents of or relating to
the Assets and the Systems, and shall permit the making of copies or extracts
thereof.
8.2 Conduct of Business. IPWT shall conduct the business and activities
of the Systems in the usual and ordinary course of business until the Closing
(including timely payment of all payments due under the Leases).
8.3 Preservation of Business. IPWT shall use reasonable efforts to
preserve the business of the Systems and to preserve existing relationships with
customers, suppliers and others having business relationships with them by
reason of the Systems and, except as agreed upon with the Partnership, use
reasonable efforts to keep available to the Partnership the services of present
management personnel and employees of the Systems.
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8.4 Compliance With Contracts and Laws.
(a) IPWT shall keep in full force and effect and shall comply in all
material respects with all material franchises, licenses, permits, consents,
certificates, authorities and operating rights currently in effect, all material
leases, contracts, agreements, commitments and arrangements currently in effect,
and all material rights, privileges and interests relating to the Systems
currently in effect, to which they are parties or by which they or the Assets
may be bound or affected.
(b) IPWT shall comply in all material respects with applicable federal,
state and local laws, regulations, ordinances and orders, and make all filings
and submissions and pay all fees, assessments and costs arising in connection
with the construction, operation and maintenance of the Systems, including,
without limitation, franchise and copyright fees.
8.5 Adverse Changes. IPWT shall promptly notify the Partnership in
writing of any materially adverse developments affecting the Systems which
become known to IPWT, including, without limitation, (i) any damage, destruction
or loss (whether or not covered by insurance) materially and adversely affecting
any of the Assets or the Systems, (ii) any material notice of violation,
forfeiture or complaint under any of the Franchises, or (iii) anything which, if
not corrected prior to the Closing Date, will prevent either Contributor from
fulfilling any condition precedent described in Article 10.
8.6 Approvals. Each Contributor shall use all reasonable commercial
efforts to obtain or cause to be obtained all approvals and consents required to
transfer its IPWT Partnership Interest to the Partnership and shall fully
cooperate with the Partnership for this purpose, including such approvals or
consents as are required for such transfer.
8.7 Sales Taxes. IPWT shall timely file or cause to be filed all sales
tax returns with respect to sales occurring in connection with the Systems on or
before the Closing Date, and IPWT shall pay or cause to be paid in timely
fashion all sales taxes applicable to the sales reported on such tax returns.
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8.8 Closing Conditions. Each Contributor shall use all reasonable
commercial efforts to ensure that the conditions set forth in Article 10 hereof
and applicable to it are satisfied.
ARTICLE 9
Covenants of the Partnership
Unless the Partnership shall have received the prior written consent of
the Contributors to the contrary, from the date hereof to and including the
Closing Date, the Partnership covenants to and agrees with the Contributors as
follows:
9.1 Closing Conditions. The Partnership shall use all reasonable
efforts to ensure that the conditions set forth in Article 11 hereof are
satisfied to the extent such matters are not within its control.
9.2 Cooperation To Obtain Approvals. The Partnership agrees to
cooperate with the Contributors in the process of obtaining approvals and
consents required to transfer the Systems, including such approvals or consents
as are required for the transfer of the IPWT Partnership Interests.
ARTICLE 10
Conditions Precedent to
Obligations of the Partnership
10.1 Conditions Precedent; Waiver. The obligations of the Partnership
to consummate the transactions contemplated on the Closing Date are subject to
the satisfaction, on or before the Closing Date, of all the conditions set forth
in this Article 10. The Partnership may waive any or all of such conditions in
whole or in part; provided that no such waiver of a condition shall constitute a
waiver by the Partnership of any of its other rights or remedies under this
Agreement or otherwise at law or in equity.
10.2 Compliance With Agreement, Representations and Warranties. The
Contributors shall have performed and complied in all material respects with all
covenants and obligations required by this Agreement to be performed or complied
with by
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the Contributors on or before the Closing Date. All representations and
warranties of the Contributors contained in this Agreement, the Schedules, or in
any document, instrument or certificate to be delivered by the Contributors
under this Agreement shall be true, correct and complete in all material
respects on the Closing Date as though made on such date. The Partnership shall
have received a certificate of an officer or general partner of each of the
Contributors, as the case may be, dated as of the Closing Date, to the effect of
the foregoing in this Section 10.2.
10.3 No Material Adverse Change. During the period from the date of
this Agreement through and including the Closing Date, there shall not have
occurred any material adverse change affecting the Systems as a whole (including
any material adverse change, loss or damage reflected in any Schedules delivered
for the first time to the Partnership after the date hereof), and there shall
not have been any material loss or damage to the Systems, whether or not
insured, that materially affects the ability of IPWT to conduct the business of
the Systems as a whole.
10.4 Approvals and Consents.
(a) The following shall have obtained, in form and substance reasonably
acceptable to the Partnership: (i) all consents to the transfer of the IPWT
Partnership Interests required by the terms of those Contracts, Franchises and
Licenses, and (ii) all governmental consents (collectively, the "Required
Consents") which shall be in full force and effect on the Closing Date and such
Contracts, Franchises and Licenses after the securing of any necessary consents
shall contain material terms and conditions no less favorable than are presently
contained therein. All such Required Consents are set forth in Schedule 10.4
(b) As of the Closing Date, no action or proceeding shall be completed
or pending against the Contributors, IPWT or the Partnership that has or may
result in a judgment, decree or order that would prevent or make unlawful the
consummation of the transactions under this Agreement or have a material adverse
effect on the IPWT Partnership Interests or the Systems and there shall be in
effect no order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect thereto.
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ARTICLE 11
Conditions Precedent to Obligations
of the Contributors
11.1 Conditions Precedent; Waiver. The obligations of the Contributors
to consummate the transactions contemplated on the Closing Date are subject to
the satisfaction, on or before the Closing Date, of all the conditions set forth
in this Article 11. The Contributors may waive any or all of such conditions in
whole or in part; provided that no such waiver of a condition shall constitute a
waiver by the Contributors of any of their other rights or remedies under this
Agreement or otherwise at law or in equity.
11.2 Compliance With Agreement, Representations and Warranties. The
Partnership shall have performed and complied in all material respects with all
covenants and obligations required by this Agreement to be performed or complied
with by the Partnership on or before the Closing Date. All representations and
warranties made by the Partnership contained in this Agreement, the Schedules or
in any document, instrument or certificate to be delivered by the Partnership
under this Agreement shall be true, correct and complete in all material
respects on the Closing Date as though made on such date. The Contributors shall
have received a certificate of the Partnership, signed by the General Partner of
the Partnership and dated as of the Closing Date to the effect of the foregoing
in this Section 11.
11.3 Approvals and Consents.
(a) IP or IPWT shall have obtained, in form and substance reasonably
acceptable to the Contributors, all Required Consents; provided, however, that
this condition shall be deemed to be satisfied as to the Contributors with
respect to any Required Consent if the Partnership at or prior to Closing (i)
waives the requirement that such Required Consent be obtained prior to Closing;
and (ii) agrees to release the Contributors from any liability to the
Partnership as a result of consummation of the transaction contemplated
hereunder without such Required Consent, in which event the Partnership shall
indemnify, defend and hold the Contributors harmless from and against any and
all loss, cost, damage or expense arising
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from the consummation of the transaction contemplated hereunder without such
Required Consent.
(b) As of the Closing Date, no action or proceeding shall be completed
or pending against the Contributors, any affiliates thereof or the Partnership
that has or is likely to result in a judgment, decree or order that would
prevent or make unlawful the consummation of the transactions under this
Agreement and there shall be in effect no order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement nor any
proceeding pending with respect thereto.
11.4 Payment of Contingent Interest. IP shall have paid to GECC
$1,362,500 of contingent interest payable pursuant to section 2.9(f)(i) of the
Loan Agreement.
ARTICLE 12
Closing Documents
12.1 Closing Documents To Be Delivered by the Contributors. At the
Closing each Contributor shall deliver to the Partnership the following
documents:
(a) a Certificate of Qualification of IPWT, certified to by
the Secretary of State of California.;
(b) In the case of IP, a Certificate of Qualification of IP,
certified to by the Secretary of State of California.;
(c) In the case of GECC, a Certificate of Good Standing
certified to by the Secretary of State of New York;
(d) The certificate required by Section 10.2;
(e) An instrument of assignment for that Contributor's IPWT
Partnership Interest together with any consents relating thereto and as
shall be necessary to vest in the Partnership good and marketable title
in and to that Contributor's IPWT Partnership Interest;
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(f) In the case of GECC, an instrument for the assignment of
the Debt; and
(g) Such signed documentation as shall be necessary to cause
the Contributors to become limited partners under the IP IV Partnership
Agreement.
12.2 Closing Documents To Be Delivered by the Partnership. At the
Closing the Partnership shall deliver to the Contributors the following
documents:
(a) A Certificate of Qualification of the Partnership
certified to by the California Secretary of State;
(b) A Certificate of the Partnership that all appropriate
action authorizing the execution, performance and delivery of this
Agreement has been taken; and
(c) The certificate required by Section 11.
ARTICLE 13
Indemnification
13.1 Indemnification by the Contributors. Each Contributor severally
(and not jointly) agrees to indemnify the Partnership, its affiliates, partners
and employees, and the employees of its general partner against and hold each of
them harmless, on an after-tax basis, from any and all losses, liabilities,
claims, suits, demands, judgments, damages, expenses and costs, including,
without limitation, reasonable counsel fees and costs and expenses incurred in
the investigation, defense or settlement of any claims covered by this indemnity
(in this Section 13.1, collectively, the "Indemnifiable Damages") which any such
indemnified party may suffer or incur by reason of (i) in the case of IP, the
inaccuracy of any of its representations or warranties set forth in Article 4,
breach of any of its covenants set forth in Article 8 or the operation of the
Systems on or prior to the Closing Date, (ii) in the case of GECC, the
inaccuracy of any of its representations or warranties set forth in Article 5,
and (iii) in the case of IP and GECC, the inaccuracy of any of the
representations or warranties set
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forth in Article 6, provided that each of IP's and GECC's liability for such
indemnification shall be shared as set forth in subsection (g) below. The
foregoing obligation of each Contributor shall be subject to and limited by the
qualifications set forth below.
(a) Each of the representations, warranties and covenants made by each
Contributor in this Agreement or pursuant hereto shall survive until one (1)
year after the Closing Date, and thereafter all such representations, warranties
and covenants shall be extinguished, except (i) as set forth in subparagraphs
(b), (c), (d) and (e) below, and (ii) with respect to bona fide and valid claims
for which notice has been given before the expiration of such one-year period.
(b) The representations and warranties made by each Contributor with
respect to taxes and the right of the Partnership to assert claims arising out
of the inaccuracy of any of such representations and warranties shall survive
until the expiry of the statute of the limitations applicable with respect to
such taxes.
(c) The representations and warranties made by each Contributor with
respect to title to any of the Assets, its IPWT Partnership Interest or, in the
case of GECC, the Debt, and the right of the Partnership to assert claims
arising out of the inaccuracy of any of such representations and warranties,
shall survive indefinitely.
(d) The right of the Partnership to assert claims for Indemnifiable
Damages suffered as a result of third-party claims arising out of the ownership
or operation of the Systems on or prior to the Closing Date shall survive until
one (1) year after the Closing Date.
(e) The representations and warranties made by IP with respect to
environmental matters, and the right of the Partnership to assert claims arising
out of the inaccuracy of any of such representation and warranties, shall
survive until three (3) years after the Closing Date.
(f) Notwithstanding the foregoing, no indemnification by the
Contributors of the Partnership under this Section 13.1 shall be required if the
facts which otherwise would have given rise to a claim for indemnification
hereunder were caused
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primarily by the negligence or intentional misconduct of the Partnership.
(g) Notwithstanding the foregoing, with respect to any Indemnifiable
Damages arising out of the inaccuracy of any of the representation and warrants
of the Contributors contained in this Agreement shall in the case of:
(i) IP, with respect to its representations and warranties set
forth in Article 4 of this Agreement be limited to twelve million
dollars ($12,000,000);
(ii) GECC, with respect to its representations and warranties
set forth in Article 5 of this Agreement be limited to the
consideration received from the Partnership for GECC's transfer thereto
of the Debt;
(iii) IP and GECC, with respect to the representations and
warranties set forth in Article 6 be shared as follows:
(A) IP and GECC will be liable for eighty percent
(80%) and twenty percent (20%), respectively, for the first
fifteen million dollars ($15,000,000) of such liability;
(B) IP and GECC will be liable for ten percent (10%)
and ninety percent (90%), respectively, for the next five
million dollars ($5,000,000) of such liability; and
(C) Neither IP nor GECC shall have any liability for
such indemnification beyond that set forth in clauses (A) and
(B) above.
13.2 Indemnification by the Partnership. The Partnership agrees to
indemnify each Contributor and its affiliates, officers, partners and employees
against and hold each of them harmless, on an after-tax basis, from any and all
losses, liabilities, claims, suits, demands, judgments, damages, expenses and
costs, including, without limitation, reasonable counsel fees and costs and
expenses incurred in the investigation, defense or settlement of any claims
covered by this
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indemnity (in this Section 13.2, collectively, the "Indemnifiable Damages")
which any such indemnified party may suffer or incur by reason of or in
connection with (i) the inaccuracy of any of the representations and warranties
of the Partnership contained in this Agreement; (ii) the ownership and operation
of the Systems after the Closing Date; and (iii) any obligation or liability
assumed by the Partnership hereunder. The foregoing obligation of the
Partnership shall be subject to and limited by the qualifications set forth
below.
(a) Each of the representations, warranties and covenants made by the
Partnership in this Agreement shall survive until one (1) year following the
Closing Date, and thereafter all such representations, warranties and covenants
shall be extinguished, except with respect to bona fide and valid claims for
which notice has been given prior to one (1) year following the Closing Date.
(b) The right of the Contributors to assert claims for Indemnifiable
Damages suffered as a result of third-party claims arising out of the ownership
or operation of the Systems after the Closing Date and with respect to
liabilities of the Contributors or IPWT assumed by the Partnership shall survive
indefinitely.
(c) Notwithstanding the foregoing, no indemnification by the
Partnership of the Contributors under this Section 13.2 shall be required if the
facts which otherwise would have given rise to a claim for indemnification
hereunder were caused primarily by the negligence or intentional misconduct of
the Contributors.
13.3 Notice and Right To Defend Third-Party Claims. Upon receipt of
written notice of any claim, demand or assessment or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought on
account of an indemnity agreement contained in this Article, the party seeking
indemnification (the "Indemnitee"), shall promptly, but in no event later than
twenty (20) days prior to the date a response or answer thereto is due (unless a
response or answer is due within fewer than twenty (20) days from the date of
Indemnitee's receipt of notice thereof), inform the party against whom
indemnification is sought (the "Indemnitor") in writing thereof. The failure of
such Indemnitee to notify the Indemnitor within the time period specified above
of any such claim or action shall relieve such
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<PAGE> 36
Indemnitor from any liability which it may have to such Indemnitee in
connection therewith, if the effect of such failure, refusal or neglect is to
materially prejudice the rights of the Indemnitor in defending against the claim
or action. In case any claim, demand or assessment shall be asserted or suit,
action or proceeding commenced against an Indemnitee, and such Indemnitee shall
have timely and properly notified the Indemnitor of the commencement thereof,
the Indemnitor will be entitled to participate therein, and, to the extent that
it may wish, to assume the defense, conduct or settlement thereof, with counsel
selected by the Indemnitor. After notice from the Indemnitor to the Indemnitee
of its election to assume the defense, conduct or settlement thereof, the
Indemnitor will not be liable to the Indemnitee for expenses incurred in
connection with the defense, conduct or settlement thereof, except for such
expenses as may be reasonably required to enable the Indemnitor to take over
such defense, conduct or settlement. The Indemnitee will at its own expense
cooperate with the Indemnitor in connection with any such claim, make personnel,
witnesses, books and records relevant to the claim available to the Indemnitor
at no cost, and grant such authorizations or powers of attorney to the agents,
representatives and counsel of the Indemnitor as the Indemnitor may reasonably
request in connection with the defense or settlement of any such claim. In the
event that the Indemnitor does not wish to assume the defense, conduct or
settlement of any claim, demand or assessment, the Indemnitee shall have the
exclusive right to prosecute, defend, compromise, settle or pay the claim in its
sole discretion and pursue its rights under this Agreement; provided that,
before settling any claim hereunder, the Indemnitee shall give 10 days' notice
to the Indemnitor to allow the Indemnitor to reject the settlement, in which
case Indemnitor shall defend the claim. Notwithstanding the foregoing, the
Indemnitee shall have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be its fees and expenses unless (a) the
Indemnitor has agreed to pay such fees and expenses, (b) the Indemnitor has
failed to assume the defense of such action, claim or proceeding, or (c) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both the Indemnitor and the Indemnitee and the Indemnitee has
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
Indemnitor (in which case, if the Indemnitee
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<PAGE> 37
informs the Indemnitor in writing that it elects to employ separate counsel at
the expense of the Indemnitor, the Indemnitor shall not have the right to assume
the defense of such action, claim or proceeding on behalf of the Indemnitee, it
being understood, however, that the Indemnitor shall not, in connection with any
one such action, claim or proceeding or separate but substantially similar or
related actions, claims or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for the
Indemnitee, which firm shall be designated in writing by the Indemnitee).
13.4 Sole Remedies. The remedies set forth in this Article 13 shall be
the sole and exclusive remedies of the Partnership for the inaccuracy of any
representation or warranty of or the breach of any covenant by either
Contributor.
13.5 Waiver of Contribution. GECC hereby waives any and all claims,
actions, suits, causes of action and rights of indemnity or contribution,
whether arising in law or equity, which it may have against IP arising out of
any losses, liabilities, claims, suits, demands, judgments, damages, expenses
and costs which GECC may incur under Section 13.1(g)(iii) as a result of any
breach by IP of any representation or warranty set forth in Article 6.
13.6 Contribution Adjustment. In the event it shall be determined that
the Partnership is entitled to be indemnified by GECC pursuant to this Article
13, then GECC shall satisfy its indemnification obligation through a dollar for
dollar adjustment to the value of its preferred limited partnership in the
Partnership in accordance with the IP IV Partnership Agreement.
ARTICLE 14
Termination
14.1 Termination. If either a Contributor or the Partnership materially
defaults in the timely performance of any of its covenants or agreements under
this Agreement or is in material default of any of its representations or
warranties on the date hereof (or, if later, the date on which such
representation or warranty is deemed to be made), the nondefaulting
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<PAGE> 38
party may give notice of termination of this Agreement. The notice shall specify
with particularity the default on which the notice is based. The termination
shall be effective ten (10) days after the date of the notice, unless the
specified default has been cured on or before the effective date for
termination. In addition, in the event that one or more of the Schedules hereto
are delivered for the first time by the Contributors to the Partnership after
the date of this Agreement pursuant to Section 3.2, then the Partnership shall
be entitled to terminate this Agreement by notice delivered to the Contributors
within fifteen (15) days after receipt thereof by the Partnership.
ARTICLE 15
General
15.1 Amendment. Except as otherwise provided herein, the Partnership
and the Contributors may amend or supplement this Agreement at any time, but
only in writing executed by each of the parties.
15.2 Entire Understanding. The terms set forth in this Agreement,
including its Schedules, are intended by the parties as a final, complete and
exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms.
15.3 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.4 Headings. The headings preceding the text of sections of this
Agreement are for convenience only and shall not be deemed a part hereof.
15.5 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
15.6 Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by overnight courier or deposited in
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<PAGE> 39
the mail, postage prepaid, sent certified or registered, return receipt
requested, and addressed as set forth below or to such other address as any
party shall have previously designated by such notice. Any notice so delivered
personally shall be deemed to be received on the date of delivery; any notice so
sent by overnight courier shall be deemed to be received one (1) business day
after the date sent; and any notice so mailed shall be deemed to be received on
the date shown on the return receipt (evidence of rejection of delivery or
inability to deliver because of a changed address of which no notice was given
pursuant to the provisions of this Agreement shall be deemed to be a receipt).
If to the Partnership:
InterMedia Capital Partners IV, L.P.
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Attention: Mr. Leo J. Hindery, Jr.
Copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Gregg Vignos, Esq.
If to IP:
Intermedia Partners
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Attention: Mr. Leo J. Hindery, Jr.
Copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Gregg Vignos, Esq.
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<PAGE> 40
If to GECC:
General Electric Capital Corporation
3379 Peachtree Road, N.E.
Suite 600
Atlanta, GA 30326
Attention: Mr. Thomas P. Waters III
15.7 Fees and Expenses. Each of the Partnership and the Contributors
shall each be responsible for the payment of its fees and costs incurred in
connection with the negotiation, preparation and execution of this Agreement,
including attorneys' fees.
15.8 "Knowledge" Defined. Wherever this Agreement shall refer to a
matter being "known by" or "to the knowledge of" the
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<PAGE> 41
Contributors, such matter shall be deemed to be known by the Contributors
(whether or not actually known by the Contributors) if IPWT shall have knowledge
thereof.
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date first above written.
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By InterMedia Capital Management IV,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
-----------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA PARTNERS, a California
limited partnership
By InterMedia Capital Management,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
Managing General Partner
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Thomas P. Waters
-----------------------------------------
Its Vice President
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<PAGE> 42
LIST OF SCHEDULES
Schedule 6.3 Franchise, Licenses, Contracts, Owned and Real
Property
Schedule 6.4 Employee Benefits
Schedule 6.6 Tax Returns
Schedule 6.7 Systems Information
Schedule 6.8 Compliance with Law
Schedule 6.9 Leasehold Interests
Schedule 6.10 Financial Statements
Schedule 6.12 Environmental Claims
Schedule 10.4 Required Consents
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<PAGE> 43
FIRST AMENDMENT TO CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION AGREEMENT (this "First Amendment")
dated as of June 26, 1996, by and among INTERMEDIA CAPITAL PARTNERS IV, L.P., a
California limited partnership (the "Partnership"), INTERMEDIA PARTNERS, a
California limited partnership ("IP"), and GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation ("GECC"),
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain Contribution
Agreement, dated as of April 30, 1996 (the "Contribution Agreement"); and
WHEREAS, the parties hereto desire to amend the Contribution Agreement
as set forth below;
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such terms in the
Contribution Agreement.
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<PAGE> 44
2. Amendments to Contribution Agreement.
(a) Section 3.1 of the Contribution Agreement is hereby
amended to delete "July 1, 1996" in the fifth line of such section and
replace it with "October 30, 1996."
(b) Section 13.6 of the Contribution Agreement is hereby
amended to add the following at the end of the sixth line of such
section: ", provided, however, if GECC's preferred limited partnership
interest in the Partnership is, or becomes, equal to zero dollars, then
GECC shall satisfy any remaining indemnification obligation through a
cash payment to the Partnership."
3. Ratification of Contribution Agreement. Except as amended hereby,
all of the provisions set forth in the Contribution Agreement remain in full
force and effect. From and after the date hereby, any reference in the
Contribution Agreement to "this Agreement" shall mean the Contribution Agreement
as amended by this First Amendment.
4. Severability. If any provision of this First Amendment shall be held
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
5. Governing Law. This First Amendment shall be governed by and
construed in accordance with the internal laws of the State of California
without regard to its principles regarding choice of law.
6. Counterparts. This First Amendment may be executed in any number of
counterparts, all of which together shall constitute a single instrument, and it
shall not be necessary that any counterpart be signed by all the parties hereto.
7. Headings. The headings hereof are for convenience only and are not
intended to effect the meaning or interpretation of this First Amendment.
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<PAGE> 45
8. Benefit of Agreement. This First Amendment shall inure to the
benefit of, and be enforceable by the Partnership, IP and GECC, and their
respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have cause this First Amendment to
be duly executed as of the day and year first above written.
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By InterMedia Capital Management IV,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA PARTNERS, a California
limited partnership
By InterMedia Capital Management,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
------------------------------
Leo J. Hindery, Jr.
Managing General Partner
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Thomas P. Waters
------------------------------------
Its Vice President
-3-
<PAGE> 46
SECOND AMENDMENT TO CONTRIBUTION AGREEMENT
THIS SECOND AMENDMENT TO CONTRIBUTION AGREEMENT (this "Second
Amendment") dated as of July 25, 1996, by and among INTERMEDIA CAPITAL PARTNERS
IV, L.P., a California limited partnership (the "Partnership"), INTERMEDIA
PARTNERS, a California limited partnership ("IP"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GECC"),
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to that certain Contribution
Agreement, dated as of April 30, 1996, as amended by that certain First
Amendment to Contribution Agreement, dated as of June 26, 1996 (as amended, the
"Contribution Agreement"); and
WHEREAS, the parties hereto desire to amend the Contribution Agreement
as set forth below;
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such terms in the
Contribution Agreement.
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<PAGE> 47
2. Amendments to Contribution Agreement.
(a) Section 3.2 of the Contribution Agreement is hereby
deleted in its entirety.
(b) Section 3.3 of the Contribution Agreement is
hereby deleted in its entirety.
(c) The last sentence of Section 14.1 of the Contribution
Agreement is hereby deleted in its entirety.
3. Ratification of Contribution Agreement. Except as amended
hereby, all of the provisions set forth in the Contribution Agreement remain in
full force and effect. From and after the date hereby, any reference in the
Contribution Agreement to "this Agreement" shall mean the Contribution Agreement
as amended by this Second Amendment.
4. Severability. If any provision of this Second Amendment shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
5. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the internal laws of the State of California
without regard to its principles regarding choice of law.
6. Counterparts. This Second Amendment may be executed in any
number of counterparts, all of which together shall
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<PAGE> 48
constitute a single instrument, and it shall not be necessary that any
counterpart be signed by all the parties hereto.
7. Headings. The headings hereof are for convenience only and are
not intended to effect the meaning or interpretation of this Second Amendment.
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<PAGE> 49
8. Benefit of Agreement. This Second Amendment shall inure to the
benefit of, and be enforceable by the Partnership, IP and GECC, and their
respective successors and assigns.
IN WITNESS WHEREOF, the undersigned have cause this Second Amendment to
be duly executed as of the day and year first above written.
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By InterMedia Capital Management IV,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
---------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA PARTNERS, a California
limited partnership
By Intermedia Capital Management
a California limited partnership
By /s/ Leo J. Hindery, Jr.
---------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Thomas P. Waters
---------------------------------------
Its Vice President
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<PAGE> 1
EXHIBIT 2.5
CONTRIBUTION AGREEMENT
DATED AS OF MARCH 4, 1996
BETWEEN
TCI OF GREENVILLE, INC.,
TCI OF PIEDMONT, INC. AND
TCI OF SPARTANBURG, INC.
and
INTERMEDIA PARTNERS IV, L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS
1.1 Certain Definitions....................................................... 1
1.2 Other Definitions......................................................... 6
1.3 Number, Gender, etc....................................................... 7
1.4 Accounting Terms.......................................................... 7
ARTICLE 2 CONTRIBUTION
2.1 Contribution of Assets.................................................... 7
2.2 Assumed Liabilities....................................................... 8
2.3 Fair Market Value of Systems.............................................. 9
2.4 Adjustment Amount......................................................... 9
2.5 Calculation of Adjustment Amount.......................................... 11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TCI PARTIES
3.1 Organization.............................................................. 12
3.2 Authority and Validity.................................................... 12
3.3 No Conflict; Required Consents............................................ 13
3.4 Assets: Title, Condition and Sufficiency.................................. 13
3.5 Franchises, Licenses, Contracts, Owned Property and Real Property
Interests................................................................. 13
3.6 Employee Benefits......................................................... 14
3.7 Litigation................................................................ 14
3.8 Tax Returns; Other Reports................................................ 15
3.9 Systems Information....................................................... 15
3.10 Compliance with Legal Requirements........................................ 15
3.11 Real Property............................................................. 17
3.12 No Adverse Change; Financial Statements................................... 17
3.13 Employees................................................................. 17
3.14 Environmental............................................................. 18
3.15 Taxpayer Identification Number............................................ 18
3.16 Holding Period............................................................ 18
3.17 Cash Flow for Systems..................................................... 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF IP-IV
4.1 Organization, Power, etc.................................................. 19
4.2 Approvals................................................................. 19
4.3 No Conflicts.............................................................. 19
4.4 Commissions............................................................... 19
ARTICLE 5 COVENANTS
5.1 Schedules................................................................. 20
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.2 HSR Notification.......................................................... 20
5.3 Employees................................................................. 20
5.4 Title Insurance Commitments............................................... 21
5.5 Certain TCI Pre-Adjustment Date Affirmative Covenants..................... 22
5.6 Certain TCI Pre-Adjustment Date Negative Covenants........................ 24
5.7 Certain TCI Pre-Closing Covenants......................................... 24
5.8 Certain Post-Closing Covenants............................................ 25
5.9 Certain IP-IV Covenants................................................... 26
5.10 Confidentiality and Publicity............................................. 27
ARTICLE 6 CONDITIONS PRECEDENT TO CLOSINGS
6.1 Conditions to TCI Parties' Obligations.................................... 28
6.2 Conditions to IP-IV's Obligations......................................... 28
ARTICLE 7 THE CLOSINGS
7.1 Closing................................................................... 29
7.2 Multiple Closing Contingency.............................................. 29
7.3 Interim Management of the Systems by IP-IV................................ 30
7.4 Substitute Consideration.................................................. 32
7.5 Retained Assets........................................................... 33
7.6 Final Consideration....................................................... 34
ARTICLE 8 TERMINATION AND DEFAULT
8.1 Termination Events........................................................ 34
8.2 Effect of Termination..................................................... 35
ARTICLE 9 INDEMNIFICATION
9.1 Indemnification by IP-IV.................................................. 35
9.2 Indemnification by TCI Parties............................................ 36
9.3 Procedure for Indemnified Third Party Claim............................... 36
9.4 Determination of Indemnification Amounts and Related Matters.............. 37
9.5 Time and Manner of Certain Claims......................................... 38
9.6 Other Indemnification..................................................... 38
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 Expenses.................................................................. 38
10.2 Brokerage................................................................. 38
10.3 Waivers................................................................... 39
10.4 Notices................................................................... 39
10.5 Entire Agreement; Prior Representations; Amendments....................... 40
10.6 Binding Effect; Benefits.................................................. 40
10.7 Headings and Exhibits..................................................... 41
10.8 Counterparts.............................................................. 41
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.9 Governing Law............................................................. 41
10.10 Severability.............................................................. 41
10.11 Third Parties; Joint Ventures............................................. 41
10.12 Construction.............................................................. 41
10.13 Attorneys' Fees........................................................... 41
10.14 Risk of Loss.............................................................. 41
10.15 Tax Consequences.......................................................... 42
10.16 Commercially Reasonable Efforts........................................... 42
10.17 Covenant Not To Sue and Nonrecourse to Partners........................... 42
10.18 Bulk Sales................................................................ 43
10.19 Taxes..................................................................... 43
</TABLE>
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<PAGE> 5
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1 Interim Contracts
Schedule 2.1(b)(i) Tangible Personal Property
Schedule 2.1(b)(ii) Owned Property and Real Property
Interests
Schedule 2.1(b)(iii) Franchises
Schedule 2.1(b)(iv) Licenses
Schedule 2.1(b)(v) Contracts
Schedule 2.1(c) Excluded Assets
Schedule 2.3(a) Fair Market Value of Systems
Schedule 2.3(b) TCI Debt Terms
Schedule 3.3 Conflicts and Consents
Schedule 3.4 Liens and Permitted Liens
Schedule 3.5 Noncompliance with Franchises, Licenses,
Contracts, Owned Property and Real
Property Interests
Schedule 3.6 Plans
Schedule 3.7 Litigation
Schedule 3.8 Tax Filings
Schedule 3.9 Systems Information
Schedule 3.10 Legal Compliance
Schedule 3.12 Financial Information
Schedule 3.13 Employee Information
Schedule 3.14 Environmental Disclosures
Schedule 5.5 Capital Budget
Schedule 7.1(a)(i) Deliverables by TCI Parties
Schedule 7.1(a)(ii) Deliverables by IP-IV
Schedule 7.3 Adjustment Date Consents
Exhibit 7.1(b)(i)-1 Bill of Sale and Assignment
Exhibit 7.1(b)(i)-2 Assumption Agreement
Exhibit 7.3(b)(i)-3 Noncompetition Covenant
Exhibit 7.3 Management Agreement
-iv-
<PAGE> 6
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT ("Agreement") is made and entered into as
of March 4, 1996, by and between TCI OF GREENVILLE, INC., a South Carolina
corporation ("TCI-Greenville"), whose U.S. Taxpayer Identification Number is
54-1523910, TCI OF PIEDMONT, INC., a South Carolina corporation
("TCI-Piedmont"), whose U.S. Taxpayer Identification Number is 57-0871856, and
TCI OF SPARTANBURG, INC., a South Carolina corporation ("TCI-Spartanburg"; each
of TCI-Greenville, TCI-Piedmont and TCI-Spartanburg is referred to as a "TCI
Party" and collectively as the "TCI Parties"), whose U.S. Taxpayer
Identification Number is 54-1523907, on one hand, and INTERMEDIA PARTNERS IV,
L.P., a California limited partnership, whose U.S. Taxpayer Identification
Number is 94-3232894 ("IP-IV"), on the other.
RECITALS
A. TCI-Greenville owns and operates an advertising sales business for
various cable television systems located in South Carolina and it and
TCI-Piedmont and TCI-Spartanburg each owns and operates a cable television
system providing television programming and other cable-related services to
subscribers located in and around (i) in the case of TCI-Greenville, the City of
Greenville, South Carolina, (ii) in the case of TCI-Piedmont, the city of
Piedmont, South Carolina and (iii) in the case of TCI- Spartanburg, the city of
Spartanburg, South Carolina (individually, a "System" (including in the case of
TCI-Greenville, the aforementioned advertising sales business) and collectively,
the "Systems").
B. Each TCI Party desires to contribute its System to IP-IV, and IP-IV
desires to accept such contribution, on the terms and subject to the conditions
of this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS.
As used in this Agreement:
"Adjustment Date" means either (a) the Closing Date or (b) April 1,
1996 or such other date (i) within sixty (60) days of April 1, 1996 as IP-IV may
choose or (ii) as the parties may
<PAGE> 7
agree, in each case in this clause (b), if (x) the Closing has not occurred by
that date and (y) the conditions set forth in Section 7.3(b) have been satisfied
or waived by that date.
"Adjustment Time" means 11:59 p.m. local time, on the Adjustment Date.
"Affiliate" means, as to any Person, any Person controlling, controlled
by or under common control with such Person; "control" means the ownership,
directly or indirectly, of voting securities representing the right generally to
elect a majority of the directors (or similar officials) of a Person or the
possession, by contract or otherwise, of the authority to direct the management
and policies of a Person. For purposes of this definition of Affiliate, a
managing general partner of a partnership shall be deemed to be in possession of
the sole authority to direct the management and policies of such partnership.
"Basic Service" means the basic package of cable television programming
sold to subscribers, including broadcast and satellite service programming plus
the expanded basic package, for which a subscriber pays a fixed monthly fee, but
not including premium programming services selected by and sold to subscribers
on an a la carte basis for monthly fees in addition to the fee for Basic Service
or the lease of equipment used by a subscriber in connection with the services
received.
"1984 Cable Act" means the Cable Communications Policy Act of 1984, as
amended, and the rules and regulations promulgated thereunder.
"1992 Cable Act" means the Cable Television Consumer Protection and
Competition Act of 1992, as amended, and the rules and regulations promulgated
thereunder.
"Cash Flow" shall mean for any period after the Adjustment Date for a
System the gross revenues less all costs, expenses and charges pertaining to the
operation of the System (a) to the extent that such costs, expenses and charges
would be included in the Assumed Liabilities had the Closing occurred on the
Adjustment Date, (b) arising after the Adjustment Date under the contracts (i)
listed on SCHEDULE 1.1 or (ii) in respect of which payments made thereunder are
reflected in SCHEDULE 3.12 and (c) capital expenditures listed in SCHEDULE 5.5.
For the avoidance of doubt, such costs, expenses and charges do not include
management fees, legal fees relating to the corporate organization of a TCI
Party, financing fees, income taxes, any other administrative costs or taxes
incurred in connection with corporate matters not associated with the Systems
and non-cash charges; and none of the foregoing shall be paid from the Cash Flow
contributed to IP-IV.
"Closing Time" means 11:59 p.m. local time, on a Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as amended,
including, but not limited to, any amendments pursuant to the 1984 Cable Act and
the 1992 Cable Act, and the rules and regulations promulgated thereunder.
-2-
<PAGE> 8
"Deposits" means all monies which are on deposit with third parties as
of the Adjustment Date for the account of any TCI Party or as security for any
TCI Party's performance of its obligations (other than any deposits which are
Excluded Assets or the full benefit of which will not be available to IP-IV
following the Closing), including deposits on real property leases and deposits
for utilities.
"EBSs" means, for a System, a number equal to (a) the number of
residential subscribers (including any subscribers who receives service at a
standard discount offered in the ordinary course of business but excluding any
subscriber who receives service without charge) of a System and (b) the quotient
of (i) the total monthly billings for such System for the last full month
preceding the date of calculation for sales of Basic Service to bulk and
commercial accounts, divided by (ii) the predominant monthly rate for that
System set forth on SCHEDULE 3.9 for Basic Service charged to single family
households in effect during such month. For purposes of calculating the number
of EBSs, there will be excluded (i) all billings to any subscriber who is more
than 60 days delinquent in the payment of any amount in excess of $10, (ii) all
billings to any subscriber who, as of the date of calculation, has not paid in
full the charges for at least one full month of service, (iii) that portion of
the billings to any subscriber representing an installation or other
nonrecurring charge or a pass-through charge for copyright fees, franchise fees,
sales taxes and the like, (iv) all billings to any subscriber whose service is
pending disconnection for any reason and (v) all billings to any subscriber who
was solicited during the 60-day period preceding the Adjustment Date by
extraordinary promotions or offers of discounts other than those then generally
being offered by Tele-Communications, Inc. and its Affiliates. For purposes of
this definition, payments on account of monthly billings will be deemed due on
the first day of the period during which the service to which such billings
relate is provided.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, which together with any TCI Party would be deemed a single
employer within the meaning of section 4001 of ERISA.
"FCC" means the Federal Communications Commission.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof and any political subdivision or
quasi-governmental authority of any of the same, including any court, tribunal,
department, commission, board, bureau, agency, county, municipality, province,
parish or other instrumentality.
"Hazardous Substances" means (a) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C.A. Section
6901, et seq.), as amended, and the rules and regulations promulgated
thereunder; (b) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.A.
Section 9601, et seq.) (CERCLA), as amended, and the rules and regulations
promulgated
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thereunder; (c) any substance regulated by the Toxic Substances Control Act
(TSCA) (42 U.S.C. Section 2601, et seq.), as amended, and the rules and
regulations promulgated thereunder; (d) asbestos; (e) polychlorinated biphenyls;
(f) any substances regulated under the provisions of Subtitle I of RCRA relating
to underground storage tanks; (g) any substance the presence, use, treatment,
storage or disposal of which on Owned Property or Leased Property is prohibited
by any Legal Requirement; and (h) any other substance which by any Legal
Requirement requires special handling, reporting or notification of any
Governmental Authority in its collection, storage, use, treatment or disposal.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Judgment" means any judgment, writ, order, injunction, award or decree
of any court, judge, justice or magistrate, including any bankruptcy court or
judge or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
"Knowledge" of any party means the (a) actual knowledge of a particular
matter of one or more of the executive officers of such party and (b) in the
case of a TCI Party, the general manager or one or more of the managers of its
System.
"Legal Requirement" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
written standard, requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority, including any Judgment.
"Lien" means any security interest, any interest retained by the
transferor under a conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim, attachment, exception to or defect in title or
other ownership interest (including but not limited to reservations, rights of
entry, possibilities of reverter, encroachments, easements, rights-of-way,
restrictive covenants, leases and licenses) of any kind which constitutes an
interest in or claim against property, whether arising pursuant to any Legal
Requirement, Contract or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing or other activity or procedure that could result in a
Judgment, and any notice of any of the foregoing, including any of the foregoing
related to Taxes.
"Losses" means, on an after-Tax basis, any claims, losses, liabilities,
damages, Liens, penalties, costs and expenses, including interest which may be
imposed in connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts, and the cost to any Person making a
claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect to
which indemnification is sought.
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"Permitted Liens" means (a) Liens for Taxes, assessments and
governmental charges not yet due and payable, (b) zoning laws and ordinances and
similar Legal Requirements, (c) rights reserved to any Governmental Authority to
regulate the affected property, (d) as to Owned Property and Real Property
Interests, any easements, rights-of-way, servitudes, permits, leases,
conditions, covenants, restrictions and minor imperfections or irregularities in
title which are reflected in the public records and which do not individually or
in the aggregate interfere with the right or ability to own, use, enjoy or
operate the Owned Property or Real Property Interests or to convey good,
marketable and indefeasible fee simple title to the same, and (e) Liens granted
at the request of IP-IV to secure indebtedness incurred to refinance, in whole
or part, the TCI Debt; provided that "Permitted Liens" will not include any Lien
which could prevent or inhibit in any way the conduct of the business of the
affected System, and provided further that classification of any Lien as a
"Permitted Lien" will not affect any liability which a TCI Party may have for
any such Lien, including pursuant to any indemnity obligation under this
Agreement.
"Person" means any human being, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
"Required Consents" means in respect of a System any and all consents,
authorizations and approvals required under the Franchises, Licenses, Real
Property Interests and Contracts which are identified on SCHEDULE 3.3 for that
System for (a) the TCI Party which owns that System to transfer its Assets to
IP-IV, (b) IP-IV to operate such System and to own, lease, use and operate those
Assets and such System at the places and in the manner in which those Assets are
used and such System is operated as of the date of this Agreement and as of the
relevant Closing and (c) IP-IV to assume and perform the relevant Franchises,
the Licenses, the Real Property Interests and the Contracts.
"Taxes" means all levies and assessments of any kind or nature imposed
by any Governmental Authority, including all income, sales, use, ad valorem,
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, together with any interest thereon and any
penalties, additions to tax or additional amounts applicable thereto. For
purposes of determining any Tax cost or Tax benefit to any Person, such amount
shall be the actual cost or benefit recognized by such Person at the time of
actual payment of the additional Tax or actual recognition of the Tax benefit.
In the event that any payment or other amount is required to be determined on an
after-Tax basis, such payment or other amount shall initially be determined
without regard to any Tax cost or Tax benefit not actually recognized currently,
and appropriate adjustments shall be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
"Transaction Documents" means the instruments and documents described
in Sections 7.1(b) and 7.3 which are being executed and delivered by a TCI Party
or IP-IV in connection with this Agreement or the transactions contemplated
hereby.
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1.2 OTHER DEFINITIONS. The following terms are defined in the Sections
or Recitals indicated:
Term Section or Recital
---- ------------------
Adjustment Amount 2.4
Assets 2.1(b)
Assumed Liabilities 2.2
Closing 7.1
Closing Date 7.1
Contracts 2.1(b)(v)
Excluded Assets 2.1(c)
Fair Market Value 7.4(a)
Final Adjustment Certificate 2.5
Franchise Extensions 5.5(k)
Franchises 2.1(b)(iii)
GAAP 1.4
Indemnitee 9.3
Indemnitor 9.3
Initial Adjustment Certificate 2.5
Leased Property 3.11
Leases 3.11
Licenses 2.1(b)(iv)
Minimum Damage Requirement 9.4(a)
Net Cash Flow 3.17
Outside Closing Date 8.1(d)
Owned Property 2.1(b)(ii)
Partnership Agreement 2.1(a)
Plans 3.6(a)
Real Property Interests 2.1(b)(ii)
Retained Assets 7.5
Subscriber Accounts Receivable 2.4(b)
Substitute Systems 7.4(a)
Surveys 5.4
Systems Recital A
Tangible Personal Property 2.1(b)(i)
TCI Debt 2.3(b)
Title Commitments 5.4
Title Company 5.4
Title Defect 5.4
Transferred Assets 7.5
WARN 5.3(b)
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1.3 NUMBER, GENDER, ETC. Terms used with initial capital letters will
have the meanings specified, applicable to singular and plural forms and to any
gender, for all purposes of this Agreement. The word "include" and all
derivations of that word are used in this Agreement in an illustrative sense
rather than a limiting sense.
1.4 ACCOUNTING TERMS. All accounting terms not otherwise defined in
this Agreement will have the meanings ascribed to them under Generally Accepted
Accounting Principles ("GAAP") as in effect from time to time in the United
States.
ARTICLE 2
CONTRIBUTION
2.1 CONTRIBUTION OF ASSETS.
(a) Pursuant to the provisions of the InterMedia Partners IV, L.P.
Amended and Restated Agreement of Limited Partnership dated as of December 29,
1995 (as amended, the "Partnership Agreement"), and subject to the terms and
conditions hereinafter set forth, as a contribution in kind to the capital of
IP-IV, each TCI Party hereby severally undertakes to transfer to IP-IV (i) all
of its right, title and interest in and to the Assets of its System as set forth
in Sections 7.1 and 7.2 and (ii) the Cash Flow of its System pursuant to Section
7.2; and IP-IV agrees to accept such capital contribution in kind from each TCI
Party. The Assets shall be transferred to IP-IV free and clear of all mortgages,
liens, charges, claims or restrictions, except for Permitted Liens and Liens
marked with an asterisk on SCHEDULE 3.4. In return for its capital contribution,
each TCI Party or its designee shall receive a credit to its capital account in
IP-IV in an amount equal to the fair market value of its System as set forth in
SCHEDULE 2.3(a), such credit to be made on the earlier of the Adjustment Date or
the first Closing Date.
(b) "Assets" means all the assets and properties, real and personal,
tangible and intangible, used by or useful to a TCI Party in its operation of,
or otherwise relating to, its System as of the relevant Closing Date that are
not Excluded Assets, including the following:
(i) all tangible personal property, including towers, tower
equipment, aboveground and underground cable, distribution systems,
headend amplifiers, line amplifiers, microwave equipment, converters,
testing equipment, motor vehicles, office equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal
items of which are described on SCHEDULE 2.1(b)(i) (the "Tangible
Personal Property");
(ii) the fee interests in the real property described as Owned
Property on SCHEDULE 2.1(b)(ii) and all improvements thereon (the
"Owned Property"), and the leases, easements, rights of access and
other interests in real property described as Real Property Interests
on SCHEDULE 2.1(b)(ii) (the "Real Property Interests"),
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but excluding multiple dwelling unit agreements, easements and rights
of access described on SCHEDULE 2.1(b)(v);
(iii) the franchises and other authorizations or permits
described on SCHEDULE 2.1(b)(iii) (the "Franchises");
(iv) the cable television relay service (CARS), business radio,
common carrier, earth station, and other licenses, authorizations,
consents or permits issued by the FCC or any other Governmental
Authority described on SCHEDULE 2.1(b)(iv) (the "Licenses");
(v) the pole line and joint line agreements, underground
conduit agreements, crossing agreements, multiple dwelling unit
agreements, bulk or commercial service agreements, retransmission
consent agreements, easements, rights of access and mortgages, deeds of
trust, bonds, indentures, leases, licenses, notes, franchises,
certificates, options, warrants, rights, or other instruments,
documents, obligations, or agreements, whether written or oral,
described on SCHEDULE 2.1(b)(v), but excluding leases and licenses
included on SCHEDULE 2.1(b)(ii) and franchises included on SCHEDULE
2.1(b)(iii) (the "Contracts");
(vi) all subscriber, trade and other accounts receivable; and
(vii) all engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and processes, and all
files of correspondence, lists, records and reports concerning
subscribers and prospective subscribers of the Systems, signal and
program carriage and dealings with Governmental Authorities, including
all reports filed by or on behalf of the relevant TCI Party with the
FCC and statements of account filed by or on behalf of the relevant TCI
Party with the U.S. Copyright Office.
(c) "Excluded Assets" means in relation to a System all: (i)
programming contracts and retransmission consent agreements (except any such
agreement listed on SCHEDULE 2.1(b)(v)); (ii) insurance policies and rights and
claims thereunder (except as otherwise provided in Section 10.14); (iii) bonds,
letters of credit, surety instruments and other similar items; (iv) cash and
cash equivalents; (v) the relevant TCI Party's trademarks, trade names, service
marks, service names, logos and similar proprietary rights; (vi) subscriber
billing Contracts and related leased equipment (except any such agreement which
is assignable by its terms and which IP-IV has explicitly agreed to assume);
(vii) Litigation to the extent attributable to periods prior to the relevant
Closing Time and proceeds thereof; and (viii) rights, assets and properties
described on SCHEDULE 2.1(c).
2.2 ASSUMED LIABILITIES. At each Closing, IP-IV will assume and after
that Closing, IP-IV will pay, discharge and perform, with respect to the Assets
which are being transferred the following (the "Assumed Liabilities"): (i) those
obligations and liabilities attributable to periods after the relevant Closing
Time under or with respect to the Assets assigned and transferred to
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IP-IV at that Closing; (ii) other obligations and liabilities of the TCI Parties
only to the extent that an adjustment in favor of IP-IV is required with respect
thereto pursuant to Section 2.4; (iii) all other obligations and liabilities
attributable to periods after the relevant Closing Time and arising out of
IP-IV's ownership of the Assets or operation of the Systems after that Closing,
except to the extent that such obligations or liabilities relate to any Excluded
Asset; and (iv) the TCI Debt. All obligations and liabilities arising out of or
relating to the Assets or the Systems other than the Assumed Liabilities will
remain and be the obligations and liabilities solely of the relevant TCI Party,
including those obligations and liabilities of the TCI Parties described in
Section 3.8.
2.3 FAIR MARKET VALUE OF SYSTEMS.
(a) IP-IV and the TCI Parties agree that the fair market value (net of
the indebtedness which will be assumed by IP-IV) of (i) the Systems is one
hundred sixty-four million one hundred fifty thousand dollars ($164,150,000) and
(ii) each System is set forth on SCHEDULE 2.3(a).
(b) On the earlier to occur of the first Closing Date or the date, on
or after the Adjustment Date, on which IP-IV notifies the TCI Parties that it
intends to refinance the indebtedness of the TCI Parties, IP-IV shall, pursuant
to an assumption agreement in form and substance satisfactory to the TCI
Parties, assume such indebtedness in the aggregate amount of seventy-five
million eight hundred fifty thousand dollars ($75,850,000), and on the terms and
conditions, set forth in SCHEDULE 2.3(b) (the "TCI Debt").
2.4 ADJUSTMENT AMOUNT. On the Adjustment Date, the following amounts
shall be calculated and paid for each System, without duplication (the net
amount is referred to as the "Adjustment Amount"):
(a) either:
(i) each TCI Party shall pay IP-IV the amount of the excess, if
any, of Current Liabilities over Current Assets of that TCI Party's
System or
(ii) IP-IV shall pay each TCI Party the excess, if any, of
Current Assets over Current Liabilities of that TCI Party's System; and
(b) each TCI Party shall pay IP-IV the amount of any deductible under
the casualty insurance policies insuring that TCI Party's Assets if the last
sentence of Section 10.14 is applicable.
"ACCOUNTS PAYABLE" means with respect to a System the book value of all
accounts payable of a System relating to the conduct of that System determined
as of the Adjustment Time in accordance with GAAP on a basis consistent with the
application of such principles in the preparation of the Financial Statements.
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"ACCOUNTS RECEIVABLE" means all Subscriber Accounts Receivable of a
System that are sixty (60) or fewer days past due as of the Adjustment Time, one
hundred percent (100%) of the face amount of all Advertising Accounts Receivable
of a System that are one hundred twenty (120) days or fewer past due as of the
Adjustment Time and all other accounts receivable which arise in the ordinary
course of business that are sixty (60) days or fewer past due as of the
Adjustment Time. No Subscriber Accounts Receivable that are more than sixty (60)
days past due and no Advertising Accounts Receivable that are more than one
hundred twenty (120) days past due shall be Accounts Receivable.
"ADVERTISING ACCOUNTS RECEIVABLE" shall mean all accounts receivable of
a TCI Party relating to its System representing amounts owed to it in connection
with advertising on that System or another cable television system sold either
directly by that TCI Party or by an ad sales representative or an advertising
agency of that TCI Party or through an advertising interconnect partnership. The
"past due" calculation for purposes of determining whether Advertising Accounts
Receivable are Accounts Receivable shall be based upon date of invoice.
"CURRENT ASSETS" means the sum of (a) Accounts Receivable net of any
credit balances owed to Subscribers, (b) Prepaid Expenses and (c) Deposits, each
as of the Adjustment Date.
"CURRENT LIABILITIES" means the sum of (a) Accounts Payable, (b)
Deferred Revenue and (c) Other Current Liabilities, each as of the Adjustment
Date.
"DEFERRED REVENUE" means liabilities to subscribers representing
advance billings for services to be performed by IP-IV after the Adjustment
Time.
"OTHER CURRENT LIABILITIES" means with respect to a System all current
liabilities (including, but not limited to, accrued vacation pay of employees of
the relevant TCI Party subscriber security deposits and customer advance
payments, but excluding (i) Accounts Payable and (ii) Deferred Revenue) of that
System relating to the conduct of the System determined as of the Adjustment
Time in accordance with GAAP on a basis consistent with the application of such
principles in the preparation of the Financial Statements.
"PREPAID EXPENSES" means with respect to a System the book value of
prepaid expenses and miscellaneous prepaids (in each case, only to the extent
constituting a current asset) of that System with respect to the System
determined as of the Adjustment Time in accordance with GAAP on a basis
consistent with the application of such principles in the preparation of the
Financial Statements, to the extent that such prepaid expenses will accrue to
the benefit of IP-IV upon and after the Adjustment Time.
"SUBSCRIBER ACCOUNTS RECEIVABLE" of a System means accounts receivable
(excluding Advertising Accounts Receivable) resulting from the supply of cable
television service to that System's subscribers that are active subscribers as
of the Adjustment Time and that relate to periods of time prior to the
Adjustment Time. For purposes of making "past due" calculations to determine
whether Subscriber Accounts Receivable are Accounts Receivable, the subscriber
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billing statements of a System will be deemed to be due and payable on the first
day of the period during which the service to which such billing statements
relate is provided.
(c) As of the Adjustment Time, all income and expenses relating to each
System and its operations, determined in accordance with GAAP, will be prorated
so that, with respect to that System, all income and expenses for periods prior
to the Adjustment Time will be for the account of the relevant TCI Party, and
all income and expenses for periods after the Adjustment Time will be for the
account of IP-IV. Without limiting the generality of the foregoing, the
following expenses will be prorated as described in the preceding sentence:
(i) all payments and charges under or with respect to
Franchises, Licenses, Contracts, contracts included in clause (b) of
the definition of Cash Flow, Real Property Interests and Owned
Property;
(ii) general property taxes, special assessments, and ad
valorem taxes levied or assessed against any Assets;
(iii) sales and use taxes, if any, payable with respect to
cable television service and related sales to System subscribers;
(iv) charges for utilities and other goods or services
furnished to each System; and
(v) copyright fees based on signal carriage by each System;
provided, however, that no TCI Party will prorate any items of income and
expense which are non-cash items (such as depreciation and amortization) or
which relate to any Excluded Assets (except as set forth in clause (i) above),
all of which will remain and be solely for the account of such TCI Party.
2.5 CALCULATION OF ADJUSTMENT AMOUNT.
(a) The adjustments and prorations prescribed by Section 2.4 will be
estimated in good faith by the TCI Parties with respect to the Systems, and set
forth, together with a detailed statement of the calculation thereof, in a
certificate (the "Initial Adjustment Certificate") executed by an authorized
officer of each TCI Party and delivered to IP-IV at least ten (10) days prior to
the Adjustment Date. The Initial Adjustment Certificate will be accompanied by
appropriate documentation for each System, in summary form, supporting the
adjustments proposed in such certificate, including documentation supporting the
number of Basic Subscribers and EBSs of each System determined as of the
Adjustment Date and the annualized Net Cash Flow for 1996 measured through the
end of the second calendar month ended immediately prior to the calendar month
in which the Adjustment Date occurs. Within forty-five (45) days after the
Adjustment Date, IP-IV will deliver to the TCI Parties a certificate (the "Final
Adjustment Certificate") showing in full detail the final determination of the
Adjustment Amount, which certificate will be accompanied by appropriate
documentation supporting the adjustments proposed in such
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certificate, including an accounts receivable detail with relevant aging
information as of the Adjustment Time, and which will be executed by a
representative of IP-IV. Each party will provide to the other reasonable access
to all records in its possession which were used in the preparation of its
Initial and Final Adjustment Certificates.
(b) The TCI Parties will review the Final Adjustment Certificate and
will give written notice to IP-IV of any objections they may have to the
calculations shown in such certificate within thirty (30) days after their
receipt thereof. IP-IV and the TCI Parties will endeavor in good faith to
resolve any such objections within thirty (30) days after the receipt of the TCI
Parties' objections. If any objections or disputes have not been resolved at the
end of such 30-day period, the disputed portion of the Adjustment Amount will be
determined within the following thirty (30) days by a partner in a major
accounting firm with substantial cable television audit experience which is not
the auditor of either the TCI Parties or IP-IV (or any Affiliate of them) and
the determination of such auditor will be final and will be binding upon all
parties. If the TCI Parties and IP-IV cannot agree with respect to selection of
an auditor, KPMG Peat Marwick and Price Waterhouse LLP will select an auditor
whose determination will be final and will be binding upon all parties. The TCI
Parties and IP-IV will bear equally the expenses arising in connection with any
determination of disputed amounts by an auditor's determination.
(c) Within five (5) days of the expiration of the review period or the
date of final determination, (i) IP-IV shall pay to each TCI Party the amount
(if any) by which the relevant Adjustment Amount, as adjusted as set forth in
the Final Adjustment Certificate, as finally determined, shall be more than the
relevant Adjustment Amount determined pursuant to Section 2.4(a)(ii) or less
than the relevant Adjustment Amount determined pursuant to Section 2.4(a)(i); or
(ii) each TCI Party shall pay IP-IV the amount (if any) by which the relevant
Adjustment Amount, as adjusted as set forth in the Final Adjustment Certificate,
as finally determined, shall be less the relevant Adjustment Amount determined
pursuant to Section 2.4(a)(ii) or more than the relevant Adjustment Amount
determined pursuant to Section 2.4(a)(i). Either such amount shall be paid in
cash by wire or interbank transfer in immediately available funds.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TCI PARTIES
Each TCI Party (severally and not jointly) represents and warrants to
IP-IV, as of the date of this Agreement and as of the Adjustment Date for its
System, as follows:
3.1 ORGANIZATION. That TCI Party (a) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, (b) has all requisite power and authority to own, lease and
operate its properties and to carry on its business as presently conducted, and
(c) is qualified to do business as a foreign corporation and is in good standing
in all jurisdictions in which the ownership or leasing of its Assets or the
nature of its activities in connection with the System it owns makes such
qualification necessary and in which failure to so qualify would have a material
adverse effect on the ownership or operation of its Assets and such System or on
its ability to perform its obligations under this Agreement.
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3.2 AUTHORITY AND VALIDITY. That TCI Party has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement
and consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by that TCI Party have been duly and validly authorized by
all necessary corporate action on its part. This Agreement has been duly and
validly executed and delivered by that TCI Party, and is the valid and binding
obligation of that TCI Party, enforceable against it in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
3.3 NO CONFLICT; REQUIRED CONSENTS. Subject to obtaining the consents
described on SCHEDULES 3.3 and 7.3 the execution, delivery and performance by
that TCI Party of this Agreement does not and will not: (i) conflict with or
violate any provision of its articles of incorporation or bylaws; (ii) violate
any material Legal Requirements; (iii) conflict with, violate, result in a
breach of, constitute a default under (without regard to requirements of notice,
lapse of time, or elections of other Persons, or any combination thereof), or
accelerate or permit the acceleration of the performance required by, any
Contract to which that TCI Party is a party or by which it or the assets or
properties owned or leased by it are bound or affected; (iv) result in the
creation or imposition of any Lien against or upon any of its Assets; or (v)
require any consent, approval, or authorization of, or filing of any
certificate, notice, application, report or other document with, any
Governmental Authority or other Person (including any anti-trafficking waivers
from the FCC).
3.4 ASSETS: TITLE, CONDITION AND SUFFICIENCY.
(a) That TCI Party has good and marketable title to all of its owned
Assets, free and clear of all Liens, except (i) Liens described on SCHEDULE 3.4,
all of which (except for those marked with an asterisk on SCHEDULE 3.4) will be
terminated, released, or, in the case of the rights of first refusal named
thereon, waived, as appropriate, at the Closing, and (ii) Permitted Liens. In
the case of Assets leased by it from another Person, that TCI Party has valid
leasehold interests in such Assets. Except as described on SCHEDULE 2.1(b)(i),
the material Tangible Personal Property is in good condition and repair,
ordinary wear and tear excepted.
(b) The Assets as described on SCHEDULES 2.1(b)(i), (ii), (iii), (iv)
and (v) constitute substantially all of the assets necessary to permit IP-IV to
operate in the case of TCI-Greenville, its System, and in the case of
TCI-Piedmont and TCI- Spartanburg, their Systems, substantially as they are
being operated on the date of this Agreement and in compliance with all
applicable Legal Requirements and to perform all of the Assumed Liabilities.
3.5 FRANCHISES, LICENSES, CONTRACTS, OWNED PROPERTY AND REAL PROPERTY
INTERESTS.
(a) Except as described on SCHEDULES 2.1(b)(ii), (iii), (iv) and (v),
or 2.1(C), that TCI Party is not bound or affected by any of the following that
relate primarily or in whole to its System: (i) leases of real property; (ii)
leases of personal property for a term exceeding one year
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or requiring payments of more than $25,000 in the aggregate; (iii) franchises
for the construction or operation of cable television systems, or contracts of
substantially equivalent effect; (iv) licenses, authorizations, consents or
permits of the FCC; (v) other material licenses, authorizations, consents or
permits of any other Governmental Authority; (vi) material easements or rights
of access; (vii) pole line and joint line agreements, underground conduit
agreements, crossing agreements, or bulk or commercial service agreement, in
each case a material agreement; or (viii) contracts, written or oral, other than
those described in any other clause of this Section 3.5(a), which contemplate
payments by or to that TCI Party in any 12-month period exceeding $25,000
individually or $250,000 in the aggregate.
(b) That TCI Party has delivered to IP-IV true and complete copies of
(i) its Franchises, (ii) any notices alleging non-compliance with the
requirements of any of its Franchise, (iii) its Licenses, (iv) its contracts,
mortgages, deeds of trust, bonds, indentures, leases, licenses, notes,
franchises, certificates, options, warrants, rights or other agreements, or
other documents evidencing the Real Property Interests, including any amendments
thereto (or, in the case of oral contracts, true and complete written summaries
thereof) and each document evidencing its ownership of the Owned Property, and
(iv) all material correspondence with any local franchising authority regarding
customer service with respect to its System.
(c) Except as described in SCHEDULE 3.5, (i) that TCI Party is in
material compliance with each of its Franchises and Licenses; (ii) that TCI
Party has fulfilled when due, or has taken all action necessary to enable it to
fulfill when due, all of its material obligations under each of the Contracts or
Real Property Interests, in each case to which it is a party; and (iii) to that
TCI Party's Knowledge, there has not occurred any material breach (without
regard to lapse of time or the giving of notice, or both) by any Person under
any of its Franchises, Licenses, Contracts or Real Property Interests.
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3.6 EMPLOYEE BENEFITS.
(a) Each employee benefit plan (as defined in section 3(3) of ERISA) or
any multiemployer plan (as defined in section 3(37) of ERISA) with respect to
which that TCI Party has any liability or in which any employees or agents, or
any former employees or agents, of that TCI Party participate is set forth in
SCHEDULE 3.6 (the "TCI Party Plans").
(b) That TCI Party and ERISA Affiliate of it is not in material
violation of any provision of ERISA. No reportable event (as defined in section
4043 of ERISA) has occurred and is continuing with respect to any TCI Party Plan
or any employee benefit plan or multiemployer plan with respect to which any
ERISA Affiliate has any liability (together with the TCI Party Plans, these
plans are referred to as the "TCI Group Plans") and no prohibited transaction
(as defined in section 406 of ERISA) has occurred with respect to any TCI Group
Plan which would result in material liability to that TCI Party or any ERISA
Affiliate of that TCI Party. No material accumulated funding deficiency (as
defined in section 302 of ERISA) exists with respect to any TCI Group Plan.
After the Closing for that TCI Party's System, IP-IV will not be required, under
ERISA, the Code, or any collective bargaining agreement, to establish, maintain,
or continue any TCI Group Plan currently maintained by that TCI Party or any
ERISA Affiliate of it.
3.7 LITIGATION. Except as set forth in SCHEDULE 3.7: (i) there is no
Litigation pending or, to that TCI Party's Knowledge, threatened by or before
any Governmental Authority or private arbitration tribunal, against that TCI
Party which could materially adversely affect the financial condition or
operations of its System, its Assets or the ability of that TCI Party to perform
its obligations under this Agreement, or which seeks or could result in the
modification, revocation, termination, suspension or other limitation of any of
its Franchises, Licenses, Contracts or Real Property Interests; and (ii) there
is not in existence any Judgment requiring that TCI Party to take any action of
any kind with respect to its Assets or the operation of its System, or to which
that TCI Party, its System, or its Assets are subject or by which they are bound
or affected.
3.8 TAX RETURNS; OTHER REPORTS. Except as set forth in SCHEDULE 3.8,
that TCI Party (a) has filed by any due date or extended due date in correct
form all federal, state, local and foreign Tax returns and other Tax reports
required to be filed by any due date or extended due date, (b) has timely paid
all Taxes which have become due and payable, except such amounts as are being
contested diligently and in good faith and are not material in amount, whether
or not so shown on any such return or report, the failure of which to be filed
or paid could affect or result in transferee or other liability on IP-IV or in
the imposition of a Lien upon the Assets, and (c) has not received notice of,
nor does it have any Knowledge of, any deficiency, assessment or audit, or
proposed deficiency, assessment or audit from any taxing Governmental Authority
which could affect or result in transferee or other liability on IP-IV or in the
imposition of a Lien upon the Assets.
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3.9 SYSTEMS INFORMATION. SCHEDULE 3.9 sets forth a materially true and
accurate description of the following information as of the date of this
Agreement:
(a) the number of miles of plant in its System;
(b) the number of single family homes and residential dwelling units
passed by its System;
(c) a description of basic and optional or tier services available from
its System, the rates charged by that TCI Party for each, and the number of EBSs
receiving each optional or tier service;
(d) the stations and signals carried by its System and the channel
position of each such signal and station; and
(e) the cities, towns, villages, boroughs and counties served by its
System.
3.10 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) Except as set forth in SCHEDULE 3.10, the operation of that TCI
Party's System as currently conducted does not violate or infringe in any
material respect any Legal Requirements currently in effect (other than Legal
Requirements described in subsections (c) and (d) below, as to which the
representations and warranties set forth in those subsections will apply). That
TCI Party has not received any notice of any violation by it or its System of
any material Legal Requirement applicable to the operation of that System as
currently conducted and knows of no basis for the allegation of any such
violation.
(b) Except as set forth in SCHEDULE 3.10 and for matters described in
subsections (c) and (d) below, as to which the representations and warranties
set forth in those subsections will apply, and without limiting the generality
of representations in subsection (a) above, with respect to its System, that TCI
Party has submitted to the FCC all filings, including cable television
registration statements, annual reports and aeronautical frequency usage
notices, that are required under the rules and regulations of the FCC; the
operation of its System has been and is in material compliance with the rules
and regulations of the FCC, and that TCI Party has not received any notice from
the FCC of any material violation of its rules and regulations; that TCI Party
is and since its acquisition of its System has been in material compliance with
the FCC's equal employment opportunity rules; its System is in material
compliance with all signal leakage criteria prescribed by the FCC; and for each
relevant semi-annual reporting period, that TCI Party has timely filed with the
United States Copyright Office all required Statements of Account in true and
correct form, has paid when due all required copyright royalty fee payments in
correct amount, relating to its System's carriage of television broadcast
signals and is otherwise in compliance with all applicable rules and regulations
of the Copyright Office. That TCI Party has delivered to IP-IV copies of all
reports and filings for the past year made or filed pursuant to FCC and
copyright rules and
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regulations by it with respect to its System and will make available to IP-IV
all other past reports and filings made or filed pursuant to FCC and copyright
rules and regulations by that TCI Party with respect to its System. Except as
set forth in SCHEDULE 3.10, a request for renewal has been timely filed under
section 626(a) of the 1984 Cable Act with the proper Governmental Authority with
respect to each of its Franchises expiring within 36 months after the date of
this Agreement.
(c) That TCI Party has used commercially reasonable efforts to comply
in all material respects with the provisions of the 1992 Cable Act and the FCC
rules and regulations promulgated thereunder as such Legal Requirements relate
to the operation of its System. That TCI Party has complied in all material
respects with the must carry and retransmission consent provisions of the 1992
Cable Act and the FCC rules and regulations promulgated thereunder, including
(i) duly and timely notifying "local commercial television stations" of
inadequate signal strength or increased copyright liability, if applicable, (ii)
duly and timely notifying non-commercial educational stations of the location of
its System's principal headend, (iii) duly and timely notifying subscribers of
changes in the channel alignment on its System, (iv) duly and timely notifying
"local commercial and non-commercial television stations" of the broadcast
signals carried on its System and their channel positions, (v) maintaining the
requisite public file identifying broadcast signal carriage, (vi) carrying the
broadcast signals after June 1, 1993, on its System for all "local commercial
television stations" which elected must carry status and, if required, up to two
"qualified low power stations" and (vii) obtaining retransmission consents for
all broadcast signals carried on its System after October 5, 1993, except for
the signals carried pursuant to a must carry election.
(d) That TCI Party has used commercially reasonable efforts to
establish rates charged to subscribers, effective as of September 1, 1993, that
would be allowable under rules and regulations promulgated by the FCC under the
1992 Cable Act, and any authoritative interpretation thereof, whether or not
such rates were subject to regulation at that date by any Governmental
Authority, including any local franchising authority and/or the FCC.
Notwithstanding the foregoing, that TCI Party makes no representation or
warranty that either the rates charged to subscribers would be allowable under
any rules and regulations of the FCC, or any authoritative interpretation
thereof, promulgated after the date of the Closing. That TCI Party has delivered
to IP-IV complete and correct copies of all FCC Forms 393, 1200, 1205, 1210,
1215, 1220 and 1240 filed, and FCC Forms 1240 prepared for filing, with the
local franchising authority and/or the FCC and will deliver as soon as available
all such FCC forms that are prepared with respect to its System, copies of all
correspondence with any Governmental Authority relating to rate regulation
generally or specific rates charged to subscribers of its System, including
copies of any complaints filed with the FCC with respect to any rates charged to
subscribers of its System, and any documentation supporting an exemption from
the rate regulation provisions of the 1992 Cable Act claimed by that TCI Party
with respect to its System.
(e) That TCI Party does not possess any patent, patent right, trademark
or copyright related to or material to the operation of its System and is not a
party to any license or royalty agreement with respect to any such patent,
trademark or copyright, except for licenses respecting program material and
obligations under the Copyright Act of 1976 applicable to cable television
systems generally. That TCI Party's System has been operated in such a manner so
as not to give
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rise to any rightful claim of any third party for copyright, trademark, service
mark, patent or license infringement or the like (excluding claims involving
music performance rights).
3.11 REAL PROPERTY. Except for leasehold interests described on
SCHEDULE 2.1(b)(ii) (the "Leases"), that TCI Party does not hold or use under
lease or lease to others any real property relating to its System. Except for
its Owned Property described on SCHEDULE 2.1(b)(ii), that TCI Party has no other
ownership interest in real property relating to its System. Except for routine
repairs, all of the improvements, leasehold improvements and the premises of its
Owned Property and the premises demised under its Leases (the "Leased Property")
are in good operating condition and repair and are suitable for the purposes
used. Its Leases have not been modified since copies thereof have been delivered
to IP-IV and are in full force and effect and the parties, to that TCI Party's
Knowledge, are not in default thereunder. The current use and occupancy of its
Owned Property and its Leased Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements. Each parcel of its Owned
Property and each parcel of its Leased Property (i) has access to and over
public streets, or private streets for which that TCI Party has a valid right of
ingress and egress, (ii) conforms in its current use to all material zoning
requirements without reliance upon a variance issued by a local government or a
classification of the parcel in question as a nonconforming use and (iii)
conforms in its use to all restrictive covenants, if any, or other encumbrances
affecting all or part of such parcel.
3.12 NO ADVERSE CHANGE; FINANCIAL STATEMENTS.
(a) Since December 31, 1995, there has been no material adverse change
in that TCI Party's Assets, taken as a whole, or its financial condition or
operations or its System.
(b) A correct copy of the financial statements of that TCI Party for
its System as of December 31, 1995, including an unaudited income statement and
balance sheet which fairly present the financial conditions of its System, is
attached as SCHEDULE 3.12.
3.13 EMPLOYEES.
(a) Except as set forth on SCHEDULE 3.13, there are no collective
bargaining agreements applicable to any persons who are employed by that TCI
Party and who render services in connection with its System, and it has no duty
to bargain with any labor organization with respect to any such persons. Except
as disclosed in SCHEDULE 3.13, there are not pending any unfair labor practice
charges against that TCI Party, or any demand for recognition, or any other
request or demand from a labor organization for representative status with
respect to any persons employed by it that render services in connection with
its System.
(b) Except as disclosed in SCHEDULE 3.13, that TCI Party has complied
in all material respects with all Legal Requirements applicable to its
employment of labor in connection with its System, including, without
limitation, WARN, ERISA, continuation coverage requirements of group health
plans, and those relating to wages, hours, collective bargaining, unemployment
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<PAGE> 24
insurance, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of taxes.
(c) Except as described on SCHEDULE 3.13, that TCI Party has no
employment agreements, either written or oral, with any employee of its System
and none of the employment agreements listed on SCHEDULE 3.13 requires IP-IV to
employ any person after the Closing.
3.14 ENVIRONMENTAL.
(a) Except as disclosed in SCHEDULE 3.14, that TCI Party has not
received any notice that it is the subject of any "Superfund" evaluation or
investigation, or that it is the subject of any investigation or proceeding of
any Governmental Authority evaluating whether any remedial action is necessary
to respond to any release of Hazardous Substances on or in connection with its
Owned Property or its Leased Property.
(b) Except as disclosed in SCHEDULE 3.14, that TCI Party (i) is in
compliance in all material respects with all Legal Requirements with respect to
pollution or protection of the environment, including Legal Requirements
relating to actual or threatened emissions, discharges or releases of Hazardous
Substances into ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, insofar as they relate
to its Owned Property or its Leased Property and (ii) has received no notice of,
and it has no Knowledge of circumstances relating to, any past, present or
future events, conditions, circumstances, activities, practices or incidents
(including the presence, use, generation, manufacture, disposal, release or
threatened release of any Hazardous Substances from or on its Owned Property or
its Leased Property), which could interfere with or prevent continued
compliance, or which are reasonably likely to give rise to any liability, based
upon or related to the processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance from or
attributable to its Owned Property or its Leased Property.
3.15 TAXPAYER IDENTIFICATION NUMBER. That TCI Party's U.S. Taxpayer
Identification Number is set forth in the introductory paragraph of this
Agreement.
3.16 HOLDING PERIOD. The transfer by that TCI Party of its System to
IP-IV under this Agreement will not violate or require obtaining a waiver under
section 617 of the 1992 Cable Act and the FCC rules and regulations promulgated
thereunder.
3.17 CASH FLOW FOR SYSTEMS. The annualized aggregate total Net Cash
Flow for the Systems for the nine-month period ending December 31, 1995 was not
less than $23,004,152. "Net Cash Flow" means the gross revenues for a cable
television system for a period less all operating expenses (other than
management fees (if any), consulting fees, legal fees relating to the corporate
organization, financing fees and obligations for borrowed money and income
taxes, any
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other administrative costs and taxes incurred in connection with corporate
matters not associated with that system and non-cash charges) for the applicable
period.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF IP-IV
IP-IV represents and warrants to each TCI Party, as of the date of this
Agreement and as of the Adjustment Date, as follows:
4.1 ORGANIZATION, POWER, ETC.
(a) IP-IV is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of California. IP-IV has all
necessary partnership power and authority to own, lease and operate its
properties and to carry on its business as presently conducted.
(b) IP-IV has all requisite power and authority to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by IP-IV and the
consummation of transactions contemplated hereby have been duly authorized and
executed and delivered by all necessary partnership action on the part of IP-IV
and its partners.
(c) This Agreement will constitute the legal, valid and binding
obligation of IP-IV enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditors' rights and by general principles of
equity.
4.2 APPROVALS. The execution and delivery of this Agreement by IP-IV do
not require any registration with, consent or approval of, notice to, or action
by any person or governmental authority which registration, approval, consent,
notice or action has not been made, given or otherwise accomplished.
4.3 NO CONFLICTS. The execution and delivery of this Agreement and any
other agreements contemplated hereunder by IP-IV and the consummation of the
transactions contemplated hereby and thereby will not (i) violate any material
Legal Requirement, (ii) conflict with or violate the provisions of the
Partnership Agreement, or (iii) conflict with, require a consent under or result
in a default under, or constitute an event which would permit early termination
of any material agreement to which IP-IV is a party or by which any of its
properties are bound.
4.4 COMMISSIONS. All activities of IP-IV relating to this Agreement and
the transactions contemplated hereunder have been carried on by IP-IV in such a
manner so as not to give rise to any valid claim by any person against any TCI
Party for a finder's fee, brokerage commission or other like expense.
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ARTICLE 5
COVENANTS
5.1 SCHEDULES. The parties agree that (a) as of the date of this
Agreement, the TCI Parties shall not be deemed to have made any of the
representations and warranties in Article 3 other than those set forth in
Sections 3.1, 3.2, 3.15, 3.16 and 3.17, (b) each TCI Party has twenty-one (21)
days after the date of this Agreement to deliver Schedules pertaining to its
System to IP-IV, and (c) IP-IV may terminate this Agreement as provided in
Section 8.1 after its review of such Schedules. If IP-IV accepts the Schedules
delivered by the TCI Parties, as such Schedules may be further modified after
any discussion between the parties, such Schedules will be deemed to be included
in this Agreement and to have been included in this Agreement as of the date of
this Agreement for all purposes of this Agreement. Upon such Schedules being
included in this Agreement, each TCI Party shall be deemed to have made the
representations and warranties in Article 3 not made as of the date of this
Agreement. IP-IV's sole remedy for failure to provide the schedules as required
herein shall be termination of this Agreement as set forth in Section 8.1.
5.2 HSR NOTIFICATION. As soon as practicable after the execution
of this Agreement, but in any event no later than thirty (30) days after such
execution, each party will complete and file, or cause to be completed and
filed, any notification and report required to be filed under the HSR Act. Each
party will take any additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings and will furnish to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. Each party
will pay its own filing fees in connection with a filing under the HSR Act
required by this Section . Notwithstanding anything to the contrary in this
Agreement, if either the TCI Parties or IP-IV, in their or its sole opinion,
considers a request from a Governmental Authority for additional data and
information in connection with the HSR Act to be unduly burdensome, such party
may terminate this Agreement; provided that if either the TCI Parties or IP-IV
terminate this Agreement pursuant to this Section 5.2, the terminating party
shall reimburse the other parties or party for any filing fee paid by such other
party in connection with any filing made under the HSR Act related to the
transactions contemplated by this Agreement within 15 days of such termination.
5.3 EMPLOYEES.
(a) No later than fifteen (15) days after the date of this
Agreement, each TCI Party will provide a list to IP-IV identifying its
employees. At least thirty (30) days prior to the Adjustment Date, IP-IV will
notify the relevant TCI Party as to which employees of such TCI Party IP-IV
intends to offer employment. Employees hired by IP-IV will be offered a program
of employee benefits, including medical, dental, life insurance and disability
benefits. For purposes of calculating the benefits to which the employees
employed by IP-IV shall be entitled, IP-IV shall treat the period of such
employees' employment with the relevant TCI Party immediately prior to
employment with IP-IV as if such employment had been with IP-IV. IP-IV will have
no obligation to hire any of the TCI Parties' employees that render services in
connection with the operation of the Systems. IP-IV shall pay any employee of a
TCI Party whom IP-IV employs
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after the Adjustment Date and terminates without cause within ninety (90) days
thereof any severance pay which that TCI Party would have paid had such TCI
Party terminated such employee at the Adjustment Time.
(b) Subject to Sections 9.2 through 9.6, each TCI Party will
remain solely responsible for, and will indemnify and hold harmless IP-IV from
and against all Losses arising from or with respect to, all salaries and all
severance, vacation, medical, sick, holiday, continuation coverage and other
compensation or benefits to which its employees may be entitled, whether or not
such employees may be hired by IP-IV, as a result of their employment by it
prior to the Adjustment Time, the termination of their employment prior to the
Adjustment Time, the consummation of the transactions contemplated hereby, or
pursuant to any applicable law (including without limitation, the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101, et seq.
("WARN")), or otherwise, relating to their employment prior to the Adjustment
Time.
5.4 TITLE INSURANCE COMMITMENTS. Each TCI Party will provide to
IP-IV, within thirty (30) days after the date of this Agreement, a copy of each
vesting deed pursuant to which such TCI Party obtained title to any of its Owned
Property. IP-IV will have the option to obtain, at its own expense, (i)
commitments of title insurance ("Title Commitments") issued by a nationally
recognized title insurance company selected by it obtaining such title
commitments (the "Title Company") and containing policy limits and other terms
reasonably acceptable to it, and photocopies of all recorded items described as
exceptions therein committing to insure (A) fee title in it to each parcel of
Owned Property included in its Assets and (B) a leasehold interest in IP-IV in
each parcel of Leased Property included in its Assets that is the site of a
System headend or tower, by ALTA (1992) owner's or lessee's policies of title
insurance, and (ii) current ALTA as-built surveys of each such parcel of Owned
Property or Leased Property included in the Assets with monuments placed at all
major corners of the property boundary unless already marked and showing the
location and identification by recorded instrument number of all easements or
rights-of-way burdening or benefiting the property in question and all other
documents and matters referenced as exceptions on the Title Commitment, the
location of all apparent easements and rights-of-way, flood zone designation,
setback lines, if applicable, the location of all substantial visible
improvements on such property and the location of all adjoining streets and
indication of access to a public way such as curb cuts and driveways, in such
form as is reasonably satisfactory to IP-IV and as is necessary to obtain the
title insurance to be issued pursuant to the Title Commitments with the standard
printed exceptions relating to survey matters deleted (the "Surveys"), certified
to IP-IV and the Title Company issuing a Title Commitment. If IP-IV notifies the
relevant TCI Party prior to the Adjustment Date of its receipt of both the Title
Commitments and the Surveys of any Lien (other than a Permitted Lien or a Lien
set forth in SCHEDULE 3.4) or other matter affecting title to Owned Property or
Leased Property which renders (or presents a material risk of rendering) title
to any parcel of Owned Property not good and marketable or prevents or
materially interferes with (or presents a material risk of preventing or
interfering with) the use of any parcel of Owned Property or Leased Property for
the purposes for which it is currently used (each a "Title Defect"), such TCI
Party will exercise commercially reasonable efforts to remove or, with the
consent of IP-IV, cause the Title Company to commit to insure over, each such
Title Defect prior to the Adjustment Date.
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5.5 CERTAIN TCI PRE-ADJUSTMENT DATE AFFIRMATIVE COVENANTS. Except
as IP-IV may otherwise consent in writing, between the date of this Agreement
and the Adjustment Date, each TCI Party shall with respect to its System and the
Assets owned or leased by it to, as applicable:
(a) operate that System only in the usual, regular and ordinary
course and in accordance with past practices (including but not limited to
completing line extensions, placing conduit or cable in new developments,
fulfilling installation requests, continuing work on existing construction
projects, purchasing new converters, replacing vehicles and other capital
expenditures consistent with that TCI Party's capital budget for that System and
attached as SCHEDULE 5.5 and, to the extent consistent with such operation, use
its reasonable efforts to (i) preserve the current business organization of that
System intact, including preserving existing relationships with franchising
authorities, suppliers, customers and others having business dealings with that
System, unless IP-IV requests otherwise, (ii) use reasonable efforts to keep
available the services of its employees providing services in connection with
the System and (iii) continue budgeted marketing, advertising and promotional
expenditures with respect to that System;
(b) maintain (i) those Assets in good operating condition
consistent with past practices and the capital budget attached as SCHEDULE 5.5,
(ii) equipment and inventory for that System at normal historical levels
consistent with past practices, but in no event will there be less than thirty
(30) days of equipment and inventory, assuming normal use, on the Adjustment
Date for that System and (iii) in full force and effect, policies of insurance
with respect to those Assets and the operation of that System, in such amounts
and with respect to such risks as are maintained on the date of this Agreement;
(c) maintain its books, records and accounts with respect to those
Assets and the operation of that System in the usual, regular and ordinary
manner on a basis consistent with past practices or current practices and
policies of Tele-Communications, Inc.;
(d) (i) give to IP-IV, and its counsel, accountants and other
representatives, upon reasonable notice, full access during normal business
hours to that System, its Owned Property, its Leased Property, all of its
Assets, its books and records and tax returns, and that System's personnel; and
(ii) furnish to IP-IV and such representatives all such additional documents,
financial information, and other information as IP-IV from time to time
reasonably may request; provided that no investigation will affect or limit the
scope of any of the representations and warranties of a TCI Party herein or in
any Transaction Document or limit liability for any breach of such
representations and warranties;
(e) use its commercially reasonable efforts to obtain in writing
as promptly as possible the Required Consents and any other consent,
authorization or approval required to be obtained by such party in connection
with the transactions contemplated hereunder, and deliver to IP-IV copies of
such Required Consents and such other consents, authorizations or approvals;
provided, however, that such TCI Party will afford IP-IV the opportunity to
review, approve and revise the form of Required Consent prior to delivery to the
party whose consent is sought and that TCI Party will not accept or agree or
accede to any modifications or amendments to, or any conditions
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to the transfer of, any of its Franchises, Licenses, Contracts or Real Property
Interests of its System that are not reasonably acceptable to IP-IV;
(f) promptly deliver to IP-IV true and complete copies of all
monthly and quarterly financial statements and operating reports and any reports
with respect to the operation of that System prepared by or for that TCI Party
at any time from the date hereof until the Adjustment Date, and any other
similar materials which IP-IV may reasonably request;
(g) promptly notify IP-IV of any circumstance, event or action by
it or otherwise (i) which, if known at the date of this Agreement, would have
been required to be disclosed in or pursuant to this Agreement, or (ii) the
existence, occurrence or taking of which would result in any of its
representations and warranties in this Agreement or in any Transaction Document
not being true and correct in all material respects when made or at the
Adjustment Date, and, with respect to clause (ii), use its commercially
reasonable efforts to remedy the same;
(h) negotiate in good faith with IP-IV with respect to the
assignment and assumption of retransmission agreements for its System;
(i) give or cause to be given to IP-IV, and its counsel,
accountants and other representatives, as soon as reasonably possible but in any
event prior to the date of submission to the appropriate Governmental Authority,
copies of all FCC Forms 1200, 1205, 1210, 1215, 1220 and 1240 or any other FCC
forms required under the regulations of the FCC promulgated under the 1992 Cable
Act and prepared with respect to that System, such forms to be satisfactory in
form and substance to IP-IV;
(j) use reasonable good faith efforts to establish or cause to be
established rates charged to subscribers of that System, as of the Adjustment
Date, that would be allowable under the regulations of the FCC promulgated under
the 1992 Cable Act;
(k) use reasonable commercial efforts to obtain extensions (the
"Franchise Extensions") to the term of those Franchises which, in the absence of
such extensions, would expire earlier than three years from the Adjustment Date,
such extensions to expire no earlier than three (3) years from the Adjustment
Date;
(l) use its best efforts to obtain, at or prior to the Adjustment
Date, from each owner of a multiple dwelling complex or trailer park who is a
cable subscriber pursuant to a written or oral agreement of that TCI Party's
System and from whom IP-IV requests in writing an agreement be obtained a
multiple dwelling unit agreement in form and substance satisfactory to IP-IV;
and
(m) deliver to IP-IV copies of all fidelity, performance and other
bonds posted for franchise and pole agreements in connection with its System.
5.6 CERTAIN TCI PRE-ADJUSTMENT DATE NEGATIVE COVENANTS. Except as
IP-IV may otherwise consent in writing, or as contemplated by this Agreement,
between the date of this
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Agreement and the Adjustment Date, each TCI Party shall not with respect to its
System or the Assets owned or leased by it, as applicable:
(a) modify, terminate, renew, suspend or abrogate any Real
Property Interest or Contract described in SCHEDULE 2.1(b)(i), (ii), (iii), (iv)
OR (v) other than in the ordinary course of business;
(b) modify, terminate, renew, suspend or abrogate any Franchise or
License;
(c) enter into any transaction or take any action that would
result in any of its representations and warranties in this Agreement or in any
Transaction Document not being true and correct in all material respects when
made or on the Adjustment Date for its System;
(d) engage in any marketing, subscriber installation or collection
practices that are inconsistent with its past practices, except as otherwise
budgeted;
(e) except as required by law or as budgeted, change the rate
charged for any level of cable television service or any pay cable television
service or add or delete any programming services;
(f) enter into any agreement with or commitment to any competitive
access providers with respect to its System;
(g) sell any portion of its Assets other than sales in the
ordinary course of business; or
(h) hire new employees (other than replacement employees),
increase compensation or benefits except as otherwise budgeted or enter
collective bargaining agreements.
5.7 CERTAIN TCI PRE-CLOSING COVENANTS. Each TCI Party shall on or
before the first Closing:
(a) in connection with any financing by IP-IV or refinancing by
IP-IV of the TCI Debt:
(i) grant to IP-IV's lenders, as security for any
indebtedness of IP-IV incurred in connection with the refinancing of
the TCI Debt, a first priority nonrecourse security interest (subject
only to Permitted Liens) in and to the Cash Flow and to all of that TCI
Party's Assets,
(ii) consent to the granting by IP-IV of a security
interest in and to all rights arising under this Agreement and the
Management Agreement, and
(iii) execute and deliver any security agreements,
mortgages, financing statements and other instruments reasonably
necessary or appropriate to evidence
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or effect any security interest granted by the TCI Parties pursuant to
this Section 5.7;
provided that
(A) IP-IV shall be the borrower and such
financing and any refinancing of such financing shall be a
"nonrecourse liability" as that term is used in sections 704
and 752 of regulations under the Code;
(B) no TCI Party shall be liable for the payment
of any amount in respect of any such indebtedness incurred by
IP-IV, as an obligor, co-obligor, guarantor or otherwise;
(C) the security agreements, mortgages,
financing statements and other instruments shall be in form
and substance reasonably satisfactory to the TCI Parties; and
(D) the TCI Parties shall have obtained any
consents which may be required by any law applicable to, or
under any contract which is binding upon, a TCI Party or any
Affiliate of it or its Assets for the grant of any liens
described in this Section 5.7(a);
(b) pay the remaining balances on any leases for vehicles included
in its Tangible Personal Property and will deliver title to such vehicles free
and clear of all Liens to IP-IV at the first Closing;
(c) unless otherwise restricted or prohibited by any Governmental
Authority or applicable Legal Requirements, if requested by IP-IV, delete any
distant broadcast signals which IP-IV determines will result in unacceptable
liability on the part of IP-IV for copyright payments with respect to continued
carriage of such signals after such Closing; and
(d) not knowingly act or fail to notify IP-IV of any matter of
which it acquires Knowledge between the Adjustment Date and the relevant Closing
Date where, if such TCI Party's representations and warranties which are made as
of the Adjustment Date had also been made as of the relevant Closing Date, such
action or matter would have rendered that TCI Party's representations and
warranties untrue or incorrect in any material respect on that Closing Date
(notwithstanding that the representations and warranties of each TCI Party in
Article 3 shall not be made as of the Closing Date or that the covenants in
Sections 5.4, 5.5 and 5.6 of each TCI Party shall not have to be performed after
the Adjustment Date); provided, that no TCI Party shall have any liability under
this Section 5.7(d) for a failure to notify IP-IV of any matter of which IP-IV
has independent knowledge prior to the Closing.
5.8 CERTAIN POST-CLOSING COVENANTS. Subsequent to the first
Closing each TCI Party shall:
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(a) continue to use commercially reasonable efforts to obtain in
writing as promptly as possible any consent, authorization or approval required
to be obtained by it in connection with the transactions contemplated hereunder
which was not obtained on or before that Closing and will deliver copies of the
same, reasonably satisfactory in form and substance, to IP-IV;
(b) for sixty (60) days, to the extent practicable, provide
reasonable transition billing assistance and shall be timely reimbursed for any
expenses incurred with respect to such assistance;
(c) for one (1) year cooperate with and assist IP-IV, at IP-IV's
cost and expense, in connection with IP-IV's preparation of any audited or
unaudited financial statements or information that IP-IV reasonably considers to
be necessary for the purposes of compliance with any rules and regulations
imposed by the Securities and Exchange Commission;
(d) for 18 months, cooperate with and assist IP-IV by providing,
upon request, all information in that TCI Party's possession (and not previously
made available to IP-IV) relating directly to the rates set forth in SCHEDULE
3.9, as applicable, or on any of FCC Forms 393, 1200, 1205, 1210, 1215, 1220 or
1240, that IP-IV may reasonably require to justify such rates in response to any
inquiry, order or requirements of any Governmental Authority;
(e) at the request of IP-IV, promptly execute and deliver, or
cause to be executed and delivered, to the other all such documents and
instruments, in addition to those otherwise required by this Agreement, in form
and substance reasonably satisfactory to IP-IV as IP-IV may reasonably request
in order to carry out or evidence the terms of this Agreement, or to collect any
accounts receivables or other claims included in the Assets; and
(f) for a period of sixty (60) days allow IP-IV to use the
trademarks, trade names, service marks, service names, logos and similar
proprietary rights of the other to the extent incorporated in or on the Assets
transferred to it at that Closing, provided that IP-IV will exercise efforts to
remove all such names, marks, logos and similar proprietary rights of the
relevant TCI Party from the Assets as soon as reasonably practicable following
that Closing.
5.9 CERTAIN IP-IV COVENANTS. IP-IV shall:
(a) use all reasonable efforts to ensure that the conditions set
forth in Article 6 and Section 7.3(b) are satisfied to the extent such matters
are within its control;
(b) cooperate with the TCI Parties in the process of obtaining
approvals and consents required to transfer the Systems, including such
approvals or consents as are required for the assignment of the Franchises;
(c) execute and deliver such documents and take such action as may
be reasonably requested by each TCI Party to enable such TCI Party to comply
with the requirements of its programming agreements with respect to divestitures
and acquisitions of cable television systems; provided, however, that IP-IV will
not be required to provide specific programming or channels
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or to assume any liability with respect to or in connection with any TCI Party's
programming agreements; and
(d) at the request of any TCI Party, promptly execute and deliver,
or cause to be executed and delivered, to the other all such documents and
instruments, in addition to those otherwise required by this Agreement, in form
and substance reasonably satisfactory to that TCI Party as that TCI Party may
reasonably request in order to carry out or evidence the terms of this
Agreement.
5.10 CONFIDENTIALITY AND PUBLICITY.
(a) Each party will use reasonable efforts to assure that any
non-public information that such party may obtain from the other in connection
with this Agreement with respect to the other will be confidential and, unless
and until the Closing occurs, such party will not disclose any such information
to any other Person (other than on a "need-to-know" basis to its directors,
officers, partners and employees, and representatives of its advisers and
lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use such information to
the detriment of the other (including the use of such information to compete for
the provision of cable television service in the Systems of such other party);
provided that (i) such party may use and disclose any such information once it
has been publicly disclosed (other than by such party in breach of its
obligations under this Section ) or which rightfully has come into the
possession of such party (other than from the other party), and (ii) to the
extent that such party may, in the reasonable opinion of its counsel, be
compelled by Legal Requirements to disclose any of such information, such party
may disclose such information if it will have used all reasonable efforts, and
will have afforded the other the opportunity, to obtain an appropriate
protective order, or other satisfactory assurance of confidential treatment, for
the information compelled to be disclosed. The obligation by the parties to hold
information in confidence pursuant to this Section will be satisfied if such
party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information. In the
event of termination of this Agreement, each party will destroy all copies of
any documents, work papers and other materials obtained by such party or on its
behalf from the other, whether so obtained before or after the execution hereof
as long as such documents, work papers and other materials do not fall within
the exceptions set forth in clauses (i) and (ii) of this subsection.
(b) IP-IV and the TCI Parties each will consult with and cooperate
with the other with respect to the content and timing of all press releases and
other public announcements, and any oral or written statements to the TCI
Parties' employees concerning this Agreement and the transactions contemplated
hereby. Except as required by applicable Legal Requirements, neither IP-IV nor
any TCI Party will make any such release, announcement or statements without the
prior written consent and approval of the other, which consent and approval may
not be unreasonably withheld.
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ARTICLE 6
CONDITIONS PRECEDENT TO CLOSINGS
6.1 CONDITIONS TO TCI PARTIES' OBLIGATIONS. The obligations of
each TCI Party to consummate the transactions contemplated by this Agreement
will be subject to the satisfaction, at or before the Closing, of the following
conditions, which may be waived by the TCI Parties:
(a) there is no Legal Requirement, and no Judgment has been
entered and not vacated by any Governmental Authority of competent jurisdiction
in any Litigation or arising therefrom, which enjoins, restrains, makes illegal,
or prohibits consummation of the transactions contemplated by this Agreement or
by any Transaction Document, and there is no Litigation pending or threatened
seeking, or which if successful would have the effect of, any of the foregoing;
(b) TCI shall have obtained or received evidence, in form and
substance satisfactory to it, that Required Consents marked with an asterisk on
SCHEDULE 3.3 for the Systems have been obtained;
(c) all filings required under the HSR Act have been made and the
applicable waiting period has expired or been earlier terminated without the
receipt of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement; and
(d) if the first Closing occurs on or before the Adjustment Date,
the conditions precedent in Section 7.3(b)(i) (only for purposes of the first
Closing), except that each reference therein to the Adjustment Date shall be a
reference to the first Closing Date.
6.2 CONDITIONS TO IP-IV'S OBLIGATIONS. The obligations of IP-IV to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before each Closing, of the following conditions, which
may be waived by IP-IV:
(a) there is no Legal Requirement, and no Judgment has been
entered and not vacated by any Governmental Authority of competent jurisdiction
in any Litigation or arising therefrom, which enjoins, restrains, makes illegal,
or prohibits consummation of the transactions contemplated by this Agreement or
by any Transaction Document; and there is no Litigation pending or threatened
seeking, or which if successful would have the effect of, any of the foregoing;
(b) IP-IV has received evidence, in form and substance reasonably
satisfactory to it, that Required Consents marked with an asterisk on SCHEDULE
3.3 for the Systems which will be transferred at that Closing have been
obtained;
(c) all filings required under the HSR Act have been made and the
applicable waiting period has expired or been earlier terminated without the
receipt of any objection or the
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commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement; and
(d) all required retransmission consent agreements for carriage of
broadcast signals carried on the Systems shall have been obtained on terms and
conditions reasonably acceptable to IP-IV where any existing retransmission
consent agreement for the carriage of such signals is an Excluded Asset,
provided that this condition shall expire on the first anniversary of the date
of this Agreement; and
(e) if the first Closing occurs on or before the Adjustment Date,
the conditions precedent set forth in Section 7.3(b)(ii) (only for purposes of
the first Closing), except that each reference therein to the Adjustment Date
shall be a reference to the first Closing Date.
ARTICLE 7
THE CLOSINGS
7.1 CLOSING.
(a) Subject to Section 7.2, a single closing of the contribution
of all Assets (the "Closing") shall take place by mail and facsimile at a date
and time mutually determined by IP-IV and the relevant TCI Parties as soon as
practicable but no later than ten (10) days after all conditions set forth in
Article 6 have been satisfied or waived (the "Closing Date").
(b) At the Closing, (i) each TCI Party will deliver or cause to be
delivered to IP-IV the agreements, documents, instruments and certificates
listed on SCHEDULE 7.1(b)(i), and (ii) IP-IV will deliver to the TCI Parties the
agreements, documents, instruments and certificates listed on SCHEDULE
7.1(b)(ii).
7.2 MULTIPLE CLOSING CONTINGENCY.
(a) If the conditions to closing set forth in Article 6 have not
been satisfied or waived with respect to all of the Assets on or prior to the
date specified in clause (b) of the definition of Adjustment Date, then each TCI
Party shall (i) from and after the Adjustment Date deliver monthly to IP-IV the
Cash Flow of its Assets until the earliest of (A) the Closing for those Assets
as described in clause (ii) below, (B) the first anniversary of the Adjustment
Date if the first Closing has not occurred on or before that date or (C) such
earlier date as the parties hereto shall agree upon; (ii) as soon as practicable
after the Adjustment Date, consummate the transactions contemplated hereby at a
Closing with respect to all of its Assets, other than Leases and Contracts
marked with an double asterisk on SCHEDULE 3.3 and Franchises and Licenses, in
each case, the consent for the transfer of which has not been obtained, when the
Minimum Required Consents for the Systems have been obtained and all other
conditions applicable to the Systems have been either satisfied or waived; (iii)
continue, thereafter, to use all reasonable commercial efforts to cause all
remaining warranties conditions to be satisfied with respect to its Retained
Assets; and (iv) consummate the contribution of the Retained Assets at one or
more future closings as soon as practicable thereafter. "Minimum Required
Consents" means the consents required for the
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transfer of Leases and Contracts designated on SCHEDULE 3.3 with a double
asterisk, all Licenses and those Franchises pursuant to which cable television
service is delivered to ninety-five percent (95%) of the EBSs of the Systems.
(b) Notwithstanding anything to the contrary in this Agreement, in
the event that there shall be more than one Closing under this Agreement, then
with respect to any Assets, all references to the Closing hereunder shall be
deemed to refer to the Closing at which such Assets are contributed to IP-IV.
7.3 INTERIM MANAGEMENT OF THE SYSTEMS BY IP-IV.
(a) Subject to Section 7.3(b), if the conditions to closing set
forth in Article 6 have not been satisfied or waived with respect to all of the
Assets on or prior to the date specified in clause (b) of the definition of
Adjustment Date (without reference to clause (ii) therein), on that date, IP-IV
shall commence management of those Assets which have not been transferred to
IP-IV pursuant to the terms set forth in a management agreement in the form
attached as EXHIBIT 7.3 (the "Management Agreement").
(b) No party shall be obligated to enter into the Management
Agreement unless:
(i) in the case of each TCI Party, the following
conditions precedent are satisfied or waived by such TCI Party on or
before the date specified in clause (b) of the definition of Adjustment
Date (without reference to clause (ii) therein):
(A) the representations and warranties of IP-IV
in this Agreement are true in all material respects at and as
of the Adjustment Date with the same effect as if made at and
as of that date;
(B) IP-IV has performed in all material respects
all obligations and agreements and complied in all material
respects with all covenants in this Agreement to be performed
and complied with by it at or before the Adjustment Date;
(C) there is no Legal Requirement, and no
Judgment has been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated by
this Agreement or the Management Agreement and there is no
Litigation pending or threatened seeking, or which if
successful would have the effect of, any of the foregoing;
(D) TCI-Spartanburg shall have received the
demand promissory note date January 22, 1996 made by it in
favor of IP-IV in an original principal amount of $5,666,404,
canceled by IP-IV; TCI-Greenville shall have received the
demand promissory note dated January 22, 1996 made
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by it in favor of IP-IV in an original principal amount of
$22,665,616, canceled by IP-IV; and TCI-Piedmont shall have
received the demand promissory note dated January 22, 1996
made by it in favor of IP-IV in an original principal amount
of $5,666,404, canceled by IP-IV;
(E) an amendment to the Partnership Agreement,
in form and substance satisfactory to the TCI Parties, shall
have been executed and delivered;
(F) if this Agreement has been assigned to a
partnership which owns equity interests in IP-IV as
contemplated in Section 10.6, each TCI Party shall have
approved the partnership agreement for that partnership and
shall have been admitted as a limited partner therein to the
extent of its interests in IP-IV; and
(ii) in the case of IP-IV, the following conditions
precedent are satisfied or waived by IP-IV on or before date specified
in clause (b) of the definition of the Adjustment Date without
reference to clause (ii) therein:
(A) the representations and warranties of each
TCI Party in this Agreement are true in all material respects
at and as of the Adjustment Date with the same effect as if
made at and as of that date;
(B) each TCI Party has performed in all material
respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement to be
performed and complied with by it at or before the Adjustment
Date;
(C) there is no Legal Requirement, and no
Judgment has been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or
arising therefrom, which (i) enjoins, restrains, makes
illegal, or prohibits consummation of the transactions
contemplated by this Agreement or the Management Agreement; or
(ii) might have a material adverse effect on any of the
Systems and there is no Litigation pending against a TCI Party
or threatened against a TCI Party seeking, or which if
successful would have the effect of, any of the foregoing;
(D) the Systems have as of the Adjustment Date
at least one hundred fourteen thousand five hundred (114,500)
EBSs;
(E) the consents and approvals listed on
SCHEDULE 7.3 are received in form and substance satisfactory
to IP-IV;
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(F) there is no material adverse change in the
Assets or the financial condition or operations of the Systems
since the date of this Agreement;
(G) there exist no material Title Defects which
the Title Company has not deleted from the Title Commitments
or, with the consent of IP-IV, committed to insure over;
(H) any environmental audits or assessments
conducted by IP-IV with respect to Owned Property or Leased
Property do not indicate the presence thereon, or the
likelihood of presence thereon, of Hazardous Substances of a
kind or in a quantity as could reasonably be expected to give
rise to a material risk of liability;
(I) IP-IV shall have received from Daniels &
Associates an appraisal, in form and substance satisfactory to
IP-IV, concluding that the fair market value of all of the
Assets (assuming that the purchaser thereof was not assuming
any indebtedness with respect to such Assets) is at least
equal to two hundred forty million dollars ($240,000,000); and
(J) The annualized cumulative Net Cash Flow for
1996 of the Systems measured through the second calendar month
ended immediately prior to the calendar month in which the
Adjustment Date occurs is not less than $22,000,000.
7.4 SUBSTITUTE CONSIDERATION.
(a) If, on the date sixty (60) days prior to the first anniversary
of the Adjustment Date, the first Closing has not occurred but the Management
Agreement has been entered into, each TCI Party or TCI Parties shall propose, at
the option of such TCI Party or TCI Parties, substituting for its Assets (x)
payment of cash, (y) transfer of cable television systems ("Substitute Systems")
located in the same geographical region as its System and reasonably acceptable
to IP-IV or (z) assumption of indebtedness of IP-IV (or any combination of the
foregoing), in each case, equivalent in amount or value to: (i) the Fair Market
Value of its System as of the date on which the Substitute Systems are
substituted for such System; (ii) plus any Adjustment Amount paid by IP-IV to
such TCI Party or TCI Parties; and (iii) minus any Adjustment Amount paid by
such TCI Party or TCI Parties to IP-IV and any TCI Debt not assumed by IP-IV.
"Fair Market Value" means with respect to a System the fair market sales value
that would be obtained in an arm's-length transaction between an informed and
willing buyer and an informed and willing seller, under no compulsion,
respectively, to buy or sell, and neither of which is an Affiliate of IP-IV or a
TCI Party, for the purchase of that System, taking into consideration the effect
of any capital expenditures made by IP-IV with respect to the Systems and
assuming in the determination of such fair market value that the buyer has
rights to use the Assets for such System in connection with the operation of
that System which rights are comparable to those enjoyed by the relevant TCI
Party at the date of such determination.
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(b) If IP-IV and the relevant TCI Party fail to agree upon the
Fair Market Value of a System or Substitute System within thirty (30) days of
the date on which such TCI Party proposed a Substitute System, cash or the
assumption of the indebtedness of IP-IV, they shall appoint an appraiser to
determine the Fair Market Value of such System or Substitute System, whose
determination shall be made within thirty (30) days of its appointment and shall
be final and binding on IP-IV and the TCI Parties. If IP-IV and such TCI Party
fail to agree upon a mutually acceptable appraiser within five (5) days after
IP-IV or such TCI Party delivers a written request therefor to the other, each
shall appoint, within five (5) days thereafter, an independent appraiser, and
such appraisers shall jointly determine such matter, or, if such appraisers
cannot agree on such matter within thirty (30) days, such matter shall be
determined by the two independent appraisers and a third independent appraiser
chosen by agreement of such first two appraisers within five (5) days after such
thirty (30) day period. If such three appraisers fail to reach an agreement, the
estimates of such three appraisers shall be averaged unless the estimate of one
appraiser differs from the median of the three estimates by more than twice the
amount that any other estimate differs from the median, in which case the
estimate which differs most from the median shall be discarded and the two
remaining estimates averaged. If such third appraiser is not appointed within
such five (5) day period or such appraisal is not made within thirty (30) days
of such appointment, then such appraisal shall be made promptly by an appraiser
appointed by the American Arbitration Association. If either party fails to
appoint an appraiser within the time required, the determination of the
appraiser appointed by the other party shall be final. The expenses of the
appraisal procedure shall be shared by IP-IV and the relevant TCI Party.
(c) Upon the TCI Parties' agreement to pay such cash or assume
indebtedness of IP-IV or IP-IV's acceptance of such Substitute Systems and the
release of all Liens other than Permitted Liens (excluding clause (e) in the
definition thereof) imposed upon the Assets while IP-IV managed the Systems, the
parties shall amend (i) this Agreement to (A) delete the Systems and the receipt
by IP-IV of the Cash Flow therefrom, (B) substitute therefor the cash,
assumption of IP-IV's indebtedness or the Substitute Systems, as applicable, and
(C) provide for payment of the Adjustment Amount with respect to the Substitute
Systems on and determined as of the date that the Substitute Systems shall
become subject to this Agreement; and (ii) the Management Agreement to provide
that (A) the Systems shall no longer be subject thereto and (B) the Substitute
Systems (if any) shall be subject to management by IP-IV thereunder.
7.5 RETAINED ASSETS. If the first Closing shall have occurred at
any time prior to the Outside Closing Date but thereafter there remain Assets
which have not been transferred to IP-IV ("Retained Assets"), subject to Section
7.2(a) and the Management Agreement, IP-IV shall manage the Retained Assets
under the Management Agreement until such time as IP-IV shall sell or otherwise
transfer or dispose of the System or Systems or Substitute System or Substitute
Systems, as the case may be ("Transferred Assets"), of which the Retained Assets
are a part. The TCI Party or TCI Parties which own the Retained Assets shall not
grant any Lien on any of the Assets included in its Retained Assets, except for
Permitted Liens, and shall notify IP-IV of any matter of which it has Knowledge
which may result in the imposition of a Lien on any such Assets. When IP-IV
transfers or disposes of a Transferred Assets, the TCI Party or TCI Parties
which own the Retained Assets shall transfer all its right, title and interest
in the Retained Assets to the person to whom IP-IV transfers the Transferred
Assets; however, the TCI Party or TCI
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Parties shall not be entitled to receive any of the consideration which may be
paid therefor by the recipient of the Transferred Assets and Retained Assets,
other than in its capacity as a limited partner of IP-IV. Each TCI Party which
shall transfer any Retained Assets to a third party shall execute and deliver a
bill of sale and assumption agreement in substantially the form which it would
have executed, and shall provide such evidence of its authority to execute and
deliver the same, had the Retained Assets been transferred pursuant to a Closing
under this Agreement.
7.6 FINAL CONSIDERATION. If the first Closing has not occurred on
or before the Outside Closing Date and the Management Agreement has been entered
into, each TCI Party shall, on or before that date, either substitute for its
Assets (x) payment of cash or (y) assumption of indebtedness of IP-IV (or any
combination of the foregoing), in each case, equivalent in amount or value to
(i) the Fair Market Value of its Substitute System, determined as of the date on
which such TCI Party will pay cash or assume indebtedness of IP-IV, (ii) plus
any Adjustment Amount paid by IP-IV to such TCI Party or TCI Parties with
respect to that Substitute System, and (iii) minus any Adjustment Amount paid by
such TCI Party or TCI Parties to IP-IV with respect to that Substitute System
and any TCI Debt not assumed by IP-IV. Upon the TCI Parties' agreement to pay
such cash or assume IP-IV's indebtedness and the release of all Liens other than
Permitted Liens (excluding clause (e) in the definition thereof) imposed upon
the Assets while IP-IV managed the Systems, the parties shall (i) amend this
Agreement to (A) delete the Substitute Systems and the receipt by IP-IV of the
Cash Flow therefrom or (B) substitute therefor the cash or assumption of IP-IV's
indebtedness, as applicable, and (ii) terminate the Management Agreement.
ARTICLE 8
TERMINATION AND DEFAULT
8.1 TERMINATION EVENTS. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) by IP-IV at any time within the first twenty-one (21) days
after the date of this Agreement if IP-IV determines, in its sole discretion,
after completion of its review of the Schedules and such other due diligence
investigation of the Assets as IP-IV shall determine is appropriate that a
deficiency in title to or the physical condition of any of the Assets or a
liability in respect of any Litigation or any Legal Requirement described in
Section 3.14 exists and such deficiency or liability, when taken together with
other such deficiencies and liabilities, exceeds one million dollars
($1,000,000);
(b) at any time, by the mutual agreement of the TCI Parties, on
one hand, and IP-IV, on the other;
(c) by either the TCI Parties, on one hand, or IP-IV, on the
other, at any time, if the other (any TCI Party or IP-IV) is in material breach
or default of any of its covenants, agreements or other obligations herein or in
any Transaction Document, or if any of its representations herein
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or in any Transaction Document, or if any of its representations herein or in
any Transaction Document are not true in all material respects when made or when
otherwise required by this Agreement or any Transaction Document to be true;
(d) by either the TCI Parties, on one hand, or IP-IV, on the other,
upon written notice to the other, if the Management Agreement has not been
executed and delivered by all such parties by June 1, 1996;
(e) subject to Section 7.6 , by either the TCI Parties, on one hand, or
IP-IV, on the other, upon written notice to the other, if the first Closing has
not occurred on or before the second anniversary of the date referred to in
clause (b) of the definition of Adjustment Date (the "Outside Closing Date"),
for any reason other than a material breach or default by such party of its
respective covenants, agreements or other obligations hereunder, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
(f) by either party if that party terminates the Management Agreement
prior to the first Closing; or
(g) as otherwise provided herein.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the parties hereunder and under the Management
Agreement (if in force) will terminate, except for the obligations set forth in
Sections 5.10, 10.1, 10.2, 10.13 and 10.17. Termination of this Agreement
pursuant to Section 9.1(b) or 9.1(c) will not limit or impair any remedies
that IP-IV or any TCI Party may have with respect to a breach or default by the
other of its covenants, agreements or obligations hereunder. If this Agreement
is terminated pursuant to Section 8.1(e), IP-IV shall be entitled to the cash
payment as provided in Sections 7.4 and 7.6.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY IP-IV. From and after the Adjustment Date with
respect to subsections (a) and (b) and from and after the relevant Closing Date
with respect to subsection (c), IP-IV will indemnify and hold harmless each TCI
Party, its respective Affiliates, partners, officers, directors, employees,
agents and representatives, and any Person claiming by or through any of them,
as the case may be, from and against any and all Losses (after taking into
account any Taxes payable by an indemnified party as a result of such
indemnification) arising out of or resulting from:
(a) any representation or warranty made by IP-IV in this Agreement or
in any Transaction Document not being true and accurate in all material respects
when made or, in the case of any representation or warranty which is qualified
by its terms by a materiality requirement, not being true and accurate when
made;
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(b) any failure by IP-IV to perform in all material respects any of its
covenants, agreements or obligations in this Agreement or the Management
Agreement or, in the case of any agreement, covenant or obligation, which is by
its terms is qualified by a limitation that performance need only be material,
any failure to perform such covenant, agreement or obligation;
(c) the Assumed Liabilities.
If, by reason of the claim of any third party relating to any of the matters
subject to such indemnification, a Lien is placed or made upon any of the
properties or assets owned or leased by a TCI Party or any other Indemnitee
under this Section, in addition to any indemnity obligation of IP-IV under this
Section, IP-IV will furnish a bond sufficient to obtain the prompt release
thereof within ten (10) days after receipt from that TCI Party of notice
thereof.
9.2 INDEMNIFICATION BY TCI PARTIES. From and after the Adjustment Date
with respect to subsections (a) and (b) and from and after the relevant Closing
Date with respect to subsections (c) and (d), each TCI Party will indemnify and
hold harmless IP-IV, its Affiliates, partners, officers, directors, employees,
agents and representatives, and any Person claiming by or through any of them,
as the case may be, from and against any and all Losses (after taking into
account any Taxes payable by an indemnified party as a result of such
indemnification) arising out of or resulting from:
(a) any representations and warranties made by that TCI Party in this
Agreement or in any Transaction Document not being true and accurate in all
material respects when made or, in the case of any representation or warranty
which is qualified by its terms by a materiality requirement, not being true and
accurate when made;
(b) any failure by that TCI Party to perform when due in all material
respects any of its covenants, agreements or obligations in this Agreement
(other than those in Sections 2.1(a), 5.7 through 5.10 and 7.1 through 7.6 of
this Agreement or in the Management Agreement) or, in the case of any agreement,
covenant or obligation, which is by its terms is qualified by a limitation that
performance need only be material, any failure to perform such covenant,
agreement or obligation;
(c) any failure by that TCI Party to perform in all material respects
any of its covenants, agreements or obligations in any Transaction Document, the
Management Agreement, or in Sections 5.7 through 5.10 and 7.1 through 7.6 of
this Agreement or, in the case of any agreement, covenant or obligation, which
is by its terms is qualified by a limitation that performance need only be
material, any failure to perform such covenant, agreement or obligation; and
(d) all liabilities of that TCI Party or relating to its System that
are not Assumed Liabilities, except for liabilities for which IP-IV is
responsible under the Management Agreement during the term thereof.
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If, by reason of the claim of any third party relating to any of the matters
subject to such indemnification, a Lien is placed or made upon any of the
properties or assets owned or leased by IP-IV or any other Indemnitee under this
Section, in addition to any indemnity obligation of TCI under this Section, the
relevant TCI Party will furnish a bond sufficient to obtain the prompt release
thereof within ten (10) days after receipt from IP-IV of notice thereof.
9.3 PROCEDURE FOR INDEMNIFIED THIRD PARTY CLAIM. Promptly after receipt
by a party entitled to indemnification hereunder (the "Indemnitee") of written
notice of the assertion of a claim or the commencement of any Litigation with
respect to any matter referred to in Section 9.1 or 9.2, the Indemnitee will
give written notice thereof to the party from whom indemnification is sought
pursuant hereto (the "Indemnitor") and thereafter will keep the Indemnitor
reasonably informed with respect thereto if the Indemnitor does not assume the
defense of such claim; provided, however, that failure of the Indemnitee to give
the Indemnitor notice as provided herein will not relieve the Indemnitor of its
obligations hereunder, except to the extent that such failure to give notice
will prejudice any defense or claim available to the Indemnitor. In case any
Litigation is brought against any Indemnitee, the Indemnitor will be entitled to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnitee, at the Indemnitor's sole expense. If the Indemnitor assumes the
defense of any Litigation, it will not settle the Litigation unless the
settlement includes as an unconditional term thereof the giving by the claimant
or the plaintiff of a release of the Indemnitee, satisfactory to the Indemnitee,
from all liability with respect to such Litigation. If the Indemnitor does not
assume the defense of any Litigation, the Indemnitor will nevertheless provide
reasonable cooperation to the Indemnitee in the defense of such Litigation, and
any settlement of such Litigation will be on terms reasonably satisfactory to
the Indemnitor.
9.4 DETERMINATION OF INDEMNIFICATION AMOUNTS AND RELATED MATTERS.
(a) Neither IP-IV nor any TCI Party will have any liability under
Sections 9.1 and 9.2, respectively, unless the aggregate amount of Losses
subject to its indemnification obligations thereunder exceeds five hundred
thousand dollars ($500,000) (the "Minimum Damage Requirement") in which case
IP-IV or the relevant TCI Party, as the case may be, will be liable for all
Losses; provided, that the Minimum Damage Requirement will not apply to any
Losses resulting from or arising out of (i) the failure by IP-IV or a TCI Party,
as applicable, to pay any Tax or any franchise fee to any Governmental Authority
when due or any other breach of such party's representations, warranties,
covenants or agreements with respect to Tax matters contained in this Agreement,
(ii) the failure by IP-IV or TCI, as applicable, to pay any copyright payments,
including interest and penalties thereon, when due or any other breach of such
parties' representations, warranties, covenants or agreements with respect to
copyright payments contained in this Agreement, (iii) any refund obligations to
subscribers of the Systems for the period prior to the relevant Closing Time
based upon rules and regulations promulgated by the FCC under the 1992 Cable
Act, or any authoritative interpretation thereof, in effect on or prior to the
relevant Closing Date, (iv) any breach of the representations, warranties,
covenants or agreements of a TCI Party with respect to any Environmental Law
contained in this Agreement, (v) any breach of Section 5.7(d) or 10.2 or (vi)
any failure of IP-IV to pay or perform the Assumed Liabilities or to pay the
amounts it is required to pay under the Management Agreement. Neither IP-IV nor
any TCI Party will have any liability under Sections 9.1 and 9.2, respectively,
to the extent that
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the aggregate amount of Losses otherwise subject to its indemnification
obligations hereunder exceeds fifty million dollars ($50,000,000), except for a
breach of Section 5.7(d), 7.4, 7.5 or 7.6 or any failure of IP-IV to pay or
perform the Assumed Liabilities or to pay the amounts it is required to pay
under the Management Agreement for which the limitation on liability shall be
two hundred forty million dollars ($240,000,000).
(b) Amounts payable by the Indemnitor to the Indemnitee in respect of
any Losses under Sections 9.1 or 9.2 will be payable by the Indemnitor within
five business days after the Indemnitor receives notice of the Losses incurred
by the Indemnitee, and will bear interest at the rate publicly announced from
time to time by The Bank of New York as its prime rate plus two percent (2%) per
annum from the date the Indemnitor receives notice of the Losses for which
indemnification is sought until the date of payment of indemnification by the
Indemnitor, if such indemnification payment is not made by the Indemnitor within
five business days after receiving notice of the Indemnitee's request for
indemnification.
9.5 TIME AND MANNER OF CERTAIN CLAIMS. The indemnification obligations
and remedies set forth in this Article are intended to be the sole and exclusive
remedy of the parties with respect to the matters for which indemnification may
be sought pursuant to Section 9.1 or 9.2, or elsewhere in this Agreement. The
representations and warranties of each TCI Party and IP-IV in this Agreement and
any Transaction Document will survive for that TCI Party's System for a period
of one year from the date of the Adjustment Date except that (i) the liability
of the parties will extend beyond such one-year period with respect to any claim
which has been asserted in a written notice before the expiration of such
one-year period, (ii) all such representations and warranties with respect to
any Taxes and with respect to any FCC or copyright matters will survive until
the expiration of the applicable statute of limitations, (iii) the
representations and warranties in Section 3.14 will survive for a period of
three years from the Adjustment Date (the liability of the parties will extend
beyond such three-year period with respect to any claim which has been asserted
in a written notice before the expiration of such three-year period) and (iv)
all representations with respect to ownership of or title to the Assets will
survive the Adjustment Date and will continue in full force and effect without
limitation. The covenants and agreements of the parties in this Agreement and in
the Transaction Documents will survive and will continue in full force and
effect for a period of one year following the date on which indemnification
under Section 9.1 or 9.2 commences for such covenants and agreements, except the
covenants and agreements of the parties contained in Sections 2.2, 5.8(a)
through 5.8(d), 7.4 through 7.6, 10.1, 10.13, 10.17 and 10.19 and the
Management Agreement which will continue in full force and effect without
limitation, provided that nothing in this Section shall obligate a party to
perform a covenant or agreement for a period of time longer than the period
expressly stated in such covenant or agreement.
9.6 OTHER INDEMNIFICATION. The provisions of Sections 9.3, 9.4 and 9.5
will be applicable to any claim for indemnification made under any other
provision of this Agreement, and all references in Sections 9.3, 9.4 and 9.5 to
Sections 9.1 and 9.2 will be deemed to be references to such other provisions of
this Agreement.
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ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 EXPENSES. Except as otherwise provided in Section 10.13 or
elsewhere in this Agreement, each of the parties will pay its own expenses and
the fees and expenses of its counsel, accountants and other experts in
connection with this Agreement whether or not the transactions contemplated
hereby occur.
10.2 BROKERAGE. IP-IV will indemnify and hold each TCI Party harmless
from and against any and all Losses arising from any employment by IP-IV or any
Affiliate of IP-IV of, or services rendered to IP-IV by, any finder, broker,
agency or other intermediary, in connection with the transactions contemplated
hereby, or any allegation of any such employment or services. Each TCI Party
will indemnify and hold IP-IV harmless from and against any and all Losses
arising from any employment by that TCI Party or any of its Affiliate of, or
services rendered to it by, any finder, broker, agency or other intermediary, in
connection with the transactions contemplated hereby, or any allegation of any
such employment or services.
10.3 WAIVERS. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party hereto, will be deemed to constitute
a waiver by the party taking the action of compliance with any representation,
warranty, covenant or agreement contained herein or in any Transaction Document.
The waiver by any party of any condition or of a breach of another provision of
this Agreement or any Transaction Document will be in writing and will not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party of any of the conditions precedent to its obligations
under this Agreement will not preclude it from seeking redress for breach of
this Agreement other than with respect to the condition so waived.
10.4 NOTICES. All notices, requests, claims, demands, applications,
services of process and other communications which are required to be or may be
given under this Agreement or any Transaction Document will be in writing and
will be deemed to have been duly given if sent by telecopy or facsimile
transmission, answer back requested, or delivered by courier or mailed,
certified first class mail, postage prepaid, return receipt requested, to the
parties hereto at the following addresses:
To TCI-Greenville, TCI-Piedmont or TCI-Spartanburg:
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Attn: Senior Vice President, Corporate Development
Telephone: (303) 267-5500
Telecopy: (303) 488-3219
Copies: Similarly addressed, Attention: Legal Department
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To IP-IV:
InterMedia Partners IV [Acquisition], L.P.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn: Leo J. Hindery, Jr./Rodney M. Royse
Telephone: (415) 616-4600
Telecopy: (415) 397-3978
Copies:
Gregg F. Vignos, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Telephone: (415) 983-1649
Telecopy: (415) 983-1200
or to such other address as any party will have furnished to the other by notice
given in accordance with this Section. Such notice will be effective, (i) if
delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, when
confirmation is received, or (iii) if mailed, upon the date of delivery as shown
by the return receipt therefor (rejection or other refusal to accept or
inability to deliver because of a change of address of which no notice was given
shall be deemed to be receipt of notice).
10.5 ENTIRE AGREEMENT; PRIOR REPRESENTATIONS; AMENDMENTS. This
Agreement embodies the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior representations,
agreements and understandings, oral or written, with respect thereto.
Notwithstanding any representations which may have been made by either party in
connection with the transactions contemplated by this Agreement, each party
acknowledges that (i) it has not relied on any representation by the other party
with respect to such transactions, the Assets or the Systems except those
contained in this Agreement, the Exhibits or the Schedules hereto and (ii) its
execution of this Agreement specifically precludes any claims of negligent
misrepresentation or other claims by it based on any representation made by the
other party which is not contained in this Agreement, the Exhibits or the
Schedules hereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification or discharge may be sought to be enforced.
10.6 BINDING EFFECT; BENEFITS. This Agreement will inure to the benefit
of and will be binding upon the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns. Neither IP-IV nor any TCI
Party will assign this Agreement or delegate any of its duties hereunder to any
other Person without the prior written consent of the other parties; provided,
however, that, at any time during the first sixty (60) days after the date of
this Agreement, IP-IV may, without the consent of the TCI Parties, assign all of
its rights and delegate
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all of its duties (including its duty to credit the capital accounts of the TCI
Parties asset forth in Section 2.1(a)) under this Agreement to any Affiliate of
IP-IV which will own at least ninety-nine percent (99%) of the partnership
interests in IP-IV and whose general partner is also a general partner of IP-IV
and such transferee may assign to any Affiliate of IP-IV its rights to receive
and manage the Assets and all rights, powers, obligations and liabilities
relating thereto, including the assumption of the Assumed Liabilities, but
excluding the obligation to credit the capital accounts of the TCI Parties in
IP-IV as set forth in Section 2.1(a), which shall remain the obligation of
IP-IV.
10.7 HEADINGS AND EXHIBITS. The section and other headings contained in
this Agreement are for reference purposes only and will not affect the meaning
or interpretation of this Agreement. References to Exhibits or Schedules will
unless otherwise indicated, refer to the Exhibits and Schedules attached to this
Agreement, which will be incorporated in and constitute a part of this Agreement
by such reference.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, will be deemed to be an original and
all of which together will be deemed to be one and the same instrument.
10.9 GOVERNING LAW. The validity, performance and enforcement of this
Agreement and all Transaction Documents, unless expressly provided to the
contrary, will be governed by the laws of the State of New York, without giving
effect to the principles of conflicts of law of such state. Each party agrees
that the courts of the State of New York and the United States of America for
the Southern District for New York have jurisdiction to settle any disputes in
connection with this agreement and any Transaction Document and accordingly
submits to the jurisdiction of such courts.
10.10 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other provisions
of this Agreement.
10.11 THIRD PARTIES; JOINT VENTURES. This Agreement constitutes an
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies, obligations
or liabilities, legal or equitable, including any right of employment, on any
Person other than the parties hereto and their respective successors, or
assigns, or otherwise constitute any Person a third party beneficiary under or
by reason of this Agreement. Nothing in this Agreement, expressed or implied, is
intended to or will constitute the parties hereto partners or participants in a
joint venture.
10.12 CONSTRUCTION. This Agreement has been negotiated by the TCI
Parties, on one hand, and IP-IV, on the other, and their respective legal
counsel, and legal or equitable principles that might require the construction
of this Agreement or any provision of this Agreement against the party drafting
this Agreement will not apply in any construction or interpretation of this
Agreement.
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10.13 ATTORNEYS' FEES. If any Litigation between IP-IV, on one hand,
and one or more of the TCI Parties, on the other, with respect to this Agreement
or the transactions contemplated hereby will be resolved or adjudicated by a
Judgment of any court, the party prevailing under such Judgment will be
entitled, as part of such Judgment, to recover from the other party its
reasonable attorneys' fees and costs and expenses of litigation.
10.14 RISK OF LOSS. The risk of any loss or damage to the Assets
resulting from fire, theft or any other casualty (except reasonable wear and
tear) will be borne by the relevant TCI Party at all times prior to the
Adjustment Time. In the event that any such loss or damage will be sufficiently
substantial so as to preclude and prevent resumption of normal operations of any
material portion of a System or the replacement or restoration of the lost or
damaged property prior to the earlier of the Adjustment Date or 20 days from the
occurrence of the event resulting in such loss or damage, the affected TCI Party
will immediately notify IP-IV in writing of its inability to resume normal
operations or to replace or restore the lost or damaged property, and IP-IV, at
any time within 10 days after receipt of such notice, may elect by written
notice to the notifying party to either (i) waive such defect and proceed toward
consummation of the transaction in accordance with terms of this Agreement, or
(ii) terminate this Agreement. If IP-IV elects to so terminate this Agreement,
all parties will stand fully released and discharged of any and all obligations
hereunder. If IP-IV elects to consummate the transactions contemplated by this
Agreement notwithstanding such loss or damage and does so, the Adjustment Amount
shall be decreased by the amount of the deductible under the casualty insurance
policies insuring the Assets and all insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage will be delivered
by the notifying party to IP-IV, or the rights thereto will be assigned by the
notifying party to IP-IV if not yet paid over to the notifying party.
10.15 TAX CONSEQUENCES. No party to this Agreement makes any
representation or warranty, express or implied, with respect to the Tax
implications of any aspect of this Agreement on any other party to this
Agreement, and all parties expressly disclaim any such representation or
warranty with respect to any Tax consequences arising under this Agreement. Each
party has relied solely on its own Tax advisors with respect to the Tax
implications of this Agreement.
10.16 COMMERCIALLY REASONABLE EFFORTS. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a party to
undertake extraordinary measures, including the initiation or prosecution of
legal proceedings or the payment of amounts in excess of normal and usual filing
fees and processing fees, if any.
10.17 COVENANT NOT TO SUE AND NONRECOURSE TO PARTNERS.
(a) Subject to the provisions of Section 10.17(c), each TCI Party
agrees that notwithstanding any other provision in this Agreement or in any
Transaction Document, and any rule of law or equity to the contrary, to the
fullest extent permitted by law, IP-IV's obligations and liabilities under all
Transaction Documents and in connection with the transactions contemplated
therein shall be nonrecourse to all direct and indirect general and limited
partners of IP-IV.
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"NONRECOURSE" means that the obligations and liabilities are limited in
recourse solely to the assets of IP-IV (for those purposes, any capital
contribution obligations of the general and limited partners of IP-IV or any
negative capital account balances of such partners shall not be deemed to be
assets of IP-IV) and are not guaranteed directly or indirectly by, or the
primary obligations of, any general or limited partner of IP-IV, and neither
IP-IV nor any general or limited partner or any officer, director, partner,
employee or agent of IP-IV or any general or limited partner of any successor
partnership, either directly or indirectly, shall be personally liable in any
respect (except to the extent of their respective interests in the assets of
IP-IV) for any obligation or liability of IP-IV under any Transaction Document
or any transaction contemplated therein.
"DIRECT" partners include all general and limited partners of IP-IV,
and "INDIRECT" partners include all general and limited partners of each direct
partner and all general and limited partners of each such indirect partner and
all such further indirect partners thereof and each such indirect partner.
(b) Subject to the provisions of Section 10.17(c), each TCI Party
hereby covenants for itself, its successors and assigns, that it, its successors
and assigns, will not make, bring, claim, commence, prosecute, maintain, cause
or permit any action to be brought, commenced, prosecuted, maintained, either at
law or equity, in any court of the United States or any state thereof against
any direct or indirect general or limited partner of IP-IV or any officer,
director, partner, employee or agent of IP-IV or any direct or indirect general
or limited partner of IP-IV for (i) the payment of any amount or the performance
of any obligation under any Transaction Document or (ii) the satisfaction of any
liability arising in connection with any such payment or obligation or
otherwise, including without limitation, liability arising in law for tort
(including, without limitation, for active and passive negligence, negligent
misrepresentation and fraud), equity (including, without limitation, for
indemnification and contribution) and contract (including, without limitation,
monetary damages for the breach of representation or warranty or performance of
any of the covenants or obligations contained in any Transaction Document or
with the transactions contemplated herein or therein).
(c) Notwithstanding the provisions of Sections 10.17(a) and (b), if
IP-IV dissolves and liquidates or if IP-IV sells or otherwise disposes of any
substantial portion of its assets other than for fair value or makes any
distribution to any of its partners which disposition or distribution renders
IP-IV financially unable to perform its obligations under this Agreement or any
Transaction Document, then the parties agree that IP-IV's obligations and
liabilities under this Agreement and all Transaction Documents shall be recourse
to InterMedia Capital Management IV, L.P., a California limited partnership
("ICM-IV"); provided, however, that all such obligations and liabilities of
IP-IV which may become recourse against ICM-IV under this Section 10.17(c)
shall in all events remain nonrecourse to all direct and indirect general and
limited partners of ICM-IV.
10.18 BULK SALES. IP-IV waives compliance by the TCI Parties with Legal
Requirements relating to bulk sales applicable to the transactions contemplated
hereby.
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<PAGE> 50
10.19 TAXES. All sales, use, transfer and similar taxes or assessments,
including any transfer fees and similar assessments for Franchises, Licenses and
Contracts, arising from or
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payable by reason of the conveyance of the Assets will be paid by IP-IV with
respect to the Assets. All taxes attributable to the ownership and operation of
the Assets prior to the Closing for such Assets will be the responsibility of,
and paid by, the relevant TCI Party.
The parties have executed this Agreement as of the day and year first
above written.
INTERMEDIA PARTNERS IV, L.P.
By InterMedia Capital Management IV, L.P., a
California limited partnership, its General
Partner
By /s/ Leo J. Hindery, Jr.
------------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
TCI OF GREENVILLE, INC.
By /s/ William Fitzgerald
--------------------------------------
Name William Fitzgerald
--------------------------------------
Title SVP
--------------------------------------
TCI OF PIEDMONT, INC.
By /s/ William Fitzgerald
--------------------------------------
Name William Fitzgerald
--------------------------------------
Title SVP
--------------------------------------
TCI OF SPARTANBURG, INC.
By /s/ William Fitzgerald
--------------------------------------
Name William Fitzgerald
--------------------------------------
Title SVP
--------------------------------------
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FIRST AMENDMENT TO CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION AGREEMENT ("Amendment") is made
and entered into as of June 21, 1996, by and between TCI OF GREENVILLE, INC., a
South Carolina corporation ("TCI-Greenville"), TCI OF PIEDMONT, INC., a South
Carolina corporation ("TCI-Piedmont"), and TCI OF SPARTANBURG, INC., a South
Carolina corporation ("TCI-Spartanburg"; each of TCI-Greenville, TCI-Piedmont
and TCI-Spartanburg is referred to as a "TCI Party" and collectively as the "TCI
Parties"), on one hand, and INTERMEDIA PARTNERS IV, L.P., a California limited
partnership ("IP-IV"), on the other.
RECITALS
A. TCI-Greenville, TCI-Piedmont and TCI-Spartanburg and IP-IV entered
into that certain Contribution Agreement dated as of March 4, 1996 (the
"Contribution Agreement").
B. TCI-Greenville, TCI-Piedmont and TCI-Spartanburg by a letter dated
March 26, 1996 to IP-IV extended the date by which IP-IV was to complete its due
diligence as provided in section 8.1(a) of the Contribution Agreement.
C. The parties hereto now wish to make certain changes to the
Contribution Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto agree
as follows:
1. CAPITAL CONTRIBUTION.
(a) Section 2.3(a) of the Contribution Agreement is amended by adding
after "Schedule 2.3(a)" therein the following:
"; provided that if the Advertising Availability Purchase and Sale
Agreement between TCI-Greenville and TCI of Roanoke is not included in
the Assets transferred to IP-IV at the first Closing, then the
aggregate fair market value of the Systems shall be reduced by an
amount equal to ten times the annualized aggregate total Net Cash Flow
received by the Systems in connection with such Asset, determined as of
the month preceding the Adjustment Date, and the fair market value of
such System shall be reduced on a pro rata basis"
(b) Section 2.3 of the Contribution Agreement is amended by adding a
new subsection (c) as follows:
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<PAGE> 53
"(c) Notwithstanding any term or condition in Section 2.1 or
this 2.3, if, on the Adjustment Date, the aggregate partnership
interests in IP-IV held by Tele-Communications, Inc. and its Affiliates
(the "TCI Interests") would, after the TCI Parties receive credit for
their capital contributions as set forth in Sections 2.1 and 2.3(a) of
this Agreement, exceed forty-nine percent (49%) of the total
partnership interests in IP-IV:
"(i) the amount of each TCI Party's capital contribution to
IP-IV shall be reduced proportionately so that the TCI Interests do not
exceed forty-nine percent (49%) of the total partnership interests in
IP-IV; and
"(ii) the amount of the TCI Debt which IP-IV shall assume from
each TCI Party shall be increased by an amount equal to the difference
between the fair market value of that TCI Party's Asset, as set forth
in SCHEDULE 2.3(a), and the amount of its capital contribution,
calculated pursuant to preceding clause (i)."
(c) Section 7.3(b)(i) of the Contribution Agreement is amended by
adding new subsection (F) as follows and renumbering subsection (F) as
subsection (G):
"(F) IP-IV shall have received from sources other than the TCI
Parties equity contributions equal to or greater than one hundred forty
million dollars ($140,000,000); and"
2. CASH FLOW. The definition of "Cash Flow" is amended and restated
in its entirety as follows:
"'Cash Flow' shall mean for any period after the Adjustment
Date for a System that has not on that date been transferred to IP-IV
the gross revenues less all costs, expenses and charges pertaining to
the operation of that System to the extent that such costs, expenses
and charges (a) would be included in the Assumed Liabilities had the
Closing occurred on the Adjustment Date, (b) arise after the Adjustment
Date and before the first Closing Date under the contracts (i) listed
on SCHEDULE 1.1 or (ii) in respect of which payments made thereunder
are reflected in SCHEDULE 3.12 or (c) are capital expenditures listed
in SCHEDULE 5.5. For the avoidance of doubt, such costs, expenses and
charges do not include management fees, legal fees relating to the
corporate organization of a TCI Party, financing fees, income taxes,
any other administrative costs or taxes incurred in connection with
corporate matters not associated with the Systems and non-cash charges;
and none of the foregoing shall be paid from the Cash Flow transferred
to IP-IV."
3. CLOSINGS. Sections 1.1, 6.1, 6.2, 7.1 and 7.2 of the Contribution
Agreement are amended as follows:
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<PAGE> 54
(a) In the definition of "Adjustment Date" in Section 1.1 of the
Contribution Agreement:
(i) the word "first" is inserted before the words "Closing
Date" in the first and third lines of the definition; and
(ii) "on or before August 15, 1996" is hereby substituted for
"within sixty (60) days of April 1, 1996" therein.
(b) The introductory paragraph of section 6.1 of the Contribution
Agreement is amended and restated in its entirety to provide:
"6.1 CONDITIONS TO TCI PARTIES' OBLIGATIONS. The obligations
of each TCI Party to transfer its Assets (whether constituting a System
or a portion thereof) at a Closing and to consummate the other
transactions contemplated by this Agreement in relation to such a
transfer will be subject to the satisfaction, on or before the date for
such transfer and related transactions, of the following conditions,
which may be waived by the TCI Parties:"
(c) Section 6.1(b) of the Contribution Agreement is amended and
restated in its entirety to provide:
"(b) Subject to Section 7.2, TCI shall have obtained or
received evidence, in form and substance satisfactory to it, that the
Required Consents for the Assets which are proposed to be transferred
at that Closing have been obtained;"
(d) The introductory paragraph of section 6.2 of the Contribution
Agreement is deleted and amended to provide:
"6.2 CONDITIONS TO IP-IV'S OBLIGATIONS. The obligations of
IP-IV to accept a transfer of any Assets (whether constituting a System
or a portion thereof) at a Closing and for IP-IV to consummate the
other transactions contemplated by this Agreement in relation to such a
transfer will be subject to the satisfaction, on or before the date for
such transfer and related transactions, of the following conditions,
which may be waived by IP-IV:"
(e) Section 6.2(b) of the Contribution Agreement is amended and
restated in its entirety to provide:
"(b) Subject to Section 7.2, IP-IV shall have received
evidence, in form and substance satisfactory to it, that the Required
Consents for the Assets which are proposed to be transferred at that
Closing have been obtained;"
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<PAGE> 55
(f) Sections 7.1 and 7.2 of the Contribution Agreement are amended and
restated in their entirety to provide:
"7.1 CLOSING.
"(a) One closing of the contribution of all Assets shall take
place by mail and facsimile at a date and time mutually determined by
IP-IV and the TCI Parties as soon as practicable but no later than ten
(10) days after all conditions set forth in Article 6 have been
satisfied or waived.
"(b) At the Closing (or each Closing if there is more than
one Closing as provided in Section 7.2), (i) each TCI Party will
deliver or cause to be delivered to IP-IV the agreements, documents,
instruments and certificates listed in paragraphs 2 through 9 and 13 on
SCHEDULE 7.1(b)(i) as applicable to the Assets which are being
transferred at that Closing, and (ii) IP-IV will deliver to the TCI
Parties the agreements, documents, instruments and certificates listed
in paragraphs 2 through 4 and 6 on SCHEDULE 7.1(b)(ii).
"(c) At the first Closing, (i) each TCI Party will deliver or
cause to be delivered to IP-IV the documents, instruments and
certificates listed in paragraphs 1, 10 and 11 on SCHEDULE 7.1(b)(i),
and (ii) IP-IV will deliver to the TCI Parties the documents,
instruments and certificates listed in paragraphs 1 and 5 on SCHEDULE
7.1(b)(ii).
"7.2 MULTIPLE CLOSING CONTINGENCY.
"(a) If the conditions to closing set forth in Article 6 have
not been satisfied or waived with respect to all of the Assets on or
prior to the date specified in clause (b) of the definition of
Adjustment Date, then each TCI Party shall, subject to satisfaction of
the conditions set forth in Section 7.3(b) of the Contribution
Agreement, (i) from and after the Adjustment Date deliver monthly to
IP-IV the Cash Flow of its Assets to the extent those Assets are not
transferred to IP-IV on that date until the earliest of (A) the Closing
for those Assets as described in clause (ii) below, (B) the first
anniversary of the Adjustment Date if the first Closing has not
occurred on or before that date or (C) such earlier date as the parties
hereto shall agree upon; (ii) as soon as practicable on or after the
Adjustment Date, consummate the first Closing as set forth in Sections
7.1(a) and (c) when the Minimum Required Consents have been obtained
and all conditions precedent in Sections 6.1 and 6.2 other than
Sections 6.1(b) and 6.2(b), which shall cease to be conditions
precedent, have been satisfied or waived; (iii) continue, thereafter,
to use all reasonable commercial efforts to cause all remaining
conditions to be satisfied with respect to its Retained Assets; and
(iv) consummate the contribution of the Retained Assets at one or more
future closings (after the
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<PAGE> 56
first Closing) when the Additional Consents in respect of those Assets
have been obtained.
"(b) 'Minimum Required Consents' means the consents required
for the transfer of (i) all Licenses and (ii) those Franchises pursuant
to which cable television service is delivered to ninety percent (90%)
of the EBSs of the Systems. 'Additional Consents' means the consents
required for the transfer of (i) a Franchise or Franchises which will
be transferred at a Closing subsequent to the first Closing and (ii)
the Leases and Contracts required by TCI-Greenville for the operation
of its advertising sales business (collectively, the "Ad Sales
Contracts").
"(c) If there shall be more than one Closing, each TCI Party
shall transfer to IP-IV (i) at the first Closing, all (A) Franchises
(I) the transfer of which do not require any consent of any person or
(II) the consents for the transfer of which have been obtained, (B)
Leases and Contracts, other than the Ad Sales Contracts and (C) Ad
Sales Contracts if the consents for the transfer thereof have been
obtained and (D) Licenses and other Assets; and (ii) at each subsequent
Closing, (A) Franchises the consents for the transfer of which have
been obtained after the first Closing and (B) all Ad Sales Contracts if
the consents for the transfer thereof have been obtained; provided that
if the first Closing Date has then occurred, the Ad Sales Contracts
shall be transferred to IP-IV on the Outside Closing Date whether or
not the consents for the transfer thereof have been obtained.
"(d) Notwithstanding anything to the contrary in this
Agreement, in the event that there shall be more than one Closing under
this Agreement, then with respect to any Assets, all references to the
Closing hereunder shall be deemed to refer to the Closing at which such
Assets are transferred to IP-IV. Each date on which a Closing occurs is
referred to as a 'Closing Date.'"
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<PAGE> 57
4. SUBSTITUTE CONSIDERATION. Section 7.4(c) of the Contribution
Agreement is amended and restated in its entirety as follows:
"(c) Upon (x) either (I) the TCI Parties' agreement to pay
such cash or assume indebtedness of IP-IV or (II) IP-IV's acceptance of
such Substitute Systems, but in neither event later than the first
anniversary of Adjustment Date, and (y) the release of all Liens other
than Permitted Liens (excluding clause (e) in the definition thereof)
imposed upon the Assets while IP-IV managed the Systems, the parties
shall amend (i) this Agreement to (A) delete the Systems and the
receipt by IP-IV of the Cash Flow therefrom, (B) substitute therefor
the cash, assumption of IP-IV's indebtedness or the Substitute Systems,
as applicable, and (C) provide for payment of the Adjustment Amount
with respect to the Substitute Systems on and determined as of the date
that the Substitute Systems shall become subject to this Agreement; and
(ii) the Management Agreement to provide that (A) the Systems shall no
longer be subject thereto and (B) the Substitute Systems (if any) shall
be subject to management by IP-IV thereunder."
5. TERMINATION.
(a) The parties confirm that Section 8.1(a) of the Contribution
Agreement has been amended such that the phrase "within the first twenty-one
(21) days of the date of this Agreement" is deleted and the phrase "on or before
April 8, 1996" substituted therefor.
(b) The date "June 1, 1996" in Section 8.1(d) of the Contribution
Agreement is amended to be "August 15, 1996".
6. INDEMNIFICATION. TCI-Spartanburg shall indemnify IP-IV for any and
all Losses which it incurs in connection with claims, assessments, suits,
proceedings or demands instituted by a Governmental Authority or third party or
any remediation, removal or cleanup required by any Governmental Authority or by
any third party, in each case arising from the release of Hazardous Substances
or violation of any Legal Requirement described in Section 3.14(b) of the
Contribution Agreement, in either case, prior to the Adjustment Date, with
respect to the parcel of real property described as Block Map No. 7-16-04-125.1
and forming a portion of the real property located at 725 Union Street,
Spartanburg, South Carolina. The indemnity set forth in this Section 4 is
additional to the indemnification obligations set forth in Section 9.2 of the
Contribution Agreement and is not subject to the limitations on the
indemnification rights in that section as set forth in Sections 9.3 through 9.6
of the Contribution Agreement.
7. INDEMNIFICATION LIMITATION. To the extent that a Required Consent
for the transfer of a Contract to IP-IV shall not have been obtained by a TCI
Party prior to a Closing at which such Contract is transferred to IP-IV, IP-IV
shall not seek indemnification under Section 9.2(b) or (c) of the Contribution
Agreement by reason of that TCI Party's failure to obtain such Required Consent
prior to such Closing.
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<PAGE> 58
8. LEGAL OPINIONS. The legal opinions referred to in paragraphs 10
and 11 of SCHEDULE 7.1(b)(i) to the Contribution Agreement shall be
substantially in the form attached hereto as SCHEDULES 2 and 3. The legal
opinion referred to in paragraph 5 of SCHEDULE 7.1(b)(ii) to the Contribution
Agreement shall be substantially in the form attached hereto as SCHEDULE 4.
9. SCHEDULES. The schedules attached as SCHEDULE 1 to this Amendment
have been approved by IP-IV and are deemed to be part of the Contribution
Agreement, as provided in Section 5.1 of that agreement.
10. INTERIM MANAGEMENT OF THE SYSTEMS BY IP-IV.
(a) Concurrent with the execution and delivery of this Amendment,
InterMedia Partners of Tennessee, a California general partnership ("IP-Tenn"),
and the TCI Parties are entering into a management agreement (the "Interim
Management Agreement"), in the form attached hereto as SCHEDULE 5. The Interim
Management Agreement will terminate on the Adjustment Date, and if the first
Closing does not occur on that date, the TCI Parties and IP-Tenn shall enter
into the Management Agreement as provided in Section 7.3(a) of the Contribution
Agreement.
(b) Section 7.3(b)(i)(B) of the Contribution Agreement is amended and
restated in its entirety as follows:
"(B) IP-IV has performed in all material respects all obligations
and agreements and complied in all material respects with all covenants
in this Agreement to be performed and complied with by it at or before
the Adjustment Date, and InterMedia Partners of Tennessee, a California
general partnership ("IP-Tenn"), has performed in all material respects
all obligations and agreements and complied in all material respects
with all covenants to be performed and complied with by it under the
Management Agreement dated as of June 21, 1996, by and between the TCI
Parties and IP-Tenn (the "Interim Management Agreement");"
(c) Section 7.3(b)(ii)(A) of the Contribution Agreement is amended and
restated in its entirety as follows:
"(A) the representations and warranties of each TCI Party in
this Agreement were true in all material respects at and as of the date
that the Interim Management Agreement is entered into (the "Interim
Management Date") with the same effect as if made at and as of that
date;"
(d) Section 7.3(b)(ii)(B) of the Contribution Agreement is amended and
restated in its entirety as follows:
"(B) each TCI Party has performed in all material respects all
obligations and agreements and complied in all material respects with
all covenants in this Agreement and
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<PAGE> 59
the Interim Management Agreement to be performed and complied with by
it at or before the Adjustment Date;"
(e) Section 7.3(b)(ii)(D) of the Contribution Agreement is amended and
restated in its entirety as follows:
"(D) the Systems had as of the Interim Management Date at least
one hundred fourteen thousand five hundred (114,500) EBSs;"
(f) Section 7.3(b)(ii)(J) of the Contribution Agreement is amended and
restated in its entirety as follows:
"(J) the cumulative Net Cash Flow of the Systems for the first
four months of 1996, through April 30, 1996, was not less than
$7,200,000."
(g) Each TCI Party hereby certifies that as of the Interim Management
Date all of its representations and warranties in the Contribution Agreement
were true in all material respects.
(h) IP-IV hereby agrees that as of the date of the Interim Management
Date the conditions precedent to IP-IV entering into the Management Agreement
which are set forth in Sections 7.3(b)(ii)(E), (F), (G), (H) and (I) of the
Contribution Agreement are deemed satisfied and waived, and are no longer
conditions to IP-IV's entering into the Management Agreement or consummating the
Closing.
(i) IP-IV hereby agrees that from and after the Interim Management
Date to the extent that IP-Tenn has assumed responsibility under the Interim
Management Agreement for the matters which are the subject of Sections 5.5 and
5.6 of the Contribution Agreement, the TCI Parties shall not have obligations
under such Sections 5.5 and 5.6.
(j) IP-IV hereby agrees that from and after the Interim Management
Date the TCI Parties shall have no further obligation under Section 5.5(k) of
the Contribution Agreement with respect to the franchise issued for Cherokee
County, South Carolina.
11. MANAGEMENT AGREEMENT. EXHIBIT 7.3 to the Contribution Agreement is
amended as follows:
(a) Recitals C, D, E and F of EXHIBIT 7.3 are amended and restated in
their entirety as follows:
"C. TCI-Spartanburg is the owner of that certain cable television
system servicing the area located in and around Spartanburg, South
Carolina (the `Spartanburg System').
"D. Each of TCI-Greenville, TCI-Piedmont and TCI-Spartanburg,
pursuant to a Contribution Agreement dated as of March 4, 1996, as
amended by
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<PAGE> 60
the First Amendment to Contribution Agreement dated June 21, 1996 (as
amended, the "Contribution Agreement"; capitalized terms not defined in
this Management Agreement have the meanings ascribed to them in the
Contribution Agreement) with IP-IV, has agreed to cause the
contribution of the Greenville System, the Piedmont System and the
Spartanburg System, respectively, to the capital of IP-IV pursuant to
the terms and at the times specified therein.
"E. IP-IV is experienced in the operation and management of
cable television systems such as the Greenville System, the Piedmont
System and the Spartanburg System.
"F. The TCI Parties desire to retain the services of IP-IV in
connection with the management and operation of the portion of the
Greenville System, the Piedmont System and the Spartanburg System
described on SCHEDULE 1 to this Agreement (each such portion,
constituting a cable television system which serves subscribers
pursuant to a franchise, is referred to as a `System'; and all such
portions are referred to collectively as the `Systems')."
(b) Section 3 of EXHIBIT 7.3 is amended and restated in its entirety
as follows:
"3. TERM. The engagement of IP-IV pursuant to this Agreement
shall become effective as of the date hereof and shall continue, unless
earlier terminated pursuant to Section 8, with respect to each System
until the date such System is transferred to IP-IV or a third party.
The term of this Agreement shall terminate when the TCI Parties are no
longer owners of the Systems, such having been transferred to IP-IV or
a third party as provided in the Contribution Agreement."
(c) The words "prior to the first Closing Date under the Contribution
Agreement" are inserted after the word "that" in the sixth line of Section 4(g)
of the Management Agreement.
(d) The words "prior to the first Closing Date under the Contribution
Agreement" are inserted after the word "and" in the second line of Section 4(i)
of the Management Agreement and after the word "IP-IV" in the fifth line of such
section.
(e) Section 5(c) of EXHIBIT 7.3 is amended and restated in its
entirety as follows:
"(C) INSURANCE AND BONDS. IP-IV will maintain, at its expense,
(i) casualty and liability insurance covering and insuring the Systems
against risks in such amounts usually and customarily insured, prior to
the first Closing, by Tele-Communications, Inc. and its Affiliates, and
after the first Closing, by IP-IV and its Affiliates, in each case,
subject to reasonable deductibles and naming each of the TCI Parties as
an additional insured and (ii) all performance, surety and other bonds
and letters of credit required under the Franchises and the Contracts,
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<PAGE> 61
except as the same may have been waived by the grantor or other party
to any such Franchise or contract."
(f) Section 6 of EXHIBIT 7.3 is amended and restated in its entirety
as follows:
"6. OPERATING ACCOUNTS. IP-IV shall create and maintain bank
accounts in which the funds generated by the Systems shall be
deposited. All funds in said accounts from time to time shall be the
property of IP-IV pursuant to the Contribution Agreement. IP-IV shall
make or cause to be made, at its expense, payments of (a) all costs,
expenses and charges pertaining to the operation of the System (i) to
the extent that such costs, expenses and charges would be included in
the Assumed Liabilities had the Closing occurred on the Adjustment Date
or (ii) arise after the Adjustment Date and before the first Closing
Date under contracts (A) listed on Schedule 1.1 to the Contribution
Agreement or (B) in respect of which payments made thereunder are
reflected on Schedule 3.12 to the Contribution Agreement, (b) capital
expenditures listed in Schedule 5.5 to the Contribution Agreement,
determined on an accrual basis in accordance with GAAP and (c) interest
accruing after the Adjustment Date and principal on the TCI Debt. For
the avoidance of doubt such costs, expenses and charges do not include
management fees, legal fees relating to the corporate organization of a
TCI Party, financing fees, income taxes, taxes and any other
administrative cost incurred in connection with corporate matters not
associated with the System and non-cash charges; and none of the
foregoing shall be paid from the funds generated by the Systems."
12. CONDITIONS PRECEDENT. This Amendment shall be effective upon the
execution and delivery by all of the parties hereto.
13. ASSIGNMENT. Each of the TCI Parties hereby consents to the
assignments of the Contribution Agreement set forth in the Assignment and
Assumption Agreement attached hereto as SCHEDULE 6, and hereby agrees to any
amendments to the Contribution Agreement therein to the extent that such
Assignment and Assumption Agreement shall amend the Contribution Agreement.
Notwithstanding the foregoing, the assignments described in the Assignment and
Assumption Agreement may not be effected until the conditions set forth in
Section 7.3(b)(i)(E) and (F) of the Contribution Agreement have been met. Upon
the Assignment and Assumption Agreement being entered into, Section 7.3(b)(i)(E)
shall be amended and restated in its entirety as follows:
"(E) all of the partners of IP-IV (determined as of the date
of the Assignment and Assumption Agreement is entered into) shall have
assigned their partnership interests in IP-IV to ICP-IV and the TCI
Parties shall have not further obligation to make capital contributions
to IP-IV;"
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<PAGE> 62
Any further assignment by the parties to the Assignment and Assumption Agreement
shall require the consent of each of the TCI Parties.
14. MISCELLANEOUS.
(a) This Amendment may be executed in any number of counterparts and
by each of the parties hereto on separate counterparts, each of which, once
executed and delivered, shall be deemed to be an original and all of which taken
together shall constitute but one and same instrument.
(b) Section headings in this Amendment are included herein for
convenience of reference only, and shall not constitute a part of this Amendment
for any other purpose.
(c) The validity, performance and enforcement of this Amendment will
be governed by the laws of the State of New York, without giving effect to the
principles of conflicts of law of such state. Each party agrees that the courts
of the State of New York and the United States of America for the Southern
District for New York have jurisdiction to settle any disputes in connection
with this Amendment and accordingly submits to the jurisdiction of such courts.
The parties have executed this Amendment as of the day and year first
above written.
INTERMEDIA PARTNERS IV, L.P., a California
limited partnership
By InterMedia Capital Management IV, L.P., a
California limited partnership, its General
Partner
By /s/ Leo J. Hindery, Jr.
_______________________________________
Leo J. Hindery, Jr.
Managing General Partner
TCI OF GREENVILLE, INC.
By /s/ William Fitzgerald
_____________________________________________
Name William R. Fitzgerald
___________________________________________
Title Vice President
__________________________________________
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<PAGE> 63
TCI OF PIEDMONT, INC.
By /s/ William Fitzgerald
_____________________________________________
Name William R. Fitzgerald
___________________________________________
Title Vice President
__________________________________________
TCI OF SPARTANBURG, INC.
By /s/ William Fitzgerald
_____________________________________________
Name William R. Fitzgerald
___________________________________________
Title Vice President
__________________________________________
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<PAGE> 64
July 29, 1996
TCI of Greenville, Inc.
TCI of Piedmont, Inc.
TCI of Spartanburg, Inc
c/o Tele-Communications, Inc.
5619 DTC Parkway, 11th Floor
Englewood, CO 80111
Attn: Mr. William R. Fitzgerald
Re: InterMedia Capital Partners IV, L.P.
Ladies and Gentlemen:
This letter (this "Letter Agreement") relates to the (1) Agreement of
Limited Partnership of InterMedia Capital Partners IV, L.P. dated as of March
19, 1996, as amended (the "Partnership Agreement"), and (2) the Contribution
Agreement dated as of March 4, 1996, as amended by the First Amendment to
Contribution Agreement dated June 21, 1996 (as amended, the "Contribution
Agreement"), between InterMedia Capital Partners IV, L.P., a California limited
partnership (the "Partnership"), and InterMedia Partners of Tennessee, on one
hand, and TCI of Greenville, Inc., TCI of Piedmont, Inc. and TCI of Spartanburg,
Inc., on the other. Capitalized terms used, but not defined herein shall have
the respective meanings given them in the Contribution Agreement.
This will confirm the understanding of the Partnership and the TCI
Parties that, in consideration of the exclusion from the Assets of the
Advertising Availability Purchase and Sale Agreement between TCI-Greenville and
TCI of Roanoke Rapids, Inc. and the waiver of the condition in Section
7.3(b)(ii)(J) of the Contribution Agreement, (a) the amount of the TCI Debt of
TCI-Greenville which the Partnership shall be required to assume pursuant to
Section 2.3(b) of the Contribution Agreement before any adjustments are made
pursuant to sections 2.3(c) and 2.4 thereof shall be reduced by six hundred
seven thousand seven hundred ninety-seven dollars ($607,797) from forty-seven
million twenty-seven thousand dollars ($47,027,000) to forty-six million four
hundred nineteen thousand two hundred three dollars ($46,419,203) and (b) the
aggregate amount of the TCI Debt which the Partnership shall be required to
assume pursuant to Section 2.3(b) of the Contribution Agreement before any
adjustments are made pursuant to sections 2.3(c) and 2.4 thereof shall be
reduced by six hundred seven thousand seven hundred ninety-seven dollars
($607,797) from seventy-five million eight hundred fifty thousand dollars
($75,850,000) to seventy-five million two forty-two thousand two hundred three
dollars ($75,242,203).
Section 2.3 of the Contribution Agreement provides that the aggregate
capital contribution of the TCI Parties to the Partnership shall be reduced so
that the TCI Interests, after
<PAGE> 65
TCI of Greenville, Inc.
TCI of Piedmont, Inc.
TCI of Spartanburg, Inc.
July 29, 1996
Page 2
the TCI Parties receive credit for their capital contributions to the
Partnership, do not exceed forty-nine percent (49%) of the total partnership
interests in the Partnership, other than any preferred limited partnership
interests.
For good and valuable consideration, the receipt and adequacy of which
is acknowledged, the TCI Parties hereby agree that to the extent, as a result of
the application of section 2.3 of the Contribution Agreement, the aggregate
capital contributions of the TCI Parties are reduced below one hundred sixty
four million one hundred fifty thousand dollars ($164,150,000) on the Adjustment
Date, from time to time thereafter, when and as the aggregate capital
contributions to the Partnership are increased such that the TCI Interests are
less than forty-nine percent (49.0%) of the total partnership interests in the
Partnership, other than any preferred limited partnership interests, the TCI
Parties will make additional cash capital contributions such that the TCI
Interests equal forty-nine percent (49.0%) of the total partnership interests in
the Partnership, other than any preferred limited partnership interests;
provided, in no event shall the aggregate capital contributions of the TCI
Entities attributable to the Contribution Agreement ever exceed one hundred
sixty four million one hundred fifty thousand dollars ($164,150,000.00).
The TCI Parties acknowledge that (1) the application of section 2.3 of
the Contribution Agreement is estimated to result in a reduction of the capital
contributions of the TCI Parties with respect to the TCI Interests to one
hundred seventeen million six hundred thousand dollars ($117,600,000) on the
Adjustment Date, which is anticipated to occur on July 30, 1996, (2) the
application of the preceding paragraph will require additional capital
contributions by the TCI Parties of forty-six million five hundred fifty
thousand dollars ($46,550,000) and (3) that such additional capital
contributions are anticipated to be required upon the consummation of the
transactions contemplated in the Implementation Agreement dated as of July 24,
1995, between Viacom International Inc. and Viacom International Services Inc.
This Letter Agreement shall become effective upon the TCI Parties'
execution and delivery of a counterpart of the Partnership Agreement.
<PAGE> 66
TCI of Greenville, Inc.
TCI of Piedmont, Inc.
TCI of Spartanburg, Inc.
July 29, 1996
Page 3
Please indicate your agreement with the foregoing by signing the
enclosed copy of this letter and returning it the Partnership.
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By InterMedia Capital Management IV,
L.P., a California limited
partnership, a General Partner
By InterMedia Management, Inc., a
General Partner
By /s/ Rodney M. Royse
------------------------------
Rodney M. Royse
Vice President
AGREED AND ACCEPTED:
TCI OF GREENVILLE, INC.
By /s/ William R. Fitzgerald
-----------------------------
Name William R. Fitzgerald
Title Vice President
TCI OF PIEDMONT, INC.
By /s/ William R. Fitzgerald
-----------------------------
Name William R. Fitzgerald
Title Vice President
<PAGE> 67
TCI of Greenville, Inc.
TCI of Piedmont, Inc.
TCI of Spartanburg, Inc.
July 29, 1996
Page 4
TCI OF SPARTANBURG, INC.
By /s/ William R. Fitzgerald
-----------------------------
Name William R. Fitzgerald
Title Vice President
<PAGE> 68
ASSIGNMENT AND ASSUMPTION
THIS ASSIGNMENT AND ASSUMPTION (this "Assignment"), dated as of July 12,
1996, made by and between INTERMEDIA PARTNERS IV, L.P., a California limited
partnership ("IP-IV"), INTERMEDIA CAPITAL PARTNERS IV, L.P., a California
limited partnership ("ICP-IV"), and INTERMEDIA PARTNERS OF TENNESSEE, a
California partnership ("IP-Tenn"),
RECITALS
A. IP-IV has entered into that certain Contribution Agreement dated as
of March 4, 1996, as amended by the First Amendment to Contribution Agreement
dated June 21, 1996 (as amended, the "Agreement"; capitalized terms not defined
herein have the meanings given them in the Contribution Agreement), with TCI of
Greenville, Inc., TCI of Piedmont, Inc., and TCI of Spartanburg, Inc.
(collectively, the "TCI Parties"); and
B. IP-IV desires to assign all of its rights and delegate all of its
obligations and liabilities under the Agreement to ICP-IV; and
C. ICP-IV desires to assign back to IP-IV all of its rights under the
Agreement to manage and to receive title to and own and operate the Assets and
the obligations and liabilities thereunder to assume the Assumed Liabilities
related to the Assets; and
D. IP-IV desires to assign to IP-Tenn all of the rights and obligations
under the Agreement which it receives and assumes from ICP-IV pursuant to this
Assignment:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. IP-IV hereby assigns, conveys, sells and transfers all of its rights
and delegates all of its obligations and liabilities under the Agreement to
ICP-IV.
2. ICP-IV hereby (i) accepts the assignment of rights and delegation of
obligations and liabilities set forth in Section 1 hereof and assumes all
obligations and liabilities of IP-IV under the Agreement and (ii) indemnifies
IP-IV and its affiliates, partners, officers and employees against and holds
each of them harmless from any and all losses, liabilities, claims, suits,
proceedings, demands, judgments, damages, expenses and costs, including, without
limitation, reasonable counsel fees ("Losses") which any of them may suffer or
incur by reason of the breach by ICP-IV of this Assignment.
3. ICP-IV hereby assigns, conveys, sells and transfers all of its rights
under the Agreement to manage and to receive title to and to own and operate the
Assets and delegates the obligations and liabilities under the Contribution
Agreement to assume and perform the Assumed Liabilities related to the Assets,
as set forth more fully on Schedule 1 attached hereto.
<PAGE> 69
4. IP-IV hereby (i) accepts the assignment of rights and delegation of
obligations and liabilities set forth in Section 3 hereof and assumes all
obligations and liabilities delegated thereunder by ICP-IV, and (ii) indemnifies
ICP-IV and its affiliates, partners, officers and employees against and holds
each of them harmless from any and all Losses which any of them may suffer or
incur by reason of the breach by IP-IV of this Assignment.
5. IP-IV hereby assigns, conveys, sells and transfers all of the rights
and delegates all of its obligations and liabilities under the Agreement which
are assigned and delegated to it and accepted and assumed by it pursuant to
Sections 3 and 4 hereof to IP-Tenn.
6. IP-Tenn hereby (i) accepts the assignment of rights and delegation of
obligations and liabilities set forth in Section 5 hereof and assumes all
obligations and liabilities delegated thereunder by IP-IV, and (ii) indemnifies
IP-IV and its affiliates, partners, officers and employees against and holds
each of them harmless from any and all Losses which any of them may suffer or
incur by reason of the breach by IP-Tenn of this Assignment.
7. Each party to this Assignment represents and warrants to and agrees
with each other party hereto that it has full power and authority to enter into
this Assignment, perform its obligations hereunder and consummate the
transactions contemplated hereby. All necessary and appropriate action has been
taken by it with respect to the execution and delivery of this Assignment. This
Assignment constitutes the valid and binding obligation of it enforceable in
accordance with the terms hereof.
8. Each of IP-IV and ICP-IV represents and warrants to each other and
IP-IV further represents and warrants to IP-Tenn that (a) it has not assigned,
mortgaged, pledged, encumbered, or otherwise hypothecated any of its right,
title or interest under the Agreement, except as set forth in this Assignment;
(b) it is not (nor, to its best knowledge, is any other party) in violation of,
in default in respect of nor has there occurred an event or condition which,
with the passage of time or giving of notice (or both), would constitute a
violation or default of the Agreement; (c) to its best knowledge, there are no
facts or circumstances which would reasonably indicate that it or any other
party will be or may be in violation of or in default in respect to the
Agreement subsequent to the date hereof; (d) no notice has been received by it
claiming any such default by it or indicating the desire or intention of any
other party to such Agreement to amend, modify, rescind or terminate the same
except for a proposed amendment to the Agreement which has been disclosed to
ICP-IV and IP-Tenn; and (e) neither the execution and delivery of this
Assignment nor compliance by it with the terms and provisions hereof, including
without limitation, the consummation of the transactions contemplated hereby,
will violate in any fashion or conflict with or result in the breach of any
term, condition or provision of either of the Agreement or constitute a default
(or an event which, with the lapse of time or the giving of notice, or both,
will constitute a default) under such Agreement.
9. On and after the date hereof, each of IP-IV and ICP-IV shall prepare,
execute and deliver, at its expense, such further instruments of conveyance,
sale, assignment or transfer, and take or cause to be taken such other or
further action as IP-Tenn shall reasonably request at any time or from time to
time in order to perfect, confirm or evidence in IP-Tenn all or any part of
IP-IV's or ICP-IV's respective rights under the Agreement assigned to IP-Tenn
under this Assignment, give IP-Tenn the full benefit of the transactions
contemplated hereby or to consummate, in any other manner, the terms and
conditions of this Assignment.
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<PAGE> 70
10. (a) From and after the date of this Assignment, the references to
"IP-IV" in the sections of the Contribution Agreement listed on Schedule 1 under
the heading "A" are amended to be references to "IP-Tenn."
(b) From and after the date of this Assignment, the references to
"IP-IV" in the sections of the Contribution Agreement listed on Schedule 1 under
the heading "B" are amended to be references to "ICP-IV."
(c) From and after the date of this Assignment, the references to
"IP-IV" in the sections of the Contribution Agreement listed on Schedule 1 under
the heading "C" are amended to be references to "ICP-IV or IP-Tenn or both."
(d) From and after the date of this Assignment, the references to
"IP-IV" in the sections of the Contribution Agreement listed on Schedule 1 under
the heading "D" shall remain references to "IP-IV."
(e) From and after the date of this Assignment, the words in the
first three lines of Section 2.1(a) of the Contribution Agreement "the
InterMedia Partners IV, L.P. Amended and Restated Agreement of Limited
Partnership dated as of December 29, 1995 (as amended, the "Partnership
Agreement")" are hereby deleted and the following words are inserted in their
stead: "the InterMedia Capital Partners IV, L.P. Agreement of Limited
Partnership dated as of March 19, 1996 (as amended, the "Partnership
Agreement")".
(f) Each of ICP-IV and IP-Tenn (a) agrees that all actions of IP-IV
prior to the date of this Assignment shall be treated as if taken by ICP-IV and
IP-Tenn, (b) agrees that all notices, consents, and waivers given by IP-IV prior
to the date of this Assignment shall be treated as if given by ICP-IV and
IP-Tenn, (c) agrees that all documents, information, and notices given to IP-IV
prior to the date of this Assignment shall be treated as if given to ICP-IV and
IP-Tenn, and (d) assumes liability for all acts of IP-IV through the date of
this Assignment, as if such acts had been the acts of ICP-IV and IP-Tenn.
11. To the extent this Assignment constitutes an Amendment to the
Contribution Agreement, the TCI Parties shall enjoy rights under this Assignment
and Assumption as if they are named parties hereto.
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<PAGE> 71
12. This Assignment shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties have executed or caused the execution of
this Assignment effective as of the date first written above.
INTERMEDIA PARTNERS IV, L.P.
By: InterMedia Capital Management IV, L.P., a
California limited partnership,
its Managing General Partner
By: /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA CAPITAL PARTNERS IV, L.P.
By: InterMedia Capital Management IV, L.P., a
California limited partnership,
a General Partner
By: /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA PARTNERS OF TENNESSEE
By: InterMedia Capital Management IV, L.P., a
California limited partnership,
its Managing General Partner
By: /s/ Leo J. Hindery, Jr.
----------------------------------
Leo J. Hindery, Jr.
Managing General Partner
-4-
<PAGE> 1
EXHIBIT 2.6
EXECUTION COPY
EXCHANGE AGREEMENT
BETWEEN
TCI COMMUNICATIONS, INC.
AND
INTERMEDIA PARTNERS SOUTHEAST
DATED AS OF DECEMBER 18, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Recitals ............................................................................ 1
Agreement............................................................................ 2
1. Incorporation by Reference; Definitions............................ 2
2. Exchange Transaction............................................... 5
3. Purchase of PCII Stock............................................. 6
4. Effect of Assignments and Assumptions with Respect to the Nashville
System and the Exchange Systems.................................... 6
5. Common Assets...................................................... 7
6. Exchange Closing................................................... 8
7. Nashville Closing Adjustments...................................... 9
8. Exchange System Adjustments........................................ 11
9. Exchange Closing Date Calculations................................. 11
10. Representations and Warranties of IPSE............................. 12
11. Representations and Warranties of TCIC............................. 13
12. Covenants.......................................................... 14
13. Conditions to Obligations of IPSE.................................. 18
14. Conditions to Obligations of TCIC.................................. 19
15. Nashville System Indemnification................................... 21
16. Additional Indemnifications........................................ 22
17. Regulatory Approvals............................................... 23
18. HSR Notification................................................... 24
19. Post-Closing Cooperation........................................... 24
20. Tax Matters........................................................ 24
21. Termination........................................................ 24
22. Procedure Upon Termination......................................... 25
23. Back-up Sale of Exchange Systems................................... 25
24. Negotiations Regarding Back-Up Transfer of Nashville System........ 26
25. Confidentiality and Publicity...................................... 26
26. Miscellaneous...................................................... 27
</TABLE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A Form of Exchange Systems Management Agreement
EXHIBIT B Form of Nashville Management Agreement
EXHIBIT C Form of TCIC Counsel Opinion
EXHIBIT D Form of IPSE Counsel Opinion
SCHEDULE 1 Old VII Nashville Franchises
-i-
<PAGE> 3
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is made and entered into as
of the 18th day of December, 1995, by and among TCI COMMUNICATIONS, INC., a
Delaware corporation ("TCIC"), and INTERMEDIA PARTNERS SOUTHEAST, a California
general partnership ("IPSE"). TCIC and IPSE are sometimes referred to
individually as "party" and collectively as the "parties" in this Agreement.
RECITALS
A. Tele-Communications, Inc., a Delaware corporation ("TCI"), TCIC and
Viacom International Inc., a Delaware corporation ("Old VII"), are parties to a
Subscription Agreement dated as of July 24, 1995, as modified by a letter
agreement between TCIC and Viacom International Services Inc., a Delaware
corporation ("New VII"), and agreed to by TCI, Old VII and Viacom Inc., dated as
of July 24, 1995 (collectively, the "Subscription Agreement"), pursuant to which
Old VII has agreed to sell, and TCIC has agreed to purchase, all the issued and
outstanding Class B Common Stock of Old VII on the terms and subject to the
conditions set forth in the Subscription Agreement.
B. Old VII, its wholly owned subsidiary, Tele-Vue Systems, Inc., a
Washington corporation ("Tele-Vue"), and Tele-Vue's wholly owned subsidiary, VSC
Cable Inc., a Delaware corporation ("VSC"), own the Nashville System (as defined
below).
C. IPSE and Prime Cable of Fort Bend, L.P., a Delaware limited
partnership ("Fort Bend"), are parties to an Asset and Stock Purchase and Sale
Agreement dated as of October 13, 1995, as amended (the "Fort Bend Agreement"),
pursuant to which Fort Bend has agreed to sell, and IPSE has agreed to purchase,
certain cable television assets (including, except where the context otherwise
requires, the PCII Stock (as defined below)) of Fort Bend in the Houston, Texas
area (the "Fort Bend System"), on the terms and subject to the conditions set
forth in the Fort Bend Agreement.
D. IPSE and Prime Cable Income Partners L.P., a Delaware limited
partnership ("PCIP"), are parties to an Asset Purchase and Sale Agreement dated
as of October 13, 1995, as amended (the "PCIP Agreement"), pursuant to which
PCIP has agreed to sell, and IPSE has agreed to purchase, certain cable
television and other assets of PCIP in Harris County, Texas (the "PCIP System"),
on the terms and subject to the conditions set forth in the PCIP Agreement. The
Fort Bend System and the PCIP System are referred to collectively in this
Agreement as the "Houston System."
E. The parties intend that subsequent to the signing of this Agreement
IPSE will become a party to a purchase and sale agreement (the "Additional
Systems Agreement"), pursuant to which the owner (the "Additional Systems
Owner") of one or more cable television systems to be specified by an amendment
to this Agreement as soon as reasonably practicable (the "Additional Systems"),
will agree to sell, and IPSE will agree to purchase, the Additional Systems, on
the terms and subject to the conditions to be set forth in the
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<PAGE> 4
Additional Systems Agreement. The Houston System and the Additional Systems are
referred to collectively in this Agreement as the "Exchange Systems."
F. Prior to the consummation of the TCIC/IPSE Transaction (as defined
below), all of the Nashville Assets and Nashville Assumed Liabilities will be
held by Tele-Vue, as a result of transfers and internal corporate
reorganizations to be effected, as further described in this Agreement.
G. Upon TCIC's purchase of the Old VII Class B Common Stock pursuant to
the Subscription Agreement and the acquisition by IPSE of the Exchange Systems,
the parties intend that (1) IPSE will transfer the Exchange Systems to Tele-Vue
in exchange for Tele-Vue's transfer to IPSE of the Nashville System, all subject
to the terms and conditions of this Agreement and in such a manner as to effect
a like-kind exchange of the Nashville System under Section 1031 of the Code, and
(2) a simultaneous purchase by Tele-Vue of the PCII Stock from IPSE for cash
will occur, as set forth in this Agreement (collectively, the "TCIC/IPSE
Transaction").
AGREEMENT
For valuable consideration, the parties agree as follows:
1. Incorporation by Reference; Definitions. Each of the capitalized
terms used in this Agreement, if not otherwise defined in this Agreement, will
have the meanings set forth for such terms: (a) with respect to the Nashville
System, in the Subscription Agreement or the Implementation Agreement, (b) with
respect to the Fort Bend System, in the Fort Bend Agreement, (c) with respect to
the PCIP System, in the PCIP Agreement and (d) with respect to the Additional
Systems, in the Additional Systems Agreement. In addition, the following terms
will have the meanings specified below for purposes of this Agreement:
"Affiliate" will have the meaning specified in the Implementation
Agreement.
"AVR Partnership" means AVR of Tennessee, L.P., a California limited
partnership.
"Business Day" means any day which is not a Saturday or Sunday, or
which in New York, New York is neither a legal holiday nor a day on which
banking institutions are authorized by law or regulation to close.
"Cable Division Subsidiaries" will have the meaning specified in the
Implementation Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Exchange Systems Agreements" means, collectively, the Fort Bend
Agreement, the PCIP Agreement and the Additional Systems Agreement, and any
related agreements
-2-
<PAGE> 5
entered into by the respective sellers (or their Affiliates, if applicable) and
IPSE in connection with the related closings of IPSE's purchase of the Exchange
Systems.
"Exchange Systems Assumed Liabilities" means the liabilities that
relate to any of the Exchange Systems that are assumed by IPSE in accordance
with the Exchange Systems Agreements or to which IPSE is subject by virtue of
ownership or control of the Exchange Systems.
"Exchange Systems Interim Period Capital Expenditure Amount" will have
the meaning specified in the Exchange Systems Management Agreement.
"Exchange Systems Working Capital" means, with respect to each of the
Exchange Systems as of the applicable calculation date, the amount of working
capital and other adjustment items referred to in Sections 2.4(a) and 2.4(c) of
the Fort Bend Agreement and PCIP Agreement (and comparable provisions of the
Additional Systems Agreement).
"Exchange Systems Working Capital Change" means an amount equal to (a)
the Exchange Systems Working Capital calculated as of the Exchange Closing Date
minus (b) the Exchange Systems Working Capital, as determined under the Exchange
System Agreements and calculated as of the closing dates thereunder.
"Excluded Old VII Systems" means cable television systems of Old VII or
the Cable Division Subsidiaries other than the Nashville System.
"Governmental Authority" will mean any federal, state, municipal or
local governmental authority or political subdivision thereof.
"Implementation Agreement" means the Implementation Agreement dated as
of July 24, 1995, as modified by a letter agreement between TCI and New VII
dated as of July 24, 1995, pursuant to which Old VII has agreed to transfer and
assign, and New VII has agreed to acquire and assume, all of Old VII's rights
and obligations with respect to the "Non-Cable Assets" and "Non-Cable
Liabilities" (as such terms are defined in the Implementation Agreement) of Old
VII, on the terms and subject to the conditions set forth in the Implementation
Agreement.
"Legal Requirement" will have the meaning specified in the
Implementation Agreement.
"Nashville Assets" means all right, title and interest of Old VII,
Tele-Vue and VSC in all assets, rights, privileges, interests, claims and
properties owned, used or held for use by Old VII, Tele-Vue and VSC and relating
solely or primarily to the Nashville System, including such parties' right,
title and interest in all equity and other ownership interests in the Nashville
System and the AVR Partnership, but excluding Common Assets.
"Nashville Assumed Liabilities" means any and all Cable Liabilities
relating solely or primarily to the Nashville System, including with respect to
employee matters.
-3-
<PAGE> 6
"Nashville Fixed Amount" means $257,515,000.
"Nashville System" means the cable television system owned and operated
by Old VII, Tele-Vue and VSC in and around Nashville, Tennessee.
"Nashville System Interim Period Capital Expenditure Amount" will have
the meaning specified in the Nashville Management Agreement.
"Nashville Working Capital" means, as of the applicable calculation
date, the amount of the "Working Capital" (as defined in the Implementation
Agreement) applicable to the Nashville System.
"Nashville Working Capital Change" means an amount equal to (a) the
Nashville Working Capital, calculated as of the Exchange Closing Date, minus (b)
the Nashville Working Capital, as determined under the Implementation Agreement
and calculated as of the closing date thereunder.
"Old VII Closing" means the "Closing" as defined in Section 4.1(a) of
the Subscription Agreement.
"Old VII Nashville Franchises" means the cable television franchises
owned as of the date of this Agreement by Old VII in the Nashville, Tennessee
area as described in Schedule 1.
"PCII Stock" means the outstanding common stock, par value $.01, in
Prime Cable II Systems, Inc., a Texas corporation, which as of the date of this
Agreement is a wholly owned subsidiary of Fort Bend.
"Person" means an individual, corporation, partnership, joint venture,
limited liability company, association, trust or any other organization or
entity, including a Governmental Authority.
When used in this Agreement, the words "include," "includes" and "including"
will be deemed to be followed by the phrase "without limitation." In addition,
the following terms will have the meanings specified in the Sections indicated:
Term Section
---- -------
Additional Systems Recital E
Additional Systems Adjusted Exchange Value 8(c)
Additional Systems Agreement Recital E
Additional Systems Owner Recital E
Aggregate Threshold 15(b)
Cable Assets 12(m)
Claims and Damages 16(b)
Common Assets 5
Converter Adjustment 7(a)(xi)
-4-
<PAGE> 7
Exchange Closing 6(a)
Exchange Closing Date 6(a)
Exchange Systems Recital E
Exchange Systems Additional Adjustments 9(a)
Exchange Systems Adjusted Exchange Value 8(d)
Exchange Systems Management Agreement 12(a)
Fort Bend Recital C
Fort Bend Adjusted Exchange Value 8(a)
Fort Bend Agreement Recital C
Fort Bend System Recital C
Houston System Recital D
IPSE's Threshold Amount 15(b)
Nashville Additional Adjustments 9(a)
Nashville Adjusted Exchange Value 7(a)
Nashville Lost Service Subscribers 12(c)
Nashville Subscriber Shortfall Reduction Amount 7(b)
Nashville Management Agreement 12(b)
New VII Recital A
Old VII Recital A
PCIP Recital D
PCIP Adjusted Exchange Value 8(b)
PCIP Agreement Recital D
PCIP System Recital D
Real Property 12(m)
Subscription Agreement Recital A
System Difference Amount 2(c)
Taxes 16(e)
TCI Recital A
TCIC/IPSE Transaction Recital G
Tele-Vue Recital B
Transaction Documents 26(p)
VSC Recital B
2. Exchange Transaction. Subject to the terms and conditions set forth
in this Agreement, at the Exchange Closing (defined below), the Exchange
Transaction will be effected as follows:
(a) TCIC will cause Tele-Vue to convey, assign and transfer to IPSE the
Nashville System free and clear of all Liens (except Permitted Liens). In
further implementation of such conveyance, assignment and transfer, TCIC will
(and will cause TCI to) transfer and assign to IPSE, and IPSE will acquire and
assume from TCI and TCIC, all of TCI and TCIC's respective rights, remedies,
duties and obligations under the Subscription Agreement and Implementation
Agreement relating to the Nashville System, including IPSE's assumption of the
Nashville Assumed Liabilities, from and after the Exchange Closing.
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<PAGE> 8
(b) IPSE will convey, assign and transfer to Tele-Vue the Exchange
Systems free and clear of all Liens (except Permitted Liens). In further
implementation of such conveyance, assignment and transfer, IPSE will transfer
and assign to Tele-Vue, and Tele-Vue will acquire and assume from IPSE, all of
IPSE's rights, remedies, duties and obligations under the Exchange Systems
Agreements, and all related agreements, including Tele-Vue's assumption of the
Exchange Systems Assumed Liabilities from and after the Exchange Closing.
(c) If the Exchange Systems Adjusted Exchange Value exceeds the
Nashville Adjusted Exchange Value, TCIC will pay or cause Tele-Vue to pay to
IPSE cash in an amount equal to such excess. If the Nashville Adjusted Exchange
Value exceeds the Exchange Systems Adjusted Exchange Value, IPSE will pay or
cause to be paid to TCIC cash in an amount equal to such excess Any amount
required to be paid under this Section 2(c) is referred to as the "System
Difference Amount."
3. Purchase of PCII Stock. Subject to the terms and conditions set
forth in this Agreement, at the Exchange Closing, TCIC will cause Tele-Vue to
purchase the PCII Stock from IPSE for a cash purchase price of $17,977,000.
4. Effect of Assignments and Assumptions with Respect to the Nashville
System and the Exchange Systems. Except as otherwise specifically provided in
this Agreement:
(a) Effective upon the Exchange Closing, as among TCIC, TCI and IPSE
(i) each representation and warranty by Old VII in the Subscription Agreement
and New VII in the Implementation Agreement, to the extent relating to the
Nashville System, is deemed to be a representation and warranty to IPSE and not
to TCI and TCIC, (ii) each covenant and agreement of Old VII in the Subscription
Agreement and of Old VII or New VII in the Implementation Agreement, to the
extent relating to the Nashville System, is deemed made to and for the benefit
of IPSE and not TCI and TCIC, (iii) each covenant and agreement of TCI and TCIC
in the Subscription Agreement and the Implementation Agreement, to the extent
relating to the Nashville System, is deemed made to Old VII or New VII by IPSE
and not by TCI and TCIC, (iv) each right and remedy of Old VII under the
Subscription Agreement and of New VII under the Implementation Agreement to
enforce the performance and discharge of TCI and TCIC's representations,
warranties, covenants and agreements, to the extent relating to the Nashville
System, will be assumed by, assigned to and deemed enforceable against IPSE and
not against TCI and TCIC, and (v) each right and remedy of TCI and TCIC under
the Subscription Agreement and the Implementation Agreement to enforce the
performance and discharge of Old VII's and New VII's representations,
warranties, covenants and agreements, to the extent relating to the Nashville
System, will be assumed by, assigned to and deemed enforceable by IPSE. If any
rights, claims and causes of action relating to the Nashville System are
available to TCI or TCIC against Old VII under the Subscription Agreement or
against New VII under the Implementation Agreement, then effective upon the
Exchange Closing, TCIC will cause them to be enforced against Old VII and New
VII on behalf of IPSE, at IPSE's expense, as contemplated in this Section 4(a)
to the extent reasonably requested by IPSE. At the
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<PAGE> 9
Exchange Closing, TCIC will cause TCI to deliver to IPSE written confirmation of
its agreement to this Section 4(a).
(b) Effective upon the Exchange Closing, IPSE will assign to Tele-Vue,
and Tele-Vue will assume, all of IPSE's rights and obligations under the
Exchange Systems Agreements and upon such assignment and assumption, (i) each
representation and warranty by the sellers in the Exchange Systems Agreements
will be deemed to be a representation and warranty to Tele-Vue and not to IPSE,
(ii) each covenant and agreement of the sellers in the Exchange Systems
Agreements will be deemed to be made to and for the benefit of Tele-Vue and not
IPSE, (iii) each covenant and agreement of IPSE in the Exchange Systems
Agreements will be deemed to be made to the sellers by Tele-Vue and not by IPSE,
(iv) each right and remedy of the sellers under the Exchange Systems Agreements
to enforce the performance and discharge of IPSE's representations, warranties,
covenants and agreements will be assumed by and enforceable against Tele-Vue and
not against IPSE, and (v) each right and remedy of IPSE under the Exchange
Systems Agreements to enforce the performance and discharge of the
representations, warranties, covenants and agreements of such sellers will be
assumed by, assigned to and deemed enforceable by Tele-Vue. If any rights,
claims and causes of action are available to IPSE against the sellers under the
Exchange Systems Agreements, then effective upon the Exchange Closing, IPSE will
enforce them against such sellers on behalf of Tele-Vue, at Tele-Vue's expense,
to the extent reasonably requested by TCIC.
5. Common Assets. With respect to the accounting records and billing
system software owned by Old VII after the Old VII Closing and currently used
for both the Nashville System and the Excluded Old VII Systems (collectively
referred to as the "Common Assets"), the parties agree as follows:
(a) At the Exchange Closing, TCIC will cause Old VII to provide IPSE
the right to use the Common Assets, to the extent necessary in connection with
the maintenance or operation of the Nashville System, for three months following
the Exchange Closing, for a fee with respect to each Common Asset, payable at
the end of such three-month period within 20 days after IPSE's receipt of an
invoice from Old VII, equal to either (i) the percentage of IPSE's use of such
Common Asset to the total use thereof multiplied by Old VII's aggregate actual
out-of-pocket expenses with respect thereto or (ii) in the event the parties are
unable in good faith to determine IPSE's percentage use of such Common Asset,
12.88% of Old VII's aggregate actual out-of-pocket expenses with respect
thereto.
(b) During the three-month period following the Exchange Closing, IPSE
will, and TCIC will cause Old VII to, use reasonable efforts to cooperate with
each other with respect to the use and enjoyment of the Common Assets.
(c) Nothing in this Section 5 will restrict Old VII from any sale,
transfer, encumbrance, relocation or abandonment of any or all of the Common
Assets in its sole discretion, and IPSE will have no right to any proceeds
received by Old VII with respect to any such disposition or action or to
continue its use of the Common Assets after any
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<PAGE> 10
disposition. TCIC will cause Old VII to provide IPSE with notice of any such
planned action as early as practicable.
6. Exchange Closing.
(a) Subject to the terms and conditions of this Agreement, the Exchange
Transaction will be consummated at a closing (the "Exchange Closing") at the
offices of TCIC, at 10:00 a.m., local time, on the fifth Business Day following
the satisfaction of the conditions to the Exchange Closing set forth in Sections
13 and 14, or at such other place or time or on such other date as the parties
may agree (such date of the Exchange Closing being referred to as the "Exchange
Closing Date"); provided, however, that such date will not be any earlier than
the first Business Day after the Old VII Closing.
(b) Subject to the terms and conditions of this Agreement, at the
Exchange Closing:
(i) TCIC will cause Tele-Vue to deliver to IPSE: (A) bills of
sale, deeds and other instruments of assignment sufficient to sell,
assign, transfer and convey to IPSE all of Tele-Vue's right, title and
interest in and to the Nashville System in conformance with this
Agreement, (B) an instrument of assumption sufficient for Tele-Vue to
assume and agree to pay, perform and discharge, from and after the
Exchange Closing, all Exchange Systems Assumed Liabilities in form and
substance reasonably satisfactory to IPSE and TCIC;
(ii) IPSE will deliver to Tele-Vue: (A) bills of sale, stock
certificates representing all of the outstanding shares of PCII Stock
accompanied by stock powers duly executed in blank or duly executed
instruments of transfer and any other documents that are necessary to
transfer title to the PCII Stock, deeds and other instruments of
assignment sufficient to sell, assign, transfer and convey to Tele-Vue
all of IPSE's right, title and interest in and to the Exchange Systems
and in and to the Exchange Systems Agreements in conformance with this
Agreement; (B) an instrument of assumption sufficient for IPSE to
assume and agree to pay, perform and discharge, from and after the
Exchange Closing, all Nashville Assumed Liabilities, in form and
substance reasonably satisfactory to TCIC and IPSE;
(iii) TCIC will, and will cause TCI to, deliver to IPSE, and
IPSE will deliver to TCIC and TCI, an instrument of assignment and
assumption with respect to the Subscription Agreement and
Implementation Agreement (but only as related to the Nashville System),
as contemplated by the second sentence of Section 2(a), in form and
substance reasonably satisfactory to TCIC and IPSE.
(iv) TCIC will cause Tele-Vue to deliver to IPSE, by wire
transfer (to a bank account designated by IPSE no later than two
Business Days prior to
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the Exchange Closing), a cash payment in an amount of $17,977,000
reflecting the agreed upon value of the PCII Stock; and
(v) The party, if any, required to pay the System Difference
Amount will deliver to the other, by wire transfer (to a bank account
designated by the recipient no later than two Business Days prior to
the Exchange Closing), a cash payment in the amount of the System
Difference Amount, as estimated based on the estimated adjustments and
system exchange values calculated pursuant to Sections 7, 8 and 9(a).
(c) If the System Difference Amount paid at the Exchange Closing
differs from the System Difference Amount as finally determined in accordance
with Sections 7, 8 and 9(b), then within ten days after such final
determination, the party receiving excess funds or paying deficient funds with
respect to the estimated System Difference Amount at the Exchange Closing will
pay to the other the amount of such excess or deficiency.
7. Nashville Closing Adjustments.
(a) The Nashville Adjusted Exchange Value will be equal to the sum of
the Nashville Fixed Amount:
(i) plus the portion of the Capital Expenditure Amount
applicable to the Nashville System; and
(ii) plus the portion of the Inventory Amount applicable to
the Nashville System; and
(iii) plus the portion of the Working Capital applicable to
the Nashville System, if it is a positive amount; and
(iv) plus the portion of the Telecom Amount applicable to the
AVR Partnership; and
(v) minus the portion of the Working Capital applicable to the
Nashville System, if it is a negative amount; and
(vi) minus the portion of the amount of the front-end loaded
programming payments set forth on Exhibit B to the Implementation
Agreement applicable to the Nashville System, if any; and
(vii) plus an amount equal to interest on the sum of the
Nashville Fixed Amount and the foregoing amounts described in Section
7(a)(i) through (vi), at the LIBOR Rate for the period from and
including September 1, 1995 to (but excluding) the Exchange Date; and
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(viii) minus the Nashville Subscriber Shortfall Reduction
Amount (defined below), if any; and
(ix) plus the amount of interest, if any, paid by Old VII to
New VII pursuant to Section 3.3 of the Implementation Agreement, to the
extent attributable to the Nashville System; and
(x) minus the amount of interest, if any, paid by New VII to
Old VII pursuant to Section 3.3 of the Implementation Agreement, to the
extent attributable to the Nashville System; and
(xi) minus an amount equal to $32.50 for each preexisting
converter box removed from the Nashville System by Old VII during the
period from January 20, 1995 through the Exchange Closing Date and
transferred to any other Systems (as defined in the Implementation
Agreement) for which the Nashville System did not receive compensation
(the "Converter Adjustment"); and
(xii) plus the Nashville Working Capital Change, if it is a
positive amount; and
(xiii) minus the Nashville Working Capital Change, if it is a
negative amount; and
(xiv) plus the Nashville System Interim Period Capital
Expenditure Amount.
(b) If the Nashville Fixed Amount is reduced pursuant to Section 3.4 of
the Implementation Agreement as a result of a shortfall of Basic Subscribers
below 1,122,660, then the Nashville Subscriber Shortfall Reduction Amount, if
any, will be equal to the product of (i) $1,907.51 multiplied by (ii) the
shortfall of Basic Subscribers located in the Nashville System below 133,650,
provided that in no event will the Nashville Subscriber Shortfall Amount exceed
12 88% of the reduction of the Fixed Amount pursuant to Section 3.4 of the
Implementation Agreement as a result of a Basic Subscriber shortfall.
(c) Not later than 45 days after the Exchange Date, IPSE will deliver
to TCIC a statement showing IPSE's calculations of the actual Adjustment Amounts
relating to the Nashville System. TCIC will cause Old VII to include such
calculations in the Final Certificate delivered to New VII pursuant to Section
3.2(b) of the Implementation Agreement. IPSE will make available to TCIC, Old
VII and New VII, upon any such Person's reasonable request, IPSE's accountants'
work papers and such other information related to the calculation of the
Adjustment Amount with respect to the Nashville System.
(d) Not later than five days after the delivery of the Estimate
Statement by Old VII to New VII pursuant to Section 3.1 of the Implementation
Agreement, TCIC will cause
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<PAGE> 13
a copy of the portions of the Estimate Statement related to the Nashville System
to be delivered to IPSE.
(e) In the event that New VII disputes Old VII's calculations of the
Adjustment Amounts relating to the Nashville System, TCIC will cause Old VII to
consult with IPSE in connection with resolving such dispute and to use
commercially reasonable efforts to address IPSE's concerns. The Nashville
Adjusted Exchange Value will be determined based on the final Adjustment Amounts
related to the Nashville System as determined under the Implementation
Agreement. Notwithstanding anything to the contrary in this Agreement or any
assignment or other document delivered at the Exchange Closing, IPSE's sole
rights with respect to the calculation of the Adjustment Amounts related to the
Nashville System will be as specified in this Section 7.
8. Exchange System Adjustments.
(a) The "Fort Bend Adjusted Exchange Value" will be equal to (i) the
Final Purchase Price for the Fort Bend System determined as provided in Sections
2.3, 2.4 and 2.5 of the Fort Bend Agreement, including a reduction to reflect
any reimbursement owed to Fort Bend pursuant to the last sentence of Section
2.4(b) of the Fort Bend Agreement, (ii) less $17,977,000
(b) The "PCIP Adjusted Exchange Value" will be equal to the Final
Purchase Price for the PCIP System determined as provided in Sections 2.3, 2.4
and 2.5 of the PCIP Agreement
(c) The "Additional Systems Adjusted Exchange Value" will be equal to
the Final Purchase Price for the Additional Systems, determined as provided in
the Additional Systems Agreement.
(d) The "Exchange Systems Adjusted Exchange Value" will be equal to the
sum of (i) the Fort Bend Adjusted Exchange Value, (ii) the PCIP Adjusted
Exchange Value, (iii) the Additional Systems Adjusted Exchange Value, (iv) the
Exchange Systems Interim Period Capital Expenditure Amount and (v) plus (if it
is a positive number) or minus (if it is a negative number) the Exchange Systems
Working Capital Change.
9. Exchange Closing Date Calculations.
(a) IPSE, with respect to its good faith estimate of the (i) Exchange
Systems Working Capital calculated as of the Exchange Closing Date and (ii) the
Exchange Systems Interim Period Capital Expenditure Amount (collectively, the
"Exchange Systems Additional Adjustments"), and TCIC with respect to its good
faith estimate of (x) the Nashville Working Capital calculated as of the
Exchange Closing Date, (y) the Nashville System Interim Period Capital
Expenditure Amount and (z) the Converter Adjustment (collectively, the
"Nashville Additional Adjustments") will at its option provide to the other a
certificate (the "Initial Adjustment Certificate") executed by an authorized
representative of IPSE or TCIC, as appropriate, and delivered to the other party
3 Business Days prior to the
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Exchange Closing. Each Initial Adjustment Certificate will be accompanied by
appropriate documentation, in summary forms, supporting the calculations
proposed in such certificate.
(b) Within 90 days after the Exchange Closing, IPSE, with respect to
the Exchange Systems Additional Adjustments, and TCIC, with respect to the
Nashville Additional Adjustments, will deliver to the other a certificate (the
"Final Adjustment Certificate") showing in full detail the final determination
of such amounts, which certificate will be accompanied by appropriate
documentation supporting the calculations proposed in such certificate,
including a schedule setting forth detailed accounts receivable information,
including relevant aging information as of the Exchange Closing Date, and which
will be executed by an officer of IPSE or TCIC, as appropriate. Each party will
provide to the other reasonable access to all records in its possession which
were used in the preparation of its Initial (if any) and Final Adjustment
Certificates, and each party will cooperate in furnishing the other with
information and access to records needed to prepare such other party's Initial
(if any) and Final Adjustment Certificates. IPSE and TCIC each will review the
other's Final Adjustment Certificate and will give written notice to the other
party of any objections it has to the calculations shown in such certificate
within 30 days after its receipt thereof TCIC and IPSE will endeavor in good
faith to resolve any such objections within 30 days after the receipt by the
parties of each other's objections. If any objections or disputes have not been
resolved at the end of such 30-day period, the disputed portion of the Exchange
Systems Additional Adjustments and the Nashville Additional Adjustments will be
determined within the following 30 days by a partner in a major accounting firm
with substantial cable television audit experience which is not the auditor of
either IPSE or TCIC or their Affiliates, and the determination of such auditor
will be final and will be binding upon both parties. If IPSE and TCIC cannot
agree with respect to selection of an auditor, IPSE and TCIC each will select an
auditor and those two auditors will select a third auditor whose determination
will be final and will be binding upon both parties. IPSE and TCIC will bear
equally the expenses incurred in connection with such determination.
10. Representations and Warranties of IPSE. IPSE represents and
warrants to TCIC as follows:
(a) IPSE is a general partnership, duly organized, validly existing and
in good standing under the laws of the State of California, and is authorized to
transact business and is in good standing in each state in which its ownership
of assets or conduct of business requires such qualification, and has all
partnership powers required to carry on its business as now conducted, with such
exceptions as would not materially and adversely affect the ability of IPSE to
consummate this Agreement or the Exchange Transaction as it relates to IPSE. The
general partners of IPSE are InterMedia Capital Management IV, L.P., a
California limited partnership, and InterMedia Partners IV, L.P., a California
limited partnership.
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<PAGE> 15
(b) The execution, delivery and performance by IPSE of this Agreement
and the consummation by IPSE of the Exchange Transaction are within IPSE's
partnership powers and have been duly authorized by all necessary partnership
action on the part of IPSE.
(c) The execution, delivery and performance by IPSE of this Agreement,
and the consummation by IPSE of the Exchange Transaction as it relates to IPSE,
require no material action by or in respect of, or filing with, any governmental
body, agency, official or authority other than (i) compliance with any
applicable requirements of the HSR Act, (ii) the FCC Authorizations and the
Local Authorizations relating to the Nashville System and (iii) the Required
Consents relating to the Exchange Systems.
(d) No consent by any Person under any contract to which IPSE is a
party or to which its assets are subject is required or necessary for the
execution, delivery and performance by IPSE of this Agreement or the
consummation by IPSE of the Exchange Transaction as it relates to IPSE, with
such exceptions as would not materially and adversely affect the ability of IPSE
to consummate the Exchange Transaction as it relates to IPSE.
(e) The execution, delivery and performance by IPSE of this Agreement
and the consummation by IPSE of the Exchange Transaction as it relates to IPSE
does not and will not (i) contravene the partnership agreement of IPSE or (ii)
result in or constitute a breach or default (including any event that, with the
passage of time or giving of notice, or both, would become a breach or default)
under any applicable Legal Requirement or any judgment, order, decree, contract,
license, lease, indenture, mortgage, loan agreement or note, as to which IPSE is
a party or by which any of its properties may be bound, the effect of which
would materially impair the ability of IPSE to perform its obligations under
this Agreement or consummate the Exchange Transaction as it relates to IPSE.
(f) This Agreement has been duly executed and delivered by IPSE and
constitutes a valid and binding obligation of IPSE, enforceable against IPSE in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies.
(g) There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of IPSE or any of
its Affiliates which might be entitled to any fee or commission from TCIC or any
of its Affiliates in connection with the execution. delivery or performance of
this Agreement or the Exchange Transaction as it relates to IPSE
11. Representations and Warranties of TCIC. TCIC represents and
warrants to IPSE as follows:
(a) TCIC is a corporation, duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and is authorized to
transact business and is in good standing in each state in which its ownership
of assets or conduct of business
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<PAGE> 16
requires such qualification, and has all corporate powers required to carry on
its business as now conducted, with such exceptions as would not materially and
adversely affect the ability of TCIC to consummate this Agreement or the
Exchange Transaction as it relates to TCIC.
(b) The execution, delivery and performance by TCIC of this Agreement
and the consummation by TCIC of the Exchange Transaction are within TCIC's
corporate powers and have been duly authorized by all necessary corporate action
on the part of TCIC.
(c) The execution, delivery and performance by TCIC of this Agreement,
and the consummation by TCIC of the Exchange Transaction as it relates to TCIC,
require no material action by or in respect of, or filing with, any governmental
body, agency, official or authority other than (i) compliance with any
applicable requirements of the HSR Act, (ii) the FCC Authorizations the Local
Authorizations relating to the Nashville System and (iii) the Required Consents
relating to the Exchange Systems.
(d) No consent by any Person under any contract to which TCIC is a
party or to which its assets are subject is required or necessary for the
execution, delivery and performance by TCIC of this Agreement or the
consummation by TCIC of the Exchange Transaction as it relates to TCIC, with
such exceptions as would not materially and adversely affect the ability of TCIC
to consummate the Exchange Transaction as it relates to TCIC, and except that
any assignment of the Subscription Agreement and Implementation Agreement
contemplated by this Agreement will require the consent of Viacom International,
Inc. and/or Viacom International Services, Inc.
(e) The execution, delivery and performance by TCIC of this Agreement
and the consummation by TCIC of the Exchange Transaction as it relates to TCIC
does not and will not (i) contravene the certificate of incorporation of TCIC or
(y) result in or constitute a breach or default (including any event that, with
the passage of time or giving of notice, or both, would become a breach or
default) under any applicable Legal Requirement or any judgment, order, decree,
contract, license, lease, indenture, mortgage, loan agreement or note, as to
which TCIC is a party or by which any of its properties may be bound, the effect
of which would materially impair the ability of TCIC to perform its obligations
under this Agreement or consummate the Exchange Transaction as it relates to
TCIC.
(f) This Agreement has been duly executed and delivered by TCIC and
constitutes a valid and binding obligation of TCIC, enforceable against TCIC in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies.
(g) There is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of TCIC or any of
its Affiliates which might be entitled to any fee or commission from IPSE or any
of its Affiliates in connection with the execution, delivery or performance of
this Agreement or the Exchange Transaction as it relates to TCIC.
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12. Covenants.
(a) Upon the closing of IPSE's acquisition of any Exchange System, IPSE
will enter into a management agreement in the form of the attached Exhibit A
(the "Exchange Systems Management Agreement") under which TCIC or its designee
will manage each such Exchange System on IPSE's behalf from the date of such
Exchange System closing until the earlier of (i) the Exchange Closing or (ii) if
this Agreement is terminated, either (A) if either party exercises the option
with respect to TCIC's purchase of any Exchange System pursuant to Section
23(b), the date of closing of such TCIC purchase or (B) the date 31 days after
termination of this Agreement.
(b) Upon the consummation of the Old VII Closing, TCIC will cause (i)
Old VII to transfer the Old VII Nashville Franchises to Tele-Vue prior to the
Exchange Closing, (ii) VSC Cable Inc. to merge into Tele-Vue or otherwise
transfer all of its right, title and interest in the Nashville Assets and
Nashville Assumed Liabilities to Tele-Vue prior to the Exchange Closing and
(iii) Tele-Vue to enter into a management agreement in the form of the attached
Exhibit B (the "Nashville Management Agreement") under which IPSE will manage
the Nashville System on Tele-Vue's behalf from the date of the Old VII Closing
until the earlier of the Exchange Closing or termination of this Agreement.
(c) In the event that on or before the Exchange Closing any natural
disaster has occurred that has damaged the tangible assets of the Nashville
System sufficiently to cause more than 1,350 Basic Subscribers (the "Nashville
Lost Service Subscribers") to be unable to receive cable television service at
the Exchange Closing Date as a result of such damage and if pursuant to Section
2.5 of the Implementation Agreement, New VII reimburses Old VII for
out-of-pocket expenses incurred in causing the damage to be repaired and for
Lost Service Subscriber Cumulative Deemed Net Cash Flow, then if the Exchange
Closing has occurred, TCIC will cause Old VII to promptly pay to IPSE the amount
of such received reimbursement applicable to repairs made to the Nashville
System by IPSE and to the Lost Service Subscriber Cumulative Deemed Net Cash
Flow applicable to the Nashville Lost Service Subscribers.
(d) If following the Exchange Closing, New VII is able to transfer to
Old VII or IPSE (or Old VII or Tele-Vue is able to transfer to IPSE) an
Unapproved Local Authorization and all related Unapproved Franchise Assets
related to the Nashville System on a Deferred Closing Date, then pursuant to
Section 2.3(c) of the Implementation Agreement, IPSE will assume, pay, perform
and discharge the liabilities and obligations arising after the Exchange Date
under or in respect of such Unapproved Franchise Assets related to the Nashville
System.
(e) If New VII pays to Old VII the Appraised Value of any portion of
the Nashville System covered by any Terminated Unapproved Franchise Areas as
provided in Section 2.3(d) of the Implementation Agreement, then if the Exchange
Closing has occurred, TCIC will cause Old VII promptly to pay such amount to
IPSE. TCIC will cause Old VII to assign the rights to such payments to IPSE
following the Exchange Closing.
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<PAGE> 18
(f) If the Subscription Agreement terminates without the Exchange Time
having occurred and if pursuant to Section 7.18 of the Subscription Agreement,
TCIC is required to reimburse Old VII for the amount of additional capital
expenditures that Old VII has made after January 20, 1995 as a result of
complying with TCIC's rebuild standards as determined pursuant to the Approved
Capital Expenditure Plan, then IPSE will promptly pay to TCIC the amount of such
reimbursement applicable to capital expenditures made with respect to the
Nashville System
(g) If at the Old VII Closing any Local Authority Consent related to
the Nashville System has not been obtained or does not remain in full force and
effect and:
(i) if pursuant to Section 2. 3(b) of the Implementation
Agreement Old VII has entered into any agreement with New VII
(including any management agreement) with respect to any Unapproved
Franchise Areas in the Nashville System, IPSE will assume such
agreements on behalf of Old VII at the Exchange Closing;
(ii) if pursuant to Section 2.3(b) of the Implementation
Agreement, New VII has reimbursed Old VII for any cash flow applicable
to Unapproved Franchise Assets in the Nashville System, Old VII will
promptly pay IPSE an amount equal to such payment with respect to
periods following the Exchange Closing; and
(iii) if, at any time after the Exchange Closing, pursuant to
Section 2.3(d) of the Implementation Agreement, Old VII has entered
into any agreements for any Terminated Unapproved Franchise Areas in
the Nashville System, IPSE promptly will assume such agreements on
behalf of Old VII.
(h) If at the Old VII Closing any consent of another Person required
for the transfer or assignment of any Cable Group Contract relating to the
Nashville System has not been obtained or does not remain in full force and
effect, then TCIC will cause Old VII to cause New VII, in accordance with the
provisions of Section 2.2 of the Implementation Agreement, to use its reasonable
commercial efforts (at the expense of New VII and at no out-of-pocket expense to
TCIC, Old VII or IPSE, but without New VII being required to provide any
consideration therefor) after the Exchange Closing to: (i) keep each such Cable
Group Contract in effect and obtain such consent; (ii) provide to IPSE the
benefits of each such Cable Group Contract through subcontract or otherwise;
(iii) cooperate in any reasonable arrangement designed to provide such benefits
to IPSE; and (iv) enforce, at the request and sole expense of IPSE, any rights
of New VII under or with respect to any such Cable Group Contract against all
other Persons (including termination of the foregoing in accordance with the
terms thereof upon the election of IPSE), in each case of clauses (i)-(iv) to
the extent that IPSE performs all obligations of New VII under such Cable Group
Contract. If all such consents under any such Cable Group Contract relating to
the Nashville System are obtained after the Old VII Closing and the Exchange
Closing, TCIC will cause Old VII to cause New VII promptly to assign such Cable
Group Contract to IPSE and IPSE will assume all obligations under such Cable
Group Contract with respect to
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periods following such assignment, in each case without the payment of
additional consideration by TCIC, New VII, Old VII or IPSE. TCIC will cause Old
VII to take such action prior to or as of the Exchange Closing Date as may be
necessary to cause IPSE to have, after the Exchange Closing, to the fullest
extent reasonably possible (including by means of a sublease where appropriate),
the rights, powers and privileges incident to beneficial and economic ownership
of such Cable Group Contract(s) relating to the Nashville System.
(i) IPSE will not amend any term or provision of any Exchange Systems
Agreements, or agree on the amount of the purchase price adjustments under any
Exchange Systems Agreements, without the prior written consent of TCIC in its
sole discretion. IPSE will not waive any covenants or conditions precedent to
the closing under any Exchange Systems Agreements without the prior written
consent of TCIC in its sole discretion.
(j) None of IPSE, its general partners or any agent or representative
of any of them will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Exchange Closing or the termination
of this Agreement, directly or indirectly (i) solicit or initiate the submission
of proposals or offers from any Person for, (ii) participate in any discussions
pertaining to or (iii) furnish any information to any Person (other than TCIC or
its representatives) relating to, any direct or indirect acquisition or purchase
of all or any portion of the Exchange Systems by any Person (other than IPSE).
IPSE will promptly notify TCIC of any solicitation or inquiry and the terms of
any proposal or offer it or, to its knowledge, any of its Affiliates receives
with respect to any such matter.
(k) None of TCIC, its shareholder or any agent or representative of
either of them will, during the period commencing on the date of this Agreement
and ending with the earlier to occur of the Exchange Closing or the termination
of this Agreement, directly or indirectly (nor will TCIC permit Old VII or
Tele-Vue, during any portion of such period that such entities are TCIC's
Affiliates, to): (i) solicit or initiate the submission of proposals or offers
from any Person for, (ii) participate in any discussions pertaining to or (iii)
furnish any information to any Person (other than IPSE or its representatives)
relating to, any direct or indirect acquisition or purchase of all or any
portion of the Nashville System by any Person (other than TCIC). TCIC will
promptly notify IPSE of any solicitation or inquiry and the terms of any
proposal or offer it or, to its knowledge, any of its Affiliates receives with
respect to any such matter.
(l) IPSE will pay to TCIC any amounts IPSE receives from any seller
under any of the Exchange Systems Agreements, including insurance proceeds or
other amounts relating to any casualty loss affecting an Exchange System,
condemnation proceeds, any payment or reimbursement pursuant to Section 8.2 of
the PCIP Agreement and any proceeds of any indemnification claim against the
seller of an Exchange System, with IPSE's payment to TCIC to be made at the
Exchange Closing, with respect to any such amounts IPSE has received prior to
the Exchange Closing Date, or within five days after IPSE's receipt, with
respect to any such amounts IPSE receives subsequently.
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(m) In connection with consummation of the Exchange Closing, the assets
of the Nashville System, on the one hand, and the Exchange Systems, on the
other, will be exchanged for the following separate exchange groups: (i) Cable
Assets, (ii) Real Property and (iii) franchises, licenses, system contracts and
other operating intangibles. IPSE will, and TCIC will cause Tele-Vue to, no
later than three days prior to the Exchange Closing, deliver to the other a
written estimate of the value to be allocated by it to each of the above listed
exchange groups. The parties will use reasonable efforts to agree within 30 days
after the Exchange Closing on the final values to be allocated to each such
exchange group. If such an agreement is reached, IPSE and Tele-Vue, for purposes
of Sections 1031 and 1060 of the Code and the regulations thereunder, will
report the transactions contemplated by this Agreement in accordance with such
agreed upon values. If an agreement can not be reached on such values, each
party will make its own good faith determination of the values to be allocated
to each exchange group and will report such values in accordance with Sections
1031 and 1060 of the Code and the regulations thereunder. Liabilities assumed or
taken subject to by each party are being exchanged each for the other to the
maximum extent permitted under Section 1031 of the Code and regulations
thereunder. Each party promptly will give the other notice of any disallowance
or challenge of asset values by the Internal Revenue Service, or any state or
local tax authority. For the purposes of this provision: (A) "Cable Assets"
means all tangible personal property necessary to the operation of cable
television systems that is not included in another asset class, including
towers, tower equipment, antennae, above-ground and underground cable, headends,
converters, head-end amplifiers, line amplifiers, earth satellite reception
equipment, local origination equipment, bulk installations, spare parts, testing
equipment, office equipment, furniture, motor vehicles and other physical
assets; and (B) "Real Property" means all fee interests, leases, easements,
rights of access and other interests in real property.
(n) TCIC will use commercially reasonably efforts to complete the
negotiation of the Additional Systems Agreement as soon as reasonably
practicable after this Agreement is signed, and upon such completion, the
parties will sign and deliver an amendment to this Agreement that specifically
references the Additional Systems Agreement and makes such other conforming
changes in this Agreement as deemed necessary by the parties to reflect the
final terms of the Additional Systems Agreement.
(o) TCIC and IPSE each will use its reasonable efforts to obtain any
consent, approval, release, authority or other action of any third party (other
than any Governmental Authority, with respect to which Sections 17 and 18 will
apply) required to be obtained in connection with the acquisition and exchange
of the Exchange Systems and the Nashville System.
13. Conditions to Obligations of IPSE. The obligations of IPSE to be
performed at the Exchange Closing are subject to the satisfaction, at or prior
to the Exchange Closing, of each of the following conditions, each of which may
be waived by IPSE:
(a) Each representation and warranty of Old VII contained in the
Subscription Agreement and of New VII contained in the Implementation Agreement,
to the extent applicable to the Nashville System, will be true and correct in
all material respects as of the
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date of the Old VII Closing as though such representation and warranty was made
on and as of such date (except to the extent a different date is specified
therein, in which case such representation and warranty will be true and correct
as of such date).
(b) Each material covenant and obligation of Old VII required by the
Subscription Agreement and of New VII required by the Implementation Agreement
to be performed by it at or prior to the Old VII Closing will have been duly
performed and complied with in all material respects as of the Exchange Closing
Date, in each case to the extent applicable to the Nashville System.
(c) Each representation and warranty of TCIC in this Agreement will be
true and correct in all material respects as of the Exchange Closing Date as
though such representation and warranty was made on and as of such date (except
to the extent a different date is specified therein, in which case such
representation and warranty will be true and correct as of such date).
(d) Each material covenant and obligation of TCIC required by this
Agreement to be performed by it at or prior to the Exchange Closing Date will
have been duly performed and complied with in all material respects as of the
Exchange Closing Date.
(e) All consents required to be obtained by Old VII, Tele-Vue or VSC,
in connection with the Exchange Transaction, to the extent applicable to the
Nashville System, will have been obtained and remain in full force and effect,
with such exceptions as do not result in a material adverse effect on Tele-Vue's
ability to consummate the transfer to IPSE of the Nashville System
(f) At the Exchange Closing, IPSE will have received a copy of the
certificate delivered to TCIC pursuant to Section 8.2.1(d) of the Subscription
Agreement, and a certificate dated the Exchange Closing Date and duly executed
by an officer of TCIC, to the effect that the conditions set forth in Sections
13(c), (d) and (e) have been satisfied.
(g) A copy of the legal opinion of counsel to Old VII as required under
the Subscription Agreement will be delivered to IPSE (although IPSE recognizes
that it will not have such counsel's permission for IPSE to rely on such
opinion), and an opinion of TCIC's counsel, in the form attached as Exhibit C,
will be delivered to IPSE at the Exchange Closing.
(h) The closing of each of the transactions contemplated under the
Exchange Systems Agreements will have occurred.
(i) The Old VII Closing will have occurred.
(j) No modification or amendment of any material term or provision of
the Subscription Agreement or the Implementation Agreement, and no waiver of any
conditions precedent to the Old VII Closing, in each case that has an adverse
impact on the Nashville System, will have been agreed to by TCI or TCIC without
IPSE's prior written consent.
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(k) No temporary, preliminary or permanent injunction or other order,
stay, judgment, decree or ruling of any Governmental Authority shall be in
effect which would make the consummation of the Exchange Transaction illegal or
would otherwise prevent the consummation of the transactions contemplated by
this Agreement.
14. Conditions to Obligations of TCIC. The obligations of TCIC to be
performed at the Exchange Closing are subject to the satisfaction, at or prior
to the Exchange Closing, of each of the following conditions, each of which may
be waived by TCIC:
(a) Each of Fort Bend, PCIP and the Additional Systems Owner will have
represented at the respective closing of IPSE's purchase of such Exchange System
that all representations and warranties contained in the applicable Exchange
Systems Agreement were true and correct in all material respects as of the
applicable closing date as though each such representation and warranty was made
on and as of such date (except to the extent a different date is specified
therein, in which case such representation and warranty will be true and correct
as of such date).
(b) Each material covenant and obligation of Fort Bend, PCIP and the
Additional Systems Owner required by the Exchange Systems Agreements to be
performed by the owners of the Exchange Systems at or prior to the closing of
the sales contemplated thereby will have been duly performed and complied with
in all material respects as of the Exchange Closing Date.
(c) Each representation and warranty of IPSE in this Agreement will be
true and correct in all material respects as of the Exchange Closing Date as
though such representation and warranty was made on and as of such date (except
to the extent a different date is specified therein, in which case such
representation and warranty will be true and correct as of such date).
(d) Each material covenant and obligation of IPSE required by this
Agreement to be performed by it at or prior to the Exchange Closing Date will
have been duly performed and complied with in all material respects as of the
Exchange Closing Date.
(e) All consents required to be obtained by IPSE in connection with the
Exchange Transaction, to the extent applicable to any of the Exchange Systems,
will have been obtained and remain in full force and effect, with such
exceptions as do not result in a material adverse effect on IPSE's ability to
consummate the transfer to Tele-Vue of the Exchange Systems and the PCII Stock.
(f) At the Exchange Closing, TCIC will have received a copy of the
closing certificates delivered by the sellers of the Exchange Systems to IPSE at
the closing of IPSE's purchase of such Exchange Systems, and a certificate,
dated the Exchange Closing Date and duly executed by an officer of IPSE, to the
effect that the conditions set forth in Sections 14(c), (d) and (e) have been
satisfied.
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(g) Copies of the legal opinions of counsel to Fort Bend, PCIP and the
Additional Systems Owner required by the Exchange Systems Agreements will be
delivered to TCIC and an opinion of IPSE's counsel, in the form attached as
Exhibit D, will be delivered to TCIC and Tele-Vue at the Exchange Closing.
(h) The closing of each of the transactions contemplated under the
Exchange Systems Agreements will have occurred.
(i) The Old VII Closing will have occurred.
(j) TCIC has determined it is satisfied with the treatment of the
Exchange Transaction for federal income tax purposes.
(k) Each condition to the obligations of IPSE to close under the
Exchange Systems Agreements will have been satisfied or, with TCIC's prior
written consent, waived.
(l) No temporary, preliminary or permanent injunction or other order,
stay, judgment, decree or ruling of any Governmental Authority shall be in
effect which would make the consummation of the Exchange Transaction illegal or
would otherwise prevent the consummation of the transactions contemplated by
this Agreement.
15. Nashville System Indemnification.
(a) The parties hereby agree that, if the Exchange Closing occurs:
(i) IPSE will be entitled to the amount of indemnification
recoveries from New VII pursuant to Section 7.2(b) of the
Implementation Agreement for Losses relating to the Nashville System,
subject to the limitations described below;
(ii) IPSE will be responsible for all payments of New VII's
Losses relating to the Nashville System pursuant to Section 7.2(c) of
the Implementation Agreement; however, to the extent such New VII
Losses are subject to the minimum indemnification threshold described
in Section 7.2(e)(ii) of the Implementation Agreement, IPSE will be
responsible for such Losses provided that: (A) the combined Losses of
New VII exceed the Aggregate Threshold (defined below) and (B) the
Losses of New VII relating to the Nashville System exceed IPSE's
Threshold;
(iii) TCIC will indemnify and hold harmless IPSE and its
Affiliates against and in respect of any and all Cable Liabilities
other than the Nashville Assumed Liabilities, without regard to the
Aggregate Threshold;
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(iv) IPSE will indemnify and hold harmless TCIC and its
Affiliates against and in respect of any and all Nashville Assumed
Liabilities, without regard to IPSE's Threshold Amount; and
(v) Except as otherwise provided herein, each other term and
provision of Section 7.2 of the Implementation Agreement applicable to
Indemnified Parties and Indemnifying Parties will apply to IPSE and
TCIC with respect to their indemnification rights and obligations under
this Agreement with respect to the Nashville System.
(b) The following provisions will govern claims for indemnification
from New VII that are subject to the minimum indemnification threshold described
in Section 7.2(e)(ii) of the Implementation Agreement (the "Aggregate
Threshold"). The term "IPSE's Threshold Amount" means the dollar amount equal to
1/2 of 1% of the sum of (i) the Nashville Fixed Amount and (ii) the amounts
referred to in Section 7(a)(i) through Section 7(a)(vii).
(i) With respect to Losses that are subject to the Aggregate
Threshold, IPSE's right pursuant to Section 15(a)(i) to any portion of
indemnification recoveries from New VII will be applicable only if (A)
the combined Losses of Old VII and IPSE of the type to which the
Aggregate Threshold applies exceed the Aggregate Threshold and (B) the
Losses of IPSE relating to the Nashville System of the type to which
the Aggregate Threshold applies exceed IPSE's Threshold Amount. If the
conditions in the preceding sentence are satisfied, then with respect
to Losses of IPSE relating to the Nashville System of the type to which
the Aggregate Threshold applies, IPSE will be entitled only to those
amounts recovered from New VII with respect to such Losses on the
Nashville System that are in excess of IPSE's Threshold Amount.
(ii) Each party will cooperate to pursue its respective
indemnification claims against New VII and to provide information with
respect to Losses (including Losses of the type to which the Aggregate
Threshold or the IPSE Threshold applies). For each indemnifiable claim
subject to the Aggregate Threshold under Section 7(e)(ii) of the
Implementation Agreement arising after the Aggregate Threshold and the
IPSE Threshold have been reached, the appropriate indemnified party
will make and prosecute such claim against New VII. Notwithstanding the
preceding sentence, if IPSE prosecutes a claim with respect to the
Nashville System against New VII, and New VII rejects such claim in
whole or in part because IPSE is not a party to the Implementation
Agreement, then TCIC will use commercially reasonable efforts, at
IPSE's sole expense and direction, to prosecute IPSE's claim against
New VII on behalf of IPSE in accordance with the provisions of this
Section 15 as if IPSE were prosecuting such claim against New VII
directly.
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(iii) In no event will TCIC or any of its Affiliates be
responsible for indemnification or payment to IPSE for any of IPSE's
Losses other than from funds received from New VII pursuant to Article
VII of the Implementation Agreement and then, if Section 15(b)(i) is
applicable, only to the extent the applicable IPSE Losses exceed IPSE's
Threshold Amount.
16. Additional Indemnifications.
(a) All rights to indemnifications available to or from the buyer under
each of the Exchange Systems Agreements will be applicable directly to Tele-Vue
following the Exchange Closing, and Tele-Vue will have the right to pursue
indemnification claims with respect to the Exchange Systems directly against the
sellers under the Exchange Systems Agreements. IPSE will not interfere with TCIC
or its Affiliates with respect to such assigned indemnification rights.
(b) TCIC will indemnify and hold harmless, on an after-tax basis (as
described below), IPSE and its Affiliates against and in respect of any and all
claims, suits, actions, proceedings (formal and informal), investigations,
judgments, deficiencies, damages, fines, penalties, settlements, liabilities and
legal and other expenses (including the reasonable fees and expenses of
attorneys, accountants, consultants and other professionals) (collectively,
"Claims and Damages") which may be incurred by IPSE or any of its Affiliates by
reason of the breach of any representation, warranty, covenant or agreement of
TCIC in this Agreement or the Transaction Documents.
(c) IPSE will indemnify and hold harmless, on an after-tax basis (as
described below), TCIC and its Affiliates against and in respect of any and all
Claims and Damages which may be incurred by TCIC or any of its Affiliates by
reason of the breach of any representation, warranty, covenant or agreement of
IPSE in this Agreement or the Transaction Documents.
(d) IPSE and TCIC each agrees that from and after the Exchange Closing,
its sole and exclusive remedy as against the other or the Affiliates of the
other with respect to any Claims and Damages made against or suffered or
incurred by them will be its respective rights to indemnification under Sections
15 and 16, and that from and after the Exchange Closing it otherwise will have
no recourse against the other or the Affiliates of the other with respect to any
Claims and Damages under, with respect to, relating to, or arising out of, this
Agreement or the Exchange Transaction.
(e) For purposes of this Section, "Taxes" means all levies and
assessments of any kind or nature imposed by any Government Authority, including
all income, sales, use, ad valorem, value added, franchise, severance, net or
gross proceeds, withholdings, payroll, employment, excise or property taxes,
together with any interest thereon and any penalties, additions, to tax or
additional amounts applicable thereto. For purposes of determining any Tax cost
or Tax benefit to any Person, such amount will be the actual cost or benefit
recognized by such Person at the time of actual payment of the additional Tax or
actual recognition of the Tax benefit. In the event that any payment or other
amount is
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required to be determined on an after-Tax basis, such payment or other amount
will initially be determined without regard to any Tax cost or Tax benefit not
actually recognized currently, and appropriate adjustments will be made when and
to the extent that such Tax cost or Tax benefit is actually recognized.
17. Regulatory Approvals. Each party will use its commercially
reasonable efforts to obtain in writing as promptly as possible the required
regulatory approvals, and any other consent, authorization or approval required
to be obtained by such party in connection with the transactions contemplated
under this Agreement, and deliver to the other copies of such regulatory
approvals and other consents, authorizations, or approvals; provided, however,
that each party will afford the other party the opportunity to review the form
of regulatory approval prior to delivery to the party whose consent is sought
and neither party will accept or agree or accede to any modifications or
amendments to, or any conditions to the transfer of, any of the franchises,
licenses, contracts or real property interests of either the Nashville System or
any Exchange System that are not reasonably acceptable to each party. IPSE
acknowledges that approval of the transfer of the Houston System directly to TCI
of Houston, Inc. will satisfy the applicable buyer's closing condition under the
Fort Bend and PCIP Agreements, and that requests for transfer approval for the
Houston System are required to include such direct transfer as an alternative.
18. HSR Notification. As soon as practicable after the execution of
this Agreement, but in any event no later than 30 days after such execution,
each party will complete and file, or cause to be completed and filed, any
notification and report required to be filed under the HSR Act. Each party will
take any additional action that may be necessary, proper or advisable, will
cooperate to prevent inconsistencies between their respective filings and will
furnish to each other such necessary information and reasonable assistance as
the other may reasonably request in connection with its preparation of necessary
filings or submissions under the HSR Act. TCIC will pay the filing fees in
connection with any filings under the HSR Act with respect to the Exchange
Systems, and IPSE will pay the filing fees in connection with any filings under
the HSR Act with respect to the Nashville System, as required by this Section
18. Notwithstanding anything to the contrary in this Agreement, if either IPSE
or TCIC, in its sole opinion, considers a request from a Governmental Authority
for additional data and information in connection with the HSR Act to be unduly
burdensome, such party may terminate this Agreement; provided that if either
IPSE or TCIC terminates this Agreement pursuant to this Section 18, the
terminating party will reimburse the other party for any filing fee paid by such
other party in connection with any filing made under the HSR Act related to the
transactions contemplated by this Agreement within 15 days of such termination.
19. Post-Closing Cooperation. For a period of 18 months after the
Exchange Closing, each party will cooperate with and assist the other by
providing, upon request, all information in that party's possession (and not
previously made available to the requesting party), that the requesting party
may reasonably require to respond to any inquiry, order or requirements of any
Governmental Authority.
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20. Tax Matters. All sales, use, transfer and similar taxes or
assessments, including transfer fees and similar assessments for licenses and
contracts, arising from or payable by reason of the conveyance of the Nashville
System or the Exchange Systems will be paid by Old VII with respect to the
Nashville System and by IPSE with respect to the Exchange Systems. All taxes
attributable to the ownership and operation of the Nashville System and the
Exchange Systems for periods or portions thereof ending on or prior to the
Exchange Closing will be the responsibility of, and paid by, Old VII with
respect to the Nashville System and by IPSE with respect to the Exchange Systems
21. Termination. Subject to the requirements of Section 23, this
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:
(a) at any time, by mutual written agreement of TCIC and IPSE;
(b) by either party upon termination of the Subscription Agreement;
(c) by either party pursuant to Section 18;
(d) by either party at any time on or after October 1, 1996, if the
Exchange Closing has not occurred; provided, however, that the right to
terminate this Agreement under this Section 21(d) will not be available to any
party whose breach of any obligation under this Agreement is the cause of, or
resulted in, the failure of the Exchange Closing to occur prior to such date;
(e) by TCIC at any time if it determines that the exchange of the
Nashville System pursuant to this Agreement is not reasonably likely to be
substantially tax free under Section 1031 of the Code; or
(f) by either party if there is any law or regulation of any
Governmental Authority that makes consummation of a material portion of the
transactions contemplated by this Agreement illegal or otherwise prohibited or
if any judgment, injunction, order or decree of any Governmental Authority
prohibiting a material portion of the transactions contemplated by this
Agreement is entered, and such judgment, injunction, order or decree becomes
final and non-appealable.
22. Procedure Upon Termination. In the event of the termination of this
Agreement pursuant to Section 21, written notice will promptly be given by the
party so terminating to the other party, and this Agreement will terminate, and
the transactions contemplated hereby will be abandoned, without further action
by either party, with no liability on the part of either party, or its
directors, officers, agents, partners, members or stockholders, with respect to
this Agreement, except for (a) obligations arising under Sections 2.15 or 10.1
of the Implementation Agreement, (b) obligations of IPSE arising under Section
12(f) of this Agreement, (c) rights and obligations of the parties arising under
Sections 23, 24 and 25 of this Agreement, and (d) liability for any
misrepresentation, breach or default under this Agreement in connection with any
representation, warranty,
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covenant, agreement, duty or obligation given, occurring or arising prior to the
date of termination.
23. Back-up Sale of Exchange Systems. If this Agreement is terminated
pursuant to Section 21, then at the option of IPSE or TCIC, to be exercised by
written notice delivered to the other within 30 days after such termination: (a)
with respect to any Exchange System as to which closing of IPSE's purchase has
not yet been completed, TCIC (or its designated Affiliate) promptly will become
the assignee of all of IPSE's rights, and assume all of IPSE's obligations,
under the applicable Exchange Systems Agreements, and (b) with respect to any
Exchange System as to which closing of IPSE's purchase has previously been
completed, TCIC (or its designated Affiliate) promptly will or will cause its
designee to purchase and IPSE promptly will sell such Exchange System (including
the PCII Stock, if applicable) for cash in an amount equal to the Exchange
Systems Adjusted Exchange Value for such Exchange System(s), calculated as
described in Sections 8 and 9, plus (if a purchase of the PCII Stock is
involved) the amount payable pursuant to Section 3, and IPSE will assign, and
TCIC or its designee, as the case may be, will assume, IPSE's rights and
obligations under the Exchange Systems Agreements. Any purchase pursuant to this
Section 23 will be subject to satisfaction or waiver of the conditions stated in
Section 14 (except Sections 14(h), (i) and (j)), and at closing of such purchase
the parties will deliver the documents contemplated by Section 6(b)(i) and (ii)
(but reflecting TCIC or its designated Affiliate, in place of Tele-Vue) with
respect to the Exchange System(s) to be purchased, and if such purchase takes
place, the following provisions will continue in effect with respect to the
Exchange System(s) so purchased notwithstanding the termination of other
portions of this Agreement pursuant to Section 21 (but reflecting TCIC or its
designated Affiliate, in place of Tele-Vue): Sections 4(b), 12(1), 16 and 26.
24. Negotiations Regarding Back-Up Transfer of Nashville System. If the
Old VII Closing has occurred and no closing of the transactions pursuant to the
Exchange System Agreements has occurred, and this Agreement has been terminated
pursuant to Section 21(d), then IPSE and TCIC will negotiate in good faith for a
period of 45 days following such termination for a transaction involving the
transfer of the Nashville System to IPSE by Tele-Vue, in a like kind exchange
pursuant to Section 1031 of the Code or otherwise on a substantially tax free
basis for Tele-Vue, however, no binding obligation will exist with respect to
any such possible transfer except as specifically included in a definitive
transfer agreement, if any, as may be signed by Tele-Vue and IPSE.
25. Confidentiality and Publicity.
(a) Each party will use reasonable efforts to assure that any
non-public information that such party may obtain from the other in connection
with this Agreement will be confidential and, unless and until the Exchange
Closing occurs (and after the Exchange Closing, with respect to IPSE's
obligations of confidentiality as to the Common Assets and related information),
such party will not disclose any such information to any other Person (other
than on a "need-to-know" basis to its directors, officers, partners and
employees, and representatives of its advisers and lenders, and representative
of the sellers of the Exchange Systems and their representatives, whose
knowledge thereof is necessary in
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order to facilitate the consummation of the transactions contemplated hereby) or
use such information to the detriment of the other; provided that (i) such party
may use and disclose any such information once it has been publicly disclosed
(other than by such party in breach of its obligations under this Section) or
which rightfully has come into the possession of such party (other than from the
other party), and (ii) to the extent that such party may, in the reasonable
opinion of its counsel, be compelled by Legal Requirements to disclose any of
such information, such party may disclose such information if it will have used
all reasonable efforts, and will have afforded the other the opportunity, to
obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed. The
obligation of the parties to hold information in confidence pursuant to this
Section will be satisfied if such party exercises the same care with respect to
such information as it would exercise to preserve the confidentiality of its own
similar information. In the event of termination of this Agreement, each party
will use all reasonable efforts to cause to be delivered to the other, and
retain no copies of, any documents, work papers and other materials obtained by
such party or on its behalf from the other, whether so obtained before or after
the execution hereof as long as such documents, work papers and other materials
do not fall within the exceptions set forth in clauses (i) and (ii) of this
subsection. If TCIC or its designated Affiliate acquires an interest in any
Exchange System(s) as a result of the operation of Section 23, TCIC and its
Affiliates will no longer be subject to the restrictions of this Section 25 with
respect to such Exchange System(s).
(b) TCIC and IPSE each will consult with and cooperate with the other
with respect to the content and timing of all press releases and other public
announcements, and any oral or written statements to IPSE's and TCIC's employees
concerning this Agreement and the transactions contemplated hereby. Except as
required by applicable Legal Requirements, neither TCI nor IPSE will make any
such release, announcement or statements without the prior written consent and
approval of the other, which consent and approval may not be unreasonably
withheld.
26. Miscellaneous.
(a) Each of the parties will pay its own expenses and the fees and
expenses of its counsel, accountants and other experts in connection with this
Agreement whether or not the transactions contemplated occur; provided however,
that in the event, pursuant to any of the Exchange Systems Agreements, IPSE is
obligated to incur expenses of any nature that TCIC is not directly or
indirectly obligated to incur under the Subscription Agreement or the
Implementation Agreement with respect to the Nashville System (an "additional
obligated expense"), the parties shall cooperate in arranging for appropriate
sharing by TCIC and IPSE of such additional obligated expense.
(b) No action taken pursuant to this Agreement, including any
investigation by or on behalf of either party, will be deemed to constitute a
waiver by the party taking the action of compliance with any representation,
warranty, covenant or agreement contained in this Agreement or in any related
agreement. The waiver by either party of any condition or of a breach of another
provision of this Agreement will be in writing and will not operate
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<PAGE> 30
or be construed as a waiver of any other condition or subsequent breach. The
waiver by either party of any of the conditions precedent to its obligations
under this Agreement will not preclude it from seeking redress for breach of
this Agreement other than with respect to the condition so waived.
(c) This Agreement embodies the entire agreement between the parties
with respect to the subject matter and supersedes all prior representations,
agreements and understandings, oral or written, with respect to the subject
matter. This Agreement may not be modified orally, but only by an agreement in
writing signed by the party or parties against whom any waiver, change,
amendment, modification or discharge may be sought to be enforced.
(d) This Agreement will inure to the benefit of and will be binding
upon the parties and their respective heirs, legal representatives, successors
and permitted assigns. Neither party will assign this Agreement or delegate any
of its duties under this Agreement to any other Person without the prior written
consent of the other; provided, however, that either party may, without the
consent of the other, assign its rights and delegate its duties under this
Agreement to any Affiliate of such party.
(e) The section and other headings contained in this Agreement are for
reference purposes only and will not affect the meaning or interpretation of
this Agreement. References to Exhibits or Schedules will unless otherwise
indicated, refer to the Exhibits and Schedules attached to this Agreement, which
by this reference are incorporated in and made a part of this Agreement
(f) This Agreement may be executed in any number of counterparts. each
of which, when executed, will be deemed to be an original and all of which
together will be deemed to be one and the same instrument.
(g) The validity, performance and enforcement of this Agreement will be
governed by the laws of the State of Delaware, without giving effect to the
principles of conflicts of law of such state.
(h) Any term or provision of this Agreement which is invalid or
unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other provisions
of this Agreement.
(i) This Agreement constitutes an agreement solely among the parties
and, except as otherwise provided in this Agreement, is not intended to and will
not confer any rights, remedies, obligations or liabilities, legal or equitable,
including any right of employment, on any Person other than the parties and
their respective successors or permitted assigns, or otherwise constitute any
Person a third party beneficiary under or by reason of this Agreement. Nothing
in this Agreement, expressed or implied, is intended to or will cause the
parties to be deemed partners or participants in a joint venture.
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<PAGE> 31
(j) This Agreement has been negotiated by IPSE and TCIC and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement or any provision of this Agreement against
the party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
(k) If any litigation between the parties with respect to this
Agreement or the transactions contemplated hereby is resolved or adjudicated by
a judgment of any court, the party prevailing under such judgment will be
entitled, as part of such judgment, to recover from the other party its
reasonable attorneys' fees and costs and expenses of litigation.
(l) For purposes of this Agreement, "commercially reasonable efforts"
or "reasonable efforts" will not be deemed to require a party to undertake
extraordinary measures, including the initiation or prosecution of legal
proceedings or the payment of amounts in excess of normal and usual filing fees
and processing fees, if any.
(m) Each party will execute and deliver such instruments and take such
other actions as any other party may reasonably request in order to carry out
the intent of this Agreement. Each party will use commercially reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated and, without limiting the generality of the foregoing, to obtain all
consents and authorizations of government agencies and third parties and to make
all filings with and give all notice to government agencies and third parties
which may be necessary or reasonably required in order to effect the
transactions contemplated by this Agreement. Each party will give prompt notice
to the other, after receipt of (i) any notice or other communication by or
relating to Old VII or New VII or any seller under the Exchange Systems
Agreements concerning the subject matter of this Agreement and (ii) any notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement.
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(n) All notices, requests, claims, demands, applications, services of
process and other communications which are required to be or may be given under
this Agreement will be in writing and will be deemed to have been duly given if
sent by telecopy or facsimile transmission, answer back requested, or delivered
in person or by courier, to the parties at the following addresses:
To TCIC: TCI Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Attn: Mr. Gary S. Howard
Telephone: (303) 267-4720
Telecopy: (303) 488-3219
Copies: Similarly addressed, Attention: Legal Department
and to:
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, CO 80202
Attn: Arlene S. Bobrow, Esq.
Telephone: (303) 299-8134
Telecopy: (303) 298-0940
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<PAGE> 33
To IPSE: InterMedia Partners
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn: Mr. Leo J. Hindery, Jr.
Telephone: (415) 616-4600
Telecopy: (415) 397-3978
Copies: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Gregg F. Vignos, Esq.
Telephone: (415) 983-1649
Telecopy: (415) 983-1200
or to such other address as either party has furnished to the other by notice
given in accordance with this Section. Such notice will be effective (i) if
delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, when
confirmation is received.
(o) Time is of the essence in each and every provision of this
Agreement
(p) TCIC agrees that, to the fullest extent permitted by law, IPSE's
obligations and liabilities under this Agreement and any related agreement (the
"Transaction Documents") and in connection with the transactions contemplated
therein will be nonrecourse to all direct and indirect general and limited
partners of the direct general partners of IPSE, except to the extent of
distributions to such Persons, directly or indirectly, from IPSE that are
required to be returned, directly or indirectly, to a direct general partner of
IPSE pursuant to applicable provisions of the Revised Limited Partnership Act of
California. "Nonrecourse" as to a Person means that such Person will not,
directly or indirectly, be personally liable in any respect (except to the
extent of such Person's respective interests in the assets of IPSE or its direct
general partners) for any obligation or liability of IPSE under any Transaction
Document or any transaction contemplated therein. "Direct" partners means all
general partners of IPSE, and "indirect" partners means all general and limited
partners of each direct general partner and all general and limited partners of
each such indirect partner and all such further indirect partners thereof
(q) TCIC agrees that TCI and TCIC will use reasonable efforts not to
exercise any right or remedy under the Subscription Agreement or the
Implementation Agreement, or perform any covenant or agreement of TCI or TCIC
under the Subscription Agreement or the Implementation Agreement, in each case
in a manner which adversely affects the Nashville System, without first using
reasonable efforts to advise IPSE and to provide IPSE with an opportunity to
comment on such action, as may be reasonable under the particular circumstances.
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(r) If either party fails to pay the other any amounts when due under
this Agreement, the amounts due will bear interest from the due date to the date
of payment at the annual rate publicly announced from time to time by The Bank
of New York as its prime rate plus 3%, adjusted as and when changes in such
prime rate are made.
The parties have cause this Exchange Agreement to be duly executed as
of the day and year first written above.
TCI COMMUNICATIONS, INC.
By /s/ Gary S. Howard
______________________________________
Name: Gary S. Howard
Title:
INTERMEDIA PARTNERS SOUTHEAST
By InterMedia Capital Management IV, L.P.,
its General Partner
By /s/ Leo J. Hindery, Jr.
________________________________
Leo J. Hindery, Jr.
Managing General Partner
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<PAGE> 35
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A Form of Exchange Systems Management Agreement
EXHIBIT B Form of Nashville Management Agreement
EXHIBIT C Form of TCIC Counsel Opinion
EXHIBIT D Form of IPSE Counsel Opinion
SCHEDULE 1 Old VII Nashville Franchises
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EXECUTION COPY
FIRST AMENDMENT TO EXCHANGE AGREEMENT
This First Amendment to Exchange Agreement (this "First Amendment") is
entered into as of May 8, 1996 (the "Effective Date") by and between InterMedia
Partners Southeast ("IPSE"), and TCI Communications, Inc. ("TCIC").
BACKGROUND
IPSE and TCIC entered into an Exchange Agreement as of December 18,
1995 (the "Agreement"). The parties wish to amend the Agreement as set forth in
this First Amendment. All capitalized terms used but not defined in this First
Amendment will have the meanings set forth for such terms in the Agreement.
AMENDMENT
For valuable consideration the parties agree as follows:
1. Clause (iv) of Section 8(d) of the Exchange Agreement
is amended to read in its entirety as follows:
(iv) the Exchange Systems Interim Period Capital Expenditure
Amount (and if such amount was financed by IPSE borrowings, the amount
of interest paid on such borrowings);
2. Section 23 of the Agreement is amended to read in its
entirety as follows:
23. Back-up Sale of Exchange Systems. If this
Agreement is terminated pursuant to Section 21, then at the
option of IPSE or TCIC, to be exercised by written notice
delivered to the other within 30 days after such
termination:
(a) with respect to any Exchange System as to which
closing of IPSE's purchase has not yet been completed, TCIC
(or its designated Affiliate) promptly will become the
assignee of all of IPSE's rights, and assume all of IPSE's
obligations, under the applicable Exchange Systems Agreements,
and
(b) With respect to any Exchange System as to which
closing of IPSE's purchase has previously been completed, TCIC
(or its designated Affiliate) promptly will or will cause its
designee to purchase and IPSE promptly will sell such Exchange
System (including the PCII Stock, if applicable) for cash in
an amount equal
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to the Exchange Systems Adjusted Exchange Value for such
Exchange System(s), calculated as described in Sections 8 and
9, plus (if a purchase of PCII Stock is involved) the amount
payable pursuant to Section 3, plus the Interest Amount
(defined below), and IPSE will assign, and TCIC or its
designee, as the case may be, will assume, IPSE's rights and
obligations under the Exchange Systems Agreements. The
Interest Amount will be equal to the amount of interest
payable by IPSE to Bank of America National Trust and Savings
Association ("BA") pursuant to the Loan Agreement between BA
and IPSE dated May 8, 1996 for the period commencing May 8,
1996 and continuing to the date of closing pursuant to this
Section less the IPSE Cash Flow (defined below). The IPSE Cash
Flow will be equal to the amount of cash flow from such
Exchange Systems actually received by IPSE after payment of
all management fees required pursuant to the Exchange Systems
Management Agreement and all interest on IPSE's borrowings in
connection with its acquisition of such Exchange Systems.
3. This First Amendment may be signed in any number of counterparts
each of which will be an original and all of which together will constitute one
First Amendment.
4. This First Amendment and the rights of the parties under it will be
governed by and construed in all respects in accordance with the internal laws
of the State of Delaware (and not the laws of conflicts).
5. This First Amendment and the Agreement, as amended hereby, contain
the entire agreement of the parties and supersede all prior oral and written
agreements and understandings, in each case with respect to the subject matter
hereof. Except as amended by this First Amendment, all of the terms of the
Agreement will remain in full force and effect.
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<PAGE> 38
This First Amendment to Exchange Agreement is signed by the parties as
of the date first written above.
INTERMEDIA PARTNERS SOUTHEAST
By InterMedia Capital
Management IV, L.P.,
its General Partner
By InterMedia Management, Inc.,
its General Partner
By: /s/ Rodney Royse
__________________________
Name: Rodney Royse
________________________
Title: Vice President
_______________________
TCI COMMUNICATIONS, INC.
By: /s/ Bernard Schotters
__________________________
Name: Bernard Schotters
________________________
Title:
_______________________
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
INTERMEDIA PARTNERS IV, CAPITAL CORP.
FIRST: The name of the corporation is:
InterMedia Partners IV, Capital Corp.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is:
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Laws of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, $.01 par
value per share.
FIFTH: The Board of Directors is authorized to adopt, amend or repeal
the By-laws of the corporation. Election of directors need not be by ballot.
SIXTH: The name and mailing address of the incorporator is:
Christopher T. Crocker
c/o Pillsbury Madison & Sutro LLP
235 Montgomery Street, Room 1688
San Francisco, CA 94104
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<PAGE> 2
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (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) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
If the Delaware Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this paragraph by the
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
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<PAGE> 3
EIGHTH: The powers of the incorporator are to terminate upon the filing
of this Certificate of Incorporation. The names and mailing addresses of the
persons who are to serve as the initial directors of the corporation until the
first annual meeting of stockholders of the corporation, or until each person's
successor is elected and qualified, are:
Leo J. Hindery, Jr.
c/o InterMedia Capital Management IV, L.P.
235 Montgomery Street, Suite 420
San Francisco, CA 94104
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed on this 2nd day of April, 1996.
/s/ Christopher T. Crocker
__________________________________
Christopher T. Crocker
Incorporator
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<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
INTERMEDIA PARTNERS IV CAPITAL CORP.
a Delaware corporation
(the "Corporation")
As adopted on April 3, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Offices...............................................................................................1
Section 1.1 Registered Office...........................................................1
Section 1.2 Additional Offices..........................................................1
ARTICLE II Stockholders Meetings................................................................................1
Section 2.1 Annual Meetings.............................................................1
Section 2.2 Special Meetings............................................................1
Section 2.3 Notices.....................................................................1
Section 2.4 Quorum......................................................................2
Section 2.5 Organization and Conduct of Meetings........................................2
Section 2.6 Notification of Stockholder Business........................................2
Section 2.7 Voting of Shares............................................................3
Section 2.7.1 Voting Lists........................................................3
Section 2.7.2 Votes Per Share.....................................................4
Section 2.7.3 Proxies.............................................................4
Section 2.7.4 Required Vote.......................................................4
Section 2.7.5 Consents in Lieu of Meeting.........................................5
ARTICLE III Directors...........................................................................................5
Section 3.1 Purpose.....................................................................5
Section 3.2 Number......................................................................5
Section 3.3 Election....................................................................5
Section 3.4 Notification of Nominations.................................................5
Section 3.5 Vacancies and Newly Created
Directorships...............................................................6
Section 3.6 Removal.....................................................................6
Section 3.7 Compensation................................................................7
ARTICLE IV Board Meetings.......................................................................................7
Section 4.1 Regular Meetings............................................................7
Section 4.2 Special Meetings............................................................7
Section 4.3 Conduct of Meetings.........................................................7
Section 4.4 Quorum, Required Vote.......................................................8
Section 4.5 Consent In Lieu of Meeting..................................................8
ARTICLE V Committees of Directors...............................................................................8
Section 5.1 Establishment; Standing Committees..........................................8
Section 5.1.1. Finance Committee...................................................8
Section 5.1.2. Audit Committee.....................................................9
Section 5.1.3. Compensation Committee..............................................9
Section 5.2. Available Powers............................................................9
Section 5.3. Unavailable Powers........................................................ 10
Section 5.4. Alternate Members......................................................... 10
Section 5.5. Procedures................................................................ 10
ARTICLE VI Officers........................................................................................... 10
Section 6.1 Elected Officers.......................................................... 10
Section 6.1.1. Chairman of the Board............................................. 11
Section 6.1.2. President......................................................... 11
Section 6.1.3. Chief Financial Officer........................................... 11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 6.1.4. Vice Presidents................................................... 11
Section 6.1.5. Secretary......................................................... 11
Section 6.1.6. Assistant Secretaries............................................. 12
Section 6.1.7. Treasurer......................................................... 12
Section 6.1.8. Assistant Treasurers.............................................. 12
Section 6.1.9. Divisional Officers............................................... 13
Section 6.2. Election.................................................................. 13
Section 6.3. Appointed Officers........................................................ 13
Section 6.4. Multiple Officeholders, Stockholder and
Director Officers......................................................... 13
Section 6.5. Compensation Vacancies.................................................... 13
Section 6.6. Additional Powers and Duties.............................................. 13
Section 6.7. Removal................................................................... 14
Section 6.8. Voting Upon Stocks........................................................ 14
ARTICLE VII Share Certificates................................................................................ 14
Section 7.1. Entitlement to Certificates............................................... 14
Section 7.2. Multiple Classes of Stock................................................. 14
Section 7.3. Signatures................................................................ 15
Section 7.4. Issuance and Payment...................................................... 15
Section 7.5. Lost, Stolen or Destroyed Certificates.................................... 15
Section 7.6. Transfer of Stock......................................................... 15
Section 7.7. Registered Stockholders................................................... 16
ARTICLE VIII Indemnification.................................................................................. 16
Section 8.1. General................................................................... 16
Section 8.2 Actions by or in the Right of the
Corporation............................................................... 16
Section 8.3 Board Determinations...................................................... 17
Section 8.4 Advancement of Expenses................................................... 17
Section 8.5 Nonexclusive.............................................................. 17
Section 8.6 Insurance................................................................. 18
Section 8.7 Certain Definitions....................................................... 18
Section 8.8 Change in Governing Law................................................... 18
ARTICLE IX INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS.................................................... 19
Section 9.1 Validity.................................................................. 19
Section 9.2 Disclosure Approval....................................................... 19
Section 9.3 Nonexclusive.............................................................. 19
ARTICLE X MISCELLANEOUS....................................................................................... 19
Section 10.1 Place of Meetings......................................................... 19
Section 10.2 Fixing Record Dates....................................................... 20
Section 10.3 Means of Giving Notice.................................................... 20
Section 10.4 Waiver of Notice.......................................................... 20
Section 10.5 Attendance via Communications
Equipment................................................................. 21
Section 10.6 Dividends................................................................. 21
Section 10.7 Reserves.................................................................. 21
Section 10.8 Reports to Stockholders................................................... 21
Section 10.9 Checks, Notes and Contracts............................................... 21
Section 10.10 Loans..................................................................... 22
Section 10.11 Fiscal Year............................................................... 22
Section 10.12 Seal...................................................................... 22
</TABLE>
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<TABLE>
<S> <C>
Section 10.13 Books and Records......................................................... 22
Section 10.14 Resignation............................................................... 22
Section 10.15 Surety Bonds.............................................................. 22
Section 10.16 Amendments................................................................ 23
</TABLE>
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<PAGE> 5
BY-LAWS
OF
INTERMEDIA PARTNERS IV CAPITAL CORP.
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
within the State of Delaware shall be located at the principal place of business
in said state of such Corporation or individual acting as the Corporation's
registered agent in Delaware.
Section 1.2 Additional Offices. The Corporation may, in addition to its
registered office in the State of Delaware, have such other offices and places
of business, both within and without the State of Delaware, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business and affairs of the Corporation may require.
ARTICLE II
Stockholders Meetings
Section 2.1 Annual Meetings. Annual meetings of stockholders shall be
held at a place and time on any weekday which is not a holiday and which is not
more than 120 days after the end of the fiscal year of the Corporation as shall
be designated by the Board of Directors and stated in the notice of the meeting,
at which meeting the stockholders shall elect the directors of the Corporation
and transact such other business as may properly be brought before the meeting.
Section 2.2 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute, the Certificate
of Incorporation or by these By-Laws, may be called only by (i) the Chairman of
the Board, (ii) the President or (iii) the Board of Directors pursuant to a
resolution adopted by a majority of the then- authorized number of directors of
the Corporation.
Section 2.3 Notices. Written notices of each stockholder meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote thereat at the address of such stockholder as
reflected in the records of the Corporation. Such notice shall be given by or at
the direction of the party calling such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting. If said notice is for a
stockholders meeting other than an annual
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<PAGE> 6
meeting, it shall in addition state the purpose or purposes for which said
meeting is being called, and the business transacted at such meeting shall be
limited to the matters so stated in said notice and any matters reasonably
related thereto.
Section 2.4 Quorum. At any stockholders meeting, the holders present in
person or by proxy of a majority of the outstanding shares of capital stock
entitled to vote thereat shall constitute a quorum of the stockholders for all
purposes (unless the representation of a larger number of shares shall be
required by law or by the Certificate of Incorporation, in which case the
representation of the number of shares so required shall constitute a quorum).
The holders of a majority of the outstanding shares of capital stock
entitled to vote which are present in person or by proxy at any meeting (whether
or not constituting a quorum of the outstanding shares) may adjourn the meeting
from time to time without notice other than by announcement thereat; and at any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called,
but only those stockholders entitled to vote at the meeting originally noticed
shall be entitled to vote at any adjournment or adjournments thereof. However,
if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 2.5 Organization and Conduct of Meetings. The Chairman of the
Board shall call stockholders meetings to order and shall act as Chairman of
such meetings. In the absence of the Chairman of the Board at any meeting, the
President or, in his absence, any Vice President designated by the Board of
Directors to perform the duties of the Chairman of the Board shall act as
Chairman. In the absence of the Chairman of the Board, the President and any
such Vice President at any meeting, the holders of a majority of the shares of
capital stock entitled to vote present in present or by proxy at such meeting
shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
stockholders meetings; but, in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting.
Proceedings at every stockholders meeting shall, at the election of the
chairman, comply with Robert's Rules of Order (latest published edition).
Section 2.6 Notification of Stockholder Business. All business properly
brought before an annual meeting shall be transacted at such meeting. Subject to
the right of stockholders to elect a Chairman of the meeting, as set forth in
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Section 2.5 of these By-Laws, business shall be deemed properly brought only if
it is (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors or
(iii) brought before the meeting by a stockholder of record entitled to vote at
such meeting if written notice of such stockholder's intent to bring such
business before such meeting is delivered to, or mailed, postage prepaid, and
received by, the Secretary of the Corporation at the principal executive offices
of the Corporation not later than the close of business on the tenth day
following the date on which the Corporation first makes public disclosure (by
notice to any national securities exchange or national market system in the
United States on which the capital stock of the Corporation entitled to vote at
such meeting is listed or otherwise) of the date of the annual meeting;
provided, however, that in the event that the annual meeting is adjourned, and
the Corporation is required by Delaware law to give notice to stockholders of
the adjourned meeting date, written notice of such stockholder's intent to bring
such business before the meeting must be delivered to or received by the
Secretary of the Corporation no later than the close of business on the fifth
day following the earlier of (1) the date the Corporation makes public
disclosure (by notice to any such exchange or system or otherwise) of the date
of the adjourned meeting or (2) the date on which notice of such adjourned
meeting is first given to stockholders. Each notice given by such stockholder
shall set forth: (A) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting;
(B) the name and address of the stockholder who intends to propose such
business; (C) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting (or if the record date
for such meeting is subsequent to the date required for such stockholder notice,
a representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such meeting)
and intends to appear in person or by proxy at such meeting to propose such
business; and (D) any material interest of the stockholder, if any, in such
business. The Chairman of the meeting may refuse to transact any business at any
meeting made without compliance with the foregoing procedure.
Section 2.7 Voting of Shares.
Section 2.7.1 Voting Lists. The officer or agent who has charge of the
stock ledger of the Corporation shall prepare, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote thereat arranged in alphabetical order and showing the address 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
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<PAGE> 8
hours for a period of at least then (10) days prior to the meeting, either at a
place within the city 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 original stock transfer books
shall be prima face evidence as to who are the stockholders entitled to examine
such list or transfer books or to vote at any meeting of stockholders. Failure
to comply with the requirements of this section shall not affect the validity of
any action taken at said meeting.
Section 2.7.2 Votes Per Share. Each outstanding share of capital stock
shall be entitled to vote in accordance with the provisions for voting included
in the Certificate of Incorporation. In determining the number of shares of
stock required by law, by the Certificate of Incorporation or by the By-Laws to
be represented for any purpose, or to determine the outcome of any matter
submitted to stockholders for approval or consent, the number of shares
represented or voted shall be weighted in accordance with the provisions of the
Certificate of Incorporation regarding voting powers of each class of stock. Any
reference in these By-Laws to a majority or a particular percentage of the
voting stock or a majority or a particular percentage of the capital stock shall
be deemed to refer to a majority or a particular percentage, respectively, of
the voting power of such stock. Issues shall be determined by a class vote only
when a class vote is required by law or the Certificate of Incorporation.
Section 2.7.3 Proxies. Every stockholder entitled to vote at a meeting
or to express consent or dissent without a meeting or a stockholder's duly
authorized attorney-in-face may authorize another person or persons to act for
him by proxy. Each proxy shall be in writing, executed by the stockholder giving
the proxy or by his duly authorized attorney. No proxy shall be voted on or
after three years (3) years from its date, unless the proxy provides for a
longer period. Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it, or his legal representatives or assigns,
except in those cases where an irrevocable proxy permitted by statute has been
given.
Section 2.7.4 Required Vote. When a quorum is present at any meeting,
the vote of the holders, present in person or represented by proxy, of capital
stock of the Corporation representing a majority of the votes of all capital
stock of the Corporation entitled to vote thereat shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of law or the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
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Section 2.7.5 Consents in Lieu of Meeting. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any annual or special meeting of the stockholders of
the Corporation, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of capital stock of the Corporation having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a duly convened meeting. The signed consent, or a signed copy, shall
be placed in the minute book of the Corporation.
ARTICLE III
Directors
Section 3.1 Purpose. The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors, acting by not
less than a majority of the directors then in office. The Board of Directors
shall exercise all such powers of the Corporation and do all such lawful acts
and things as are not by law, the Certificate of Incorporation or these By-Laws
directed or required to be exercised or done by the stockholders. Directors need
not be stockholders or residents of the State of Delaware.
Section 3.2 Number. The number of directors constituting the Board of
Directors shall never be less than one (1) nor more than twenty-five (25), and
shall be determined by resolution of the Board of Directors.
Section 3.3 Election. Directors shall be elected by the stockholders by
plurality vote at a stockholders meeting as provided in the Certificate of
Incorporation and by these By-Laws, and each director shall hold office until
his successor has been duly elected and qualified.
Section 3.4 Notification of Nominations. Subject to the rights of the
holders of any one or more series of Preferred Stock then outstanding,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at an annual meeting
or a special meeting called for the purpose of electing directors may nominate
persons for election as directors at such meeting only if written notice of such
stockholder's intent to make such nomination is delivered to, or mailed, postage
prepaid, and received by, the Secretary of the Corporation at the principal
executive offices of the Corporation not later than the close of business on the
tenth day following the date on which the Corporation first makes public
disclosure (by notice to any national securities exchange
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<PAGE> 10
or national market system in the United States on which the capital stock of the
Corporation entitled to vote at such meeting is listed or otherwise) of the date
of the meeting; provided, however, that in the event that the meeting is
adjourned, and the Corporation is required by Delaware law to give notice to
stockholders of the adjourned meeting date, written notice of such stockholder's
intent to make such nomination at such adjourned meeting must be delivered to or
received by the Secretary of the Corporation no later than the close of business
on the fifth day following the earlier of (1) the date the Corporation makes
public disclosure (by notice to any such exchange or system or otherwise) of the
date of the adjourned meeting or (2) the date on which notice of such adjourned
meeting is first given to stockholders. Each notice given by such stockholder
shall set forth: (A) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (B) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting (or if the record date for such
meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such meeting)
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (C) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (D) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors; and (E) the written consent of each
nominee to serve as a director of the Corporation is so elected. The Chairman of
the meeting may refuse to acknowledge the nomination of any person made without
compliance with the foregoing procedure.
Section 3.5 Vacancies and Newly Created Directorships. Any newly
created directorships or any vacancies on the Board resulting from death,
resignation, disqualification, removal or other cause, may be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board. Any director elected in accordance with
the preceding sentence shall hold office until the next annual meeting of
stockholders or until his successor has been duly elected and qualified, subject
to earlier death, resignation, disqualification or removal.
Section 3.6 Removal. Any director may be removed either for or without
cause at any special meeting of stockholders by the affirmative vote of a
majority in number of the stockholders present in person or represented by proxy
at such meeting and
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<PAGE> 11
entitled to vote for the election of such director, if notice of the intention
to act up such matter shall have been given in the notice calling such meeting.
Section 3.7 Compensation. Unless otherwise restricted by law, the
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix compensation of directors. The directors may be reimbursed
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid either a fixed sum for attendance at each meeting of the Board
of Directors and/or a stated salary as director. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of committees of the Board of Directors may be
allowed like compensation.
ARTICLE IV
Board Meetings
Section 4.1 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
determine. No notice shall be required for any regular meeting of the Board of
Directors, but a notice of the fixing or changing of the time or place of
regular meetings shall be mailed to every director at least five (5) days before
the first meeting held pursuant to the notice.
Section 4.2 Special Meetings. Special meetings of the Board of
Directors (i) may be called by the Chairman of the Board or President and (ii)
shall be called by the President or Secretary on the written request of two or
more directors. Notice of each special meeting of the Board of Directors shall
be given to each director at least 24 hours before the meeting if such notice is
delivered personally or by means of telephone, telegram, telex or facsimile
transmission and delivery; two (2) days before the meeting if such notice is
delivered by a recognized express delivery service; and three (3) days before
the meeting if such notice is delivered through the United States mail. Any and
all business may be transacted at a special meeting which may be transacted at a
regular meeting of the Board of Directors. Except as may be otherwise expressly
provided by law, the Certificate of Incorporation or these ByLaws, neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 4.3 Conduct of Meetings. The Chairman of the Board shall
preside at all meetings of the Board of Directors and shall determine the order
of business that shall be considered at such meetings. In the absence of the
Chairman of the Board, the President shall preside at all meetings of the Board
of Directors. In the absence of the President, a Chairman
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of the meeting shall be elected from the directors present. The Secretary of the
Corporation shall act as Secretary of all meetings of the directors, but in the
absence of the Secretary, the Chairman of the meeting may appoint any person to
act as Secretary of the meeting.
Section 4.4 Quorum, Required Vote. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law, the Certificate of Incorporation
or these By-Laws. If a quorum shall not be present at any meeting, a majority of
the directors present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present.
Section 4.5 Consent In Lieu of Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken by written consent in lieu of a meeting in accordance with
applicable provisions of law.
ARTICLE V
Committees of Directors
Section 5.1 Establishment; Standing Committees. The Board of Directors
may by resolution establish, name or dissolve one or more committees, each
committee to consist of one or more of the directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required. Such committees may include the following standing committees,
which committees, if established, shall have and may exercise the following
powers and authority:
Section 5.1.1. Finance Committee. The Finance Committee shall, from
time to time, meet to review the Corporation's consolidated operating and
financial affairs, both with respect to the Corporation and all of its
subsidiaries, and to report its findings and recommendations to the Board of
Directors for final action. The Financial Committee shall not be empowered to
approve any corporate action, of whatever kind or nature and the recommendations
of the Finance Committee shall not be binding on the Board of Directors, except
when, pursuant to the provisions of Section 5.2 of these By-Laws, such power and
authority have been specifically delegated to such committee by the Board of
Directors by resolution. In addition to the foregoing, the specific duties of
the Finance Committee shall be determined by the Board of Directors by
resolution.
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Section 5.1.2. Audit Committee. The Audit Committee shall, from time to
time, but no less than two times per year, meet to review and monitor the
financial and cost accounting practices and procedures of the Corporation and
all of its subsidiaries and to report its findings and recommendations to the
Board of Directors for final action. In addition, the Audit Committee shall
perform other accounting services for the Corporation to the Board of Directors
for submission to the stockholders for approval. The composition of the Audit
Committee shall meet the requirements of any national securities exchange or
national market system on which the Corporation lists any of its capital stock.
The Audit Committee shall not be empowered to approve any corporate action, of
whatever kind or nature, and the recommendations of the Audit Committee shall
not be binding on the Board of Directors, except when, pursuant to the
provisions of Section 5.2 of these By-Laws, such power and authority have been
specifically delegated to such committee by the Board of Directors by
resolution. In addition to the foregoing, the specific duties of the Audit
Committee shall be determined by the Board of Directors by resolution.
Section 5.1.3. Compensation Committee. The Compensation Committee
shall, from time to time, meet to review the various compensation plans,
policies and practices of the Corporation and all of its subsidiaries and to
report its findings and recommendations to the Board of Directors for final
action. The Compensation Committee shall not be empowered to approve any
corporate action, of whatever kind or nature, and the recommendations of the
Compensation Committee shall not be binding on the Board of Directors, except
when, pursuant to the provisions of Section 5.2 of these By-Laws, such power and
authority have been specifically delegated to such committee by the Board of
Directors by resolution. In addition to the foregoing, the specific duties of
the Compensation Committee shall be determined by the Board of Directors by
resolution.
Section 5.2. Available Powers. Any committee established pursuant to
Section 5.1 of these By-Laws, including the Finance Committee, the Audit
Committee and the Compensation Committee, but only to the extent provided in the
resolution of the Board of Directors establishing such committee or otherwise
delegating specific power and authority to such committee, and as limited by
law, the Certificate of Incorporation, and these By-Laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
Without limiting the foregoing, such committee may, but only to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 151(a) of the
General Corporation Law of the State of Delaware, fix any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the
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Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the company.
Section 5.3. Unavailable Powers. No committee of the Board of Directors
shall have the power or authority to amend the Certificate of Incorporation
(except in connection with the issuance of capital stock as provided in the
previous section); adopt an agreement of merger or consolidation; recommend to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, a dissolution of the Corporation or a
revocation of such a dissolution; amend the By-Laws of the Corporation; or,
unless the resolution establishing such committee or the Certificate of
Incorporation expressly so provides, declare a dividend, authorize the issuance
of stock or adopt a certificate of ownership and merger.
Section 5.4. Alternate Members. In the absence or disqualification of a
member of a committee, (i) the Board of Directors may designate one or more
directors as alternate members of any such committee or (ii) the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he 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; provided, however, that any person or
persons appointed pursuant to subparagraph (i) or (ii) are qualified to serve on
such committee in accordance with the resolutions establishing the same.
Section 5.5. Procedures. Time, place and notice, if any, of meetings of
a committee shall be determined by such committee. At meetings of a committee, a
majority of the number of members designated by the Board of Directors to serve
on such committee shall constitute a quorum for the transaction of business. The
act of a majority of the members present at any meeting at which a quorum is
present shall be the act of the committee, except as otherwise specifically
provided by law, the Certificate of Incorporation, these By-Laws or the
resolution or resolutions establishing such committee. If a quorum is not
present at a meeting of a committee, the members present may adjourn the meeting
from time to time, without notice other than an announcement at the meeting,
until a quorum is present.
ARTICLE VI
Officers
Section 6.1 Elected Officers. The Board of Directors shall elect a
President and a Secretary (collectively, the "Required Officers") and may elect
such other officers having
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the titles and duties set forth below which are not reserved from the Required
Officers or such other titles as the Board of Directors may by resolution from
time to time establish. The respective duties of the Required Officers or any
other officer, shall be defined by and subject to the description of such office
set forth below and by the resolution creating the same.
Section 6.1.1. Chairman of the Board. The Chairman of the Board, or in
his absence, the President, shall preside, when present, over all meetings of
the stockholders and the Board of Directors. The Chairman of the Board shall
advise and counsel the President and other officers and shall exercise such
powers and perform such duties as shall be assigned to or required of him from
time to time by the Board of Directors or these ByLaws. The Chairman of the
Board may execute bonds, mortgages and other contracts requiring a seal under
the seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed to another agent of the Corporation or where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The Chairman of the
Board may delegate all or any of his powers or duties to the President, if and
to the extent deemed by the Chairman of the Board to be desirable or
appropriate.
Section 6.1.2. President. The President shall be the chief executive
officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event of his inability or refusal to act, the President
shall perform the duties and exercise the powers of the Chairman of the Board.
Section 6.1.3. Chief Financial Officer. The Chief Financial Officer
shall be the principal financial officer of the Corporation and shall have such
powers and perform such duties as these By-Laws or the Board of Directors may
from time to time prescribe.
Section 6.1.4. Vice Presidents. In the absence of the President, or in
the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any such designation,
then in the order of their election or appointment) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all restrictions upon the President.
Section 6.1.5. Secretary. The Secretary shall keep in books provided
for that purpose the minutes of all meetings of the Board of Directors and of
all committees of the Board of Directors and the minutes of all meetings of the
stockholders;
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he shall attend to the giving or serving of all notices of the Corporation; he
may sign with the Chairman of the Board or the President or a Vice President, in
the name of the Corporation, all contracts when authorized so to do either
generally or in specific instances by the Board of Directors or by any committee
of the Board of Directors having the requisite authority and, when so ordered by
the Board of Directors or such committee, he shall affix the seal of the
Corporation thereto; he may sign with the Chairman of the Board, the President
or a Vice President certificate of shares of the capital stock; he shall have
charge of the stock certificate books, transfer books and stock ledgers and such
other books and papers as the Board of Directors shall direct, all of which
shall at all reasonable times be open to the examination of the independent
public accountants of the Corporation or any director, at the office of the
Corporation during business hours; and he shall in general perform all the
duties incident to the office of Secretary, subject to the control of the Board
of Directors.
Section 6.1.6. Assistant Secretaries. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries (in the order determined by
the Board of Directors or if there be no such determination, then in the order
of their election or appointment) shall, in the absence of the Secretary or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Secretary.
Section 6.1.7. Treasurer. The Treasurer shall have custody of all the
funds and securities of the Corporation which may come into his hands, and shall
deposit the same with such bank or banks or other depositary or depositaries as
the Board of Directors from time to time shall determine; he may endorse on
behalf of the Corporation for collection checks, notes and other obligations and
shall deposit the same to the credit of the Corporation; he may sign with the
Chairman of the Board or the President or a Vice President certificate for
shares of the capital stock; he shall enter or cause to be entered regularly int
he books of the Corporation full and accurate accounts of all moneys received
and paid on account for the Corporation and wherever required by the Board of
Directors shall render statements of such accounts; he shall, at all reasonable
times, exhibit his books and accounts to the independent public accountant of
the Corporation or to any director of the Corporation during business hours; and
he shall perform all acts incident of the office of Treasurer, subject to the
control of the Board of Directors.
Section 6.1.8. Assistant Treasurers. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers (in the order determined
by the Board of Directors or if there be no such determination, then in the
order of their election or appointment) shall, in the absence of the Treasurer
or in the event of his inability or refusal to act, perform the duties and
exercise the powers of the Treasurer.
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Section 6.1.9. Divisional Officers. Each division of the Corporation,
if any, may have a President, Secretary or Treasurer and one or move Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other assistant
officers. Any number of such officers may be held by the same person. Such
divisional officers will be appointed by, report to and serve at the pleasure of
the Board of Directors and such other officers that the Board of Directors may
place in authority over them. The officers of each division shall have such
authority with respect to the business and affairs of that division as may be
granted from time to time by the Board of Directors, and in the regular course
of business of such division may sign contracts and other documents in the name
of the division where so authorized; provided that in no case and under no
circumstances shall an officer of one division have authority to bind any other
division of the Corporation except as necessary in the pursuit of the normal and
usual business of the division of which he is an officer.
Section 6.2. Election. All officers shall serve until their successors
are duly elected and qualified or until their earlier death, disqualification,
retirement, resignation or removal from office.
Section 6.3. Appointed Officers. The Board of Directors may also
appoint or delegate the power to appoint such other officers, assistant officers
and agents, and may also remove such officers and agents or delegate the power
to remove same, as it shall from time to time deem necessary, and the titles and
duties of such appointed such officers may be as described in Section 6.1 for
elected officers; provided that the officers and any officer possessing
authority over or responsibility for any function of the Board of Directors
shall be elected officers.
Section 6.4. Multiple Officeholders, Stockholder and Director Officers.
Any number of officers may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide. Officers need not be
stockholders or residents of the State of Delaware. Officers, such as the
Chairman of the Board, possessing authority over or responsibility for any
function of the Board of Directors must be directors.
Section 6.5. Compensation Vacancies. The compensation of elected
officers shall be set by the Board of Directors. The Board of Directors shall
also fill any vacancy in an elected office. The compensation of appointed
officers and the filling of vacancies in appointed officers may be delegated by
the Board of Directors to the same extent as permitted by these By-Laws for the
initial filling of such offices.
Section 6.6. Additional Powers and Duties. In addition to the foregoing
especially enumerated powers and duties, the several elected and appointed
officers of the Corporation shall
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perform such other duties and exercise such further powers as may be provided by
law, the Certificate of Incorporation or these By-Laws or as the Board of
Directors may from time to time determine or as may be assigned to hem by any
competent committee or superior officer.
Section 6.7. Removal. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board of Directors.
Section 6.8. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board or the President, or any other officer
of the Corporation designated by the Chairman of the Board or the President,
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote in person or by proxy at any meeting of the holders of
securities of any corporation or entity in which the Corporation may own or hold
stock or other securities, and at any such meeting shall possess and may
exercise in person or by proxy any and all rights, powers and privileges
incident to the ownership of such stock or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The Chairman of the Board, the President or any other officer of the
Corporation designated by the Chairman of the Board or the President, may also
execute and deliver on behalf of the Corporation powers of attorney, proxies,
waivers of notice and other instruments relating to the stocks or securities
owned or held by the Corporation. The Board of Directors may, from time to time,
by resolution confer like powers upon any other person or persons.
ARTICLE VII
Share Certificates
Section 7.1. Entitlement to Certificates. Every holder of the capital
stock of the Corporation, unless and to the extent the Board of Directors by
resolution provides that any or all classes or series of stock shall be
uncertificated, shall be entitled to have a certificate, in such form as is
approved by the Board of Directors and conforms with applicable law, certifying
the number of shares owned by him.
Section 7.2. Multiple Classes of Stock. If the Corporation shall be
authorized to issue more than one class of capital stock or more than one series
of any class, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualification, limitations or restrictions of such preferences
and/or rights shall, unless the Board of Directors shall by resolution provide
that such class or series of stock shall be uncertificated, be set forth in full
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or summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, to the extent
allowed by law, in lieu of such statement, the face or back of such certificate
may state that the Corporation will furnish a copy of such statement without
charge to each requesting stockholder.
Section 7.3. Signatures. Each certificate representing capital stock of
the Corporation shall be signed by or in the name of the Corporation by (1) the
Chairman of the Board, the President or a Vice President; and (2) the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the
Corporation. The signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to hold such office before such
certificate is issued, it may be issued by the Corporation with the same effect
as if held such office on the date of issue.
Section 7.4. Issuance and Payment. Subject to the provisions of the
law, the Certificate of Incorporation or these By-Laws, shares may be issued for
such consideration and to such persons as the Board of Directors may determine
from time to time. Shares may not be issued until the full amount of the
consideration has been paid, unless upon the face or back of each certificate
issued to represent any partly paid shares of capital stock there shall have
been set forth the total amount of the consideration to be paid.
Section 7.5. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 7.6. Transfer of Stock. Upon surrender to the Corporation or
its transfer agent, if any, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer and of the payment of all taxes applicable to the transfer of said
shares, the Corporation shall be obligated to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books; provided, however, that
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the Corporation shall not be so obligated unless such transfer was made in
compliance with applicable state and federal securities laws.
Section 7.7. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, vote and be held liable for calls and
assessments and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person other than such
registered owner, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VIII
Indemnification
Section 8.1. General. The Corporation shall indemnify any person who
was or is 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 (other than an action by or in the right of the Corporation),
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of or in any other capacity with
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had not
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, have
reasonable cause to believe that his conduct was unlawful.
Section 8.2 Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of or in any other capacity with
another corporation,
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partnership, joint venture or trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 8.3 Board Determinations. Any indemnification under Section 8.1
and 8.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 8.1 and 8.2.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written
Section 8.4 Advancement of Expenses. Expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding shall (in the case of any action, suit or proceeding
against a director of the Corporation) or may (in the case of any pending
threatened action, suit or proceeding against an officer, employee or agent) 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,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized by law or in this Section.
Section 8.5 Nonexclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Section shall not be deemed
exclusive of any other rights which any director, officer, employee or agent of
the Corporation seeking indemnification or advancement of expenses may be
entitled under any other provision of these By-Laws or by the Certificate of
Incorporation, an agreement, a vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall, unless otherwise provided
when authorized or ratified, continue as to a person
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who has ceased to be a director, officer, employee or agent of the Corporation
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 8.6 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him any such capacity or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under provisions of the statutes, the
Certificate of Incorporation or this Section.
Section 8.7 Certain Definitions. For purposes of this Article VIII, (a)
references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, which, if its separate
existence had continued, would have the power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee, or agent of such constituent corporation, or is
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence had
continued; (b) references to "other enterprises" shall include employee benefit
plans; (c) references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and (d) references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
any employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Section.
Section 8.8 Change in Governing Law. In the event of any amendment or
addition to Section 145 of the General Corporation Law of the State of Delaware
or the addition of any other section to such law which shall limit
indemnification rights thereunder, the Corporation shall, to the extent
permitted by the General Corporation Law of the State of Delaware, indemnify to
the fullest extent authorized or permitted hereunder, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or
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proceeding, whether civil, criminal, administrative or investigative (including
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
ARTICLE IX
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
Section 9.1 Validity. Any contract or other transaction between the
Corporation and any of its directors, officers or stockholders (or any
corporation or firm in which any of them are directly or indirectly interested)
shall be valid for all purposes notwithstanding the presence of such director,
officer, or stockholder at the meeting authorizing such contract or transaction,
or his participation or vote in such meeting or authorization.
Section 9.2 Disclosure Approval. The foregoing shall, however, apply
only if the material facts of the relationship or the interest of each such
director, officer or stockholder is known or disclosed:
(1) to the Board of Directors and it nevertheless in good
faith authorizes or ratifies the contract or transaction by a majority
of the directors present, each such interested director to be counted
in determining whether a quorum is present but in calculating the
majority to carry the vote; or
(2) to the stockholders and they nevertheless in good faith
authorize or ratify the contract or transaction by a majority of the
shares present, each such interested stockholder to be counted for
quorum and voting purposes.
Section 9.3 Nonexclusive. This provision shall not be construed to
invalidate any contract or transaction which would be valid in the absence of
this provision.
ARTICLE X
MISCELLANEOUS
Section 10.1 Place of Meetings. All stockholders, directors and
committee meetings shall be held at such place or places, within or without the
State of Delaware, as shall be
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designated from time to time by the Board of Directors or such committee and
stated in the notices thereof. If no such place is so designated, said meetings
shall be held at the principal business office of the Corporation.
Section 10.2 Fixing Record Dates. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, to receive payment of any dividend or
other distribution or allotment of any rights, to exercise any rights in respect
of any change, conversion or exchange of stock or to effect any other lawful
action, or to make a determination of stockholders for any other proper purpose,
the Board of Directors may fix, in advance, a record date for any such
determination of stockholders, which shall not be more than sixty (60) nor less
than ten (1) days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. In the absence of any action
by the Board of Directors, the date on which a notice of meeting is given, or
the date the Board of Directors adopts the resolution declaring a dividend or
other distribution or allotment or approving any change, conversion or exchange,
as the case may be, shall be the record date. A record date validly fixed for
any meeting of stockholders and the determination of stockholders entitled to
vote at such meeting shall be valid for any adjournment of said meeting except
where such determination has been made through the closing of stock transfer
books and the stated period of closing has expired.
Section 10.3 Means of Giving Notice. Except as expressly provided
elsewhere herein, whenever under law, the Certificate of Incorporation or these
By-Laws, notice is required to be given to any director or stockholder, such
notice may be given in writing and delivered personally, through the United
States mail, by a recognized express of delivery service (such as Federal
Express) or by means of telegraph, telex, or facsimile transmission, addressed
to such director of stockholder at his address, telex or facsimile transmission
number, as the case may be, appearing on the records of the Corporation, with
postage and fees thereon prepaid. Such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail or with an
express delivery service or when transmitted, as the case may be.
Section 10.4 Waiver of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or of these
By-Laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein shall be deemed
equivalent to notice. Attendance of a person at a meeting of stockholders or of
directors or of a committee shall constitute waiver of notice of such meeting,
except where otherwise provided by law.
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<PAGE> 25
Section 10.5 Attendance via Communications Equipment. Unless otherwise
restricted by law, the Certificate of Incorporation or these By-Laws, members of
the Board of Directors or any committee thereof of the stockholders may hold a
meeting by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can effectively
communicate with each other. Such participation in a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 10.6 Dividends. Dividends on the capital stock of the
Corporation, paid in cash, property, or securities of the Corporation and as may
be limited by applicable law and applicable provisions of the Certificate of
Incorporation (if any), may be declared by the Board of Directors at any regular
or special meeting.
Section 10.7 Reserves. Before payment of any dividends, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in its absolute discretion,
think proper as a reserve or reserves to meet contingencies, for equalizing
dividends, for repairing or maintaining any property of the Corporation to be
distributed to stockholders, or for such other purpose as the Board of Directors
shall determine to be in the best interest of the Corporation; and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
Section 10.8 Reports to Stockholders. The Board of Directors shall
present at each annual meeting of stockholders, and at any special meeting of
stockholders when called for by vote of the stockholders, a statement of the
business and condition of the Corporation.
Section 10.9 Checks, Notes and Contracts. Checks and other orders for
the payment of money shall be signed by such person or persons as the Board of
Directors shall from time to time by resolution determine. Contracts and other
instruments or documents may be signed in the name of the Corporation by the
Chairman of the Board or the President or by any other officer authorized to
sign such contract, instrument or document by the Board of Directors, and such
authority may be general or confined to specific instances.
Checks and other orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation, with a
depositary authorized by resolution of the Board of Directors, by the Chief
Financial Officer or Treasurer or such other persons as the Board of Directors
may from time to time by resolution determine.
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<PAGE> 26
Section 10.10 Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do by the Board of Directors, any officer or
agent of the Corporation may effect loans and advances for the Corporation from
any bank, trust company or other institution or from any firm, corporation or
individual, and for such loans and advances may make, execute and delivery
promissory notes, bonds or other evidences of indebtedness of the Corporation.
When authorized so to do by the Board of Directors, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the payment of
any and all loans, advances, indebtedness and liabilities of the Corporation,
any and all stocks, securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
Section 10.11 Fiscal Year. The fiscal year of the Corporation shall be
the 52-53 week period ending on the Sunday closest to the end of each calendar
year.
Section 10.12 Seal. The seal of the Corporation shall being such form
as shall from time to time be adopted by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or otherwise
reproduced.
Section 10.13 Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its stockholders, Board of Directors and committees and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names and
addressed of all stockholders and the number and class of the shares held by
each.
Section 10.14 Resignation. Any director, committee member, officer or
agent may resign by giving written notice to the Chairman of the Board, the
President or the Secretary. The resignation shall take effect at the time
specified herein, or immediately if no time is specified. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 10.15 Surety Bonds. Such officers and agents of the Corporation
(if any) as the President or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation, retirement,
disqualification or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in their possession or under their control
belonging to the Corporation, in such amounts and by such surety companies as
the president or the Board of Directors may determine. The premiums
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<PAGE> 27
on such bonds shall be paid by the Corporation and the bonds so furnished shall
be in the custody of the Secretary.
Section 10.16 Amendments. These By-Laws may from time to time be
altered, amended or repealed and new By-Laws may be adopted, as provided in the
Certificate of Incorporation.
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<PAGE> 1
EXHIBIT 3.3
EXECUTION COPY
INTERMEDIA CAPITAL PARTNERS IV, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of March 19, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Formation of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Term of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 Capital Contributions, Withdrawals and Capital Accounts . . . . . . . . . . . . . . . . . . . . 3
2.1 Contributions of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) General Partner as Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Additional Contributions by Limited Partners . . . . . . . . . . . . . . . . . . . . . 3
(e) Additional Contributions by General Partner . . . . . . . . . . . . . . . . . . . . . . 4
(f) Payment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(g) General Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) Limited Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) Return of Certain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Withdrawals of Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Withdrawals in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Required Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Effective Date of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Effect of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Limitations on Withdrawal of Capital Account . . . . . . . . . . . . . . . . . . . . . 6
(f) Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 Profits and Losses; Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 Management of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Management Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Specific Authority of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Revaluation of Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Management Fee and General Partner Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) General Partner Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Rights of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) No Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
(d) Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Dissolution or Bankruptcy of a Limited Partner . . . . . . . . . . . . . . . . . . . 21
4.8 Successor General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Removal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Withdrawal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Provision Regarding Approvals by the Limited Partners. . . . . . . . . . . . 23
(d) Right To Recover Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Sale Initiation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Nonvoting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 Tax Matters and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 Tax Reports to Current and Former Partners . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3 Restriction on General Partner Activity With Respect to Publicly Traded Partnerships . . . . . 27
5.4 Duties and Obligations of the General Partner With Respect to Publicly Traded Partnerships . . 27
5.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 Conflicts of Interest; Indemnification; Exculpation . . . . . . . . . . . . . . . . . . . . . 28
6.1 Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Contracts With the General Partner, Affiliates and Limited Partners . . . . . . . . . . . . . 29
6.3 Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7 Termination and Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 No Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Order of Liquidating Payments and Distributions . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Orderly Methods of Liquidating Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8 Transfer of Interest, Failure To Pay Capital Contributions, Beneficial Owners . . . . . . . . 35
8.1 Transfer of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Transfer of IP Holdings Affiliates' Interests . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Failure To Pay Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Increase in Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
9.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.7 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.8 Confidentiality of Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.11 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.12 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13 Nonrecourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.14 Foreign Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
-iii-
<PAGE> 5
DEFINITIONS
Term Section
- ---- -------
1933 Act . . . . . . . . . . . . . . .Legend No. 1
Act . . . . . . . . . . . . . . . . . .1.1
Adjacent Systems . . . . . . . . . . .6.1
Advisory Committee . . . . . . . . . .4.7(d)
Adverse Regulatory Development . . . .7.6(b)
Affected Partner . . . . . . . . . . .7.6(b)
AVR . . . . . . . . . . . . . . . . . .Exhibit 2
BHC LP . . . . . . . . . . . . . . . .4.10
Capital Account . . . . . . . . . . . .2.3
Code . . . . . . . . . . . . . . . . .2.3
FRB . . . . . . . . . . . . . . . . .4.10
General Partner . . . . . . . . . . . .Preamble
Greenville/Spartanburg . . . . . . . .Exhibit 1 Note 5
Contribution Agreement
IMI . . . . . . . . . . . . . . . . . .6.2
Income Tax Regulations . . . . . . . .2.3
Indemnified Person . . . . . . . . . .8.2(a)
Indemnifying Person . . . . . . . . .8.2(a)
Interests . . . . . . . . . . . . . . .Legend No. 1
Investing Partnership . . . . . . . . .1.5(a)
Investment Company Act . . . . . . . .2.2(b)
IP . . . . . . . . . . . . . . . . . .Exhibit 1 Note 3
IP-IV . . . . . . . . . . . . . . . . .1.5(a)
IPSE . . . . . . . . . . . . . . . . .Exhibit 2
IPWT Contribution Agreement . . . . . .Exhibit 1 Note 3
IPWT . . . . . . . . . . . . . . . . .Exhibit 1 Note 3
Exhibit 2
Management Fee . . . . . . . . . . . .4.6(a)
New Partner . . . . . . . . . . . . . .2.1(f)
Net Loss . . . . . . . . . . . . . . .3.1(j)(4)
Nonvoting Interests . . . . . . . . .4.10
Notice Date . . . . . . . . . . . . . .4.9(d)
Override Tax Distributions . . . . . .2.1(i)(B)
Partnership . . . . . . . . . . . . . .1.1
Partnership Interest . . . . . . . . .3.1(a)
Preferred Return . . . . . . . . . . .3.3(d)(1)
Regulatory Change . . . . . . . . . . .7.6(b)
Retrievable Tax Benefit . . . . . . . .2.1(i)(B)
RMG . . . . . . . . . . . . . . . . . .Exhibit 2
Shortfall . . . . . . . . . . . . . . .2.1(i)
Systems . . . . . . . . . . . . . . . .Exhibit 1 Note 5
TCI Entities . . . . . . . . . . . . .Exhibit 1 Note 5
TCI . . . . . . . . . . . . . . . . . .4.7(b)(vii)
The Cablevision Company . . . . . . . .Exhibit 2
-iv-
<PAGE> 6
INTERMEDIA CAPITAL PARTNERS IV, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
THE LIMITED PARTNERSHIP INTERESTS ("INTERESTS") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). SUCH
INTERESTS ARE BEING OFFERED AND SOLD UNDER THE EXEMPTION PROVIDED BY SECTION
4(2) OF THE 1933 ACT AND/OR PURSUANT TO RULE 506 OF REGULATION D THEREUNDER.
A PURCHASER OF ANY INTEREST MUST BE PREPARED TO BEAR THE ECONOMIC RISK
OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE INTERESTS HAVE
NOT BEEN REGISTERED UNDER THE 1933 ACT AND, THEREFORE, CANNOT BE SOLD UNLESS
THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THERE IS NO OBLIGATION OF THE PARTNERSHIP TO REGISTER THE INTERESTS UNDER THE
1933 ACT.
THE AGREEMENT RESTRICTS TRANSFER OF THE INTERESTS. ACCORDINGLY,
PURCHASE OF THE INTERESTS IS ONLY SUITABLE FOR INVESTORS WILLING AND ABLE TO
ACCEPT THE ECONOMIC RISK OF THE INVESTMENT AND LACK OF LIQUIDITY.
* * *
THIS AGREEMENT OF LIMITED PARTNERSHIP is entered into as of March 19,
1996 by and among INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a California limited
partnership, as general partner (the "General Partner"), GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation ("GECC") as the preferred limited
partner (the "Preferred Limited Partner") with respect to, and only with respect
to, a portion of its interest and as a limited partner with respect to the
remainder of its interest, all as set forth on Exhibit 1 hereto, and the limited
partners listed on the signature pages hereto, who together with such other
persons or entities who hereafter shall be admitted as additional or substituted
limited partners pursuant to the terms hereof, all of which shall be listed on
Exhibit 1 hereto, collectively shall be referred to as the "Limited Partners."
Unless otherwise specifically set forth herein, the term Limited Partners shall
include the Preferred Limited Partner. The General Partner and the Limited
Partners are collectively referred to as the Partners and individually as a
Partner. In consideration of the mutual promises and agreements herein made and
intending to be legally bound, the Partners hereby agree as follows:
<PAGE> 7
ARTICLE 1
General Provisions
1.1 Formation of the Partnership. The Partners hereby form a limited
partnership (the "Partnership") pursuant to the California Revised Limited
Partnership Act (the "Act"). The Partnership shall continue without interruption
as a limited partnership pursuant to the Act. The persons and entities listed as
Limited Partners on Exhibit 1 to this Agreement shall be admitted to the
Partnership as Limited Partners upon their execution of this Agreement.
1.2 Name. The name of the Partnership shall be: InterMedia Capital
Partners IV, L.P. The name of the Partnership may be changed by the General
Partner upon compliance with applicable laws and after notice by the General
Partner to the Limited Partners.
1.3 Principal Place of Business. The principal place of business of the
Partnership shall be 235 Montgomery Street, Suite 420, San Francisco, California
94104. The principal place of business of the Partnership may be changed by the
General Partner after notice to the Limited Partners.
1.4 Agent for Service of Process. The agent for service of process for
the Partnership and his address shall be Leo J. Hindery, Jr., 235 Montgomery
Street, Suite 420, San Francisco, CA 94104. The agent for service of process of
the Partnership may be changed by the General Partner upon notice to the Limited
Partners.
1.5 Business of the Partnership.
(a) The Partnership is organized for the purpose of directly or
indirectly making equity and debt investments in, including acting as a general
partner and/or a limited partner of InterMedia Partners IV, L.P., a California
limited partnership ("IP-IV") and various partnerships which operate cable
television systems (each an "Investing Partnership"), and operating cable
television systems and to engage in all necessary and appropriate activities and
transactions as the General Partner may deem necessary, appropriate or advisable
in connection therewith, provided, however, the Partnership will not make any
investments, nor maintain any offices outside of the United States. Prior to
January 1, 1996, the Partnership had no material assets or liabilities and had
not engaged in any material business activities.
(b) Pending the investment of Partnership funds as described in Section
1.5(a), and the distribution of funds as described in Section 3.3, the
Partnership may invest in certificates of deposit and overnight time deposits in
commercial banks with capital and surplus over $500 million, commercial
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paper, money market funds, repurchase agreements and U.S. Treasury bills and
other government obligations and any other short-term, investment grade highly
liquid investments.
(c) The Partnership may enter into, deliver and perform all contracts,
agreements and other undertakings and engage in all activities and transactions
that are necessary or appropriate to carry out the foregoing purposes. Without
limiting the foregoing, the Partnership may:
(i) exercise all rights, powers, privileges, and other
incidents of ownership or possession with respect to Partnership
property and investments;
(ii) borrow or raise money and secure the payment of any
obligations of the Partnership, IP-IV or an Investing Partnership by
mortgage upon, or pledge or hypothecation of, all or any part of the
assets of the Partnership, IP-IV or an Investing Partnership;
(iii) engage personnel, whether part-time or full-time and do
such other acts as the General Partner may reasonably deem necessary or
advisable in connection with the maintenance and administration of the
Partnership, IP-IV or an Investing Partnership and their investments;
and
(iv) engage attorneys, independent accountants, investment
bankers, consultants or such other persons for the Partnership, IP-IV
or an Investing Partnership as the General Partner may deem necessary
or advisable.
1.6 Term of the Partnership. The term of the Partnership shall be from
the date the Certificate of Limited Partnership was filed with the California
Secretary of State until December 31, 2007, unless the Partnership is earlier
dissolved pursuant to Article 7.
ARTICLE 2
Capital Contributions, Withdrawals and Capital Accounts
2.1 Contributions of Capital.
(a) In General. The committed capital contributions of the Partners
shall be contributed in cash, in the respective amounts set forth next to each
Partner's name on Exhibit 1 attached hereto in the manner provided by Section
2.1(f). Notwithstanding the foregoing, committed capital contributions shall be
contributed in the form of property pursuant to the Greenville/Spartanburg
Contribution Agreement and the IPWT
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Contribution Agreement (both as defined on Exhibit 1 hereto). The General
Partner shall contribute an amount of capital to the Partnership such that the
General Partner's capital contribution will be at least one percent (1%) of the
aggregate capital contributions of all of the Partners, a portion of which may
be contributed in the form of a note as set forth on Exhibit 1 hereto.
(b) General Partner as Limited Partner. The General Partner shall also
be a Limited Partner to the extent that it purchases an interest as a Limited
Partner or it purchases or becomes a transferee of all of or any part of the
interest of a Limited Partner, and to such extent shall be treated in all
respects as a Limited Partner, and the consent of the Limited Partners to such a
purchase or transfer and admission of the General Partner as a Limited Partner
need not be obtained; provided, however, the General Partner shall not be
entitled to consent as a Limited Partner on those matters set forth in Section
4.7(b)(iv). The General Partner's capital contributions referred to in Sections
2.1(a) and 2.1(e) hereof will be made in its capacity as the General Partner and
such capital contribution as the General Partner will not entitle the General
Partner to any rights of a Limited Partner.
(c) Additional Limited Partners. Until the aggregate committed capital
contributions to the Partnership total $335,000,000 (not including the preferred
limited partner interest of the Preferred Limited Partner), and subject to the
condition that each new Limited Partner shall execute a signature page of this
Agreement, which execution shall be deemed to represent the execution of a
counterpart of this Agreement, and certain other agreements in connection with
its subscription, and such Limited Partner meets the suitability requirements
imposed on the original Limited Partners pursuant to the subscription
agreements, the General Partner may admit one or more additional Limited
Partners and may appropriately amend this Agreement to reflect such admissions,
only with the consent of seventy percent (70%) in interest of the Limited
Partners. Admission of a new Limited Partner shall not be a cause for
dissolution of the Partnership. Upon the aggregate committed capital
contributions to the Partnership equaling $335,000,000 (not including the
preferred limited partner interest of the Preferred Limited Partner), the
General Partner may admit any additional Limited Partners to increase the
aggregate committed capital contributions beyond $335,000,000 only with the
consent of one hundred percent (100%) in interest of the Limited Partners or
accept any additional commitment to make capital contributions from the Limited
Partners only with the consent of ninety percent (90%) in interest of the
Limited Partners; provided, however, that the General Partner shall offer, on a
pro rata basis, preemptive rights in connection with any additional cash capital
contributions to the existing Limited Partners and any such additional
commitments to make cash capital contributions shall be on terms no more
favorable
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than those offered to the existing Limited Partners. The Limited Partners will
have fifteen (15) days from the date of the written notice to exercise such
preemptive rights.
(d) Additional Contributions by Limited Partners. Until the aggregate
committed capital contributions to the Partnership total $335,000,000 (not
including the preferred limited partner interest of the Preferred Limited
Partner), the General Partner shall permit one or more Limited Partners to make
additional contributions to the Partnership until July 31, 1997 and may
appropriately amend this Agreement to reflect such additional contributions,
without the consent of any Limited Partner. A Partner which desires to make such
additional contributions during such period shall notify the General Partner of
its desire to do so not later than fifteen (15) days before such proposed
contribution.
(e) Additional Contributions by General Partner. The General Partner
shall from time to time make additional capital contributions to the extent
required to cause its aggregate capital contributions to equal at least one
percent (1%) of the aggregate capital contributions of all Partners. Any such
additional capital contribution required of the General Partner shall be made
within ten (10) days of the capital contribution of the Limited Partner(s)
giving rise to such requirement.
(f) Payment of Capital Contributions. The capital contributions to be
contributed in the form of property pursuant to the Greenville/Spartanburg
Contribution Agreement or the IPWT Contribution Agreement shall be made at the
time and in the manner set forth in those agreements which in the case of the
Partners contributing assets pursuant to those agreements shall represent their
entire commitment. In no event shall the TCI Entities be required to contribute
more than forty-nine percent (49%) of the total capital contributions to the
Partnership (excluding the capital contributions of the Preferred Limited
Partner with respect to the Preferred Limited Partnership Interest). Except as
otherwise agreed to by the Partnership and any Partner, the provisions of this
Section 2.1(f) shall apply to all committed capital contributions to be made in
cash. Included in the first capital call by the Partnership, the Partners will
pay the portion of their committed capital contributions necessary to pay the
organizational expenses of the Partnership up to a maximum of $300,000 (in
aggregate). The committed capital contributions of the Limited Partners shall be
paid on fifteen (15) business days written notice in the following manner: (i)
as the General Partner determines is necessary or appropriate for meeting the
funding requirements of the Partnership or to comply with the Partnership's
obligations to make capital contributions to IP-IV or any Investing Partnership,
(ii) commencing on January 1, 1996, on the first day of each calendar quarter of
each year to the extent determined necessary by the General Partner for the
payment of Partnership expenses or the reimbursement of the General Partner
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for Partnership expenses described in Section 3.2; and (iii) as necessary to pay
the Management Fee as set forth in Section 4.6. The amount to be paid by each
Partner in respect of each such capital call shall be determined by first
requiring any additional Partner admitted to the Partnership pursuant to Section
2.1(c) (and any other Partner to the extent of any non-pro rata increase in its
capital commitment pursuant to Section 2.1(d)) ("New Partner") to pay an amount
such that the proportion of capital contributions paid by such New Partner in
relation to the committed capital contributions of such New Partner is the same
as the proportion of capital contributions previously made by the other
Partners, other than Partners who contributed property pursuant to the
Greenville/Spartanburg Contribution Agreement and the IPWT Contribution
Agreement, in relation to the committed capital contributions of such other
Partners, and then by dividing each Partner's committed capital contribution by
the aggregate committed capital contributions of all the Partners and
multiplying such fraction by the total remaining amount of capital to be called.
In the event a Partner executes and contributes a promissory note in respect of
its capital commitment, any payment of principal pursuant to such note shall
constitute a funding of its capital contribution. No capital contributions for
the Partnership or for investments in Investing Partnerships will be called by
the General Partner after December 31, 2000. References herein to a Partner's
capital contribution shall mean the amount of cash or the principal amount of
any note contributed by the General Partner or the value of property contributed
as set forth in the Greenville/Spartanburg Contribution Agreement or the IPWT
Contribution Agreement.
(g) General Partner Obligations. The General Partner shall not be
personally obligated to contribute cash or other assets to the Partnership to
make up any reduction in the Capital Accounts of the Limited Partners either
during the term of the Partnership or upon dissolution, subject to the
obligation of the General Partner to return to the Partnership certain
distributions as provided in the Act.
(h) Limited Partner Obligations. Limited Partners shall not be
personally obligated for the debts, liabilities and obligations of the
Partnership or of any other Partner, except that, any other provision of this
Agreement to the contrary notwithstanding, each Limited Partner shall only be
obligated to make its full capital contribution to the Partnership in the amount
set forth in Exhibit 1 hereto to the extent required by this Section 2.1, and
each Limited Partner (and any former Limited Partner) shall be obligated to
return to the Partnership distributions only to the extent provided in section
15666 of the Act.
(i) Return of Certain Distributions. If upon the liquidation of the
Partnership pursuant to Section 7.3 hereof, the Partners have not received the
full amount described in
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Sections 3.3(d)(1), 3.3(d)(2) and 3.3(d)(3) hereof (such deficiency being
referred to as the "Shortfall"), then notwithstanding anything in this Agreement
to the contrary, including Section 2.1(g), the General Partner shall be
obligated to contribute to the Partnership the lesser of:
(A) the amount necessary to provide the Partnership with
sufficient funds to allow the Partnership to make distributions in an
amount equal to the Shortfall; and
(B) an amount equal to the sum of all distributions made to
the General Partner pursuant to Section 3.3(a) which are attributable
to allocations of income and gain pursuant to Section 3.1(k)(5)(A)
("Override Tax Distributions"), but not in excess of the Retrievable
Tax Benefit.
For purposes of this Section 2.1(i), the term "Retrievable Tax Benefit" means an
amount equal to the excess, if any, of the Override Tax Distributions over the
General Partner's net aggregate actual tax liability arising out of allocations
of income and gain pursuant to Section 3.1(k)(5)(A). Such tax liability shall be
computed by taking into account any offsets, allowable for Federal income tax
purposes, against such allocations for (y) allocations of loss and deduction to
the General Partner pursuant to Section 3.1(j)(4)(A) and (z) any loss or
deduction arising out of any payment to be made under this Section 2.1(i).
2.2 Withdrawals of Capital Accounts. No Partner shall be entitled to
withdraw any amount from its Capital Account, other than as provided in this
Section 2.2.
(a) Withdrawals in General. A Limited Partner may not withdraw from the
Partnership in whole or in part prior to dissolution of the Partnership, except
(i) as required by Section 2.2(b), or (ii) with the unanimous written consent of
all of the Partners. In the event a Limited Partner elects to withdraw with the
consent of the Partners, or upon withdrawal of a Limited Partner pursuant to
Section 2.2(b), the Partnership Interest of such Limited Partner shall be
withdrawn in its entirety and shall be valued pursuant to Section 4.4 as of the
date of withdrawal. Notwithstanding the foregoing, the value of the Preferred
Limited Partnership Interest shall be deemed to be the amount of such Partner's
Capital Contribution plus the Preferred Return, reduced by any distributions
received by the Preferred Limited Partner prior to such valuation. The Capital
Account of such withdrawing Limited Partner shall be paid for in the manner
provided in this Section 2.2(a) as expeditiously as possible, at a time
determined by the General Partner. The General Partner shall not be required to
sell, liquidate, pledge or encumber any Partnership asset or security to effect
such withdrawal. The General Partner shall have sole discretion to
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make the payment in respect of the Capital Account of any withdrawing Limited
Partner in cash or, at the option of the General Partner, with a promissory note
bearing interest at a rate per annum equal to the rate announced from time to
time by Bank of America NT&SA as its prime rate. The promissory note will be
payable only after the payment of all third party debt and payment of preferred
return to the Preferred Limited Partner and any payments on such promissory
notes will be paid pari passu with payments due to the other Partners (excluding
the Preferred Limited Partner) with respect to the event giving rise to such
payment to the withdrawing Limited Partner upon the earlier of (i) final
dissolution of the Partnership, (ii) sale of all or substantially all of the
Partnership's assets, or (iii) December 31, 2007. For purposes of the foregoing,
the amount to be paid pari passu shall be determined by treating the amount that
would have been paid to each Partner if no payment were made to the withdrawing
Partner as if it also were represented by a promissory note and pro rating the
amount available for distribution to each Partner and withdrawing Partner on
that basis. Any portion of any payments made to a withdrawing Limited Partner in
kind pursuant to this Section 2.2 shall be made, based upon the balance in a
Partner's Capital Account as of the date of withdrawal, ratably in proportion to
the value that each security or asset then held by the Partnership, including
any interest in an Investing Partnership, determined pursuant to Section 4.4,
bears to the value of all assets of the Partnership determined pursuant to
Section 4.4.
(b) Required Withdrawals. The General Partner may terminate the
interest of any Limited Partner in the Partnership, with cause, at the end of
any calendar month upon fifteen (15) days prior written notice. For purposes of
this Agreement, "cause" shall be determined by the General Partner and shall
mean the following: (i) the continued participation of such Limited Partner is
likely, in the sole judgment of the General Partner, to cause the Partnership or
the General Partner to register as an investment company or elect to be a
"business development company" under the Investment Company Act of 1940 (the
"Investment Company Act"), the General Partner or any of its partners to
register as an investment adviser under the Investment Advisers Act of 1940, or
the Partnership or any Partner to violate any law, or (ii) such Limited Partner
fails to make a required capital contribution and the General Partner requires
withdrawal pursuant to Section 8.4(b). Notwithstanding the foregoing,
termination of the Partnership Interest of any Limited Partner as the result of
an Adverse Regulatory Development (as defined in Section 7.6(b)) shall be
treated as set forth in Section 7.6.
(c) Effective Date of Withdrawal. For purposes of this Agreement, the
effective date of a Partner's withdrawal shall mean the last day of the calendar
month in which the General Partner consents to such withdrawal pursuant to
Section 2.2(a)
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or such Partner's notice period lapses pursuant to Section 2.2(b).
(d) Effect of Withdrawal. In the event of the withdrawal of any Limited
Partner pursuant to this Section 2.2, the withdrawing Limited Partner shall not
otherwise share in the income, gains and losses of the Partnership from the
valuation date of its Partnership Interest and shall not have any other rights
under this Agreement other than payment to it of its Capital Account as revalued
pursuant to Section 4.5. The interest of a Limited Partner who withdraws
pursuant to this Section 2.2 shall not thereafter be included in calculating the
percentage in interest of the Limited Partners required to take any action under
this Agreement.
(e) Limitations on Withdrawal of Capital Account. The right of any
withdrawn Partner or its legal representatives to have distributed the Capital
Account of such Partner pursuant to this Section 2.2 is subject to the provision
by the General Partner for all Partnership liabilities in accordance with
section 15666 of the Act, and for estimates for contingencies and expenses. The
unused portion of any such estimates shall be distributed after the General
Partner shall have determined that the need therefor shall have ceased.
(f) Interest on Capital Accounts. No interest or compensation shall be
paid on or with respect to the Capital Account or capital contributions of any
of the Partners, except as otherwise expressly provided herein.
2.3 Capital Accounts. The Partnership shall maintain for each Partner a
separate capital account (a "Capital Account") in accordance with the capital
accounting rules of section 704(b) of the Internal Revenue Code of 1986 (the
"Code"), and the regulations thereunder (the "Income Tax Regulations")
(including particularly section 1.704-1(b)(2)(iv) of the Income Tax
Regulations).
(a) In general, under such capital accounting rules (but subject to any
contrary requirements of the Code and the Income Tax Regulations), a Partner's
Capital Account shall be (i) increased by the amount of money and the fair
market value (determined in accordance with Section 4.4 or as otherwise provided
in the Greenville/Spartanburg Contribution Agreement or the IPWT Contribution
Agreement) of other property (net of liabilities secured by such contributed
property that the Partnership is considered to take
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subject to or assume under section 752 of the Code) contributed by the Partner
to the Partnership and allocations to the Partner of Partnership income and gain
(or items thereof), including income and gains exempt from tax, and (ii)
decreased by the amount of money and the fair market value (determined in
accordance with Section 4.4) of other property distributed (net of liabilities
secured by such distributed property that the Partner is considered to take
subject to or assume under section 752 of the Code) to the Partner by the
Partnership and allocations to the Partner of Partnership loss and deduction (or
items thereof), including Partnership expenditures not deductible in computing
its taxable income and not properly chargeable to Capital Account. For purposes
of making allocations of all items of income, gain, loss and deduction and for
purposes of crediting or charging distributions to Capital Accounts, the
Preferred Limited Partner shall be considered to have a Capital Account separate
and distinct from its Capital Account attributable to its additional interest as
a Limited Partner.
(b) When Partnership property is revalued by the General Partner
pursuant to Section 4.5 or distributed in kind (whether in connection with
dissolution and liquidation of the Partnership or otherwise), the Capital
Accounts of the Partners first shall be adjusted to reflect the manner in which
the unrealized income, gain, loss or deduction inherent in such property (that
has not previously been allocated to Capital Accounts) would be allocated among
the Partners if there were a taxable disposition of such property for its fair
market value (determined in accordance with Section 4.4 and taking into account
section 7701(g) of the Code) and such income, gain, loss or deduction had been
recognized for federal income tax purposes immediately upon such distribution or
the event requiring such revaluation.
(c) Where section 704(c) of the Code applies to Partnership property or
when Partnership property is revalued pursuant to section 1.704-1(b)(2)(iv)(f)
of the Income Tax Regulations, Capital Accounts of the Partners shall be
adjusted in accordance with section 1.704-1(b)(2)(iv)(g) of the Income Tax
Regulations as to allocations to the Partners of depreciation, depletion,
amortization and gain or loss, as computed for book purposes with respect to
such property.
(d) The General Partner shall direct the Partnership's accountant to
make all necessary adjustments in each Partner's Capital Account as required by
the rules of section 704(b) of the Code and the regulations thereunder.
ARTICLE 3
Profits and Losses; Distributions
3.1 Profits and Losses. A Partner's distributive share of the
Partnership's total income, gain, loss, deduction or credit (or items thereof),
which total shall be as shown on the annual federal income tax return prepared
by the Partnership's accountants or as finally determined by the Internal
Revenue Service or the courts, and as modified by the capital accounting rules
of section 704(b) of the Code and the Income Tax Regula-
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tions thereunder as implemented by Section 2.3, as applicable, shall be
determined as provided in this Section 3.1.
(a) Except as otherwise provided in this Section 3.1, items of
Partnership income, gain, loss, deduction and credit shall be allocated among
the Partners in proportion to their respective actual capital contributions
(each, a "Partnership Interest").
(b) Solely for tax purposes, in determining each Partner's allocable
share of the taxable income or loss of the Partnership, depreciation, depletion,
amortization and gain or loss with respect to any contributed property, or with
respect to revalued property where Partnership property is revalued pursuant to
section 1.704-1(b)(2)(iv)(f) of the Income Tax Regulations, shall be allocated
to the Partners under the remedial method as provided in section 1.704-3(d) of
the Income Tax Regulations.
(c) Notwithstanding anything to the contrary in this Section 3.1, if
there is a net decrease in Partnership Minimum Gain or Partner Nonrecourse Debt
Minimum Gain (as such terms are defined in sections 1.704-2(b) and
1.704-2(i)(2), respectively, of the Income Tax Regulations) during a Partnership
taxable year, then each Partner shall be allocated items of Partnership income
and gain for such year (and, if necessary, for subsequent years), to the extent
required by, and in the manner provided in, section 1.704-2 of the Income Tax
Regulations. This provision is intended to be a "minimum gain chargeback" within
the meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax
Regulations and shall be interpreted and implemented as therein provided.
(d) Subject to the provisions of Section 3.1(c), but otherwise
notwithstanding anything to the contrary in this Section 3.1, if any Partner's
Capital Account has a deficit balance in excess of such Partner's obligation to
restore its Capital Account balance, computed in accordance with the rules of
section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations (including such
Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
Gain as provided in sections 1.704-2(g) and 1.704-2(i)(5) of the Income Tax
Regulations), then sufficient amounts of income and gain (consisting of a pro
rata portion of each item of Partnership income, including gross income, and
gain for such year) shall be allocated to such Partner in an amount and manner
sufficient to eliminate such deficit as quickly as possible. This provision is
intended to be a "qualified income offset" within the meaning of section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and shall be interpreted and
implemented as therein provided.
(e) Subject to the provisions of section 704(c) of the Code, Sections
3.1(b) through 3.1(d) and Sections 3.1(k)(1) and 3.1(l)(1) hereof, gain
recognized (or deemed recognized under
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the provisions hereof) upon the sale or other disposition of Partnership
property, which is subject to depreciation recapture, shall be allocated to the
Partner who was entitled to deduct such depreciation.
(f) Except as otherwise provided in Section 3.1(j), if and to the
extent any Partner is deemed to recognize income as a result of any loans
described herein pursuant to the rules of sections 1272, 1273, 1274, 1274A,
7872, 482 or 483 of the Code, or any similar provision now or hereafter in
effect, any corresponding resulting deduction of the Partnership shall be
allocated to the Partner who is charged with the income. Subject to the
provisions of section 704(c) of the Code and Sections 3.1(b) through 3.1(d)
hereof, if and to the extent the Partnership is deemed to recognize income as a
result of any loans described herein pursuant to the rules of sections 1272,
1273, 1274, 1274A, 7872, 482 or 483 of the Code, or any similar provision now or
hereafter in effect, such income shall be allocated to the Partner who is
entitled to any corresponding resulting deduction.
(g) Except as otherwise required by law, tax credits shall be allocated
among the Partners pro rata in accordance with the manner in which Partnership
profits are allocated to the Partners under this Section 3.1, as of the time the
credit property is placed in service or if no property is involved, as of the
time the credit is earned. Recapture of any tax credit required by the Code
shall be allocated to the Partners in the same proportion in which such tax
credit was allocated.
(h) Except as provided in Sections 3.1(f) and 3.1(g) or as otherwise
required by law, if the Partnership Interests of the Partners are changed
hereunder during any taxable year, all items to be allocated to the Partners for
such entire taxable year shall be prorated on the basis of the portion of such
taxable year which precedes each such change and the portion of such taxable
year on and after each such change according to the number of days in each such
portion, and the items so allocated for each such portion shall be allocated to
the Partners in the manner in which such items are allocated as provided in this
Section 3.1 during each such portion of the taxable year in question.
(i) Any special allocation of income or gain pursuant to Section 3.1(d)
shall be taken into account in computing subsequent allocations of income and
gain pursuant to this Section 3.1 so that the net amount of all such allocations
to each Partner shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Partner pursuant to the provisions of
this Section 3.1 if such special allocations of income or gain under Section
3.1(d) had not occurred.
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(j) (1) Items of deduction and loss attributable to recourse
liabilities of the Partnership (within the meaning of section 1.752-1(a)(1) of
the Income Tax Regulations but excluding Partner nonrecourse debt within the
meaning of section 1.704-2(b)(4) of the Income Tax Regulations) shall be
allocated among the Partners in accordance with the ratio in which the Partners
share the economic risk of loss (within the meaning of section 1.752-2 of the
Income Tax Regulations) for such liabilities.
(2) Items of deduction and loss attributable to Partner nonrecourse
debt within the meaning of section 1.704-2(b)(4) of the Income Tax Regulations
shall be allocated to the Partners bearing the economic risk of loss with
respect to such debt in accordance with section 1.704-2(i) of the Income Tax
Regulations.
(3) Items of deduction and loss attributable to Partnership nonrecourse
liabilities within the meaning of section 1.704-2(b)(1) of the Income Tax
Regulations shall be allocated among the Partners proportionately in accordance
with their Partnership Interests.
(4) All other items of deduction or loss ("Net Loss") shall be
allocated (A) First, if allocations of items of income or gain have been made to
any Partner under Section 3.1(k)(5)(A), then to such Partner in the amount of,
and proportionate to, the amount of such items of income or gain; (B) Second,
among any New Partners (as defined in Section 2.1(f)), an amount of Net Loss
sufficient to reduce its Capital Account balance to what it would have been had
all Partners been admitted to the Partnership as of the date hereof, with losses
so allocated to each New Partner in the proportion which such New Partner's
capital contribution bears to the capital contributions of all New Partners; and
(C) Third, among (i) the Partners (other than the Preferred Limited Partner),
proportionately in accordance with their Partnership Interests, except that Net
Loss shall not be allocated to any Partner to the extent it would create a
deficit balance in excess of such Partner's obligation to restore its capital
account balance, computed in accordance with the rules of section
1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and including such Partner's
share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as
provided in sections 1.704-2(g) and 1.704-2(i)(5) of the Income Tax Regulations
and (ii) thereafter to the Preferred Limited Partner to the extent of its
Capital Account balance until the balance of its Capital Account is equal to
zero (but never reduced below zero). Any Net Loss which cannot be allocated to a
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Partner because of the limitation set forth in the previous sentence
shall be allocated first to the other Partners to the extent such other
Partners would not be subject to such limitation and second any
remaining amount to the Partners in the manner required by the Code and
the Income Tax Regulations.
(k) Subject to the provisions of Sections 3.1(c) through 3.1(j), items
of income and gain shall be allocated to the Partners in the following priority:
(1) First, to the Preferred Limited Partner, (i) first, in an
amount equal to the excess of the amount of losses previously allocated
to it pursuant to Section 3.1(j)(4) over the amount of income
previously allocated to it pursuant to this clause (i) of Section
3.1(k)(1) and (ii) thereafter in the amount of any distributions of the
Preferred Return made to it pursuant to Section 3.3(d)(1)(i).
(2) Second, to those Partners who have had items of loss or
deductions allocated to them under section 3.1(j)(1), in the amount of,
and proportionate to, the amount of such items of loss or deduction
(provided, however, that no such allocation shall be made with respect
to previously allocated items of loss or deduction to the extent of any
income and gains previously deemed recognized under Section 2.3(b)).
(3) Third, if allocations of Net Loss have been made to the
Partners under Section 3.1(j)(4)(C)(i), then in the amount of, and
proportionate to, the amount of such Net Loss (provided, however, that
no such allocation shall be made with respect to previously allocated
Net Loss to the extent of any income and gains previously deemed
recognized under Section 2.3(b)).
(4) Fourth, to the Partners (other than the Preferred Limited
Partner), in amounts sufficient, after taking into account all amounts
previously distributed to such Partner and including such Partner's
actual capital contributions, to yield a pre-tax internal rate of
return of fifteen percent (15%), on such Partner's actual capital
contributions and in proportion to the amount required for each
Partner.
(5) Fifth, (A) twenty percent (20%) of the balance to the
General Partner; and (B) eighty percent (80%) of the balance among the
Partners (other than the Preferred Limited Partner) in proportion to
their relative Partnership Interests;
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(l) Notwithstanding Section 3.1(k), but subject to the provisions of
Section 3.1(c) through 3.1(j), gain which is recognized (or deemed to be
recognized) upon the sale, exchange or other disposition of all or substantially
all of the assets of the Partnership or upon the dissolution of the Partnership
shall be allocated in the following order:
(1) First, to the Preferred Limited Partner, in an amount
sufficient to bring its Capital Account balance (computed in the same
manner as provided parenthetically in subparagraph 2 below) to an
amount equal to the amount of its accrued and unpaid Preferred Return
and its unrepaid capital contribution.
(2) Second, to the Partners (other than the Preferred Limited
Partner) having deficit balances in their Capital Accounts (computed
after giving effect to all contributions, distributions, allocations
and other Capital Account adjustments for all taxable years, including
the year during which such liquidation or dissolution occurs and
including each Partner's share of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain as provided in sections 1.704-2(g) and
1.704-2(i)(5) of the Income Tax Regulations), to the extent of, and in
proportion to, those deficits; and
(3) Thereafter, so as to bring the relationship of the credit
balance in each Partner's (other than the Preferred Limited Partner)
Capital Account (computed in the same manner as provided
parenthetically in the preceding subparagraph (2)), as nearly as
possible, the amount such Partner would receive in a distribution, if
the distribution were made in accordance with the provisions of Section
3.3(d).
(m) Unless otherwise specified by the instruments of transfer, any
Partner transferring part of its interest pursuant to this Agreement shall be
deemed to be transferring that portion of its share in future allocations of the
Partnership attributable to the portion of its total Capital Account transferred
by it.
(n) All matters not expressly provided for by the terms of this
Agreement concerning the valuation of assets of the Partnership, the allocation
of profits, gains, deductions, losses and credits among the Partners, including
taxes thereon, and accounting procedures shall be reasonably determined by the
General Partner, whose determination shall be final and conclusive as to all of
the Partners, provided that such action does not materially decrease the amount
or postpone the timing of any distributions, including distributions upon
liquidation,
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that any Partner would otherwise be entitled to receive pursuant to this
Agreement.
(o) Any financing or refinancing of TCI Debt (as defined in section
2.3(b) of the Greenville/Spartanburg Contribution Agreement) shall be a
"non-recourse" liability of the Partnership as such term is used in Section
1.752-1(a)(ii) of the Income Tax Regulations.
3.2 Partnership Expenses. To the extent not paid by IP-IV or an
Investing Partnership, the Partnership shall pay (or reimburse the General
Partner for) all expenses relating to the Partnership's business, investments or
reports not required to be borne by the General Partner pursuant to Section
4.6(b), including, without limitation, the following expenses: organization and
offering expenses, placement fees, interest, legal, accounting, consulting and
investment banking fees and expenses of the Partnership in connection with its
investments, preparation of federal and state tax returns, cost of Partnership
meetings (if any), all costs of acquisition and disposition of assets,
securities or investments (including legal, overhead expenses, accounting,
banking and advisory fees, expenses and commissions), all costs of research,
market and statistical information which are paid to unrelated third parties in
connection with a potential transaction, directors and advisers fees paid to
unrelated third parties, fees and expenses incurred in connection with
investigation, prosecution, or defense of any claims by or against the
Partnership, all costs of insurance and any extraordinary or other expenses
which the General Partner reasonably determines should properly be considered
related to the investment of the Partnership's assets or the operations of the
Partnership or its assets or investments.
3.3 Distributions.
(a) Subject to Section 3.3(e), prior to dissolution of the Partnership,
the General Partner shall, to the extent of available cash, distribute in cash,
no later than ninety (90) days after the close of each fiscal year, the excess,
if any, of (i) forty percent (40%) of an amount equal to the excess, if any, of
the cumulative items of income and gain over the cumulative items of deduction,
loss and credit (grossed up to a deduction equivalent at a forty percent (40%)
tax rate) of the Partnership as shown on the federal income tax returns of the
Partnership for all periods over (ii) the sum of amounts previously distributed
pursuant to Section 3.3(a), 3.3(b) or 3.3(c), provided that the General Partner
shall make such distributions on a quarterly basis as soon as possible to
address any Partner's quarterly payments of estimated tax if such early
distribution is feasible in terms of available cash and accurate anticipation of
the fiscal year's net tax position. The General Partner, in its reasonable
discretion, may adjust the rate of distribution provided in this Section 3.3(a)
to reflect any changes made to the ordinary income and capital
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gains tax rates of the Code which may have the effect of requiring the Partners
to pay more or less taxes on ordinary income or capital gains generated by
Partnership activities. Distributions pursuant to this Section 3.3(a) shall be
made to the Partners ratably in the proportions in which the net recognized
income and gains (but not income and gains deemed recognized under Section
2.3(b)) for such fiscal periods have been allocated to them for federal income
tax purposes pursuant to Section 3.1. For purposes of this Section 3.3(a), in
the case of property contributed to the capital of the Partnership, items of
income, gain, deduction and loss shall be computed as if the tax basis of such
property were equal to its fair market value at the time of such contribution as
determined in the Greenville/Spartanburg Contribution Agreement or the IPWT
Contribution Agreement, or as otherwise provided herein.
(b) Subject to Sections 3.3(a) and 3.3(e), prior to dissolution of the
Partnership, the General Partner shall distribute the net proceeds from the sale
or other disposition of any investment, after payment of all indebtedness with
respect thereto and less reasonable estimates for the Partnership's expenses,
liabilities, contingencies and working capital requirements, no later than
ninety (90) days after the close of such sale.
(c) Subject to the mandatory distribution provisions set forth in
Sections 3.3(a) and 3.3(b) and to Section 3.3(e), prior to dissolution of the
Partnership, the General Partner shall distribute to the Partners no less
frequently than on a quarterly basis cash received by the Partnership from
operations, any transaction not described in Section 3.3(b), and any dividends,
interest or other cash distributions from any corporation or other entity in
which the Partnership has invested and which is not necessary in the reasonable
judgment of the General Partner for the payment of Partnership expenses or debt
or the maintenance of reasonable reserves for the Partnership's expenses,
liabilities, contingencies and working capital requirements. With the consent of
seventy percent (70%) in interest of the Limited Partners, and with the consent
of the Preferred Limited Partner with respect to distributions to such Partner,
distributions may be made in assets of the Partnership other than those
described in the preceding sentence.
(d) Distributions pursuant to Sections 3.3(b) and 3.3(c) shall be made
as follows:
(1) First, to the Preferred Limited Partner (i) in payment of
its accrued Preferred Return until it has received the full amount
thereof, and (ii) then in payment of its unrepaid capital contribution.
For purposes of this Agreement, the "Preferred Return" shall be an
amount equal to eleven and three quarters percent (11.75%), per annum,
compounded semi-annually, multiplied by its unrepaid capital
contributions; for
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purposes of calculating Preferred Return for a subsequent period, any
accrued and unpaid Preferred Return shall be added to the principal
amount of the unrepaid capital contribution; and
(2) Second, to those Partners (other than the Preferred
Limited Partner) that have not received distributions pursuant to this
Section 3.3 equal to their actual capital contributions, in proportion
to their relative actual capital contributions until the Partners
(other than the Preferred Limited Partner) have received distributions
pursuant to this Section 3.3 equal to their actual capital
contributions; and
(3) Third, to those Partners (other than the Preferred Limited
Partner) that have not received distributions pursuant to this Section
3.3 of amounts sufficient to yield a pre-tax internal rate of return of
fifteen percent (15%) on their actual capital contributions, until such
time that they have each received distributions pursuant to this
Section 3.3 of amounts sufficient to yield a pre-tax internal rate of
return of fifteen percent (15%) on their actual capital contributions
and in proportion to the amount required for each such Partner; and
(4) Fourth, twenty percent (20%) of the balance to the General
Partner and eighty percent (80%) of the balance to the Partners (other
than the Preferred Limited Partner) in proportion to their relative
Partnership Interests.
All distributions made pursuant to this Section 3.3 (other than pursuant to
Section 3.3(d)(1)) shall be treated as a return of Partners' capital
contributions until their respective actual capital contributions are returned
in full. Except as otherwise provided herein, no Partner shall have a priority
over any other Partner as to returns of capital contributions or as to
compensation as a Partner by way of income.
(e) Any other provision of this Agreement to the contrary
notwithstanding, no distribution shall be made which would render the
Partnership insolvent or which is prohibited by the terms of any indebtedness of
the Partnership, IP-IV or an Investing Partnership, provided, however, that the
General Partner shall use its reasonable best efforts to obtain the right to
make tax distributions pursuant to Section 3.3(a) above under the terms of any
such indebtedness.
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ARTICLE 4
Management of Partnership
4.1 Management Generally. Except as otherwise provided herein, the business
of the Partnership shall be conducted and managed exclusively by the General
Partner. The General Partner will not be obligated to do or perform any act in
connection with the business of the Partnership not expressly set forth in this
Agreement. The General Partner (including Leo J. Hindery, Jr. as managing
general partner of the General Partner) shall devote such time, effort and skill
to the business and affairs of the Partnership, IP-IV and any Investing
Partnerships and their management as may be reasonable and necessary or
appropriate for the welfare and success of the Partnership, IP-IV and the
Investing Partnerships. The General Partner shall have the rights and powers and
be subject to all the restrictions and liabilities of a partner in a partnership
without limited partners.
4.2 Specific Authority of the General Partner. Except as otherwise provided
in this Agreement, the General Partner shall have full power and authority to do
all things and to perform all acts that it reasonably deems necessary or
advisable to conduct the business affairs of the Partnership, IP-IV and the
Investing Partnerships, or incidental thereto, without the consent of any
Limited Partner, including, without limitation, full power and authority to take
any of the following actions, each of which is hereby expressly authorized by
the parties hereto:
(a) Enter into contracts and perform the obligations of the Partnership
undertaken in such contracts, including, without limitation, any contract
entered into with the General Partner or a Limited Partner pursuant to Section
6.2;
(b) Make all decisions with respect to the investigation, selection,
negotiation, structure, acquisition, operation and disposition of the assets of
the Partnership, IP-IV or any Investing Partnership; and employ such agents,
consultants, advisers, directors, attorneys, accountants, investment bankers and
other personnel as may be necessary or appropriate for the business of the
Partnership, IP-IV or the Investing Partnerships on such terms and conditions as
the General Partner shall determine are reasonable; provided, however, that
concurrent with the formation of a new Investing Partnership or any partnership
which provides financing to any Investing Partnership, the General Partner will
obtain an opinion of counsel, reasonably satisfactory to the Advisory Committee,
that such Investing Partnership is taxable as a partnership.
(c) Open, maintain and close bank accounts and draw checks and other orders
for the payment of money;
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(d) Collect accounts receivable, income and other payments due to the
Partnership, IP-IV or any Investing Partnership;
(e) Keep the books and records of the Partnership and hire independent
certified public accountants;
(f) Pay accounts payable and other expenses of the Partnership;
(g) Transfer, hypothecate, compromise or release any Partnership claim;
(h) Administer the financial affairs of the Partnership, IP-IV and any
Investing Partnership, make tax and accounting elections, including an election
or elections under section 754 of the Code (which election shall be made upon
the request of any Limited Partner), file all required tax returns relating to
the Partnership, pay the liabilities of the Partnership and distribute the
profits of the Partnership to the Partners;
(i) Borrow money on behalf of the Partnership, IP-IV or any Investing
Partnership and make, issue, accept, endorse and execute promissory notes,
drafts, bills of exchange, guarantees, and other instruments and evidences of
indebtedness in the name of the Partnership, IP-IV or any Investing Partnership,
including, without limitation, in connection with and as part of purchasing
assets and securities for the Partnership, IP-IV or any Investing Partnership
and mortgage, pledge, assign or grant security interests in all or any part of
the assets then owned or thereafter acquired by the Partnership, IP-IV or any
Investing Partnership in connection therewith;
(j) Cause the Partnership, IP-IV and any Investing Partnership to purchase
and maintain any insurance, in amounts and on terms customary in the industry,
covering the potential liabilities of the Partnership, the General Partner and
its partners, employees and agents, and the officers, directors and employees of
the partners, of the General Partner, as well as the potential liabilities of
any person serving at the request of the Partnership, IP-IV or any Investing
Partnership as a director, officer, employee, agent, partner, consultant or
adviser of any corporation or other entity in which the Partnership, IP-IV or
any Investing Partnership has an investment; provided, however, the General
Partner shall cause the Partnership to purchase insurance for the liabilities of
directors and officers to the extent such insurance is available on commercially
reasonable terms;
(k) Commence or defend litigation that pertains to the Partnership, IP-IV
or any Investing Partnership or any assets of the Partnership, IP-IV or any
Investing Partnership and investigate potential claims;
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(l) Execute and file fictitious business name statements and similar
documents;
(m) Admit additional Limited Partners and permit additional capital
contributions as provided in Sections 2.1(c) and 2.1(d) (and appropriately amend
this Agreement to reflect such admissions and additional capital contributions)
without the consent of any Limited Partner except as provided in Section 2.1(c)
and admit an assignee of a Limited Partner's interest to be a substituted
Limited Partner in the Partnership (and appropriately amend this Agreement and
the Partnership records to reflect such assignment), without the consent of any
Limited Partner;
(n) Terminate the Partnership pursuant to Section 7.2(vi), (vii) or (viii);
and
(o) Execute and deliver all documents and instruments necessary or
advisable to carry out the foregoing.
4.3 Reports. The General Partner will distribute annual audited financial
statements of the Partnership, prepared by a "big six" accounting firm, to the
Limited Partners within ninety (90) days after the end of each Partnership
fiscal year. The General Partner will distribute unaudited quarterly progress
reports on the Partnership's investment activities to the Limited Partners
within forty-five (45) days of the end of the first three fiscal quarters. The
General Partner will distribute monthly income statements of the Partnership to
the Limited Partners within fifteen (15) days of the end of each calendar month.
The General Partner will distribute any default notices with respect to the debt
of the Partnership, IP-IV or any Investing Partnership to the Limited Partners
within five (5) days of the receipt thereof from a lender or the delivery
thereof by the Partnership, IP-IV or any Investing Partnership to a lender.
4.4 Valuation of Assets.
(a) The General Partner shall value the assets of the Partnership whenever
the General Partner may, in its sole discretion, deem appropriate, and whenever
else required by this Agreement or under the Code, and on any date provided for
in this Agreement on which valuation is required due to the withdrawal of a
Limited Partner pursuant to Section 2.2 or Section 7.6, and shall within ninety
(90) days of each such date furnish to each Limited Partner a statement showing
the value of each system and the net worth of the Partnership. If the
Partnership is dissolved and the assets are not sold, the General Partner shall
value the assets of the Partnership as of the date of dissolution and shall as
promptly as practicable thereafter furnish the Limited Partners with the
statement showing the value of each system and the net worth of the Partnership.
The value of any system of the Partnership
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determined by the General Partner pursuant to this Section 4.4(a) shall be
conclusive and binding on all of the Partners and all parties claiming through
or under them except as provided in Section 4.4(c).
(b) In the event of the withdrawal of a Limited Partner from the
Partnership pursuant to Section 2.2 or Section 7.6, the General Partner shall
within a reasonable period of time notify the Limited Partners in writing of the
valuation of the total amount of the assets of the Partnership attributable to
the withdrawing Limited Partner.
(c) If (i) any of the Limited Partners object in writing to the valuation
of the systems and/or net worth of the Partnership made pursuant to Section
4.4(a) by the General Partner or (ii) the withdrawing Limited Partner objects in
writing to the valuation of the systems and/or net worth of the Partnership made
pursuant to Section 4.4(b) by the General Partner, in either case, within thirty
(30) days after the General Partner has furnished the Limited Partners with the
statement provided by Section 4.4(a) or 4.4(b) as of such date, the General
Partner shall give notice to all the Limited Partners of such objection and the
General Partner shall attempt to determine an alternative value for the systems
and net worth of the Partnership (with respect to a valuation pursuant to
Section 4.4(a)) or the assets of the Partnership attributable to the withdrawing
Partner (with respect to a valuation pursuant to Section 4.4(b)). If the General
Partner and (i) seventy percent (70%) in interest of the Limited Partners (with
respect to a valuation pursuant to 4.4(a)) or (ii) the withdrawing Limited
Partner (with respect to a valuation pursuant to Section 4.4(b)) are unable to
determine an alternative value for the systems and/or net worth of the
Partnership within sixty (60) days after such objections, the matter in dispute
shall be submitted to three appraisers of which one shall be chosen by the
General Partner, one by (x) seventy percent (70%) in interest of the Limited
Partners (with respect to a valuation pursuant to Section 4.4(a)) or (y) the
withdrawing Limited Partner (with respect to a valuation pursuant to Section
4.4(b)) and the third by means of the written agreement of the two appraisers
selected by such Partners, provided that such third individual is not associated
with any of the Partners. Each appraiser appointed in accordance with this
paragraph shall complete its appraisal within sixty (60) days of its
appointment. The two appraisals closest to one another shall be averaged and
such valuation shall be final and binding on the Partners. If performed in
connection with Section 4.4(a), the Partnership shall bear all of the costs and
expenses of such appraisal. The Partnership and the withdrawing Limited Partner
shall each bear one-half (1/2) of the costs and expenses of such appraisal if
performed in connection with Section 4.4(b).
4.5 Revaluation of Partnership Assets. The General Partner shall revalue
Partnership property to its fair market
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value (determined as provided in Section 4.4) as of the date when any additional
or existing Partner makes a non-pro rata contribution of money or property to
the Partnership in exchange for an interest in the Partnership or when the
Partnership distributes money or property to a withdrawing or continuing Partner
in exchange for all or part of its interest in the Partnership.
4.6 Management Fee and General Partner Expenses.
(a) Management Fee. The Partnership will pay to the General Partner in cash
during the period the Partnership is in existence, as full payment for services
rendered as the General Partner, an annual management fee (the "Management Fee")
equal to one percent (1%) per annum of the total capital contributions that have
been funded by Partners to the Partnership (other than with respect to the
preferred limited partner interest of the Preferred Limited Partner) determined
as of the beginning of each calendar quarter in each fiscal year of the
Partnership; provided, however, if the acquisition of a cable system by the
Partnership, IP-IV or an Investing Partnership is made with debt financing of
more than two-thirds of the purchase price of such cable system, capital
contributions of one-third of such purchase price shall be deemed to have been
made and the Management Fee shall be paid on such deemed contributions. At such
time as any such debt financing is replaced with actual capital contributions of
the Partners, the Management Fee shall be based on such actual capital
contributions rather than a deemed contribution for such amount. Notwithstanding
the foregoing, in no event shall a Management Fee be payable on any amounts in
excess of the total capital commitments to the Partnership. Except with respect
to acquisitions of cable systems with debt financing as set forth above, the
General Partner agrees that it will not receive a management fee from the
Investing Partnerships of the Partnership greater than one percent (1%) of the
capital contributions to the Investing Partnerships and the Partnership. The
Management Fee for the first year on any capital contribution shall be paid in
advance upon payment of such capital contribution and shall begin to accrue from
the closing of the first cable television system purchased by the Partnership.
The Management Fee for all subsequent periods shall be paid quarterly, in
advance, one-fourth of one percent (.25%) per quarter, on the first business day
of each calendar quarter, beginning with the first calendar quarter that begins
after the first anniversary of the payment of such capital contribution. Any
Management Fee due for the period from the expiration of such first year and the
next scheduled payment of the Management Fee shall be paid at such next payment
date. The Management Fee shall be offset, on a cumulative basis, by any
management fee received by the General Partner or any affiliate of the General
Partner from IP-IV or any Investing Partnership. The Management Fee for the
Partnership's last annual fiscal
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year, if less than a full year, shall be prorated based upon the number of days
in such period.
(b) General Partner Expenses. The General Partner will bear and be charged
with the following expenses: salaries and other expenses (including bonuses and
health, welfare, retirement and other benefits) and overhead expenses (including
rents, travel and costs) of the General Partner, and the chief operating officer
and the directors of development, finance and accounting of the General Partner
and their related staffs.
4.7 Rights of the Limited Partners.
(a) No Control. The Limited Partners shall not take part in the control,
management, direction or operation of the business of the Partnership, nor,
except as specified in Section 4.7(b) and Section 4.9, have the right, power or
authority to be consulted with respect to investment decisions or the other
affairs of the Partnership nor have the power to sign documents for or otherwise
bind the Partnership and shall have no right to consent on any matter except
those expressly set forth in this Agreement or otherwise specified in Section
4.7(b) and Section 4.9.
(b) Consents. The Limited Partners shall have a right to consent only with
respect to those matters expressly set forth in this Agreement and the matters
listed below, which actions may be taken only with the written consent of the
General Partner (except with respect to item (iv) which action may be taken
without the consent of the General Partner and except to the extent provided in
Section 4.9) and the affirmative consent of the percent in interest of the
Limited Partners so indicated. The Preferred Limited Partner shall not be
entitled to consent, initiate or cause any sale of the Partnership's cable
systems or otherwise vote on or take action with respect to any matters in this
Agreement, including without limitation Section 4.9 hereof, unless required by
law and the preferred limited partnership interest of the Preferred Limited
Partner shall not be included in either the numerator or the denominator of any
computation of the required percentage in interest of the Limited Partners
hereunder for all such purposes (except where the consent of the Preferred
Limited Partner is required); provided, that the Preferred Limited Partner shall
be entitled to consent on any matter which requires the unanimous consent of the
Limited Partners and provided further that the Preferred Limited Partner's
consent shall be required for any settlement with a tax authority which would
affect the income, gain, loss, deductions or credits allocated to it. For any
matters on which the Preferred Limited Partner is not entitled to consent, the
required consent shall be the required percent of interest of the Limited
Partners other than the Preferred Limited Partner Interest of the Preferred
Limited Partner. In the event one Limited Partner holds seventy percent (70%) of
the interests of the Limited Partners, all references in this Agreement to
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seventy percent (70%) shall be changed to seventy-five percent (75%). For
purposes of this Agreement a Limited Partner's interest in the Partnership shall
be determined on the basis of its actual capital contributions. The Limited
Partners shall be entitled to consent on the following matters:
(i) The amendment of this Agreement pursuant to Section 9.3 hereof
upon the affirmative consent of seventy percent (70%) in interest of the
Limited Partners; provided, however, that this Agreement may not be amended
without the approval of the Partner being affected if the amendment would
change the allocation to any Partner of any income or loss or distribution
of cash or property from that which is provided or contemplated herein
(other than as a result of any dilution in their Partnership Interests
resulting from the admission of any new Limited Partners as contemplated by
Section 2.1(c) or additional contributions by Partners pursuant to Section
2.1(d) or 2.1(e) hereof, as Section 2.1(c), Section 2.1(d) or 2.1(e) may be
amended from time to time);
(ii) The amendment of the allocations and distributions to the
Limited Partners other than as permitted by Section 3.1 upon the
affirmative consent of each Partner adversely affected;
(iii) The admission of a new general partner where there is an
existing General Partner upon the affirmative consent of seventy percent
(70%) in interest of the Limited Partners;
(iv) The approval of a transaction in which the General Partner or
any of its affiliates has an actual or potential conflict of interest with
the Limited Partners or the Partnership and which is not permitted by
Section 6.1 or 6.2 or otherwise expressly permitted by the terms of this
Agreement, upon the affirmative consent of seventy percent (70%) in
interest of the disinterested Limited Partners; provided, however, the
transactions set forth on Exhibit 2 hereto may be consummated by the
Partnership, IP-IV or any Investing Partnership without any further consent
of the Limited Partners;
(v) The continuation of the Partnership to effect an orderly
dissolution of the Partnership in accordance with Article 7 upon the
affirmative consent of seventy percent (70%) in interest of the Limited
Partners;
(vi) The agreement to enter into any Investing Partnership or make
any investments in excess of
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$15,000,000 upon the affirmative consent of seventy percent (70%) in
interest of the Limited Partners; provided, however, each of the
acquisitions set forth on Exhibit 2 hereto may be consummated by the
Partnership, IP-IV or any Investing Partnership without any further consent
of the Limited Partners;
(vii) The merger of or consolidation of the Partnership with any
other entity upon the affirmative consent of each Partner;
(viii) The taking of any act that would make it impossible to carry
on the business of the Partnership except upon the dissolution of the
Partnership in accordance with this Agreement upon the affirmative consent
of each Partner;
(ix) Confessing a judgment against the Partnership, IP-IV or any
Investing Partnership in excess of one hundred fifty thousand dollars
($150,000) or settling a judgment against the Partnership, IP-IV or any
Investing Partnership in excess of three hundred thousand dollars
($300,000) upon the affirmative consent of each Partner;
(x) Using any funds or assets of the Partnership other than for the
benefit of the Partnership upon the affirmative consent of each Partner;
(xi) Taking any action that would subject the Limited Partners to
personal liability as a general partner in any jurisdiction upon the
affirmative consent of each Partner;
(xii) The making of, execution of, or delivery of any general
assignment for the benefit of the Partnership's creditors upon the
affirmative consent of each Partner;
(xiii) Any matter in the partnership agreement of IP-IV or any
Investing Partnership that requires the consent of the Limited Partners or
of the limited partner or a general partner other than the managing general
partner of IP-IV or an Investing Partnership; provided, however, that the
consent required under this clause (xiii) shall require the approval of the
applicable percentage of Limited Partners that would have been required if
such consent were required under this Agreement or if no percentage is
specified hereunder, seventy percent (70%); and provided further, that the
amount or timing of any distributions to the Partnership from any Investing
Partnership or IP-IV may not be changed in a manner inconsistent with the
amount or timing of
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distributions under this Agreement without the unanimous consent of the
Limited Partners and the General Partner;
(xiv) The approval of a transaction with Tele-Communications, Inc. or
any of its affiliates in an amount greater than five hundred thousand
dollars ($500,000) or transactions less than five hundred thousand dollars
($500,000), which exceed an aggregate of two million dollars ($2,000,000),
in any twelve (12) month period, upon the affirmative consent of a majority
in interest of the Limited Partners (other than TCI or any of its
affiliates); provided, however, that purchases of programming and equipment
on no less favorable to the Partnership than arms'-length terms and in the
ordinary course of business shall not require any approval by the Limited
Partners; and provided further, that the transactions set forth on Exhibit
2 hereto may be consummated by the Partnership, IP-IV or any Investing
Partnership without any further consent of the Limited Partners; and
(xv) The approval of any waiver of rights of the Partnership under
the IPWT Contribution Agreement if such waiver would result in the
Partnership forgoing rights valued in excess of five percent (5%) of the
total consideration paid by the Partnership for the contribution of
partnership interests and debt transferred under such agreement.
(c) Annual Operating Plan. The General Partner shall prepare and submit to
the Limited Partner having the largest interest as a Limited Partner in the
Partnership for approval (which approval shall not be unreasonably withheld)
each year an annual operating plan for the Partnership (including IP-IV and the
Investing Partnerships) which shall also set forth the amounts to be expended by
the Partnership, IP-IV or any Investing Partnership for capital expenditures in
the following categories: system rebuild, plant extensions, converters and
related equipment, plant maintenance and miscellaneous expenditures. A copy of
the final approved operating plan shall be sent to each Limited Partner.
Notwithstanding any provision of this Agreement to the contrary, the General
Partner on behalf of the Partnership as General Partner of IP-IV and each
Investing Partnership shall cause IP-IV and each Investing Partnership not to
make any expenditures which would cause expenditures in any enumerated category
of the annual operating plan to exceed the approved amount for such category by
more than ten percent (10%) without the consent of the largest limited partner
as set forth above.
(d) Advisory Committee. The Partnership will form an Advisory Committee
(the "Advisory Committee") consisting of one
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representative from each of the seven (7) Limited Partners with the largest
aggregate interests in the Partnership (for purposes of selection of the
Advisory Committee, (i) each of the interests of GECC as a Preferred Limited
Partner and a Limited Partner shall be aggregated, (ii) each of the interests of
NationsBanc Investment Corp. and Atlantic Equity Corporation as Limited Partners
shall be aggregated, (iii) each of the interests of Mellon Bank, N.A., as
Trustee for Third Plaza Trust and the interests of Mellon Bank, N.A., as Trustee
for Fourth Plaza Trust as Limited Partners shall be aggregated, and (iv) each of
the interests of the IP Holdings Affiliates (as that term is defined in Exhibit
1 hereto) shall be aggregated). For purposes of this Agreement, the
determination of aggregate Limited Partner interests in the Partnership shall be
based on the aggregate Limited Partner interests in the Partnership held by a
Limited Partner and any affiliates thereof, which aggregate holdings shall
entitle such Limited Partner and affiliates, if any, to one representative on
the Advisory Committee. The General Partner will be responsible for
administration of the Advisory Committee and shall have the right to attend any
meeting of the Advisory Committee, but shall be excluded from Advisory Committee
membership. The General Partner will distribute to the Advisory Committee
monthly profit and loss statements of the Partnership and any other monthly
financial statements prepared for management personnel. The General Partner will
distribute to the Advisory Committee quarterly profit and loss statements,
balance sheets and statements of cash flow of the Partnership. The General
Partner will distribute to the Advisory Committee the proposed annual operating
plan at the same time that it is submitted pursuant to Section 4.7(c) to the
Limited Partner having the largest interest in the Partnership, and each member
of the Advisory Committee shall have the right to consult with the General
Partner regarding such plan for ten (10) days after receipt. In addition, the
General Partner will distribute the foregoing reports to any Limited Partner
that would be entitled to be on the Advisory Committee but due to regulatory
requirements is precluded from membership on the Advisory Committee. The
Advisory Committee (including any Limited Partner that because of regulatory
requirements is precluded from membership on the Advisory Committee) will meet
quarterly in a location approved by the General Partner and a majority of the
members of the Advisory Committee, and will consult with and advise the General
Partner with respect to the business of the Partnership and perform such other
advisory functions as may be requested by the General Partner from time to time;
provided, however, that the Advisory Committee shall not perform any functions
or duties, which, if performed by a Limited Partner, would constitute
participation in the control of the business of the Partnership under the Act.
The doing of any act or the failure to do any act by any member of the Advisory
Committee, acting in its capacity as such, the effect of which may cause or
result in loss, liability, damage or expense to the Partnership or any Partner,
shall not subject such member to any liability to the
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Partnership or to any Partner, except that such member may be so liable if it
acted fraudulently or in bad faith or was guilty of willful misconduct or a
breach of this Agreement. The Partnership shall pay all reasonable expenses of
each member of the Advisory Committee incurred in connection with attendance at
Advisory Committee meetings or otherwise in the performance of his or her duties
as a member of the Advisory Committee. In the event that interests in the
Partnership are converted into or exchanged for interests in a corporation
(other than in connection with a sale of interests in the Partnership), the
General Partner will take all actions necessary to cause a director of such
corporation at all times to be a person designated by each Limited Partner
entitled to a representative on the Advisory Committee, so long as such Limited
Partner owns an interest in such corporation.
(e) Dissolution or Bankruptcy of a Limited Partner. In the event of the
dissolution, liquidation, bankruptcy or insolvency of a Limited Partner, the
interest of such Limited Partner will continue at the risk of the Partnership
business until the dissolution and winding up of the Partnership. The legal
representative of a Limited Partner who has dissolved, liquidated or been
declared bankrupt or become insolvent will succeed to such Limited Partner's
interest in the Partnership, but will not be a substituted Limited Partner
without the prior written consent of the General Partner which consent may be
granted or denied in the sole and absolute discretion of the General Partner
without the consent of any Limited Partner.
4.8 Successor General Partner.
(a) Removal of the General Partner.
(i) Seventy percent (70%) in interest of the Limited Partners may initiate
removal of the General Partner by delivering written notice to the General
Partner (x) specifying one or more grounds for removal that the Limited Partners
believe exist, and, (y) if the notice specifies grounds for removal described in
Section 4.8(a)(i)(A), selecting an individual to arbitrate whether such grounds
exist in accordance with Section 4.8(a)(ii). For purposes of this Section
4.8(a), grounds for removal means any of the following:
(A) conduct by or on behalf of the General Partner in connection with
the Partnership that constitutes willful misconduct, bad faith, gross
negligence, reckless disregard of its duties, criminal intent, or a
material breach of this Agreement;
(B) acceleration of the senior debt of the Partnership, IP-IV, any
Investing Partnership or any operating company for any reason; or
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(C) the occurrence of any event of default that permits acceleration of
the Partnership's, IP-IV's, any Investing Partnership's or any operating
company's senior debt, if such event of default has not been waived or
cured within sixty (60) days of the date the General Partner knew or should
have known of its occurrence.
(ii) The existence of grounds for removal with respect to matters described
in Section 4.8(a)(i)(A) shall be determined by arbitration. Within ten (10)
business days after its receipt of the Limited Partners' notice described in
Section 4.8(a)(i), the General Partner shall send a written notice to the
Limited Partners selecting a second individual to arbitrate whether grounds for
removal exist. If the General Partner fails to select a second arbitrator within
the time period specified in the preceding sentence, the existence of grounds
for removal shall be determined by the arbitrator selected by the Limited
Partners (and such arbitrator shall be deemed to be the "arbitration panel" for
purposes of this Section 4.8(a)). If the General Partner selects a second
arbitrator within the specified time period, the existence of grounds for
removal shall be determined by an arbitration panel consisting of the arbitrator
selected by the Limited Partners, the arbitrator selected by the General
Partner, and a third arbitrator selected by the two arbitrators previously
selected. None of the arbitrators selected pursuant to this Section 4.8(a) shall
be associated or affiliated with any of the Partners or with any partner of the
General Partner. The arbitration panel shall conduct its proceedings in San
Francisco in accordance with the commercial rules of the American Arbitration
Association then in effect and the determination of such panel shall be final
and binding upon and enforceable against all Partners.
(iii) If the required percent of the Limited Partners (with respect to
matters described in Section 4.8(a)(i)(B) or (C)) or the arbitration panel (with
respect to matters described in Section 4.8(a)(i)(A)) determines that grounds
for removal exist, then:
(A) A successor general partner of the Partnership shall be selected
by seventy percent (70%) in interest of the Limited Partners. If the
Limited Partners are unable to agree on a successor general partner within
sixty (60) days after the determination that grounds for removal exist, the
Partnership shall be dissolved in accordance with Article 7.
(B) Promptly following the determination that grounds for removal
exist, the Partners and the partners of the General Partner shall undertake
to obtain any government consents and approvals necessary to permit the
actions described in the following paragraphs of this Section 4.8(a)(iii)
to be taken.
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Such actions shall be taken as soon as practicable after all such consents
and approvals have been obtained; provided, however, that if all such
consents and approvals shall not have been obtained within one (1) year
after the determination by the arbitration panel that grounds for removal
exist, the Partnership shall be dissolved in accordance with Article 7.
(C) The successor general partner designated in accordance with
Section 4.8(a)(iii)(A) shall be admitted as the general partner of the
Partnership and the General Partner shall be converted into a limited
partner of the Partnership as set forth in Section 4.8(a)(iii)(D). The
successor general partner shall, beginning on the date of admission, have
the same authority and obligations that the removed general partner had and
shall have such rights to distributions and allocations as are determined
by the unanimous consent of the Limited Partners and the removed General
Partner. Upon the admission of the successor general partner, the rights to
distributions and allocations of the Partners shall be modified to the
extent required to reflect the rights accorded to the successor general
partner. The admission of a successor general partner to the Partnership
shall be deemed to have occurred prior to the effective date of the
conversion of the General Partner.
(D) Upon removal of the General Partner as general partner of the
Partnership, its interest in the Partnership shall be converted to a
limited partnership interest and the Partnership Agreement shall be amended
to reflect the events set forth in this Section 4.8.
(E) The removed General Partner shall remain liable for any
obligations and liabilities incurred by it as general partner prior to the
effective date of its removal but shall be free of any and all obligations
or liabilities incurred on account of the activities of the general partner
of the Partnership from and after that time.
(b) Withdrawal of the General Partner.
(i) For purposes of this Section 4.8(b), "withdrawal of the General
Partner" shall include the occurrence of any of the following:
(A) any event that causes the General Partner to cease to be the
General Partner;
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(B) the bankruptcy, insolvency, or appointment of a trustee to manage
the affairs of the General Partner or Leo J. Hindery, Jr.;
(C) the dissolution, whether or not required by operation of law or
judicial decree, of the General Partner;
(D) the death of Leo J. Hindery, Jr.;
(E) the incapacity of Leo J. Hindery, Jr. such that he is unable to
perform substantially all of his duties as general partner of the General
Partner for a period of nine (9) months; or
(F) any other event that causes the General Partner to cease to be
controlled directly or indirectly through one or more intermediaries by Leo
J. Hindery, Jr.
(ii) Upon the withdrawal of the General Partner, the provisions of Section
4.8(a)(iii) shall be complied with, however, the time frames set forth in
Sections 4.8(a)(iii)(A) and (B) shall run from the date of withdrawal of the
General Partner.
(c) General Provision Regarding Approvals by the Limited Partners. For
purposes of any provision of this Section 4.8 that refers to the approval of a
specified interest of the Limited Partners, any Limited Partner that is an
affiliate of the General Partner shall not be entitled to consent or approve the
matter at issue and such Limited Partner's interest shall not be taken into
account in determining whether the matter at issue has been approved by Limited
Partners holding the requisite interest.
(d) Right To Recover Damages. (i) Removal of the General Partner pursuant
to this Section 4.8 shall not limit the right of the Partnership or any Partner
to recover any direct compensatory damages suffered by such person as a result
of any breach of this Agreement by the General Partner or any other person.
(ii) Removal of the General Partner, except pursuant to the terms of this
Agreement, shall entitle the General Partner to receive, in cash compensation,
damages for all direct and indirect economic consequences of such removal,
including, but not limited to, damages for all lost profits. Such removed
General Partner's interest in the Partnership shall be converted to a limited
partnership interest pursuant to Section 4.8(a)(iii)(D).
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4.9 Sale Initiation Rights.
(a) Any time after July 31, 1999, Partners (other than
Tele-Communications, Inc. or any directly or indirectly controlled affiliate
thereof which is a Partner (collectively "TCI")) comprising twenty percent (20%)
or more of the Interests in the Partnership may petition the General Partner to
review, report on and recommend (or not) a sale of some or all of the
Partnership's cable systems.
(b) Any time after July 31, 2001, (i) Partners (other than TCI, the
General Partner and InterMedia Partners, a California limited partnership
("IP-I")), comprising a majority or more of the Interests in the Partnership
(other than Interests in the Partnership held by TCI, the General Partner and
IP-I) may force a sale of one (1) or both of the Partnership's two significant
cable system clusters (i.e., (a) middle Tennessee and (b) eastern Tennessee,
eastern Georgia and western South Carolina), by sending a notice to such effect
(the "Sale Notice") to the General Partner; provided that TCI shall have a
"right of first offer" related thereto as provided in Section 4.9(d) and the
terms of any such sale shall be approved by Partners (other than TCI, the
General Partner and IP- I) comprising a majority or more of the Interests in the
Partnership (other than Interests in the Partnership held by TCI, the General
Partner and IP-I), provided that any Sale Notice must include the sale of all of
the systems in each cluster and shall include all significant clusters, or (ii)
Partners (including TCI, the General Partner and IP-I) comprising seventy
percent (70%) or more of the Interests in the Partnership may force a sale of
some or all of the Partnership's cable systems by sending a Sale Notice to the
General Partner and the terms of any such sale shall be approved by Partners
(including TCI, the General Partner and IP-I) comprising seventy percent (70%)
or more of the Interests in the Partnership unless such sale is to TCI in which
case the foregoing percentage required to approve the terms of the sale to TCI
shall be 75%. The Sale Notice shall indicate which cable television systems are
desired to be sold and any desired price. The General Partner shall promptly
respond to the Partners that sent the Sale Notice (the "Sale Partners") with a
good faith proposal for effectuating the sale of the assets specified in the
Sale Notice, such proposal to be approved by the Sale Partners. Immediately upon
approval of such proposal, the General Partner shall use its best efforts to
effect the sale on such terms as soon as is reasonably practicable and the
General Partner will provide the Partners with monthly progress reports on the
sale process.
(c) In addition to Section 4.9(b), at any time, the General Partner may
elect to (i) sell all or substantially all of the Partnership's cable systems
subject to obtaining the consent of Partners (other than TCI) comprising a
majority or more of the Partnership Interests (other than Partnership
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Interests held by TCI); provided that, if the General Partner makes an election
to sell pursuant to this Section 4.9(c)(i) prior to July 31, 2001, TCI shall
have a "right of first refusal" related thereto in accordance with the
procedures set forth in Section 4.9(e) or (ii) sell some or all of the
Partnership's cable systems subject to obtaining the consent of Partners
(including TCI) comprising at least seventy percent (70%) of the Partnership
Interests unless the sale is to TCI in which case the foregoing percentage shall
be 75%.
(d) Before the Partnership shall offer to sell any of the Partnership's
cable television systems pursuant to Section 4.9(b)(i), the General Partner
shall (i) first deliver a notice to TCI offering to sell all such assets to TCI
and specifying the purchase price and other terms on which the General Partner
would propose to sell such assets to any third party (the date of such notice
being the "Notice Date") and (ii) deliver to each Limited Partner a copy of an
appraisal of any such cable television system conducted by an independent
appraisal firm to be selected by the General Partner to the reasonable
satisfaction of the Advisory Committee, provided, that such appraisal firm has
no current or pre-existing relationship with the General Partner or any of its
Affiliates other than transactions in which the appraisal firm (i) represents
the General Partner or any of its Affiliates as a buyer or seller, (ii)
represents the other party to a transaction with the General Partner or any of
its Affiliates as a buyer or seller or (iii) any other transaction in the
ordinary course of business with such appraisal firm on arm's-length terms.
Within thirty (30) days after the Notice Date, TCI may, by giving notice to the
General Partner elect, to purchase all such assets for such purchase price and
on such other terms specified in such notice and shall enter into an agreement
binding it to such purchase within ninety (90) days after its election to
exercise the right under such notice. If TCI fails to notify the General Partner
of its agreement to purchase all of such assets as of the end of such thirty
(30) day period, fails to enter into a purchase agreement within ninety (90)
days of such election date, or fails to purchase the assets within either (i)
one hundred fifty (150) days after entering into a purchase agreement or (ii)
the earlier of ten (10) days after all regulatory and franchise approvals have
been obtained or three hundred sixty (360) days after the Notice Date (each an
"Abandonment Date"), TCI will not have the right to purchase any of such assets
except as provided in the subsequent provisions of this Section 4.9(d) or if the
failure to purchase such assets is due to a breach of such purchase agreement by
the Partnership and, in the event of such abandonment, the TCI affiliates who
are Limited Partners will be deemed to have approved any subsequent sale by the
Partnership pursuant to the terms of this Section 4.9(d); provided, however,
that nothing contained herein shall preclude TCI and its affiliates from
participating in any auction of such assets by the Partnership. If TCI elects
not to or does not purchase such assets offered in accordance with the
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terms of this Section 4.9(d), the General Partner may thereafter sell such
assets to any third party only at a price equal to or greater than the price and
on terms and conditions not materially more favorable to the purchaser than
those specified in the notice delivered pursuant to this Section 4.9(d),
provided that a binding agreement for such sale is executed within two hundred
ten (210) days after the Abandonment Date and such sale shall be consummated
within four hundred fifty (450) days of the Abandonment Date and, provided,
further that in the event TCI enters into a purchase agreement with respect to
such assets, but fails to close (other than due to a breach of the agreement by
the Partnership), then the Partnership will be free to sell such assets at a
price less than the price, and on terms and conditions materially more favorable
to the purchaser than those, agreed to with TCI, but TCI will be permitted to
participate in any auction by the Partnership for such assets. If a binding
agreement is not executed within such two hundred ten (210) day period or such
sale is not consummated within such four hundred fifty (450) day period, then
the Partnership shall be required to again offer such assets to TCI pursuant to
and must otherwise comply with the terms of this Section 4.9(d) unless the
Partnership had previously entered into an agreement with respect to such assets
and TCI had failed to close such agreement due to failure to obtain regulatory
or franchise consents or due to a breach by TCI. The rights of TCI pursuant to
this Section shall terminate if TCI enters into a binding agreement with respect
to any of the Partnership's cable television systems and fails to close such
purchase due to its breach; provided that TCI and its affiliates may participate
in any auction by the Partnership of its assets.
(e) If the Partnership desires to sell any of its cable systems as
provided in Section 4.9(c)(i) to a third party pursuant to a bona fide written
offer (which shall set forth all material terms of the proposed sale but may be
subject to reasonable and customary conditions in the cable television industry)
by such third party to purchase such cable systems for cash, then the
Partnership shall first offer to sell such cable systems to TCI at the price and
on the other terms stated in such bona fide written offer. The Partnership's
offer to TCI shall be in writing and shall be accompanied by a copy of the third
party bona fide offer. TCI shall have thirty (30) days from the date of receipt
of such offer in which to accept it by giving written notice of such acceptance
to the General Partner. If TCI fails to accept the Partnership's offer within
such thirty (30) day period, the Partnership will be free to sell such cable
systems for a period of three hundred sixty (360) days after the end of the
thirty (30) day right of first refusal period, or such longer or shorter period
as may be specified in the original bona fide offer, but only at a price and on
terms not more favorable to the purchaser than those contained in the bona fide
offer. If TCI timely accepts the Partnership's offer, TCI must enter into an
agreement binding it to such purchase within ninety (90) days after its
acceptance of such offer and
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must purchase such cable systems within either (i) one hundred fifty (150) days
after entering into a purchase agreement or (ii) the earlier of ten (10) days
after all regulatory and franchise approvals have been obtained or three hundred
sixty (360) days after receipt of the Partnership's offer, or in either case,
such longer or shorter period as may have been specified in the original bona
fide offer. If TCI accepts the Partnership's offer but fails to enter into a
purchase agreement or fails to purchase the cable systems, in either case within
the respective periods specified in the preceding sentence, then the Partnership
may sell such cable systems at a price and on terms not more favorable to the
purchaser than those contained in the bona fide written offer within the time
period specified in such offer or, if no time period is specified in the offer,
within three hundred sixty (360) days and TCI will not have the right to
purchase any of such cable systems within such period. Any sale to any third
party pursuant to this Section 4.9(e) shall not be connected in any way with any
other transaction (including the sale of any other assets) under which
consideration of any kind is transferred to the third party by the Partnership
such that the price purported to be paid for the Partnership's cable systems (as
specified in the bona fide offer) could overstate the value assigned thereto by
the third party.
(f) For purposes of this Section 4.9, all references to the
Partnership's cable systems shall mean any cable system in which the Partnership
has an ownership interest either directly or indirectly through IP-IV or any
Investing Partnership.
4.10 Nonvoting Interests. Notwithstanding anything to the contrary in
this Agreement, if (i) a Limited Partner or any affiliate of such Limited
Partner is subject to the Bank Holding Company Act of 1956, as amended, and
Regulation Y of the Board of Governors of the Federal Reserve System (the "FRB")
promulgated thereunder (such Limited Partner and any of its affiliates
hereinafter collectively referred to as a "BHC LP"), (ii) the limited
partnership interests of the Partnership (the "Interests") held by the BHC LP
exceed 5.0% of the then total outstanding Interests (exclusive of the Nonvoting
Interests, as defined below); and (iii) the BHC LP has not received the approval
of the FRB to hold more than 5.0% of the Interests, then the overline amount of
the Interests in excess of 5.0% shall constitute a separate class of limited
partnership interests hereinafter referred to as "Nonvoting Interests". In
addition, the aggregate amount of the Interests and Nonvoting Interests held by
a BHC LP, that has not received the approval of the FRB to hold more than 5.0%
of the Interests, shall at no time exceed 24.9% of the aggregate amount of all
outstanding Interests and Nonvoting Interests. The rights, privileges, benefits
and liabilities appertaining to the Nonvoting Interests shall be identical in
all respects to the rights, privileges, benefits and liabilities appertaining to
the Interests, except that (i) holders of Nonvoting Interests shall not be
entitled to
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vote upon or give consents in respect of any action by the Partners, except
those matters that, in the judgment of the BHC LP, acting upon advice of legal
counsel, would significantly and adversely affect the rights or preference of
its Interests or Nonvoting Interests, including but not limited to the issuance
of additional Interests or Nonvoting Interests; any modification or amendment
relating to the terms of its Interests, Nonvoting Interests or this Agreement;
or the dissolution of the Partnership and (ii) the Nonvoting Interests (other
than such Nonvoting Interests that are subject to the exception set forth in the
immediately preceding clause (i)) shall not be included in either the numerator
or the denominator of any computation of the required percentage in interest of
the Limited Partners hereunder for all such purposes (except where the consent
of the holders of the Nonvoting Interests is required).
ARTICLE 5
Tax Matters and Reports
5.1 Filing of Tax Returns. The General Partner, at the expense of the
Partnership, shall prepare and file, or cause the accountants of the Partnership
to prepare and file, all required tax returns, including a federal information
tax return in compliance with section 6031 of the Code and any required state
and local income tax and information returns for each tax year of the
Partnership. The General Partner shall act as the Tax Matters Partner of the
Partnership as that term is defined in section 6231(a)(7) of the Code.
5.2 Tax Reports to Current and Former Partners. Within ninety (90) days
of the end of each fiscal year, the Partnership shall prepare and mail, or cause
its accountants to prepare and mail, to each Partner and, to the extent
necessary, to each former Partner (or its legal representatives), a report
setting forth in sufficient detail such information as is required to be
furnished to the Partners by law (e.g., section 6031(b) of the Code and
regulations thereunder) and as shall enable such Partner or former Partner (or
his or its legal representatives) to prepare their respective federal and state
income tax or informational returns in accordance with the laws, rules and
regulations then prevailing. Partners subject to ERISA will receive information
necessary for them to calculate the fair market value of their Partnership
Interests (determined in accordance with Section 4.4).
5.3 Restriction on General Partner Activity With Respect to Publicly
Traded Partnerships. Without the consent of all of the Limited Partners, the
General Partner shall not have the authority on behalf of the Partnership to:
(a) list, recognize, or facilitate the trading of partnership interests
(or any interest therein) on any "established
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securities market" within the meaning of section 7704 of the Code, or permit any
of its affiliates to take such actions, if as a result thereof the Partnership
might be taxed for federal income tax purposes as an association taxable as a
corporation; or
(b) create for the partnership interests (or any interest therein) a
"secondary market (or the substantial equivalent thereof)" within the meaning of
section 7704 of the Code or otherwise permit, recognize or facilitate the
trading of such interests (or any interest therein) on any such market, or
permit any of its affiliates (or to the extent the General Partner has rights
with respect thereto, the selling agents or any of their affiliates) to take
such actions, if as a result thereof the Partnership might be taxed for federal
income tax purposes as an association taxable as a corporation.
5.4 Duties and Obligations of the General Partner With Respect to
Publicly Traded Partnerships. The General Partner shall monitor the transfers of
partnership interests to determine if such interests are being traded on an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of section 7704 of the Code, and shall
take (and cause its affiliates to take) all steps within its power and authority
as are reasonably necessary or appropriate to prevent any such trading of
interests.
5.5 Books and Records. Complete books and records accurately reflecting
the accounts, business, transactions and Partners of the Partnership shall be
maintained and kept by the General Partner at the Partnership's principal place
of business. The books and records of the Partnership required to be maintained
by section 15615 of the Act shall be open at reasonable business hours on prior
appointment for inspection and copying by the Partners. Notwithstanding anything
to the contrary in this Agreement, the General Partner shall have the right to
keep confidential from the Limited Partners for such period of time as the
General Partner deems reasonable, any information which the Partnership is
required by law or by agreement with a third party to keep confidential and any
information which relates to its purchasing of individual items of programming,
plant or equipment which it reasonably deems confidential.
5.6 Fiscal Year. Except as may otherwise be required by the federal tax
laws, the fiscal year of the Partnership for both financial and tax reporting
purposes shall end on December 31.
5.7 Method of Accounting. The books and accounts of the Partnership
shall be maintained using the accrual method of accounting for financial
reporting purposes and for tax purposes and shall be annually audited by a "Big
Six" accounting firm (or a successor thereof). Those documents relating to
allocations
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of items of Partnership income, gain, loss, deduction or credit and Capital
Accounts shall be kept under federal income tax accounting principles as
provided herein.
ARTICLE 6
Conflicts of Interest; Indemnification; Exculpation
6.1 Outside Activities. Without the consent of seventy percent (70%) in
interest of the Limited Partners, the General Partner (and its partners,
employees, agents and affiliates, including, but not limited to, Leo J. Hindery,
Jr.) may not begin the offer and sale of interests in other enterprises with the
purpose of investing in cable television systems until the earlier of July 31,
1997 or such time as sixty-six and two-thirds percent (66-2/3%) of the committed
capital contributions to the Partnership shall be invested or committed for
investment. Without the consent of a majority in interest of the Limited
Partners, the General Partner (and its partners, employees, agents and
affiliates, including, but not limited to, Leo J. Hindery, Jr.) may not begin to
actively supervise the investment of capital of such other enterprises or
partnerships until the earlier of July 31, 1997 or such time as ninety-five
percent (95%) of the committed capital contributions to the Partnership shall be
invested or committed for investment. The General Partner shall first offer any
investment opportunities within the scope of the Partnership, IP-IV's and the
Investing Partnerships' business purpose and for which the Partnership, IP-IV or
the Investing Partnerships have adequate resources to take advantage of the
opportunity to the Partnership, IP-IV and the Investing Partnerships and, to the
extent that the Partnership and the Investing Partnerships, after good faith
consideration by the General Partner, do not invest in such opportunity or take
all of such opportunity, the General Partner may elect to give or share such
investment opportunity to or with one or more of the following: any Partner, any
officer, director, shareholder, partner, employee or affiliate of a Partner, any
enterprise or partnership in which the General Partner has an interest, or any
nonaffiliated person. Notwithstanding the foregoing, in the event the General
Partner is permitted under the provisions of this Section 6.1 to begin the offer
and sale of interests in other enterprises with the purpose of investing in
cable television systems, and the General Partner believes such enterprises may
invest in cable television systems in areas contiguous to those owned by the
Partnership, IP-IV or any Investing Partnership, the General Partner will offer
the Limited Partners an opportunity to invest in such enterprise. Except as set
forth in this Section 6.1, the General Partner or its partners, employees,
agents or affiliates shall not be prohibited from engaging directly or
indirectly in other activities, or from directly or indirectly purchasing,
selling and holding securities or assets in cable television systems or
corporations for their account or for the
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accounts of others. Any Limited Partner (and their partners, employees, agents
and affiliates) may engage in any other enterprises, including enterprises in
competition or in conflict with the Partnership. The Partnership shall not have
any right to any income or profit derived by any Partner, or its partners,
officers, directors, employees, agents or affiliates from any enterprise,
opportunity or transactions permitted by this paragraph. Each Limited Partner
shall have the right to transact business with the Partnership, IP-IV or the
Investing Partnerships. Neither the General Partner nor any of its affiliates
shall sell securities or assets to or purchase securities or assets from the
Partnership without the unanimous consent of the Limited Partners; provided that
the transactions set forth in Exhibit 2 hereto may be consummated by the
Partnership, IP-IV or any Investing Partnership without any further consent of
the Limited Partners. The General Partner may, on behalf of the Partnership or
cable systems of IP-IV or any Investing Partnership, enter into cost and revenue
sharing agreements with cable systems adjacent to those owned by the
Partnership, IP-IV or any Investing Partnership including those systems
purchased by any enterprise or partnership in which the General Partner, any
affiliate of the General Partner or the Partnership or any partner of the
General Partner has an interest (the "Adjacent Systems"), to operate the
Adjacent Systems as a single system with the cable systems of the Partnership,
IP-IV or any Investing Partnership with costs equitably allocated between the
various systems as the General Partner and the owner or operator of such
Adjacent System shall determine based on the relative costs associated with such
systems and, if determined by the General Partner and the owner or operator of
such Adjacent System to be in the best interests of the Partnership, IP-IV, the
Investing Partnerships and the Adjacent Systems, to sell such systems as a
single system and allocate the sales revenues in such manner as such parties
deem appropriate based on the relative values of such systems; provided,
however, the terms of any such arrangement are disclosed to the Limited Partners
and are on arm's-length terms and conditions. The parties hereto hereby waive,
and covenant not to sue on the basis of, any law (statutory, common law or
otherwise) respecting the rights and obligations of the Partners inter se which
is or may be inconsistent with this Section 6.1 with respect to the matters
covered by this Section 6.1, but in no event shall the foregoing be construed as
limiting any rights or remedies with respect to a breach of this Section 6.1.
6.2 Contracts With the General Partner, Affiliates and Limited
Partners. The General Partner may, on behalf of the Partnership, IP-IV or
portfolio companies of the Investing Partnerships, enter into contracts with
itself or any of its partners, employees, agents or affiliates, including but
not limited to InterMedia Management, Inc. ("IMI"), a corporation wholly owned
by Leo J. Hindery, Jr.; provided, however, that except to the extent that the
proceeds therefrom offset but do not exceed the Management Fee payable by the
Partnership, such
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transactions shall be on terms no less favorable to the Partnership than are
generally afforded from unrelated third parties or shall require the approval
of seventy percent (70%) in interest of the Limited Partners, excluding any
interest as a Limited Partner owned or controlled directly or indirectly by the
General Partner, which approval shall not be unreasonably withheld. The
validity of any transaction, agreement or payment involving the Partnership,
IP-IV or an Investing Partnership and the General Partner or any affiliate of
the General Partner or a Limited Partner shall not be affected by reason of (a)
the relationship between the Partnership, IP-IV or portfolio companies of an
Investing Partnership, and the General Partner or such partner, employee, agent
or affiliate of the General Partner or a Limited Partner or the relationship
between such partner, employee, agent or affiliate of the General Partner or a
Limited Partner and the General Partner or (b) the absence of approval of said
transaction, agreement or payment by the Limited Partners if the proceeds
therefrom offset but do not exceed the Management Fee.
6.3 Indemnification of the Partners. The Partnership shall indemnify
and hold harmless the General Partner, any Limited Partner, any Advisory
Committee member and any partner, employee or agent of the General Partner, any
Limited Partner or any Advisory Committee member and any employee or agent of
the Partnership and/or the legal representatives of any of them, and each other
person who may incur liability as a general partner in connection with the
management of the Partnership or any corporation or other entity in which the
Partnership has an investment, against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, and as counsel fees)
reasonably incurred by him or it in connection with the defense or disposition
of any civil action, suit or other proceeding, in which he or it may be involved
or with which he or it may be threatened, while a general partner or serving in
such other capacity or thereafter, by reason of its being or having been a
general partner, or by serving in such other capacity, except with respect to
any matter which constitutes willful misconduct, bad faith, gross negligence or
reckless disregard of the duties of its office, or material breach of this
Agreement. The Partnership shall advance, in the sole discretion of the General
Partner, to the General Partner, any Limited Partner, any Advisory Committee
member and any partner, employee or agent of the General Partner, any Limited
Partner, any Advisory Committee member or the Partnership reasonable attorneys'
fees and other costs and expenses incurred in connection with the defense of any
such action or proceeding. The General Partner hereby agrees, and each employee
or agent of the General Partner and the Partnership shall agree in writing prior
to any such advancement, that in the event he or it receives any such advance,
such indemnified party shall reimburse the Partnership for such fees, costs and
expenses to the extent that it shall be determined that he or it was not
entitled to indemnification under this Section. The rights ac-
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cruing to a General Partner, any Limited Partner and each partner, employee or
agent of the General Partner, any Limited Partner or the Partnership under this
paragraph shall not exclude any other right to which it or they may be lawfully
entitled; provided, that any right of indemnity or reimbursement granted in this
paragraph or to which any indemnified party may be otherwise entitled may only
be satisfied out of the assets of the Partnership, and no withdrawn General
Partner, and no Limited Partner, shall be personally liable with respect to any
such claim for indemnity or reimbursement. Notwithstanding any of the foregoing
to the contrary, the provisions of this Section 6.3 shall not be construed so as
to provide for the indemnification of the General Partner, any Limited Partner,
and Advisory Committee member or any employee or agent of the General Partner,
any Limited Partner or Advisory Committee member for any liability to the extent
(but only to the extent) that such indemnification would be in violation of
applicable law or such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 6.3 to the fullest extent permitted by law.
6.4 Exculpation. The General Partner and any partner, employee or agent
of the General Partner or the Partnership shall not be liable to any
Limited Partner or the Partnership for mistakes of judgment or for action or
inaction which the General Partner or any such partner, employee or agent of
the General Partner or the Partnership reasonably believed to be in the best
interests of the Partnership unless action or inaction constitutes willful
misconduct, bad faith, gross negligence, reckless disregard of its duties or
material breach of this Agreement. The General Partner may consult with counsel,
accountants and other experts in respect of Partnership affairs and be fully
protected and justified in any action or inaction which is taken in accordance
with the advice or opinion of such counsel, accountants or other experts,
provided that they shall have selected with reasonable care. Notwithstanding
any of the foregoing to the contrary, the provisions of this section 6.4 shall
not be construed so as to relieve (or attempt to relieve) the General Partner
and any partner, employee or agent of the General Partner or the Partnership of
any liability, to the extent (but only to the extent) that such liability may
not be waved, modified or limited under applicable law, but shall be construed
so as to effectuate the provisions of this Section 6.4 to the fullest extent
permitted by law.
ARTICLE 7
Termination and Dissolution
7.1 No Dissolution. The Partnership shall not be dissolved by the
admission of substituted Limited Partners or by
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the admission of a new General Partner in accordance with the terms of this
Agreement. The dissolution or bankruptcy of a Limited Partner shall not cause a
dissolution of the Partnership.
7.2 Events of Dissolution. The Partnership shall dissolve upon the
first to occur of the following: (i) expiration of the term of the Partnership
specified in Section 1.6 hereof, (ii) the bankruptcy, insolvency or appointment
of a trustee or receiver to manage the affairs of the General Partner, (iii) the
voluntary withdrawal of Leo J. Hindery, Jr. as general partner of the General
Partner if a successor general partner has not been appointed in accordance with
Section 4.8 hereof, (iv) the removal of the General Partner pursuant to Section
4.8(a) if a successor general partner of the Partnership is not appointed
pursuant to Section 4.8 hereof, (v) dissolution being required by operation of
law or judicial decree including, without limitation, the withdrawal of the
General Partner where there is no remaining or surviving general partner, (vi)
the determination by the General Partner with the affirmative consent of seventy
percent (70%) in interest of the Limited Partners, (vii) the Partnership
becoming taxable as a corporation for federal tax purposes or, (viii) the
determination by the General Partner, based upon advice of counsel, that the
Partnership would be required to register as an investment company under the
Investment Company Act and there is no reasonably practicable means of avoiding
such requirement. Notwithstanding anything to the contrary in this Section 7.2,
without the unanimous consent of the Limited Partners, the General Partner
agrees not to voluntarily withdraw as a general partner of the Partnership, and
Leo J. Hindery, Jr. agrees not to voluntarily withdraw as managing general
partner of the General Partner, and the General Partner and Leo J. Hindery, Jr.
each agrees that they will not voluntarily take or permit any action that would
cause the Partnership to cease to be controlled directly or indirectly by Leo J.
Hindery, Jr. and if any of such persons effects such withdrawal or cessation of
control in violation of this Agreement, the Partnership may recover damages for
breach of this Agreement.
7.3 Winding-up. Upon the occurrence of an event of dissolution, the
Partnership shall be wound up and liquidated. The General Partner or, if there
is no general partner or if the General Partner or the general partner of the
General Partner wrongfully caused the dissolution of the Partnership, a
liquidator appointed by a majority in interest of the Limited Partners, shall
proceed with the dissolution and the final distribution. In the dissolution, the
General Partner or such liquidator shall use its best efforts to reduce to cash
and cash equivalent items such assets of the Partnership as the General Partner
or such liquidator shall deem it advisable to sell, subject to obtaining fair
value for such assets and any tax or other legal considerations. A reasonable
time shall be allowed for the orderly winding up of the business and affairs of
the
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Partnership and the liquidation of its assets in order to minimize any losses
otherwise attendant upon such a winding up, provided that the liquidation is
carried out in conformity with the requirements of Section 7.4 and section
1.704-1(b)(2)(ii)(b)(2) and (3) of the Income Tax Regulations.
7.4 Order of Liquidating Payments and Distributions. In settling
accounts after dissolution, the assets of the Partnership shall be distributed
as expeditiously as possible in the following order not later than the end of
the taxable year of the liquidation (i.e., the date upon which the Partnership
ceases to be a going concern as provided in section 1.704-1(b)(2)(ii)(g) of the
Income Tax Regulations) or if later, within ninety (90) days after the date of
such liquidation:
(a) To creditors, including the Partners to the extent of any unpaid
expenses or any outstanding loan or advance;
(b) To the payment of the costs of winding up the affairs of,
liquidating and dissolving the Partnership including, without limitation,
expenses of selling assets of the Partnership, discharging the liabilities of
the Partnership, distributing the assets of the Partnership and terminating the
Partnership in accordance with Section 7.3 hereof;
(c) To the establishment of reasonable reserves to provide for
obligations to creditors;
(d) To the Partners with respect to which any other debts of the
Partnership are owing, other than debts arising out of the expulsion or
withdrawal of a Partner;
(e) To the Preferred Limited Partner in an amount equal to the positive
balance in its Capital Account as determined after all adjustments to such
account for the taxable year of the Partnership during which the liquidation
occurs as are required by this Agreement and section 1.704-1(b) of the Income
Tax Regulations, such adjustments to be made within the time specified in such
Regulations;
(f) To the Partners (other than the Preferred Limited Partner) in the
proportion of their respective Capital Accounts as those accounts are determined
after all adjustments to such accounts for the taxable year of the Partnership
during which the liquidation occurs as are required by this Agreement and
section 1.704-1(b) of the Income Tax Regulations, such adjustments to be made
within the time specified in such Regulations.
7.5 Termination. The Partnership shall terminate following its
dissolution and liquidation pursuant to this Article 7 when all of the
Partnership assets as to which it is practicable to do so in the sole discretion
of the General Partner or the liquidator shall have been converted into cash,
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the net proceeds therefrom, as well as any other assets of the Partnership,
after payment of or due provision for all debts, liabilities and obligations of
the Partnership, shall have been distributed to the Partners as provided for
herein and the Partnership shall have been terminated in the manner required by
the Act.
7.6 Government Regulation.
(a) The General Partner shall use its best efforts to insure that it
and the Partnership are in substantial compliance with those provisions, if any,
of ERISA with which they are obligated by that statute to comply, and to qualify
as a venture capital operating company (as defined in the Department of Labor
regulations promulgated under ERISA) subject to the following provisions of this
Section 7.6.
(b) In the event that at any time after its admission to the
Partnership, (i) any Limited Partner delivers to the General Partner a written
opinion of counsel, reasonably satisfactory to the General Partner, to the
effect that, by reason of the adoption of any law, rule or regulation or the
issuance of any order or directive by any governmental authority (a "Regulatory
Change"), such Limited Partner's continued participation in the Partnership or
the making by such Limited Partner of any additional capital contribution to the
Partnership would violate any law, rule, regulation, license, permit or other
regulatory requirement binding upon or required of such Limited Partner or would
subject such Limited Partner to any penalty or tax to which it was not subject
at the time of its admission to the Partnership and which is, in the reasonable
judgment of such Limited Partner, material in relation to its investment in the
Partnership and is not applicable to such Limited Partner's investments
generally or (ii) the General Partner delivers to any Limited Partner an opinion
of the Partnership's counsel to the same effect or to the effect that, by reason
of a Regulatory Change, such Limited Partner's continued participation in the
Partnership would materially restrict the continued conduct of the Partnership's
business (any such event described in clause (i) or (ii) of this paragraph (b)
is referred to as an "Adverse Regulatory Development" and the Limited Partner
affected thereby is referred to as the "Affected Partner"), then the General
Partner and the Affected Partner shall cooperate with each other in taking or
causing to be taken such action as shall eliminate such Adverse Regulatory
Development. Any such opinion of counsel shall describe the applicable
Regulatory Change and its effect on the Affected Partner and the Partnership
and, insofar as practicable, the actions which would eliminate such Adverse
Regulatory Development.
(c) If an Adverse Regulatory Development cannot otherwise be resolved
to the mutual satisfaction of the Affected Partner and the General Partner, the
General Partner and the Affected Partner shall each use its best efforts to find
a purchaser for
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all the Affected Partner's interest in the Partnership, or such part thereof as
shall be sufficient to eliminate the Adverse Regulatory Development, on terms
and conditions reasonably acceptable to the Affected Partner, and if acceptable
to the Affected Partner, the General Partner shall consent to the sale of such
interest as long as, in the reasonable judgment of the General Partner, the
purchaser thereof has sufficient financial resources to satisfy any remaining
obligation to contribute capital to the Partnership to be assumed by such
purchaser from the Affected Partner with respect to the interest in the
Partnership to be purchased by it and meets the requirements for transfer set
forth in Section 8.1.
(d) If, within thirty (30) business days after the delivery of an
opinion referred to in paragraph (b) above or such later time as the General
Partner and the Affected Partner shall agree, the General Partner and the
Affected Partner have not resolved to their mutual satisfaction the Adverse
Regulatory Development, then the Partnership may take any of the following
actions with respect to the Affected Partner's interest in the Partnership, but
only upon the delivery to the Affected Partner of an opinion of the
Partnership's counsel (which opinion shall be reasonably acceptable to the
Affected Partner) to the effect that the taking of such action should eliminate
the Adverse Regulatory Development: (i) release the Affected Partner from making
any capital contribution with respect to any new investment by the Partnership
(and appropriate provisions shall be made in this Agreement to preserve such
Affected Partner's interest in all existing investments and to eliminate such
Affected Partner's participation in future investments); (ii) redeem the
Affected Partner's interest in the Partnership in exchange for the assignment to
the Affected Partner of the percentage share of the Partnership's cash and
short-term investments which the Affected Partner would receive if all such
assets were then distributed to the Partners plus the percentage share in each
of the Partnership's other investments and any other assets of the Partnership
equal to the share of all such assets it would receive if the Partnership were
dissolved at such time and all such assets were liquidated for their then value
as determined in accordance with Section 4.4(b), or a cash payment in lieu
thereof in an amount equal to the fair market value (as determined pursuant to
Section 4.4) of their Partnership Interest as of the date of the determination
of an Adverse Regulatory Development; or (iii) terminate and dissolve the
Partnership and, if in the judgment of the General Partner it is prudent to do
so, distribute all or any portion of the Partnership's investments to the
Partners in kind so that, as nearly as practicable, each Partner receives an
equal portion of its total distribution in each investment distributed in kind,
in which event the General Partner shall offer to establish a successor
partnership on terms and conditions in all material respects the same as this
Partnership by contributing the property distributed to them by this
Partnership. The Partnership shall seek to take the foregoing actions in the
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order stated and shall take an action subsequently stated only if, in accordance
with the opinion of counsel referred to above, none of the actions previously
stated should eliminate the Adverse Regulatory Development.
(e) If, within sixty (60) business days after the delivery of the
opinion referred to in paragraph (b) above or such later time as the General
Partner and the Affected Partner shall agree upon, the General Partner and the
Affected Partner have not resolved to their mutual satisfaction the Adverse
Regulatory Development or the Partnership has not taken any of the actions
permitted by paragraph (d) above to eliminate the Adverse Regulatory
Development, the Affected Partner, by notice to the Partnership, may require the
Partnership to take any of such actions but only upon the delivery to the
Partnership of an opinion of counsel (which opinion and counsel shall be
reasonably acceptable to the General Partner) to the effect that the taking of
such action should eliminate the Adverse Regulatory Development; provided that
the Affected Partner shall require the Partnership to take any of the actions
stated in paragraph (d) only if, in the opinion of counsel delivered pursuant to
this paragraph (e), none of the actions stated in paragraph (d) before the
action proposed to be taken would likely eliminate the Adverse Regulatory
Development; and provided further that the Partnership shall not be required to
take the actions referred to in clause (iii) of paragraph (d) if the Regulatory
Change is the imposition on the Affected Partner of a penalty or tax of the type
referred to in paragraph (b) and the General Partner reasonably determines that
such action would have an effect on the other Limited Partners that is material
and adverse in relation to their investment in the Partnership.
(f) The Partnership and the Affected Partner shall each bear all
expenses it may respectively incur in connection with taking any of the actions
permitted or required of it by paragraphs (b) through (e) of this Section 7.6,
including the costs of providing any opinions of counsel it is required to
provide.
(g) Whenever the General Partner proposes to make any cash payment to
an Affected Partner as permitted by paragraph (d) or as may otherwise be agreed
upon by the Affected Partner and the General Partner or to take any other action
pursuant to this Section 7.6 which would adversely and materially affect the
interest of the other Limited Partners in relation to their investment in the
Partnership, the General Partner shall first obtain the approval of seventy
percent (70%) of such Limited Partners for such payment or action.
(h) The Partnership or an Affected Partner may take the actions
contemplated by this Section 7.6 either (i) in advance of any Regulatory Change
coming into effect if all necessary governmental action has occurred to cause
such Regulatory Change to come into effect or (ii) prior to expiration of the
time
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periods provided hereunder for the taking of such actions if in the opinion of
counsel referred to herein doing so is necessary to avoid an Adverse Regulatory
Development coming into effect with respect to an Affected Partner.
7.7 Orderly Methods of Liquidating Payments. Notwithstanding anything
to the contrary in this Article 7, if required to maximize the proceeds of
liquidation, the General Partner (or the liquidator chosen in accordance with
Section 7.3) may, with the consent of seventy percent (70%) in interest of the
Limited Partners, implement the distribution provisions of Section 7.4(f) hereof
by transfer, on behalf of the Partners, of the assets of the Partnership to a
liquidating trustee or trustees.
ARTICLE 8
Transfer of Interest, Failure To Pay
Capital Contributions, Beneficial Owners
8.1 Transfer of Partnership Interest. No Limited Partner shall sell,
assign, mortgage, encumber, hypothecate or otherwise transfer, whether
voluntarily or involuntarily, its interest in the Partnership or any part
thereof, unless (x) any such transferee entity meets the suitability
requirements originally imposed under the subscription agreement on the
transferring Limited Partner and (y) such assignment or transfer will not (and,
upon request of the General Partner, the transferring Limited Partner provides
an opinion of counsel in form and substance satisfactory to the General Partner
that such assignment or transfer will not) (A) violate any applicable federal or
state securities laws or regulations, subject the Partnership to registration as
an investment company or election as a "business development company" under the
Investment Company Act; (B) require the General Partner or any of its partners
to register as an investment adviser under the Investment Advisers Act of 1940;
(C) violate any other federal, state or local laws; (D) effect a termination of
the Partnership under section 708 of the Code; or (E) cause the Partnership to
be treated as an association taxable as a corporation for federal income tax
purposes, or violate this Agreement. Notwithstanding the preceding sentence, a
Partner may assign or transfer its interest in the Partnership if any such
assignment or transfer effects a termination of the Partnership under section
708 of the Code so long as the transferring Partner agrees to indemnify and hold
harmless the Partnership and all other Partners against any and all costs and
expenses incurred as a direct result of a termination of the Partnership under
section 708 of the Code. No transferee or assignee of all or any part of a
Limited Partner's interest shall become a Limited Partner without the prior
written consent of the General Partner which consent shall not be unreasonably
withheld so long as such Partner sells the lesser of all its Partnership
Interests or a Partnership Interest representing an initial contribution of at
least
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$5,000,000 and in no event shall the substitution of an assignee or transferee
as a Limited Partner require the consent of any Limited Partner. Any purported
transfer of any interest of a Limited Partner in the Partnership or any part
thereof not in compliance with this Section 8.1 shall be void and of no force or
effect and the transferring Partner shall be liable to the other Partners and
the Partnership for all liabilities, obligations, damages, losses, costs and
expenses (including reasonable attorneys' fees and court costs) arising as a
result of such noncomplying transfer.
8.2 Transfer of IP Holdings Affiliates' Interests. Notwithstanding the
provisions of Section 8.1, any IP Holdings Affiliate (as that term is defined in
Exhibit 1 hereto) may transfer any or all of its interest in the Partnership to
any other IP Holdings Affiliate at any time, provided that such transfer is made
in compliance with clauses (x) and (y) of Section 8.1.
8.3 Indemnification. (a) Each Limited Partner and substituted Limited
Partner (each an "Indemnifying Person") shall indemnify and hold harmless the
Partnership, the General Partner and every other Limited Partner (each an
"Indemnified Person") 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, by reason of or arising from
(including without limitation from any actual or alleged misrepresentation or
misstatement of facts or omission to represent or state facts made by such
Limited Partner in connection with) (i) any assignment, transfer, encumbrance or
other disposition of all or any part of such Limited Partner's Partnership
Interest, or (ii) the admission of such substituted Limited Partner, against
losses, liabilities and expenses for which the Partnership or other person has
not otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by it in connection
with such action, suit or proceeding.
(b) Each Indemnifying Person agrees that no Indemnifying Person will,
without the prior written consent of the Indemnified Person, settle, compromise
or consent to the entry of any judgment in any pending or threatened action in
respect of which indemnification may be sought under this Agreement unless such
settlement includes an unconditional release of the Indemnified Person from all
liability arising therefrom. Any Indemnifying Person shall have no
indemnification obligations with respect to any such claim or demand which has
been settled by an Indemnified Person without the prior written consent of such
Indemnifying Person, which consent will not be unreasonably withheld or delayed.
8.4 Failure To Pay Capital Contributions. The parties hereto agree that
prompt payment of the installments of required
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capital contributions hereunder is of the essence and that failure of any
Partner to make such payments as provided herein will cause substantial injury
to the Partnership and the other Partners; further, the amount of damages caused
by such injury will be difficult to calculate. Accordingly, the parties hereto
agree that in the event that any Limited Partner fails to pay any installment of
its required capital contribution to the Partnership promptly when due, the
General Partner shall give such defaulting Limited Partner written notice
thereof, and if such defaulting Limited Partner shall fail to make such required
payment in full within fifteen (15) days following the mailing of such notice or
such other longer period as the General Partner may elect, the General Partner
may elect, in its sole discretion, either of the following alternatives:
(a) to commence legal proceedings against such defaulting Limited
Partner to collect the due and unpaid payment, plus interest from the date due
at the reference rate as announced from time to time by Bank of America NT&SA,
plus two (2) percentage points, plus the expenses of collection, including
attorneys' fees; or
(b) to rescind and terminate all of the defaulting Limited Partner's
interest in the Partnership. In such event, the defaulting Limited Partner will
receive, upon termination of the Partnership, the lesser of (1) its paid-in
capital or (2) seventy-five percent (75%) of its Capital Account at the time of
default (reduced by what its Partnership Interest in subsequent deductions and
losses would have been had it remained a Partner in the Partnership) and in such
event the remaining amount that would have been distributed to such Limited
Partners shall be available for distribution to the remaining Partners in
accordance with Article 3.
Notwithstanding the foregoing, without the consent of the Limited
Partner having the largest interest as a Limited Partner (other than with
respect to a default by such Limited Partner) or if the defaulting Limited
Partner has not then paid to the Partnership at least one-third of its
commitment of equity to the Partnership as in effect on the date hereof, the
General Partner shall not have the option to pursue remedies against the
defaulting Limited Partner under the terms of clause 8.3(b) above, but instead
may only pursue remedies against such Limited Partner pursuant to clause 8.3(a)
above or as otherwise provided herein, at law or in equity.
The foregoing alternatives, to the extent available as provided above,
are in addition to and not in limitation of any other right or remedy of the
Partnership under this Agreement, at law or in equity. Losses attributable to a
defaulting Limited Partner pursuant to Section 3.1 shall be calculated as if
such installment had been paid when due.
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8.5 Increase in Beneficial Owners. Notwithstanding any other provision
of this Agreement, no Limited Partner shall increase the number of its
beneficial owners if (a) at such time, such Limited Partner owns more than ten
percent (10%) of the Partnership Interests in the Partnership and has more than
ten percent (10%) of its assets invested in private investment companies which
are not registered under the Investment Company Act of 1940, as amended, because
such companies have less than one hundred (100) beneficial owners and do not
presently propose to make a public offering of their interests, or (b) such
Limited Partner was formed for the purpose of investing in a Partnership
Interest.
ARTICLE 9
Miscellaneous
9.1 Notices. All notices, approvals, consents and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be hand delivered (including by messenger or recognized commercial
delivery or courier service), sent by facsimile transmission or sent by
registered or certified mail, postage prepaid, addressed to the Partner intended
at the address set forth below its name on Exhibit 1 hereto or at such other
address as such Partner may designate by notice given to the other Partners in
the manner aforesaid and shall be deemed given and received on the date it is
delivered, in the case of delivery by hand or by facsimile (if sent on a
business day, or if not sent on a business day, the next business day
thereafter) or, in the case of delivery by mail, actual delivery as shown by the
addressee's return receipt. Rejection or other refusal to accept or inability to
deliver because of a change of address of which no notice was given shall be
deemed to be receipt of the notice.
9.2 Governing Law. This Agreement and this limited partnership created
hereby shall be governed by and construed in accordance with the laws of the
State of California.
9.3 Amendments. This Agreement may be modified or amended only by an
instrument in writing signed by the General Partner and by seventy percent (70%)
in interest of the Limited Partners (or such other percentage as required by
Section 4.7(b)); provided that, in addition to any amendments otherwise
authorized herein, this Agreement may be amended from time to time by the
General Partner without the consent of any of the Limited Partners to (i) add to
the representations, duties or obligations of the General Partner or surrender
any right or power granted to the General Partner herein, (ii) add to the rights
or powers granted to the Limited Partners, (iii) clarify any inconsistency
between sections hereof and correct any printing, stenographic or clerical
errors or omissions; and (iv) to comply with legal or tax requirements provided
such compliance
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does not materially decrease the amount or timing of any distributions,
including distributions upon liquidation, or materially change allocations of
income or losses, that the Limited Partners would otherwise be entitled to
receive pursuant to this Agreement, provided however, that nothing herein shall
be construed to permit the General Partner to add to the rights or powers of the
Limited Partners if such addition could reasonably be expected to cause the
Limited Partners to have liability as general partners and provided that the
General Partner shall not relinquish any rights or powers if such relinquishment
could reasonably be expected to prevent it from performing its duties and
obligations hereunder.
9.4 Entire Agreement. This instrument together with the Subscription
Agreements of the Partners constitute the entire agreement between the Partners
with respect to the Partnership and supersede all prior agreements,
understandings, offers and negotiations, oral or written.
9.5 Waiver of Partition. Each Partner hereby irrevocably waives any and
all rights that it may have to maintain an action for partition of the
Partnership or any of the Partnership's property.
9.6 Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Partnership.
9.7 Successors. Subject to Article 8, all rights and duties of the
Partners hereunder shall inure to the benefit of and be binding upon their
respective successors and assigns.
9.8 Confidentiality of Investors. Neither the General Partner nor the
Partnership shall disclose to any person or entity (other than to another
Partner or potential partner or to lenders or potential lenders to the
Partnership) the fact that a Limited Partner is an investor in the Partnership
except to the extent (a) required by law or legal process upon prior written
notice to such Limited Partner or (b) authorized by any such Limited Partner in
writing.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
9.10 Severability. Each provision of this Agreement shall be considered
severable and if for any reason any provision which is not essential to the
effectuation of the basic purposes of the Agreement is determined by a court of
competent jurisdiction to be invalid or unenforceable and contrary to the Act or
existing or future applicable law, such invalidity shall not impair the
operation of or affect those provisions of this Agreement which are valid. In
that case, this Agreement shall
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<PAGE> 58
be construed so as to limit any term or provision so as to make it enforceable
or valid within the requirements of any applicable law, and in the event such
term or provision cannot be so limited, this Agreement shall be construed to
omit such invalid or unenforceable provisions.
9.11 Affiliate. For purposes of this Agreement, an affiliate of any
person shall mean any other person that (i) directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control
with, the specified person; (ii) is a director or officer of, partner in, member
of, or trustee of, or serves in a similar capacity with respect to, the
specified person or of which the specified person is a director, officer,
partner, or trustee, or with respect to which the specified person serves in a
similar capacity; (iii) directly or indirectly through one or more
intermediaries is the beneficial owner of ten percent (10%) or more of any class
of equity securities of the specified person or of which the specified person is
directly or indirectly through one or more intermediaries the owner of ten
percent (10%) or more of any class of equity securities; (iv) directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, a person described in clause (iii), (v) is acting at
the direction and primarily in furtherance of the interests of the specified
person or (vi) is an immediate family member of the specified person.
Notwithstanding the foregoing, for purposes of Sections 4.7(d), 4.8, 4.9, 6.1
and 6.2 of this Agreement in no event shall any person that is under the direct
or indirect control of Leo J. Hindery, Jr. be deemed to be an affiliate of
Tele-Communications, Inc. or its related entities and for purposes of Sections
4.7(d), 4.8 and 6.1, InterMedia Partners, a California limited partnership,
shall not be deemed to be an affiliate of the General Partner, the Partnership,
IP-IV or any Investing Partnership.
9.12 Power of Attorney. Each Limited Partner, including any additional
or substituted Limited Partner, hereby irrevocably constitutes and appoints the
General Partner, and each general partner of the General Partner, and each of
them acting singly, its true and lawful agent and attorney-in-fact, with full
power and authority of substitution, to make, amend, execute, acknowledge, swear
to, deliver, file and record for and on behalf of such Limited Partner, such
documents and instruments as may be reasonably necessary to carry out the
provisions of, and which is permitted by, this Agreement, including a
Certificate of Limited Partnership and any amendments thereto required by law,
any amendments to this Agreement by reason of admissions, substitutions or
withdrawals of Limited Partners or any amendments to give effect to the voting
of the Partners and any amendments permitted by Section 9.3 without the consent
of the Limited Partners.
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<PAGE> 59
The foregoing power of attorney, being coupled with an interest, is
hereby declared to be irrevocable, and shall survive the death, dissolution or
incapacity of any Limited Partner.
9.13 Nonrecourse. Neither the Partnership nor the Partners shall have
recourse to any partner, officer, director or shareholder of any Partner or to
the assets of any partner, officer, director or shareholder of any Partner with
respect to the obligations and liabilities of such Partner under this Agreement,
except that this Section 9.13 shall not limit or impair the exercise or
enforcement of rights and remedies in respect of any agreement to which such
person is a party in accordance with the terms and provisions of such agreement.
9.14 Foreign Person. Should any Partner be subject to withholding
pursuant to the Code or any applicable state, local or foreign law, the
Partnership may withhold all amounts otherwise distributable to such Partner or
otherwise under this Agreement or such other amount as may be required by law
and any amounts so withheld shall be deemed to have been distributed to the
Partner under this Agreement. If any sums are withheld pursuant to this
provision, the Partnership shall remit the sums so withheld to and file the
required forms with the Internal Revenue Service or other applicable government
agency and, in the event of any claimed over- withholding, the Partner shall be
limited to an action against the Internal Revenue Service or other applicable
government agency for refund and hereby waives any claim or right of action
against the Partnership on account of such withholding. Moreover, if the amounts
required to be withheld exceed the amounts which would otherwise have been
distributed to such Partner, such Partner shall contribute any deficiency to the
Partnership within five (5) days after receipt of notice from the General
Partner.
IN WITNESS WHEREOF, the Partners have executed this Agreement of
Limited Partnership as of the date first hereinabove written.
GENERAL PARTNER:
INTERMEDIA CAPITAL MANAGEMENT IV,
L.P.
By /s/ Leo J. Hindery, Jr.
------------------------------
Leo J. Hindery, Jr.
Managing General Partner
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<PAGE> 60
PREFERRED LIMITED PARTNER:
GENERAL ELECTRIC CAPITAL CORPORATION
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
LIMITED PARTNERS:
ATLANTIC EQUITY CORPORATION
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
BANCORP HAWAII, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
-55-
<PAGE> 61
THE BANK OF NEW YORK COMPANY, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
CABLE PARTNERS, AN ILLINOIS
GENERAL PARTNERSHIP
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
MELLON BANK, N.A., AS TRUSTEE FOR
THIRD PLAZA TRUST
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
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<PAGE> 62
MELLON BANK, N.A., AS TRUSTEE FOR
FOURTH PLAZA TRUST
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
***
---------------------------------------
WILLIAM D. HORVITZ
INDOSUEZ CAPITAL
By Indosuez CM II, Inc.
Its Managing General Partner
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
***
---------------------------------------
THIERRY DEVERGNES
-57-
<PAGE> 63
INTER CABLE INVESTORS, A
CALIFORNIA LIMITED PARTNERSHIP
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
INTERMEDIA PARTNERS, a California
limited partnership
By InterMedia Capital Management,
a California limited partnership
Its General Partner
By
------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
IP HOLDINGS L.P.,
By Centre Partners, L.P.
Its General Partner
By Park Road Corporation
Its General Partner
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
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<PAGE> 64
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT
INVESTORS II, L.P.
By Centre Partners II, L.P. as
general partner of such
partnerships
By Centre Partners Management
LLC,
attorney-in fact
By ***
------------------------------------
Bruce G. Pollack
Managing Director
CENTRE PARTNERS COINVESTMENT,
L.P.
CENTRE PARALLEL MANAGEMENT
PARTNERS, L.P.
By Centre Partners II, LLC, a
general partner
By ***
------------------------------------
Bruce G. Pollack
Managing Director
SBA CABLE CORP.
By ***
------------------------------------
Bruce G. Pollack
Treasurer
OVERSEAS CABLE CORP.
By ***
------------------------------------
Bruce G. Pollack
Treasurer
-59-
<PAGE> 65
LJR LIMITED PARTNERSHIP
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
NATIONSBANC INVESTMENT CORP.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
RMS LIMITED PARTNERSHIP
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
ROYAL BANK OF CANADA
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
SUMITOMO CORPORATION
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
-60-
<PAGE> 66
SUMITOMO CORPORATION OF AMERICA
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
TCI OF GREENVILLE, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
TCI OF PIEDMONT, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
TCI OF SPARTANBURG, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
TORONTO DOMINION INVESTMENTS, INC.
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
-61-
<PAGE> 67
WLD LAMONT PARTNERS
By ***
------------------------------------
Name
----------------------------------
Title
---------------------------------
Leo J. Hindery, Jr. agrees to be bound by the terms of Section 6.1 and Section
7.2 to the extent such Sections relate to him.
Agreed and Accepted this 19th
day of March, 1996
/s/ Leo J. Hindery, Jr.
- ------------------------------
Leo J. Hindery, Jr.
InterMedia Capital Management IV, L.P.,
a California limited partnership as
Attorney-in-Fact for each Limited Partner
marked with ***
/s/ Leo J. Hindery, Jr.
- ------------------------------
Leo J. Hindery, Jr.
Managing General Partne
-62-
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV CAPITAL CORP.
$292,000,000
11 1/4% Senior Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
July 19, 1996
NationsBanc Capital Markets, Inc.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Toronto Dominion Securities (USA) Inc.
31 West 52nd Street
New York, New York 10019
Ladies and Gentlemen:
InterMedia Capital Partners IV, L.P., a California limited
partnership ("ICP-IV"), and InterMedia Partners IV Capital Corp., a Delaware
corporation and a wholly owned subsidiary of ICP-IV ("IPCC" and, together with
ICP-IV, the "Issuers"), propose, jointly and severally, to issue and sell to
certain purchasers (the "Initial Purchasers"), upon the terms set forth in a
Purchase Agreement of even date herewith (the "Purchase Agreement"), its 11 1/4%
Senior Notes Due 2006 (the "Notes") (the "Initial Placement"). As an inducement
to the Initial Purchasers to purchase the Notes, and in satisfaction of a
condition to your obligations under the Purchase Agreement, the Issuers agree
with you for the benefit of the holders from time to time of the Notes
(including the Initial Purchasers) (each of the foregoing a "Holder" and,
collectively, the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
<PAGE> 2
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" means July 30, 1996.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer Registration Period" means the 180-day period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Issuers on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Initial Purchasers) that is a broker-dealer, electing to exchange Notes acquired
for its own account as a result of market-making activities or other trading
activities, for New Notes.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Notes, dated
as of the Closing Date, among the Issuers and as trustee, as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering.
2
<PAGE> 3
"New Notes" means debt securities of the Issuers identical in
all material respects to the Notes (except that the transfer restrictions
pertaining to such Notes will be modified or eliminated, as appropriate), to be
issued under the Indenture.
"Notes" has the meaning set forth in the preamble hereto.
"Offering Memorandum" means the offering memorandum, dated
July 19, 1996, relating to the offer and sale of the Notes.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Notes or the New Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Notes, a like
principal amount of the New Notes.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes or the
New Notes pursuant to the provisions of this Agreement, Amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Issuers pursuant to the provisions of Section 3 hereof, which
covers some or all of the Notes or New Notes, as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
3
<PAGE> 4
"Trustee" means the trustee with respect to the Notes or New
Notes, as applicable, under the Indenture.
"Underwriter" means any underwriter of Notes in connection
with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Notes by
Exchanging Dealers; Private Exchange.
(a) The Issuers shall prepare and, as soon as practicable but
not later than 45 days following the Closing Date, shall file with the
Commission the Exchange Offer Registration Statement with respect to
the Registered Exchange Offer. The Issuers shall use their best efforts
(i) to cause the Exchange Offer Registration Statement to become
effective under the Act at the earliest possible time but not later
than 120 days after the Closing Date and (ii) to consummate the
Registered Exchange Offer on the earliest practicable date after the
Exchange Offer Registration Statement has become effective but not
later than 30 days thereafter.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuers shall promptly commence the Registered Exchange
Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Notes for New Notes (assuming
that such Holder is not an affiliate of either of the Issuers within
the meaning of the Act, acquires the New Notes in the ordinary course
of such Holder's business and has no arrangements with any person to
participate in the distribution of the New Notes) to trade such New
Notes from and after their receipt without any limitations or
restrictions under the Act and without material restrictions under the
securities laws of a substantial proportion of the several states of
the United States.
(c) In connection with the Registered Exchange Offer, the
Issuers shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(ii) keep the Registered Exchange Offer open for not
less than 30 days (or longer if required by applicable law)
and not more than 60 days (or longer if required by applicable
law) after the date notice thereof is mailed to the Holders;
4
<PAGE> 5
(iii) utilize the services of a depository for the
Registered Exchange Offer with an address in the Borough of
Manhattan, the City of New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Issuers shall:
(i) accept for exchange all Notes tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all
Notes so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and
deliver to each Holder of Notes, New Notes equal in principal
amount to the Notes of such Holder so accepted for exchange.
(e) You and the Issuers acknowledge that, pursuant to
interpretations by the Commission's staff of Section 5 of the Act, and
in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of
any New Notes received by such Exchanging Dealer pursuant to the
Registered Exchange Offer in exchange for Notes acquired for its own
account as a result of market-making activities or other trading
activities. Accordingly, the Issuers shall:
(i) include the information set forth in Annex A
hereto on the cover of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange
Offer Registration Statement in a section setting forth
details of the Exchange Offer, and in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus
forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the
letter of transmittal delivered pursuant to the Registered
Exchange Offer; and
(ii) use their best efforts to keep the Exchange
Offer Registration Statement continuously effective under the
Act during the Exchange Offer Registration Period for delivery
by Exchanging Dealers in connection with sales of New Notes
received pursuant to the Registered Exchange Offer, as
contemplated by Section 4(h) below.
5
<PAGE> 6
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect
to the exchange of Notes constituting any portion of an unsold
allotment, upon the effectiveness of the Shelf Registration Statement
as contemplated by Section 3 hereof, at the request of such Initial
Purchaser, the Issuers shall issue and deliver to such Initial
Purchaser, or to the party purchasing New Notes from such Initial
Purchaser registered under such Shelf Registration Statement, in
exchange for such Notes, a like principal amount of New Notes. The
Issuers shall seek to cause the CUSIP Service Bureau to issue the same
CUSIP number for such New Notes as for New Notes issued pursuant to the
Registered Exchange Offer.
3. Shelf Registration. If: (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Issuers
determine upon advice of their outside counsel that they are not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii)
for any other reason the Registered Exchange Offer is not consummated within 150
days of the Closing Date; (iii) the Holders of a majority in principal amount of
Notes determine in good faith that (x) they are prohibited by law or Commission
policy from participating in the Registered Exchange Offer or (y) the Exchange
Notes such Holders would receive in the Registered Exchange Offer could only be
reoffered and resold by such Holders upon compliance with the registration and
prospectus delivery requirements of the Act and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for
resales; or (iv) any Initial Purchaser that participates in the Registered
Exchange Offer or acquires New Notes pursuant to Section 2(f) hereof does not
receive freely tradable New Notes in exchange for Notes constituting any portion
of an unsold allotment (it being understood that, for purposes of this Section
3, (x) the requirement that an Initial Purchaser deliver a Prospectus containing
the information required by Items 507 and/or 508 of Regulation S-K under the Act
in connection with sales of New Notes acquired in exchange for such Notes shall
result in such New Notes being not "freely tradable" but (y) the requirement
that an Exchanging Dealer deliver a Prospectus in connection with sales of New
Notes acquired in the Registered Exchange Offer in exchange for Notes acquired
as a result of market-making activities or other trading activities shall not
result in such New Notes being not "freely tradable"), the following provisions
shall apply:
(a) The Issuers shall as promptly as practicable (but in no
event more than 30 days after so required or requested pursuant to this
Section 3), file with the Commission a Shelf Registration Statement
relating to the offer and sale of the Notes or the New Notes, as
applicable, by the Holders from time to time in accordance with the
methods of distribution
6
<PAGE> 7
elected by such Holders and set forth in such Shelf Registration
Statement and Rule 415 under the Act, provided, however, that with
respect to New Notes received by a Purchaser in exchange for Notes
constituting any portion of an unsold allotment, the Issuers may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or
508, as applicable, in satisfaction of its obligations under this
Paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as,
and governed by the provisions herein applicable to, a Shelf
Registration Statement.
(b) The Issuers shall use their best efforts to cause the
Shelf Registration Statement to be declared effective under the Act
within 90 days after so required or requested to file such Shelf
Registration Statement pursuant to this Section 3, and shall use its
best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to be
usable by Holders for a period of three years from the date the Shelf
Registration Statement is declared effective by the Commission or such
shorter period that will terminate when all the Notes or New Notes, as
applicable, covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such
period being called the "Shelf Registration Period"). The Issuers shall
be deemed not to have used their best efforts to keep the Shelf
Registration Statement effective during the requisite period if they
voluntarily take any action that would result in Holders of securities
covered thereby not being able to offer and sell such securities during
that period, unless: (i) such action is required by applicable law; or
(ii) such action is taken by the Issuers in good faith and for valid
business reasons (not including avoidance of the Issuers' obligations
hereunder), including the acquisition or divestiture of assets, so long
as the Issuers promptly thereafter comply with the requirements of
Section 4(c) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuers shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Registration Statement, and
each amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein, and shall use their best efforts to
reflect in any Shelf
7
<PAGE> 8
Registration Statement, when so filed with the Commission, such
comments as you reasonably may propose.
(b) The Issuers shall ensure that: (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder; (ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement, and
any amendment or supplement to such Prospectus, does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) (i) The Issuers shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:
(A) when a Registration Statement and any
amendment thereto has been filed with the Commission
and when the Registration Statement or any
post-effective amendment thereto has become
effective; and
(B) of any request by the Commission for
amendments or supplements to the Registration
Statement or the Prospectus included therein or for
additional information.
(ii) The Issuers shall advise you and, in the case of
a Shelf Registration Statement, the Holders of securities
covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has
provided in writing to the Issuers a telephone or facsimile
number and address for notices, and, if requested by you or
any such Holder or Exchanging Dealer, confirm such advice in
writing:
(A) of the issuance by the Commission of any
stop order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose;
(B) of the receipt by the Issuers of any
notification with respect to the suspension of the
8
<PAGE> 9
qualification of the securities included therein for
sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(C) of the happening of any event that
requires the making of any changes in the
Registration Statement or the Prospectus so that, as
of such date, the statements therein are not
misleading and do not omit to state a material fact
required to be stated therein or necessary to make
the statements therein (in the case of the
Prospectus, in light of the circumstances under which
they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been
made).
(d) The Issuers shall use their best efforts to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Issuers shall furnish to each Holder of securities
included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement,
any post-effective amendment thereto, including financial statements
and schedules, and, if the Holder so requests in writing, all exhibits
(including those incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period,
deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Issuers consent to the use
of the Prospectus or any amendment or supplement thereto by each of the
selling Holders of securities in connection with the offering and sale
of the securities covered by the Prospectus or any amendment or
supplement thereto.
(g) The Issuers shall furnish to each Exchanging Dealer that
so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, any documents
incorporated by reference therein, and, if the Exchanging Dealer so
requests in writing, all exhibits (including those incorporated by
reference).
(h) The Issuers shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging
9
<PAGE> 10
Dealer, without charge, such reasonable number of copies of the
Prospectus included in such Exchange Offer Registration Statement and
any amendment or supplement thereto as such Exchanging Dealer may
request for delivery by such Exchanging Dealer in connection with a
sale of New Notes received by it pursuant to the Registered Exchange
Offer, and the Issuers consent to the use of the Prospectus or any
amendment or supplement thereto by any such Exchanging Dealer, as
aforesaid.
(i) Prior to the Registered Exchange Offer (or any offering of
securities pursuant to any Registration Statement), the Issuers shall
register or qualify or cooperate with the Holders of securities
included therein and their respective counsel in connection with the
registration or qualification of such securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such
jurisdictions of the securities covered by such Registration Statement;
provided, however, that the Issuers will not be required to qualify
generally to do business in any jurisdiction where they are not then so
qualified or to take any action that would subject them to general
service of process or to taxation in any such jurisdiction where they
are not then so subject.
(j) The Issuers shall cooperate with the Holders of Notes to
facilitate the timely preparation and delivery of certificates
representing Notes to be sold pursuant to any Registration Statement
free of any restrictive legends and in denominations of $1,000 or an
integral multiple thereof and registered in such names as Holders may
request prior to sales of securities pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by Paragraph
(c)(ii)(3) above, the Issuers shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement
to the related Prospectus or file any other required document so that,
as thereafter delivered to purchasers of the securities included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Issuers shall provide a CUSIP number for the
Notes or New Notes, as the case may be, registered under such
Registration Statement, and provide the applicable trustee with printed
certificates for such Notes or
10
<PAGE> 11
New Notes, in a form eligible for deposit with The Depository Trust
Company.
(m) The Issuers shall use their best efforts to comply with
all applicable rules and regulations of the Commission and shall make
generally available to their security holders as soon as practicable
after the effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Act.
(n) The Issuers shall cause the Indenture to be qualified
under the Trust Indenture Act in a timely manner.
(o) The Issuers may require each Holder of securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Issuers such information regarding the Holder and the distribution of
such securities as the Issuers may from time to time reasonably require
for inclusion in such Registration Statement.
(p) The Issuers shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf
Registration Statement such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the
Issuers shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite
or facilitate the registration or the disposition of the Notes, and in
connection therewith, if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and procedures no
less favorable than those set forth in Section 6 hereof (or such other
provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any) with respect to all parties to be
indemnified pursuant to Section 6 hereof from Holders of Notes to the
Issuers.
(r) In the case of any Shelf Registration Statement, the
Issuers shall: (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Issuers
and their
11
<PAGE> 12
subsidiaries; (ii) cause the Issuers' partners, officers, directors and
employees to supply all relevant information reasonably requested by
the Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Issuers, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily appropriately made by issuers to
underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Issuers and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the underwriters, if any, covering
such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (v) obtain "cold comfort"
letters and updates thereof from the independent certified public
accountants of either of the Issuers (and, if necessary, any other
independent certified public accountants of any subsidiary of either of
the Issuers or of any business acquired by either of the Issuers for
which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if
any, in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with primary
underwritten offerings; and (vi) deliver such documents and
certificates as may be reasonably requested by the Majority Holders and
the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) hereof and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by either of the Issuers. The foregoing actions set forth in clauses
(iii), (iv), (v) and (vi) of this Section 4(r) shall be performed at:
(x) the effectiveness of such Registration Statement and each
post-effective amendment thereto; and (y) each closing under
underwriting or similar agreement as and to the extent required
thereunder.
12
<PAGE> 13
5. Registration Expenses. The Issuers shall, jointly and
severally, bear all expenses incurred in connection with the performance of
their obligations under Sections 2, 3 and 4 hereof and, in the event of any
Shelf Registration Statement, will reimburse the Holders for the reasonable fees
and disbursements of legal counsel designated by the Majority Holders to act as
counsel for the Holders in connection therewith, which counsel is reasonably
satisfactory to ICP-IV, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Initial Purchasers for the reasonable fees and
disbursement of legal counsel acting in connection therewith.
6. Indemnification and Contribution.
(a) In connection with any Registration Statement, the Issuers
agree, jointly and severally, to indemnify and hold each of you
harmless and, with respect to any Prospectus delivery as contemplated
in Section 4(h) hereof, each Exchanging Dealer, each of your and any
Exchanging Dealer's directors, officers, employees and agents and each
person who controls either of you or any Exchanging Dealer within the
meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Issuers will not be liable in any
case to the extent that any such loss, claim, damage or liability that
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Issuers by or on behalf of any such Holder specifically for
inclusion therein. This indemnity agreement will be in addition to any
liability that the Issuers may otherwise have. The Issuers also agree,
jointly and severally, to indemnify or contribute to Losses of, as
13
<PAGE> 14
provided in Section 6(d), any selling Holders and any underwriters of
Notes registered under a Shelf Registration Statement, their respective
officers and directors and each person who controls any such
underwriter on substantially the same basis as that of the
indemnification of the Initial Purchasers provided in this Section 6(a)
and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q)
hereof.
(b) Each Holder of securities covered by a Registration
Statement (including each Initial Purchaser and, with respect to any
Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer) severally agrees to indemnify and hold harmless: (i)
the Issuers; (ii) each of their directors; (iii) each of their officers
who signs such Registration Statement; and (iv) each person who
controls either of ICP-IV or IPCC within the meaning of either the Act
or the Exchange Act to the same extent as the foregoing indemnity from
the Issuers to each such Holder, but only with reference to written
information relating to such Holder furnished to the Issuers by or on
behalf of such Holder specifically for inclusion in the documents
referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability that any such Holder may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party: (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and
defenses; and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification
is sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall
14
<PAGE> 15
have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel (and local counsel) if: (i) the named
parties to any such action, claim or proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party, and such indemnified party shall have been advised
in writing by counsel that a conflict of interest may exist, if such
counsel represents both such indemnified party and the indemnifying
party; (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party; (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the
institution of such action; or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall have a joint and several obligation to contribute to the
aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which such indemnified party
may be subject such proportion as is appropriate to reflect the
relative benefits received by such indemnifying party, on the one hand,
and each indemnified party, on the other hand, from the Initial
Placement and the Registration Statement that resulted in such Losses;
provided, however, that in no case shall any Purchaser or any
subsequent Holder of any Note or New Note be responsible, in the
aggregate, for any amount in excess of the purchase discount or
commission applicable to such Note, or in the case of a New
15
<PAGE> 16
Note, applicable to the Note that was exchangeable into such New Note,
as set forth on the cover page of the Offering Memorandum, nor shall
any underwriter be responsible for any amount in excess of the
underwriting discount or commission applicable to the securities
purchased by such underwriter under the Registration Statement that
resulted in such Losses. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements
or omissions that resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Issuers shall be
deemed to be equal to the sum of (x) the total net proceeds from the
Initial Placement (before deducting expenses) as set forth on the cover
page of the Offering Memorandum and (y) the total amount of additional
interest that the Issuers were not required to pay as a result of
registering the securities covered by the Registration Statement that
resulted in such Losses. Benefits received by the Purchasers shall be
deemed to be equal to the total purchase discounts and commissions as
set forth on the cover page of the Offering Memorandum, and benefits
received by any other Holders shall be deemed to be equal to the value
of receiving Notes or New Notes, as applicable, registered under the
Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration
Statement that resulted in such Losses. Relative fault shall be
determined by reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying party, on
the one hand, or by the indemnified party, on the other hand. The
parties hereto agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method
of allocation that did not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph
(d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who
controls a Holder within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person
who controls either of the Issuers within the meaning of either the Act
or the Exchange Act, each officer of either of the Issuers who shall
have signed the Registration Statement and each director
16
<PAGE> 17
or partner of either of the Issuers shall have the same rights to
contribution as the Issuers, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any
Holder or the Issuers or any of the officers, directors or controlling
persons referred to in this Section 6, and will survive the sale by a
Holder of securities covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, entered into, nor shall either or both of them, on or
after the date hereof, enter into, any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
Issuers have obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount of Notes
(or, after the consummation of any Exchange Offer in accordance with
Section 2 hereof, of New Notes), provided that, with respect to any
matter that directly or indirectly affects the rights of any Purchaser
hereunder, the Issuers shall obtain the written consent of each such
Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing
(except the foregoing proviso), a waiver or consent to departure from
the provisions hereof with respect to a matter that relates exclusively
to the rights of Holders whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect
the rights of other Holders may be given by the Majority Holders,
determined on the basis of securities being sold rather than registered
under such Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(i) if to a Holder, at the most current address given
by such Holder to the Issuers in accordance with the
provisions of this Section 7(c), which address
17
<PAGE> 18
initially is, with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy in like
manner to NationsBanc Capital Markets, Inc.;
(ii) if to you, initially at the address set forth in
the Purchase Agreement, and copied to counsel as set forth
therein; and
(iii) if to the Issuers, initially at its address set
forth in the Purchase Agreement, and copied to counsel as set
forth therein.
All such notices and communications shall be deemed to have
been duly given when received.
Each of the parties hereto, by notice to the others, may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assign of each of the
parties hereto, including, without the need for an express assignment
or any consent by the Issuers thereto, subsequent Holders of Notes
and/or New Notes. The Issuers hereby agree to extend the benefits of
this Agreement to any Holder of Notes and/or New Notes and any such
Holder may specifically enforce the provisions of this Agreement as if
an original party hereto.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way
18
<PAGE> 19
impaired or affected thereby, it being intended that all of the rights
and privileges of each of the parties shall be enforceable to the
fullest extent permitted by law.
(i) Notes Held by the Issuers, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of
Notes or New Notes is required hereunder, Notes or New Notes, as
applicable, held by either of the Issuers or any of their Affiliates
(other than subsequent Holders of Notes or New Notes if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings
of such Notes or New Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage.
[signature page follows]
19
<PAGE> 20
Please confirm that the foregoing correctly sets forth the
agreement among the Issuers and you as of the date first written above.
Very truly yours,
INTERMEDIA CAPITAL PARTNERS IV, L.P. ("ICP-IV"),
a California limited partnership
By: InterMedia Capital Management IV, L.P.,
a California limited partnership,
as general partner of ICP-IV
By: /s/ Leo J. Hindery, Jr.
-------------------------------------
Leo J. Hindery, Jr.,
Managing General Partner
INTERMEDIA PARTNERS IV CAPITAL CORP.,
a Delaware corporation
By: /s/ Leo J. Hindery, Jr.
---------------------------------------------
Leo J. Hindery, Jr.,
President
Accepted in New York, New York
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Gary Wolfe
--------------------------------------
Gary Wolfe,
Vice President
TORONTO DOMINION SECURITIES (USA) INC.
By: /s/ Gordon Paris
--------------------------------------
Gordon Paris,
Managing Director
<PAGE> 21
ANNEX A
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Notes received in exchange
for Notes where such New Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Issuers have agreed
that, starting on the Expiration Date (as defined herein) and ending on the
close of business 180 days after the Expiration Date, they will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
21
<PAGE> 22
ANNEX B
Each broker-dealer that receives New Notes for its own account in exchange for
Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a Prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
22
<PAGE> 23
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Notes where such Notes were acquired as a result of market-making activities or
other trading activities. Each of the Issuers has agreed that, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , , 199 , all dealers effecting transactions in the New Notes
may be required to deliver a Prospectus.
The Issuers will not receive any proceeds from any sale of New
Notes by broker-dealers. New Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Act and any profit of any such resale of New-Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an Underwriter within the
meaning of the Act.
For a period of 180 days after the Expiration Date, the
Issuers will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Issuers have agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
23
<PAGE> 24
broker-dealers) against certain liabilities, including liabilities under the
Act.
24
<PAGE> 25
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes.
If the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Notes, it represents that the Notes to be exchanged for
New Notes were acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a Prospectus in
connection with any resale of such New Notes and will indemnify, defend and hold
harmless InterMedia Capital Partners IV, L.P. and InterMedia Partners IV Capital
Corp. for the undersigned's failure to do so; however, by so acknowledging and
by delivering a Prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Act.
25
<PAGE> 1
EXHIBIT 4.2
INTERMEDIA CAPITAL PARTNERS IV, L.P.
AND
INTERMEDIA PARTNERS IV CAPITAL CORP.
11 1/4% SENIOR NOTES DUE 2006
-----------------
INDENTURE
Dated as of July 30, 1996
-----------------
The Bank of New York
Trustee
-----------------
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1)........................................ 7.10
(a)(2)....................................... 7.10
(a)(3) ...................................... N.A.
(a)(4)....................................... N.A.
(a)(5)....................................... 7.10
(b) ......................................... 7.10
(c) ......................................... N.A.
311 (a) .......................................... 7.11
(b) ......................................... 7.11
(c) ......................................... N.A.
312 (a)........................................... 2.05
(b).......................................... 10.03
(c) ......................................... 10.03
313 (a) .......................................... 7.06
(b)(1) ...................................... 7.06
(b)(2) ...................................... 7.06;7.07
(c) ......................................... 7.06;10.02
(d).......................................... 7.06
314 (a) .......................................... 4.03;10.02
(b) ......................................... 4.21
(c)(1) ...................................... 10.04
(c)(2) ...................................... 10.04
(c)(3) ...................................... N.A.
(d).......................................... 10.03, 10.04, 10.05
(e) ........................................ 10.05
(f).......................................... N.A.
315 (a)........................................... 7.01
(b).......................................... 7.05,10.02
(c) ........................................ 7.01
(d).......................................... 7.01
(e).......................................... 6.11
316 (a)(last sentence) ........................... 2.09
(a)(1)(A).................................... 6.05
(a)(1)(B) ................................... 6.04
(a)(2) ...................................... N.A.
<PAGE> 3
(b) ......................................... 6.07
(c) ......................................... 2.12
317 (a)(1) ....................................... 6.08
(a)(2)....................................... 6.09
(b) ......................................... 2.04
318 (a)........................................... 10.01
(b).......................................... N.A.
(c).......................................... 10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
B-7
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TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01.
Definitions.................................... 1
Section 1.02.
Other Definitions.............................. 16
Section 1.03.
Incorporation by Reference of Trust
Indenture Act............. .......................... 16
Section 1.04.
Rules of Construction.......................... 17
ARTICLE 2 THE NOTES
Section 2.01.
Form and Dating................................. 17
Section 2.02.
Execution and Authentication.................... 18
Section 2.03.
Registrar and Paying Agent...................... 18
Section 2.04.
Paying Agent to Hold Money in Trust............. 19
Section 2.05.
Holder Lists.................................... 19
Section 2.06.
Transfer and Exchange........................... 19
Section 2.07.
Replacement Notes............................... 24
Section 2.08.
Outstanding Notes............................... 25
Section 2.09.
Treasury Notes.................................. 25
Section 2.10.
Temporary ...................................... 25
Section 2.11.
Cancellation.................................... 25
Section 2.12.
Defaulted Interest.............................. 26
Section 2.13.
CUSIP Numbers................................... 26
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01.
Notices to Trustee.............................. 26
Section 3.02.
Selection of Notes to Be Redeemed............... 26
Section 3.03.
Notice of Redemption............................ 27
Section 3.04.
Effect of Notice of Redemption.................. 28
Section 3.05.
Deposit of Redemption Price..................... 28
Section 3.06.
Notes Redeemed in Part.......................... 28
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Section 3.07.
Optional Redemption...................................... 28
Section 3.08.
Mandatory Redemption..................................... 29
Section 3.09.
Offer to Purchase by Application of Excess Proceeds...... 29
ARTICLE 4 COVENANTS
Section 4.01.
Payment of Notes......................................... 31
Section 4.02.
Maintenance of Office or Agency.......................... 31
Section 4.03.
Reports.................................................. 32
Section 4.04.
Compliance Certificate................................... 32
Section 4.05.
Taxes.................................................... 33
Section 4.06.
Stay, Extension and Usury Laws........................... 33
Section 4.07.
Restricted Payments...................................... 33
Section 4.08.
Dividend and Other Payment Restrictions
Affecting Subsidiaries........................................... 35
Section 4.09.
Incurrence of Indebtedness and Issuance of
Preferred Equity................................................. 35
Section 4.10.
Asset Sales.............................................. 37
Section 4.11.
Transactions with Affiliates............................. 38
Section 4.12.
Liens.................................................... 39
Section 4.13.
Limitation on Conduct Of IPCC............................ 39
Section 4.14.
Corporate or Partnership Existence....................... 39
Section 4.15.
Offer to Repurchase Upon Change of Control............... 39
Section 4.16.
Ownership of Operating Partnership....................... 40
Section 4.17.
Consummation of the Viacom Nashville Acquisition......... 40
Section 4.18.
Designation of Restricted and Unrestricted Subsidiaries.. 41
Section 4.19.
Suspended Covenants...................................... 41
Section 4.20
Payments for Consent..................................... 42
Section 4.21.
Security................................................. 42
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ARTICLE 5 SUCCESSORS
Section 5.01.
Merger, Consolidation, or Sale of Assets............ 43
Section 5.02.
Successor Corporation Substituted................... 44
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01.
Events of Default.................................. 44
Section 6.02.
Acceleration....................................... 46
Section 6.03.
Other Remedies..................................... 47
Section 6.04.
Waiver of Past Defaults............................ 47
Section 6.05.
Control by Majority................................ 47
Section 6.06.
Limitation on Suits................................ 47
Section 6.07.
Rights of Holders of Notes to Receive Payment...... 48
Section 6.08.
Collection Suit by Trustee......................... 48
Section 6.09.
Trustee May File Proofs of Claim................... 48
Section 6.10.
Priorities......................................... 48
Section 6.11.
Undertaking for Costs.............................. 49
ARTICLE 7 TRUSTEE
Section 7.01.
Duties of Trustee.................................. 49
Section 7.02.
Rights of Trustee.................................. 50
Section 7.03.
Individual Rights of Trustee....................... 51
Section 7.04.
Trustee's Disclaimer............................... 51
Section 7.05.
Notice of Defaults................................. 51
Section 7.06.
Reports by Trustee to Holders of the Notes......... 51
Section 7.07.
Compensation and Indemnity......................... 52
Section 7.08.
Replacement of Trustee............................. 52
Section 7.09.
Successor Trustee by Merger, etc................... 53
Section 7.10.
Eligibility; Disqualification...................... 53
Section 7.11.
Preferential Collection of Claims Against
Issuers..................................................... 54
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ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01.
Option to Effect Legal Defeasance or
Covenant Defeasance........................................... 54
Section 8.02.
Legal Defeasance and Discharge........................... 54
Section 8.03.
Covenant Defeasance...................................... 55
Section 8.04.
Conditions to Legal or Covenant Defeasance............... 55
Section 8.05.
Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions....................... 56
Section 8.06.
Repayment to Issuers.................................... 57
Section 8.07.
Reinstatement............................................ 57
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01.
Without Consent of Holders of Notes...................... 58
Section 9.02.
With Consent of Holders of Notes......................... 58
Section 9.03.
Compliance with Trust Indenture Act...................... 60
Section 9.04.
Revocation and Effect of Consents........................ 60
Section 9.05.
Notation on or Exchange of Notes......................... 60
Section 9.06.
Trustee to Sign Amendments, etc.......................... 60
ARTICLE 10 MISCELLANEOUS
Section 10.01.
Trust Indenture Act Controls............................. 60
Section 10.02.
Notices.................................................. 61
Section 10.03.
Communication by Holders of Notes with Other
Holders of Notes............................................... 62
Section 10.04.
Certificate and Opinion as to Conditions Precedent....... 62
Section 10.05.
Statements Required in Certificate or Opinion........... 62
Section 10.06.
Rules by Trustee and Agents.............................. 63
Section 10.07.
No Personal Liability of Directors, Officers,
Employees, Partners and Stockholders........................... 63
Section 10.08.
Governing Law............................................ 63
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Section 10.09.
No Adverse Interpretation of Other Agreements.......... 63
Section 10.10.
Successors............................................. 63
Section 10.11.
Severability........................................... 64
Section 10.12.
Counterpart Originals.................................. 64
Section 10.13.
Table of Contents, Headings, etc....................... 64
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B
CERTIFICATE OF TRANSFEROR
Exhibit C
PLEDGE AND ESCROW AGREEMENT
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INDENTURE dated as of July 30, 1996 between InterMedia Capital
Partners IV, L.P., a California limited partnership ("ICP-IV"), and InterMedia
Partners IV Capital Corporation, a Delaware corporation and a wholly owned
subsidiary of ICP-IV ("IPCC" and, together with ICP-IV, the "Issuers") and The
Bank of New York, a New York banking corporation, as trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 11 1/4% Senior
Notes Due 2006 (the "Original Notes") and the 11 1/4% Senior Notes Due 2006 to
be issued to Holders pursuant to the Exchange Offer (the "New Notes" and
together with the Original Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person; and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10.0% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Acquisitions" shall have the meaning assigned thereto in the
Offering Memorandum.
"AVR" means AVR of Tennessee, L.P.
"AVR Interests" means the partnership interests in AVR held by RMG
and IPSE.
<PAGE> 10
"AVR Letter of Intent" means that certain letter of intent, dated
February 12, 1996, by and among Hyperion Telecommunications of Tennessee, Inc.,
RMG and IPSE, with respect to the sale of the AVR Interests.
"BA Loan" means that certain $3.0 million nonrecourse bridge loan to
IPSE made by Bank of America NT&SA pursuant to the loan agreement, dated May 8,
1996 by and between Bank of America NT&SA and IPSE in order to fund a portion of
the purchase price of the Prime Houston Systems.
"Bank Facility" means that certain Revolving Credit and Term Loan
Agreement, dated as of the date hereof, by and among the Operating Partnership,
as borrower, and The Bank of New York, NationsBank of Texas, N.A. and The
Toronto Dominion Bank, as arranging agents, and The Bank of New York, as
administrative agent, providing for (i) a term loan of $220.0 million (the "Term
Loan") and (ii) a revolving credit facility for up to $350.0 million prior to
the consummation of the Viacom Nashville Acquisition or $475.0 million following
the consummation of the Viacom Nashville Acquisition (the "Revolving Credit
Facility"), together with, in each case, any related notes, guarantees,
collateral documents and other agreements executed in connection therewith, and
in each case as amended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Bankruptcy Custodian" means any receiver, trustee, assignee,
liquidator or similar officer under any Bankruptcy Law.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means (i) for so long as ICP-IV is a
partnership, the managing general partner of ICP-IV and (ii) otherwise, the
board of directors of ICP-IV.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means: (i) in the case of a corporation, corporate
stock; (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock; (iii) in the case of a partnership or limited
liability company, partnership interests (whether general or limited) or other
membership interests; and (iv) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
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"Capital Stock Proceeds" means an amount equal to the net cash
proceeds received by ICP-IV from the sale of Equity Interests after the Issue
Date (other than (i) Disqualified Stock, (ii) Equity Interests sold to any of
ICP-IV's Subsidiaries and (iii) any Equity Interests issued to finance all or a
portion of the cost of the Viacom Nashville Acquisition).
"Cash Equivalents" means: (i) United States dollars; (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition; (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the Bank
Facility or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above; and (v) commercial paper having the highest rating obtainable from
Moody's or Standard & Poor's and, in each case, maturing within six months after
the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of ICP-IV and its Restricted Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals and their Related Parties; (ii) the
adoption of a plan relating to the liquidation or dissolution of ICP-IV; (iii)
the consummation of any transaction (including, without limitation, any merger
or consolidation) the result of which is that any person (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person will be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of Equity Interests of ICP-IV
representing the right to receive more than 50.0% of the income and profits of
ICP- IV; (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that (a) any of
the Principals or any Related Party or any person (as defined above) that
includes at least one Principal or Related Party, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person will be deemed to have "beneficial
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<PAGE> 12
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), directly or indirectly, of Equity
Interests representing the right to receive more than 50.0% of the income and
profits of ICP-IV and (b) there is a Rating Decline with respect to the Notes;
or (v) the first day on which TCI and its Subsidiaries fail to own, in the
aggregate, Equity Interests of ICP-IV representing the right to receive more
than 35.0% of the income and profits of ICP-IV.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means cash in the Pledge Account, the Pledged Securities
and the proceeds thereof.
"Collateral Agent" means The Bank of New York, as Collateral Agent
under the Pledge Agreement.
"Consolidated Indebtedness" means, with respect to any Person as of
any date of determination, the sum of: (i) the total amount of Indebtedness of
such Person and its Restricted Subsidiaries; plus (ii) the total amount of other
Indebtedness shown on the balance sheet of the primary obligor on such
Indebtedness, to the extent that such Indebtedness has been Guaranteed by such
Person or one or more of its Restricted Subsidiaries; plus (iii) the aggregate
liquidation value of all Disqualified Stock of such Person and all Preferred
Equity of Restricted Subsidiaries of such Person (other than the RMH Redeemable
Preferred Stock), in each case, determined on a consolidated basis in accordance
with GAAP, less (iv) the fair market value of the Pledged Securities then held
by the Trustee as determined in good faith by an Officer of ICP-IV.
"Consolidated Interest Expense" means, with respect to any Person,
for any period, the sum of: (i) the amount of interest in respect of
Indebtedness (including fees payable in connection with financings, including
commitment, availability and similar fees, and amortization of debt issuance
costs, capitalized interest, 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); (ii) the amount of Redeemable Dividends of such Person; (iii) the
amount of Preferred Equity dividends in respect of all Preferred Equity of
Restricted Subsidiaries held by Persons other than the referent Person or a
Restricted Subsidiary thereof, commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing; and
(iv) the interest component of rentals in respect of any Capital Lease
Obligation, in each case, that was paid, accrued or scheduled to be paid or
accrued by such
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<PAGE> 13
Person during such period, determined on a consolidated basis in accordance with
GAAP. For purposes of this definition, interest on a Capital Lease Obligation
will be deemed to accrue at an interest rate reasonably determined by the
referent Person to be the rate of interest implicit in such Capital Lease
Obligation in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the net income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP and
prior to any reduction in respect of dividends or other distributions in respect
of any series of Preferred Equity of such Person, provided that such
Consolidated Net Income shall exclude: (i) the net income or loss of any Person
that is not a Restricted Subsidiary, except that ICP- IV's equity in the net
income of any such Person for such period will be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to ICP-IV or a Restricted Subsidiary as a dividend or
other distribution; (ii) the net income or loss of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any after-tax gain or loss realized upon the sale or other
disposition of any property, plant or equipment of ICP-IV or its consolidated
Restricted Subsidiaries that is not sold or otherwise disposed of in the
ordinary course of business and any after-tax gain or loss realized upon the
sale or other disposition of any Capital Stock of any Person; (iv) in the case
of ICP-IV, the incurrence by ICP-IV of one-time expenses in order to conform any
of the systems acquired pursuant to the Acquisitions or the Viacom Nashville
Acquisition to the MIS or billing systems of ICP-IV, provided that such one-time
expenses with respect to each such acquisition are incurred within the first
twelve months of the completion of such acquisition and, provided further, that
such expenses do not exceed $5.0 million in the aggregate; and (v) the
cumulative effect of a change in accounting principles.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 10.02 hereof or such other address as to which
the Trustee may give notice to the Issuers.
"Cumulative EBITDA" means at any date of determination the cumulative
EBITDA of ICP-IV from and after the Issue Date to the end of the most recently
ended full fiscal quarter of ICP-IV immediately preceding the date of
determination for which consolidated financial statements are available or, if
such cumulative EBITDA for such period is negative, minus the amount 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
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<PAGE> 14
paid, accrued or scheduled to be paid or accrued by ICP-IV from the Issue Date
to the end of the most recently ended full fiscal quarter of ICP-IV immediately
preceding the date of determination for which consolidated financial statements
are available, determined on a consolidated basis in accordance with GAAP.
"Custodian or Note Custodian" means the Trustee, as custodian with
respect to the Notes in global form, or any successor entity thereto.
"D.D. Cable Transactions" means (i) the distribution of $3.2 million
from InterMedia Partners II, L.P. ("IP-II") to RMG, (ii) the contribution by RMG
of $300,000 to the equity capital of IP-II, and (iii) the sale of RMG's Equity
Interests in IP-II owned as of the Issue Date for a nominal amount, provided
that no other assets have been contributed or otherwise transferred to IP-II by
ICP-IV or any of its Subsidiaries since the Issue Date.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 2 thereof.
"Depository" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"EBITDA" means, with respect to any Person for any period, an amount
equal to: (i) the sum (without duplication) of (a) Consolidated Net Income for
such period; plus (b) 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 sub-clause (a) hereof; (c) Consolidated Interest Expense for such
period; (d) depreciation for such period on a consolidated basis; (e)
amortization of intangibles for such period on a consolidated basis; (f) any
other non-cash items reducing Consolidated Net Income for such period and (g)
any expense
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<PAGE> 15
resulting from an extraordinary item; minus (ii) (a) all non-cash items
increasing Consolidated Net Income for such period (other than any non-cash
charge that represents an accrual or reserve in respect of a cash payment in a
future period), and (b) any item of revenue or gain attributable to an
extraordinary item, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied, except that with respect to ICP-IV
each of the foregoing items will be determined on a consolidated basis with
respect to ICP-IV and its Restricted Subsidiaries only.
"Eligible Institution" means a commercial banking institution that
has combined capital and surplus of not less than $500.0 million or its
equivalent in foreign currency, whose debt (or the debt of whose holding
company) is rated "A" (or higher) according to Standard and Poor's or "A2" (or
higher) by Moody's at the time as of which any investment or rollover therein is
made.
"Equity Interests" means, collectively, Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but excluding any
debt security that is convertible into, or exchangeable for, Capital Stock).
"Equity Market Capitalization" means, with respect to any Person, the
aggregate market value of the outstanding Equity Interests (other than Preferred
Equity and excluding any such Equity Interests held in treasury by such Person )
of such Person. For purposes of this definition, the "market value" of any such
Equity Interests shall be: (i) the average of the high and low sale prices, or
if no sales are reported, the average of the closing bid and ask prices, as
reported in the composite transactions or the principal national securities
exchange on which such Equity Interest is listed or admitted to trading or, if
such Equity Interest is not listed or admitted to trading on a national
securities exchange, as reported by Nasdaq for each trading day in a
20-consecutive-day period ending not more than 45 days prior to the date such
Person commits to make an investment in the Equity Interest of ICP-IV; or (ii)
if such Equity Interest is not listed as admitted for trading on any national
securities exchange or Nasdaq, the fair market value of the common equity
capital of such Person as determined by the written opinion of an investment
banking firm of national standing delivered to the Trustee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Issuers
pursuant to the Registration Rights Agreement to exchange New Notes for Original
Notes.
"Executive Officer" means, for any Person, the managing general
partner, the chief financial officer, chief operating officer or chief executive
officer of such Person.
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<PAGE> 16
"fair market value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and a willing buyer
under no compulsion to buy; provided, that with respect to the Pledged
Securities, the fair market value thereof shall be net of the accrued and unpaid
interest, if any, on the Notes.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or obligations
fully guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"ICM-IV" means InterMedia Capital Management IV, L.P., a California
limited partnership and the general partner of ICP-IV.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, that 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
8
<PAGE> 17
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 Capital Lease Obligations; (ii) Indebtedness of
any other Person secured by a Lien to which the property or assets owned or held
by the referent 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 assets or the amount of
the Indebtedness so secured); (iii) Guarantees of Indebtedness of any other
Person; (iv) any Disqualified Stock; (v) all obligations of such Person in
respect of letters of credit, bankers' acceptance 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 described in this definition) 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; (vi) in
the case of ICP-IV, Preferred Equity of its Restricted Subsidiaries; and (vii)
obligations of any such Person under any Hedging Obligation applicable to any of
the foregoing. Notwithstanding the foregoing, Indebtedness shall not include any
interest or accrued interest until due and payable.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Independent Appraiser" means an investment banking firm of national
standing with non-investment grade debt underwriting experience or any third
party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of ICP-IV.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement.
"Investment Grade Rating" means a rating equal to or higher than Baa3
(or the equivalent) and BBB- (or the equivalent) by Moody's (or any successor to
the rating agency business thereof) and Standard & Poor's (or any successor to
the rating agency business thereof), respectively.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
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<PAGE> 18
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
ICP-IV for consideration consisting of common equity securities of ICP-IV shall
not be deemed to be an Investment. If ICP-IV or any Restricted Subsidiary of
ICP-IV sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of ICP-IV such that, after giving effect to any
such sale or disposition, such Person is no longer a Subsidiary of ICP-IV,
ICP-IV shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"IPSE" means InterMedia Partners Southeast, a California general
partnership and a Subsidiary of ICP-IV.
"Issue Date" means the date on which the Notes are initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Leverage Ratio" means, with respect to any Person as of any date of
determination, the ratio of (i) the Consolidated Indebtedness of such Person as
of such date calculated on a pro forma basis to give effect to the transaction
with respect to which the Leverage Ratio is being calculated, to (ii) the
product of such Person's Pro Forma EBITDA for the most recently ended fiscal
quarter of such Person for which consolidated financial statements are available
multiplied by four.
"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 Capital
Lease Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
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<PAGE> 19
"Marketable Securities" means:
(i) Government Securities or, for purposes of determining
whether such Government Securities may serve as substitute Pledged
Securities, Government Securities having a maturity date on or before
the date on which the payments of interest (or principal) on the
Notes to which such Government Securities are pledged occur:
(ii) any certificate of deposit maturing not more than 270 days
after the date of acquisition issued by, or time deposit of, an
Eligible Institution;
(iii) commercial paper maturing not more than 270 days after the
date of acquisition issued by a corporation (other than an Affiliate
of the Company) with a rating at the time as of which any investment
therein is made, of "A-1" (or higher) according to Standard and
Poor's or "P-1" (or higher) according to Moody's;
(iv) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the types
described in clauses (i) through (iv) above.
"Moody's" means Moody's Investors Service, Inc. and any successor to
the rating agency business thereof.
"Net Proceeds" means the aggregate cash proceeds received by ICP-IV
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, sales commissions
and legal, accounting and investment banking fees) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither ICP-IV
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement
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<PAGE> 20
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of ICP-IV or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of ICP-IV or any of its Restricted
Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Issuers.
"Offering Memorandum" means the Offering Memorandum of the Issuers,
dated July 19, 1996, with respect to the Notes.
"Officer" means the General Partner, Managing General Partner,
President, Chief Financial Officer, Treasurer or any Executive Vice President or
Vice President of ICP-IV or IPCC, as applicable.
"Officers' Certificate" means a certificate signed by two Officers at
least one of whom shall be the principal executive officer, principal accounting
officer or principal financial officer of ICP-IV or IPCC, as applicable, that
meets the requirements of Section 10.05 hereof.
"Operating Partnership" means InterMedia Partners IV, L.P., a
California limited partnership and a Subsidiary of ICP-IV.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to ICP-IV, IPCC or
both.
"Permitted Investments" means: (i) any Investment in ICP-IV or in a
Restricted Subsidiary of ICP-IV; (ii) any Investment in Cash Equivalents; (iii)
any Investment by ICP-IV or any Subsidiary of ICP-IV in a Person, if as a result
of such Investment (a) such Person becomes a Restricted Subsidiary of ICP-IV or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
ICP-IV or a Restricted Subsidiary of ICP-IV; (iv) any Investment in ICM-IV not
to exceed $1.85 million; (v) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof; and (vi) any Permitted Joint
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<PAGE> 21
Venture Investment, provided, that after giving pro forma effect to such
Permitted Joint Venture Investment as if the same had occurred at the beginning
of the most recently ended full fiscal quarter of ICP-IV for which consolidated
financial statements are available, ICP-IV would have been able to incur at
least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to
Section 4.09 hereof.
"Permitted Joint Venture Investment" means any Investment by ICP-IV
or any Restricted Subsidiary of ICP-IV in a joint venture or other enterprise
if: (i) substantially all of the income and profits of such joint venture or
other enterprise are derived from operating or owning a license to operate one
or more cable television systems or telephone systems in the United States and
any other activity reasonably related to such activities; (ii) ICP-IV and its
Restricted Subsidiaries have operating control of such joint venture or other
enterprise; and (iii) ICP-IV and its Restricted Subsidiaries own, in the
aggregate, Equity Interests of such joint venture or other enterprise
representing the right to receive more than 40.0% of the income and profits
thereof.
"Permitted Liens" means: (i) Liens on the Property of ICP-IV or any
of its Subsidiaries existing on the Issue Date; (ii) Liens on the Property of
ICP-IV or any of its Subsidiaries under the Bank Facility; (iii) Liens securing
Indebtedness of Subsidiaries permitted by this Indenture to be incurred; (iv)
Liens on the Property of ICP-IV or any of its Subsidiaries for taxes,
assessments or governmental charges or levies 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
carriers', warehousemen's and mechanics' Liens, and other similar Liens on the
Property of ICP-IV or any of its Subsidiaries arising in the ordinary course of
business that 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 ICP-IV or any of its Subsidiaries in
favor of issuers of performance bonds and surety or appeal bonds; (vii) Liens on
Property at the time ICP-IV or any of its Subsidiaries acquired such Property,
including any acquisition by means of a merger or consolidation with or into
ICP-IV or such Subsidiary; provided, however, that such Lien shall not have been
incurred in anticipation or in connection with such transaction or series of
related transactions pursuant to which such Property was acquired by ICP-IV or
such Subsidiary; (viii) other Liens on the Property of ICP-IV or any of its
Subsidiaries incidental to the conduct of any of their businesses or the
ownership of any of their Properties that were not created in connection with
the incurrence of Indebtedness or the obtaining of advances or credit and that
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 ICP-IV or any of its
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<PAGE> 22
Subsidiaries under workmen's 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 ICP-IV
or any of its Subsidiaries is a party, or deposits to secure public or statutory
obligations of ICP-IV or any of its Subsidiaries, or deposits for the payment of
rent, in each case incurred in the ordinary course of business; (x) utility
easements, building restrictions and such other encumbrances or charges against
real property as are or a nature generally existing with respect to properties
of a similar character; (xi) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; and (xii) Liens securing
Indebtedness or other obligations not to exceed $1.0 million in aggregate
principal amount.
"Permitted Refinancing Debt" means any Indebtedness of ICP-IV or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of ICP-IV or any of its Restricted Subsidiaries; provided that: (i)
the principal amount of such Permitted Refinancing Debt does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Debt has a period until
its final maturity date no shorter than the final maturity date of, and has a
Weighted Average Life to Maturity no shorter than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Debt has a final maturity date later than
the final maturity date of, and is subordinated in right of payment to, such
Notes on terms at least as favorable to the Holders of such Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by (a) ICP-IV or (b) ICP-IV or the Restricted Subsidiary that
was the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, company (including
limited liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Pledge Account" means an account established with the Collateral
Agent pursuant to the terms of the Pledge Agreement for the deposit of the
Pledged Securities purchased by the Issuers with a portion of the net proceeds
from the Offering.
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<PAGE> 23
"Pledge Agreement" means the pledge and escrow agreement, dated as of
the Issue Date, by and among the Issuers, the Collateral Agent and the Trustee,
that is attached hereto as Exhibit C.
"Pledged Securities" means the securities purchased by the Issuers,
with a portion of the net proceeds from the Offering, which shall initially
consist of Government Securities, to be deposited in the Pledge Account.
"Preferred Equity" means any Capital Stock of a Person, however
designated, that entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Prime Houston Acquisition" means the acquisition by ICP-IV of
certain cable television systems, located in and near the Houston, Texas area,
from certain affiliates of Prime Cable, Inc. as part of the Viacom Nashville
Acquisition pursuant to certain asset purchase agreements with the terms
described in the Offering Memorandum.
"Principals" means Leo J. Hindery, Jr., TCI and TCI's Subsidiaries.
"Pro Forma EBITDA" means, with respect to any Person, for any period,
the EBITDA of such Person for such period as determined on a consolidated basis
in accordance with GAAP consistently applied after giving effect to the
following, as if the same had occurred at the beginning of such period: (i) if,
during or after such period, such Person or any of its Subsidiaries shall have
sold or otherwise disposed of any assets outside of the ordinary course of
business in any single transaction or series of related transactions for
consideration in excess of $1.0 million, Pro Forma EBITDA of such Person and its
Subsidiaries for such period will be reduced by an amount equal to the Pro Forma
EBITDA (if positive) directly attributable to the assets that were sold or
otherwise disposed of for the period or increased by an amount equal to the Pro
Forma EBITDA (if negative) directly attributable thereto for such period; and
(ii) if, during or after such period, such Person or any of its Subsidiaries
completes an acquisition of any Person or business that 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 will be computed so
as to give pro forma effect to the acquisition of such Person or business;
provided, however, that, with respect to ICP-IV, all of the foregoing references
to "Subsidiary" or "Subsidiaries" are deemed to refer only to the "Restricted
Subsidiaries" of ICP-IV.
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real,
15
<PAGE> 24
personal or mixed, or tangible or intangible, including, without limitation,
Capital Stock in any other Person (but excluding Capital Stock or other
securities issued by such Person).
"Public Equity Offering" means the consummation of an offering of
Equity Interests (other than Disqualified Stock) by ICP-IV to the public
pursuant to a registration statement filed with the Commission, the net proceeds
of which exceed $25.0 million.
"Rating Agencies" means Standard and Poor's and Moody's, or any
successor to the respective rating agency businesses thereof.
"Rating Date" means the date that is 90 days prior to the earlier of
(i) a Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of ICP-IV to effect a Change of Control.
"Rating Decline" means, with respect to the Notes, the occurrence of
the following on, or within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by ICP-IV to effect a
Change of Control (which period shall be extended so long as the rating of such
Notes is under publicly announced consideration for possible downgrade by either
of the Rating Agencies): (i) in the event the Notes are assigned an Investment
Grade Rating by either of the Rating Agencies on the Rating Date, the rating of
the Notes by both of the Rating Agencies shall be below an Investment Grade
Rating; or (ii) in the event the Notes are rated below an Investment Grade
Rating by both of the Rating Agencies on the Rating Date, the rating of the
Notes by either of the Rating Agencies shall be decreased by one or more
gradations (including gradations within rating categories as well as between
rating categories).
"Redeemable Dividend" means, for any dividend with regard to
Disqualified Stock, 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 Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Issuers and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Related Party" means, with respect to any Principal, (i) any
controlling stockholder, 80.0% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or (ii)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of
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<PAGE> 25
which consist of such Principal and/or such other Persons referred to in the
immediately preceding clause (i).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, with respect to any Person, any
Subsidiary of such Person that is not an Unrestricted Subsidiary. As of the
Issue Date, all of ICP-IV's Subsidiaries other than AVR, IPSE and IPSE's
subsidiaries will be the Restricted Subsidiaries of ICP-IV.
"Revolving Credit Facility" has the meaning assigned to it in the
definition of "Bank Facility."
"RMG" means Robin Media Group, Inc., a Nevada corporation and a
Subsidiary of RMH.
"RMH" means Robin Media Holdings, Inc., a Nevada corporation and a
Subsidiary of ICP-IV.
"RMH Redeemable Preferred Stock" means the preferred stock of RMH to
be outstanding on the Issue Date and the Capital Stock of RMG, with
substantially the same terms as the RMH Redeemable Preferred Stock, into which
the RMH Redeemable Preferred Stock will be converted as a result of the merger
of RMH into RMG, together with all additional shares thereof issued in payment
of dividends thereon in accordance with the terms thereof in effect on the Issue
Date.
"Standard and Poor's" means Standard and Poor's Rating Group, a
division of McGraw Hill Inc., and any successor to the rating agency business
thereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Strategic Equity Investment" means the issuance and sale of Equity
Interests (other than Disqualified Stock) of ICP-IV for net cash proceeds of at
least $25.0 million to a Person engaged primarily in the business of
transmitting video, voice or data over
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<PAGE> 26
cable television or telephone facilities or any business reasonably related
thereto that has an Equity Market Capitalization of at least $750.0 million.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50.0% of the total
voting power of shares of Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person, (b) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof) or (c) such Person owns, alone or together with ICP-IV, a
majority of the partnership interests.
"Tax Amount" means, with respect to any Person for any period, the
combined federal, state and local income taxes that would be paid by such Person
if it were a Delaware corporation filing separate tax returns with respect to
its Taxable Income for such Period; provided, however, that in determining the
Tax Amount, the effect thereon of any net operating loss carryforwards or other
carryforwards or tax attributes, such as alterative minimum tax carryforwards,
that would have arisen if such Person were a Delaware corporation shall be taken
into account. Notwithstanding anything to the contrary, Tax Amount shall not
include taxes resulting from such Person's reorganization as or change in the
status to a corporation.
"Tax Distribution" means a distribution in respect of taxes to the
partners of ICP-IV pursuant to clause (v) of the second paragraph of Section
4.07 hereof.
"Taxable Income" means, with respect to any Person for any period,
the taxable income or loss of such Person for such period for federal income tax
purposes; provided, that (i) all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss, (ii) any basis adjustment made in
connection with an election under Section 754 of the Code shall be disregarded
and (iii) such taxable income shall be increased or such taxable loss shall be
decreased by the amount of any interest expense incurred by such Person that is
not treated as deductible for federal income tax purposes by a partner or member
of such Person.
"TCI" means Tele-Communications, Inc.
"TCIC" means TCI Communications, Inc.
"TCIC Loan" means that certain $ 297.0 million nonrecourse bridge
loan to IPSE made by TCI of Houston, Inc. pursuant to the
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<PAGE> 27
loan agreement, dated May 8, 1996, by and between TCI of Houston, Inc. and IPSE
in order to fund a portion of the purchase price of Prime Houston Systems.
"Term Loan" has the meaning assigned to it in the definition of "Bank
Facility."
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.03 hereof.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06(g) hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary, other than IPCC, that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a resolution of the Board of Directors, but only to the extent that such
Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not
party to any agreement, contract, arrangement or understanding with ICP-IV or
any Restricted Subsidiary of ICP-IV unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to ICP-IV or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of ICP-IV; (iii) is a Person with respect to which
neither ICP-IV nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (iv) has not Guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of ICP-IV or
any of its Restricted Subsidiaries; and (v) in the case of a Subsidiary that is
a corporation, such Subsidiary has at least one director on its board of
directors that is not a director or executive officer of ICP-IV or any of its
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of ICP-IV or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter
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cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of ICP-IV as of such date (and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, ICP-IV shall be in
default of such Section ).
"Viacom Nashville Acquisition" means the acquisition by a Subsidiary
of ICP-IV of certain cable television assets in and near Nashville, Tennessee
from TCIC pursuant to an exchange agreement as described in the Offering
Memorandum.
"Voting Stock" means, with respect to any specified Person, Capital
Stock with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"........................................ 4.11
"Asset Sale"................................................... 4.10
"Asset Sale Offer"............................................. 3.09
"Asset Sale Offer Purchase Date"............................... 3.09
"Asset Sale Offer Trigger Date"................................. 4.10
"Change of Control Offer"...................................... 4.15
"Change of Control Offer Purchase Price"....................... 4.15
"Change of Control Payment Date"............................... 4.15
"Covenant Defeasance".......................................... 8.03
"DTC".......................................................... 2.03
"Event of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.10
"incur"........................................................ 4.09
"Legal Defeasance" ............................................ 8.02
"Offer Amount"................................................. 3.09
"Offer Period"................................................. 3.09
"Paying Agent"................................................. 2.03
"Payment Default".............................................. 6.01
"Permitted Debt"............................................... 4.09
"Pledged Securities Lien"...................................... 4.21
"Registrar".................................................... 2.03
</TABLE>
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<TABLE>
<S> <C>
"Restricted Payments".......................................... 4.07
"Surviving Person"............................................. 5.01
"Suspended Covenants".......................................... 4.19
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Issuers and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities
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Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issued in
minimum denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Issuers and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
The General Partner of ICP-IV and an Officer of IPCC shall sign the
Notes for ICP-IV or IPCC, as applicable, by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
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A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by the
General Partner of ICP-IV and an Officer of IPCC, authenticate Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Notes. The aggregate principal amount of Notes outstanding at any time may not
exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Issuers or
an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. ICP-IV or any of its
Subsidiaries, including IPCC, may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Issuers in making any such
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payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Issuers at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than ICP-IV or a Subsidiary
thereof) shall have no further liability for the money. If ICP-IV or a
Subsidiary thereof acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to
either of the Issuers, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, ICP-IV shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and ICP-IV shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized
denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be
accompanied by the following additional information
and documents, as applicable:
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(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification to that effect from
such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that effect
from such Holder (in substantially the form of
Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act, a certification to that effect
from such Holder (in substantially the form of
Exhibit B hereto) and an Opinion of Counsel from
such Holder or the transferee reasonably
acceptable to the Issuers and to the Registrar
to the effect that such transfer is in
compliance with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may not be exchanged for a beneficial interest in
a Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form
of Exhibit B hereto) to the effect that such Definitive Note is
being transferred by such Holder to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing
the Trustee to make, or to direct the Note Custodian to make, an
endorsement on the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the
Global Note,
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in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Issuers shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate, a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial
interest in a Global Note, and, in the case of a Transfer
Restricted Security, the following additional information
and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as
being the beneficial owner, a certification to
that effect from such Person (in substantially
the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities
Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that effect
from the transferor (in substantially the form
of Exhibit B hereto); or
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(C) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act,
a certification to that effect from the
transferor (in substantially the form of Exhibit
B hereto) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable
to the Issuers and to the Registrar to the
effect that such transfer is in compliance with
the Securities Act,
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between the
Depository and the Note Custodian, cause the aggregate
principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Issuers shall execute
and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate
and deliver to the transferee a Definitive Note in the
appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d)
shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions
from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes
are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Authentication of Definitive Notes in Absence of Depository.
If at any time:
(i) the Depository for the Notes notifies the Issuers that the
Depository is unwilling or unable to continue as
Depository for the Global Notes and a successor Depository
for the Global Notes is not appointed by the Issuers
within 90 days after delivery of such notice; or
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(ii) the Issuers, at their discretion, notify the Trustee in
writing that they elect to cause the issuance of
Definitive Notes under this Indenture,
then the Issuers shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange
therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE
144A UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE ISSUERS SO REQUEST), (2) TO THE ISSUERS OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
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(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Note that does not bear the
legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer
Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
legend set forth in (i) above, but shall continue to
be subject to the provisions of Section 2.06(c)
hereof; provided, however, that with respect to any
request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Definitive Note that does not bear the legend set
forth in (i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being
made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Issuers shall issue and, upon receipt
of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate New Notes in
exchange for Original Notes accepted for exchange in the
Exchange Offer, which New Notes shall not bear the legend
set forth in (i) above, and the Registrar shall rescind
any restriction on the transfer of such Notes, in each
case unless the Holder of such Original Notes is either
(A) a broker-dealer, (B) a Person participating in the
distribution of the Original Notes or (C) a Person who is
an affiliate (as defined in Rule 144A) of the Issuers.
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in Global Notes have been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global
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Note shall be reduced accordingly and an endorsement shall be made on such
Global Note, by the Trustee or the Note Custodian, at the direction of the
Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Issuers shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuers
may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer
taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.07, 4.10,
4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations
of the Issuers, evidencing the same debt, and
entitled to the same benefits under this Indenture,
as the Definitive Notes or Global Notes surrendered
upon such registration of transfer or exchange.
(v) The Issuers shall not be required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the
opening of business 15 days before the day of
any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of
business on the day of selection; or
(B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note
being redeemed in part; or
(C) to register the transfer of or to exchange a
Note between a record date and the next
succeeding interest payment date.
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(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Issuers may deem and treat the Person in whose name
any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of
principal of and interest on such Notes, and neither
the Trustee, any Agent nor the Issuers shall be
affected by notice to the contrary.
(vii)The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Issuers,
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Issuers shall issue and the Trustee, upon the written
order of the Issuers signed by two Officers of each Issuer, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Issuers, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Issuers to protect the
Issuers, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Issuers may charge for their
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuers and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Issuers or an Affiliate of either
of the Issuers holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
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If the Paying Agent (other than ICP-IV, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuers, or by any Affiliate of either Issuer, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Issuers signed by two Officers of each of the Issuers. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Issuers consider appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate definitive Notes in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall retain
canncelled Notes or return them to the Issuers at the written request of the
Issuers. The Issuers may not issue new Notes to replace Notes that they have
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If ICP-IV defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. ICP-IV shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date
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of the proposed payment. ICP-IV shall fix or cause to be fixed each such special
record date and payment date, provided that no such special record date shall be
less than 10 days prior to the related payment date for such defaulted interest.
At least 15 days before the special record date, ICP-IV (or, upon the written
request of ICP-IV, the Trustee in the name and at the expense of ICP-IV) shall
mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Issuers in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. ICP-IV will promptly notify the Trustee of any change
in the CUSIP numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If ICP-IV elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45
days (unless the Trustee and the Issuers agree to a shorter period) but not more
than 60 days before a redemption date, an Officers' Certificate setting forth
(i) the clause of this Indenture pursuant to which the redemption shall occur,
(ii) the redemption date, (iii) the principal amount of Notes to be redeemed and
(iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; provided that no Notes of $1,000 or less will be
redeemed in part. In the event that less than all of the Notes are to be
redeemed by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
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The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Issuers shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address. Failure to receive
such notice or any defect in the notice to any such Holder shall not affect the
validity of the proceedings for the redemption of any other Notes or portion
thereof.
The notice shall identify the Notes to be redeemed (including CUSIP
number) and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless ICP-IV defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
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At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at their expense; provided, however, that
the Issuers shall have delivered to the Trustee, at least 45 days (unless the
Trustee and the Issuers agree to a shorter period) prior to the redemption date,
an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, ICP-IV shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest and Liquidated Damages, if any, on all Notes to be
redeemed on that date. The Trustee or the Paying Agent shall promptly return to
ICP-IV any money deposited with the Trustee or the Paying Agent by ICP-IV in
excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If ICP-IV complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest and Liquidated Damages, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of ICP-IV to comply
with the preceding paragraph, interest shall be paid on the unpaid principal,
from the redemption date until such principal is paid, and to the extent lawful
on any interest not paid on such unpaid principal, in each case at the rate
provided in the Note and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and, upon the Issuers' written request, the Trustee shall authenticate for
the Holder at the expense of the Issuers a new Note equal in principal amount to
the unredeemed portion of the Note surrendered.
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SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, ICP-IV
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to August 1, 2001. Thereafter, ICP-IV shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' written
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
____ __________
<S> <C>
2001 ................................................................. 105.625%
2002 ................................................................. 103.750%
2003 ................................................................. 101.875%
2004 and thereafter................................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to August 1, 1999, ICP-IV may redeem up to 35.0% of the
aggregate principal amount of Notes originally issued with the net proceeds of a
Public Equity Offering or a Strategic Equity Investment at a redemption price
equal to 111.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption; provided,
however, that at least 65.0% in aggregate principal amount of the Notes
originally issued remains outstanding immediately after the occurrence of such
redemption and, provided further, that such redemption occurs within 90 days
after the date of the closing of such Public Equity Offering or a Strategic
Equity Investment.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the Issuers
shall not be required to make mandatory redemption payments or sinking fund
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, ICP-IV shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
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The Asset Sale Offer shall be made to all Holders and shall remain
open for a period of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Offer Period").
If the Asset Sale Offer Purchase Date is on or after an interest
record date and on or before the related interest payment date, any accrued and
unpaid interest and Liquidated Damages thereon, if any, shall be paid to the
Person in whose name a Note is registered at the close of business on such
record date, and no additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
Within 10 days following any Asset Sale Offer Trigger Date, ICP-IV
shall send, by first class mail, a notice to each of the Holders at such
Holder's registered address, with a copy to the Trustee. The notice, which shall
govern the terms of the Asset Sale Offer, shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the Asset
Sale Offer, and shall state:
(a) that the Asset Sale Offer Trigger Date has occurred pursuant
to Section 4.10 hereof and that ICP-IV is offering to purchase the maximum
principal of Notes that may be purchased out of the Excess Proceeds (the
"Offer Amount") at an offer price in cash in an amount equal to 100.0% of
the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to date of purchase, which shall be a
Business Day (the "Asset Sale Offer Purchase Date") that is not earlier
than 30 days nor later than 60 days from the date such notice is mailed;
(b) the amount of accrued and unpaid interest, if any, and
unpaid Liquidated Damages, if any, as of the Asset Sale Offer Purchase
Date;
(c) that any Note subject to the Asset Sale Offer not tendered
shall continue to accrue interest;
(d) that, unless ICP-IV defaults in the payment of the purchase
price for the Notes payable pursuant to the Asset Sale Offer, any such
Notes accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest, after the Asset Sale Offer Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased and
may not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender
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<PAGE> 46
the Note, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Note completed, or transfer by book-entry transfer, to
ICP-IV, a depositary, if appointed by ICP-IV, or a Paying Agent at the
address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election if
ICP-IV, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount or less than all of the Notes tendered
pursuant to the Asset Sale Offer are accepted for payment by ICP-IV for
any reason consistent with this Indenture, the Trustee shall select the
Notes to be purchased in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if
the Notes are not so listed, on a pro rata basis, by lot or by such method
as the Trustee deems fair and appropriate; provided that Notes accepted
for payment in part will only be purchased in integral multiples of
$1,000; and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered (or transferred by book-entry transfer).
On the Asset Sale Offer Purchase Date, ICP-IV shall: (i) accept for
payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of the Excess
Proceeds; (ii) deposit with the Paying Agent the aggregate purchase price of all
Notes or portions thereof accepted for payment; and (iii) deliver or cause to be
delivered to the Trustee all Notes tendered pursuant to the Asset Sale Offer.
ICP-IV, the depository or the Paying Agent, as the case may be, shall promptly
mail to each Holder of Notes or portions thereof accepted for payment an amount
equal to the purchase price for such Notes and the Trustee shall promptly
authenticate and mail to any such Holder of Notes accepted for payment in part a
new Note equal in principal amount to any unpurchased portion of the Notes, and
any Note not accepted for payment in whole or in part shall be promptly returned
to the Holder of such Note. ICP-IV shall announce the results of the Asset Sale
Offer to Holders of the Notes on or as soon as practicable after the Asset Sale
Offer Purchase Date. The Issuers shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act, and any other securities
laws or regulations, in connection with any Asset Sale Offer.
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Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
ICP-IV shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than ICP-IV or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by ICP-IV in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. ICP- IV shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
ICP-IV shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1.0% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuers in respect of the Notes and this Indenture may be
served. The Issuers shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Issuers
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<PAGE> 48
of their obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Issuers shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the
Trustee as one such office or agency of the Issuers in accordance with Section
2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, ICP-IV shall furnish to the Trustee and to
all Holders of Notes: (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and
10-K if ICP-IV were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of ICP-IV and its
Restricted Subsidiaries and, with respect to the annual information only, a
report thereon by ICP-IV's certified independent accountants; and (ii) all
reports that would be required to be filed with the SEC on Form 8-K if ICP-IV
were required to file such reports. In addition, whether or not required by the
rules and regulations of the SEC, ICP-IV shall file a copy of all such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing) and shall promptly make such information
available to all securities analysts and prospective investors upon request.
ICP-IV shall at all times comply with TIA Section 314(a).
(b) For so long as any Transfer Restricted Securities remain
outstanding, ICP-IV shall furnish to all Holders and prospective purchasers of
the Notes designated by the Holders of Transfer Restricted Securities, promptly
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers'
compliance with any of the covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) Each of the Issuers shall deliver to the Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of IPCC and
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<PAGE> 49
ICP-IV and its Subsidiaries during the preceding fiscal year has been made under
the supervision of the signing Officers with a view to determining whether such
Issuer has kept, observed, performed and fulfilled its obligations under this
Indenture and the Pledge Agreement, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge such Issuer
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and the Pledge Agreement and is not in default in the performance
or observance of any of the terms, provisions and conditions of this Indenture
and the Pledge Agreement (or, if a Default or Event of Default shall have
occurred and is continuing, describing all such Defaults or Events of Default of
which he or she may have knowledge and what action ICP-IV is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action ICP-IV is
taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action ICP-IV is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
ICP-IV shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
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ICP-IV covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and ICP-IV (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
ICP-IV shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Equity Interests of ICP-IV
or any of its Restricted Subsidiaries (including, without limitation, any
payment in connection with any merger or consolidation) or to the direct or
indirect holders of the Equity Interests of ICP-IV or any of its Restricted
Subsidiaries in their capacity as such, other than dividends or distributions of
Equity Interests (other than Disqualified Stock) of ICP-IV or dividends or
distributions payable to ICP-IV or any Restricted Subsidiary of ICP-IV; (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of ICP-IV or any Affiliate of ICP-IV; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except at final maturity; (iv)
make any Restricted Investment or (v) designate any Restricted Subsidiary to be
an Unrestricted Subsidiary (all such payments and other actions set forth in
clauses (i) through (v) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made after the Issue Date (excluding those
permitted by clauses (x), (y) and (z) of the following paragraph) would
exceed, at the date of determination, an amount equal to the sum of (1)
the excess of (A) Cumulative EBITDA from the Issue Date to the end of
ICP-IV's most recently ended full fiscal quarter for which consolidated
financial statements are available, taken as a single accounting period,
over (B) the product of 1.2 times ICP-IV's Cumulative Interest Expense
from the Issue Date to the end of ICP-IV's most recently ended full fiscal
quarter for which consolidated financial statements are available, taken
as a single accounting period,
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<PAGE> 51
plus (2) Capital Stock Proceeds, plus (3) to the extent that any
Restricted Investment that was made after the Issue Date is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (4) $10.0 million; and
(c) ICP-IV would, immediately after giving effect to such Restricted
Payment as if the same had occurred at the beginning of the most recently
ended full fiscal quarter of ICP-IV for which consolidated financial
statements are available, have been permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Debt) pursuant to Section
4.09 hereof.
Provided that no Event of Default shall have occurred and be continuing,
the foregoing provisions shall not prohibit: (t) the D.D. Cable Transactions;
(u) distribution of the proceeds from the sale of the AVR Interests up to $5.0
million; (v) quarterly distributions in respect of partners' income tax
liability in an amount not to exceed the Tax Amount; (w) the payment of any
dividend or distribution within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of this Indenture; (x) the payment of in-kind dividends on the RMH
Redeemable Preferred Stock in accordance with the terms thereof as in effect on
the Issue Date; (y) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of ICP-IV in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of ICP-IV) of
other Equity Interests of ICP-IV (other than any Disqualified Stock), provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (b)(2) of the preceding paragraph; and (z) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Debt or the substantially concurrent sale
(other than to a Subsidiary of ICP-IV) of Equity Interests of ICP- IV (other
than Disqualified Stock), provided that the amount of any such net cash proceeds
from sales of Equity Interests that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (b)(2)
of the preceding paragraph.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by ICP-IV or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, ICP-IV will deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon
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which the calculations required by the first paragraph of this Section 4.07 were
computed, which calculations may be based upon ICP-IV's most recently available
financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
ICP-IV 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 any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions
to ICP-IV or any of its Restricted Subsidiaries (1) on its Capital Stock or (2)
with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to ICP-IV or any of its Restricted
Subsidiaries; (ii) make loans or advances to ICP-IV or any of its Restricted
Subsidiaries; or (iii) transfer any of its properties or assets to ICP-IV or any
of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (a) Indebtedness as in effect on the Issue Date,
(b) the Bank Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Bank
Facility as in effect on the Issue Date, (c) this Indenture and the Notes, (d)
applicable law, (e) any other Indebtedness permitted by the terms of this
Indenture to be incurred, provided that the restrictions contained in the
agreements governing such other Indebtedness are no more restrictive than those
contained in the Bank Facility, (f) customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices, or (g) Permitted Refinancing Debt, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Debt are no
more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED EQUITY.
ICP-IV shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that ICP-IV will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of Preferred Equity,
except the RMH Redeemable Preferred Stock in an amount up to $12.0 million as of
the date of this Indenture; provided,
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<PAGE> 53
however, that ICP-IV or any of its Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) and ICP-IV may issue Disqualified Stock
if ICP-IV's Leverage Ratio at the time of incurrence of such Indebtedness or
issuance of such Disqualified Stock, as applicable, after giving pro forma
effect to such incurrence or issuance as of such date and to the use of proceeds
therefrom as if the same had occurred at the beginning of the most recently
ended full fiscal quarter of ICP-IV for which consolidated financial statements
are available, would have been no greater than 8.0 to 1.0. if before January 1,
1998 or 7.5 to 1.0 if on or after January 1, 1998.
The foregoing provisions shall not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by ICP-IV and its Restricted Subsidiaries of
Indebtedness (including all Obligations with respect thereto) under the
Revolving Credit Facility in an aggregate principal amount of up to (a)
$350.0 million prior to the consummation of the Viacom Nashville
Acquisition or (b) $475.0 million following the consummation of the Viacom
Nashville Acquisition, in each case, with letters of credit being deemed
to have a principal amount equal to the maximum potential liability
thereunder and less the aggregate amount of all repayments of principal
under the Revolving Credit Facility, optional or mandatory (other than
repayments that are immediately reborrowed), that have been made since the
Issue Date;
(ii) the incurrence by ICP-IV and its Restricted Subsidiaries of the
Notes and the Indebtedness outstanding on the Issue Date, including,
without limitation, the Term Loan;
(iii) the incurrence by ICP-IV or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred;
(iv) the incurrence by ICP-IV or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among ICP-IV and any of its
Restricted Subsidiaries; provided, however, that (i) if ICP-IV is the
obligor on such Indebtedness, such Indebtedness is expressly subordinate
to the payment in full of all Obligations with respect to all of the Notes
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than ICP-IV
or a Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either ICP-IV or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by ICP-IV or such Restricted Subsidiary, as the case may
be;
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(v) the incurrence by ICP-IV or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(vi) the incurrence by ICP-IV's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of ICP-IV;
(vii) the incurrence by IPSE of the indebtedness represented by the
TCIC Loan and BA Loan, provided that such loans are repaid substantially
concurrently with the earlier of the consummation of the Viacom Nashville
Acquisition or the failure of the Viacom Nashville Acquisition to be
consummated; and
(viii) the incurrence by ICP-IV or any of its Restricted Subsidiaries
of Indebtedness (in addition to Indebtedness permitted by any other clause
of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $25.0 million.
SECTION 4.10. ASSET SALES.
ICP-IV shall not, and shall not permit any Restricted Subsidiary to:
(i) sell, lease, convey or otherwise dispose of any assets (including, without
limitation, by way of a sale and leaseback or similar arrangement) other than in
the ordinary course of business; provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of ICP-IV and its
Restricted Subsidiaries taken as a whole shall be governed by the provisions of
Section 5.01 hereof and not by the provisions of this Section 4.10; or (ii)
issue or sell Equity Interests of any of ICP-IV's Subsidiaries, in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0 million
or (b) for aggregate net proceeds in excess of $1.0 million (each of the
foregoing an "Asset Sale"), unless (x) ICP-IV or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value (as evidenced by a resolution of ICP-IV's Board
of Directors set forth in an Officers' Certificate delivered to the Trustee) of
the assets, or other property issued or sold or otherwise disposed of in the
Asset Sale; and (y) at least 75.0% of such consideration is in the form of cash
or Cash Equivalents. Notwithstanding the foregoing, none of the following shall
be deemed to be an Asset Sale: (i) the D.D. Cable Transactions; (ii) a transfer
of assets by ICP-IV to a Restricted Subsidiary or by a Restricted Subsidiary to
ICP-IV or to another Restricted Subsidiary; (iii) an issuance of Equity
Interests by a Restricted Subsidiary to ICP-IV or to another
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Restricted Subsidiary; (iv) the sale of AVR Interests in accordance with the
terms of an agreement substantially similar to the AVR Letter of Intent; or (v)
any Restricted Payment or Permitted Investment that is permitted by Section 4.07
hereof.
Notwithstanding the immediately preceding paragraph, ICP-IV and its
Restricted Subsidiaries may consummate an Asset Sale without complying with such
paragraph if (i) ICP-IV or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or other property sold, issued or otherwise
disposed of (as evidenced by a resolution of ICP-IV's Board of Directors set
forth in an Officers' Certificate delivered to the Trustee), and (ii) at least
75% of the consideration for such Asset Sale constitutes assets or other
property of a kind usable by ICP-IV and its Restricted Subsidiaries in the
business of ICP-IV and its Restricted Subsidiaries as conducted by ICP-IV and
its Restricted Subsidiaries on the Issue Date; provided that any consideration
not constituting assets or property of a kind usable by ICP-IV and its
Restricted Subsidiaries in the business conducted by them on the date of such
Asset Sale received by ICP-IV or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Proceeds subject to the provisions of the two succeeding
paragraphs.
Within 180 days after any Asset Sale, ICP-IV may apply the Net
Proceeds from such Asset Sale, to (a) permanently reduce any Indebtedness of any
Restricted Subsidiary of ICP-IV under the Bank Facility and/or (b) commit in
writing to the Trustee to make an investment in or acquire assets or property of
a kind usable by ICP-IV and its Restricted Subsidiaries in the business
conducted by them on the date of such Asset Sale or a business reasonably
related thereto and consummate such investment or acquisition within 360 days
after such Asset Sale, provided, however, that if at any time any non-cash
consideration received by ICP-IV or any Restricted Subsidiary of ICP-IV, as the
case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such cash shall be deemed to constitute Net
Proceeds and shall be required to be applied in accordance with clauses (a)
and/or (b) above. Pending the final application of any such Net Proceeds, ICP-IV
may temporarily invest such Net Proceeds in any manner not prohibited by this
Indenture. Any Net Proceeds from an Asset Sale not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds."
As soon as practical, but in no event later than 180 business after
any date that the aggregate amount of Excess Proceeds exceeds $5.0 million (an
"Asset Sale Offer Trigger Date"), ICP-IV shall commence an Asset Sale Offer
pursuant to Section 3.09 hereof to purchase the maximum principal amount of
Notes that may be
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purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100.0% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase in
accordance with the procedures set forth in Section 3.09 hereof. To the extent
that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, ICP-IV (or such Subsidiary) may use such excess
for general corporate purposes. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be deemed to be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
ICP-IV shall not, and shall not permit any of its Restricted
Subsidiaries 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 or the rendering of
any service) with, or for the benefit of, any Affiliate (an "Affiliate
Transaction") unless: (i) the terms of such Affiliate Transaction are in
writing; (ii) such Affiliate Transaction is in the best interest of ICP-IV or
such Restricted Subsidiary, as the case may be; (iii) such Affiliate Transaction
is on terms at least as favorable to ICP-IV or such Restricted Subsidiary, as
the case may be, as 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; (iv) with respect to each Affiliate Transaction
involving aggregate payments or consideration in excess of $5.0 million, ICP-IV
delivers to the Trustee an Officers' Certificate certifying that such Affiliate
Transaction was approved by an Executive Officer of ICP-IV and that such
Affiliate Transaction complies with clauses (ii) and (iii) of this paragraph;
and (v) with respect to each Affiliate Transaction involving aggregate payments
or consideration in excess of $25.0 million, ICP-IV delivers to the Trustee, in
addition to those documents required by clause (iv) of this paragraph, an
opinion letter from an Independent Appraiser to the effect that such Affiliate
Transaction is fair to the Holders from a financial point of view.
Notwithstanding the immediately preceding paragraph: (i) any
transaction pursuant to any contract in existence on the Issue Date in
accordance with the terms thereof as in effect on the Issue Date, including
contracts for the acquisition of cable television programming and renewals,
extensions and replacements thereof on terms no less favorable to ICP-IV and its
Restricted Subsidiaries than those in effect on the Issue Date; (ii)
transactions permitted under Section 4.07; (iii) any transaction or series of
transactions between ICP-IV and one or more of its Restricted Subsidiaries or
between two or more of its Restricted Subsidiaries (provided that no more than
10.0% of the equity interest in any of such Restricted Subsidiaries is owned by
an Affiliate that is not itself a Restricted Subsidiary); (iv) the payment of
compensation (including
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amounts paid pursuant to employee benefit plans) for the personal services of
officers, directors and employees of ICP-IV or any of its Restricted
Subsidiaries, or any consultant or advisor thereto, so long as the Board of
Directors of ICP-IV in good faith shall have approved the terms thereof and
deemed the services theretofore or thereafter to be performed for such
compensation or fees to be fair consideration therefor; (v) any sale of Equity
Interests of ICP-IV; and (vi) the D.D. Cable Transactions shall not be deemed
Affiliate Transactions.
SECTION 4.12. LIENS.
ICP-IV shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) upon any of its Property, or the Property of such
Subsidiaries whether now owned or hereafter acquired, or any interest therein or
any income or profits therefrom, unless it has made or will make effective a
provision whereby all payments due under this Indenture and the Notes will be
secured by such Lien equally and ratably with (or prior to) all other
Indebtedness of ICP-IV or such Subsidiary secured by such Lien for so long as
any such other Indebtedness of ICP-IV or such Subsidiary shall be so secured.
SECTION 4.13. LIMITATION ON CONDUCT OF IPCC.
IPCC shall not acquire or hold any significant assets or other
properties or engage in any business activities; provided, however, that IPCC
may be a co-obligor with respect to Indebtedness if ICP-IV is a primary obligor
or guarantor with respect to such Indebtedness and the net proceeds of such
Indebtedness are loaned to ICP-IV.
SECTION 4.14. CORPORATE OR PARTNERSHIP EXISTENCE.
Subject to Article 5 hereof, each of ICP-IV and IPCC shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate or partnership existence, as applicable, and the
corporate, partnership or other existence of each of its Restricted
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of ICP-IV or any such Restricted
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of ICP-IV and its Restricted Subsidiaries; provided, however, that ICP-IV shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Restricted Subsidiaries,
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of ICP-IV and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
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SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Within 30 days of the occurrence of a Change of Control, ICP-IV
shall notify the Trustee in writing of such proposed occurrence and shall make
an offer to purchase (a "Change of Control Offer") the Notes at a purchase price
equal to 101.0% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the Change of Control Payment Date
(the "Change of Control Purchase Price"). ICP-IV shall not be required to make a
Change of Control Offer upon the occurrence of a Change of Control if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Indenture and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer. Within 50 days of the occurrence of a Change of Control, ICP-IV
shall also: (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) send by first-class mail, postage prepaid, to the Trustee
and to each registered Holder of Notes, at its address appearing in the register
of the Notes maintained by the Registrar, a notice stating: (A) that the Change
of Control Offer is being made pursuant to this Section 4.15 and that all Notes
tendered will be accepted for payment, subject to the terms and conditions set
forth herein; (B) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days and no later than 60 days
after the date on which such notice is mailed) (the "Change of Control Payment
Date"); (C) that any Note not tendered will continue to accrue interest; (D)
that unless ICP-IV defaults in the payment of the Change of Control Purchase
Price, any such Notes accepted for payment pursuant to the Change of Control
Offer will cease to accrue interest after the Change of Control Payment Date;
(E) that Holders accepting the offer to have their Notes purchased pursuant to a
Change of Control Offer will be required to surrender such Notes to the Paying
Agent at the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date; (F) that Holders
will be entitled to withdraw their acceptance if the Paying Agent receives, not
later than the close of business on the third Business Day preceding the Change
of Control Payment Date, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of such Notes delivered for purchase,
and a statement that such Holder is withdrawing its election to have such Notes
purchased; (G) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, provided that each Note purchased and each such new Note
issued shall be in an original principal amount in denominations of $1,000 and
integral multiples thereof; and (H) any other procedures that a Holder must
follow to accept a Change of Control Offer or effect withdrawal of such
acceptance. The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) the
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Exchange Act and any other securities laws and regulations in connection
with the repurchase of Notes in connection with a Change of Control and, to the
extent that the provisions of such securities laws or regulations conflict with
this Section 4.15, the Issuers shall not be deemed to have breached their
obligations under this Section 4.15 by virtue thereof.
(b) On the Change of Control Payment Date, ICP-IV shall, to the
extent lawful, (i) accept for payment all the Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof tendered to ICP-IV.
The Paying Agent shall promptly mail to each Holder of Notes so accepted payment
in an amount equal to the purchase price for the Notes, and the Trustee shall
promptly authenticate and mail to such Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered by such Holder, if
any; provided, that each such new Note shall be in a principal amount of $1,000
or an integral multiple thereof.
(c) The Change of Control provisions described herein shall be
applicable whether or not any other provisions of this Indenture are applicable.
SECTION 4.16. OWNERSHIP OF OPERATING PARTNERSHIP.
ICP-IV shall continue to own at least 99.99% of the outstanding
Equity Interests of the Operating Partnership or any successor to all or
substantially all of the Operating Partnership's assets.
SECTION 4.17. CONSUMMATION OF THE VIACOM NASHVILLE ACQUISITION.
ICP-IV shall, and shall cause each of its Subsidiaries to, use its
best efforts to consummate the Viacom Nashville Acquisition on substantially the
terms described in the Offering Memorandum and to cause the Viacom Nashville
System to be transferred to a Restricted Subsidiary of ICP-IV.
SECTION 4.18. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary at any time; provided, however, that immediately
after giving effect to such designation on a pro forma basis as if the same had
occurred at the beginning of the most recently ended full fiscal quarter of
ICP-IV for which consolidated financial statements are available, (i) ICP-IV
would be permitted to incur at least $1.00 of additional Indebtedness
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(other than Permitted Debt) pursuant to Section 4.09, (ii) there exist no Liens
(other than Permitted Liens) on the Property of ICP-IV or its Restricted
Subsidiaries and (iii) an Officers' Certificate with respect to such designation
is delivered to the Trustee within 75 days after the end of the fiscal quarter
of ICP-IV in which such designation is made (or, in the case of a designation
made during the last fiscal quarter of ICP-IV's fiscal year, within 120 days
after the end of such fiscal year), which Officers' Certificate states the
effective date of such designation; and provided, further, that such designation
shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary
of ICPIV of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if no Default or Event of Default would
be in existence following such designation. The provisions of this paragraph
shall not be applicable to the designation of IPSE as a Restricted Subsidiary of
ICP-IV following the consummation of the Viacom Nashville Acquisition.
The Board of Directors may designate any Restricted Subsidiary, other than
IPCC, to be an Unrestricted Subsidiary if such designation would not cause a
Default; provided, however, that immediately after giving effect to such
designation on a pro forma basis, ICP-IV would be in compliance with Section
4.07 hereof. For purposes of making such determination, all outstanding
Investments by ICP-IV and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated, whether made before or after
the Issue Date, shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments. All
such outstanding Investments shall be deemed to constitute Investments in an
amount equal to the greatest of (i) the net book value of such Investments at
the time of such designation, (ii) the fair market value of such Investments at
the time of such designation and (iii) the original fair market value of such
Investments at the time they were made. Such designation shall only be permitted
if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
SECTION 4.19. SUSPENDED COVENANTS.
If, at any time, (i) the ratings assigned to the Notes by both of the
Rating Agencies are Investment Grade Ratings and (ii) no Default has occurred
and is continuing, ICP-IV and its Restricted Subsidiaries shall thereafter cease
to be subject to the provisions of Sections 4.07, 4.08, 4.09, 4.10, 4.11 and
4.18 hereof and clause (iv) of Section 5.01 hereof (the "Suspended Covenants").
In the event that ICP-IV 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 Ratings Agencies
withdraws its ratings or downgrades the ratings assigned to such Notes below the
required
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Investment Grade Ratings, then ICP-IV and its Restricted Subsidiaries shall
thereafter again be subject to the Suspended Covenants for the benefit of such
Notes and compliance with the Suspended Covenants with respect to Restricted
Payments made after the time of such withdrawal or downgrade shall be calculated
in accordance with the terms of Section 4.07 as if such Section had been in
effect during the entire period of time from the Issue Date.
SECTION 4.20 PAYMENTS FOR CONSENT.
Neither ICP-IV nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Note for or as an inducement to
any consent, waiver or amendment of any of the terms of provisions of this
Indenture or the Notes, unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.21. SECURITY.
(a) The Issuers shall: (i) enter into the Pledge Agreement (in the
form attached hereto as Exhibit C) and comply with the terms and provisions
thereof; and (ii) use a portion of the net proceeds of the Offering to purchase
the Pledged Securities to be pledged to the Collateral Agent for the benefit of
the Holders of the Notes in such amount as shall be sufficient upon receipt of
scheduled interest and principal payments of such securities, in the opinion of
a nationally recognized firm of independent public accountants selected by the
Issuers, to provide for payment in full of the first six scheduled interest
payments due on the Notes. The Pledged Securities shall be pledged by the
Issuers to the Collateral Agent for the benefit of the Holders of the Notes and
shall be held by the Collateral Agent in the Pledge Account pending disbursement
pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and agrees to
the terms of the Pledge Agreement (including, without limitation, the provisions
providing for foreclosure and release of Collateral) as the same may be in
effect or may be amended from time to time in accordance with its terms, and
authorizes and directs each of the Trustee and the Collateral Agent to enter
into the Pledge Agreement and to perform its respective obligations and exercise
its respective rights thereunder in accordance therewith. The Issuers shall do
or cause to be done all such acts and things as may be necessary or proper, or
as may be required by the provisions of the Pledge Agreement, to assure and
confirm to the Trustee and the Collateral Agent the security interest in the
Collateral contemplated hereby, by the Pledge Agreement or any part thereof, as
from time to time constituted, so as to render the same
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available for the security and benefit of this Indenture and of the Notes
secured hereby, according to the intent and purposes herein expressed. The
Issuers shall take, or shall cause to be taken, any and all actions reasonably
required to cause the Pledge Agreement to create and maintain, as security for
the obligations of the Issuers under this Indenture and the Notes, valid and
enforceable first priority liens (collectively, the "Pledged Securities Lien")
in and on all the Collateral, in favor of the Collateral Agent, superior to and
prior to the rights of all third Persons and subject to no other Liens other
than as provided herein.
(c) The release of any Collateral pursuant to the Pledge Agreement
shall not be deemed to impair the security under this Indenture in contravention
of the provisions hereof if and to the extent the Collateral is released
pursuant to this Indenture and the Pledge Agreement. To the extent applicable,
the Issuers shall cause TIA Section 314(d) relating to the release of property
or securities from the Pledged Securities Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Pledged Securities Lien and security interest
of the Pledge Agreement to be complied with. Any certificate or opinion required
by TIA Section 314(d) may be made by an Officer of each of the Issuers, except
in cases where TIA Section 314(d) requires that such certificate or opinion be
made by an independent Person, which Person shall be a reputable independent
engineer, appraiser or other expert selected or approved by the Issuers in the
exercise of reasonable care.
(d) The Issuers shall cause TIA Section 314(b), relating to opinions
of counsel regarding the Pledged Securities Lien of the Pledge Agreement, to be
complied with. The Issuers shall furnish the following to the Collateral Agent
and the Trustee prior to each proposed release of Collateral pursuant to the
Pledge Agreement: (i) all documents required by TIA Section 314(d); and (ii) an
Opinion of Counsel to the effect that such accompanying documents constitute all
documents required by TIA Section 314(d). The Trustee may, to the extent
permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained in
such instruments.
(e) The Collateral Agent may, in its sole discretion and without the
consent of the Holders, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (i) enforce any of the terms of the Pledge
Agreement and (ii) collect and receive any and all amounts payable in respect of
the obligations of the Issuers hereunder. The Collateral Agent shall have power
to institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any acts that may be unlawful or
in violation of the Pledge Agreement or this Indenture, and such suits and
proceedings as either the Collateral Agent may deem expedient to preserve or
protect its interests and the interests of the Holders in the
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Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders or of the Collateral Agent.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
ICP-IV shall not consolidate with or merge with or into (whether or
not ICP-IV is the surviving Person) or convey, sell, assign, transfer, lease or
otherwise dispose of all or substantially all of its properties or assets (as an
entirety or substantially as an entirety in a transaction or a series of related
transactions) to any Person unless: (i) ICP-IV will be the surviving Person (the
"Surviving Person"), or the Surviving Person (if other than the ICP-IV) formed
by or surviving any such consolidation or merger or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Surviving Person (if
other than ICP-IV) expressly assumes, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of ICP-IV under the Notes and this Indenture, and the obligations
under this Indenture remain in full force and effect, (iii) immediately before
and immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing, and (iv) immediately after giving
effect to such transaction on a pro forma basis as if the same had occurred at
the beginning of the most recently ended full fiscal quarter of ICP-IV for which
consolidated financial statements are available (including any Indebtedness
incurred or anticipated to be incurred in connection with such transaction or
series of transactions), the Surviving Person would be permitted to incur at
least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to
the Leverage Ratio test applicable to ICP-IV set forth in the proviso of the
first paragraph of Section 4.09 hereof.
In connection with any consolidation, merger or transfer contemplated
by this provision, ICP-IV 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 in this
Indenture provided for relating to such transaction or transactions have been
complied with.
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Notwithstanding the foregoing, ICP-IV is permitted to reorganize as a
corporation in accordance with the procedures established in this Indenture,
provided that ICP-IV shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming that such
reorganization is not adverse to Holders of the Notes (it being recognized that
such reorganization shall not be deemed adverse to the Holders of the Notes
solely because (A) of the accrual of deferred tax liabilities resulting from
such reorganization or (B) the successor or surviving corporation (a) is subject
to income tax as a corporate entity or (b) is considered to be an "includible
corporation" of an affiliated group of corporations within the meaning of the
Code or any similar state or local law).
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of ICP-IV in accordance with Section 5.01 hereof, the Surviving Person formed by
such consolidation or into or with which ICP-IV is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to "ICP-IV" shall refer instead to the
Surviving Person and not to ICP-IV), and may exercise every right and power of
ICP-IV under this Indenture with the same effect as if such Surviving Person had
been named as ICP-IV herein; provided, however, that ICP-IV shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of ICP-IV's assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) (i) ICP-IV defaults in the payment when due of interest on
the Notes on any day on or prior to August 1, 1999, or (ii) ICP-IV
defaults in the payment when due of interest on the Notes on any day
after August 1, 1999 and such default continues for a period of 30
days;
(b) ICP-IV defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable
at maturity, upon redemption (including in connection with an offer
to purchase) or otherwise;
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(c) ICP-IV fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the
Notes for 30 days after notice to ICP-IV by the Trustee or the
Holders of at least 25.0% in principal amount of the Notes then
outstanding;
(d) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by ICP-IV or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
ICPIV or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists, or is created after the Issue
Date, which default (i) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the
expiration of such grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (ii) results in the
acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more, which Payment Default
shall not be cured or waived, or which acceleration shall not be
rescinded or annulled, within 10 days after written notice thereof;
(e) a final judgment or final judgments for the payment of money
are entered by a court or courts of competent jurisdiction against
ICP-IV or any of its Restricted Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 30 consecutive days, provided
that the aggregate of all such undischarged judgments exceeds $10.0
million;
(f) ICP-IV or any of its Restricted Subsidiaries pursuant to
or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a Bankruptcy
Custodian of it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
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(v) generally is not paying its debts as they become due;
or
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against ICP-IV or any of its Restricted
Subsidiaries in an involuntary case;
(ii) appoints a Bankruptcy Custodian of ICP-IV or any of
its Restricted Subsidiaries for all or substantially all of the
property of ICP-IV or any of its Restricted Subsidiaries; or
(iii) orders the liquidation of ICP-IV or any of its
Restricted Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (f) or (g) of Section 6.01 hereof with respect to ICP-IV or any of its
Restricted Subsidiaries) occurs and is continuing, the Trustee or the Holders of
at least 25.0% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately. Notwithstanding the foregoing,
if an Event of Default specified in clause (f) or (g) of Section 6.01 hereof
occurs with respect to ICP-IV or any of its Restricted Subsidiaries all
outstanding Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
Upon the acceleration of the Notes under this Section 6.02, the
Collateral Agent shall, at the Trustee's direction, liquidate the Pledged
Securities and apply the proceeds thereof to the principal, interest and
Liquidated Damages, if any, on the Notes to the date of such acceleration.
If an Event of Default occurs on or after August 1, 2001 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of ICP-IV
with the intention of avoiding payment of the premium that ICP-IV would have had
to pay if ICP-IV then had elected to redeem the Notes pursuant to Section 3.07
hereof, then,
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upon acceleration of the Notes, an equivalent premium shall also become and be
immediately due and payable, to the extent permitted by law, anything in this
Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to August 1, 2001 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of ICP-IV with the intention of
avoiding the prohibition on redemption of the Notes prior to such date, then,
upon acceleration of the Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on
August 1 of the years set forth below, as set forth below (expressed as
percentages of principal amount:
YEAR PERCENTAGE
____ __________
1997...................................... 111.250%
1998...................................... 109.849%
1999...................................... 108.438%
2000 ..................................... 107.031%
2001...................................... 105.625%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes (including in connection
with an offer to purchase). Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
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SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Note only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25.0% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Notes or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Notes may not use this Indenture to prejudice the rights of
another Holder of a Notes or to obtain a preference or priority over another
Holder of a Notes.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against ICP-IV for the whole amount of principal
of, premium and Liquidated Damages, if any, and interest remaining unpaid on the
Notes and interest on overdue principal and, to the extent lawful, interest and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to ICP-IV (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
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First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, Liquidated Damages, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium and Liquidated Damages, if any and interest,
respectively; and
Third: to ICP-IV or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10.0% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or
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obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with ICP-IV. Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented
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by the proper Person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of ICP-IV.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of ICP-IV with the same rights it would have if it were not Trustee.
However, in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for ICP-IV's use of the proceeds from the Notes or any money paid to
ICP-IV or upon ICP-IV's direction under any provision of this Indenture, it
shall not be responsible for the use or application of any money received by
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any Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Notes, the Trustee may withhold the notice if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2) and Section 313(b)(1). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to ICPIV and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA Section 313(d). ICP-IV shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
ICP-IV shall pay to the Trustee from time to time such compensation
as shall be agreed between ICP-IV and the Trustee for its acceptance of this
Indenture and services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. ICP-IV
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
ICP-IV shall indemnify each of the Trustee and any predecessor
Trustee against any and all losses, liabilities, damages, claims or expenses,
including taxes (other than taxes
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based on the income of the Trustee), incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Issuers (including this Section 7.07) and defending itself against any claim
(whether asserted by the Issuers or any Holder or any other person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify ICP-IV
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify ICP-IV shall not relieve ICP-IV of its obligations hereunder. ICP-IV
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and ICP-IV shall pay the reasonable fees and
expenses of such counsel. ICP-IV need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of ICP-IV under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure ICP-IV's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(f) or (g) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying ICP-IV. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and ICP-IV in writing. ICP-IV may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Bankruptcy Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, ICP-IV shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by ICP-IV.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, ICP-IV, or the
Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to ICP-IV. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, ICP-IV's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of their Boards of Directors evidenced
by a resolution set forth in Officers' Certificates, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuers shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all their other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions, which
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shall survive until otherwise terminated or discharged hereunder: (i) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest (including Liquidated
Damages) on such Notes when such payments are due; (ii) the Issuers' obligations
with respect to such Notes under Article 2 and Section 4.02 hereof; (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Issuers' obligations in connection therewith; and (iv) this Article Eight.
Subject to compliance with this Article 8, the Issuers may exercise their option
under this Section 8.02 notwithstanding the prior exercise of their option under
Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuers shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from their
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Issuers may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(d) through
6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) The Issuers must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest (if such deposit
occurs prior to August 1, 1999, the Pledged Securities shall be
applied toward the interest required to effect such Legal Defeasance
or Covenant Defeasance) on the outstanding Notes on the stated date
for payment thereof or on the applicable redemption date, as the case
may be;
(b) in the case of an election under Section 8.02 hereof,
the Issuers shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuers have received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Issuers shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or
a portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or
insofar as Section 6.01(f) or 6.01(g) hereof is concerned, at any
time in the period ending on the 91st day after the date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under,
any material agreement or instrument (other than this Indenture) to
which an Issuer or any of its Restricted Subsidiaries is a party or
by which an Issuer or any of its Restricted Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that, as of the date such opinion,
(i) the trust funds will not be subject to rights of holders of
Indebtedness other than the Notes and (ii) assuming no intervening
bankruptcy of either Issuer between the date of deposit and the 91st
day following the deposit (assuming no Holder of Notes is an insider
of either Issuer) or the day following the end of such other
preference period in effect at the time of such opinion (assuming a
Holder of Notes is an insider of either Issuer), as applicable,
following the deposit, the trust funds will not be subject to the
effects of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally under any
applicable United States or state law;
(g) each Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by such
Issuer with the intent of preferring the Holders of Notes over any
other creditors of such Issuer or with the intent of defeating,
hindering, delaying or defrauding creditors of such Issuer or others;
and
(h) each Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including ICP-IV acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest
(including Liquidated Damages), but such money need not be segregated from other
funds except to the extent required by law.
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ICP-IV shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to ICP-IV from time to time upon the request of
ICP-IV any money or non-callable Government Securities held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Issuers, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuers on their request or (if then held by the Issuers) shall be
discharged from such trust; and the Holder of such Notes shall thereafter, as a
secured creditor, look only to the Issuers for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Issuers as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Issuers cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be;
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provided, however, that, if ICP-IV makes any payment of principal of, premium,
if any, or interest on any Note following the reinstatement of its obligations,
the Issuers shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers and the
Trustee may amend or supplement this Indenture, the Pledge Agreement or the
Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the ICP-IV's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article Five hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuers accompanied by a resolution of their
Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Issuers in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuers and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof), the Pledge Agreement or the Notes with the consent of the
Holders of at least a majority in
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principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a tender offer or exchange offer for the
Notes) and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, the Pledge Agreement or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
Upon the request of each of the Issuers accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.06
hereof, the Trustee shall join with the Issuers in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Issuers with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Notes or alter or waive any of the provisions with respect to the
redemption of the Notes (except as provided above with respect to
Sections 4.10 and 4.15 hereof);
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(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes
and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest on
the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Section 4.10 or 4.15 hereof);
(h) release any Collateral from the Pledged Securities Lien
created by the Pledge Agreement, except in accordance with the terms
thereof; or
(i) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuers may not sign an amendment or supplemental Indenture until the Board
of Directors of each Issuer approves it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject to
Section 7.01) shall be fully protected in relying upon, Officers' Certificates
and Opinions of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 10.02. NOTICES.
Any notice or communication by ICP-IV, IPCC or the Trustee to the
others is duly given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next-day delivery, to the others' address:
If to ICP-IV:
InterMedia Capital Partners IV, L.P.
235 Montgomery Street, Suite 420
San Francisco, California 94104
Telecopier No.: (415) 397-3978
Attention: General Partner
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With a copy to:
Gregg F. Vignos, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Telecopier No.: 415-983-1600
If to IPCC:
InterMedia Partners IV Capital Corporation
235 Montgomery Street, Suite 420
San Francisco, California 94104
Telecopier No.: (415) 397-3978
Attention: President
With a copy to:
Gregg F. Vignos, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Telecopier No.: 415-983-1600
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
ICP-IV, IPCC or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail to its address shown on the register kept by the Registrar. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
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If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If ICP-IV and/or IPCC mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by an Issuer to the Trustee to take
any action under this Indenture, such requesting entity shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to
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whether or not such covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
PARTNERS AND STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator,
partner or stockholder of either of the Issuers, as such, shall have any
liability for any obligations of the Issuers under the Notes, this Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Issuers or their Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes shall
bind their successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[signature page follows]
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SIGNATURES
Dated as of July 30, 1996.
INTERMEDIA CAPITAL PARTNERS IV, LP.,
a California limited partnership
By: InterMedia Capital Management IV, L.P.,
a California limited partnership,
as general partner of InterMedia Capital
Partners IV, L.P.
By: /s/ Leo J. Hindery, Jr.
_______________________________________
Leo J. Hindery, Jr.,
Managing General Partner
INTERMEDIA PARTNERS IV CAPITAL CORP.,
a Delaware corporation
By: /s/ Leo J. Hindery, Jr.
_______________________________________
Leo J. Hindery, Jr.,
President
Dated as of July 30, 1996.
THE BANK OF NEW YORK, as Trustee
By: /s/ Vivian Georges
______________________
Vivian Georges,
Assistant Vice President
<PAGE> 90
EXHIBIT A
(Face of Note)
11 1/4% Senior Notes Due 2006
CUSIP: __________
No. $__________________
InterMedia Capital Partners IV, L.P.
and
InterMedia Partners IV Capital Corp.
promises to pay to
or registered assigns,
the principal sum of
Dollars on August 1, 2006.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
INTERMEDIA CAPITAL PARTNERS IV, LP.
By: InterMedia Capital Management IV, L.P.,
its general partner
By: ______________________________
Name:
Title:
INTERMEDIA PARTNERS IV CAPITAL CORP.
By: ______________________________
Name:
Title:
Dated as of __________________
This is one of the
Notes referred to in the
within-mentioned Indenture:
The Bank of New York,
as Trustee
By: __________________________
Authorized Signatory
A-1
<PAGE> 91
(Back of Note)
11 1/4% Senior Notes Due 2006
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co, has an interest herein.1
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE ISSUERS THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN OF RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
IF THE ISSUERS SO REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE
- --------
1 This paragraph should be included only in the Note if issued in global
firm.
A-2
<PAGE> 92
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. InterMedia Capital Partners IV, L.P., a California limited
partnership ("ICP-IV"), and InterMedia Partners IV Capital Corporation, a
Delaware corporation and a wholly owned subsidiary of ICP-IV ("IPCC" and,
together with ICP-IV, the "Issuers") promise to pay interest on the principal
amount of this Note at 11 1/4% per annum from July 30, 1996 until maturity and
shall pay the Liquidated Damages payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. The Issuers will pay interest
and Liquidated Damages semi-annually on February 1 and August 1 of each year, or
if any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that the first Interest Payment Date shall
be February 1, 1997. ICP-IV shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. ICP-IV shall pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the January 15 or July 15 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium, interest and Liquidated Damages at the
office or agency of ICP-IV maintained for such purpose within or without the
City and State of New York, or, at the option of ICP-IV, payment of interest and
Liquidated Damages may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, and provided that payment by wire transfer
of immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided written wire transfer
instructions to ICP-IV or the Paying Agent at least 10 Business Days prior to
the applicable payment date. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
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<PAGE> 93
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. ICP-IV may
change any Paying Agent or Registrar without notice to any Holder. ICP-IV or any
of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of
July 30, 1996 (the "Indenture") among the Issuers and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code SectionSection 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are obligations of the Issuers limited to $292.0 million in
aggregate principal amount and secured by a portion of the proceeds of the
Offering pursuant to the Pledge Agreement.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, ICP-IV
shall not have the option to redeem the Notes prior to August 1, 2001.
Thereafter, ICP-IV shall have the option to redeem the Notes, in whole or in
part, upon not less than 30 nor more than 60 days' written notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on August 1 of each of the years indicated below:
YEAR PERCENTAGE
2001...................................... 105.625%
2002 ..................................... 103.750%
2003 ..................................... 101.875%
2004 and thereafter....................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
5, at any time prior to August 1, 1999, ICP-IV may redeem up to 35% of the
aggregate principal amount of Notes originally issued with the net proceeds of a
Public Equity Offering or a Strategic Equity Investment at a redemption price
equal to 111.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption; provided,
however, that at least 65% in aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption
and, provided further, that such redemption occurs within 90 days of the date of
the closing of such Public Equity Offering or a Strategic Equity Investment.
6. MANDATORY REDEMPTION.
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The Issuers shall not be required to make mandatory redemption payments or
sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, ICP-IV shall be required to make an
offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the principal amount thereof plus accrued and any unpaid
interest and Liquidated Damages thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Purchase Price").
Within 30 days of the occurrence of a Change of Control, ICP-IV shall notify the
Trustee in writing of such proposed occurrence and shall make a Change of
Control Offer. Within 50 days following the occurrence of a Change of Control,
ICPIV shall mail a notice to each Holder setting forth the procedures governing
the Change of Control Offer as required by the Indenture.
(b) If ICP-IV or a Restricted Subsidiary consummates any Asset Sales,
within ten days of each Asset Sale Trigger Date, ICP-IV shall commence an offer
to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the Asset Sale Offer Purchase Date in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, ICP-IV (or such Subsidiary) may use such excess for
general corporate purposes. Holders of Notes that are the subject of an offer to
purchase will receive an Asset Sale Offer from ICP-IV prior to any related
purchase date and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30
days but not more than 60 days before a redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The
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<PAGE> 95
Issuers need not exchange or register the transfer of any Note or portion of a
Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, it need not exchange or register the transfer of
any Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture, the Pledge Agreement or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes, and any existing default or compliance with any
provision of the Indenture, the Pledge Agreement or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note, the Indenture,
the Pledge Agreement or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
ICP-IV's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) (a) default in
the payment when due of interest on the Notes on any day on or prior to August
1, 1999, or (b) default for 30 days in the payment when due of interest on the
Notes on any day after August 1, 1999; (ii) default in payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise, (iii) failure by ICP-IV for 30 days after notice to
ICP-IV by the Trustee or the Holders of at least 25% in principal amount of the
Notes then outstanding to comply with certain other agreements in the Indenture
or the Notes; (iv) default under certain other agreements relating to
Indebtedness of ICP-IV which default results in the acceleration of such
Indebtedness prior to its express maturity; (v) certain final judgments for the
payment of money that remain undischarged for a period of 30 days; and (vi)
certain events of bankruptcy or insolvency with respect to ICP-IV or any of its
Restricted Subsidiaries. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to ICP-IV or any of its
Restricted Subsidiaries, all
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<PAGE> 96
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH THE ISSUERS. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers or their Affiliates, and may otherwise deal with the
Issuers or their Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or partner of the Issuers, as such,
shall not have any liability for any obligations of the Issuers under the Notes
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of July 19, 1996, between the Issuers and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
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<PAGE> 97
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
ICP-IV will furnish to any Holder upon written request and without charge
a copy of the Indenture and/or the Registration Rights Agreement. Requests may
be made to:
InterMedia Capital Partners IV, L.P.
235 Montgomery Street, Suite 240
San Francisco, California 94104
Telecopier No.: (415) 397-3978
Attention: General Partner
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<PAGE> 98
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
Date: ___________________
Your Signature: ___________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee.
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<PAGE> 99
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by ICP-IV pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by
ICP-IV pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature: _______________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.: _____________________
Signature Guarantee.
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<PAGE> 100
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE2
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized signatory
Principal Amount of Principal Amount of following such decrease of Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------------- ----------------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
2 This should be included only if the Debenture is issued in global form.
A-11
<PAGE> 101
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
NOTES
Re: 11 1/4% Senior Notes Due 2006 of ICP-IV and IPCC.
This Certificate relates to $_____ principal amount of Notes held in
* ________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Note held by the Depository a
Note or Notes in definitive, registered form of authorized
denominations in an aggregate principal amount equal to its beneficial
interest in such Global Note (or the portion thereof indicated above);
or
[ ] has requested the Trustee by written order to exchange or register
the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of
Section 2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i) (B) of
the Indenture) or pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (in satisfaction of
Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture.)
B-1
<PAGE> 102
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*Check applicable box.
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<PAGE> 103
[ ] Such Note is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration statement
under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or
Section 2.06(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities
Act, other than Rule 144A, 144 or Rule 904 under the Securities Act. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the
Indenture).
___________________________
[INSERT NAME OF TRANSFEROR]
By: _______________________
Date: ________________________
B-3
<PAGE> 104
- ---------------
*Check applicable box.
B-4
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
PLEDGE AND ESCROW AGREEMENT
THIS PLEDGE AND ESCROW AGREEMENT (this "Pledge Agreement") is
made and entered into as of July 30, 1996 by and among InterMedia Capital
Partners IV, L.P., a California limited partnership ("ICP-IV"), having its
principal office at 235 Montgomery Street, Suite 420, San Francisco, California
94104, and InterMedia Partners IV Capital Corp., a Delaware corporation ("IPCC"
and, together with ICP-IV, the "Pledgors"), having its principal office at 235
Montgomery Street, Suite 420, San Francisco, California 94104, in favor of The
Bank of New York, a New York banking corporation ("The Bank of New York"),
having its principal corporate trust office at 101 Barclay Street, New York, New
York 10286, as collateral agent (in such capacity, the "Collateral Agent") and
The Bank of New York, as trustee (in such capacity, the "Trustee") under the
Indenture (as defined herein) for the benefit of the holders (the "Holders") of
the Notes (as defined herein) issued by the Pledgors.
W I T N E S S E T H
WHEREAS, the Pledgors and the Trustee have entered into that
certain indenture dated as of July 30, 1996 (as amended, restated, supplemented
or otherwise modified from time to time, the "Indenture"), pursuant to which the
Pledgors are issuing on the date hereof up to $292,000,000 in aggregate
principal amount of 11 1/4% Senior Notes Due 2006 (the "Notes"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in the Indenture; and
WHEREAS, the Pledgors agreed, pursuant to the Indenture, to
(i) purchase a portfolio of securities, initially consisting of cash and
securities that are direct obligations of, or obligations fully guaranteed by,
the United States of America for the payment of which guarantee or obligations
the full faith and credit of the United States is pledged (the "Government
Securities"), including any Marketable Securities (as defined in the Indenture)
substituted in respect thereof (collectively, the "Pledged Securities"), in an
amount sufficient upon receipt of scheduled interest and principal payments in
respect of Pledged Securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Pledgors that is attached hereto
as Annex I, to provide for payment in full of the first six scheduled interest
payments due on the Notes and (ii) place such Pledged Securities in an account
held by the Collateral Agent for the benefit of Holders of the Notes; and
<PAGE> 2
WHEREAS, the Pledgors are the legal and beneficial owners of
the Pledged Securities; and
WHEREAS, to secure their now existing and hereafter arising
absolute and contingent obligations under this Pledge Agreement, the Indenture
and the Notes (the "Obligations"), the Pledgors have agreed to (i) pledge to the
Collateral Agent for its benefit and the ratable benefit of the Holders of
Notes, and grant to the Collateral Agent for the benefit of the Collateral
Agent, the Trustee and the ratable benefit of the Holders of Notes, a security
interest in the Pledged Securities and the Pledge Account (as defined below) and
(ii) execute and deliver this Pledge Agreement in order to secure the payment
and performance by the Pledgors of all such Obligations.
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<PAGE> 3
AGREEMENT
NOW, THEREFORE, in order to induce the Holders of Notes to
purchase the Notes, and for good and valuable consideration, the receipt of
which is hereby acknowledged, the Pledgors hereby agree with the Collateral
Agent for its benefit, for the benefit of the Trustee and for the ratable
benefit of the Holders of Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. The Pledgors
hereby pledge to the Collateral Agent, and grant to the Collateral Agent, a
continuing first priority security interest in and to (a) all of the Pledgors'
right, title and interest in the Pledged Securities, the Pledge Account and all
money delivered to the Collateral Agent by the Pledgors for deposit in the
Pledge Account, (b) the certificates or other evidence of ownership representing
the Pledged Securities and/or the Pledge Account and (c) except as otherwise
provided herein, all proceeds of any of the foregoing, including, without
limitation, all dividends, interest, principal payments, cash, options,
warrants, rights, instruments, subscriptions and other property or proceeds from
time to time received, receivable or otherwise distributed or distributable in
respect of or in exchange for any or all of the Pledged Securities
(collectively, the "Collateral").
SECTION 2. Security for Obligations. This Pledge Agreement
secures the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all Obligations.
SECTION 3. Delivery of Collateral; Pledge Account; Interest;
Substitution of Collateral.
3.1 (a) All money included in the Collateral shall be
delivered to and held by the Collateral Agent pursuant hereto.
(b) All certificated securities included in the Collateral
shall either be: (i) delivered to and held by the Collateral Agent and
registered in the name of the Collateral Agent or, if requested by the
Collateral Agent, registered to bearer or in the name of the Collateral
Agent's nominee, or (ii) with the consent of the Collateral Agent,
delivered to and held by a clearing corporation, a custodian or a
nominee of either which is subject to the control of such clearing
corporation with which the Collateral Agent (or its nominee) maintains
an account (each of the foregoing, an "Approved Depository"), in bearer
form, indorsed in blank or registered in the name of such Approved
Depository, and in each of the foregoing cases in this clause (ii)
credited to an account in the name of the Collateral Agent (or its
nominee) and, as applicable, subtracted from the account(s) of the
applicable Pledgor(s) maintained with such Approved Depository.
(c) All instruments representing or evidencing any portion
of the Collateral shall be delivered to and held by the Collateral
Agent pursuant hereto and shall be duly
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<PAGE> 4
indorsed in blank or to the order of the Collateral Agent, its nominee
or bearer, as the Collateral Agent may request.
(d) All Government Securities included in the
Collateral shall be registered in the name of the Collateral Agent on
the records of the Federal Reserve Bank of New York. All other
uncertificated securities, if any, included in the Collateral shall be
registered in the name of the Collateral Agent, its nominee or an
Approved Depositary on the books of the issuer of such uncertificated
securities.
3.2 Concurrently with the execution and delivery hereof, the
Collateral Agent shall establish an account for the deposit of the Pledged
Securities (the "Pledge Account") at its office at 101 Barclay Street, New York,
New York 10286. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property accepted by the Collateral Agent pursuant
to this Pledge Agreement shall be held in the Pledge Account for the benefit of
the Collateral Agent and the ratable benefit of the Holders of Notes.
3.3 All interest earned on any Collateral shall be retained in
the Pledge Account (or reinvested, as the case may be), pending disbursement
pursuant to the terms hereof.
3.4 At any time while the Pledge Agreement is in force, the
Pledgors may substitute Marketable Securities (as defined in the Indenture) for
the Government Securities (as defined in the Indenture) originally pledged as
collateral hereunder; provided, however that the Marketable Securities so
substituted must have a fair market value (as defined in the Indenture)
(measured at the date of substitution), in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgors, at
least equal to 125.0% of the amount of any of the first six scheduled interest
payments on the Notes that are unpaid (or the pro rata portion of such interest
payments equal to the percentage of such interest payments to be secured by such
Marketable Securities) as of the date such Marketable Securities are proposed to
be substituted as security hereunder. Concurrently with such substitution, each
of the Pledgors shall deliver to the Collateral Agent a certificate signed by
the general partner or an executive officer, as applicable, of such Pledgor
reaffirming the representations and warranties set forth in Sections 5(1)
through (7) hereof, and an opinion of counsel stating that the Collateral Agent
has a perfected lien in such Marketable Securities. The Collateral Agent hereby
confirms such pledge and security interest (whether of Collateral now owned or
hereafter acquired) to the Trustee and the Holders of the Notes.
3.5 Pending disbursement of funds from the Pledge Account as
contemplated hereby, the Collateral Agent shall, if requested in writing by the
Pledgors (such request to specify the particular investment), reinvest any
interest payments received in respect of the Pledged Securities in Marketable
Securities; provided that any amounts so reinvested and the securities acquired
thereby must be (a) held as Collateral in the Pledge Account, (b)
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<PAGE> 5
subject to the first priority perfected security interest of the Collateral
Agent created hereby and (c) otherwise subject to the terms hereof.
SECTION 4. Disbursements.
4.1 Upon the date when each of the first six scheduled
interest payments is due on the Notes and without notice from Pledgors, the
Collateral Agent shall transfer to the Trustee, in its capacity as Paying Agent
under the Indenture, cash from the Pledge Account to provide for payment in full
of such scheduled interest payment on the Notes and the Paying Agent shall apply
the proceeds thereof to such interest payment. If one Business Day prior to a
scheduled interest payment date, the available cash in the Pledge Account is
insufficient, and will be insufficient on the date of payment, to make a
scheduled interest payment on the Notes, the Collateral Agent shall liquidate
such portion of the Pledged Securities necessary to generate net cash proceeds
in an amount equal to such scheduled interest payment (liquidiating those
securities with the earliest maturity dates first). The Collateral Agent and the
Trustee shall take any action necessary to provide for the payment of such
interest payment on the Notes directly to the Holders of Notes from proceeds of
the Pledged Securities in the Pledge Account.
4.2 If either of the Pledgors makes any interest payment on
the Notes or portion of such an interest payment for which the Pledged
Securities are collateral from a source of funds other than the Collateral
("Pledgor Funds"), the Pledgors may, after payment in full of such interest
payment (whether from Pledgor Funds alone or Pledgor Funds and Collateral),
deliver to the Collateral Agent written acknowledgement from the Paying Agent of
its receipt of such funds, together with a written request for release of a
portion of collateral not in excess of the Pledgor Funds so paid, whereupon the
Collateral Agent is hereby authorized and directed to release to the Pledgors or
to the order of the Pledgors an amount of funds and/or Pledged Securities from
the Pledge Account less than or equal to the amount of Pledgor Funds so
expended. Upon receipt of such a written request from the Pledgors and any other
documentation reasonably satisfactory to the Collateral Agent to substantiate
such expenditure of Pledgor Funds by the Pledgors (including the certificate
described in the following sentence), the Collateral Agent shall take any
action necessary to enable it to pay over to the Pledgors the requested amount.
Concurrently with any release of funds to the Pledgors pursuant to this Section
4.2, the Pledgors shall deliver to each of the Collateral Agent and the Trustee
a certificate signed by an Executive Officer (as defined in the Indenture) of
each of the Pledgors stating that such use of Pledgor Funds has been duly
authorized by all necessary action by each of the Pledgors, and does not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation of IPCC or the partnership
agreement of ICP-IV or of any agreement, judgment, injunction, order, decree or
other instrument binding upon either of the Pledgors or result in the creation
or imposition of any Lien on any assets of either of the Pledgors.
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<PAGE> 6
4.3 If at any time the amount of Pledged Securities exceeds
100% of the amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Pledgors, to provide for payment
in full of the first six scheduled interest payments due on the Notes (or, in
the event an interest payment or payments have been made, an amount sufficient
to provide for payment in full of any interest payments then remaining, up to
and including the sixth scheduled interest payment), the Pledgors may deliver
such opinion to the Collateral Agent and the Collateral Agent is hereby
authorized and directed to release any such overfunding to ICP-IV. Upon receipt
of a request from the Pledgors and a copy of such opinion, the Collateral Agent
shall pay over to the Pledgors any such overfunded amount.
4.4 Upon payment in full of the first six scheduled interest
payments on the Notes, the security interest in the Collateral evidenced by this
Pledge Agreement shall terminate and be of no further force and effect.
Furthermore, upon the release of any Collateral from the Pledge Account in
accordance with the terms of this Pledge Agreement, whether upon release of
Collateral to Holders as payment of interest, to either of the Pledgors or
otherwise, the security interest evidenced by this Pledge Agreement in the
Collateral so released will terminate and be of no further force and effect.
SECTION 5. Representations and Warranties. Each of the
Pledgors hereby represents and warrants that:
(1) The execution, delivery and performance by the
Pledgors of this Pledge Agreement are within each of the Pledgors'
corporate and/or limited partnership powers, as applicable, have been
duly authorized by all necessary corporate and/or partnership action,
as applicable, and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of
incorporation of IPCC or the partnership agreement of ICP-IV or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon either of the Pledgors or result in the creation or
imposition of any Lien on any assets of either of the Pledgors, except
for the security interests granted under this Pledge Agreement.
(2) The Pledgors are the legal and beneficial owners
of the Collateral, free and clear of any Lien or claims of any person
or entity (except for the security interests granted under this Pledge
Agreement). In the 21 days preceding the date hereof, neither of the
Pledgors has agreed to grant any Lien on the Collateral to any Person
other than the Collateral Agent. No financing statement covering the
Pledged Securities is on file in any public office other than the
financing statements filed pursuant to this Pledge Agreement.
(3) This Pledge Agreement has been duly executed and
delivered by each of the Pledgors and constitutes a valid and binding
obligation of each of the Pledgors, enforceable
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<PAGE> 7
against each of the Pledgors in accordance with its terms, except as
such enforceability may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or general principles of
equity and commercial reasonableness.
(4) Upon the delivery to the Collateral Agent of the
certificates representing the Pledged Securities and any filing of
financial statements required by the Uniform Commercial Code (the
"UCC"), the pledge of the Collateral pursuant to this Pledge Agreement
creates a valid and perfected first priority security interest in and
to the Collateral, securing the payment of the Obligations for the
benefit of the Collateral Agent and the ratable benefit of the Holders
of Notes, enforceable as such against all creditors of the Pledgors and
any persons purporting to purchase any of the Collateral from the
Pledgors other than as permitted by the Indenture.
(5) No consent of any other Person and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either
(a) for the pledge by the Pledgors of the Collateral pursuant to this
Pledge Agreement or for the execution, delivery or performance of this
Pledge Agreement by the Pledgors (except for any filings necessary to
perfect Liens on the Collateral) or (b) for the exercise by the
Collateral Agent of the rights provided for in this Pledge Agreement or
the remedies in respect of the Collateral pursuant to this Pledge
Agreement.
(6) No litigation, proceeding or, to the knowledge of
Pledgors, investigation of or before any arbitrator or governmental
authority is pending or, to the knowledge of either of the Pledgors,
threatened by or against the Pledgors with respect to this Pledge
Agreement or any of the transactions contemplated hereby, except as
disclosed in the Offering Memorandum.
(7) The pledge of the Collateral pursuant to this
Pledge Agreement is not prohibited by any applicable law or
governmental regulation, release, interpretation or opinion of the
Board of Governors of the Federal Reserve System or other regulatory
agency (including, without limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System).
SECTION 6. Further Assurance. Each of the Pledgors shall,
promptly upon request by the Collateral Agent or the Trustee, execute and
deliver or cause to be executed and delivered, or use its best efforts to
procure, all stock powers, proxies, assignments, instruments and other
documents, all in form and substance satisfactory to the Collateral Agent or the
Trustee, as applicable, deliver any instruments to such Collateral Agent or
Trustee and take any other actions that are necessary or, in the
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<PAGE> 8
reasonable opinion of such Collateral Agent or Trustee, desirable to perfect,
continue the perfection of, or protect the first priority of the Collateral
Agent's security interest in and to the Collateral, to protect the Collateral
against the rights, claims, or interests of third persons or to effect the
purposes of this Pledge Agreement. The Pledgors also hereby authorize the
Collateral Agent to file any financing or continuation statements with respect
to, and to deliver appropriate notices of the transfer and grant of a security
interest in, the Collateral without the signature of the Pledgors (to the extent
permitted by applicable law). The Pledgors shall pay all costs incurred by the
Collateral Agent or either of them in connection with any of the foregoing.
SECTION 7. Covenants. Each of the Pledgors covenants and
agrees with the Collateral Agent, the Trustee and the Holders of Notes from and
after the date of this Pledge Agreement until the earlier of payment in full in
cash of (A) each of the first six scheduled interest payments due on the Notes
under the terms of the Indenture or (B) all obligations due and owing under the
Indenture and the Notes in the event such obligations become due and payable
prior to the payment of the first six scheduled interest payments on the Notes:
(1) Each of the Pledgors agrees that it will not (a) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (b) create or permit to exist any Lien upon or with respect to any
of the Collateral (except for the lien created pursuant to this Pledge
Agreement) and at all times will be the sole beneficial owners of the
Collateral.
(2) Each of the Pledgors agrees that it will not (a) enter
into any agreement or understanding that purports to or may restrict or inhibit
the Collateral Agent's rights or remedies hereunder, including, without
limitation, the Collateral Agent's right to sell or otherwise dispose of the
Collateral or (b) fail to pay or discharge any tax, assessment or levy of any
nature not later than five days prior to the date of any proposed sale under any
judgement, writ or warrant of attachment with regard to the Collateral.
SECTION 8. Power of Attorney. In addition to all of the powers
granted to The Bank of New York as Trustee pursuant to Article 6 of the
Indenture, the Pledgors hereby appoint and constitute The Bank of New York, in
its capacity as Collateral Agent, as each of the Pledgors' attorney-in-fact to
exercise to the fullest extent permitted by law all of the following powers upon
and at any time after the occurrence and during the continuance of an Event of
Default: (a) collection of proceeds of any Collateral; (b) conveyance of any
item of Collateral to any purchaser thereof; (c) giving of any notices or
recording of any Liens under Section 6 hereof; (d) making of any payments or
taking any acts under Section 9 hereof and (e) paying or discharging taxes or
Liens levied or placed upon the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by the Collateral
Agent in its sole discretion, and such payments made by the Collateral Agent to
become the Obligations of
-8-
<PAGE> 9
the Pledgors to the Collateral Agent, due and payable immediately upon demand.
The Collateral Agent's authority hereunder shall include, without limitation,
the authority to endorse and negotiate any checks or instruments representing
proceeds of Collateral in the name of the Pledgors, execute and give receipt for
any certificate of ownership or any document constituting Collateral, transfer
title to any item of Collateral, sign each of the Pledgors' names on all
financing statements (to the extent permitted by applicable law) or any other
documents deemed necessary or appropriate by the Collateral Agent to preserve,
protect or perfect the security interest in the Collateral and to file the same,
prepare, file and sign each of the Pledgors' names on any notice of Lien, and to
take any other actions arising from or incident to the powers granted to the
Collateral Agent in this Pledge Agreement. This power of attorney is coupled
with an interest and is irrevocable by the Pledgors.
SECTION 9. Collateral Agent May Perform. If either of the
Pledgors fails to perform any agreement contained herein in accordance with the
terms hereof, the Collateral Agent may itself perform, or cause performance of,
but shall have no liability whatsoever for its failure to so perform or cause
performance of, such agreement, and the expenses of the Collateral Agent and its
agents and attorneys incurred in connection therewith shall be payable by the
Pledgors under Section 13 hereof.
SECTION 10. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Collateral Agent hereunder are being granted in
order to preserve and protect the Collateral Agent's and the Holders' of Notes
security interest in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Collateral Agent in
connection therewith other than those imposed under applicable law. Except as
provided by applicable law, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Collateral Agent accords similar property in similar situations,
it being understood that the Collateral Agent shall not have any responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral,
whether or not the Collateral Agent has or is deemed to have knowledge of such
matters or (b) taking any necessary steps to preserve rights against any parties
with respect to any Collateral. The Collateral Agent shall have no liability
whatsoever for any fee, tax, loss, expense or other charge incurred with respect
to any investment, reinvestment or liquidation of an investment hereunder. To
the extent applicable, the Collateral Agent shall have the same protections as
the Trustee under the Indenture.
SECTION 11. Indemnity. The Pledgors shall indemnify, hold
harmless and defend the Collateral Agent and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations and
liabilities, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Collateral Agent's performance under
this
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<PAGE> 10
Pledge Agreement, except to the extent that (i) with respect to Section 4.1
hereof, such claim, action, obligation or liability is directly attributable to
the bad faith, negligence or willful misconduct of such indemnified person and
(ii) otherwise, with respect to this Pledge Agreement, such claim, action,
obligation or liability is directly attributable to the bad faith, gross
negligence or willful misconduct of such indemnified person.
SECTION 12. Remedies Upon Event of Default.
If an Event of Default under the Indenture shall have occurred
and be continuing:
(1) Upon the acceleration of the Notes in accordance
with the terms of the Indenture, the Collateral Agent shall, at the
Trustee's direction, liquidate the Pledged Securities and pay the net
cash proceeds thereof, together with any amounts in the Pledge Account,
to the Paying Agent for application to the principal, interest and
Liquidated Damages, if any, on the Notes to the date of such
acceleration.
(2) The Collateral Agent, the Trustee and the Holders
of Notes shall have, in addition to all other rights given by law or by
this Pledge Agreement or the Indenture, all of the rights and remedies
with respect to the Collateral of a secured party under the UCC in
effect in the State of New York at that time. In addition, with respect
to any Collateral that shall then be in or shall thereafter come into
the possession or custody of the Collateral Agent, the Collateral Agent
may sell or cause the same to be sold at any broker's board or at a
public or private sale, in one or more sales or lots, at such price or
prices as the Collateral Agent may deem best, for cash or on credit or
for future delivery, without assumption of any credit risk. The
purchaser of any or all Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever created by or through either of the Pledgors. Unless any of
the Collateral threatens, in the reasonable judgment of the Collateral
Agent, to decline speedily in value or is or becomes of a type sold on
a recognized market, the Collateral Agent shall give the Pledgors
reasonable notice of the time and place of any public sale thereof, or
of the time after which any private sale or other intended disposition
is to be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies,
commercial finance companies or other financial institutions disposing
of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be
met if such notice is mailed to the Pledgors as provided in Section
15.1 herein, at least fifteen (15) days before the time of the sale or
disposition. The Collateral Agent or any Holder of Notes may, in its
own name or in the name of a designee or nominee, buy any of the
Collateral at any public sale and, if permitted by applicable law, at
any private sale. All expenses (including
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<PAGE> 11
court costs and reasonable attorneys' fees, expenses and disbursements)
of, or incident to, the enforcement of any of the provisions hereof
shall be recoverable from the proceeds of the sale or other disposition
of the Collateral.
(3) Each of the Pledgors further agree to use its
best efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 12 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgors further agree that a breach of any of the covenants contained
in this Section 12 will cause irreparable injury to the Collateral
Agent, the Trustee and the Holders of Notes, that the Collateral Agent,
the Trustee and the Holders of Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this Section 12 shall be specifically enforceable
against each of the Pledgors, jointly and severally, and each of the
Pledgors hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that no Event of Default has occurred.
SECTION 13. Expenses. The Pledgors shall upon demand pay to
the Collateral Agent the agreed upon fees for all services rendered hereunder
and the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Collateral Agent that the Collateral Agent
may incur in connection with (a) the administration of this Pledge Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Collateral Agent and the Holders of Notes hereunder or (d)
the failure by either of the Pledgors to perform or observe any of the
provisions hereof.
SECTION 14. Security Interest Absolute. All rights of the
Collateral Agent and the Holders of Notes and security interests hereunder, and
all obligations of each of the Pledgors hereunder, shall be absolute and
unconditional irrespective of:
(1) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(2) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of or any consent to any departure from
the Indenture;
(3) any exchange, surrender, release or
non-perfection of any Liens on any other collateral for all or any of
the Obligations; or
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<PAGE> 12
(4) to the extent permitted by applicable law, any
other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Pledgors in respect of the Obligations or of
this Pledge Agreement.
SECTION 15. Miscellaneous Provisions.
15.1 Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder (collectively,
"Notices") shall be in the form and manner, and delivered to each of the parties
hereto at their respective addresses, as set forth or provided for in Section
10.02 of the Indenture. If to the Collateral Agent, such Notices shall be sent
in care of the Trustee in the manner and at the address set forth in such
Section .
15.2 No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of either of the Pledgors or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Pledge Agreement.
15.3 Severability. The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
15.4 Headings. The headings in this Pledge Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
15.5 Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
15.6 Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of Notes, any benefit or
any legal or equitable right, remedy or claim under this Pledge Agreement.
15.7 Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Pledge Agreement and any consent to any departure by
the Pledgors from any provision of this Pledge Agreement shall be effective only
if made or duly given in compliance with all of the terms and provisions of the
Indenture, and none of the Collateral Agent, the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default or in any breach of
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<PAGE> 13
any of the terms and conditions hereof. Failure of the Collateral Agent or any
Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Collateral Agent, the Trustee or any Holder of Notes of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy that the Collateral Agent or such Holder of Notes would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
15.8 Interpretation of Agreement. All terms not defined herein
or in the Indenture shall have the meaning set forth in the applicable Uniform
Commercial Code, except where the context otherwise requires. To the extent a
term or provision of this Pledge Agreement conflicts with the Indenture, the
Indenture shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Pledge Agreement shall not be relevant to determine the meaning of
this Pledge Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
15.9 Continuing Security Interest; Termination.
(1) This Pledge Agreement shall create a continuing
security interest in and to the Collateral and shall, unless otherwise
provided in the Indenture or in this Pledge Agreement, remain in full
force and effect until the earlier of payment in full in cash of (A)
each of the first six scheduled interest payments due on the Notes
under the terms of the Indenture or (B) all obligations due and owing
under the Indenture and the Notes in the event such obligations become
payable prior to the payment of the first six scheduled interest
payments on the Notes. This Pledge Agreement shall be binding upon each
of the Pledgors, its successors and assigns, and shall inure, together
with the rights and remedies of the Collateral Agent and the Trustee
hereunder, to the benefit of the Collateral Agent, the Trustee, the
Holders of Notes and their respective successors, transferees and
assigns.
(2) Subject to the provisions of Section 15.10
hereof, this Pledge Agreement shall terminate upon the earlier of
payment in full in cash of (A) each of the first six scheduled interest
payments due on the Notes under the terms of the Indenture or (B) all
obligations due and owing under the Indenture and the Notes in the
event such obligations become payable prior to the payment of the first
six scheduled interest payments on the Notes. At such time, the
Collateral Agent shall, at the written request of the Pledgors,
reassign and redeliver to the Pledgors all of the Collateral hereunder
that has not been sold, disposed of, retained or applied by
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<PAGE> 14
the Collateral Agent in accordance with the terms of this Pledge
Agreement and the Indenture. Such reassignment and redelivery shall be
without warranty (either express or implied) by or recourse to the
Collateral Agent, except as to the absence of any prior assignments by
the Collateral Agent of its interest in the Collateral, and shall be at
the expense of the Pledgors.
15.10 Survival of Provisions. All representations, warranties
and covenants of each of the Pledgors contained herein shall survive the
execution and delivery of this Pledge Agreement, and shall terminate only upon
the termination of this Pledge Agreement, provided, however, that the provisions
of Sections 11 and 13 hereof shall survive the termination of this Pledge
Agreement.
15.11 Waivers. Each of the Pledgors waives presentment and
demand for payment of any of the Obligations, protest and notice of dishonor or
default with respect to any of the Obligations, and all other notices to which
either of the Pledgors might otherwise be entitled, except as otherwise
expressly provided herein or in the Indenture.
15.12 Authority of the Collateral Agent.
(1) The Collateral Agent shall have and be entitled
to exercise all powers hereunder that are specifically granted to the
Collateral Agent by the terms hereof, together with such powers as are
reasonably incident thereto. The Collateral Agent may perform any of
its duties hereunder or in connection with the Collateral by or through
agents or employees and shall be entitled to retain counsel of its
selection and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Collateral Agent, any director, officer,
employee, attorney or agent of the Collateral Agent nor the Holders of
Notes shall be liable to either of the Pledgors for any action taken or
omitted to be taken by it or them hereunder, except for its or their
own bad faith, gross negligence or willful misconduct, nor shall the
Collateral Agent be responsible for the validity, effectiveness or
sufficiency hereof or of any document or security furnished pursuant
hereto. The Collateral Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication,
instrument or document believed by it or them to be genuine and correct
and to have been signed or sent by the proper person or persons.
(2) The Pledgors acknowledge that the rights and
responsibilities of the Collateral Agent under this Pledge Agreement
with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Collateral Agent and the Holders of Notes, be governed by the Indenture
and by such other agreements with respect thereto as may exist from
time
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<PAGE> 15
to time among them, but, as between the Collateral Agent and the
Pledgors, the Collateral Agent shall be conclusively presumed to be
acting as agent for the Holders of Notes with full and valid authority
so to act or refrain from acting, and the Pledgors shall not be
obligated or entitled to make any inquiry respecting such authority.
15.13 Limitation by Law. All rights, remedies and powers
provided herein may be exercised only to the extent that they will not render
this Pledge Agreement not entitled to be recorded, registered or filed under
provisions of any applicable law.
15.14 Final Expression. This Pledge Agreement, together with
any other agreement executed in connection herewith, is intended by the parties
as a final expression of this Pledge Agreement and is intended as a complete and
exclusive statement of the terms and conditions thereof.
15.15 Rights of Holders of Notes. No Holder of Notes shall
have any independent rights hereunder other than those rights granted to
individual Holders of Notes pursuant to Section 6.06 of the Indenture; provided
that nothing in this subsection shall limit any rights granted to the Collateral
Agent under the Notes or the Indenture.
15.16 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES.
(1) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THE PLEDGORS, THE COLLATERAL AGENT, THE TRUSTEE AND THE HOLDERS OF NOTES IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
(2) EACH OF THE PLEDGORS AGREES THAT THE COLLATERAL AGENT
SHALL, IN ITS CAPACITY AS COLLATERAL AGENT OR IN THE NAME AND ON BEHALF OF ANY
HOLDER OF NOTES, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST EITHER OF THE PLEDGORS OR THEIR RESPECTIVE PROPERTY IN A COURT
IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM
JURISDICTION OVER THE PLEDGOR OR ITS PROPERTY, AS THE CASE MAY BE) TO ENABLE THE
COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. EACH OF THE PLEDGORS
AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSS CLAIMS IN ANY
PROCEEDING BROUGHT BY THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY OR TO
ENFORCE A JUDGEMENT OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT,
EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSS CLAIMS THAT, IF NOT ASSERTED IN
ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. EACH OF THE
PLEDGORS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE
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<PAGE> 16
COLLATERAL AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(3) THE PLEDGORS AND THE COLLATERAL AGENT EACH WAIVE ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
PLEDGE AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT SHALL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
(4) EACH OF THE PLEDGORS AGREES THAT NEITHER THE COLLATERAL
AGENT NOR ANY HOLDER OF NOTES SHALL HAVE ANY LIABILITY TO EITHER OF THE PLEDGORS
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY EITHER
OF THE PLEDGORS IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO,
THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE COLLATERAL AGENT OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE,
THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
COLLATERAL AGENT OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD
FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(5) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT, EACH OF THE PLEDGORS WAIVES ALL
RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE COLLATERAL
AGENT OR ANY HOLDER OF NOTES OF ITS RIGHTS DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH
OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PLEDGORS WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY HOLDER OF NOTES IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH
OR LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE
ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT OR
ANY HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT
OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN EITHER OR BOTH OF THE PLEDGORS ON THE
ONE HAND AND THE COLLATERAL AGENT AND/OR THE HOLDERS OF NOTES ON THE OTHER HAND.
[signature page follows]
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<PAGE> 17
IN WITNESS WHEREOF, the Pledgors, the Collateral Agent and the
Trustee have each caused this Pledge Agreement to be duly executed and delivered
as of the date first above written.
PLEDGORS:
INTERMEDIA CAPITAL PARTNERS IV, L.P.,
a California limited partnership
By: InterMedia Capital Management IV, L.P.,
a California limited partnership,
as general partner of InterMedia
Capital Partners IV, L.P.
By: /s/ Leo J. Hindery, Jr.
------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA PARTNERS IV CAPITAL CORP.,
a Delaware corporation
By: /s/ Leo J. Hindery, Jr.
---------------------------------------------
Leo J. Hindery, Jr.,
President
TRUSTEE:
THE BANK OF NEW YORK,
as Trustee
By: /s/ Vivian Georges
-----------------------------
Vivian Georges,
Assistant Vice President
COLLATERAL AGENT:
THE BANK OF NEW YORK,
as Collateral Agent
By: /s/ Vivian Georges
-----------------------------
Vivian Georges,
Assistant Vice President
<PAGE> 1
EXHIBIT 10.1
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of July 30, 1996
among
InterMedia Partners IV, L.P.
and
The Bank of New York,
as Administrative Agent
and
The Bank of New York
NationsBank of Texas, N.A.
Toronto Dominion (Texas), Inc.,
as Arranging Agents
and
NationsBank of Texas, N.A.
Toronto Dominion (Texas), Inc.,
as Syndication Agents
and
The Financial Institution Parties Hereto.
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................. 2
Section 1.01. Definitions................................................. 2
ARTICLE II THE REVOLVING CREDIT AND TERM LOANS......................... 24
Section 2.01. The Revolving Credit and Term Loans......................... 24
Section 2.02. Procedure for Borrowings.................................... 24
Section 2.03. Revolving Credit Notes and the Term
Notes....................................................... 26
Section 2.04. Revolving Credit Commitment Fee............................. 26
Section 2.05. Other Fees.................................................. 27
Section 2.06. Optional Cancellation or Reduction of
Total Revolving Credit Commitment and
Term Loans.................................................. 27
Section 2.07. Mandatory Reductions of the Total
Revolving Credit Commitment................................. 28
Section 2.08. Mandatory and Optional Prepayment........................... 29
ARTICLE III [RESERVED].................................................. 31
ARTICLE IV INTEREST.................................................... 31
Section 4.01. Interest on ABR Loans....................................... 31
Section 4.02. Interest on Eurodollar Loans................................ 31
Section 4.03. Procedure for Interest Determination........................ 32
Section 4.04. Post Default Interest....................................... 33
Section 4.05. Maximum Interest Rate....................................... 34
ARTICLE V DISBURSEMENT AND PAYMENT.................................... 34
Section 5.01. Pro Rata Treatment.......................................... 34
Section 5.02. Method of Payment........................................... 35
Section 5.03. Compensation for Losses..................................... 35
Section 5.04. Taxes, Reserves and Additional Costs........................ 36
Section 5.05. Unavailability.............................................. 39
ARTICLE VI REPRESENTATIONS AND WARRANTIES.............................. 40
Section 6.01. Representations and Warranties.............................. 40
ARTICLE VII CONDITIONS OF LENDING....................................... 52
Section 7.01. Conditions to the Making of the Initial
Loans....................................................... 52
</TABLE>
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Section 7.02. Conditions to the Making of Each Loan....................... 56
ARTICLE VIII COVENANTS................................................... 56
Section 8.01. Affirmative Covenants....................................... 56
Section 8.02. Negative Covenants.......................................... 63
ARTICLE IX EVENTS OF DEFAULT........................................... 72
Section 9.01. Events of Default........................................... 72
ARTICLE X THE AGENT AND THE LENDERS................................... 76
Section 10.01. Appointment, Powers and Immunities.......................... 76
Section 10.02. Sharing of Payments and Expenses............................ 77
Section 10.03. The Agent's Liabilities..................................... 78
Section 10.04. Defaults and Events of Default.............................. 78
Section 10.05. Rights as a Lender.......................................... 78
Section 10.06. Lender Credit Decision...................................... 79
Section 10.07. Indemnification............................................. 79
Section 10.08. Failure to Act.............................................. 80
Section 10.09. Resignation of Agent........................................ 80
Section 10.10. Withholding Tax Exemption................................... 81
Section 10.11. Duties and Obligations of Arranging
Agents and Co-Agents........................................ 81
ARTICLE XI CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL....................................................... 82
Section 11.01. Consent to Jurisdiction..................................... 82
Section 11.02. Waiver of Jury Trial........................................ 82
ARTICLE XII MISCELLANEOUS............................................... 83
Section 12.01. APPLICABLE LAW.............................................. 83
Section 12.02. Set-off..................................................... 83
Section 12.03. Expenses; Indemnification................................... 83
Section 12.04. Amendments.................................................. 84
Section 12.05. Cumulative Rights and No Waiver............................. 85
Section 12.06. Notices..................................................... 85
Section 12.07. Separability................................................ 86
Section 12.08. Assignments and Participations.............................. 86
Section 12.09. Execution in Counterparts................................... 88
Section 12.10. Survival.................................................... 88
ARTICLE XIII LIMITED RECOURSE............................................ 88
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 13.01. Limited Recourse............................................ 88
Exhibit A Form of Revolving Credit Borrowing Notice
Exhibit B Form of Revolving Credit Note
Exhibit C Form of Term Loan Borrowing Notice
Exhibit D Form of Term Loan Note
Exhibit E Form of Interest Election
Exhibit F-1 Form of Pillsbury Madison & Sutro LLP Opinion
Exhibit F-2 Form of FCC Counsel Opinion
Exhibit F-3 Form of General Counsel Opinion
Exhibit G Form of Security and Hypothecation Agreement
Exhibit H Form of Guarantee
Exhibit I Form of Intercompany Loan Agreement
Exhibit J Form of Intercompany Note
Exhibit K Form of Letter from Maker of Intercompany Note
Schedule I Acquisition Systems
Schedule II Systems
Schedule III Acquisition Systems Agreements
Schedule IV Liens
Schedule V Adjustments for Pro Forma Effects of
Greenville/Spartanburg and Viacom Nashville
Schedule VI Deductions in the Calculation of Total
Consolidated Debt
</TABLE>
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<PAGE> 5
REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as
of July 30, 1996, among INTERMEDIA PARTNERS IV, L.P., a California limited
partnership (the "Borrower"), InterMedia Capital Partners IV, L.P., a California
limited partnership, as to certain provisions, each of the several financial
institutions identified on the signature pages hereof (each a "Lender", and
collectively the "Lenders"), The Bank of New York, NationsBank of Texas, N.A.
and The Toronto-Dominion Bank, as arranging agents (the "Arranging Agents"),
NationsBank of Texas, N.A. and The Toronto-Dominion Bank, as syndication agents
(the "Syndication Agents") and The Bank of New York, as administrative agent
(the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lenders to
(i) lend up to $475,000,000 to the Borrower on a revolving basis and (ii) make a
term loan in the principal amount of $220,000,000 to enable the Borrower to
refinance certain indebtedness of its subsidiaries, finance the acquisition of
IP West Tennessee, the Greenville/Spartanburg Cable System, the Viacom Nashville
System and RMG (all as hereinafter defined) and for other general partnership
purposes; and
WHEREAS, the Guarantors (as hereinafter defined)
will jointly and severally guarantee the obligations of the
Borrower hereunder; and
WHEREAS, the Borrower is willing to secure all of
its obligations hereunder by pledging to the Lenders the collateral described in
the Hypothecation Agreements (as hereinafter defined) executed by the Borrower
and the Restricted Subsidiaries; and
WHEREAS, the partners of the Borrower are willing
to secure all of the Borrower's obligations hereunder by hypothecating and
granting a security interest in favor of the Lenders in their respective
partnership interests in the Borrower;
<PAGE> 6
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
(a) Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, and all determinations with respect to accounting matters shall be
made, and all financial statements and certificates and reports as to financial
matters required to be delivered hereunder shall be prepared, in accordance with
GAAP as of the date of determination or preparation; provided, however, that in
the event that application of GAAP, as existing on the date of determination or
preparation, would produce inconsistencies with prior statements, certificates
and/or reports, an explanation of such inconsistencies shall be included with
the current statements, certificates and/or reports being delivered.
(b) Other Terms. The following terms shall have the
meanings ascribed to them below or in the Sections of this Agreement indicated
below and include the plural as well as the singular:
"ABR Loans" has the meaning ascribed to such term
in Section 4.01.
"ABR Revolving Loans" means Revolving Credit Loans
or portions thereof which bear interest at the rate and in the manner set forth
in Section 4.01.
"ABR Term Loans" means Term Loans or portions
thereof which bear interest at the rate and in the manner
set forth in Section 4.01.
"Acquisition Systems" means each of the cable
television systems listed on Schedule I; provided, that in
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connection with any Borrowing made to finance (in whole or in part) the
acquisition of a cable television system, the term "Acquisition Systems" shall
include such cable television system for purposes of making the representations
and warranties contained in Article VI in connection with such Borrowing.
"Acquisition Systems Agreements" means each of the
agreements set forth on Schedule III pursuant to which the Borrower or a
Restricted Subsidiary will acquire an Acquisition System listed on Schedule I.
"Administration Agreements" means (i) the
Administration Agreement between IMI and IP-Southeast dated as of July 30, 1996,
(ii) the Administration Agreement between IMI and IP Tennessee dated as of
January 19, 1995, (iii) the Amended and Restated Administration Agreement, dated
as of December 27, 1990 between IMI and IP West Tennessee, and (iv) the
Administration Agreement between IMI, the Borrower and IP-IV Capital dated as of
March 19, 1996.
"Adverse Environmental Condition" means the
occurrence of any of the events referred to in the
definition of Environmental Claim.
"Affiliate" of any Person means any Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such other Person. For purposes
of this definition, "control" of a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of equity interests, by contract or
otherwise.
"Annualized Cash Flow" as of any date, means an
amount equal to four times Cash Flow for the most recently completed fiscal
quarter; provided, however, that for the period through December 31, 1996,
Annualized Cash Flow shall mean an amount equal to four times Cash Flow for the
later of (i) the most recent fiscal quarter for which financial statements have
been furnished to the Agent pursuant to Section 8.01(a)(i) or (a)(ii) and (ii)
the most recently
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<PAGE> 8
completed three months for which the Agent has received an unaudited income
statement pursuant to Section 8.01(a)(vii).
"Applicable Margin" means a margin of 2.375% in
respect of Eurodollar Term Loans and 1.125% in respect of ABR Term Loans, and in
respect of ABR Revolving Loans and Eurodollar Revolving Loans, a margin based on
the Senior Leverage Ratio (after giving effect to any contemporaneous borrowings
or repayments) as follows:
<TABLE>
<CAPTION>
Applicable Margin
-----------------
Eurodollar Revolving ABR Revolving
Senior Leverage Ratio Loans Loans
--------------------- -------------------- -------------
<S> <C> <C>
Greater than 5.50x 1.750% 0.500%
Greater than 5.25x and less
than or equal to 5.50x 1.625% 0.375%
Greater than 5.00x and less
than or equal to 5.25x 1.500% 0.250%
Greater than 4.75x and less
than or equal to 5.00x 1.375% 0.125%
Greater than 4.50x and less
than or equal to 4.75x 1.250% 0.000%
Greater than 4.00x and less
than or equal to 4.50x 1.000% 0.000%
Greater than 3.50x and less
than or equal to 4.00x 0.875% 0.000%
Less than or equal to 3.50x 0.750% 0.000%
</TABLE>
; provided, however, that any change in the Applicable Margin shall be
effective, with respect to all Revolving Credit Loans, commencing at the earlier
of (i) a change in the amount of Loans outstanding hereunder, and (ii) one
business day after the date upon which the financial information and the
certificate of a Responsible Person referred to in Section 8.01(a)(i) was
delivered to the Agent.
"Assignee" has the meaning ascribed to such term
in Section 12.08(c).
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<PAGE> 9
"AVR" means AVR of Tennessee, L.P., a California
limited partnership.
"AVR Transactions" means the transactions
contemplated by that certain Purchase Agreement (the "AVR Purchase Agreement")
dated as of July 25, 1996 among RMG, IP-Southeast and AVR, including (i) the
sale by RMG and IP Southeast of their partnership interest in AVR, (ii) RMG's
distribution to TCI or any of its subsidiaries, (iii) IP Southeast's
distribution to the Borrower, (iv) the Borrower's distribution to IP-IV Capital
and (v) IP-IV Capital's distribution to its partners.
"Base Rate" means, for any day, a fluctuating
interest rate per annum as shall be in effect from time to time, which rate per
annum shall at all times be equal to the higher of (i) the rate of interest
publicly announced by the Agent from time to time at its Principal Office as its
prime commercial lending rate and (ii) the Federal Funds Rate plus 1/2%.
"B of A Loan" means the loan made pursuant to the
Loan Agreement dated as of May 8, 1996 between IP Southeast and Bank of America
NT & SA (the "B of A Loan Agreement").
"Borrowed Money" means as to any Person any
obligation of such Person to repay money borrowed, any indebtedness of such
Person evidenced by notes (other than trade debt incurred in the ordinary course
of business and payable on terms not longer than 90 days and Intercompany
Loans), debentures or similar instruments, any obligation of such Person to pay
for goods or services under a conditional sale or other title retention
agreement, any obligation of others constituting Borrowed Money secured by any
asset of such Person, whether or not such obligation is assumed by such Person,
any obligation for Borrowed Money of others guaranteed by such Person and all
Capital Lease Obligations of such Person; provided, however, Borrowed Money
shall not include (with respect to IP-IV Capital) an amount equal to the funds
held in the IP-IV Capital Escrow Account.
"Borrower Interest Expense" means at any date, the
aggregate amount of (i) all payments of interest (other than
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<PAGE> 10
payments in kind) on indebtedness for Borrowed Money of the Borrower (including
payments representing the interest portion of Capital Lease Obligations as
determined in accordance with GAAP) which were actually made during the
immediately preceding four fiscal quarters plus (ii) the amount (which may be
negative) of all payments scheduled to be made (net of scheduled payments from
counterparties) by the Borrower in respect of all Interest Rate Agreements for
such four fiscal quarters.
"Borrower Hypothecation Agreement" means the
Security and Hypothecation Agreement executed by the Borrower substantially in
the form of Exhibit G, as it may be amended or supplemented from time to time.
"Borrower Partnership Agreement" means the
InterMedia Partners IV, L.P. -- Amended and Restated Agreement of Limited
Partnership, dated as of March 19, 1996.
"Borrower's Pro Forma Annual Interest Expense"
means, as of any date, the sum (calculated without duplication) of (i) the
aggregate amount of all payments of interest (other than payments in kind) on
indebtedness for Borrowed Money of the Borrower (including payments representing
the interest portion of Capital Lease Obligations as determined in accordance
with GAAP) scheduled to be made for the next succeeding four fiscal quarters
(the first of which shall commence after the next succeeding Quarterly Date)
plus (ii) the amount (which may be negative) of all payments scheduled to be
made (net of scheduled payments from counterparties) by the Borrower in respect
of all Interest Rate Agreements for such four fiscal quarter period. For
purposes of this definition, the interest rates in effect on such date with
respect to any indebtedness for Borrowed Money or Interest Rate Agreements will,
subject to contractual, non-contingent changes in the interest rate or the
Applicable Margin, be assumed to be in effect for such indebtedness for Borrowed
Money or Interest Rate Agreement as long as it is outstanding and the principal
amount of such indebtedness for Borrowed Money outstanding as of such date
(after giving effect to any contemporaneous borrowings or repayments) will,
subject to contractual, non-contingent
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<PAGE> 11
obligations to make mandatory payments or prepayments of principal, be deemed to
be outstanding during such four fiscal quarter period.
"Borrowing" means the aggregate Revolving Credit
Loans or Term Loans made by all Revolving Credit Lenders or Term Lenders, as the
case may be, on a particular Borrowing Date.
"Borrowing Date" has the meaning ascribed to such
term in Section 2.02.
"Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law or executive order to close.
"Capital Lease Obligations" means, as to any
Person, the obligations of such Person to pay rent or other amounts under a
lease of (or other agreement containing the right to use) real or personal
property, which obligations are required to be classified and accounted for as
capital lease obligations on a balance sheet of such Person under GAAP, and for
the purposes of this Agreement the amount of such obligations shall be the
outstanding amount thereof, determined in accordance with GAAP.
"Cash Flow" means, for the most recent preceding
fiscal quarter for which the Borrower is required to have delivered a quarterly
financial report pursuant to Section 8.01(a), the sum (calculated without
duplication) of (a) net income attributable to the Borrower and the Restricted
Subsidiaries for such period, determined in accordance with GAAP, as adjusted to
exclude non-recurring gains and losses on unusual items and adjusted on a pro
forma basis to give effect to acquisitions, exchanges and dispositions of assets
of the Borrower or any of the Restricted Subsidiaries during any relevant period
as if such transactions occurred on the first day of such period and (b) to the
extent deducted in the calculation of net income in clause (a) above, accrued or
paid income taxes, interest expense, depreciation, amortization, and other
non-cash charges to income for such period (including the difference, if
positive, between the
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amount of Management Fees accrued for such period and the amount of Management
Fees actually paid for such period); provided, however, that for the period
through December 31, 1996, Cash Flow, as calculated hereunder, shall mean an
amount equal to the Cash Flow for the later of (i) the most recent fiscal
quarter for which financial statements have been furnished to the Agent pursuant
to Section 8.01(a)(i) or (a)(ii) and (ii) the most recently completed three
months for which the Agent has received an unaudited income statement pursuant
to Section 8.01(a)(vii). In addition, the calculation of Cash Flow shall be
adjusted for certain pro forma effects of the acquisition, combination and
integration of the Greenville/Spartanburg Cable System and the Viacom Nashville
System which are reasonably acceptable to the Arranging Agents in accordance
with Schedule V attached hereto.
"Closing Date" means the initial Borrowing Date.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Consolidated" means consolidated according to
GAAP.
"Contaminant" means any waste, pollutant,
hazardous substance, toxic substance, hazardous waste, special waste, petroleum
or petroleum-derived substance or waste, or any regulated constituent of any
such substance or waste, including any such substance regulated under any
Environmental Law.
"Contingent Liability" has the meaning ascribed to
such term in Section 8.02(f).
"Credit Documents" means this Agreement, the
Hypothecation Agreements, the Guarantees and the Notes, as any of them may be
amended or supplemented from time to time.
"DD Cable Holdings" means DD Cable Holdings, Inc.,
a Wisconsin corporation.
-8-
<PAGE> 13
"DD Cable Partners" means DD Cable Partners, L.P.,
a California limited partnership.
"DD Cable Transactions" means (i) the sale by DD
Cable Holdings and DD Cable Partners of their assets to Triax Midwest
Associates, L.P. as contemplated by that certain Contribution Agreement dated as
of April 5, 1996 among DD Cable Holdings, DD Cable Partners, Triax Midwest
Associates, L.P., certain subsidiaries of DD Cable Holdings, VF&A Communications
Partners II, L.P., Equity-Linked Investors-II and DLJ Investment Partners, L.P.,
as amended by that certain Letter Agreement dated May 10, 1996 (the "DD Cable
Agreement"), (ii) an equity contribution (in respect of a limited partnership
interest) made by RMG to IP II in the amount of $300,000 and (iii) the
subsequent sale by RMG of its limited partnership interest in IP II.
"Default" means any event which, with the giving
of notice or the lapse of time, or both, would constitute an
Event of Default.
"Election Date" has the meaning ascribed to such
term in Section 4.03(b)(i).
"Environmental Claim" means any claim, assertion,
demand, notice of violation, suit, administrative or judicial proceeding,
regulatory action, investigation, information request or order involving any
Hazardous Substance, Environmental Law, noise or odor pollution or any injury or
threat of injury to human health, property or the environment.
"Environmental Law" means any federal, state,
local or foreign statute or common law, regulation, order, decree, opinion or
agency requirement as now in effect or hereinafter adopted relating to (i) the
handling, use, presence, disposal or release of any Hazardous Substance or (ii)
the protection, preservation or restoration of the environment, natural
resources or human health or safety.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
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<PAGE> 14
"ERISA Group" means the Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414 of the Code or are considered to
be one employer under Section 4001 of ERISA.
"Eurodollar Base Rate" means, with respect to any
Interest Period for a Eurodollar Loan, the rate per annum determined by the
Agent to be the offered rate for dollar deposits with a term comparable to such
Interest Period that appears on the display designated as Page 3750 on the Dow
Jones Telerate Service (or such other page as may replace such page on such
service, or on another service designated by the British Bankers' Association,
for the purpose of displaying the rates at which dollar deposits are offered by
leading banks in the London interbank deposit market) at approximately 11:00
A.M., London time, on the second full Business Day preceding the first day of
such Interest Period.
"Eurodollar Lending Office" means the office of
each Lender designated on the signature pages hereof as its Eurodollar Lending
Office or such other office it may from time to time designate in writing to the
Agent as its Eurodollar Lending Office.
"Eurodollar Loans" has the meaning ascribed to
such term in Section 4.02.
"Eurodollar Reserve Percentage" means that
percentage, expressed as a decimal, which is in effect on such day, prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
marginal, supplemental or emergency reserve requirements) for a member bank of
the Federal Reserve System in New York City with deposits exceeding one billion
dollars in respect of eurocurrency funding liabilities.
"Eurodollar Revolving Loans" means Revolving
Credit Loans or portions thereof which bear interest at the rate and in the
manner set forth in Section 4.02.
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<PAGE> 15
"Eurodollar Term Loans" means Term Loans or
portions thereof which bear interest at the rate and in the
manner set forth in Section 4.02.
"Event of Default" has the meaning ascribed to
such term in Section 9.01.
"Federal Funds Rate" means, for any day, a
fluctuating interest rate per annum equal (rounded, if necessary, to the next
greater 1/16 of 1%) to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided that (i) if such
day is not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (ii) if such rate is not so published for
any day, the Federal Funds Rate for such day shall be the average rate charged
to or by the Agent on such day on such transactions as determined by the Agent.
"Franchise" means a franchise, license,
authorization or right to construct, own, operate, promote, extend and/or
otherwise utilize any cable television system operated or to be operated by the
Borrower or any Restricted Subsidiary granted by any state, county, city, town,
village or other local government authority but shall not include any such
franchise, license, authorization or right which is incidentally required for
the purpose of installing, constructing or extending a cable television system.
"GAAP" means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of determination.
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<PAGE> 16
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Greenville/Spartanburg Cable System" means the
cable television systems in the Greenville/Spartanburg metropolitan area that
affiliates of TCI have agreed to contribute to the Borrower pursuant to that
certain Contribution Agreement dated March 4, 1996 between TCI of Greenville,
Inc., TCI of Piedmont, Inc., TCI of Spartanburg, Inc. and the Borrower as
amended by that certain First Amendment to Contribution Agreement dated as of
June 21, 1996.
"Greenville/Spartanburg Debt" means debt owing to
TCI or its Affiliates pursuant to (i) that certain Promissory Note dated as of
January 26, 1995 made by TCI of Greenville, Inc., (ii) that certain Promissory
Note dated as of January 26, 1995 made by TCI of Piedmont, Inc., and (iii) that
certain Promissory Note dated as of January 26, 1995 made by TCI of Spartanburg,
Inc. (collectively, the "Greenville/Spartanburg Loan Agreement") in the amount
of (i) prior to the Nashville Closing $122.4 million or (ii) following the
Nashville Closing $75.9 million.
"Guarantee" means each guarantee by a Guarantor of
the obligations of the Borrower hereunder substantially in
the form of Exhibit H.
The term "guarantee" means (without duplication)
any guarantee or other contingent liability (other than any endorsement for
collection or deposit in the ordinary course of business), direct or indirect,
with respect to any obligations of another Person, through an agreement or
otherwise, including, without limitation, (i) any other endorsement or discount
with recourse or undertaking substantially equivalent to or having economic
effect similar to a guarantee in respect of any such obligations and (ii) any
agreement (A) to purchase, or to advance or supply funds for the payment or
purchase of, any such obligations, (B) to purchase, sell or lease property,
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<PAGE> 17
products, materials or supplies, or transportation or services, in respect of
enabling such other Person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the property,
products, materials or supplies or transportation or services or (C) to make any
loan, advance or capital contribution to or other investment in, or to otherwise
provide funds to or for, such other Person in respect of enabling such Person to
satisfy any obligation (including any liability for a dividend, stock
liquidation payment or expense) or to assure a minimum equity, working capital
or other balance sheet condition in respect of any such obligation. The amount
of any guarantee shall be equal to the outstanding amount of the obligations
directly or indirectly guaranteed.
The term "guarantee" shall not include any
security bond obligations, guarantees, or, to the extent of $1,000,000 in the
aggregate, letters of credit as security for the performance of the Borrower,
undertaken or incurred in the ordinary course of its business (other than in
connection with the borrowing of money or obtaining of credit) as presently
conducted for or on behalf of the Borrower.
"Guarantors" means IP-IV Capital and the
Restricted Subsidiaries.
"Hazardous Substance" means any substance, in any
concentration or mixture, that is (i) listed, classified or regulated pursuant
to any Environmental Law, (ii) petroleum product or by-product, asbestos
containing material, polychlorinated biphenyls, radioactive material or radon or
(iii) any waste or other substance regulated by any Governmental Authority or
any Environmental Law.
"Houston Loan" means the loan made pursuant to the
Loan Agreement dated as of May 8, 1996 between IP Southeast
and TCI of Houston, Inc. (the "Houston Loan Agreement").
"Hypothecation Agreements" means the Security and
Hypothecation Agreements by each of the Borrower, IP-IV Capital, ICM IV, TCID-IP
V, Inc., each Restricted Subsidiary
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<PAGE> 18
and IP-Southeast, substantially in the form of Exhibit G, in each case as they
may be amended or supplemented from time to time.
"ICM IV" means InterMedia Capital Management IV,
L.P., a California limited partnership.
"ICM IV Intercompany Loan Agreement" means that
certain Term Loan Agreement between ICM IV and the Borrower, dated as of the
date hereof.
"ICM IV Partnership Agreement" means InterMedia
Capital Management IV, L.P. Amended and Restated Agreement of Limited
Partnership dated as of September 30, 1995, as amended.
"IMI" means InterMedia Management, Inc., a
California corporation.
"Intercompany Loan" means any loan made by (i) the
Borrower to a Restricted Subsidiary, (ii) any Restricted Subsidiary to the
Borrower or any other Restricted Subsidiary, or (iii) by IP-IV Capital to the
Borrower or a Restricted Subsidiary, in each case for general partnership
purposes pursuant to an Intercompany Loan Agreement and evidenced by an
Intercompany Note.
"Intercompany Loan Agreement" means a loan
agreement in respect of an Intercompany Loan, substantially in the form of
Exhibit I, as the same may be amended or supplemented from time to time in
accordance with the terms of this Agreement; provided, that for so long as the
IP West Tennessee Loan is outstanding, the term "Intercompany Loan Agreement"
shall also include the IP West Tennessee Loan Agreement.
"Intercompany Note" means any note evidencing
obligations in respect of Intercompany Loans substantially in the form of
Exhibit J; provided, that for so long as the IP-West Tennessee Loan is
outstanding, the term "Intercompany Note" shall also include the note evidencing
the IP West Tennessee Loan which was delivered to the Agent on the Closing Date.
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<PAGE> 19
"Interest Coverage Ratio" means the ratio of (i)
Annualized Cash Flow to (ii) Interest Expense for the most recent four fiscal
quarters.
"Interest Expense" means Borrower Interest Expense
plus IP-IV Capital's Cash Interest Expense.
"Interest Period" means each one-, two-, three- or
six-month period, in the case of Eurodollar Loans; such period being selected by
the Borrower pursuant to Section 2.02(a) or 4.02(b) hereof and commencing on the
date the relevant Eurodollar Loan is made or the last day of the current
Interest Period, as the case may be.
"Interest Rate Agreement" means any interest rate
swap agreement, interest rate cap agreement or similar arrangement used by a
Person to fix or cap a floating rate of interest on indebtedness for Borrowed
Money.
"IP-II" means InterMedia Partners II, L.P., a
California limited partnership.
"IP-IV Capital" means InterMedia Capital Partners
IV, L.P., a California limited partnership.
"IP-IV Capital Escrow Account" shall mean the
escrow account of the Trustee for the IP-IV Capital Notes established by IP-IV
Capital in connection with the issuance of the IP-IV Capital Notes.
"IP-IV Capital Escrow Collateral" means the
collateral purchased with approximately $88,700,000 of proceeds from the IP-IV
Capital Notes which will be used to pay the interest payments on such notes
through August 1, 1999.
"IP-IV Capital Escrow Transactions" shall mean the
transactions pursuant to which IP-IV Capital will use $88,755,546.75 of the
proceeds of the IP-IV Capital Notes to establish the IP-IV Capital Escrow
Account, funds from which shall be used exclusively to make interest and, in
certain cases, principal payments on behalf of IP-IV Capital from the Closing
Date through August 1, 1999 to the holders of
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<PAGE> 20
the IP-IV Capital Notes pursuant to the terms of such notes; the obligation of
IP-IV Capital to make such payments to the holders of the IP-IV Capital Notes
shall be secured by a fully perfected first priority security interest in the
IP-IV Capital Escrow Account.
"IP-IV Capital Notes" means the Senior Discount
Notes Due 2006 issued by IP-IV Capital and IPCC pursuant to the Indenture dated
as of July 30, 1996, among IP-IV Capital, IPCC and The Bank of New York, as
trustee.
"IP-IV Capital Partnership Agreement" means
InterMedia Capital Partners IV, L.P. Agreement of Limited Partnership dated as
of March 19, 1996.
"IP-IV Capital's Cash Interest Expense" means at
any date, the aggregate amount of (i) all payments of interest (other than
payments in kind and payments made from the IP-IV Capital Escrow Account) on
indebtedness for Borrowed Money of IP-IV Capital (including payments
representing the interest portion of Capital Lease Obligations as determined in
accordance with GAAP) which were actually made during the immediately preceding
four fiscal quarters plus (ii) the amount (which may be negative) of all
payments scheduled to be made (net of scheduled payments from counterparties) by
IP-IV Capital in respect of all Interest Rate Agreements for such four fiscal
quarters.
"IP-IV Capital's Pro Forma Annual Cash Interest
Expense" means as of any date, the sum (calculated without duplication) of (i)
the aggregate amount of all payments of interest (other than payments in kind
and other payments made from the IP-IV Capital Escrow Account) on indebtedness
for Borrowed Money of IP-IV Capital (including payments representing the
interest portion of Capital Lease Obligations as determined in accordance with
GAAP) scheduled to be made (excluding any such payments for which collateral is
available and on deposit (or is expected to accrete prior to such payment date)
in the IP-IV Capital Escrow Account) for the next succeeding four fiscal
quarters (the first of which shall commence after the next succeeding Quarterly
Date) plus (ii) the amount (which may be negative) of all payments scheduled to
be made (net of scheduled payments
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from counterparties) by IP-IV Capital in respect of all Interest Rate Agreements
for the next succeeding period of four fiscal quarters. For purposes of this
definition, the interest rates in effect on such date with respect to any
indebtedness for Borrowed Money or Interest Rate Agreements will, subject to
contractual, non-contingent changes in the interest rate, be assumed to be in
effect for such indebtedness for Borrowed Money or Interest Rate Agreement as
long as it is outstanding and the principal amount of such indebtedness for
Borrowed Money outstanding as of such date (after giving effect to any
contemporaneous borrowings or repayments) will, subject to contractual,
non-contingent obligations to make mandatory payments or prepayments of
principal, be deemed to be outstanding during such four fiscal quarter period.
"IPCC" means InterMedia Partners IV Capital
Corporation, a Delaware corporation.
"IP-Southeast" means InterMedia Partners
Southeast, a California general partnership.
"IP Tennessee" means InterMedia Partners of
Tennessee, a California general partnership.
"IP Tennessee Loans" means the obligations of IP
Tennessee under the Revolving Credit Agreement, dated as of January 29, 1996,
among IP Tennessee, the banks parties thereto and The Bank of New York, as
agent, as the same may be amended or supplemented.
"IP West Tennessee" means InterMedia Partners of
West Tennessee, L.P., a California limited partnership.
"IP West Tennessee Contribution Agreement" means
the Contribution Agreement, dated as of April 30, 1996, between IP-IV Capital,
Intermedia Partners and General Electric Capital Corporation as amended by the
First Amendment to Contribution Agreement dated as of June 26, 1996 and as
further amended by the Second Amendment to Contribution Agreement dated as of
July 25, 1996.
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"IP West Tennessee Loan" means loan(s) made
pursuant to the Amended and Restated Loan Agreement dated as of October 3, 1994
between InterMedia Partners and General Electric Capital Corporation (the "IP
West Tennessee Loan
Agreement").
"LIBOR" means with respect to any Interest Period
the rate per annum determined pursuant to the following
formula:
LIBOR = Eurodollar Base Rate
---------------------------------
1 - Eurodollar Reserve Percentage;
LIBOR shall be adjusted automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Lien" means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"Loans" means, collectively, the Revolving Credit
Loans and Term Loans outstanding hereunder from time to time.
"Majority Lenders" means at any date Lenders
having at least 51% of the sum of outstanding Term Loans plus the Total
Revolving Credit Commitment or, if the Total Revolving Credit Commitment has
been terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"Management Agreements" means (i) the Management
Agreement between ICM IV and IP West Tennessee dated as of July 30, 1996, and
(ii) the Management Agreement between ICM IV and RMG dated as of July 30, 1996.
"Management Fees" means the management fees
payable (i) by the Borrower, IP-Southeast, IP Tennessee and IP-IV Capital
pursuant to their respective partnership agreements as in effect as of the date
hereof to ICM IV, and
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(ii) by IP West Tennessee and RMG pursuant to the Management Agreements with ICM
IV.
"Material Adverse Effect" means (i) any material
adverse effect on the business, properties, conditions (financial or otherwise),
or present operations, of the Borrower, IP-IV Capital, the Guarantors and the
Restricted Subsidiaries, taken as a whole, since the Closing Date, (ii) any
event or circumstance which is reasonably probable to occur and which is
reasonably probable to have a material adverse effect on the prospective
business, properties, conditions (financial or otherwise) or operations of the
Borrower, IP-IV Capital, the Guarantors and the Restricted Subsidiaries, taken
as a whole, since the Closing Date, (iii) any material adverse effect on the
ability of the Borrower, IP-IV Capital, the Guarantors and the Restricted
Subsidiaries, taken as a whole, to perform the obligations hereunder and under
the other Credit Documents, (iv) any material adverse effect on the legality,
validity, binding effect or enforceability of this Agreement or any other
material Credit Document, or (v) any material adverse effect on the perfection
or priority of the Lenders' Liens upon the collateral described in the
Hypothecation Agreements.
"Maturity Date" means January 1, 2005.
"Multiemployer Plan" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which any member of the ERISA Group is
making or accruing an obligation to make contributions or has within the
preceding five plan years made or accrued contributions.
"Nashville Closing" means the (a) consummation of
the transactions contemplated by, and in accordance with, the Nashville Exchange
Agreement, including (i) the acquisition by IP-Southeast of the Prime Houston
Systems, (ii) the acquisition by TCIC of the Viacom Nashville System and (iii)
the exchange of the aforementioned cable television systems by IP-Southeast and
TCIC; (b) the repayment in full of the Houston Loan and the B of A Loan and the
effective release of all collateral pledged to the lenders thereunder to secure
the Houston Loan or the B of A Loan; and (c) the receipt by the Agent of a
certificate from
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<PAGE> 24
a Responsible Party promptly after the closing of the transactions specified in
(a) and (b) above stating that such transactions have occurred.
"Nashville Date" means the date six (6) months
after the Closing Date; provided that the Nashville Date may be extended with
the consent of all of the Lenders.
"Nashville Exchange" means an exchange between
IP-Southeast and TCIC of the Prime Houston Systems and the
Viacom Nashville System pursuant to the Nashville Exchange
Agreement.
"Nashville Exchange Agreement" means the Exchange
Agreement dated December 16, 1995 between IP-Southeast and TCIC, providing for
the exchange of Prime Houston Systems and the Viacom Nashville System.
"Notes" means, collectively, the Revolving Credit
Notes and the Term Notes.
"Other Fees" has the meaning ascribed to such term
in Section 2.05.
"Participant" has the meaning ascribed to such
term in Section 12.08(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any successor thereto.
"Pension Plan" means a Plan that (i) is an
employee pension benefit plan, as defined in Section 3(3) of ERISA (other than a
Multiemployer Plan) and (ii) is subject to the provisions of Title IV of ERISA
or is subject to the minimum funding standards under Section 412 of the Code.
"Permitted Administration Fee Payments" means the
payment by the Borrower to IMI of the administration fees provided for in the
Administration Agreements to the extent of costs and expenses actually incurred
under the relevant Administration Agreement.
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"Permitted Acquisitions" means acquisitions of
cable systems in Tennessee, Kentucky, North Carolina, South
Carolina and Georgia.
"Permitted Encumbrances" means (i) Liens for taxes
not delinquent or being contested in good faith and by appropriate proceedings
and for which adequate reserves are being maintained, (ii) Liens (other than
Liens imposed with respect to any Plan) incurred or deposits or pledges to
secure obligations under workmen's compensation, social security or similar
laws, or under unemployment insurance, (iii) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), Franchises,
pole rentals, leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of business, (iv)
mechanics', workmen's, materialmen's or other like Liens arising in the ordinary
course of business with respect to obligations which are not due or which are
being contested in good faith, (v) minor imperfections of title on real estate,
provided such imperfections do not render title unmarketable, (vi) Liens
incurred in the ordinary course of business which, individually or in the
aggregate, do not exceed $2,500,000, (vii) Liens arising in the ordinary course
of business in favor of landlords of real property leases to the extent of
assets of the Borrower, IP-IV Capital or a Restricted Subsidiary actually
located on the premises and (viii) with respect to IP-IV Capital, the Lien of
the holders of the IP-IV Capital Notes in connection with the IP-IV Capital
Escrow Transactions and (ix) the Liens specified on Schedule IV.
"Permitted Management Fee Payments" means, without
duplication, (i) the payment by the Borrower to ICM IV on the Closing Date of
the Management Fees in respect of the one year period from the relevant
acquisition date for each System listed on Schedule II and each Acquisition
System, (ii) the payment by the Borrower to ICM IV on the date of the Nashville
Closing of the Management Fees in respect of the one year period from the date
of the Nashville Closing for the Viacom Nashville System, (iii) commencing one
year following the acquisition date of each System, the payment by the Borrower
to ICM IV in advance at the beginning of each fiscal quarter 80% of the
Management Fees payable in
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respect of such fiscal quarter, provided that Management Fees for any fiscal
year may not exceed 1% of the aggregate contributed equity of the Borrower and
(iii) the payment by the Borrower to ICM IV of the balance of any Management
Fees for any fiscal year may be made in the immediately following fiscal year;
provided, that (1) the Borrower has delivered a compliance certificate as to the
nonexistence of an Event of Default and (2) no Event of Default exists or would
exist as a result of the contemplated payment of Management Fees.
"Person" means any individual, sole proprietor-
ship, partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" means an employee benefit plan as defined
in Section 3(3) of ERISA (other than a Multiemployer Plan) which is maintained
or contributed to by the Borrower or any member of the ERISA Group.
"Pole Attachment Agreements" means, collectively,
all agreements, contracts or licenses relating to the licensing or other grant
of rights for use of municipal or utility company, telephone or other poles,
conduits or trenches for the purpose of supporting or housing cables comprising
an element of any System.
"Prime Houston Systems" means certain cable
television systems in and around Houston, Texas, acquired by
IP-Southeast from Prime Cable of Fort Bend, L.P. and Prime
Cable Income Partners, L.P. in order to effectuate the
Nashville Exchange.
"Principal Office" means, with respect to the
Agent, its principal office located at One Wall Street, New York, New York
10286.
"Pro Forma Debt Service" means, as of any date,
the sum (calculated without duplication) of (i) the Borrower's Pro Forma Annual
Interest Expense, (ii) Term Loan
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payments required to be made pursuant to Section 2.03 (other than, if
applicable, the Term Loan payment due on July 1, 2004 and January 1, 2005) for
the next succeeding four fiscal quarters, the first of which shall commence
after the next succeeding Quarterly Date, (iii) the difference, if positive,
between (a) the aggregate principal amount of Revolving Credit Loans outstanding
on the date of determination and (b) the amount of the Total Revolving Credit
Commitment as of the last day of the fourth succeeding fiscal quarter (as
specified in (ii) above) as specified in Section 2.07 and (iv) IP-IV Capital's
Pro-Forma Annual Cash Interest Expense.
"Quarterly Date" means the last day of each March,
June, September and December, provided that, if any such date is not a Business
Day, the relevant Quarterly Date shall be the next succeeding Business Day.
"Related Documents" means the Intercompany Notes,
the Intercompany Loan Agreements, the Management Agreement, the Administration
Agreements, the Borrower Partnership Agreement, ICM IV Intercompany Loan
Agreement, the AVR Purchase Agreement, the DD Cable Agreement, the
Greenville/Spartanburg Loan Agreement, the IP West Tennessee Loan Agreement, ICM
IV Partnership Agreement, IP-IV Capital Partnership Agreement, Nashville
Exchange Agreement, the Houston Loan Agreement, the B of A Loan Agreement, each
Acquisition System Agreement and the partnership agreement or other governing
documents of each Restricted Subsidiary and IP-Southeast.
"Responsible Person" means Leo J. Hindery, Jr.,
Edon V. Hartley, Thomas R. Stapleton or Derek Chang, so long as each is acting
as a senior executive manager of the Borrower or any other individual acceptable
to the Arranging Agents who is designated by the partner(s) of the Borrower.
"Restricted Payments" means (i) the declaration or
payment of any dividends or distributions on any partnership or other ownership
interest in the Borrower or any Restricted Subsidiary, the application of any
property or the assets of the Borrower or any Restricted Subsidiary to the
purchase or acquisition, redemption or other retirement
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of, or the setting apart of any sum for the payment of any distributions on, or
for the purchase, redemption or other retirement of, or the making of any other
distribution by reduction of partnership or other ownership interests or
otherwise in respect of any partnership or other ownership interest in the
Borrower or any Restricted Subsidiary, (ii) the application of any property or
assets of the Borrower or any Restricted Subsidiary to the prepayment of
principal, and premium, if any, purchase or other acquisition, redemption or
other retirement of indebtedness for Borrowed Money of the Borrower or any
Restricted Subsidiary or Intercompany Loans or the setting aside of any sum
therefor, (iii) any payment or other advance to any Affiliate of the Borrower,
(iv) the payment of any administration fee or management fee to any person other
than Permitted Management Fee Payments and Permitted Administration Fee Payments
and (v) any other payment or advance to any other Person, other than payments to
trade creditors or to other Persons for services rendered in the ordinary course
of business or other payments in the ordinary course of business.
"Restricted Subsidiary" means each of IP
Tennessee, IP West Tennessee, RMG, RMH and, from and after the Nashville
Closing, IP-Southeast and any other Subsidiary designated as a Restricted
Subsidiary by Borrower which is acquired or created in connection with a
Permitted Acquisition and any other Subsidiary that the Borrower elects to
designate as a Restricted Subsidiary; provided that at the time of the
Borrower's designation such Subsidiary: (i) either (x) is directly or indirectly
wholly owned by the Borrower or a Restricted Subsidiary or (y) meets the
requirements of clauses (ii) to (iv) below and the Borrower is entitled to
receive 100% of such Subsidiary's cash flow and all of the equity interests of
such Subsidiary are pledged to the Agent, all on terms reasonably satisfactory
to the Arranging Agents and 80% of the fully diluted equity of such Subsidiary
is directly or indirectly owned by the Borrower and/or a Restricted Subsidiary,
(ii) has been designated in writing by the Borrower to the Agent as a Restricted
Subsidiary, (iii) has entered into a Guarantee, and, in the event such
Subsidiary has any subsidiaries, such subsidiary has entered into a
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<PAGE> 29
Hypothecation Agreement with respect to such types of collateral as are
hypothecated by the Borrower and its Restricted Subsidiaries pursuant to
Hypothecation Agreements, and (iv) shall agree in writing that it shall be
treated as a Restricted Subsidiary for purposes of this Agreement.
"Revolving Credit Lender" means each Lender with a
Revolving Credit Commitment.
"Revolving Credit Borrowing" means a Borrowing
consisting of Revolving Credit Loans.
"Revolving Credit Commitment" has the meaning
ascribed to such term in Section 2.01.
"Revolving Credit Commitment Fee" has the meaning
ascribed to such term in Section 2.04.
"Revolving Credit Loans" has the meaning ascribed
to such term in Section 2.01.
"Revolving Credit Notes" has the meaning ascribed
to such term in Section 2.03.
"Revolving Credit Termination Date" has the
meaning ascribed to such term in Section 2.01.
"RMG" means Robin Media Group, Inc., a Nevada
corporation.
"RMG Indentures" means (i) the Indenture, dated as
of April 1, 1987, between Cooke Media Group Incorporated, as predecessor in
interest to RMG, and Bank of Montreal Trust Company, as trustee and (ii) the
Indenture, dated as of April 1, 1987 between Cooke Media Group Incorporated as
predecessor in interest to RMG, and IBJ Schroder Bank &
Trust Company, as Trustee.
"RMH" means Robin Media Holdings, Inc., a Nevada
corporation.
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"Senior Debt" means, on any date, the principal
amount of Consolidated indebtedness of the Borrower and the Restricted
Subsidiaries for Borrowed Money, whether outstanding on the Closing Date or
thereafter created, incurred or assumed, other than intercompany debt.
"Senior Leverage Ratio" means the ratio of (i)
Senior Debt as of the determination date in accordance with Section 8.01(a) to
(ii) Annualized Cash Flow.
"Shareholders' Agreement" means the Shareholders'
Agreement among the Borrower, RMH and TCID-IP V, Inc., dated as of July 26,
1996.
"Subsidiary" means any Person in which the
Borrower owns a direct or indirect equity interest.
"Systems" means each cable television system owned
by the Borrower or a Restricted Subsidiary (other than the Prime Houston
Systems) and shall include, but not be limited to (i) those Systems listed on
the attached Schedule II and (ii) each Acquisition System.
"Taxes" has the meaning ascribed to such term in
Section 5.04(a).
"TCI" means Tele-Communications, Inc.
"TCIC" means TCI Communications, Inc.
"Term Loan" has the meaning ascribed to such term
in Section 2.01.
"Term Loan Amount" has the meaning ascribed to
such term in Section 2.01.
"Term Loan Lender" means each Lender which has a
Term Loan Amount on which it has made a Term Loan.
"Term Notes" has the meaning ascribed to such term
in Section 2.03.
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"Total Consolidated Debt" means the Consolidated
indebtedness for Borrowed Money of the Borrower, the Restricted Subsidiaries and
IP-IV Capital taken as a whole minus the amounts shown on Schedule VI hereto.
"Total Consolidated Leverage Ratio" means the
ratio of (i) Total Consolidated Debt as of the date of determination after
giving effect to any borrowing on that date to (ii) Annualized Cash Flow.
"Total Revolving Credit Commitment" has the
meaning ascribed to such term in Section 2.01.
"Total Term Loan Amount" has the meaning ascribed
to such term in Section 2.01.
"Unavailable Portion" means $125 million as such
amount may be reduced from time to time in accordance with Section 2.06(b);
provided that as of and at all times after the earlier of the Nashville Closing
and the Nashville Date, the Unavailable Portion shall be zero.
"Unrestricted Subsidiary" means each of AVR, DD
Cable Partners, DD Cable Holdings, IP II and, until the Nashville Closing,
IP-Southeast and from and after the Closing Date, any other Subsidiary which is
acquired or created which is not a Restricted Subsidiary.
"Unused Amounts" means (i) the aggregate amount of
capital expenditures which the Borrower, IP-IV Capital and the Restricted
Subsidiaries were permitted to make during the prior fiscal year pursuant to
Sections 8.02(m) minus (ii) the aggregate amount of capital expenditures which
the Borrower, IP-IV Capital and the Restricted Subsidiaries made during the
prior fiscal year.
"Viacom" means VSC Cable Inc.
"Viacom Nashville Acquisition" means the
acquisition by IP-Southeast of the Viacom Nashville System pursuant to the
Nashville Exchange Agreement.
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"Viacom Nashville System" means the cable
television assets of Viacom in Nashville, Tennessee, to be acquired by
IP-Southeast pursuant to the Nashville Exchange Agreement.
ARTICLE II
THE REVOLVING CREDIT AND TERM LOANS
Section 2.01. The Revolving Credit and Term
Loans. Subject to the terms and conditions of this Agreement, each of the
Lenders, severally and not jointly with the other Lenders, agrees to make (i)
revolving credit loans (each a "Revolving Credit Loan" to the Borrower from time
to time before July 1, 2004 (the "Revolving Credit Termination Date") in an
aggregate principal amount at any one time outstanding not to exceed the sum of
the amount set forth opposite each Lender's name under the heading "Revolving
Credit Commitment" on the signature pages hereof (or of any supplement hereto),
as its revolving credit commitment (for each Lender, its "Revolving Credit
Commitment", and for all the Lenders, the "Total Revolving Credit Commitment")
minus such Revolving Credit Lender's pro rata share of the Unavailable Portion
from time to time, as such amount may be reduced from time to time pursuant to
Section 2.06 and (ii) term loans to the Borrower (each, a "Term Loan") in a
single Borrowing on the date of the initial Revolving Credit Loan hereunder in
an amount equal to the amount set forth opposite each Lender's name under the
heading "Term Loan Amount" on the signature pages hereof (or of any supplement
hereto) (for each Lender, its "Term Loan Amount" and for all the Lenders, the
"Total Term Loan Amount").
Section 2.02. Procedure for Borrowings. (a) The
Borrower may borrow pursuant to this Article II by giving the Agent, (i) in the
case of ABR Loans, written notice prior to 12:00 Noon, New York City time, on
the day and (ii) in the case of Eurodollar Loans, not less than three Business
Days' written notice, of its request for Loans, which, in the case of either (i)
or (ii) above, shall be in the aggregate amount of $500,000 or an integral
multiple
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thereof, such notice to be substantially in the form of Exhibit A attached
hereto in the case of Revolving Credit Loans and substantially in the form of
Exhibit C attached hereto in the case of Term Loans. Such notice shall specify
(i) the date of the proposed borrowing (the "Borrowing Date"), (ii) the amount
of such Borrowing, (iii) whether the Loans are to bear interest as ABR Loans or
Eurodollar Loans, (iv) if the Loans are to bear interest as Eurodollar Loans,
the term of the initial Interest Period therefor, and (v) the Applicable Margin
initially in effect for such Loans and the Applicable Margin in effect for all
other outstanding Eurodollar Loans hereunder (in each case after giving effect
to such Revolving Credit Borrowings and any other contemporaneous borrowings and
repayments of indebtedness for Borrowed Money).
(b) Upon receipt of any such notice from the
Borrower, the Agent shall forthwith give notice to each Revolving Credit Lender
or Term Loan Lender, as the case may be, of the substance thereof. Not later
than 2:00 P.M., New York City time on the Borrowing Date specified in such
notice, each Revolving Credit Lender or Term Loan Lender, as the case may be,
shall make available to the Agent in immediately available funds at the
Principal Office of the Agent, such Revolving Credit Lender's or Term Loan
Lender's, as the case may be, pro rata share of the requested Loans.
(c) Upon receipt by the Agent of all such funds and
upon satisfaction of each of the conditions set forth in Section 7.02 (and in
the case of the initial Loans, Sections 7.01 and 7.02) hereof, the Agent shall
disburse to the Borrower the Loans requested in such notice; provided, however,
that in the event that all funds necessary to make the requested Loans are not
received by the Agent prior to the time requested in the Borrower's notice, the
Agent shall disburse to the Borrower the Loans in an amount equal to the amount
of such funds as have been actually received by the Agent and are available for
disbursement and shall promptly disburse amounts thereafter received to the
Borrower. The Agent may, but shall not be required to, advance on behalf of any
Revolving Credit Lender or Term Loan Lender, as the case may be, such Lender's
pro rata share of the Loans requested to be made on a Borrowing Date unless such
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Revolving Credit Lender or Term Loan Lender, as the case may be, shall have
notified the Agent prior to the Borrowing Date that it does not intend to make
available its pro rata share of the Loans on such date. If the Agent makes such
advance, the Agent shall be entitled to recover such amount on demand from the
Lender on whose behalf such advance was made, and if such Lender does not pay
the Agent the amount of such advance on demand, the Borrower shall pay such
amount to the Agent on demand. Until such amount is repaid to the Agent by such
Revolving Credit Lender or Term Loan Lender, as the case may be, or the
Borrower, as the case may be, such advance shall be deemed for all purposes to
be a Loan made by the Agent. The Agent shall be entitled to recover from the
Revolving Credit Lender or Term Loan Lender, as the case may be, or the
Borrower, as the case may be, interest on the amount advanced by it for each day
such amount is made available at a rate per annum equal to the applicable rate
on the Loans made on the Borrowing Date.
(d) In lieu of delivering the written notice
described above, the Borrower may give the Agent telephonic notice of any
request for borrowing by the time required under this Section 2.02; provided,
that such telephonic notice shall be confirmed in writing by delivery (which may
include telecopy transmission) of a written notice to the Agent by the close of
business on the date of such telephonic notice.
Section 2.03. Revolving Credit Notes and the Term
Notes. The Borrower's obligation to repay the Revolving Credit Loans shall be
evidenced by promissory notes of the Borrower, substantially in the form of
Exhibit B (each, a "Revolving Credit Note") and the Borrower's obligation to
repay the Term Loans shall be evidenced by promissory notes of the Borrower,
substantially in the form of Exhibit D attached hereto (each, a "Term Note"), in
the case of either Note one such payable to the order of each Revolving Credit
Lender or Term Loan Lender, as the case may be. The Revolving Credit Note of
each Revolving Credit Lender shall be in the principal amount of such Revolving
Credit Lender's Revolving Credit Commitment, dated the Closing Date, and be
stated to mature on the Revolving Credit Termination Date and bear interest from
the date thereof until maturity on
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the principal balance (from time to time outstanding thereunder) payable at
the rates and in the manner provided herein. The Term Note of each Term Loan
Lender shall be in the principal amount of such Term Loan Lender's Term Loan
Amount, dated the date on which the Term Loan is made and be stated to mature in
installments as set forth in Section 2.07 hereof and bear interest from the date
thereof until maturity on the principal amount of the Term Loan outstanding
thereunder payable at the rates and in the manner determined pursuant to Section
4.03 hereof. Each Revolving Credit Lender or Term Loan Lender, as the case may
be, is authorized to indicate upon the grid attached to either its Revolving
Credit Note or Term Note all Loans made by it pursuant to this Agreement, all
interest elections and payments of principal and interest thereon. Such
notations shall be presumed correct absent manifest error as to such interest
elections, the aggregate unpaid principal amount of either all Revolving Credit
Loans or Term Loans made by such Revolving Credit Lender or Term Loan Lender, as
the case may be, and interest due thereon, but the failure by such Revolving
Credit Lender or Term Loan Lender, as the case may be, to make such notations or
the inaccuracy or incompleteness of any such notations shall not affect the
obligations of the Borrower hereunder or under either the Revolving Credit Notes
or Term Notes.
Section 2.04. Revolving Credit Commitment Fee.
The Borrower shall pay to the Agent for the account of the Revolving Credit
Lenders the commitment fee (the "Revolving Credit Commitment Fee") as set forth
below:
(a) at such time as the Senior Leverage Ratio is
greater than 4.0 times, an amount equal to (i) 0.375% per annum
of the average daily unused amount of the Total Revolving Credit
Commitment minus the Unavailable Portion (ii) plus 0.250% of the
amount of the Unavailable Portion, in each case on the basis of a
365/6-day year for the actual number of days elapsed; and
(b) at such time as the Senior Leverage Ratio is
less than or equal to 4.0 times, an amount equal to (i) 0.250%
per annum of the average daily
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<PAGE> 36
unused amount of the Total Revolving Credit Commitment minus the
Unavailable Portion (ii) plus 0.125% of the amount of the
Unavailable Portion, in each case on the basis of a 365/6-day
year for the actual number of days elapsed.
The Revolving Credit Commitment Fee shall be
payable in arrears on each Quarterly Date and on the Revolving Credit
Termination Date or the earlier termination of the Total Revolving Credit
Commitment.
Section 2.05. Other Fees. The Borrower shall pay
to the Agent, the Arranging Agents, the Co-Agents and the Lenders certain
closing-related fees and to pay to the Agent and the Arranging Agents other fees
(the "Other Fees") in the amounts and at the time or times as may have been
agreed between such parties.
Section 2.06. Optional Cancellation or Reduction
of Total Revolving Credit Commitment and Term Loans. (a) The Borrower shall have
the right, upon not less than three Business Days' written notice to the Agent
and upon payment of the Revolving Credit Commitment Fee accrued through the date
of such cancellation or reduction, to cancel the Total Revolving Credit
Commitment in full or to reduce the amount thereof in part in minimum amounts as
required by Section 2.06(c) below; provided that the amount of the Total
Revolving Credit Commitment shall at no time be less than the unpaid principal
amount of all Revolving Credit Loans then outstanding. All cancellations or
reductions shall be permanent.
(b) In connection with any reduction of the Total
Revolving Credit Commitment in accordance with this Section 2.06, the
Unavailable Portion shall be reduced by an amount equal to the quotient obtained
by dividing (i) the amount of such reduction of the Total Revolving Credit
Commitment multiplied by the amount of the Unavailable Portion as of such date
by (ii) the Total Revolving Credit Commitment prior to such reduction.
(c) On the date of any reduction of the Total
Revolving Credit Commitment pursuant to Section 2.06, the
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Borrower shall prepay Term Loans in a principal amount equal to (i) the
aggregate amount of Term Loans outstanding immediately prior to such reduction
of the Total Revolving Credit Commitment multiplied by (ii) the quotient
obtained by dividing the amount of such reduction of the Total Revolving Credit
Commitment by the amount of the Total Revolving Credit Commitment immediately
prior to such reduction of the Total Revolving Credit Commitment. The aggregate
amount of any reduction of the Total Revolving Credit Commitment plus the amount
of the repayment of the Term Loans made pursuant to the immediately preceding
sentence shall not be less than $5,000,000. The Borrower shall also be required
to pay all accrued interest on the principal of the Term Loans being prepaid to
the date of prepayment, and in the case of Eurodollar Term Loans which are
prepaid prior to the last day of the Interest Period therefor, the amounts
required by Section 5.03. All prepayments of Term Loans made pursuant to this
Section 2.06(c) shall be permanent. In allocating hereunder between Revolving
Credit Loans and Term Loans, such allocations may be rounded to the nearest
$100,000.
Section 2.07. Mandatory Reductions of the Total
Revolving Credit Commitment. (a) If the Nashville Closing is consummated by the
Nashville Date, the Total Revolving Credit Commitment will be reduced on the
dates and to the amounts set forth below:
<TABLE>
<CAPTION>
Total Revolving Credit
Date Commitment (000s)
---- ----------
<S> <C>
January 1, 1999 $450,000
July 1, 1999 $427,500
January 1, 2000 $405,000
July 1, 2000 $380,000
January 1, 2001 $357,500
July 1, 2001 $320,000
January 1, 2002 $285,000
July 1, 2002 $237,500
January 1, 2003 $190,000
July 1, 2003 $142,500
January 1, 2004 $ 95,000
July 1, 2004 $ 0
</TABLE>
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<PAGE> 38
; provided that if prior to any such date the Borrower shall have reduced the
Total Revolving Credit Commitment to less than the amount set forth above next
to such date in accordance with Section 2.06, no such reduction of the Total
Revolving Credit Commitment shall be made on such date.
(b) If the Nashville Closing is not consummated by
the Nashville Date, the Total Revolving Credit Commitment will be reduced on the
dates and to the amounts set forth below:
<TABLE>
<CAPTION>
Total Revolving Credit
Date Commitment (000s)
---- ----------
<S> <C>
January 30, 1997 $350,000
January 1, 1999 $325,000
July 1, 1999 $275,000
January 1, 2000 $250,000
July 1, 2000 $225,000
January 1, 2001 $200,000
July 1, 2001 $175,000
January 1, 2002 $150,000
July 1, 2002 $125,000
January 1, 2003 $100,000
July 1, 2003 $ 75,000
January 1, 2004 $ 50,000
July 1, 2004 $ 0
</TABLE>
; provided that if prior to any such date the Borrower shall have reduced the
Total Revolving Credit Commitment to less than the amount set forth above next
to such date in accordance with Section 2.06, no such reduction of the Total
Revolving Credit Commitment shall be made on such date.
Section 2.08. Mandatory and Optional Prepayment.
(a) The Borrower shall have the right, on not less than two Business Days'
written notice to the Agent, in the case of either Eurodollar Revolving Loans or
Eurodollar Term Loans, and on written notice prior to 1:00 P.M. New York time,
on the day to the Agent, in the case of either ABR Revolving Loans or ABR Term
Loans, to prepay Revolving Credit Loans or prepay portions of the Term Loans, as
the case may be, of the Revolving Credit Lenders or the Term Loan Lenders, as
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the case may be, bearing interest on the same basis and having the same Interest
Periods, if any, in whole or in part, without premium or penalty, and if in
part, in the aggregate principal amount required by Section 2.08(c) in the case
of Term Loans, and in the aggregate principal amount of $500,000 or an integral
multiple thereof in the case of Revolving Credit Loans, together with accrued
interest on the principal being prepaid to the date of prepayment, and in the
case of Eurodollar Revolving Loans, any amounts required by Section 5.03 and, in
the case of Eurodollar Term Loans which are prepaid prior to the last day of the
Interest Period therefor, the amounts required by Section 5.03, subject in each
case, to the second sentence of Section 2.08. Each partial prepayment of a Term
Loan shall be applied to installments of principal in the inverse order of their
maturities. All Term Loan prepayments made pursuant to this Section 2.08(a)
shall be permanent. Subject to Section 2.01, all Revolving Loan amounts prepaid
may be reborrowed.
(b) In the event that the aggregate unpaid
principal amount of the outstanding Revolving Credit Loans shall at any time
exceed the Total Revolving Credit Commitment, such excess shall be immediately
due and payable to the Revolving Credit Lenders, pro rata in proportion to their
respective Revolving Credit Commitments.
(c) On the date of any optional prepayment of Term
Loans pursuant to Section 2.08(a), the Total Revolving Credit Commitment shall
be reduced by an amount equal to (i) the amount of the Total Revolving Credit
Commitment immediately prior to such optional prepayment of the Term Loans
multiplied by (ii) the quotient obtained by dividing the amount of such optional
prepayment by the Total Term Loan Amount immediately prior to such optional
prepayment of the Term Loans. The aggregate amount of any optional prepayment of
Term Loans made in accordance with Section 2.08(a) plus the amount of the
reduction of the Total Revolving Credit Commitment made pursuant to the
immediately preceding sentence shall not be less than $5,000,000. If as a result
of a reduction of the Total Revolving Credit Commitment made pursuant to this
Section 2.08(c) the aggregate unpaid principal amount of the outstanding
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Revolving Credit Loans shall exceed the Total Revolving Credit Commitment, such
excess shall be immediately due and payable to the Revolving Credit Lenders, pro
rata in proportion to their respective Revolving Credit Commitments.
(d) The Term Loans shall be repaid in installments
payable on each January 1 and July 1, commencing on January 1, 1999, and ending
on January 1, 2005 in the amounts set forth below.
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
January 1, 1999 $500,000
July 1, 1999 $500,000
January 1, 2000 $500,000
July 1, 2000 $500,000
January 1, 2001 $500,000
July 1, 2001 $500,000
January 1, 2002 $500,000
July 1, 2002 $500,000
January 1, 2003 $500,000
July 1, 2003 $500,000
January 1, 2004 $500,000
July 1, 2004 $107,250,000
January 1, 2005 $107,250,000
</TABLE>
ARTICLE III
[RESERVED]
ARTICLE IV
INTEREST
Section 4.01. Interest on ABR Loans. Each ABR
Revolving Loan and each ABR Term Loan (collectively, the "ABR Loans") shall bear
interest from the date of such ABR Loan until maturity, or a conversion to a
Eurodollar Loan, as the case may be, payable in arrears on the last day of
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<PAGE> 41
each calendar quarter of each year, commencing with the first such date after
the date hereof, and on the date such ABR Loans are repaid, at a rate per annum
(on the basis of a 360-day year for the actual number of days involved whenever
the Base Rate is based on the Federal Funds Rate and otherwise on the basis of a
365/6-day year for the actual number of days involved) equal to the sum of (i)
the Applicable Margin and (ii) the Base Rate in effect from time to time, which
rate shall change as and when said Base Rate or Applicable Margin shall change.
Section 4.02. Interest on Eurodollar Loans.
(a) Each Eurodollar Revolving Loan and each Eurodollar Term Loan (collectively,
the "Eurodollar Loans") shall bear interest from (and including) the first day
of each Interest Period to (but excluding) the last day of such Interest Period,
payable in arrears with respect to Interest Periods of three months or less, on
the last day of the applicable Interest Period, and with respect to Interest
Periods longer than three months, on the three-month anniversary of the
commencement of such Interest Period and on the last day of such Interest
Period, at a rate per annum (on the basis of a 360-day year for the actual
number of days involved), determined by the Agent with respect to each Interest
Period, equal to the sum (rounded upwards to the nearest 1/16 of 1%) of (i) the
Applicable Margin and (ii) LIBOR, which rate shall change as and when said
Applicable Margin shall change.
(b) The Interest Period for each Eurodollar Loan
shall be initially selected by the Borrower at least three Business Days prior
to the beginning of such Interest Period in its notice of borrowing pursuant to
Section 2.02 in the case of the Eurodollar Revolving Loans, or pursuant to
Section 4.03 in the case of Eurodollar Term Loans. Subsequent Interest Periods
shall be selected pursuant to the procedures set forth in Section 4.03. If the
Borrower fails to notify the Agent of the Interest Period desired at least three
Business Days prior to the last day of the then current Interest Period for an
outstanding Eurodollar Loan, then such outstanding Eurodollar Loan shall become
an ABR Loan at the end of the current Interest Period for such outstanding
Eurodollar Loan.
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(c) Notwithstanding the foregoing: (i) if any
Interest Period for a Eurodollar Loan would otherwise end on a day which is not
a Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the immediately preceding Business Day; and (ii) no Interest Period for a
Eurodollar Loan may extend beyond the Maturity Date of the Loans (or portions
thereof) or a mandatory prepayment date where the making of such prepayment
would otherwise result in breakage costs with respect to such Interest Period
unless Borrower reimburses Lenders for such breakage cost in accordance with
Section 5.03.
(d) Eurodollar Loans shall be made by each Lender
from its branch or affiliate identified as its Eurodollar Lending Office on the
signature page hereto, or such other branch or affiliate as it may hereafter
designate to the Borrower and the Agent as its Eurodollar Lending Office.
Section 4.03. Procedure for Interest Determination.
(a) Unless the Borrower shall make an election pursuant to Section 4.03(b) that
the Loans or portions thereof shall bear interest as Eurodollar Loans, the Loans
shall bear interest as ABR Loans.
(b) The Borrower shall give the Agent not less than
three Business Days' written notice of its request for portions of the Loans in
the aggregate amount of $500,000 or an integral multiple thereof to bear
interest as Eurodollar Loans. Such notice shall be in the form of Exhibit E
attached hereto and shall specify (i) the date on which such election is to take
effect (the "Election Date"), (ii) the aggregate amount of the Loans which are
to bear interest as ABR Loans or Eurodollar Loans, (iii) when required, the term
of the Interest Period therefor and (iv) the Applicable Margin in effect for
such Loans and the Applicable Margin in effect for all other outstanding Loans
hereunder (in each case after giving effect to any contemporaneous borrowings
and repayments of indebtedness for Borrowed Money); provided, however, that
there shall at no time be Eurodollar Loans outstanding having more than fifteen
different
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Interest Periods; and, provided further, that no Loan may commence
bearing interest as a Eurodollar Loan so long as any Default or Event of Default
shall have occurred and be continuing.
(c) Upon receipt of any such notice from the
Borrower, the Agent shall forthwith give notice to each Revolving Credit Lender
or Term Loan Lender, as the case may be, of the substance thereof. Effective on
such Election Date, the Loans or portions thereof as to which the election was
made shall commence to accrue interest as set forth in this Article IV for the
interest rate selected by the Borrower.
(d) In lieu of delivering the above described
notice, the Borrower may give the Agent telephonic notice hereunder by the
required time under this Section 4.03; provided that such telephonic notice
shall be confirmed in writing by delivery (which may include telecopy
transmission) of a written notice to the Agent by the close of business on the
date of such telephonic notice.
(e) No Loan shall be deemed to have been made for
purposes of Article VII hereof solely on account of the Borrower selecting an
Interest Period pursuant to Section 4.02(b) or delivering any notice pursuant to
Section 4.03(b) or (d).
Section 4.04. Post Default Interest. After the
occurrence and during the continuance of any Event of Default and until such
Event of Default is cured, the Applicable Margin shall increase by 2.00% per
annum.
Section 4.05. Maximum Interest Rate. (a) Nothing in
this Agreement or the Notes shall require the Borrower to pay interest at a rate
exceeding the maximum rate permitted by applicable law. Neither this Section nor
Section 12.01 is intended to limit the rate of interest payable for the account
of any Lender to the maximum rate permitted by the laws of the State of New York
(or any other applicable law) if a higher rate is permitted with respect to such
Lender by supervening provisions of U.S. Federal law.
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<PAGE> 44
(b) If the amount of interest payable for the
account of any Lender on any interest payment date in respect of the immediately
preceding interest computation period, computed pursuant to this Article IV,
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the
account of any Lender in respect of any interest computation period is reduced
pursuant to Section 4.05(b) and the amount of interest payable for its account
in respect of any subsequent interest computation period would be less than the
maximum amount permitted by law to be charged by such Lender, then the amount of
interest payable for its account in respect of such subsequent interest
computation period shall be automatically increased to such maximum permissible
amount; provided that at no time shall the aggregate amount by which interest
paid for the account of any Lender has been increased pursuant to this Section
4.05(c) exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to Section 4.05(b).
ARTICLE V
DISBURSEMENT AND PAYMENT
Section 5.01. Pro Rata Treatment. All payments of
interest and principal on the Loans, each payment of the Revolving Credit
Commitment Fee and (except as provided in Section 5.04(c)) each reduction of the
Total Revolving Credit Commitment shall be apportioned (i) in the case of
payments relating to Revolving Credit Commitments or Revolving Credit Loans,
among the Revolving Credit Lenders pro rata in the proportion which their
respective outstanding revolving Credit Loans bear to all outstanding Revolving
Credit Loans, or if no Revolving Credit Loans are outstanding, their
outstanding Revolving Credit Commitments bear to the Total Revolving Credit
Commitment, and (ii) in the case of payments relating to Term Loans, pro rata
among the Term Loan Lenders in the proportion which their
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<PAGE> 45
respective outstanding Revolving Credit Loans bear to all outstanding Revolving
Credit Loans, or if no Revolving Credit Loans are outstanding, their outstanding
Revolving Credit Commitments bear to the Total Revolving Credit Commitment, and
(ii) in the case of payments relating to Term Loans, pro rata among the Term
Loan Lenders in the proportion which their respective outstanding Term Loans
bear to all outstanding Term Loans (in the case of payments relating to the Term
Loan Amounts or Term Loans). Except as permitted pursuant to Section 5.05, the
Revolving Credit Notes or portions thereof as to which an election has been made
pursuant to Section 4.03 and the Term Notes or portions thereof as to which an
election has been made pursuant to Section 4.03 hereof shall at all times bear
interest on the same basis (as ABR Loans and Eurodollar Loans), and the Interest
Periods applicable thereto, if any, shall be of the same duration.
Section 5.02. Method of Payment. All payments
hereunder and under the Notes shall be made to the Agent for the account of the
Lender or Lenders entitled thereto in lawful money of the United States and in
immediately available funds at the Principal Office of the Agent at or prior to
1:00 P.M., New York City time, on the date when due. Any payment received after
1:00 P.M., New York City time, shall be deemed to have been made on the next
succeeding Business Day.
Section 5.03. Compensation for Losses. In the event
that the Borrower makes any prepayment of any Eurodollar Loan hereunder
(including upon acceleration of the Notes as provided in Section 9.01) or in the
event an Election Date selected pursuant to Section 4.03 falls on a day other
than the last day of the Interest Period for the amount so prepaid or as to
which an election is made, or in the event the Borrower revokes any notice given
under Section 2.02 or 4.03 with respect to a Eurodollar Loan, the Borrower shall
pay to each Lender upon its demand an amount which will compensate such Lender
for any loss or premium or penalty reasonably incurred by such Lender (or any
Participant in the related Loan) as a result of such prepayment, election or
revocation of notice in respect of funds obtained for the purpose of making or
maintaining such Lender's loans, or any part thereof. Such compensation shall
include, without limitation, an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so paid or prepaid, or
not borrowed, for the period from the date of such payment or prepayment or
failure to borrow to the last day of such
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<PAGE> 46
Interest Period (or, in the case of a failure to borrow, the Interest Period
that would have commenced on the date of such failure to borrow), in each case
at the applicable rate of interest for such Loan provided for herein (excluding,
however, the Applicable Margin included therein) over (ii) the amount of
interest (as reasonably determined by such Lender or Participant) which would
have accrued to such Lender or Participant on such amount by placing such amount
on deposit for a comparable period with leading banks in the London interbank
market; provided that such Lender shall have delivered to the Borrower, within
60 days after the date of such payment or prepayment or failure to borrow, a
certificate as to the amount of such loss or expense, which certificate shall
set forth in reasonable detail the basis for such loss or expense and shall be
conclusive in the absence of manifest error.
Section 5.04. Taxes, Reserves and Additional
Costs.
(a) Taxes, Reserves and Additional Costs. In the
event that any present or future applicable law, rule or regulation, or any
change therein or in the interpretation or administration thereof, including any
formal request, guideline, directive or policy (whether or not having the force
of law) by any Governmental Authority charged with the administration or
interpretation thereof, or compliance by any Lender with any formal request,
guideline, directive or policy of any such Governmental Authority:
(i) subjects any Lender or its applicable
lending office to any tax, duty, levy, impost, deduction, fee, liability or
other charge (including the imposition of any withholding tax so long as such
Lender has complied with Section 10.10) with respect to any Loan or any part of
its Revolving Credit Commitment (other than any tax on or measured by the
overall net income of such Lender) (individually a "Tax" and collectively
"Taxes"); or
(ii) changes the basis of taxation of payments to
any Lender through its applicable lending office of principal of, or interest
on, any Loan made by such Lender with respect to its Revolving Credit Commitment
or of any
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<PAGE> 47
other amounts payable hereunder, or any combination of the foregoing or subjects
any such payment to any Tax (including the imposition of any withholding tax so
long as such Lender has complied with Section 10.10) (other than any tax on or
measured by the overall net income of such Lender); or
(iii) imposes, modifies or deems applicable any
reserve, capital adequacy, deposit or similar requirement against any assets
held by, deposits with or for the account of, or loans or commitments by, or any
acquisition of funds by or for the account of an office of any Lender or its
holding company in connection with any Loan, including, without limitation,
Statutory Reserves (as defined below); or
(iv) imposes upon any Lender any other condition
with respect to any Loan, any part of such Lender's Revolving Credit Commitment,
or this Agreement;
and the result of any of the foregoing (taking such Lender's policies into
account) is to (x) increase the cost to such Lender of making, funding or
maintaining any Loan or any part of its Revolving Credit Commitment hereunder or
(y) reduce the amount of any payment (whether of principal, interest or
otherwise) received or receivable by such Lender or (z) require such Lender or
its holding company to deposit any reserve, increase its capital or make any
payment on or calculated by reference to any Loan made or sum received by it, or
any part of its Revolving Credit Commitment, in each case by an amount which
such Lender in its judgment reasonably deems material; then
(A) such Lender shall promptly notify the
Borrower and the Agent of the happening of such
event;
(B) such Lender shall promptly, and in any case
within 90 days of the date when it becomes aware of the happening
of such an event, deliver to the Borrower and the Agent a
certificate, executed by an authorized officer of such Lender and
delivered by a relationship officer thereof, stating the change
which has occurred or the
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reserve requirements or other conditions which have been imposed
or the formal request, direction or requirement with which such
Lender has complied or will comply, or Tax to which it has or
will become subject, together with the date thereof, the amount
of such increased costs, reduction or payment (including any
interest, penalties or expenses incurred or to be incurred in
connection with the payment of any Tax), the way in which such
amount has been calculated, and shall certify that this is the
Lender's standard method of calculating such amount, that such
amount is or will be calculated in a similar way for other
borrowers of the Lender under similar circumstances, that
compliance with such formal request, direction or requirement
does not result in such Lender treating the Borrower in a manner
inconsistent with its treatment of other borrowers which are
subject to similar provisions, and that its method of allocating
any such costs, reductions or payments is fair and reasonable;
and
(C) the Borrower shall promptly pay to the Agent
for transfer to such affected Lender such amount or amounts set
forth in such certificate as will compensate such Lender for such
additional costs, reduction or payment.
For purposes of this Section 5.04(a), "Statutory
Reserves" shall mean, with respect to a LIBOR Loan, the quotient (expressed as a
decimal, rounded to the nearest 1/100 of 1%) obtained by dividing (i) the number
one by (ii) one minus the aggregate of the reserve percentages expressed as a
decimal established by the Board of Governors of the Federal Reserve System for
Eurocurrency Liabilities as prescribed under Regulation D of said Board of
Governors.
The certificate of the affected Lender as to the
additional amounts payable pursuant to this Section 5.04(a) delivered to the
Borrower shall contain in reasonable detail the basis upon which such additional
amounts have been calculated and shall be presumed correct absent manifest
error. The provisions of this Section 5.04(a) shall be
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applicable to the Borrower and the affected Lender regardless of any possible
contention of invalidity or inapplicability of the law, regulation or condition
which has been imposed. Notwithstanding the foregoing, the Borrower will not be
required to reimburse any Lender for any increased costs, reductions or payments
under this Section 5.04(a) in respect of a period prior to 90 days preceding the
date of request, unless the applicable law or regulation is imposed
retroactively. In the case of a law or regulation which is retroactive in
effect, such notice shall be provided to the Borrower not later than 90 days
from the date that such Lender reasonably should have learned of such law or
regulation, and the Borrower's obligation to compensate such Lender for such
increased cost or reduction is contingent upon the provision of such timely
notice (but any failure by such Lender to provide such timely notice shall not
affect the Borrower's reimbursement obligations with respect to (a) costs or
reduction incurred from the date as of which the law or regulation is effective
to the date that is 90 days after such Lender reasonably should have learned of
such law or regulation and (b) costs or reductions incurred following the
provision of such notice). No failure on the part of any Lender to demand
compensation under this Section 5.04(a) shall constitute a waiver of its right
to demand such compensation on any other occasion in connection with any other
similar or dissimilar event. If the affected Lender shall subsequently recoup
costs for which such Lender has theretofore been compensated by the Borrower,
such Lender shall promptly remit to the Borrower the amount of the recoupment.
Upon receipt of any certificate delivered in
accordance with this Section 5.04(a), the Borrower shall execute and deliver to
any Lender upon its request such further instruments as may be necessary or
desirable to give full force and effect to any payment required as set forth in
such certificate, including, without limitation, a new Note of the Borrower to
be issued in exchange for any Note theretofore issued.
The Borrower shall also hold each Lender harmless
and indemnify it for any stamp or other taxes (other than any tax on or measured
by the overall net income of such
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<PAGE> 50
Lender) with respect to the preparation, execution, delivery, recording,
performance or enforcement of the Credit Documents (all of which shall be
included in "Taxes"). The Borrower shall deliver to the Agent certificates or
other valid vouchers for all Taxes or other charges deducted from or paid with
respect to payments made by the Borrower hereunder.
(b) Lending Office Designations. Before giving any
notice to the Borrower pursuant to this Section, a Lender shall, if possible,
designate a different lending office if such designation will avoid the need for
giving such notice and will not, in the judgment of the Lender, be otherwise
disadvantageous to the Lender.
(c) Replacement. Notwithstanding anything in this
Agreement to the contrary, upon delivery to the Borrower by a Lender of a notice
under Section 5.04 or 5.05 hereof or a request for compensation or additional
amounts pursuant to Section 5.04(a), the Borrower shall be entitled, at any time
within 60 days of the receipt of such notice, to (i) pay all amounts then owing,
whether or not due, to such Lender under this Agreement including the
compensation or additional amounts so requested and (ii) either (A) replace such
Lender with another bank reasonably acceptable to the Agent or (B) reduce the
Total Revolving Credit Commitment provided under this Agreement by terminating
in whole or in part the Revolving Credit Commitment of such Lender. Any
reduction of the Total Revolving Credit Commitment pursuant to subclause (B)
above shall not affect the aggregate dollar amount of the Revolving Credit
Commitments of the remaining Lenders under this Agreement.
Section 5.05. Unavailability. If at any time any
Lender shall have determined in good faith (which determination shall be
conclusive in the absence of manifest error) that the making or maintenance of
any part of such Lender's Eurodollar Loans has been made impracticable or
unlawful because of compliance by such Lender in good faith with any law or
guideline or interpretation or administration thereof by any official body
charged with the interpretation or administration thereof or with any request or
directive of such body (whether or not having the effect of law), because
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<PAGE> 51
U.S. dollar deposits in the amount and requested maturity of such Eurodollar
Loan are not available to the Lender in the London Eurodollar interbank market
or because of any other reason, then the Agent, upon notification to it of such
determination by such Lender, shall forthwith advise the other Lenders and the
Borrower thereof. Upon such date as shall be specified in such notice and until
such time as the Agent, upon notification to it by such Lender, shall notify the
Borrower and the other Lenders that the circumstances specified by it in such
notice no longer apply, (i) notwithstanding any other provision of this
Agreement, such Lender's portion of such Eurodollar Loan shall automatically and
without requirement of notice by the Borrower be converted to an ABR Loan and
(ii) the obligation of only such Lender to allow borrowing, elections and
renewals of Eurodollar Loans shall be suspended, and, if the Borrower shall in a
notice of borrowing or election request that such Lender make a Eurodollar Loan,
the loan requested to be made by such Lender shall instead be made as an ABR
Loan.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties.
Borrower and, to the extent any of the following representations are applicable
to IP-IV Capital, IP-IV Capital, represents and warrants to the Lenders that
after giving effect to transactions to be completed on the Closing Date, as of
the Closing Date:
(a) Good Standing, Power and Partnership
Interests.
(i) The Borrower is a limited partnership, duly
organized and validly existing, in good standing, under the laws of the
jurisdiction of its organization, and has the power to own its property and to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such
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qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. The Borrower is classified as a partnership for
Federal tax purposes and as a limited partnership for state income tax purposes
and is not taxable as an association.
(ii) The general partners of the Borrower are
limited partnerships, duly organized and validly existing, in good standing,
under the laws of the jurisdiction of their organization, and each has the power
to own its property, to carry on its business as now being conducted and to act
as a general partner of the Borrower and is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the properties
owned or leased by it therein or in which the transaction of its business,
including without limitation, acting as a general partner of the Borrower makes
such qualification necessary, except where the failure to be so qualified would
not have a Material Adverse Effect. The general partners of the Borrower are
classified as partnerships for Federal income tax purposes and as limited
partnerships for state income tax purposes and none of them are taxable as an
association.
(iii) IP Tennessee and IP-Southeast are general
partnerships, each duly organized and validly existing, under the laws of the
jurisdiction of their organization, and each has the power to own its property,
to carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. Each of IP Tennessee and
IP-Southeast is classified as a partnership for Federal income tax and state
income tax purposes and none of them is taxable as an association.
(iv) IP West Tennessee is a limited partnership,
duly organized and validly existing, in good standing, under the laws of the
jurisdiction of its organization, and it has the power to own its property, to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the
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character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect. IP West
Tennessee is classified as a partnership for Federal income tax purposes and as
a limited partnership for state income tax purposes and none of them is taxable
as an association.
(v) RMH and RMG are corporations, each duly
incorporated and validly existing, in good standing, under the laws of the
jurisdiction of their incorporation, and each has the power to own its property,
to carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) IP-IV Capital, ICM IV and the Borrower. (i)
IP-IV Capital and ICM IV are the only partners of the Borrower. The partnership
interests of the Borrower which are owned by IP-IV Capital and ICM IV are
authorized by the Borrower Partnership Agreement and are free and clear of all
Liens other than the Liens created on the date hereof by the Hypothecation
Agreements.
(ii) Except as provided in the Borrower Partnership
Agreement or the partnership agreements, articles of incorporation or by-laws,
as the case may be, of IP-IV Capital, ICM IV, IP-Southeast, IP West Tennessee,
IP Tennessee, AVR, RMG, RMH, DD Cable Partners, DD Cable Holdings or IP II or
the Shareholders' Agreement, there are no agreements or understandings with
respect to the voting of the partnership or other equity interests of such
entities; and there are no existing options, warrants, calls, convertible
securities, commitments or agreements of any character calling for the issuance
of additional partnership or other equity interests by any such entity, or for
the transfer of any partnership interest or other equity interest to any Person
other than the Shareholders' Agreement.
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(c) Subsidiaries. (i) IP-Southeast, IP Tennessee,
IP West Tennessee, RMH, RMG, AVR, DD Cable Partners, DD Cable Holdings and IP II
are the only Subsidiaries of the Borrower on the Closing Date.
(ii) After giving effect to the transactions
contemplated hereunder, the partnership interests and other equity interests in
the Restricted Subsidiaries (which for purposes of this clause (ii) shall
include IP-Southeast) are owned free and clear of all Liens other than Liens
created on the date hereof by the Hypothecation Agreements.
(d) Authority. (i) The Borrower has full power and
authority to execute, deliver and perform each of the Credit Documents and each
of the Related Documents to which it is a party, to grant to the Lenders the
security interests and Liens described therein, to make the borrowings
contemplated hereby, to execute and deliver the Notes and to incur the
obligations provided for herein and therein, all of which have been duly
authorized by all proper and necessary partnership action of the Borrower and
its partners. No consent or approval of the partners of the Borrower is required
as a condition to the validity or performance of, or the exercise by the Lenders
or the Agent of any of their rights and remedies under, the Credit Documents to
which it is a party (other than the execution of such Credit Documents by the
general partner(s) of the Borrower), except for such consents and approvals
which have been obtained and are in full force and effect.
(ii) Each Restricted Subsidiary has full power
and authority to execute, deliver and perform each of the Credit Documents and
each of the Related Documents to which it is a party, to grant to the Lenders
the security interests and Liens described therein and to incur the obligations
provided for therein, all of which have been duly authorized by all proper and
necessary partnership action of such Restricted Subsidiary and its partners or
shareholders, as the case may be. No consent or approval of the partners or
shareholders of any Restricted Subsidiary is required as a condition to the
validity or performance of, or the exercise by the Lenders or the Agent of any
of their rights and remedies under, the Credit Documents to which the
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Restricted Subsidiaries are a party (other than the execution of such Credit
Documents by the partner(s) or authorized officers of the Restricted
Subsidiaries), except for such consents and approvals which have been obtained
and are in full force and effect.
(iii) IP-IV Capital has full power and authority to
execute, deliver and perform its obligations under this Agreement and to incur
the obligations provided for herein, all of which have been duly authorized by
all proper and necessary partnership action of IP-IV Capital and its general
partners. No consent or approval of the general partners of IP-IV Capital is
required as a condition to the validity or performance of, or the exercise by
the Lenders or the Agent of any of their rights and remedies under, this
Agreement (other than the execution of this Agreement by the general partner(s)
of IP-IV Capital), except for such consents and approvals which have been
obtained and are in full force and effect.
(iv) ICM IV has full power and authority to
execute, deliver and perform each of the Credit Documents and each of the
Related Documents to which it is a party, to grant to the Lenders the security
interests and Liens described therein and to incur the obligations provided for
therein, all of which have been duly authorized by all proper and necessary
partnership action of ICM IV and its partners. No consent or approval of the
partners of ICM IV is required as a condition to the validity or performance of,
or the exercise by the Lenders or the Agent of any of their rights and remedies
under the Credit Documents to which ICM IV is a party (other than the execution
of such Credit Documents by the partner(s)) except for such consents and
approvals which have been obtained and are in full force and effect.
(e) Authorizations. All material authorizations,
consents, approvals, registrations, notices, exemptions and licenses with, to or
from Governmental Authorities and other Persons which are necessary in
connection with the acquisition of the Acquisition Systems, the borrowings
hereunder, the grant of the security interests in and Liens on the collateral
described in the Hypothecation Agreements,
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the Guarantees, the execution and delivery of the Credit Documents and the
Related Documents by the Borrower, IP-IV Capital, ICM IV and any Restricted
Subsidiary, the performance by the Borrower, IP-IV Capital, ICM IV and the
Restricted Subsidiaries of their respective obligations hereunder and thereunder
and the exercise by the Agent and the Lenders of their remedies hereunder and
thereunder have been effected or obtained and are in full force and effect.
(f) Binding Agreement. This Agreement, each of the
other Credit Documents (other than the Notes) and each Related Document executed
on or prior to the date hereof to which the Borrower, IP-IV Capital, ICM IV or
any Restricted Subsidiary is a party constitutes, and the Notes and other Credit
Documents and Related Documents executed after the date hereof, when executed
and delivered pursuant hereto for value received, will constitute, the valid and
legally binding obligations of the Borrower, IP-IV Capital, ICM IV or any
Restricted Subsidiary, as the case may be, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(g) Litigation. Other than proceedings affecting
the cable television industry generally, there are no proceedings,
investigations or labor controversies pending or, so far as the Borrower knows,
threatened before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if there is a reasonable
possibility of a determination adverse to the interests of IP-IV Capital, ICM
IV, the Borrower or any Restricted Subsidiary, could reasonably be expected to
have a Material Adverse Effect or which relates to any Credit Document or
Related Document (other than immaterial litigation relating to any Acquisition
Systems Agreement) or the transactions contemplated hereby or thereby.
Neither the Borrower, IP-IV Capital, ICM IV nor any
Restricted Subsidiary is in default under or in violation of any Order of any
court, arbitrator or Governmental Authority or of any statute or law or of any
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rule or regulation of any Governmental Authority, which default or violation has
or might have a Material Adverse Effect; and none of them is subject to or a
party to any Order of any court or Governmental Authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters. As used
herein, the term "Order" includes any order, writ, injunction, decree, judgment,
award, determination or written direction or demand of any court, arbitrator or
Governmental Authority.
(h) No Conflicts. There is no statute, regu-
lation, rule, order or judgment, and no provision of any agreement or instrument
binding on IP-IV Capital, the Borrower, its partners or a Restricted Subsidiary
or affecting their respective properties (including each System previously
acquired by the Borrower or a Restricted Subsidiary) and no provision of the
Borrower Partnership Agreement or the partnership agreement or by-laws, as the
case may be, of IP-IV Capital or any of the Restricted Subsidiaries or any
general partner or shareholder thereof which would prohibit, or in any material
way be inconsistent with or prevent the execution, delivery, or performance of
the terms of any Credit Document or any Related Document or result in or require
the creation or imposition of any Lien (other than Permitted Encumbrances) on
any of the properties of the Borrower, IP-IV Capital or any of the Restricted
Subsidiaries (including each System previously acquired by Borrower or a
Restricted Subsidiary) as a consequence of the execution, delivery and
performance of any Credit Document or Related Document or the transactions
contemplated hereby and thereby (including the purchase or other acquisition of
the Acquisition Systems). The execution, delivery and performance by the
Borrower, IP-IV Capital and the Restricted Subsidiaries of each Credit Document
and Related Document to which they are a party and the execution, issuance,
delivery and performance of the Notes by the Borrower do not, and will not, as
the case may be, (i) violate any provision of law applicable to the Borrower,
IP-IV Capital or any Restricted Subsidiary or any of its general partners or
shareholders, the Borrower Partnership Agreement or the partnership agreement of
any of the Borrower's general partners or the partnership agreement or
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by-laws of any Restricted Subsidiary, or any order, judgment or decree of any
court or other agency of government binding on the Borrower, any of its general
partners or any Restricted Subsidiary, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
agreement or instrument binding on the Borrower or any of its general partners
or any Restricted Subsidiary, or affecting their respective properties, or (iii)
require any approval of partners or shareholders (other than the execution
thereof by the partner(s) or authorized officer(s) of the Borrower or any
Restricted Subsidiary) or any approval or consent of any Person under any
agreement or instrument binding on the Borrower or any of its partners or any
Restricted Subsidiary, or affecting their respective properties (including each
System previously acquired by Borrower), other than approvals which have been
previously obtained and are in full force and effect, and except for conflicts,
inconsistencies, Liens, violations, breaches, approvals or consents which
individually, or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(i) Financial Condition. There has heretofore been delivered
to the Lenders a pro forma consolidated income statement, a pro forma
consolidated balance sheet and financial projections of the Borrower, in each
case, dated as of, and for the three months ended March 31, 1996, and giving
effect to the acquisition of all of the Systems listed on Schedule II, the
Acquisition Systems and the Viacom Nashville System and the financing thereof,
certified by a Responsible Person. All material assumptions with respect to such
pro forma balance sheet are set forth therein. Such pro forma consolidated
income statement, pro forma consolidated balance sheet and financial projections
were prepared in good faith and the pro forma consolidated income statement and
pro forma consolidated balance sheet were prepared in accordance with Regulation
S-X as promulgated pursuant to the Securities Act of 1933, as amended.
(j) Taxes. The Borrower, IP-IV Capital and each Restricted
Subsidiary have paid, or have made adequate provision for the payment of, all
taxes shown to be due and
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payable on any assessment made against the Borrower, IP-IV Capital or any
Restricted Subsidiary or any of their respective properties and all other taxes,
assessments, fees, liabilities or other charges imposed on the Borrower, IP-IV
Capital or any Restricted Subsidiary or any of their respective properties by
any Governmental Authority, except for any taxes, assessments, fees, liabilities
or other charges which are being contested in good faith and for which reserves
which are adequate under GAAP have been established.
(k) Margin Regulations. No part of the proceeds of any Loan
will be used to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, or extend credit to others for the purpose
of purchasing or carrying, any "margin security" as defined in Regulation G or
Regulation U of the Board of Governors of the Federal Reserve System. The making
of the Loans hereunder, the use of the proceeds thereof as contemplated hereby
and the security arrangements contemplated hereby and by the Hypothecation
Agreements and the Guarantees will not violate or be inconsistent with any of
the provisions of Regulation U, G, T or X of the Board of Governors of the
Federal Reserve System.
(l) Disclosure. None of the information relating to the
Borrower, any Acquisition System, the AVR Transactions, the DD Cable
Transactions, the Nashville Closing or any System delivered in writing to any
Arranging Agent or any Lender in connection with the negotiation, execution and
delivery of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, except that with respect to the projections contained in such
information, the Borrower hereby represents and warrants that such projections
were prepared on a reasonable basis and in good faith by the Borrower.
(m) Title to Properties. The Borrower and the Restricted
Subsidiaries have good, valid and marketable title to, or valid leasehold
interests in, all properties
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and assets as owned on the Closing Date and all properties and assets thereafter
acquired in connection with the purchase of any System, except for such
immaterial properties and assets as have been disposed of in the ordinary course
of business and except for such defects in title which would not have a Material
Adverse Effect. All such assets and properties are free and clear of all Liens
and encumbrances except Permitted Encumbrances, and all consents and approvals
required for the assignment and transfer of each material leasehold interest
have been obtained.
(n) Compliance with ERISA. (i) Neither the Borrower nor any
Restricted Subsidiary has engaged in a transaction with respect to any Plan
which could reasonably be expected to subject the Borrower or any Restricted
Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount that could have a Material Adverse Effect.
(ii) No Plan had an accumulated funding deficiency, whether or
not waived, as of the last day of the most recent plan year of such Plan.
(iii) No liability under Sections 4062, 4063 or 4064 of ERISA
has been or is expected by the Borrower to be incurred by it or any Restricted
Subsidiary with respect to any Plan which is a single employer plan in an amount
that would have a Material Adverse Effect. Neither the Borrower nor any
Restricted Subsidiary has incurred or expects to incur any withdrawal liability
with respect to any Plan which is a multiemployer plan in an amount which could
have a Material Adverse Effect.
(iv) Insofar as the representations and warranties of the
Borrower and the Restricted Subsidiaries contained in subsection (i) and (ii)
relate to any Plan which is a multiemployer plan, such representations and
warranties are made to the best knowledge of the Borrower and the Restricted
Subsidiaries. As used in this Section , (A) "accumulated funding deficiency"
shall have the meaning assigned to such term in Section 412 of the Code and
Section 302 of ERISA; (B) "multiemployer plan" and "plan year" shall have the
respective meanings assigned to such terms in
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Section 3 of ERISA; (C) "single employer plan" shall have the meaning assigned
to such term in Section 4001 of ERISA; (D) "withdrawal liability" shall have the
meaning assigned to such term in Part I of Subtitle E of Title IV of ERISA.
(o) Conduct of Business. The Borrower, IP-IV Capital and the
Restricted Subsidiaries hold all authorizations, consents, approvals,
registrations, franchises, rights pursuant to Pole Attachment Agreements,
licenses and permits, with or from Governmental Authorities and other Persons as
are required or necessary for them to own their respective properties and
conduct their respective businesses as now conducted and as currently proposed
to be conducted, except for those which the failure to so hold, in any one case
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(p) Compliance with Laws and Organizational Documents. None of
the Borrower, IP-IV Capital, ICM-IV or any Restricted Subsidiary is in violation
of (i) any law, statute, rule, regulation, or order of any Governmental
Authority (including, without limitation, Environmental Laws) applicable to any
of them or any of their respective properties or assets except for such
violations which, individually and in the aggregate, could not reasonably be
expected to have a Material Adverse Effect or (ii) their respective partnership
agreements, articles of incorporation, by-laws or other organizational
documents.
(q) Government Regulation. None of Borrower, IP-IV Capital,
ICM-IV or any Restricted Subsidiary is or will be, after giving effect to the
transactions contemplated by the Credit Documents and the Related Documents and
the receipt of and use of Loans to be made hereunder, (i) an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, or (ii) subject to
regulation under the Public Utility Holding Company Act of 1935 or the Federal
Power Act or (iii) subject to any foreign, federal, state or local statute or
regulation limiting their respective ability to incur indebtedness for Borrowed
Money, pledge assets as collateral for such indebtedness or guarantee such
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indebtedness, as contemplated by any Credit Document or Related Document.
(r) Documents. Each of the representations and warranties
given by or with respect to the Borrower, IP-IV Capital or any Restricted
Subsidiary in the Related Documents is true and correct in all material
respects, and each of the representations and warranties given in the Related
Documents by or with respect to the other parties thereto is, to the best of the
Borrower's knowledge, true and correct in all material respects. There has been
no material amendment, modification or waiver of the terms of any Related
Document since the initial execution thereof, other than such amendments,
modifications or waivers previously consented to in writing by the Required
Lenders. None of the Borrower, IP-IV Capital or any Restricted Subsidiary or, to
the best of the Borrower's knowledge, any other Person is in default of any of
its material obligations under any of the Related Documents, and each of the
Related Documents is in full force and effect.
(s) Hypothecation Agreements. The provisions of the
Hypothecation Agreements are effective to create in favor of the Lenders a
valid, binding and enforceable security interest or Lien in all right, title and
interest of the pledgors under the Hypothecation Agreements in the collateral
described therein, and shall, upon proper recording or filing with the proper
state and county authorities or delivery to the Agent of the Intercompany Notes,
constitute a fully perfected first and prior security interest, Lien or
mortgage, in all right, title and interest of the pledgors under the
Hypothecation Agreements in such collateral, superior in right to any liens
except for Liens, if any, permitted to be prior hereunder or under the
Hypothecation Agreements, existing or future except, with respect to future
Liens, as otherwise provided in the applicable Uniform Commercial Code, which
the Borrower or any third Person may have against such collateral or interests
therein.
(t) Environmental Protection. To the Borrower's knowledge, all
real property directly or indirectly owned or leased by the Borrower is free of
contamination from any
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substance or constituent thereof, currently identified or listed as hazardous or
toxic pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq., or any other Environmental Laws, that
could result in the incurrence of material liabilities, or any other substance
which has in the past or could at any time in the future cause or constitute a
health, safety or environmental hazard to any person or property, including
asbestos in any building, petroleum products, PCBs, pesticides, or radioactive
materials. To the Borrower's knowledge, based on reasonable investigation, the
Borrower has not caused or suffered to occur any release of any Contaminant into
the environment or any other conditions that could result in the incurrence of
material liabilities nor any material violations of any Environmental Laws. To
the Borrower's knowledge, based on reasonable investigation, the Borrower has
not caused or suffered to occur any condition on any of the Borrower's property
that could give rise to the imposition of any lien under the Environmental Laws.
To the Borrower's knowledge, based on reasonable investigation, the Borrower is
not engaged in any manufacturing or any other operations which have a material
effect on the Borrower, other than the use of petroleum products for vehicles,
that require the use, handling, transportation, storage or disposal of any
Contaminant, where such operations require permits or are otherwise regulated
pursuant to the Environmental Laws.
(u) Insurance. All of the properties and operations of the
Borrower and each Restricted Subsidiary of a character usually insured by
companies of established reputation engaged in the same or a similar business
similarly situated are insured in customary amounts, by financially sound and
reputable insurers, against loss or damage of the kinds and in amounts
customarily insured against by such Persons, and the Borrower and the Restricted
Subsidiaries carry, with such insurers in customary amounts, such other
insurance, including larceny, embezzlement or other criminal misappropriation
insurance and business interruption insurance, as is usually carried by
companies of established reputation engaged in the same or a similar business
similarly situated.
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(v) Material Contracts. None of the Borrower, IP-IV Capital or
any Restricted Subsidiary is a party to, and none of them and none of their
respective properties are subject to or bound by, any agreement or instrument
(other than the Credit Documents and the Related Documents) which (i) materially
restricts their respective abilities to conduct business or (ii) could
reasonably be expected to have a Material Adverse Effect.
(w) Performance of Agreements. None of the Borrower, IP-IV
Capital or any Restricted Subsidiary is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any contractual obligation of the Borrower, IP-IV Capital or any
Restricted Subsidiary, as the case may be, including, without limitation, the
Related Documents, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect.
(x) Pole Attachment Agreements, Franchises, Licenses,
Approvals of Regulatory Authorities, etc. Each Franchise necessary for the
operation of the Systems is (or, prior to the acquisition of any Acquisition
System by the Borrower or any Restricted Subsidiary, as the case may be, will
be) in full force and effect and no material default has (or at the time an
Acquisition System is acquired will have) occurred and is continuing under or in
respect of any of the provisions of any such Franchise except where such failure
could not reasonably be expected to have a Material Adverse Effect. Each Pole
Attachment Agreement necessary for the operation of the Systems is (or, prior to
the acquisition of any Acquisition System by the Borrower or any Restricted
Subsidiary, as the case may be, will be) in full force and effect and no
material default has occurred and is continuing under or in respect of any of
the provisions of any such Pole Attachment Agreement, except to the extent that
the absence of such Pole Attachment Agreement or such default, individually or
in the aggregate, does not have a Material Adverse Effect. No approval,
application, filing, registration, consent or other action of any Governmental
Authority is required to enable the Borrower or any
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Restricted Subsidiary, as the case may be, to act pursuant to any such Pole
Attachment Agreement or Franchise (except for the consents, authorizations,
notices or other approvals referred to below). Neither the Borrower nor any
Restricted Subsidiary has received any notice from the granting body, any other
Governmental Authority or any other Person with respect to, nor does the
Borrower or any Restricted Subsidiary have any knowledge of, any breach of any
covenant under, or any default with respect to, or the termination, or
threatened termination, for any reason of any such Pole Attachment Agreement or
Franchise, which could have a Material Adverse Effect. The Borrower or a
Restricted Subsidiary, as appropriate, will own or be licensed or otherwise have
the right to use all licenses, permits, patents, trademarks, service-marks,
trade names, copyrights, franchises, including authorizations and other rights
(including, without limitation, rights under Pole Attachment Agreements,
easement agreements, leases of real and/or personal property, right-of-way
agreements, railroad crossing agreements, multiple dwelling unit agreements,
programming agreements, transmission and retransmission agreements and
subscriber agreements that are necessary for the operation of any System by the
Borrower or such Restricted Subsidiary, except to the extent that the absence
thereof shall not have a Material Adverse Effect. The Borrower or a Restricted
Subsidiary, as appropriate, will own or be licensed or otherwise have the right
to use all Franchises that are necessary for the operation of each System. The
Borrower and each Restricted Subsidiary have complied in all material respects
in accordance with cable industry standards with the Copyright Act of 1976, as
amended, including (without limitation) filing the statements of account and
making the royalty payments specified in Section 111 therein.
(y) Systems. Set forth on Schedule II is a true and complete
list of all cable television systems owned by the Borrower or any Restricted
Subsidiary other than the Prime Houston Systems.
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ARTICLE VII
CONDITIONS OF LENDING
Section 7.01. Conditions to the Making of the Initial Loans.
The obligation of each Lender to make its Term Loan or its initial Revolving
Credit Loans or both hereunder is subject to the conditions precedent that:
(a) The Notes. The Agent on behalf of the Lenders shall have
received the Notes, as set forth in Section 2.03 hereof, duly executed by the
Borrower.
(b) Opinion of Agent's Counsel. The Agent shall have received
a favorable written opinion of Sullivan & Cromwell, counsel to the Agent, with
respect to documents received by the Lenders and such legal matters as it may
reasonably require.
(c) Opinion of Company Counsel. The Agent shall have received
a favorable written opinion of (i) Pillsbury Madison & Sutro LLP, counsel for
the Borrower, dated the date of the initial Borrowing Date, in substantially the
form of Exhibit F-1, (ii) Borrower's FCC counsel dated the date of the initial
Borrowing Date in substantially the form of Exhibit F-2 and (iii) Bruce Stewart,
Esq., General Counsel of Borrower dated the date of the initial Borrowing Date,
in substantially the form of Exhibit F-3.
(d) Hypothecation Agreements. The Agent on behalf of the
Lenders shall have received the Hypothecation Agreements, duly executed by the
pledgors thereunder granting in favor of the Lenders a first priority perfected
security interest in the collateral specified therein together with (i)
appropriate Financing Statements (Form UCC-1) under the Uniform Commercial Code
for all jurisdictions as may be necessary or, in the opinion of the Lenders,
advisable to perfect the security interests created by the Hypothecation
Agreements signed by the pledgors thereunder and in a form suitable for filing,
(ii) such other documents and instruments in a form suitable for recording or
filing, as necessary or, in the opinion of the Lenders, advisable to perfect the
security interests created
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by the Hypothecation Agreements, (iii) original stock certificates of RMG and
RMH with appropriate stock powers, (iv) all Intercompany Notes endorsed in blank
together with letters from the makers thereof substantially in the form of
Exhibit K and (v) evidence of the completion of such other actions necessary,
or, in the opinion of the Lenders, advisable to perfect the security interests
created by the Hypothecation Agreements.
(e) Guarantees. The Agent on behalf of the Lenders shall have
received Guarantees duly executed by each Guarantor.
(f) Opinions of Affiliates' Counsel. The Agent shall have
received opinions of Pillsbury Madison & Sutro LLP as to such matters relating
to the Hypothecation Agreements and the Guarantees delivered by such partners as
the Arranging Agents may reasonably request.
(g) Regulatory Approvals. Each consent, license, authorization
or approval required to be obtained as of the Closing Date in connection with
the execution, delivery, performance, validity and enforceability of this
Agreement, the other Credit Documents and the Related Documents, including
without limitation the security interests in the collateral created by the
Hypothecation Agreements, shall have been received and shall be in full force
and effect, and the Agent shall have received copies thereof.
(h) Related Documents. The Agent shall have received certified
copies of the Related Documents which shall be in form and substance reasonably
satisfactory to the Arranging Agents (except as otherwise set forth herein);
except for the Acquisition Systems Agreements, all representations and
warranties contained therein on the part of the Borrower, the pledgors under the
Hypothecation Agreements or the Guarantors shall be true and correct in all
respects and (except as permitted under Section 8.02(k)) no material condition
contained therein shall have been waived; all representations and warranties
contained in the Acquisition Systems Agreements shall be true and correct in all
material respects; and the Agent shall have received a copy of each opinion of
counsel delivered in connection with
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each of the Related Documents and each transaction contemplated thereby.
(i) Payment of Fees. The Agent shall have received payment of
all fees payable to it and the Lenders as of the Closing Date.
(j) Administration Agreements. The Borrower shall have entered
into the Administration Agreements and the Lenders shall have received a
certified copy thereof.
(k) Partnership Agreements. The Lenders shall have received
certified copies of the partnership agreement or by-laws, as the case may be,
for the Borrower, the partners of the Borrower, each Restricted Subsidiary and
each Unrestricted Subsidiary.
(l) Equity Contributions. (i) One or more of the general
and/or limited partners of IP-IV Capital (including, but not limited to, TCI or
its subsidiaries) shall have made equity contributions to IP-IV Capital having a
fair market value of not less than $240 million and IP-IV Capital shall have
made an equity contribution to the Borrower of not less than $240 million.
(m) Preferred Equity Contributions. General Electric Capital
Corporation shall have made preferred equity contributions to IP-IV Capital in
an amount equal to not less than $25 million.
(n) TCI Contributions. TCI or its subsidiaries shall have made
equity contributions to RMH in an amount equal to not less
than $12 million.
(o) IP-IV Capital Notes. IP-IV Capital and IPCC shall have
issued, on a joint and several basis, and sold the IP-IV Capital Notes in a
unregistered offering and (i) not less than $200 million less fees and expenses
applicable thereto shall be contributed as equity to Borrower; and (ii)
$88,755,546.75 of the proceeds of which shall be used by IP IV Capital to
establish the IP-IV Capital Escrow Account.
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(p) Acquisition Systems Agreements. The Agent shall have
received a copy of each Acquisition Systems Agreement, certified by the Borrower
as a true and correct copy.
(q) Systems. The Borrower or a Restricted Subsidiary shall own
each of the Systems set forth on Schedule II hereof and the Borrower or such
Restricted Subsidiary shall have acquired such cable television system(s) in
accordance with the terms of the relevant Acquisition Systems Agreement.
(r) Greenville/Spartanburg Contribution Agreement. The Agent
shall have received a copy of the Greenville/Spartanburg Contribution Agreement,
certified by the Borrower as a true and correct copy.
(s) IP Tennessee Loans. After giving effect to the
transactions contemplated herein, all IP Tennessee Loans shall have been paid in
full.
(t) RMG Bonds. All outstanding obligations of RMG under the
RMG Indentures shall have been defeased in accordance with the terms of the RMG
Indentures and the Agent shall have received a copy of an acknowledgement of the
trustee(s) under the RMG Indentures acknowledging that upon receipt of funds
sufficient to defease the obligations under the RMG Indentures the discharge of
RMG's obligations under the RMG Indentures will be accomplished, certified as
true and correct by the Borrower.
(u) Redemption of RMG Bonds. All arrangements necessary for
the redemption of the debt securities issued under the RMG Indentures by a date
no later than 50 days after the Closing Date shall have been made and the
Arranging Agents shall be satisfied that such arrangements are sufficient to
redeem such debt securities by such date.
(v) Total Consolidated Leverage Ratio. The Total Consolidated
Leverage Ratio shall not be greater than 7.5x.
(w) Other Security Arrangements. The Agent shall have received
executed Financing Statements and any amend-
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ments thereto under the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the opinion of the Arranging Agents, advisable to maintain the
security interests created by the Hypothecation Agreements.
(x) Equity Commitment. The Agent shall have received evidence
reasonably satisfactory to the Arranging Agents that one or more general and/or
limited partners of IP-IV Capital have delivered binding commitments to make
equity contributions to IP-IV Capital of not less than $95 million as of the
Nashville Closing to permit IP-IV Capital to thereupon make an equity
contribution of not less than $95 million to the Borrower.
Section 7.02. Conditions to the Making of Each Loan. The
obligation of each Lender to make each of its Loans (including its initial
Loans, but not the Borrower's conversion, election or renewal of an existing
Borrowing) hereunder is subject to the conditions precedent that:
(a) Compliance. On the Borrowing Date and after giving effect
to such requested Loan (i) there shall have occurred no Default or Event of
Default and (ii) the representations and warranties contained in Article VI
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made at the time of such
Loan. The Borrower's notice of borrowing pursuant to Section 2.02 hereof shall
be deemed to constitute a certification to the foregoing effect.
(b) Related Documents. The Agent shall have received copies of
each Related Document and any amendments or supplements thereto not previously
delivered to the Agent, certified as true and correct by the Borrower.
ARTICLE VIII
COVENANTS
Section 8.01. Affirmative Covenants. So long as the Borrower
may borrow hereunder and until payment in full
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of the Notes and performance of all other obligations of the Borrower hereunder,
the Borrower will:
(a) Financial Statements. Furnish to the Agent with sufficient
copies for each Lender (i) as soon as available but in no event more than 45
days after the end of each of the Borrower's first three fiscal quarters,
Consolidated balance sheets of the Borrower and the Restricted Subsidiaries as
of the close of such period and Consolidated statements of income and expense
and cash flows from the beginning of the then current fiscal year and from the
beginning of such fiscal quarter to the close of such period, certified by a
Responsible Person and accompanied by a certificate of said Responsible Person
providing a calculation of the Senior Leverage Ratio as of the end of such
fiscal quarter and stating whether or not the Applicable Margin should be
adjusted, stating whether any event has occurred which constitutes a Default or
Event of Default and as to which is no longer continuing and as to which the
Lenders have been notified and, if so, stating the facts with respect thereto,
and providing calculations which establish the Borrower's compliance with the
requirements or restrictions imposed by Sections 8.02(a), (f), (l), (m), (n),
(o) and (p); (ii) as soon as available but in no event more than 120 days after
the close of each of the Borrower's fiscal years beginning on or after January
1, 1997, copies of the annual audit report relating to the Borrower and its
Restricted Subsidiaries in reasonable detail satisfactory to the Arranging
Agents and prepared in accordance with GAAP by Price Waterhouse or other
independent public accountants satisfactory to the Arranging Agents, together
with financial statements consisting of Consolidated balance sheets of the
Borrower and the Restricted Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and expense, retained earnings, partners
capital and surplus and changes in cash flows of the Borrower and the
Restricted Subsidiaries for such fiscal year, together with a certificate of a
Responsible Person providing a calculation of the Senior Leverage Ratio and
stating whether or not the Application Margin should be adjusted, stating
whether any event has occurred which constitutes a Default or Event of Default
and, if so, stating the facts with respect thereto, and providing calculations
which establish
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the Borrower's compliance with the requirements or restrictions imposed by
Sections 8.02(a), (f), (l), (m), (n), (o) and (p); (ii) as soon as available but
in no event more than 120 days after the close of each of the Borrower's fiscal
years beginning on or after January 1, 1997, copies of the annual audit report
relating to the Borrower and its Restricted Subsidiaries in reasonable detail
satisfactory to the Arranging Agents and prepared in accordance with GAAP by
Price Waterhouse or other independent public accountants satisfactory to the
Arranging Agents, together with financial statements consisting of Consolidated
balance sheets of the Borrower and the Restricted Subsidiaries as of the end of
such fiscal year and Consolidated statements of income and expense, retained
earnings, partners capital and surplus and changes in cash flows of the Borrower
and the Restricted Subsidiaries for such fiscal year, together with a
certificate of a Responsible Person providing a calculation of the Senior
Leverage Ratio and stating whether or not the Applicable Margin should be
adjusted, stating whether any event has occurred which constitutes a Default or
Event of Default and, if so, stating the facts with respect thereto, and
providing calculations which establish the Borrower's compliance with the
requirements or restrictions imposed by Sections 8.02(a), (f), (l), (m), (n),
(o), and (p); (iii) as soon as available but in no event more than 120 days
after the close of each of the Borrower's fiscal years, a letter or opinion of
the accountants who prepared the annual audit report relating to the Borrower
and the Restricted Subsidiaries stating whether anything in such accountants'
examination has revealed the existence of any event which is continuing that
constitutes an Event of Default under Section 8.02(a), (f), (l), (m), (n), (o)
and (p), and, if so, stating the facts with respect thereto; (iv) upon request,
copies of any reports and management letters submitted to the Borrower by the
Borrower's accountants in connection with any annual or interim audit of the
books of the Borrower and the Restricted Subsidiaries, together with the
Borrower's responses thereto, if any; (v) as soon as available, copies of all
financial statements, reports, notices, and proxy statements sent by the
Borrower in a general mailing to all its partners; (vi) such additional
information, reports or statements as the Arranging Agents may from time to time
reasonably request. Upon receipt of any such financial statements or additional
information, the Agent shall forthwith forward copies thereof to each Lender;
and (vii) to the extent that the Borrower calculates Annualized Cash Flow or
Cash Flow through December 31, 1996 by reference to a three month period, an
unaudited income statement for such three month period.
(b) Taxes. Pay and discharge, and cause each Restricted
Subsidiary to pay and discharge, all taxes, assessments and governmental charges
upon it, its income and its properties prior to the date on which penalties are
attached thereto, unless and to the extent only that (i) such taxes, assessments
and governmental charges shall be contested in good faith and by appropriate
proceedings by the Borrower or a Restricted Subsidiary, as the case may be, (ii)
reserves which are adequate under GAAP are maintained by the Borrower or a
Restricted Subsidiary, as the case may be, with respect thereto, and (iii) any
failure to pay and discharge such taxes, assessments and governmental charges
will not have a Material Adverse Effect.
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(c) Insurance. Maintain, and cause each Restricted Subsidiary
to maintain, insurance with responsible insurance companies against such risks,
on such properties and in such amounts as is customarily maintained by similar
businesses.
(d) Existence. (i) Maintain, and subject to Section 8.02(d),
cause each Restricted Subsidiary to maintain, its partnership or corporate
existence in good standing and (ii) qualify and remain qualified to do business
as a foreign partnership or corporation in each jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business is such that the failure to qualify would have a
Material Adverse Effect. The Borrower will maintain, and will cause the
Restricted Subsidiaries to maintain, the same fiscal year during and after the
fiscal year ended December 31, 1995.
(e) Authorizations. Obtain, make and keep in full force and
effect, and cause each Restricted Subsidiary to obtain, make and keep in full
force and effect, all authorizations from and registrations with Governmental
Authorities that may be required for the validity or enforceability against the
Borrower, IP-IV Capital and the Restricted Subsidiaries of the Credit Documents.
(f) Maintenance of Records. For the Borrower and each of the
Restricted Subsidiaries, keep proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs. All determinations pursuant to this
subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountants as
shall then be regularly engaged by the Borrower.
(g) Inspection. Permit, and cause each of the Restricted
Subsidiaries to permit, the Arranging Agents and the Lenders to have one or more
of their officers and employees, or any other Person designated by the Arranging
Agents or the Lenders, upon prior reasonable notice visit and inspect any of the
properties of the Borrower and the
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Restricted Subsidiaries and to examine the minute books, books of account and
other records of the Borrower and the Restricted Subsidiaries and make copies
thereof or extracts therefrom, and discuss its affairs, finances and accounts
with its officers and, at the request of the Lenders, with the Borrower's
independent accountants, during normal business hours and at such other
reasonable times and as often as the Lenders may reasonably desire.
(h) Maintenance of Property, etc. Subject to Section 8.02(c),
(i) except for ordinary wear and tear, maintain, keep and preserve, and cause
each of the Restricted Subsidiaries to maintain, keep and preserve, all of their
respective properties in good repair, working order and condition and from time
to time make all necessary and proper repairs, renewals, replacements, and
improvements thereto, and (ii) maintain, preserve and protect, and cause each of
the Restricted Subsidiaries to maintain, preserve and protect, all Franchises,
licenses, copyrights, patents and trademarks (except where the failure so to do,
could not reasonably be expected to have a Material Adverse Effect) so that the
businesses carried on in connection therewith may be properly conducted at all
times.
(i) Conduct of Business. (i) Engage in, and cause each
Restricted Subsidiary to engage in, as their respective principal businesses the
direct or indirect ownership or operation of cable television systems, (ii)
preserve, renew and keep in full force and effect, and cause each Restricted
Subsidiary to preserve, renew and keep in full force and effect, all their
respective material contracts, (iii) preserve, renew and keep in full force and
effect and cause each Restricted Subsidiary to preserve, renew, and keep in full
force and effect, all its Franchises and licenses necessary or desirable in the
normal conduct of its business as now conducted, and (iv) comply with, and cause
each Restricted Subsidiary to comply with, the terms of all instruments which
evidence, secure or govern the indebtedness for Borrowed Money of the Borrower
or any Restricted Subsidiary and the rules and regulations of all Governmental
Authorities, including without limitation all rules and regulations promulgated
by the Federal Communications Commission or any successor Governmental
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Authority thereto, except where the failure to comply with clauses (i) through
(iv), in any one case or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(j) Notification of Events of Default and Adverse
Developments. Promptly notify the Agent upon the discovery by any Responsible
Person or officer of the Borrower of the occurrence of (i) any Default or Event
of Default hereunder; (ii) any event, development or circumstance whereby the
financial statements most recently furnished to the Agent fail in any material
respect to present fairly, in accordance with GAAP, the financial condition and
operating results of the Borrower and the Restricted Subsidiaries as of the date
of such financial statements; (iii) any litigation or proceedings that are
instituted or threatened (to the knowledge of the Borrower) against the Borrower
or any Restricted Subsidiary or any of their respective assets which, if there
is a reasonable possibility of a determination adverse to the interests of the
Borrower or any Restricted Subsidiary, could reasonably be expected to have a
Material Adverse Effect; and (iv) each and every event which would be an Event
of Default (or an event which with the giving of notice or lapse of time or both
would be an Event of Default) under any indebtedness of the Borrower or any
Restricted Subsidiary for Borrowed Money, such notice to include the names and
addresses of the holders of such indebtedness and the amount thereof; (v) the
repeal or revocation of any Franchise, Pole Attachment Agreement, authorization,
consent, exemption or license with, to or from Governmental Authorities and
other Persons which are necessary in connection with the operation of the
Systems owned by a Restricted Subsidiary, except, to the extent that the repeal
or revocation thereof, individually or in the aggregate, does not have a
Material Adverse Effect; (vi) any other development in the business or affairs
of the Borrower if the effect thereof could reasonably be expected to have a
Material Adverse Effect; in each case describing the nature thereof and the
action the Borrower proposes to take or cause to be taken with respect thereto.
Upon receipt of any such notice of default or adverse development, the Agent
shall forthwith give notice to each Lender of the details thereof. The Borrower
shall notify the Agent and the
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Lenders of any and all amendments, modifications and waivers under any and all
Related Documents promptly following such amendments, modifications and waivers.
(k) ERISA. Furnish to the Lenders:
(i) within ten days after a Responsible Officer knows that
any "reportable event" (as defined in Section 4043(b) of ERISA), other
than a reportable event for which the 30-day notice requirement has
been waived by the PBGC, has occurred with respect to a Pension Plan, a
statement setting forth details as to such reportable event and the
action proposed to be taken with respect thereto;
(ii) within ten days after receipt thereof, a copy of any
notice that the Borrower or any member of the ERISA Group may receive
from the PBGC relating to the intention of the PBGC to terminate any
Pension Plan or to appoint a trustee to administer any Plan;
(iii) within ten days after filing with any affected party
(as such term is defined in Section 4001 of ERISA) of a notice of
intent to terminate a Pension Plan, a copy of such notice and a
statement setting forth the details of such termination, including the
amount of liability, if any, of the Borrower or any member of the ERISA
Group under Title IV of ERISA;
(iv) within ten days after the adoption of an amendment to
a Pension Plan if, after giving effect to such amendment, the Pension
Plan is a plan described in Section 4021(b) of ERISA, a statement
setting forth the details thereof;
(v) within 30 days after withdrawal from a Pension Plan
during a plan year for which the Borrower or any member of the ERISA
Group could be subject to liability under Section 4063 or 4064 of
ERISA, a statement setting forth the
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details thereof, including the amount of such liability;
(vi) within 30 days after cessation of operations by the
Borrower or any member of the ERISA Group at a facility under the
circumstances described in Section 4062(e) of ERISA, a statement
setting forth the details thereof, including the amount of liability of
the Borrower or a member of the ERISA Group under Title IV of ERISA;
(vii) within ten days after adoption of an amendment to a
Pension Plan which would require security to be given to the Pension
Plan pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA, a statement setting forth the details thereof, including the
amount of such security;
(viii) within ten days after failure by the Borrower or
any member of the ERISA Group to make payment to a Pension Plan which
would give rise to a lien in favor of the Plan under Section 302(f) of
ERISA, a statement setting forth the details thereof, including the
amount of such lien;
(ix) within ten days after the due date for filing with
the PBGC, pursuant to Section 412(n) of the Code, of a notice of
failure to make a required installment or other payment with respect to
a Pension Plan, a statement setting forth details as to such failure
and the action proposed to be taken with respect thereto; and
(x) within 30 days after receipt thereof by the Borrower
or any member of the ERISA Group from the sponsor of a Multiemployer
Plan, a copy of each notice concerning the imposition of withdrawal
liability or the termination or reorganization of a Multiemployer Plan.
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(l) Environmental Matters. (i) Comply, and cause each
Restricted Subsidiary to comply, in all material respects with all applicable
Environmental Laws, (ii) notify the Agent promptly after a Responsible Person
becomes aware of any material release, adverse environmental condition or
Environmental Claim in connection with the properties or facilities of the
Borrower or any Subsidiary, and (iii) promptly forward to Agent a copy of any
order, notice, permit, application, or any other communication or report
received by the Borrower or any Subsidiary in connection with any such matters
as they may affect such premises, if such matter would be likely to cause a
Material Adverse Affect.
(m) Intercompany Notes. The Borrower shall cause the payee of
each Intercompany Note to deliver the original of such Intercompany Note
endorsed in blank to the Agent promptly upon receipt thereof, together with (i)
a letter from the maker of such Intercompany Note in substantially the form of
Exhibit K hereto and (ii) such evidence of the due execution and delivery
thereof as the Agent may reasonably request.
(n) Interest Rate Agreements. Commencing 60 days following the
Closing Date and at all times prior to January 1, 2000 maintain either a fixed
rate of interest or one or more Interest Rate Agreements with respect to a
notional amount equal to no less than 40% of Total Consolidated Debt, which
Interest Rate Agreements shall have an initial minimum term at the time entered
into of the lesser of (i) two and one half years or (ii) the period ending
January 1, 2000 and shall contain such terms and conditions as shall be
satisfactory to the Arranging Agents.
Section 8.02. Negative Covenants. So long as the Borrower may
borrow hereunder and until payment in full of the Notes and performance of all
other obligations of the Borrower hereunder:
(a) Borrowing. The Borrower will not:
(i) Create, incur or assume any liability or obligation for
Borrowed Money or permit any Restricted
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Subsidiary so to do, except, (1) at such time as the Total Consolidated Leverage
Ratio does not, and would not after giving effect to the contemplated incurrence
of indebtedness for Borrowed Money, exceed 7.5x, (2) Intercompany Loans, (3)
Capitalized Lease Obligations in an aggregate amount not greater than $5
million, and (4) other indebtedness of the Borrower or any Restricted Subsidiary
(not including the indebtedness for Borrowed Money specified in clauses (2) and
(3) above) in an aggregate principal amount not exceeding $10 million.
(ii) Permit any Unrestricted Subsidiary to create, incur,
assume or suffer to exist any liability or obligation of indebtedness for
Borrowed Money unless the terms of the agreements evidencing such indebtedness
for Borrowed Money shall explicitly (1) limit the lender's recourse thereunder
to the assets of such Unrestricted Subsidiary and (2) provide that such
Unrestricted Subsidiary's partners or shareholders, as the case may be, shall
have no liability in respect of such indebtedness for Borrowed Money.
(b) Borrowing by IP-IV Capital. IP-IV Capital will not create,
incur, or assume any liability or obligations for Borrowed Money, unless (i) the
Total Consolidated Leverage Ratio does not, and would not after giving effect to
the contemplated incurrence of Borrowed Money, exceed 7.5x, (ii) IP-IV Capital
immediately makes an equity contribution to the Borrower in an amount not less
than the proceeds of such Borrowed Money excluding the reasonable expenses of
obtaining such Borrowed Money, (iii) the Borrower uses the proceeds of the
equity contribution made to it by IP-IV Capital to (1) make a Permitted
Acquisition, (2) repay any portion of the Term Loans or (3) repay any Revolving
Credit Loan and permanently reduce the Total Revolving Credit Commitment by such
amount in accordance with Section 2.06, (iv) the terms and conditions of the
agreements relating to such Borrowed Money are satisfactory to the Majority
Lenders and (v) no Default or Event of Default exists, or would exist after
giving effect to the contemplated incurrence of Borrowed Money.
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(c) Mortgages and Pledges. The Borrower will not create,
incur, assume or suffer to exist, or permit any Restricted Subsidiary to create,
incur, assume or suffer to exist, any Lien upon or in any of their respective
properties or assets, whether now owned or hereafter acquired, except (i) liens
incurred in the ordinary course of business (other than Liens to secure
indebtedness for Borrowed Money), (ii) liens in respect of Capitalized Lease
Obligations which are permitted to be incurred under Section 8.02(a), (iii)
Liens incurred in connection with a Permitted Acquisition; or enter into or
suffer to exist any agreement or other instrument binding on the Borrower or any
Restricted Subsidiary or affecting any of their respective properties which
prohibits, requires the consent of any Person for or otherwise restricts the
creation of any Lien in favor of the Lenders, and (iv) Permitted Encumbrances.
(d) Asset Acquisitions and Sales. (i) The Borrower will not
(A) purchase, lease or otherwise acquire, or permit any Restricted Subsidiary to
purchase, lease or otherwise acquire, assets of any Person or sell, lease, or
otherwise dispose of, or permit any Restricted Subsidiary to sell, lease or
otherwise dispose of, any of their respective assets or enter into, or permit
any Restricted Subsidiary to enter into, any agreement to do any of the
foregoing, except (1) the Borrower and the Restricted Subsidiaries may exchange
any equity interest in any Restricted Subsidiary held by it for any equity
interest in any other Restricted Subsidiary held by the Borrower or any
Restricted Subsidiary; provided, that in connection with each such exchange, the
Borrower and each Restricted Subsidiary shall execute, deliver and file each
document and other instrument necessary to maintain the Liens granted under the
Hypothecation Agreements, (2) the Borrower and the Restricted Subsidiaries may
sell or exchange assets with any Person; provided, that such assets sold or
exchanged (x) do not contribute more than 10% of Cash Flow for the most recently
completed four fiscal quarters and (y) when aggregated with all assets
previously sold or exchanged by the Borrower and the Restricted Subsidiaries
since the Closing Date, would not have generated Cash Flow in an amount in
excess of 25% of Cash Flow for the most recently completed four fiscal quarters,
(3) the Borrower and the Restricted Subsidiaries
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may acquire any cable television system which provides service solely within the
Permitted Region; provided, that the purchase price of such cable television
system, when aggregated with the purchase price of all cable television systems
which provide service solely within the Permitted Region which were acquired by
the Borrower or a Restricted Subsidiary since the Closing Date shall not be
greater than $50 million (excluding the acquisition of the Viacom Nashville
System) (the percentages specified in clauses (2)(x) and (2)(y) above shall be
increased to 15% and 30%, respectively, upon the Nashville Closing), and (4) IP
IV Capital, the Borrower and its Restricted Subsidiaries may consummate the AVR
Transactions and the DD Transactions; or
(B) Permit any Unrestricted Subsidiary to purchase, lease or
otherwise acquire assets of any Person or sell, lease, or otherwise dispose of
any of its assets, except purchases, leases, sales or other acquisitions or
dispositions of assets, (1) on terms no less favorable than if such purchase,
lease, sale or other acquisition or disposition were conducted on an
arm's-length basis, (2) pursuant to agreements which expressly limit the
recourse of the other party thereunder to such Unrestricted Subsidiary's assets,
(3) pursuant to agreements which expressly provide that such Unrestricted
Subsidiary's partners or shareholders, as the case may be, shall have no
liability for any claims or obligations owing in respect of such agreements, and
(4) as contemplated by the AVR Transactions, the DD Cable Transactions and the
Nashville Closing.
(ii) IP-IV Capital will not sell, lease, or otherwise dispose
of any of its assets, except (i) pursuant to the IP-IV Capital Escrow
Transactions or (ii) an exchange of an equity interest in the Borrower or a
Restricted Subsidiary for an equity interest in another Restricted Subsidiary
held by the Borrower or a Restricted Subsidiary; provided, that in connection
with each such exchange, IP-IV Capital shall execute, deliver and file each
document and other instrument necessary to maintain the Liens granted under the
Hypothecation Agreements.
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(e) Mergers and Acquisitions. (i) The Borrower will not (A)
enter into, or permit any Restricted Subsidiary to enter into, any merger or
consolidation, except (x) the merger and consolidation transactions contemplated
as part of the Nashville Closing (y) such acquisitions by merger or
consolidation whereby upon completion of the merger the surviving entity becomes
a Restricted Subsidiary; and (z) acquisitions of cable television systems which
provide service solely within the Permitted Region; provided that the purchase
price of any such cable television system, when aggregated with the purchase
price of all cable television systems which provide service solely within the
Permitted Region which were acquired by the Borrower, IP-IV Capital and the
Restricted Subsidiaries since the Closing Date excluding the Viacom Nashville
Acquisition, shall not be greater than $50 million; notwithstanding the
foregoing, RMH shall be permitted to merge with and into RMG, with RMG as the
surviving corporation.
(B) Permit any Unrestricted Subsidiary to enter into any
merger or consolidation, except mergers or consolidations (1) with any required
consent of the partners or shareholders, as the case may be, except for the sale
of DD Cable Transactions and AVR Transactions, (2) on terms no less favorable
than if such sale, lease or other disposition were conducted on an arm's-length
basis, (3) pursuant to agreements which expressly limit the recourse of the
other party thereunder to such Unrestricted Subsidiary's assets and (4) pursuant
to agreements which expressly provide that such Unrestricted Subsidiary's
partners or shareholders, as the case may be, shall have no liability for any
claims or obligations owing in respect of such agreements.
(ii) IP-IV Capital will not enter into any merger or
consolidation or purchase, lease or otherwise acquire assets of any Person, or
enter into any agreement to do any of the foregoing, except (i) prior to the
Nashville Date, the merger and consolidations contemplated as part of the
Nashville Closing and (ii) acquisitions of cable television systems which
provide service solely within the Permitted Region; provided that the purchase
price of any such cable television system, when aggregated with the purchase
price of all cable television systems which provide service solely
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within the Permitted Region which were acquired by the Borrower, IP-IV Capital
and the Restricted Subsidiaries since the Closing Date shall not be greater than
$50 million excluding the Viacom Nashville Acquisition.
(f) Contingent Liabilities. Neither IP-IV Capital nor Borrower
shall assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon, or permit any Restricted Subsidiary or Unrestricted
Subsidiary to assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon, the obligation of any Person (all such
transactions herein being referred to as "Contingent Liabilities"), except:
(i) in the ordinary course of business of the Borrower,
IP-IV Capital, a Restricted Subsidiary or an Unrestricted Subsidiary,
as the case may be;
(ii) the Contingent Liabilities which will be incurred in
connection with a Permitted Acquisition; provided, that the incurrence
of such Contingent Liabilities, individually or in the aggregate, could
not be reasonably expected to have a Material Adverse Effect;
(iii) by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business of the Borrower, IP-IV Capital, a Restricted Subsidiary or an
Unrestricted Subsidiary, as the case may be; and
(iv) Contingent Liabilities created, incurred or assumed
by any Unrestricted Subsidiary, provided that the terms of the
agreements evidencing such Contingent Liabilities shall explicitly (1)
limit recourse thereunder to the assets of such Unrestricted Subsidiary
and (2) provide that such Unrestricted Subsidiary's partners or
shareholders, as the case may be, shall have no liability in respect of
such contingent liability.
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(g) Loans and Investments. Neither IP-IV Capital nor Borrower
shall purchase or acquire, or permit any Restricted Subsidiary to purchase or
acquire, the obligations, stock or partnership interest of, or any other
interest in, or make loans or advances to, any Person, except (i) direct
obligations of the United States of America with a maturity not exceeding one
year (or longer in the case of obligations of the United States of America
constituting the IP-IV Capital Escrow Collateral), (ii) certificates of deposit
with a maturity not exceeding one year issued by a Lender or a commercial bank,
chartered under the laws of the United States or one of the States thereof and a
member of the Federal Reserve System with a long-term debt rating in one of the
two highest categories then provided for by a nationally recognized rating
agency, (iii) commercial paper with a remaining maturity of 270 days or less
with a debt rating in the highest category then provided for by a nationally
recognized rating agency and issued by a corporation organized under the laws of
any State, (iv) investments in mutual funds that invest in any of the foregoing
investments described in clauses (i)-(iii) above, (v) Intercompany Loans, (vi)
other loans to and investments in Persons that are engaged primarily in the
cable television business, including pay cable service, or in the business of
acquiring, owning, expanding, operating and maintaining cable television
systems, or in directly related media activities including without limitations,
data transmission services, telephony and the production and distribution of
programming; provided that (x) the Total Consolidated Leverage Ratio (taking
into account the Total Consolidated Debt on the date of determination) is less
than 5.00:1.00 and (y) the Senior Leverage Ratio (taking into account the Senior
Debt on the date of determination) is less than 4.00:1.00 and (z) the aggregate
principal amount of such loans and investments do not exceed $25 million, (vii)
the Borrower may make a loan to ICM IV pursuant to the ICM IV Intercompany Loan
Agreement in the principal amount of not more than the lesser of (x) one-half of
the aggregate equity contribution(s) made by ICM IV to IP-IV Capital and (y)
$1.85 million and (viii) the DD Cable Transaction.
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(h) Restricted Payments By Borrower. The Borrower shall not
make, or permit any Restricted Subsidiary to make, any Restricted Payment,
except (i) Restricted Payments made to the Borrower or a Restricted Subsidiary,
(ii) IP Capital, the Borrower and its Restricted Subsidiaries may make
distributions from proceeds received in connection with the AVR Transactions,
(iii) distributions pursuant to the DD Cable Transactions, (iv) the Borrower may
make Permitted Management Fee Payments and Permitted Administration Fee
Payments, and (v) on and after February 1, 2000, provided that no Default or
Event of Default exists or would exist after giving effect to the contemplated
Restricted Payment, the Borrower may make Restricted Payments to IP-IV Capital
in amounts equal to the amount of the cash interest to be paid on the IP-IV
Capital Notes, at the time such cash interest payment is due and payable.
(i) Purchase of Equity Interests. Apply, or cause any
Restricted Subsidiary to apply, any of its property or assets to the purchase,
redemption or other retirement of, or set apart, or cause any Restricted
Subsidiary to set apart, any sum for the purchase, redemption or other
retirement of, or make, or cause any Restricted Subsidiary to make, any other
distribution by reduction of capital or otherwise in respect of, any equity
interests in the Borrower or any Restricted Subsidiary.
(j) Subsidiaries. The Borrower shall not own any Subsidiary
other than the Restricted Subsidiaries, the Unrestricted Subsidiaries and any
subsidiary acquired or formed in connection with a Permitted Acquisition.
(k) Transactions with Affiliates. Neither IP-IV Capital nor
the Borrower shall enter into or permit to exist, or cause any Restricted
Subsidiary to enter into or permit to exist, any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate or any Restricted Subsidiary on
terms that are less favorable to the Borrower than those that would be
obtainable at the time in an arm's-length transaction with any Person who is not
such an Affiliate; provided that this
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subsection (j) shall not be deemed to prohibit any transaction or payment
provided for in any Related Document or any Permitted Management Fee Payment and
Permitted Administrative Fee Payments, so long as at the time of such payment or
transaction and after giving effect thereto no Default or Event of Default shall
have occurred and be continuing.
(l) Related Documents. Neither IP-IV Capital nor the Borrower
shall amend, supplement or otherwise modify or waive any material term or
condition of any Related Document without the consent of the Arranging Agents.
(m) Capital Expenditures. Neither IP-IV Capital nor the
Borrower shall incur, or permit any Restricted Subsidiary to incur, any capital
expenditure exceeding the amounts set forth below:
<TABLE>
<CAPTION>
After Nashville Before Nashville
Year Closing Closing
---- ------- -------
<S> <C> <C>
1996 $105 million $79 million
1997 $135 million plus $115 million plus
Unused Amounts Unused Amounts
1998 $88 million plus $81 million plus
all Unused Amounts all Unused Amounts
</TABLE>
(n) Senior Leverage Ratio. The Borrower shall not permit
during any period specified below, the Senior Leverage Ratio to be more than:
Ratio Period
5.75:1.00 On or after the Closing Date
and before January 1, 1997
5.50:1.00 On or after January 1, 1997
and before January 1, 1998
5.25:1.00 On or after January 1, 1998
and before July 1, 1998
5.00:1.00 On or after July 1, 1998 and
before July 1, 1999
4.75:1.00 On or after July 1, 1999 and
before January 1, 2000
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4.50:1.00 On or after January 1, 2000
and before July 1, 2000
4.00:1.00 On or after July 1, 2000 and
before July 1, 2001
3.75:1.00 On or after July 1, 2001
(o) Interest Coverage Ratio. The Borrower shall not permit as
of the end of any fiscal quarter, the Interest Coverage Ratio to be less than:
Ratio Period
2.00:1.00 On or after the Closing Date
and before January 1, 2001
2.25:1.00 On or after January 1, 2001
and before January 1, 2002
2.50:1.00 On or after January 1, 2002
(p) Annualized Cash Flow to Pro Forma Debt Service. The
Borrower shall not permit as of the end of any fiscal quarter, the ratio of
Annualized Cash Flow to Pro Forma Debt Service to be less than 1.10x.
(q) Ownership of the Borrower. IP-IV Capital shall not sell,
pledge, mortgage, lease or otherwise dispose of any of its interest in the
Borrower other than pursuant to the Credit Documents.
(r) Mortgages and Pledges. IP-IV Capital shall not create,
incur, assume or suffer to exist any Lien upon or in any of its properties or
assets, whether now owned or hereafter acquired, except (i) Permitted
Encumbrances, and (ii) Liens created pursuant to the Credit Documents; or enter
into or suffer to exist any agreement or other instrument binding on IP-IV
Capital or affecting any of its properties (other than the Credit Documents)
which prohibits, requires the consent of any Person for or otherwise restricts
the creation of any Lien in favor of the Agent or the Lenders.
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(s) Restricted Payments By IP-IV Capital. IP-IV Capital shall
not make any Restricted Payment other than pursuant to the AVR Transactions and
the IP-IV Capital Escrow Transactions.
(t) Conduct of Business. IP-IV Capital shall not engage in as
its principal business any business other than the direct or indirect ownership
or operation of cable television systems.
(u) Equity Contribution. IP-IV Capital shall as of the
Nashville Closing, obtain under the commitments of one or more general and/or
limited partners described in Section 7.01(x), an equity contribution of not
less than $95 million, and immediately thereupon make an equity contribution in
like amount to the Borrower on terms satisfactory to the Arranging Agents. No
portion of the equity contributions which were counted for purposes of
satisfying the condition precedent contained in Section 7.01 (l) may be counted
for purposes of satisfying the obligations in this section (u).
(v) Greenville/Spartanburg Debt. The Borrower shall not
create, incur, assume or suffer to exist Greenville/Spartanburg Debt in excess
of $122.4 million.
(w) TCI Equity. IP-IV Capital shall issue equity to TCI or its
subsidiaries in excess of $117.6 million with respect to the acquisition of the
Greenville/Spartanburg Cable System.
(x) Use of Proceeds. The Borrower shall use the proceeds of
the Loans only (i) to refinance all outstanding IP Tennessee Loans, (ii) to
refinance all outstanding obligations of IP-Southeast under the Houston Loan and
the B of A Loan, (iii) to refinance all outstanding Greenville/Spartanburg
Debt, (iv) to acquire 100% of the partnership interests of IP West Tennessee
pursuant to the IP West Tennessee Contribution Agreement and acquire all
outstanding obligations of IP West Tennessee under the IP West Tennessee Loan,
(v) to acquire RMH and refinance all outstanding obligations of RMH and RMG,
(vi) to make Permitted Acquisitions and (vii) for general partnership purposes,
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including working capital, capital expenditures and transaction costs associated
with any transaction consummated by the Borrower or any Restricted Subsidiary
which are permitted by the terms of this Agreement.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01. Events of Default. If one or more of the
following events (each an "Event of Default") shall occur:
(a) Default shall be made in the payment of (i) any
installment of principal of any Loan when due and payable, whether at
maturity or otherwise; or (ii) any installment of interest upon any
Loan when due and payable or of any other amounts due hereunder, and
such default shall continue unremedied for three Business Days; or
(b) Default shall be made in the due observance or performance
of any term, covenant, or agreement contained in (i) Sections
8.01(d)(i), (ii) Section 8.02, (iii) any Hypothecation Agreement or
(iv) any Guarantee; or
(c) Default shall be made in the due observance or performance
of any other term, covenant or agreement contained in this Agreement,
and such default shall have continued unremedied for a period of 30
days after any Responsible Person becomes aware, of such default; or
(d) Any representation or warranty made in any Credit Document
or any statement or representation made in any certificate, report or
opinion delivered in connection herewith shall prove to have been
misleading in any material respect when made; or
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(e) Any obligation of the Borrower (other than its obligations
hereunder), any Restricted Subsidiary or any Guarantor for the payment
of indebtedness for Borrowed Money (to the extent that such
indebtedness exceeds $5,000,000 in the aggregate) is not paid when due
or becomes or is declared to be due and payable prior to the expressed
maturity thereof, or there shall have occurred an event which, with the
giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to
be, due and payable, except obligations in the aggregate not in excess
of $5,000,000 and for which adequate reserves have been provided in
accordance with GAAP; or
(f) The Liens created by the Hypothecation Agreements shall at
any time not constitute a valid and perfected Lien on the collateral
described therein (to the extent perfection by filing, registration or
possession is required herein or therein), subject to no equal or prior
Lien, or any Hypothecation Agreement shall at any time cease to be in
full force and effect (other than in accordance with the terms thereof)
other than any loss of perfection or priority of the Lien on the
Intercompany Notes, stock certificates or any Securities as defined in
the Uniform Commercial Code, or due to the Agent's failure to maintain
proper possession of the Intercompany Notes, or any party (other than
the Lenders) thereto shall so assert in writing; or
(g) An involuntary case or other proceeding shall be commenced
against the Borrower, any Restricted Subsidiary or any Guarantor or any
general partner or shareholder, as applicable, of the Borrower, any
Restricted Subsidiary or a Guarantor seeking liquidation,
reorganization or other relief with respect to it or its debts under
any applicable Federal or State bankruptcy, insolvency, reorganization
or similar law now or hereafter in effect or seeking the appointment of
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a custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed, or an order or decree approving or ordering any of the
foregoing shall be entered and continued unstayed and in effect, in any
such event, for a period of 60 days; or
(h) The commencement by the Borrower, any Restricted
Subsidiary or any Guarantor or any general partner or shareholder, as
applicable, of the Borrower, any Restricted Subsidiary or a Guarantor
of a voluntary liquidation or case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by any of them to the entry of a
decree or order for relief in respect of the Borrower, any Restricted
Subsidiary or any Guarantor or any general partner or shareholder, as
applicable, of the Borrower, any Restricted Subsidiary or a Guarantor
in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or to
the commencement of any bankruptcy or insolvency case or proceeding
against any of them, or the filing by any of them of a petition or
answer or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by any of them to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Borrower, any Restricted Subsidiary or any
Guarantor or any general partner or shareholder, as applicable, of the
Borrower, any Restricted Subsidiary or a Guarantor or any substantial
part of their respective property, or the making by any of them of an
assignment for the benefit of creditors, or the admission by any of
them in writing of inability to pay their debts
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generally as they become due, or the taking of any action by the
Borrower, any Restricted Subsidiary or any Guarantor or any general
partner or shareholder, as applicable, of the Borrower, any Restricted
Subsidiary or a Guarantor in furtherance of any such action; or
(i) One or more judgments against the Borrower, any Restricted
Subsidiary or any Guarantor or any general partner or shareholder, as
applicable, of the Borrower, any Restricted Subsidiary or a Guarantor
or attachments against its property, which in the aggregate exceed
$5,000,000, or the operation or result of which could be to interfere
materially and adversely with the conduct of the business of the
Borrower, such Restricted Subsidiary or such Guarantor or general
partner or shareholder, as applicable, remain unpaid, unstayed on
appeal, undischarged, unbonded, or undismissed for a period of 30 days;
or
(j) Notice of intent to terminate a Pension Plan shall have
been filed with any affected party (as defined in Section 4001 of
ERISA), or notice of an application by the PBGC to institute
proceedings to terminate a Pension Plan pursuant to Section 4042 of
ERISA shall have been received by the Borrower, in each case only if
the amount of unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA) as of the date such notice is filed or received
exceeds $100,000; the Borrower or any member of the ERISA Group incurs
liability under Sections 4062(e), 4063 or 4064 of ERISA in respect of a
Pension Plan in an amount in excess of $100,000; the Borrower or any
member of the ERISA Group incurs any withdrawal liability with respect
to any Multi employer Plan in an amount in excess of $100,000; an
amendment is adopted to a Pension Plan which would require security to
be given to such Pension Plan pursuant to Section 401(a)(29) of the
Code or Section 307 of ERISA in an amount in excess of $500,000; the
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Borrower or any member of the ERISA Group fails to make a payment to a
Pension Plan which would give rise to a Lien in favor of such Plan
under Section 302(f) of ERISA in an amount in excess of $500,000; or
(k) There shall have occurred a breach of the Borrower
Partnership Agreement, resulting in ICM IV and IP-IV Capital no longer
acting as the general partners thereof or there shall have occurred a
breach of the ICM IV Partnership Agreement, resulting in IMI and Leo J.
Hindery, Jr. no longer acting as the general partners (except in the
case of his death or physical or mental incapacity) thereof or there
shall have occurred a breach of the IP-IV Capital Partnership
Agreement, resulting in ICM IV no longer acting as the sole general
partner thereof; or
(l) Leo J. Hindery, Jr. shall no longer act as President or no
longer be the sole shareholder of IMI except in the case of his death
or physical or mental incapacity; or
(m) IP-IV Capital shall fail to own directly 99.99% of the
Borrower or ICM IV shall fail to own .01% of the Borrower; or
(n) TCI shall fail to own directly or indirectly 35% of the
equity of the Borrower on a fully diluted basis at all times; or
(o) All outstanding bonds issued under the RMG Indentures
shall not have been redeemed within 55 days after the Closing Date;
then (i) upon the occurrence or at any time during the continuance of any of the
foregoing Events of Default, the obligation of the Lenders to make any further
Loans under this Agreement shall terminate upon declaration to that effect
delivered by the Agent to the Borrower and (ii) upon the happening of any of the
foregoing Events of Default which shall be continuing, the Notes shall become
and be
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immediately due and payable upon declaration to that effect delivered by the
Agent to the Borrower; provided, that upon the happening of any event specified
in Section 9.01(g) or (h), the Notes shall become immediately due and payable
and the obligation of the Lenders to make any further Loans hereunder shall
terminate without declaration or other notice to the Borrower. At any time the
Notes shall become and be immediately due and payable in accordance with the
foregoing, any Lender may realize on the security interest and lien, and
exercise the rights, granted to it in Section 12.02. The Borrower expressly
waives any presentment, demand, protest or other notice of any kind.
ARTICLE X
THE AGENT AND THE LENDERS
Section 10.01. Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder with such powers as are specifically delegated to it by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto, including without limitation the execution
and delivery by the Agent on behalf of such Lender of any document related
thereto and the exercise by the Agent of the powers delegated to the Agent
thereby, and the Agent hereby accepts such appointment subject to the terms
hereof. The relationship between the Agent and the Lenders shall be that of
agent and principal only and nothing herein shall be construed to constitute the
Agent a trustee for any Lender nor to impose on the Agent duties or obligations
other than those expressly provided for herein. The Agent: (a) shall not be
responsible to any of the Lenders for any recitals, statements, representations
or warranties contained in this Agreement, the Hypothecation Agreements, the
Guarantees or any other Credit Document, or any certificate or other document
referred to or provided for in, or received by any of the Lenders under or in
connection with, this Agreement or the other Credit Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or the other Credit Documents or any other
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document referred to or provided for herein or therein or for any failure by the
Borrower or any other Person to perform any of its obligations hereunder or
thereunder; (b) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder except to the extent requested by the Majority
Lenders; and (c) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other document or instrument referred to or
provided for herein or in connection herewith except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
Section 10.02. Sharing of Payments and Expenses. All funds
received by the Agent in respect of payments made by the Borrower pursuant to,
or from any Person on account of, this Agreement or any other Credit Document
shall be distributed forthwith by the Agent among the Lenders, in like currency
and funds as received, ratably in proportion to their respective interests
therein. In the event that any Lender shall receive from the Borrower or any
other source any payment of, on account of, or for or under this Agreement or
any other Credit Document (whether received pursuant to the exercise of any
right of set-off, banker's lien, realization upon any security held for or
appropriated to such obligation or otherwise as permitted by law) other than pro
rata, then such Lender shall purchase from each other Lender so much of its
interest in obligations of the Borrower as shall be necessary in order that each
Lender shall share such payment proportionately with each of the other Lenders;
provided, that no Lender shall purchase any interest of any Lender that does
not, to the extent that it may lawfully do so, set off against the balance of
any deposit accounts maintained with it the obligations due to it under this
Agreement; and provided further that nothing herein contained shall obligate any
Lender to apply any set-off or banker's lien or collateral security permitted
hereby first to the obligations of the Borrower hereunder if the Borrower is
obligated to such Lender pursuant to other loans or notes, but any such
application of proceeds shall be pro rata among the obligations of the Borrower
to such
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Lender. In the event that any purchasing Lender shall be required to return any
excess payment received by it, the purchase shall be rescinded and the purchase
price restored to the extent of such return, but without interest.
Section 10.03. The Agent's Liabilities. Each of the Lenders
and the Borrower agrees that (i) neither the Agent in such capacity nor any of
its officers or employees shall be liable for any action taken or omitted to be
taken by any of them hereunder except for their own gross negligence or willful
misconduct, (ii) neither the Agent in such capacity nor any of its officers or
employees shall be liable for any action taken or omitted to be taken by any of
them in good faith in reliance upon the advice of counsel, independent public
accountants or other experts selected by the Agent, and (iii) the Agent in such
capacity shall be entitled to rely upon any notice, consent, certificate,
statement or other document (including any telegram, cable, telex, facsimile or
telephone transmission) believed by it to be genuine and correct and to have
been signed and/or sent by the proper Persons.
Section 10.04. Defaults and Events of Default. The Agent shall
not be deemed to have knowledge of the occurrence of a Default or Event of
Default (other than the non-payment of principal of or interest on Loans) unless
it shall have received notice from a Lender or the Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice thereof to
the Lenders (and shall give each Lender prompt notice of each such non-payment).
The Agent shall (subject to Section 10.08 hereof) take such action with respect
to such Default or Event of Default as shall be reasonably directed by the
Majority Lenders; provided that, unless and until the Agent shall have received
such directions, the Agent may take such action, or refrain from taking such
action, with respect to such Default and Event of Default as the Agent shall
deem advisable in the best interest of the Lenders.
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Section 10.05. Rights as a Lender. With respect to its
Revolving Credit Commitment and the Loans made by it, The Bank of New York
Company, Inc., in its capacity as a Lender hereunder, shall have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
was not acting as the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent may (without having to account therefor to any Lender) accept deposits
from, lend money to and generally engage in any kind of banking, trust or other
business with the Borrower and any affiliates of the Borrower as if it were not
acting as the Agent, and the Agent may accept fees and other consideration from
the Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
The Borrower and each Lender, by their execution of this
Agreement, hereby acknowledge that one or more of the Lenders or their
affiliates may own or hereafter acquire limited partnership interests in IP-IV
Capital. Borrower and each Lender agree that such Lenders shall be entitled to
exercise or refrain from exercising their rights hereunder in their sole
discretion and regardless of the interests of the other Lenders hereunder. The
Borrower and each Lender hereby waive, to the extent permitted by applicable
law, any action, claim, or defense against such Lenders based on or arising out
of such ownership. Such waiver shall be binding upon each Participant or
Assignee hereunder.
Section 10.06. Lender Credit Decision. Neither the Agent nor
any of its officers or employees has any responsibility for, gives any guaranty
in respect of, nor makes any representation to the Lenders as to, (a) the
condition, financial or otherwise, of the Borrower, any Subsidiary, the pledgor
under any Hypothecation Agreement or any Guarantor or the truth of any
representation or warranty made herein or in any other Credit Document, or in
connection herewith or therewith or (b) the validity, execution, sufficiency,
effectiveness, construction, adequacy, enforceability or value of this Agreement
or any other Credit Document or any other document or instrument related hereto
or thereto. The Agent shall have no duty or
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responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect to the operations, business,
property, condition or creditworthiness of the Borrower, any Subsidiary, any
Guarantor or any pledgor under a Hypothecation Agreement, whether such
information comes into its possession on or before the date hereof or at any
time thereafter. Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender, based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will independently and without reliance upon the Agent or any other Lender,
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement or any other Credit Document.
Section 10.07. Indemnification. The Lenders agree (which
agreement shall survive payment of the Loans and the Notes) to indemnify the
Agent, to the extent not reimbursed by the Borrower or Guarantors, ratably in
accordance with their respective Revolving Credit Commitments or after the
Revolving Credit Termination Date, their respective Loans (as of the time of the
incurrence of the liability being indemnified against) from and against any and
all liabilities, obligations, losses, claims, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of this Agreement or any other Credit
Document, or any action taken or omitted to be taken by the Agent hereunder or
thereunder; provided, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent or any of its officers or employees. Without limitation
of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in such capacity in connection with the
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preparation, execution or enforcement of, or legal advice in respect of rights
or responsibilities under, this Agreement or any other Credit Document or any
amendments or supplements hereto or thereto, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower.
Section 10.08. Failure to Act. Except for action expressly
required of the Agent hereunder or under any other Credit Document, the Agent
shall in all cases be fully justified in failing or refusing to act hereunder or
thereunder unless it shall be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
Section 10.09. Resignation of Agent. Subject to the
appointment and acceptance of a successor to the Agent as provided below, the
Agent may resign at any time by giving notice thereof to the Lenders and the
Borrower. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Agent reasonably acceptable to the Borrower. If
no successor Agent reasonably acceptable to the Borrower shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within 30 days after a retiring Agent's giving of notice of resignation or the
Majority Lenders' removal of such retiring Agent, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent reasonably acceptable to the
Borrower, which shall either be a Lender or be a bank organized under the laws
of the United States of America or any State having an office (or an affiliate
with an office) in New York, New York, and a combined capital and surplus of at
least $100,000,000. Upon the acceptance of any appointment as an Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After a retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article X shall continue in effect for its benefit in
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respect of any actions taken or omitted to be taken by it while it was acting as
an Agent.
Section 10.10. Withholding Tax Exemption. At least four
Business Days prior to the Closing Date or, if such date does not occur within
thirty days after the date of this Agreement, by the end of such thirty day
period, each Lender agrees that it will deliver to the Borrower and the Agent
either (a) a statement that it is organized under the laws of or incorporated in
the United States of America or (b) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the
case may be, indicating in each case that such Lender either is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes as permitted by the Code or, as the case may
be, may be entitled to a reduced rate of withholding under a relevant tax
convention or treaty. Each Lender which delivers to the Borrower and the Agent a
Form 1001 or 4224, or successor applicable form, pursuant to the next preceding
sentence further undertakes to deliver to the Borrower and the Agent two further
copies of the said Form 1001 or 4224, or successor applicable form, as the case
may be, as and when the previous form filed by it hereunder shall expire or
shall become incomplete or inaccurate in any respect, unless in any of such
cases an event has occurred prior to the date on which any such delivery would
otherwise be required which renders such forms inapplicable.
Section 10.11. Duties and Obligations of Arranging Agents and
Co-Agents. The Arranging Agents and Co-Agents have no duties or obligations in
such capacity under this Agreement.
ARTICLE XI
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
Section 11.01. Consent to Jurisdiction. The Borrower and IP-IV
Capital each hereby irrevocably submits to the non-exclusive jurisdiction of any
state or federal
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court in The City of New York located in the borough of Manhattan for the
purpose of any suit, action, proceeding or judgment relating to or arising out
of this Agreement and each other Credit Document. The Borrower and IP-IV Capital
each hereby appoint CT Corporation System, with offices on the date hereof at
1633 Broadway, New York, New York, 10019, as its authorized agent on whom
process may be served in any action which may be instituted against it by the
Agent or the Lenders in any state or federal court in New York City, arising out
of or relating to any Loan or this Agreement and each other Credit Document.
Service of process upon such authorized agent and written notice of such service
to the Borrower or IP-IV Capital, as the case may be, shall be deemed in every
respect effective service of process upon the Borrower or IP-IV Capital, as the
case may be, and the Borrower and IP-IV Capital each hereby irrevocably consent
to the jurisdiction of any such court in any such action and to the laying of
venue in The City of New York. The Borrower hereby irrevocably waives any
objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, nothing herein shall in any
way affect the right of the Agent or any Lender to bring any action arising out
of or relating to the Loans or this Agreement and each other Credit Document in
any competent court elsewhere having jurisdiction over the Borrower or IP-IV
Capital, as the case may be, or its property.
Section 11.02. Waiver of Jury Trial. Each of the parties to
this Agreement hereby irrevocably waives all right to a trial by jury in any
action, proceeding or counterclaim arising out of or relating to this Agreement,
the other Credit Documents or the transactions contemplated hereby or thereby.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
UNITED STATES OF AMERICA.
Section 12.02. Set-off. As security for its obligations
hereunder, the Borrower hereby grants to each Lender a security interest in,
lien upon, and right of set-off against any amounts standing to the credit of
the Borrower on the books of such Lender in any deposit or other account
maintained with any branch of such Lender.
Section 12.03. Expenses; Indemnification. The Borrower agrees
to pay (a) all reasonable out-of-pocket expenses of the Arranging Agents
(including the reasonable fees and expenses of Sullivan & Cromwell, as counsel
to the Agent) in connection with the preparation of this Agreement and the other
Credit Documents and any amendments or supplements hereto or thereto or waivers
or consents relating hereto or thereto and (b) all out-of-pocket expenses
incurred by the Arranging Agents and any Lender, including reasonable fees and
disbursements of counsel and other professional fees, in connection with a
Default or Event of Default, the enforcement of the Credit Documents and
collection and other proceedings resulting therefrom. The Borrower shall
indemnify each Lender against any transfer taxes, documentary taxes, assessments
or charges made by any Governmental Authority by reason of the execution and
delivery of this Agreement or the other Credit Documents.
In addition to the payment of expenses pursuant to the
preceding paragraph, whether or not the transactions contemplated hereby shall
be consummated, the Borrower agrees (which agreement is in addition to the
provisions of Section 5.04(a) and not in duplication or limitation thereof) to
indemnify, pay and hold the Lenders, and the officers, directors, employees and
agents of the Lenders (collectively called the "Indemnitees"), harmless from and
against any and all other liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitee shall be designated a party thereto) that may be
imposed on, incurred by, or asserted against such Indemnitee, in any manner
relating to or arising out of this Agreement or the other Credit Documents and
any liability arising from any Environmental Law, the Lenders' agreement to make
the Loans or, the making of the Loans, or in any way arising from any actions in
connection with the transactions contemplated by the Related Documents,
including without limitation, the pledge or release of any collateral and in
particular the pledges of partnership interests or the use or intended use of
the proceeds of the Loans (the "indemnified liabilities"); provided that the
Borrower shall have no obligation to an Indemnitee hereunder with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of such Indemnitee. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them.
Section 12.04. Amendments. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Majority Lenders (and, if the
rights or duties of the Agent or Arranging Agent are affected thereby, by the
Agent or each Arranging Agent, as appropriate); provided that no such amendment,
waiver or modification shall, unless signed by all the Lenders, (i) increase the
Revolving Credit Commitment or Term Loan Amount of any Lender or subject any
Lender to any additional obligation, (ii) reduce the principal of or rate of
interest on any Loan or any fees hereunder, contained in Section 2.07, (iii)
make any change in the amortization schedule of the Term Loan contained in
Section 2.08(d) or any scheduled
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reduction in the Total Revolving Commitment, (iv) release all or substantially
all of the Liens or collateral under any Hypothecation Agreement (except Liens
on property which is otherwise permitted to be disposed of hereunder), (v)
change the number of Lenders required to approve an acquisition under Section
8.02(d) or an amendment, modification under Section 8.02(q), (vi) amend the
definition of Nashville Date, or (vii) change the percentage of any of the
Revolving Credit Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Lenders, which shall be required for the Lenders or any
of them to take any action under this Section or any other provision of this
Agreement. Any Lender which has sold a participating interest in its Loans or
its Revolving Credit Commitment pursuant to Section 12.08 shall be entitled to
split its vote to account for the exercise of any voting right granted to a
Participant with respect to such participating interest permitted by Section
12.08.
Section 12.05. Cumulative Rights and No Waiver. Each and every
right granted to the Lenders hereunder or under any other document delivered
hereunder or in connection herewith, or allowed them by law or equity, shall be
cumulative and may be exercised from time to time. No failure on the part of the
Agent, the Arranging Agent or the Lenders to exercise, and no delay in
exercising, any right will operate as a waiver thereof, nor will any single or
partial exercise by the Agent, the Arranging Agents or the Lenders of any right
preclude any other or future exercise thereof or the exercise of any other
right.
Section 12.06. Notices. Any communication, demand or notice to
be given hereunder or with respect to the Notes will be duly given when
delivered in writing (which may include by telecopy transmission) to a party at
its address:
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If to the Borrower, at
235 Montgomery Street
Suite 420
San Francisco, California 94104
Attention: Leo J. Hindery, Jr. and Edon V. Hartley
Telecopy: (415) 397-3978
with a copy to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Mark J. Coleman, Esq.
If to the Agent, at
The Bank of New York
Communications, Publishing &
Entertainment Division
One Wall Street, 16th Floor
New York, New York 10286
Attention: Wade E. Layton
Vice President
Telephone: (212) 635-8693
Telecopy: (212) 635-8593
with a copy to, in the case of all Borrowing notices, prepayment notices under
Section 2.02 and notices under Section 4.03(b), and to the attention of, in the
case of all fundings by the Lenders:
The Bank of New York, as Agent
Agency Function Administration
One Wall Street, 18th Floor
Attention: Genoveso Caviness
Telephone: (212) 635-4694
Telecopy: (212) 635-6365 (or 6366/6367)
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<PAGE> 106
except that any notice, request or demand by the Borrower to or upon the Agent
or the Lenders pursuant to Sections 2.02 and 4.03(b) shall not be effective
until received.
If to any Lender, at its address as indicated on the signature
page hereto.
Section 12.07. Separability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 12.08. Assignments and Participations. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that the Borrower
may not assign any of its rights hereunder without the prior written consent of
the Lenders.
(b) Any Lender may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Revolving Credit Commitment or any or all of its Loans, in each case, in minimum
amounts of $5,000,000. In the event of any such grant by a Lender of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Lender shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement pursuant to which any
Lender may grant such a participating interest shall provide that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Lender will not agree to
any or certain modifications, amendments or waivers of this Agreement without
the consent of the Participant. The Borrower agrees that each Participant shall
be entitled to the benefits of Sections 5.03, 5.04 and
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12.03 with respect to its participating interest; provided that all amounts
payable to a Lender for the account of a Participant under Sections 5.03, 5.04
and 12.03 shall be determined as if such Lender had not granted such
participation to the Participant. An assignment or other transfer which is not
permitted by Section 12.08(c) shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this Section 12.08(b).
(c) With the written consent of the Borrower (which consent
will not be unreasonably withheld or delayed) and the Agent, any Lender may
assign to one or more banks or other institutions (each an "Assignee") all, or a
part of its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an instrument
executed by such Assignee and such transferor Lender; provided that the written
consent of the Borrower shall not be required in respect of any assignment in
whole or in part, (i) to another Lender, (ii) to an Affiliate of any Lender,
(iii) to a Federal Reserve Lender or (iv) to any Person if a Default or Event of
Default has occurred and is continuing. Upon execution and delivery of such an
instrument and upon notice to the Agent together with payment to the Agent of a
processing fee in the amount of $3,000, such Assignee shall be a Lender party to
this Agreement and shall have all the rights and obligations of a Lender as set
forth in such instrument of assumption, and the transferor Lender shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this Section 12.08(c), the transferor Lender, the
Agent and the Borrower shall make appropriate arrangements so that, if required,
new Notes are issued to the Assignee.
(d) No Assignee, Participant or other transferee of any
Lender's rights shall be entitled to receive any greater payment under Section
5.04 than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the
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<PAGE> 108
provisions of section 5.04 requiring such Lender to designate a different
Lending Office under certain circumstances or at a time when the circumstances
giving rise to such payment did not exist.
Section 12.09. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute one and the same
instrument.
Section 12.10. Survival. All representations and warranties
made by the Borrower in this Agreement, and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement, (i) shall be considered to have been relied upon by the Lenders and
shall survive the making of the Loans regardless of any investigation made by,
or on behalf of, the Lenders, and (ii) shall continue in full force and effect
as long as any Loan or any fee payable or contemplated hereunder or any other
amount payable under any other Credit Document is outstanding and unpaid and so
long as the Total Revolving Credit Commitment has not been terminated.
ARTICLE XIII
LIMITED RECOURSE
Section 13.01. Limited Recourse. No Lender shall have recourse
to any limited or general partner of the Borrower or any limited or general
partner of such partner for the payment of any obligation of the Borrower
hereunder, except as provided in the Guarantees and the Hypothecation
Agreements.
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<PAGE> 109
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
INTERMEDIA PARTNERS IV, L.P.
By: InterMedia Capital Management IV,
L.P.
By: InterMedia Management, Inc.
By: /s/ Leo J. Hindery, Jr.
--------------------------------
Name:
Title:
INTERMEDIA CAPITAL PARTNERS IV, L.P., solely
for purposes of its representations and
covenants contained in Sections 6.01 and 8.02
hereof:
By: InterMedia Capital Management IV,
L.P.
By: InterMedia Management, Inc.
By: /s/ Leo J. Hindery, Jr.
-------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Agent and
Arranging Agent
By: /s/ Wade Layton
------------------------------------------
Name: Wade Layton
Title: Vice President
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<PAGE> 110
NATIONSBANK OF TEXAS, N.A., as Arranging
Agent and Syndication Agent
By: /s/ Whitney L. Busse
------------------------------------
Name: Whitney L. Busse
Title: Vice President
TORONTO-DOMINION (TEXAS), INC., as
Arranging Agent and Syndication Agent
By: /s/ Lisa Allison
------------------------------------
Name: Lisa Allison
Title: Vice President
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<PAGE> 111
<TABLE>
<CAPTION>
Revolving
Credit Term Loan
Commitment Amount
- ---------- ------
<S> <C>
$158,333,333.34 $73,333,333.34
</TABLE>
THE BANK OF NEW YORK COMPANY, INC.,
By:
-------------------------------
Name:
Title:
Address: 16th Floor
One Wall Street
New York, New York 10286
Eurodollar Lending Office:
16th Floor
One Wall Street
New York, New York 10286
Attention: Wade E. Layton
Telephone: (212) 635-8693
Telecopy: (212) 635-8593
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<PAGE> 112
<TABLE>
<CAPTION>
Revolving
Credit Term Loan
Commitment Amount
<S> <C>
$158,333,333.33 $73,333,333.33
</TABLE>
NATIONSBANK OF TEXAS, N.A.
By:
------------------------------
Name: Whitney L. Busse
Title: Vice President
Address: 901 Main Street,
64th Floor
Dallas, Texas 75202
Eurodollar Lending Office:
901 Main Street,
14th Floor
Dallas, Texas 75202
Attention: Whitney L. Busse
Vice President
Telephone: (214) 508-0950
Telecopy: (214) 508-9390
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<PAGE> 113
<TABLE>
<CAPTION>
Revolving
Credit Term Loan
Commitment Amount
<S> <C>
$158,333,333.33 $73,333,333.33
</TABLE>
TORONTO-DOMINION (TEXAS), INC.
By:
---------------------------
Name:
Title:
Address: 909 Fannin Street
Houston, Texas 77010
Eurodollar Lending Office:
The Toronto-Dominion Bank
909 Fannin Street
Houston, Texas 77010
Attention:
Telephone: (713) 653-8244
Telecopy: (713) 951-9921
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<PAGE> 1
EXHIBIT 10.2
SECURITY AND HYPOTHECATION AGREEMENT
SECURITY AND HYPOTHECATION AGREEMENT, dated as of July 30,
1996, made by InterMedia Partners of West Tennessee, L.P., a California limited
partnership (the "Grantor"), in favor of The Bank of New York in its capacity as
Agent for the benefit of the Lenders (as defined in the Credit Agreement
described below) (the "Agent"). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them on the date hereof in the
Revolving Credit and Term Loan Agreement, dated as of July 30, 1996, among
InterMedia Partners IV, L.P., a California limited partnership (the "Borrower"),
the Lenders party thereto, The Bank of New York, in its capacity as
Administrative Agent, The Bank of New York, NationsBank of Texas, N.A. and
Toronto Dominion (Texas), Inc. in their capacity as Arranging Agents (the
"Arranging Agents"), and NationsBank of Texas, N.A., and Toronto Dominion
(Texas), Inc. in their capacity as Syndication Agents (the "Syndication Agents")
(as the same may from time to time be amended, modified or supplemented, the
"Credit Agreement").
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make Loans to the Borrower; and
WHEREAS, the Grantor, as a subsidiary of the Borrower, is
willing to secure all of the Secured Obligations by hypothecating and granting a
security interest to the Creditors in the collateral described below;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. The following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):
"Collateral" shall have the meaning assigned to such term in
Section 2 of this Hypothecation Agreement.
"Credit Documents" shall mean the Credit Documents (as defined
in the Credit Agreement).
<PAGE> 2
"Creditors" shall mean collectively the Agent, the Arranging
Agents, the Syndication Agents, and the Lenders.
"Default" shall mean any Default (as defined in the Credit
Agreement).
"Event of Default" shall mean any Event of Default (as defined
in the Credit Agreement).
"FCC" shall mean the Federal Communications Commission (or any
successor agency of the federal government).
"Franchising Authority" shall mean each of the franchising
authorities which granted the Franchises held by the Borrower.
"Guarantor" shall mean any Guarantor (as defined in the Credit
Agreement)
"hereby," "herein," "hereof," "hereunder" and words of similar
import refer to this Hypothecation Agreement as a whole (including,
without limitation, any schedules hereto) and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"Hypothecation Agreement" shall mean this Security and
Hypothecation Agreement, as the same may from time to time be amended,
modified or supplemented and shall refer to this Security and
Hypothecation Agreement as in effect on the date such reference becomes
operative.
"Liens" shall have the definition ascribed to such term in the
Credit Agreement.
"Intercompany Loan Agreement" shall have the definition
ascribed to such term in the Credit Agreement.
"Intercompany Notes" shall mean the Intercompany Notes (as
defined in the Credit Agreement) which are made payable to the order of
the Grantor.
"New Collateral" shall mean New Collateral (as defined in each
Security Supplement).
"Proceeds" shall mean "proceeds," as such term is defined in
section 9-306(1) of the UCC and, in any
2
<PAGE> 3
event, shall include, without limitation, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the Grantor
from time to time with respect to any of the Collateral, (ii) any and
all payments (in any form whatsoever) made or due and payable to the
Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any governmental body, authority, bureau or agency
(or any person acting under color of any governmental authority), and
(iii) any and all other amounts from time to time paid or payable under
or in connection with any of the Collateral.
"Secured Obligations" shall mean (i) all of the unpaid
principal amount of, and accrued interest on, the Loans, (ii) all fees
or premiums owing by the Borrower under or in connection with the
Credit Agreement, (iii) all other liabilities and obligations of the
Borrower to the Agent or any Lender, whether now existing or hereafter
incurred, under or in connection with the Credit Agreement or any of
the other Credit Documents, and (iv) all of the obligations of the
Grantor to the Agent or any other Creditor under this Hypothecation
Agreement.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the Creditors'
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest.
As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Secured Obligations, to induce the Lenders to enter into the Credit
Agreement and to make the Loans and other extensions of credit in accordance
with the terms thereof, the Grantor hereby grants, assigns and hypothecates to
the Agent, for the ratable benefit of the Agent and the other Creditors, a
3
<PAGE> 4
first priority security interest in all of the Grantor's right, title and
interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
(i) the Intercompany Notes and any Intercompany Loan
Agreements with respect to such Intercompany Notes;
(ii) all New Collateral pledged, assigned, conveyed,
granted, hypothecated or transferred pursuant to any Security
Supplement Agreement; and
(iii) to the extent not otherwise included, all
Proceeds of the foregoing and all accessions to, substitutions
and replacements for, and rents, profits and products of the
foregoing.
3. [Reserved]
4. Representations and Warranties. The Grantor hereby represents and
warrants that:
(a) Except for the security interest granted to the Agent for
the benefit of the Agent and the other Creditors pursuant to this
Hypothecation Agreement, the Grantor is the sole owner of each item of
the Collateral in which it purports to grant a security interest
hereunder, having good and marketable title thereto, free and clear of
any and all Liens.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by the Grantor in
favor of the Agent for the benefit of the Agent and the other Creditors
pursuant to this Hypothecation Agreement.
(c) The Grantor's principal place of business and the place
where its records concerning the Collateral are kept is located at 235
Montgomery Street, Suite 420, San Francisco, California 94104, and the
Grantor will not change such principal place of business, remove such
records or change the location of its Collateral unless it has taken
such action as is neces-
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<PAGE> 5
sary to cause the security interest of the Agent on behalf of the Agent
and the other Creditors in the Collateral to continue to be perfected.
The Grantor will not change its principal place of business or the
place where its records concerning the Collateral are kept or keep
Collateral at any other location without giving thirty (30) days' prior
written notice thereof to the Agent.
(d) Each of the Intercompany Notes has been delivered to the
Agent and has been duly endorsed in blank by the Grantor and the
Grantor has delivered to the Agent a copy of the Intercompany Loan
Agreement and the letter from the Maker of the Intercompany Note
substantially in the form of Exhibit K to the Credit Agreement.
(e) Assuming that any financing statements which were
delivered to the Agent in respect of this Hypothecation Agreement have
been filed in the Office of the Secretary of State of California, this
Hypothecation Agreement is effective to create a valid and continuing
first priority lien on and first priority perfected security interest
in the Collateral with respect to which a security interest may be
perfected by filing pursuant to the UCC in favor of the Agent for the
benefit of the Agent and the other Creditors, prior to all other Liens,
and is enforceable as such as against creditors of and purchasers from
the Grantor. Assuming that the actions described in the previous
sentence have been taken, all action necessary to perfect such security
interest in each item of the Collateral has been duly taken.
(f) The Grantor has full power and authority to execute,
deliver and perform this Hypothecation Agreement and to incur the
obligations provided for herein, all of which have been duly authorized
by all proper and necessary action. No consent or approval of
shareholders or partners, as applicable, is required as a condition to
the validity or performance of, or the exercise by the Agent or the
other Creditors of any of their rights and remedies under, this
Hypothecation Agreement.
(g) This Hypothecation Agreement constitutes the valid and
legally binding obligation of the Grantor, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, reorganization and
similar laws
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<PAGE> 6
of general applicability relating to or affecting creditors' rights and
to general equity principles.
(h) There is no statute, regulation, rule, order or judgment,
and no provision of any agreement or instrument binding on the Grantor
or affecting its properties and no provision of the certificate of
incorporation or by-laws or partnership agreement, as applicable to the
Grantor, which would prohibit, conflict with or in any way be
inconsistent with or prevent the execution, delivery, or performance of
this Hypothecation Agreement or result in or require the creation or
imposition of any material Lien on any of the properties of the Grantor
as a consequence of the execution, delivery and performance of this
Hypothecation Agreement or the consummation of the transactions
contemplated hereby; and the execution, delivery and performance by the
Grantor of this Hypothecation Agreement and the consummation of the
transactions contemplated hereby do not (i) violate any provision of
law applicable to the Grantor or its charter documents or any order,
judgment or decree of any court or other agency of government binding
on the Grantor, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
agreement or instrument binding on the Grantor or affecting its
properties or (iii) require any approval of stockholders or partners,
as applicable, or any approval or consent of any Person under any
agreement or instrument binding on the Grantor or affecting its
properties.
5. Covenants. The Grantor covenants and agrees with the Agent and the
other Creditors that from and after the date of this Hypothecation Agreement and
until the Secured Obligations are fully satisfied:
(a) Further Assurances. At any time and from time to time,
upon the written request of the Agent, and at the sole expense of the
Grantor, the Grantor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action
as the Agent may reasonably deem necessary to obtain the full benefits
of this Hypothecation Agreement and of the rights and powers herein
granted, such action to include, without limitation, the filing of any
financing or continuation statements under the UCC with respect to the
liens and security interests granted hereby, and transferring
Collateral to the Agent's possession (if a security interest in such
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<PAGE> 7
Collateral can be perfected by possession). The Grantor also hereby
authorizes the Agent to file any such financing or continuation
statement without the signature of the Grantor to the extent permitted
by applicable law. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any instrument
(other than checks representing payments received in the ordinary
course of business), such instrument shall be immediately pledged to
the Agent hereunder, and shall be duly endorsed in a manner
satisfactory to the Agent and delivered to the Agent.
(b) Maintenance of Records. The Grantor will keep and maintain
at its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments
received and all credits granted with respect to the Collateral and all
other dealings with the Collateral. The Grantor will mark its books and
records pertaining to the Collateral or otherwise make appropriate
provisions in its books and records to evidence this Hypothecation
Agreement and the security interest granted hereby in the Collateral.
At the Agent's request, the Grantor agrees that upon the occurrence and
during the continuation of any Default or Event of Default, the Grantor
shall deliver and turn over any such books and records and other
documents to the Agent or to its representatives.
(c) Indemnification. In any suit, proceeding or action brought
by the Agent or any other Creditor relating to any Collateral, the
Grantor will save, indemnify and keep the Agent and such Creditor
harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach
by the Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from the Grantor, and all such
obligations of the Grantor shall be and remain enforceable against and
only against the Grantor and shall not be enforceable against the Agent
or any other Creditor.
(d) Compliance with Laws, etc. The Grantor will comply, in all
material respects, with all acts, rules, regulations, orders, decrees
and directions of any governmental authority, applicable to the
Collateral or
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<PAGE> 8
any part thereof; provided, however, that the Grantor may contest any
act, regulation, order, decree or direction in any reasonable manner
which shall not, in the reasonable opinion of the Agent, materially
adversely affect the rights of the Agent or any other Creditor
hereunder or adversely affect the first priority of their security
interest in the Collateral taken as a whole.
(e) Payment of Obligations. The Grantor will pay promptly when
due, or make adequate provision for the payment of, all taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all
claims of any kind related to the Collateral (including, without
limitation, claims for labor, materials and supplies), except to the
extent the same are being contested in good faith and reserves which
are adequate under GAAP have been established.
(f) Limitation on Liens on Collateral. The Grantor will not
create, permit or suffer to exist, and will defend the Collateral
against and take such other action as is necessary to remove, any Lien
on the Collateral, and will defend the right, title and interest of the
Agent on behalf of itself and the other Creditors in and to any of the
Grantor's rights under the Collateral against the claims and demands of
all Persons whomsoever.
(g) Limitations on Disposition. The Grantor will not sell,
assign, lease, transfer or otherwise dispose of any of the Collateral,
or contract to do so.
(h) Further Identification of Collateral. The Grantor will, if
so requested by the Agent, furnish to the Agent, as often as the Agent
reasonably requests, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request, all in reasonable
detail.
(i) Notices. The Grantor will advise the Agent promptly, in
reasonable detail, (i) of any Lien, security interest, encumbrance or
claim made or asserted against any of the Collateral, (ii) of any
material change in the composition of the Collateral, and (iii) of the
occurrence of any other event which would have a material adverse
effect on the security interests created hereunder.
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<PAGE> 9
(j) Right of Inspection. Upon reasonable prior notice to the
Grantor (unless an Event of Default has occurred and is continuing, in
which case no notice is necessary), the Agent shall at all times have
full and free access during normal business hours to all the books and
records and correspondence of the Grantor and the Borrower relating to
the Collateral, and the Agent or its representatives may examine the
same, take extracts therefrom and make photocopies thereof. Upon
reasonable prior notice to the Grantor (unless an Event of Default has
occurred and is continuing, in which case no notice is necessary), the
Agent and its representatives shall also have the right to enter into
and upon any premises where any of the Collateral is located or any
premises owned, leased or otherwise occupied by the Borrower for the
purpose of inspecting the same, observing its use or otherwise
protecting its interests therein.
(k) Continuous Perfection. The Grantor will not change its
name, identity or corporate structure in any manner which might make
any financing or continuation statement filed in connection herewith
seriously misleading within the meaning of section 9-402(7) of the UCC
(or any other then applicable provision of the UCC) unless the Grantor
shall have given the Agent at least thirty (30) days' prior written
notice thereof and shall have taken all action (or made arrangements to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend such financing statement or
continuation statement so that it is not seriously misleading.
6. The Agent's Appointment as Attorney-in-Fact.
(a) The Grantor hereby irrevocably constitutes and appoints
the Agent and any executive officer of the Agent and any agent
designated by such executive officer, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Agent's
discretion, for the purpose of carrying out the terms of this
Hypothecation Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Hypothecation
Agreement
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<PAGE> 10
and, without limiting the generality of the foregoing, hereby gives the
Agent the power and right, on behalf of the Grantor, without notice to
or assent by the Grantor to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral, to demand performance of any
covenants under, and to give any notice in connection with,
any Intercompany Loan Agreement, and in the name of the
Grantor or its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by the Agent for the purpose of collecting
any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and
all such moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to the
Agent or as the Agent shall direct; (B) to receive payment of
and receipt for any and all moneys, claims and other amounts
due, and to become due at any time, in respect of or arising
out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and
other documents constituting or relating to the Collateral;
(D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and
to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against the
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<PAGE> 11
Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as the Agent may deem appropriate; and (G) generally
to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof
for all purposes, and to do, at the Agent's option and the
Grantor's expense, at any time, or from time to time, all acts
and things which the Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and the
Creditors' Lien thereon, in order to effect the intent of this
Hypothecation Agreement, all as fully and effectively as the
Grantor might do.
(b) The Agent agrees that, except upon the occurrence and
during the continuation of an Event of Default, it will forebear from
exercising the power of attorney or any rights granted to the Agent
pursuant to this Section 6. The Grantor hereby ratifies, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted pursuant to
this Section 6 is a power coupled with an interest and shall be
irrevocable until the Secured Obligations are indefeasibly paid in
full.
(c) The powers conferred on the Agent hereunder are solely to
protect the Creditors' interests in the Collateral and shall not impose
any duty upon it to exercise any such powers. The Agent shall be
accountable only for amounts that it actually receives as a result of
the exercise of such powers and neither it nor any of its officers,
directors, employees or agents shall be responsible to the Grantor for
any act or failure to act, except for its own gross negligence or
willful misconduct.
(d) The Grantor also authorizes the Agent, at any time and
from time to time upon the occurrence and during the continuation of an
Event of Default, to execute, in connection with the sale provided for
in Section 13 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
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<PAGE> 12
7. Pledge of Additional Collateral.
(a) Subject to the terms and conditions hereof, the Grantor
may from time to time during the term of this Hypothecation Agreement
pledge additional property as Collateral hereunder.
(b) The Grantor may pledge additional property as Collateral
hereunder by delivering to the Collateral Agent a security supplement
substantially in the form attached hereto as Exhibit A (a "Security
Supplement") together with:
(i) with respect to additional certificated
securities to be pledged, certificates evidencing the same;
(ii) with respect to additional uncertificated
securities to be pledged, evidence satisfactory to the Agent
of the registration thereof;
(iii) such executed copies of financing statements on
Form UCC-1 and Form UCC-3 under the UCC as may be required and
other financing and assignment documents as may be required
hereunder;
(iv) such other evidence, including but not limited
to appropriate representations, warranties, covenants, and any
other documentation reasonably requested by the Agent,
satisfactory to the Agent, on behalf of itself and ratably on
behalf of the Lenders, first priority security interest in the
Collateral described therein; and
(c) Upon the receipt of any Security Supplement, together with
any certificates, statements and other evidence required by this
Section 7, the Security Supplement shall be added as a supplement to
this Hypothecation Agreement and the collateral identified herein shall
become Collateral.
8. Performance by the Agent of Grantor's Obligations. If the Grantor
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Hypothecation Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of the Agent incurred in connection with
such performance or compliance, shall be payable by the Grantor to the Agent on
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<PAGE> 13
demand and shall constitute Secured Obligations secured hereby.
9. Limitation on the Creditor's Obligation. It is expressly agreed by
the Grantor that, anything herein to the contrary notwithstanding, neither the
Agent nor any other Creditor shall have any obligation or liability for the
performance by the Grantor of its obligations under any Intercompany Loan
Agreement by reason of or arising out of this Hypothecation Agreement or the
granting to the Agent for the benefit of the Agent and the other Creditors, of
the security interests provided for herein or the receipt by the Creditors of
any payment relating thereto.
10. Payments. Unless an Event of Default shall have occurred and be
continuing, the Grantor shall be permitted to receive all payments made to the
extent permitted in the Credit Documents in respect of the Collateral.
11. Rights of Agent; Further Appointment as Attorney-in-Fact.
(a) During the continuation of an Event of Default, the Agent
shall have the right to receive any and all payments made in respect of
the Intercompany Collateral and to make application thereof to the
Secured Obligations, and the Agent or its nominee may thereafter (i)
notify the maker of any Intercompany Note to make payment to the Agent
of any amounts due or to become due thereunder, (ii) make demand for
payment on the Intercompany Notes, (iii) enforce collection of any of
the Intercompany Notes by suit or otherwise, (iv) surrender, release or
exchange all or any part of any Intercompany Note, or compromise or
extend or renew for any period the obligations of any maker of a
Intercompany Note thereunder, (v) exercise all other rights of the
Grantor in any of the Intercompany Notes, and (vi) take possession or
control of any proceeds of the Intercompany Notes, in each case without
liability except to account for property actually received by it, but
the Agent shall have no duty to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay
in so doing. The Grantor hereby irrevocably constitutes and appoints
the Agent and any executive officer of the Agent and any agent
designated by such executive officer, with full power of substitution,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in
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<PAGE> 14
the Agent's discretion, for the purpose of carrying out the terms of
this Hypothecation Agreement, to take any and all appropriate action
and to execute and deliver all documents and instruments which may be
necessary or desirable to exercise such rights. The Grantor hereby
ratifies, to the extent permitted by law, all that said attorneys shall
lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 11 is a power coupled with an interest
and shall be irrevocable until the Secured Obligations are indefeasibly
paid in full.
(b) The Agent agrees to release promptly to the Grantor any
cash payments on the Collateral which it may receive hereunder (and any
Proceeds of such cash distributions) during the continuation of any
Event of Default, to the extent not applied to the Secured Obligations,
following the waiver or curing of such Event of Default.
(c) The Grantor authorizes the Agent, without notice to,
demand of, or consent from the Borrower, any Guarantor, or any other
Person, and without affecting its liability to the Agent and the other
Creditors hereunder, from time to time (i) to renew, extend, accelerate
or otherwise change the time or place for payment of, or otherwise
change the terms of, the Secured Obligations or any part thereof
including, without limitation, increase or decrease of the rate of
interest thereon; (ii) to take and hold any other security for the
payment or performance of the Secured Obligations by the Borrower or
any Guarantor, and exchange, enforce, waive, surrender, modify, impair,
change, alter, renew, continue, compromise or release in whole or in
part any such security, or fail to perfect its interest in any such
security or to establish its priority with respect thereto; (iii) to
apply such security and direct the order or manner of sale thereof as
the Agent in its sole discretion may determine; (iv) to release any
Guarantor, in whole or in part, from any or all of the Secured
Obligations or substitute any or all of the obligations of any other
guarantor; (v) to settle or compromise any or all of the Secured
Obligations with any Guarantor or any endorser of the Secured
Obligations; and (vi) to subordinate any or all of the Secured
Obligations to any other obligations of or claim against the Borrower
or any Guarantor, whether owing to or existing in favor of the Agent or
any other Creditor or any other party. The Grantor shall be and remain
bound hereunder
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<PAGE> 15
notwithstanding any such renewal, extension, acceleration, change,
taking, holding, exchange, enforcement, waiver, surrender,
modification, impairment, alteration, continuation, compromise,
release, failure, application, direction, settlement or subordination.
12. Waivers. The Grantor waives any and all statutory or other rights
which the Grantor may otherwise have to require the Agent or any other Creditor
to (i) proceed against the Borrower or any Guarantor; (ii) proceed against or
exhaust any other security for the Secured Obligations; or (iii) pursue any
other remedy in their power whatsoever. The Agent and the other Creditors may,
at their election, exercise any right or remedy they may have against the
Borrower, any Guarantor, any other Person, or any other security now or
hereafter held by or for their benefit including, without limitation, the right
to foreclose upon any such security by judicial or nonjudicial sale, without
affecting or impairing in any way the liability of the Grantor hereunder except
to the extent the Secured Obligations may thereby be paid. Only the net proceeds
from any such foreclosure, after deduction of all reasonable costs and expenses
authorized to be deducted pursuant to the documents under which such other
security is held or by law, shall be applied against the Secured Obligations.
The Agent and any of the other Creditors may at their discretion purchase all or
any part of such security so sold or offered for sale for their own account and
may apply against the amount bid therefor all or any part of the Secured
Obligations for which such security is held; and in such case, only that portion
of the proceeds realized, after deduction of all costs and expenses authorized
to be deducted pursuant to the documents under which such other security is held
or pursuant to law, shall be applied against the Secured Obligations. The
Grantor waives any defense arising out of the absence, impairment or loss of any
right of reimbursement or subrogation or other right or remedy against the
Borrower, any Guarantor, any other Person, or any other security, whether
resulting from the election by the Agent or any other Creditor to exercise any
right or remedy it may have against the Borrower, any Guarantor, or any other
Person, any defect in, failure of, or loss or absence of priority with respect
to the interest of the Agent and the other Creditors in such other security, or
otherwise. In the event that any foreclosure sale is deemed to be not
commercially reasonable, the Grantor waives any right that it may have to have
any portion of the Secured Obligations discharged except to the extent of the
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<PAGE> 16
amount actually bid and received by the Agent or any other Creditor at any such
sale.
The Grantor acknowledges that repeated and successive demands
may be made and payments or performance made hereunder in response to such
demands as and when, from time to time, the Borrower or any Guarantor may
default in performance of the Secured Obligations. Notwithstanding any such
performance hereunder, this Hypothecation Agreement shall remain in full force
and effect and shall apply to any and all subsequent defaults by the Borrower or
any Guarantor in payment or performance of the Secured Obligations.
The Grantor waives any setoff, defense or counterclaim which
the Grantor may have or claim to have against the Agent or any other Creditor.
13. Remedies; Rights on Default. If an Event of Default has occurred
and is continuing, in addition to all other rights and remedies granted in this
Hypothecation Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, the Agent shall have all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the Agent
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Agent or any other Creditor shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Grantor,
which right or equity is hereby waived or released. The Agent shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein
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<PAGE> 17
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Agent hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Secured Obligations, and only after such application
and after the payment by the Agent of any other amount required by any provision
of law, including, without limitation, section 9-504(l)(c) of the UCC, need the
Agent account for the surplus, if any, to the Grantor. To the extent permitted
by applicable law, the Grantor waives all claims, damages and demands it may
acquire against the Agent arising out of the exercise by the Agent of any of its
rights hereunder. If any notice of a proposed sale or other disposition of the
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition. The
Grantor further waives and agrees not to assert any rights or privileges which
it may acquire under section 9-112 of the UCC.
The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by the Agent in the
following order of priorities:
First, to the Agent in an amount sufficient to pay in full the
reasonable expenses of the Agent in connection with such sale,
disposition or other realization, including all reasonable expenses,
liabilities and advances incurred or made by the Agent in connection
therewith, including, without limitation, reasonable attorneys' fees;
Second, to the Creditors in an amount equal to the aggregate
amount of Secured Obligations which are then unpaid in such order as
the Agent and the other Creditors may elect; and
Finally, upon payment in full of all of the Secured
Obligations, to the Grantor, or its representatives or as a court of
competent jurisdiction may direct, any surplus then remaining from such
Proceeds.
The Grantor recognizes that the Agent may be unable to effect
a public sale of any or all of the Collateral, by reason of certain prohibitions
in the Securities Act of 1933, as amended (the "Securities Act"), and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obligated
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<PAGE> 18
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the Agent than if such sale were a public sale
and agrees that such circumstances shall not, in and of themselves, result in a
determination that such sale was not made in a commercially reasonable manner.
The Agent shall be under no obligation to delay a sale of any Collateral for the
period of time necessary to permit the registration thereof under the Securities
Act, or under applicable state securities laws.
The Agent hereby acknowledges that certain actions which may
be taken by the Agent pursuant to the provisions of this Hypothecation Agreement
may be subject to receipt of consent of the FCC and Franchising Authorities
which may be required by applicable law or regulation or the terms of any
Franchises. Anything in this Hypothecation Agreement (including any
representations and warranties of the Grantor) to the contrary notwithstanding,
the security interest granted hereunder shall not be deemed to be an assignment,
transfer or change of beneficial or record ownership of the Collateral or the
cable television systems owned by the Grantor or the Borrower, and neither the
Agent nor any other Creditor shall have any right to own or control such cable
television systems, without the prior written consent or approval of the FCC and
the Franchising Authorities whose consent or approval is required by law or
regulation or the terms of their respective Franchises.
14. Limitation on the Agent's Duty in Respect of Collateral. The
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Agent deals
with similar securities and property for its own account. Neither the Agent nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Grantor or otherwise.
15. Reinstatement. This Hypothecation Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against the Borrower or any Guarantor for liquidation or reorganization, should
the Borrower or any Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver
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<PAGE> 19
or trustee be appointed for all or any significant part of the assets of the
Borrower or any Guarantor, and shall continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Secured
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Secured Obligations, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
16. Subrogation. Until all Secured Obligations shall have been
satisfied, the Grantor shall not have any right of subrogation and waives any
right to enforce any remedy which the Agent or any other Creditor now has or may
hereafter have against the Borrower or any Guarantor, and waives any and all
statutory or other rights to participate in any other security now or hereafter
held by the Agent or any other Creditor.
17. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any communication with respect to this Hypothecation
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
with receipt acknowledged or sent by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to the Agent, at
One Wall Street
New York, New York 10286
Attention: Wade E. Layton
Vice President
(b) If to the Grantor, at its principal business address
specified in Section 4(c)
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required
19
<PAGE> 20
hereunder may be waived in writing by the party entitled to receive such notice.
Every notice, demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given or served on the
date on which delivered. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
18. Severability. Any provision of this Hypothecation Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
19. No Waiver; Cumulative Remedies. Neither the Agent nor any other
Creditor shall by any act, delay, omission or otherwise be deemed to have waived
any of its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by the Agent, and then only to the extent therein set forth. A
waiver by the Agent or any other Creditor of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Agent or such other Creditor would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of the
Agent or any other Creditor, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Hypothecation Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by the Agent and, where applicable, by the Grantor.
20. Successors and Assigns; Governing Law; Consent to Jurisdiction.
(a) This Hypothecation Agreement and all obligations of the
Grantor hereunder shall be binding upon the successors and assigns of
the Grantor, and
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<PAGE> 21
shall, together with the rights and remedies of the Agent hereunder,
inure to the benefit of the Agent and the other Creditors and their
respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement
governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the
security interest granted to the Agent and the other Creditors
hereunder.
(b) THIS HYPOTHECATION AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
(c) The Grantor hereby irrevocably submits to the
non-exclusive jurisdiction of any state or federal court in The City of
New York located in the Borough of Manhattan for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Hypothecation Agreement. The Grantor hereby appoints CT Corporation
System, with offices on the date hereof at 1633 Broadway, New York, New
York 10019, as its authorized agent on whom process may be served in
any action which may be instituted against it by the Agent or any other
Creditor in any state or federal court in The City of New York located
in the Borough of Manhattan, arising out of or relating to this
Hypothecation Agreement. Service of process upon such authorized agent
and written notice of such service to the Grantor shall be deemed in
every respect effective service of process upon the Grantor, and the
Grantor hereby irrevocably consents to the jurisdiction of any such
court in any such action and to the laying of venue in New York City.
The Grantor hereby irrevocably waives any objection to the laying of
the venue of any such suit, action or proceeding brought in the
aforesaid courts and hereby irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought
in an inconvenient forum. Notwithstanding the foregoing, nothing herein
shall in any way affect the right of the Agent or any other Creditor to
bring any action arising out of or relating to this Hypothecation
Agreement in any competent court elsewhere having jurisdiction over the
Grantor or its property.
21. Further Indemnification. The Grantor agrees to pay, and to save the
Agent and each other Creditor harmless from, any and all liabilities with
respect to, or resulting
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<PAGE> 22
from any delay in paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Hypothecation
Agreement.
22. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS HYPOTHECATION AGREEMENT.
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<PAGE> 23
IN WITNESS WHEREOF, each of the parties hereto has caused this
Hypothecation Agreement to be executed and delivered by its duly authorized
officer on the date first set forth above.
INTERMEDIA PARTNERS OF WEST TENNESSEE
By: InterMedia Capital Management
IV, L.P.
By: InterMedia Management,
Inc.
By:
----------------------------
Name:
Title:
Accepted and Acknowledged by:
THE BANK OF NEW YORK,
As Agent
By:
----------------------------
Name:
Title:
<PAGE> 24
IN WITNESS WHEREOF, each of the parties hereto has caused this
Hypothecation Agreement to be executed and delivered by its duly authorized
officer on the date first set forth above.
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
By: InterMedia Partners of Tennessee
By: InterMedia Capital Management IV, L.P.
By: InterMedia Management, Inc.
By: /s/ Leo J. Hindery, Jr.
________________________________________
Name:
Title:
Accepted and Acknowledged by:
THE BANK OF NEW YORK,
As Agent
By: /s/ Wade Layton
____________________
Name:
Title:
23
<PAGE> 25
EXHIBIT ___
Form of Security Supplement
[DATE]
The Bank of New York, as Agent
One Wall Street
New York, New York 10286
Attention:
Facsimile:
Re: Security Supplement Agreement
Ladies and Gentlemen:
Reference is made to the Security and Hypothecation Agreement,
dated as of July 30, 1996 (the "Hypothecation Agreement"), between (the
"Grantor") and The Bank of New York, as Agent. All capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to them in the
Hypothecation Agreement.
As additional collateral security for the prompt and complete
payment and performance of the Obligations and to induce the Lenders as set
forth in the Hypothecation Agreement, the Grantor, upon the acceptance hereof by
the Agent, hereby assigns, conveys, mortgages, pledges, hypothecates, grants,
transfers and sets over to the Agent, for its benefit and for the ratable
benefit of the Creditors, a first security interest in all of the Grantor's
right, title and interest in, to and under the property listed on Annex A
hereto, whether now owned or hereafter acquired by the Grantor (all of which
being hereinafter collectively called the "New Collateral"). Upon the acceptance
hereof by the Agent, the New Collateral shall become Collateral, and the Grantor
is and the Agent's interests therein shall be governed in all respects by the
terms of the Hypothecation Agreement.
The Grantor hereby certifies that, upon the delivery of this
Security Supplement and the accompanying certificates, statements,
representations, warranties, covenants and other evidence, if any, the Grantor
shall have complied with all requirements for the pledge of the New Collateral
as additional Grantor Collateral under the Hypothecation Agreement. The Grantor
further certifies that on a pro-forma basis, after giving effect to such New
Collateral as Collateral, the representations and warranties
24
<PAGE> 26
of the Grantor in the Hypothecation Agreement and the Revolving Credit and Term
Loan Agreement shall be true and correct as if made on the date hereof and the
Grantor shall be in compliance with all of its covenants and agreements in the
Hypothecation Agreement.
Very truly yours,
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
By: InterMedia Partners of Tennessee
By: InterMedia Capital Management IV, L.P.
By: InterMedia Management, Inc.
By:________________________________________
Name:
Title:
Accepted by:
THE BANK OF NEW YORK,
as Agent
By: ______________________
Name:
Title:
25
<PAGE> 1
Exhibit 10.3
GENERAL GUARANTEE
GENERAL GUARANTEE, dated July 30, 1996, by and among
InterMedia Partners of West Tennessee, L.P., a California limited partnership
(the "Guarantor"), in favor of The Bank of New York (the "Agent"), as agent for
the financial institutions (the "Lenders") party to the Credit Agreement
referred to below, and the Lenders (the Agent and the Lenders being referred to
herein collectively as the "Creditors").
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Revolving Credit and Term Loan
Agreement, dated as of July __, 1996, among InterMedia Partners IV, L.P. (the
"Borrower"), the arranging agents and syndication agents named therein, the
Lenders and the Agent (as the same may from time to time be amended, modified or
supplemented, the "Credit Agreement").
1. Guarantee. For value received, and to induce the Creditors
to make the Loans or otherwise extend credit from time to time to or for the
account of the Borrower pursuant to the terms of the Credit Agreement, the
Guarantor unconditionally and irrevocably guarantees to the Creditors, their
successors, endorsees and assigns, the prompt payment when due of all present
and future obligations and liabilities of all kinds of the Borrower to any of
the Creditors based on, arising out of, or otherwise relating to the Credit
Documents, whether incurred by the Borrower as maker, endorser, drawer,
acceptor, guarantor, accommodation party or otherwise, and whether due or to
become due, secured or unsecured, absolute or contingent, joint or several, and
howsoever or whenever incurred by the Borrower (the "Obligations").
2. Absolute Guarantee. The Guarantor's obligations hereunder
shall not be affected by the genuineness, validity, regularity or enforceability
of the Obligations or any instrument evidencing any Obligation, or by the
existence, validity, enforceability, perfection, or extent of any collateral
therefor or by any other circumstance relating to the Obligations which might
otherwise constitute a defense to this Guarantee. The Creditors make no
representation or warranty with respect to any such circumstance and have no
duty or responsibility whatsoever to the Guarantor with respect to the
management and maintenance of the Obligations or any collateral
1
<PAGE> 2
therefor. The Creditors shall not be obligated to file any claim relating to the
Obligations in the event that the Borrower becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of the Creditors to so
file shall not affect the Guarantor's obligations hereunder.
The Guarantor authorizes the Creditors, without notice to,
demand of, or consent from the Borrower or the Guarantor, and without affecting
its liability to the Creditors hereunder, from time to time (a) to renew,
extend, accelerate or otherwise change the time or place for payment of, or
otherwise change the terms of, the Obligations or any part thereof including,
without limitation, to increase or decrease the rate of interest thereon; (b) to
take and hold security for the payment or performance of the Obligations and
exchange, enforce, waive, surrender, modify, impair, change, alter, renew,
continue, compromise or release in whole or in part any such security, or fail
to perfect its interest in any such security or to establish its priority with
respect thereto; (c) to apply such security and direct the order or manner of
sale thereof as the Creditors in their sole discretion may determine; (d) to
release any other guarantor, in whole or in part, from any or all of the
Obligations or substitute any or all of the obligations of any other guarantor;
(e) to settle or compromise any or all of the Obligations with any other
guarantor or any endorser of the Obligations; and (f) to subordinate any or all
of the Obligations to any other obligations of or claim against any other
guarantor, whether owing to or existing in favor of the Creditors or any other
party. The Guarantor shall be and remain bound hereunder notwithstanding any
such renewal, extension, acceleration, change, taking, holding, exchange,
enforcement, waiver, surrender, modification, impairment, alteration,
continuation, compromise, release, failure, application, direction,
substitution, settlement or subordination.
In the event that the Borrower or any other guarantor becomes
insolvent or files a petition for reorganization, arrangement, composition,
discharge or similar relief under any present or future provision of the
Bankruptcy Code, or if such a petition be filed against the Borrower or any
other guarantor, and in any such proceedings some or all of the Obligations
shall be terminated or rejected or any of the Obligations modified or abrogated,
the Guarantor agrees that its liability hereunder shall not thereby be affected
or modified, and such liability shall continue in full force and effect as if no
such action or proceeding had occurred and shall continue to be effective
2
<PAGE> 3
or reinstated, as the case may be, if any payment of any of the Obligations must
be returned by any Creditor upon such insolvency, bankruptcy or reorganization,
or otherwise, as though such payment had not been made.
The Guarantor waives any and all statutory or other right
which the Guarantor may otherwise have to require the Creditors to (a) proceed
against the Borrower or any other guarantor; (b) proceed against or exhaust any
security from the Borrower or any other guarantor; or (c) pursue any other
remedy in their power whatsoever. The Creditors may, at their election, exercise
any right or remedy they may have against the Borrower or any other guarantor or
any security now or hereafter held by or for the benefit of the Creditors
including, without limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale, without affecting or impairing in any way the
liability of the Guarantor hereunder except to the extent the Obligations may
thereby be paid. Only the net proceeds from any such foreclosure, after
deduction of all reasonable costs and expenses authorized to be deducted
pursuant to the documents under which such security is held or by law, shall be
applied against the Obligations. Any one or more of the Creditors may at their
discretion purchase all or any part of such security so sold or offered for sale
for their own account and may apply against the amount bid therefor all or any
part of the Obligations for which such security is held; and in such case, only
that portion of the proceeds realized, after deduction of all reasonable costs
and expenses authorized to be deducted pursuant to the documents under which
such security is held or pursuant to law, shall be applied against the
Obligations. The Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement or subrogation or other right
or remedy against the Borrower or any other guarantor or any such security,
whether resulting from the election by the Creditors to exercise any right or
remedy they may have against the Borrower or any other guarantor, any defect in,
failure of, or loss or absence of priority with respect to the interest of the
Creditors in such security, or otherwise. In the event that any foreclosure sale
is deemed to be not commercially reasonable, the Guarantor waives any right that
it may have to have any portion of the Obligations discharged except to the
extent of the amount actually bid and received by the Creditors at any such
sale. The Creditors shall not be required to institute or prosecute proceedings
to recover any deficiency as a condition of payment hereunder or enforcement
hereof.
3
<PAGE> 4
The Guarantor acknowledges that repeated and successive
demands may be made and payments or performance made hereunder in response to
such demands as and when, from time to time, the Borrower may default in
performance of the Obligations. Notwithstanding any such performance hereunder,
this Guarantee shall remain in full force and effect and shall apply to any and
all subsequent defaults by the Borrower in payment or performance of the
Obligations.
The Guarantor waives any setoff, defense or counterclaim which
the Guarantor may have or claim to have against any Creditor.
3. Representations and Warranties. The Guarantor
hereby represents and warrants that:
(a) Partnership Power. The Guarantor has full power and
authority to execute, deliver and perform this Guarantee and to incur
the obligations provided for herein, all of which have been duly
authorized by all proper and necessary partnership action. No consent
or approval not heretofore obtained and in full force and effect of its
partners, or of the shareholders of any such partners, is required as a
condition to the validity or performance of, or the exercise by the
Creditors of any of their rights and remedies under, this Guarantee
(other than the execution of this Guarantee by its general partner).
(b) Binding Agreement. This Guarantee constitutes the valid
and legally binding obligation of the Guarantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(c) No Conflicts. There is no statute, regulation, rule, order
or judgment, and no provision of any agreement or instrument binding on
the Guarantor or affecting its properties and no provision of the
partnership agreement of the Guarantor or any general partner thereof
which would prohibit, conflict with or in any way be inconsistent with
or prevent the execution, delivery, or performance of this Guarantee or
result in or require the creation or imposition of any material Lien on
any of the properties of the Guarantor as a consequence of the
execution, delivery and performance of this Guarantee or the
consummation
4
<PAGE> 5
of the transactions contemplated hereby; and the execution, delivery
and performance by the Guarantor of this Guarantee and the consummation
of the transactions contemplated hereby do not (i) violate any
provision of law applicable to the Guarantor or its general partner,
the partnership agreement of the Guarantor or the partnership agreement
of its general partner, or any order, judgment or decree of any court
or other agency of government binding on the Guarantor or its general
partner, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any material
agreement or instrument affecting their properties or (iii) require any
approval of partners (other than the execution of this Guarantee by the
general partner of the Guarantor) or any approval or consent of any
Person under any agreement or instrument binding on the Guarantor or
its general partner or affecting their properties, other than approvals
or consents (a) which have been previously obtained and are in full
force and effect or (b) the absence of which could not reasonably be
expected to have a Material Adverse Effect.
(d) Credit Decision. The Guarantor has made its own credit
analysis with respect to the Borrower and the Obligations and has made
such arrangements with the Borrower not inconsistent with the
provisions hereof as it has deemed appropriate.
(e) Litigation. Other than proceedings affecting the cable
television industry generally, there are no proceedings, investigations
or labor controversies pending or, so far as the Guarantor knows,
threatened before any court or arbitrator or before or by any
Governmental Authority which, in any one case or in the aggregate, if
there is a reasonable possibility of a determination adverse to the
interests of the Guarantor, could reasonably be expected to have a
Material Adverse Effect or which relates to this Guarantee or the
transactions contemplated hereby.
The Guarantor is not and will not be, after or as a result of
making this Guarantee, in default under or in violation of any Order of
any court, arbitrator or Governmental Authority or of any statute or
law or of any rule or regulation of any Governmental Authority, which
default or violation has or might have a Material Adverse Effect; and
the Guarantor is not subject to or a party to any Order of any court or
Governmental
5
<PAGE> 6
Authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of
trade, unfair competition or similar matters. As used herein, the term
"Order" includes any order, writ, injunction, decree, judgment, award,
determination or mandatory written direction or demand of any court,
arbitrator or Governmental Authority.
(f) Financial Condition. There has heretofore been delivered
to the Lenders a pro forma Consolidated income statement, and, after
giving effect to the acquisition of all of the Acquisition Systems and
the financing thereof, pro forma Consolidated balance sheet of the
Guarantor, in each case, dated as of the Closing Date, certified by a
Responsible Person. All material assumptions with respect to such pro
forma Consolidated balance sheet are set forth therein. Such pro forma
Consolidated balance sheet was prepared in good faith and in accordance
with Regulations S-X.
(g) Taxes. The Guarantor has paid, or has made adequate
provision for the payment of, all taxes shown to be due and payable on
any assessment made against the Guarantor or any of its property and
all other taxes, assessments, fees, liabilities or other charges
imposed on the Guarantor or any of its property by any Governmental
Authority, except for any taxes, assessments, fees, liabilities or
other charges which are being contested in good faith and for which
reserves which are adequate under GAAP have been established.
(h) Disclosure. None of the information relating to the
Guarantor delivered in writing to the Agent or any Lender in connection
with the negotiation, execution and delivery of this Guarantee contains
any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading,
except that with respect to the projections contained in such
information, the Guarantor hereby represents and warrants that such
projections were prepared on a reasonable basis and in good faith by
the Guarantor.
(i) Compliance with ERISA. (i) The Guarantor has
not engaged in a transaction with respect to any Plan
which could reasonably be expected to subject the
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<PAGE> 7
Guarantor to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA in an amount that could have a Material
Adverse Effect.
(ii) No Plan had an accumulated funding
deficiency, whether or not waived, as of the last day of the
most recent plan year of such Plan.
(iii) No liability under Sections 4062, 4063
or 4064 of ERISA has been or is expected by the Guarantor to
be incurred by it with respect to any Plan which is a single
employer plan in an amount that would have a Material Adverse
Effect. The Guarantor has not incurred nor expects to incur
any withdrawal liability with respect to any Plan which is a
multiemployer plan in an amount which could have a Material
Adverse Effect.
(iv) Insofar as the representations and
warranties of the Guarantor contained in subsection (i) and
(ii) relate to any Plan which is a multiemployer plan, such
representations and warranties are made to the best knowledge
of the Guarantor. As used in this Section, (A) "accumulated
funding deficiency" shall have the meaning assigned to such
term in Section 412 of the Code and Section 302 of ERISA; (B)
"multiemployer plan" and "plan year" shall have the respective
meanings assigned to such terms in Section 3 or ERISA; (C)
"single employer plan" shall have the meaning assigned to such
term in Section 4001 of ERISA; (D) "withdrawal liability"
shall have the meaning assigned to such term in Part I of
Subtitle E of Title IV of ERISA.
(j) Conduct of Business. The Guarantor holds all
authorizations, consents, approvals, registrations, franchises,
licenses and permits, with or from Governmental Authorities and other
Persons as are required or necessary for it to own its properties and
conduct its businesses as now conducted and as currently proposed to be
conducted, except for those which the failure to so hold, in any one
case or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(k) Compliance with Laws and Organizational Documents. The
Guarantor is not in violation of (i)
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<PAGE> 8
any law, statute, rule, regulation, or order of any Governmental
Authority (including, without limitation, Environmental Laws)
applicable to any of them or any of its properties or assets except for
such violations which, individually and in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or (ii) its
partnership agreement.
(l) Government Regulation. The Guarantor is not and will not
be, after giving effect to the transactions contemplated by this
Guarantee, (i) an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act
of 1940, as amended, or (ii) subject to regulation under the Public
Utility Holding Company Act of 1935 or the Federal Power Act or (iii)
subject to any foreign, federal, state or local statute or regulation
limiting its ability to incur indebtedness for Borrowed Money, pledge
assets as collateral for such indebtedness or guarantee such
indebtedness, as contemplated by this Guarantee or the Hypothecation
Agreements.
(m) Environmental Protection. To the Guarantor's knowledge,
all real property owned or leased by the Guarantor is free of
contamination from any substance that could result in the incurrence of
material liabilities, or constituent thereof, currently identified or
listed as hazardous or toxic pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601,
et seq., or any other Environmental Laws, or any other substance which
has in the past or could at any time in the future cause or constitute
a health, safety or environmental hazard to any person or property,
including asbestos in any building, petroleum products, PCBs,
pesticides, or radioactive materials. To the Guarantor's knowledge,
based on reasonable investigation, the Guarantor has not caused or
suffered to occur any release of any Contaminant into the environment
or any other conditions that could result in the incurrence of material
liabilities nor any material violations of any Environmental Laws. To
the Guarantor's knowledge, based on reasonable investigation, the
Guarantor has not caused or suffered to occur any condition on any of
the Guarantor's property that could give rise to the imposition of any
lien under the Environmental Laws. To the Guarantor's knowledge, based
on reasonable investigation, the Guarantor is not engaged in any
8
<PAGE> 9
manufacturing or any other operations, other than the use of petroleum
products for vehicles, that require the use, handling, transportation,
storage or disposal of any Contaminant, where such operations require
permits or are otherwise regulated pursuant to the Environmental Laws.
(n) Insurance. All of the properties and operations of the
Guarantor of a character usually insured by companies of established
reputation engaged in the same or a similar business similarly situated
are insured in customary amounts, by financially sound and reputable
insurers, against loss or damage of the kinds and in amounts
customarily insured against by such Persons, and the Guarantor carries,
with such insurers in customary amounts, such other insurance,
including larceny, embezzlement or other criminal misappropriation
insurance and business interruption insurance, as is usually carried by
companies of established reputation engaged in the same or a similar
business similarly situated.
(o) Material Contracts. The Guarantor is neither a party to,
nor is it or any of its properties subject to or bound by, any
agreement or instrument (other than this Guarantee and the
Hypothecation Agreement) which (i) materially restricts its ability to
conduct its business or (ii) could reasonably be expected to have a
Material Adverse Effect.
(p) Performance of Agreements. The Guarantor is not in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any contractual
obligation of the Guarantor, including, without limitation, its
Hypothecation Agreement, and no condition exists which, with the giving
of notice or the lapse of time or both, would constitute such a
default, except where the consequences, direct or indirect, of such
default or defaults, if any, could not reasonably be expected to have a
Material Adverse Effect.
4. Affirmative Covenants. Until full and final
payment of all Obligations, the Guarantor will:
(a) Financial Statements. Furnish to the Agent with sufficient
copies for each Lender (i) as soon as available, but in no event later than
August 15, 1996, unaudited consolidated financial statements of the Borrower
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as of June 30, 1996 certified by a Responsible Person and accompanied by a
certificate of said Responsible Person stating whether any event has occurred
which constitutes a Default or Event of Default and, if so, stating the facts
with respect thereto; (ii) upon request, copies of any reports and management
letters submitted to the Guarantors by accountants in connection with any annual
or interim audit of the books of the Guarantor, together with the Guarantor's
responses thereto, if any; (iii) as soon as available, copies of all financial
statements, reports and other notices sent by the Guarantor to its partners; and
(iv) such additional information, reports or statements as the Agent may from
time to time reasonably request. Upon receipt of any such financial statements
or additional information, the Agent shall forthwith forward copies thereof to
each Lender.
(b) Taxes. Pay and discharge all taxes, assessments and
governmental charges upon it, its income and its properties prior to the date on
which penalties are attached thereto, unless and to the extent only that (i)
such taxes, assessments and governmental charges shall be contested in good
faith and by appropriate proceedings by the Guarantor, (ii) reserves which are
adequate under GAAP are maintained by the Guarantor with respect thereto, and
(iii) any failure to pay and discharge such taxes, assessments and governmental
charges will not have a Material Adverse Effect.
(c) Insurance. Maintain insurance with responsible insurance
companies against such risks, on such properties and in such amounts as is
customarily maintained by similar businesses.
(d) Existence. (i) Maintain its partnership existence in good
standing and (ii) qualify and remain qualified to do business as a foreign
partnership in each jurisdiction in which the character of the properties owned
or leased by it therein or in which the transaction of its business is such that
the failure to qualify would have a Material Adverse Effect. The Guarantor will
maintain the same fiscal year during the term of this Agreement.
(e) Maintenance of Records. (i) Keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the
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opinion of such independent public accountants as shall then be regularly
engaged by the Guarantor.
(f) Inspection. Permit the Agent and the Lenders to have one
or more of their officers and employees, or any other Person designated by the
Agent or the Lenders, upon prior reasonable notice visit and inspect any of the
properties of the Guarantor and to examine the minute books, books of account
and other records of the Guarantor and make copies thereof or extracts
therefrom, and discuss its affairs, finances and accounts with its officers and,
at the request of the Lenders, with the Guarantor's independent accountants,
during normal business hours and at such other reasonable times and as often as
the Lenders may reasonably desire.
(g) Maintenance of Property, etc. Subject to Section 5(c), (i)
except for ordinary wear and tear, maintain, keep and preserve all of its
properties in good repair, working order and condition and from time to time
make all necessary and proper repairs, renewals, replacements, and improvements
thereto, and (ii) maintain, preserve and protect all Franchises, licenses,
copyrights, patents and trademarks material to its business (except where the
failure so to do, in any one case or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect) so that the business carried on in
connection therewith may be properly conducted at all times.
(h) Conduct of Business. (i) Engage in as its principal
business the direct or indirect ownership or operation of cable television
systems, (ii) preserve, renew and keep in full force and effect all its material
contracts, (iii) preserve, renew and maintain in full force and effect all its
Franchises and licenses necessary or desirable in the normal conduct of its
business as now conducted, and (iv) comply with the rules and regulations of all
Governmental Authorities, including without limitation all rules and regulations
promulgated by the Federal Communications Commission or any successor
Governmental Authority thereto, except where the failure to comply with clauses
(i) through (iv), in any one case or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(i) Notification of Events of Default and Adverse
Developments. Promptly notify the Agent upon the discovery by any Responsible
Person or officer of the Guarantor of the occurrence of (i) any Default or Event
of Default hereunder;
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(ii) any event, development or circumstance whereby the financial statements
most recently furnished to the Agent fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operating results
of the Guarantor as of the date of such financial statements; (iii) any
litigation or proceedings that are instituted or threatened (to the knowledge of
the Guarantor) against the Guarantor or any of its assets which, if there is a
reasonable possibility of a determination adverse to the interests of the
Borrower, could reasonably be expected to have a Material Adverse Effect; (iv)
each and every event which would be an event of default (or an event which with
the giving of notice or lapse of time or both would be an event of default)
under any indebtedness of the Guarantor for Borrowed Money, such notice to
include the names and addresses of the holders of such indebtedness and the
amount thereof; (v) the repeal or revocation of any Pole Attachment Agreement,
authorization, consent, exemption or license with, to or from Governmental
Authorities and other Persons which are necessary in connection with the
operation of the Acquisition Systems, except to the extent that the repeal or
revocation thereof, individually or in the aggregate, would not have a Material
Adverse Effect; (vi) the repeal or revocation of any Franchise which is
necessary in connection with the operation of an Acquisition System; and (vii)
any other development in the business or affairs of the Guarantor if the effect
thereof could reasonably be expected to have a Material Adverse Effect; in each
case describing the nature thereof and the action the Guarantor proposes to take
with respect thereto. Upon receipt of any such notice of default or adverse
development, the Agent shall forthwith give notice to each Lender of the details
thereof.
(j) ERISA. Furnish to the Lenders:
(i) within ten days after a Responsible Officer knows
that any "reportable event" (as defined in Section 4043(b) of ERISA),
other than a reportable event for which the 30-day notice requirement
has been waived by the PBGC, has occurred with respect to a Pension
Plan, a statement setting forth details as to such reportable event and
the action proposed to be taken with respect thereto;
(ii) within ten days after receipt thereof, a copy of
any notice that the Guarantor or any member of the ERISA Group may
receive from the PBGC relating to the intention of the PBGC to
terminate any Pension Plan or to appoint a trustee to administer any
Plan;
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(iii) within ten days after filing with any affected
party (as such term is defined in Section 4001 of ERISA) of a notice of
intent to terminate a Pension Plan, a copy of such notice and a
statement setting forth the details of such termination, including the
amount of liability, if any, of the Guarantor or any member of the
ERISA Group under Title IV of ERISA;
(iv) within ten days after the adoption of an
amendment to a Pension Plan if, after giving effect to such amendment,
the Pension Plan is a plan described in Section 4021(b) of ERISA, a
statement setting forth the details thereof;
(v) within 30 days after withdrawal from a Pension
Plan during a plan year for which the Guarantor or any member of the
ERISA Group could be subject to liability under Section 4063 or 4064 of
ERISA, a statement setting forth the details thereof, including the
amount of such liability;
(vi) within 30 days after cessation of operations by
the Guarantor or any member of the ERISA Group at a facility under the
circumstances described in Section 4062(e) of ERISA, a statement
setting forth the details thereof, including the amount of liability of
the Guarantor or a member of the ERISA Group under Title IV of ERISA;
(vii) within ten days after adoption of an amendment
to a Pension Plan which would require security to be given to the
Pension Plan pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA, a statement setting forth the details thereof, including the
amount of such security;
(viii) within ten days after failure by the Guarantor
or any member of the ERISA Group to make payment to a Pension Plan
which would give rise to a lien in favor of the Plan under Section
302(f) of ERISA, a statement setting forth the details thereof,
including the amount of such lien;
(ix) within ten days after the due date for filing
with the PBGC, pursuant to Section 412(n) of the Code, of a notice of
failure to make a required installment or other payment with respect to
a Pension Plan, a statement setting forth details as to such
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failure and the action proposed to be taken with respect thereto; and
(x) within 30 days after receipt thereof by the
Guarantor or any member of the ERISA Group from the sponsor of a
Multiemployer Plan, a copy of each notice concerning the imposition of
withdrawal liability or the termination or reorganization of a
Multiemployer Plan.
(k) Environmental Matters. (i) Comply in all material respects
with all applicable Environmental Laws, (ii) notify the Agent promptly after
becoming aware of any adverse environmental condition or Environmental Claim in
connection with the Guarantor's properties or facilities, and (iii) promptly
forward to the Agent a copy of any order, notice, permit, application, or any
other communication or report received by the Guarantor in connection with any
such matters as they may affect such premises, if material.
5. Negative Covenants. Until full and final
payment of all Obligations, the Guarantor will not:
(a) Borrowing. Create, incur, assume or suffer to exist any
liability or obligation for Borrowed Money, except this Guarantee. Liabilities
or obligations for Borrowed Money incurred by the Guarantor as permitted by and
in accordance with the Credit Agreement shall not constitute a liability or
obligation for Borrowed Money for purposes of this Section 5(a).
(b) Mortgages and Pledges. Create, incur, assume or suffer to
exist any Lien upon or in any of its property or assets, whether now owned or
hereafter acquired, except Permitted Encumbrances; or enter into or suffer to
exist any agreement or other instrument binding on the Guarantor or affecting
any of its properties which prohibits, requires the consent of any Person for or
otherwise restricts the creation of any Lien in favor of the Lenders. For
purposes of this Guarantee, the term "Permitted Encumbrances" shall include the
encumbrances specified in clauses (i) to (viii) of the definition thereof
contained in the Credit Agreement and shall also include the Liens granted in
the Hypothecation Agreements.
(c) Merger, Acquisition or Sales. Enter into any merger or
consolidation or purchase, lease or otherwise acquire assets of any Person or
sell, lease, or otherwise dispose of any of its assets, except the Guarantor may
enter
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into agreements to acquire one or more cable television systems provided that no
such agreement shall permit or require any such acquisition to be consummated on
or prior to the Termination Date [and except that the Guarantor may enter into
any Acquisition Systems Agreements and may consummate the transactions
contemplated thereby subject to the applicable provisions of the Credit
Agreement].
(d) Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any Person (all such transactions herein being referred to as "Contingent
Liabilities"), except (i) the obligations guaranteed by this Guarantee, (ii) by
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (iii) with respect to the
Acquisition Systems, obligations undertaken or incurred in the ordinary course
of the Borrower's business (other than in connection with the borrowing of money
or obtaining of credit) as presently conducted for or on behalf of the Borrower
and (iv) obligations of the Borrower arising in connection with the Acquisition
Systems Agreements.
(e) Loans and Investments. Purchase or acquire the
obligations, stock or partnership interest of, or any other interest in, or make
loans or advances to, any Person, except (i) direct obligations of the United
States of America with a maturity not exceeding one year, (ii) certificates of
deposit with a maturity not exceeding one year issued by a Lender or a
commercial bank, chartered under the laws of the United States or one of the
States thereof and a member of the Federal Reserve System with a long-term debt
rating in one of the two highest categories then provided for by a nationally
recognized rating agency, (iii) commercial paper with a remaining maturity of
270 days or less with a debt rating in the highest category then provided for by
a nationally recognized rating agency and issued by a corporation organized
under the laws of any State, (iv) investments in mutual funds that invest in any
of the foregoing investments described in clauses (i)-(iii) above, (v)
Intercompany Loans and (vi) other loans to and investments in Persons that are
engaged primarily in the cable television business, including pay cable service,
or in the business of acquiring, owning, expanding, operating and maintaining
cable television systems, or in directly related media activities including,
without limitations, data transmission services, telephony and the production of
programming; provided that the restrictions in Section
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8.02(g)(vi)(x), (y) and (z) of the Loan Agreement shall apply hereto.
(f) Restricted Payments. Make any Restricted Payment. For the
purpose of this Guarantee, the term "Restricted Payment" shall mean (i) the
declaration or payment of any dividends or distributions on any partnership or
other ownership interest in the Guarantor, application of any property or assets
of the Guarantor to the purchase or acquisition, redemption or other retirement
of, or setting apart of any sum for the payment of any distributions on, or for
the purchase, redemption or other retirement of, or the making of any other
distribution by reduction of partnership interests or otherwise in respect of
any partnership interest in the Guarantor, (ii) application of any property or
assets of the Guarantor to the prepayment of principal, and premium, if any,
purchase or other acquisition, redemption or other retirement of indebtedness
for Borrowed Money, or the setting aside of any sum therefor, (iii) other than
equity contributions to the Borrower in accordance herewith, any advance, equity
contribution or other payment to any Affiliate of the Guarantor, and (iv) any
other payment or advance to any other Person, other than payments to trade
creditors or to other Persons for services rendered in the ordinary course of
business or other payments in the ordinary course of business.
(g) Purchase of Equity Interests. Apply any of its property or
assets to the purchase, redemption or other retirement of, or set apart any sum
for the purchase, redemption or other retirement of, or make any other
distribution by reduction of capital or otherwise in respect of, any partnership
interests in the Guarantor.
(h) Subsidiaries. Own any Subsidiary or any general
partnership interest in any general or limited partnership, except as permitted
by and in accordance with the Credit Agreement.
(i) Transactions with Affiliates. Other than the transactions
contemplated by this Guarantee and the Hypothecation Agreements, enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Guarantor on terms that are less favorable to the Guarantor
than those that would be obtainable at the time in an arm's-length transaction
with any Person who is not such an Affiliate, provided that this subsection (i)
shall not be deemed to
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prohibit any transaction or payment provided for in any Related Document, so
long as at the time of such payment or transaction and after giving effect
thereto no Default or Event of Default shall have occurred and be continuing.
6. Reserved.
7. Events of Default. Any Event of Default (as such term is
defined in the Credit Agreement) shall constitute an "Event of Default"
hereunder.
8. Expenses. The Guarantor agrees to pay on demand all
reasonable out-of-pocket expenses (including the reasonable fees and expenses of
counsel) in any way relating to the enforcement or protection of the rights of
the Creditors hereunder.
9. Subrogation. Until all Obligations shall have been
satisfied, the Guarantor shall not have any right of subrogation, and waives any
right to enforce any remedy which any Creditor now has or may hereafter have
against the Borrower or any other guarantor, and waives any and all statutory or
other rights to participate in any security now or hereafter held by any
Creditor.
10. Continuing Guarantee. This is a continuing Guarantee and
shall remain in full force and effect and be binding upon the Guarantor, its
successors and assigns until full and final payment of all Obligations.
11. No Waiver; Cumulative Rights. No failure on the part of
any Creditor to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the Creditors of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power. Each and every
right, remedy and power hereby granted to the Creditors or allowed them by law
or other agreement shall be cumulative and not exclusive the one of any other,
and may be exercised by the Creditors from time to time.
12. Waiver of Notice. The Guarantor waives notice of the
acceptance of this Guarantee and of the making of any Loans or other extensions
of credit to the Borrower, presentment to or demand or payment from anyone
whomsoever liable upon any of the Obligations, presentment, demand, notice of
dishonor, protest, notice of any sale of collateral security and all other
notices whatsoever.
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13. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
14. Consent to Jurisdiction. The Guarantor hereby irrevocably
submits to the non-exclusive jurisdiction of any State or federal court in The
City of New York located in the Borough of Manhattan for the purpose of any
suit, action, proceeding or judgment arising out of or relating to this
Guarantee. The Guarantor hereby appoints CT Corporation System, with offices on
the date hereof at 1633 Broadway, New York, New York 10019, as its authorized
agent on whom process may be served in any action which may be instituted
against it by the Creditors in any state or federal court in New York City,
arising out of or relating to this Guarantee. Service of process upon such
authorized agent and written notice of such service to the Guarantor shall be
deemed in every respect effective service of process upon the Guarantor, and the
Guarantor hereby irrevocably consents to the jurisdiction of any such court in
any such action and to the laying of venue in New York City. The Guarantor
hereby irrevocably waives any objection to the laying of the venue of any such
suit, action or proceeding brought in the aforesaid courts and hereby
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. Notwithstanding the
foregoing, nothing herein shall in any way affect the right of the Creditors to
bring any action arising out of or relating to this Guarantee in any competent
court elsewhere having jurisdiction over the Guarantor or its property.
15. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTEE.
16. Limited Recourse. No Creditor shall have recourse to any
partner of the Guarantor (or any partner of such partner) for the payment of the
Obligations, except as provided in the Hypothecation Agreements.
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IN WITNESS WHEREOF, this Guarantee has been duly executed and
delivered by the Guarantor to the Creditors as of the date first above written.
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
By: InterMedia Partners IV, L.P.
By: InterMedia Capital Management IV, L.P.
By: InterMedia Management, Inc.
By: /s/ Leo J. Hindery, Jr.
-------------------------------------
Name:
Title:
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EXHIBIT 10.4
SATELLITE SERVICES, INC.
PROGRAMMING SUPPLY AGREEMENT
THIS AGREEMENT, dated January 28, 1996, is made by and between
SATELLITE SERVICES, INC., a Delaware corporation ("SSI"), and INTERMEDIA
PARTNERS IV, L.P., ("Operator").
RECITALS
WHEREAS, SSI is an indirect wholly-owned subsidiary of
TeleCommunications, Inc., ("TCI") which has an interest in Operator, said
interest is described on Exhibit A hereto; and
WHEREAS, Operator owns interests (which may be direct or indirect,
through a chain of ownership in corporate and/or partnership entities or
otherwise) in certain audio or visual distribution facilities consisting of
cable (those facilities now owned or hereafter acquired shall be referred to
hereinafter as the "System" or "Systems") which provide cable television
services to various communities pursuant to valid cable television franchises or
other authorization where authorization is required, which systems' headends are
listed on Exhibit B attached hereto and incorporated herein by this reference,
as it may be amended from time to time; and
WHEREAS, Operator desires to appoint SSI as the non-exclusive agent of
Operator for obtaining and managing certain cable television or
satellite-delivered programming services as listed on Exhibit C hereto; as it
may be amended from time to time, and Operator desires to appoint SSI as the
exclusive agent for managing cable television and satellite-delivered
programming services for delivery to the subscribers of the Systems, and SSI
desires to accept such appointment, in the course of its normal business
practices as of the Effective Date first written above and upon the terms and
conditions set forth below; and
WHEREAS, Operator recognizes that it is one of a large number of
entities affiliated with SSI and acknowledges that while SSI will endeavor in
all instances to obtain the right to include Operator within the terms of any
affiliation agreement for the carriage of cable television or
satellite-delivered programming, SSI cannot guarantee to Operator that it will
be able to obtain such right.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, Operator and SSI agree as follows:
1. DEFINITIONS.
As used herein the following terms shall have the respective meanings
set forth below (terms defined in the
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singular to have the same meanings when used in the plural and vice versa):
1.1 Basic Service: The level of cable television service offered by a
System to its Subscribers (as defined below) and received by all of such
System's Subscribers.
1.2 Cable Television Service: "Cable television service" includes any
satellite-delivered audio service and any satellite-delivered video service,
whether delivered by television or otherwise.
1.3 Plan: The plan to be adopted by the committee described in Section
4.2 hereof relating to the selection, billing, management and collection
practices for all Programming Services carried on any System, which Plan will
include, but will not be limited to, those SSI Programming Services identified
on Exhibit C hereto (as defined below).
1.4 Premium Service: A Programming Service for which a separate
subscription charge is customarily imposed (i.e., a service which is sold on an
a la carte basis).
1.5 Programming Service: Any cable television programming service other
than locally available, free, standard, over-the-air broadcast television
signals or free programming on a public, educational or governmental channel.
"SSI Programming Services" shall consist of those Programming Services to be
supplied by SSI under SSI Affiliation Agreements (as defined below) to Operator
under this Agreement and shall be listed on Exhibit C hereto, as it may be added
to or deleted from, from time to time. As used in this paragraph, the term
"free" shall mean programming for which the System does not pay either pursuant
to an affiliation agreement, under copyright law, or otherwise.
1.6 Service Subscribers: As to each SSI Programming Service supplied
hereunder, the Subscribers in the Systems who receive from Operator SSI
Programming Service.
1.7 Tier Package: A group of cable television services for which a
charge is imposed in addition to or in excess of the charge for Basic Service.
1.8 SSI Affiliation Agreement(s): An agreement between SSI and a
supplier of an SSI Programming Service pursuant to which SSI purchases such SSI
Programming Service.
1.9 Subscriber: Each location to which a System provides any cable
television service directly or through a third party. Subscriber shall include
(but shall not be limited to) each dwelling (whether in a single-family or
multi-unit building), hotel or motel guest room, bar, hospital room, university
or college campus dormitory room or other location, restaurant and
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other residential, commercial or other location in which any cable television
service is received. If a System provides an SSI Programming Service to multiple
dwelling complexes, including (but not limited to) apartments, hotels and
motels, on a bulk-rate basis, and if the applicable SSI Affiliation Agreement
permits, the number of Service Subscribers attributable to each such bulk-rate
Subscriber shall be equal to the total monthly retail rate charged a complex for
the level of service on which the such SSI Programming Service is carried
divided by the standard monthly retail rate charged a non-bulk rate Service
Subscriber in the applicable System for such level of service. Notwithstanding
the foregoing, if the definition of "Subscriber" in any SSI Affiliation
Agreement is different than the definition set forth in this Section 1.9, the
definition set forth in the applicable SSI Affiliation Agreement shall control
for the purposes of such SSI Affiliation Agreement. The number of Subscribers
shall be determined as to any Programming Service pursuant to the pertinent SSI
Affiliation Agreement as of the last day of each month unless otherwise required
or permitted under the pertinent SSI Affiliation Agreement.
2. PURCHASE; PROGRAMMING RESPONSIBILITY.
2.1 Except as otherwise provided herein and to the extent permitted by
the SSI Affiliation Agreements, SSI agrees to provide to Operator, and Operator
agrees to buy and procure from SSI, the Programming Services desired by the
Systems, subject to the terms and conditions of this Agreement and of the SSI
Affiliation Agreements; provided, however, that Operator shall not be required
to purchase from SSI, and may purchase directly from the supplier thereof, any
Programming Service if Operator is able to do so at a cost lower than the cost
to Operator under the pertinent SSI Affiliation Agreement and if Operator fully
complies with the following requirements at all times: (a) From and after the
date of this Agreement, SSI shall have the right at all times to require
Operator to refrain from commencing carriage of any Programming Service if SSI
has not directly entered into an SSI Affiliation Agreement with the supplier of
such Programming Service, or if SSI has an Affiliation Agreement with the
supplier of such Programming Service only as a successor in interest to another
entity; (b) if Operator purchases a Programming Service directly from a supplier
at a cost lower than the cost to Operator under the pertinent SSI Affiliation
Agreement, Operator shall provide a copy of the affiliation agreement, letter
agreement or other contract relating to such Programming Service to SSI, upon
SSI's request, unless such agreement, letter or contract contains a
confidentiality provision precluding SSI's review thereof and such agreement,
letter or contract pertains to cable television systems which are not Systems.
Operator acknowledges and agrees that the carriage by Operator of any
Programming Service contrary to SSI's disapproval pursuant to this Agreement
shall constitute a breach of this Agreement and entitle SSI to immediately
terminate this Agreement.
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2.2 Operator hereby offers to SSI, and SSI hereby accepts, the
exclusive agency and authority to manage Operator's Programming Services in the
Systems, with full and exclusive authority to make and execute decisions on
behalf of Operator with respect to the management, selection, billing and
collection of Programming Services, during the term of this Agreement. Further,
SSI is authorized to control and direct the promotion and marketing of the
Programming Services, the sale of available commercial time in connection with
the Programming Services and all other matters associated therewith to the
extent necessary to insure that such promotion, sales and marketing efforts do
not violate any of the terms of the SSI Affiliation Agreements. SSI shall use
reasonable efforts to give Operator at least thirty (30) days advance written
notice of any action taken or decision made under this Section 2.2, and in any
event shall give Operator notice of such action taken or decision made no later
than ten (10) days thereafter.
2.3 Operator acknowledges and agrees that SSI shall at all times have
sole and complete discretion in negotiating and executing SSI Affiliation
Agreements. Operator acknowledges and agrees that Operator is only one of a
large number of entities affiliated with SSI on behalf of whom SSI negotiates
SSI Affiliation Agreements, and that SSI may not always be able to obtain the
most favorable rates and terms with respect to Operator. Operator acknowledges
and agrees that SSI shall have no liability whatsoever to Operator with respect
to or arising out of any SSI Affiliation Agreement or other contract or any term
or condition of any such contract or agreement or for any failure of SSI to
obtain the most favorable rates or terms with respect to Operator. Operator also
acknowledges and agrees that, from time to time, SSI Affiliation Agreements
might include restrictions on SSI Programming Services (such as pricing and
tiering restrictions) which are not present in other contracts, and that SSI
shall have no liability to Operator for the existence of any such restrictions.
2.4 Operator shall be ineligible to obtain any SSI Programming Service
under this Agreement unless and until Operator complies fully and accurately
with any and all requests for information and documentation made by SSI from
time to time in its sole and absolute discretion; provided, however, that SSI
shall impose no such requirement unless it is reasonably necessary in order to
comply with or administer an Affiliation Agreement.
2.5 Operator shall fully comply with all requirements imposed by SSI
immediately upon notice thereof. Without limitation, Operator shall comply with
the following requirements from and after the date, and during the term, of this
Agreement:
(a) By signing this Agreement, Operator hereby acknowledges
receipt of that certain Satellite Services, Inc. Affiliate Reporting
Procedures which
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may be amended by SSI from time to time (the "Procedures"). Operator
shall at all times fully comply with all requirements set forth in the
Procedures.
(b) Each time Operator launches or deletes carriage of an SSI
Programming Service on any System, or acquires or divests itself of a
System, SSI will be under no obligation to, and will not, reflect or
cause such launch, deletion, acquisition or divestiture to be effective
under this Agreement until such time as Operator shall have fully and
accurately complied with all of the reporting requirements set forth in
the Procedures, including, without limitation, Operator's obligation to
ensure the accuracy and completeness of Exhibits A and B at all times.
(c) Upon notice from SSI, Operator shall comply with all
requirements which are imposed on it by SSI for the purpose of
complying with the SSI Affiliation Agreements.
3. TERM.
3.1 The term of this Agreement shall be a seven (7) year period
commencing on the date hereof and, thereafter, this Agreement shall be
automatically renewed for successive one (1) year periods, unless sooner
terminated (i) by either party upon at least sixty (60) days' written notice
prior to the expiration of any such period, (ii) by agreement of the parties, or
(iii) otherwise pursuant to this Agreement.
3.2 Notwithstanding Section 3.1 hereof, this Agreement may be
terminated as provided below upon the happening of any of the following events:
(a) In the event that either party 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), the other party may terminate this
Agreement by giving at least sixty (60) days' prior written notice to
the former party, provided that, if such misrepresentation or failure
is subject to being cured, the party who has made such
misrepresentation or failure may avoid the effect of this provision by
effecting a complete cure within thirty (30) days of such notice.
(b) As to any System or Systems, by either party upon prior
written notice to the other, if SSI or an affiliated company does not
own the required interest in such System or Systems which enables SSI
to provide
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Programming Services to Operator pursuant to the SSI Affiliation
Agreements.
(c) At SSI's option, immediately upon the termination of
Tele-Communications, Inc's., or an affiliate's, ownership interest in
Operator.
(d) By SSI, immediately upon the violation by Operator of any
confidentiality provision contained in this Agreement.
(e) At SSI's option, upon sixty (60) days' prior written
notice by SSI of Operator's failure to provide information required by
SSI hereunder or to comply with the provisions of any SSI Affiliation
Agreement after notification by SSI.
3.3 Operator hereby represents, warrants and covenants to SSI that any
information provided in or pursuant to this Agreement, including, without
limitation, the Exhibits hereto, as amended from time to time, shall be true,
correct, and complete in all respects at all times. Operator shall notify SSI
immediately regarding any change in any such information. Subject to Sections
16.1 and 3.2(a) hereof, Operator hereby agrees that any violation of this
representation, warranty and covenant shall be grounds for the immediate
termination of this Agreement, at SSI's election.
3.4 Termination of this Agreement in accordance with this Section 3
shall not affect the rights of Operator or SSI with respect to any damages
either has suffered as a result of any breach of this Agreement, nor shall it
affect the rights of Operator or SSI with respect to any liabilities or claims
accruing, or based upon events occurring, prior to the date of termination.
4. SUPPLY OF PROGRAMMING.
4.1 Exhibit C attached hereto sets forth the SSI Programming Services.
Promptly following the latest of (i) the execution hereof, (ii) the acquisition
by Operator of any Systems after the date of this Agreement, or (iii) the
provision to SSI by Operator of all information and documentation requested with
respect to any such SSI Programming Service or System, as necessary, SSI will
cause an order to be filed with the appropriate suppliers of the SSI Programming
Services and otherwise take the steps required to assure the earliest possible
availability of such SSI Programming Services in such Systems. From time to time
hereafter and upon request of Operator, SSI will consult with Operator with
respect to the terms of the Plan and will submit to Operator a revised Plan,
reflecting all changes to the existing Plan that SSI and Operator have agreed
upon, within thirty (30) days after such agreement has been reached. In the
event that any revised Plan
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provides for Operator to furnish to its Subscribers any Programming Services not
then provided in the Systems, SSI shall confirm whether it can supply each such
Programming Service to Operator and, if it can, shall specify the terms at which
each such Programming Service shall be offered to Operator. Any Programming
Services added to the Systems after the date hereof pursuant to any revised Plan
(after the adoption of a Plan pursuant to Section 4.2 below) may be added to
Exhibit C hereof and, then, shall be an SSI Programming Service. If SSI cannot
provide an additional Programming Service under a revised Plan to Operator at
more favorable terms and conditions than Operator could obtain elsewhere, then
subject to Section 2.1 hereof, Operator may purchase such Programming Service
elsewhere, provided that SSI consents prior to such purchase.
4.2 The selection, billing, management and collection practices
relating to the Programming Services shall be recommended to SSI by a committee
of three members, two of which shall be representatives of SSI and one of which
shall be a representative of Operator. SSI shall establish the Plan in
accordance with such recommendation, but the Plan shall be subject to amendment
in accordance with subsequent recommendations of such committee. A majority vote
of the committee shall be required for any action taken by it, including any
amendments to the Plan or to Exhibit C hereto. Each party will designate their
representatives by written notice to the other.
4.3 If, during the term of this Agreement, any of the SSI Affiliation
Agreements (pursuant to which any SSI Programming Service is provided hereunder)
is terminated or expires and is not renewed, or SSI ceases generally to
distribute any such Programming Service pursuant to any of such SSI Affiliation
Agreements, then SSI shall as soon as practicable so notify Operator in writing
and the SSI Programming Service affected thereby shall be deleted from Exhibit
C; provided, however, that SSI agrees to use its reasonable efforts to give
Operator at least thirty (30) days' prior written notice of the deletion of any
such programming. SSI shall have no further obligation to supply the deleted SSI
Programming Service to Operator, and SSI shall incur no cost or liability to
Operator relating directly or indirectly to such deletion. SSI shall notify
Operator without delay of any written threat of a termination notice received by
SSI relating to any of the SSI Affiliation Agreements referred to in the Plan.
4.4 SSI 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 SSI under the SSI
Affiliation Agreements for the SSI Programming Services furnished to Operator
hereunder. Operator's pro rata share of such benefits shall be equal to the
ratio of the number of Service Subscribers (or Subscribers, as appropriate) in
the Systems who receive the applicable SSI Programming Service compared to the
number of
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Service Subscribers (or Subscribers, as appropriate) receiving the applicable
SSI Programming Services in all cable television systems, including the Systems,
to which SSI supplies such SSI Programming Service. To the extent permitted by
the SSI Affiliation Agreements, SSI hereby grants to Operator, or will cause to
be granted to Operator, all licenses or sublicenses of the proprietary rights in
any SSI Programming Services sold to Operator hereunder (including the names,
logos and marks relating to the SSI Programming Services) as may be necessary
for Operator to sell or promote the SSI Programming Service during the term of
this Agreement; provided, however, that Operator agrees hereby not to engage in
any conduct which could constitute the infringement of any such proprietary
rights.
4.5 To the extent permitted by the SSI Affiliation Agreements and
subject to Section 5.1(c), SSI will grant to Operator the right to distribute
and redistribute any SSI Programming Service to hotels, motels, hospitals,
universities, satellite master antenna television systems ("SMATVs"), individual
dwelling units or other locations by means of equipment capable of receiving the
SSI Programming Services directly from satellite ("TVROs"), multipoint
distribution services ("MDSs"), multichannel multipoint distribution services
("MMDSs") and any other commercial establishments within franchise areas of the
Systems; provided, however, that Operator shall cause any redistributee or
subdistributee to comply with all of the pertinent terms and conditions of this
Agreement and of all of the pertinent terms and conditions of the applicable SSI
Affiliation Agreements; and further provided that any such subdistribution or
redistribution shall not affect in any manner Operator's obligations pursuant to
this Agreement, including, but not limited to, Operator's obligations with
respect to reporting and payment. SSI will immediately notify Operator of the
grant by SSI to Operator of any of the above-referenced rights.
5. CARRIAGE BY OPERATOR.
5.1 Operator agrees that its carriage of the SSI Programming Services
pursuant to this Agreement shall be subject to the restrictions concerning
carriage of such Programming Services which are imposed by the suppliers of the
SSI Programming Services pursuant to the SSI Affiliation Agreements; provided,
however, that Operator shall only be required to comply with such restrictions
after the date of written notification by SSI to Operator of such restrictions.
Without limiting the generality of the foregoing, Operator agrees
(except if and as notified by SSI of specific requirements of an SSI Affiliation
Agreement to the contrary) with respect to each SSI Programming Service as
follows:
(a) Without the prior written consent of the
supplier of any SSI Programming Service, Operator
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shall not promote or market to any Subscriber any programming other
than the SSI Programming Service in any manner which might imply that
any programming not distributed by the SSI Programming Service is part
of or is connected in any way with the SSI Programming Service.
(b) Operator shall cause each System not to exhibit or
transmit the SSI Programming Service, or any part thereof, at any time
other than as scheduled by the SSI Programming Service.
(c) Operator shall cause each System to deliver the SSI
Programming Service to its Service Subscribers by coaxial cable, SMATV
or optical fibers only, and by no other means of delivery except as
otherwise authorized by SSI.
(d) Operator shall cause each System to identify one of its
channels for the carriage of each SSI Programming Service ("Service
Channel"), and Operator shall provide complete channel line-ups to SSI,
including changes or additions thereto. Operator may substitute an
alternative Service Channel to telecast the SSI Programming Service
only if such substitution is permitted by the pertinent Affiliation
Agreement, and if Operator gives SSI prior written notification of such
substitution. No SSI Programming Service may be shown on the same
channel as any "adult-only" programming or any programming that has
received, or had it been rated would have received, an "X" or "NC-17"
rating by the Motion Picture Association of America. Channels may be
used for more than one SSI Programming Service, but only to the extent
permitted by the SSI Affiliation Agreements.
(e) The Systems may distribute each SSI Programming Service on
a full-time basis only. Operator shall cause each System to distribute
each SSI Programming Service during the hours it is carried by the
Systems, without alteration, deletion, addition, editing or delay of
any kind.
(f) Operator shall not make available all or any part of any
SSI Programming Service or the trademarks of such SSI Programming
Service for any sponsorship, advertising, promotional, public service
or commercial announcement of any party, product or service.
(g) Operator shall not knowingly permit and shall take all
necessary and reasonable precautions to prevent, any unlawful or
unauthorized use, reproduction, exhibition or distribution of the SSI
Programming Services (except that this shall not
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prohibit the connection of subscribers' video recorders, VCRs or other
devices susceptible to use for home duplication of video programming),
and Operator shall cause each System to employ strict security systems
and procedures to prevent any such unlawful or unauthorized use,
reproduction, exhibition or distribution of the SSI Programming
Services.
(h) Operator shall not carry any SSI Programming Service as
part of a Tier Package or on an a la carte basis without prior written
notice to SSI and verification from SSI that such carriage does not
violate any provision of the Affiliation Agreement with respect to such
SSI Programming Service.
(i) Operator shall not delete any Programming Service (whether
an SSI Programming Service or not) from any System unless such deletion
(i) is permitted by the Plan and/or the SSI Affiliation Agreements, as
the case may be, (ii) does not adversely affect SSI's rates and (iii)
SSI is given prior written notice of such deletion, as required by SSI.
(j) In the event that SSI, under SSI Affiliation Agreements,
has exclusively or is the exclusive redistributor or subdistributor in
operating areas of Systems, Operator will fully conform its conduct and
activities to the standards required of SSI under the pertinent SSI
Affiliation Agreements.
(k) Each System shall deliver a video and audio signal of each
SSI Programming Service to its Service Subscribers of a quality
equivalent to the lesser of the following: (i) other cable television
programming services, or (ii) the technical quality provided by the
distributor of such SSI Programming Service.
(l) Any use by Operator of the vertical blanking interval or
audio subcarriers shall not degrade, or otherwise interfere with, the
picture quality of any SSI Programming Service or the audio portion of
any SSI Programming Service signal which is the principal audio
frequency of such SSI Programming Service.
(m) Operator shall use reasonable efforts to promote the SSI
Programming Services within the Operating Areas of the Systems.
"Operating Areas" shall mean that geographic area where each System is
authorized by appropriate governmental authority to operate a cable
television system and is operating a cable television system within
such area, and any geographic area where such System is obligated to
build and/or operate a cable television system.
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(n) Operator shall, to the extent permitted by applicable law,
cooperate with SSI in any marketing tests, surveys, rating polls and
other research in connection with the SSI Programming Services.
5.2 Operator shall give SSI all such notices of launches, deletions,
acquisitions and divestitures as required by the Procedures, as amended from
time to time.
6. DISCLAIMER OF TITLE; SERVICE MARKS.
6.1 SSI does not claim title or copyright in itself to any SSI
Programming Service being sold hereunder or to any name or mark relating
thereto. Operator acknowledges and agrees that SSI is merely an agent of
Operator for the licensing of SSI Programming Services and that SSI is granting
to Operator only such right or title to such SSI Programming Services as SSI may
hold at any given time pursuant to the SSI Affiliation Agreements.
6.2 Operator acknowledges and agrees that the names, logos and marks
relating to the SSI Programming Services (and the names of certain programs
which appear in the Programming Services) are and will at all times remain the
exclusive property of the owners of the SSI Programming Services (and suppliers
thereto) and neither SSI nor Operator has or shall acquire any proprietary or
other rights therein by reason of this Agreement or any activity relating to or
arising out of this Agreement. Operator acknowledges and agrees that SSI and the
pertinent suppliers of the SSI Programming Services shall have the complete
right to approve any and all of Operator's mentioning or using of such names,
logos or marks and any and all of Operator's publicity about the owners of the
SSI Programming Services or the products or programming included in the SSI
Programming Services prior to such mentioning, use, or publicity. Use by
Operator of such names, logos and marks in routine promotional materials such as
program guides, program listings and bill stuffers shall be deemed approved
unless SSI or the supplier of the pertinent SSI Programming Service specifically
notifies Operator to the contrary or unless an SSI Affiliate Agreement provides
to the contrary. Upon written notice to Operator from SSI or a supplier of an
SSI Programming Service so requesting, Operator shall provide SSI or the
supplier so requesting with all promotional materials using any of the names or
marks relating to the pertinent SSI Programming Service or the supplier thereof
prior to using such materials, and Operator shall not use any such materials
unless and until they have been specifically approved by the pertinent supplier.
7. RATES AND PAYMENT.
7.1 *Confidential Information Omitted.
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7.2 *Confidential Information Omitted.
7.3 *Confidential Information Omitted.
7.4 *Confidential Information Omitted.
7.5 *Confidential Information Omitted.
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7.6 *Confidential Information Omitted.
8. REPORTING.
8.1 Operator shall deliver to SSI, to the attention of the Accounting
Department by overnight mail (Federal Express or other overnight courier
service), not more than fifteen (15) days after the end of each calendar month,
a subscriber data report on a computer disc which is fully compatible with Excel
5 (or which is compatible with other software required by SSI after giving six
(6) months' prior written notice to Operator of the required change in software)
on forms provided by the SSI Accounting Department, setting forth such
information as to the Subscribers in the Systems and the Service Subscribers for
each SSI Programming Service certified as complete and correct by an executive
officer of Operator. The forms provided by the SSI Accounting Department shall
be used by Operator for purposes of this Section 8 until and unless SSI notifies
Operator of any additional or different forms, which forms shall thereafter be
submitted by Operator to SSI in order to comply with the reporting requirements
of SSI's suppliers hereunder. Operator shall at all times fully and accurately
complete and comply with the reporting system set forth in this Agreement and in
the Procedures, as amended by SSI from time to time. In the event that Operator
has fewer than ten (10) head-ends, and only for such time as Operator has fewer
than ten (10) head-ends, Operator shall have the right to use another reporting
system if SSI and Operator are able to mutually agree to a different system;
provided, however, that SSI shall have no obligation to agree to any different
system. In the event that Operator fails to timely deliver any of the reports
required pursuant to this Agreement or the Procedures, or in the event that any
such reports are inaccurate or incomplete, the administrative fee calculated in
accordance with Section 7.3 shall be doubled for each month in which any report
has not been timely delivered and/or is inaccurate or incomplete.
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8.2 Upon written request of SSI, Operator shall furnish SSI with 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 Federal Communications Commission), as
pertain to the Subscribers in the Systems, the Service Subscribers or the
Programming Services. Notwithstanding anything in the foregoing to the contrary,
Operator shall not be required to furnish to SSI any such report unless and
until such report shall be available for inspection by the public generally at
the agency at which such report shall have been filed.
8.3 Operator shall keep and maintain accurate books and records of all
matters relating to this Agreement in accordance with generally accepted
accounting principles. During the term of this Agreement and for three (3) years
after the termination of this Agreement, such books and records shall be
available to SSI (or its agent or a supplier of an SSI Programming Service or
its agent) for inspection and audit, at the inspecting party's expense, at
Operator's offices upon reasonable notice to Operator for the purpose of
determining the amounts due to SSI hereunder or to a supplier and verifying (i)
compliance with the SSI Affiliation Agreements, and (ii) the reports rendered to
SSI pursuant to this Agreement. Notwithstanding the preceding sentence, nothing
contained in this Agreement shall require Operator to allow SSI to inspect or
otherwise disclose any documents which are confidential or the disclosure of
which may, in the opinion of legal counsel reasonably satisfactory to SSI,
subject Operator to civil or criminal liability or enforcement action. SSI's
right to perform such audit shall be limited to twice in any twelve-month period
during the term of this Agreement or after the termination hereof and shall be
limited to an audit with respect to amounts to be paid in the current and two
prior calendar years only, except to the extent that an SSI Affiliation
Agreement requires more frequent or additional audits.
8.4 Operator hereby acknowledges and agrees that SSI shall impose such
administrative, informational and reporting requirements as are necessary in
order for SSI to administer and comply with the SSI Affiliation Agreements.
Operator acknowledges and agrees that Operator shall not be eligible for
inclusion under any such SSI Affiliation Agreement unless and until all such
administrative, informational and reporting requirements are satisfied in full
by Operator.
8.5 Operator shall not make any physical changes on or to any discs or
statements except with SSI's prior written consent. Until such time as Operator
fully complies with all reporting requirements pursuant to this Agreement and
the Procedures with respect to any launch, deletion, acquisition or divestiture,
SSI will not give its consent to Operator to modify any discs or statements and
will not account for such launch, deletion, acquisition or divestiture in its
invoices or statements to
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Operator, and, with respect to any continued carriage (or launch) of any SSI
Programming Service in an acquired System, Operator shall pay the supplier
thereof directly until such reporting requirements are fully satisfied.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Operator hereby represents, warrants and covenants to SSI
throughout the term of this Agreement as follows:
(a) Operator is a limited partnership duly organized and
validly existing and in good standing under the laws of the State of
California; Operator has the power and authority to enter into this
Agreement and to fully perform its obligations hereunder; Operator is
under no contractual or other legal obligation which shall in any way
interfere with its full, prompt and complete performance hereunder; and
the individual executing this Agreement on behalf of Operator has the
authority to do so.
(b) The execution, delivery and performance of this Agreement
by Operator 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 or to any System; (ii)
conflict with, result in a breach of, or constitute a default under,
any agreement, license, franchise or instrument to which Operator or
any System is a party or by which it is bound; or (iii) conflict with
Operator's articles of incorporation or bylaws or partnership
agreement(s), as appropriate.
(c) Operator and each System is duly licensed and in
compliance with all existing laws and regulations to which it is
subject, whether federal, state or local, including, without
limitation, such as may pertain to the conduct of its cable television
business and other pay television business, if any, and in sending,
receiving and distributing the Programming Services, including but not
limited to, all applicable rules and regulations of the Federal
Communications Commission, and the requirements of all franchises,
permits, and approvals issued by regulatory authorities, except where
the failure to be in compliance would not have a material adverse
effect on Operator, and its respective subsidiaries and Systems, taken
as a whole.
(d) Operator shall not add any material to any
of the SSI Programming Services, including, without
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limitation, any advertising inserted by Operator or materials used by
Operator in advertising or promoting the SSI Programming Services,
which contains any material which will libel, slander or defame any
person, or violate any person or entity's right of privacy or publicity
or include any obscenity and the materials prepared by Operator or
added by Operator to any of the SSI Programming Services shall not
violate, infringe upon or give rise to any adverse claim with respect
to any contract right, common law right or any other right of any party
(including, without limitation, any copyright, trademark, literary or
dramatic right, music synchronization right, right of privacy or
publicity or music performance right) or violate any law.
(e) As of the Effective Date, Operator has performed in
accordance with all of the terms and conditions of this Agreement and
has, as required hereunder, complied with the restrictions set forth in
the SSI Affiliation Agreements.
9.2 SSI hereby represents and warrants to Operator that it is a
corporation duly organized and validly existing under the laws of the State of
Delaware; SSI has the power and authority to enter into this Agreement and to
fully perform its obligations hereunder; SSI is under no contractual or other
legal obligation which shall in any way interfere with its full, prompt and
complete performance hereunder; and the individual executing this Agreement on
behalf of SSI has the authority to do so.
10. AVAILABILITY OF INDEMNITIES.
SSI makes no representation or warranty as to whether the SSI
Programming Services, or any of them, are free of the rightful claim of any
third person by way of alleged or proven libel, slander, defamation, invasion of
privacy or publicity, or violation or infringement of copyright (including music
performance rights for any and all performances through to Operator's
subscribers), literary, dramatic or music synchronization rights or obscenity or
any other form or forms of speech (whether or not protected by the Constitution
of the United States or any state) or otherwise arising out of the content of
the SSI Programming Services as furnished by the suppliers thereof; provided,
however, SSI covenants that, to the extent permitted by law and any SSI
Affiliation Agreement, any and all of the indemnities given by the suppliers of
the SSI Programming Services and set forth in any of the SSI Affiliation
Agreements pursuant to which SSI from time to time provides any SSI Programming
Service hereunder shall extend to the Systems as a result of Operator's purchase
of such SSI Programming Services hereunder. SSI agrees to take all action
necessary to enforce
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any such indemnity on behalf of the Systems upon the request of Operator and at
Operator's cost and expense.
11. INDEMNIFICATION.
11.1 Operator shall indemnify, defend and forever hold harmless SSI,
its affiliates, SSI's suppliers of SSI Programming Services pursuant to
Affiliation Agreements, and each of their respective officers, directors,
shareholders, partners and employees, and the successors and assigns of any
thereof, from and against any and all claims, judgments, liabilities, losses,
costs, damages or expenses (including, without limitation, reasonable counsel
fees, disbursements, administrative and/or court costs) that SSI or any such
indemnitee may suffer arising from, out of, or relating to, (a) any breach of
Operator's covenants, representations or warranties under this Agreement, or
under the Procedures; (b) the distribution by Operator of Programming Services
(including, without limitation, SSI Programming Services) except to the extent
the claim, judgment, liability, loss or expense arises from or relates to a
breach by SSI of its covenants under this Agreement or a breach by SSI of the
SSI Affiliation Agreements which is not caused by an act or failure to act of
Operator; (c) any deletion or material added by Operator to any Programming
Service (including, without limitation, SSI Programming Services) which deletion
or addition gives rise to losses, liabilities, claims, costs, judgments, damages
or expenses, including, without limitation, reasonable counsel fees and court
costs; (d) any breach or violation by SSI of any of the terms or provisions of
any SSI Affiliation Agreement which is caused, directly or indirectly, in whole
or in part, by Operator, through any action or inaction, after Operator has been
notified by SSI in writing that such violation or breach would result; or (e)
any violation or breach by Operator of any of the confidentiality provisions of
this Agreement or the Procedures, including, without limitation, any violation
or breach which in any manner, directly or indirectly, results in an increase in
rates owed by SSI or any of its affiliates to the suppliers of Programming
Services (including, without limitation, SSI Programming Services). No claim for
indemnity hereunder shall be based upon, or include as a measure of damages,
lost profits or other consequential damages.
11.2 SSI shall indemnify, defend and forever hold harmless Operator,
its affiliates and each of their respective officers, directors, shareholders,
partners and employees, and the successors and assigns of any thereof, from and
against any and all claims, judgments, liabilities, losses, costs, damages or
expenses (including, without limitation, reasonable counsel fees, disbursements,
court and/or administrative costs) that Operator or any such indemnitee may
suffer as a result of, (a) any breach by SSI of its covenants, representations
or warranties under this Agreement; or (b) a breach by SSI of the terms of the
SSI Affiliation Agreements in connection with the provision of SSI Programming
Services to the Systems if by
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virtue of such breach the suppliers of such SSI Programming Services assert a
claim against Operator or any such indemnitee, provided in either case that such
breach by SSI is not a result of an act or failure to act of Operator. No claim
for indemnity hereunder shall be based upon, or include as a measure of damages,
lost profits or other consequential damages.
11.3 In connection with any indemnification provided for in this
Section 11, each party shall so indemnify the other only if such other party
claiming indemnity shall give the indemnifying party prompt notice of any claim
or litigation to which its indemnity applies. 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 this
Section 11, such party shall promptly so notify the other party in writing, and
shall tender the defense of such claim to the other party. If a claim to which
these indemnification provisions apply arises out of a suit or other demand by a
third party against the indemnified party, its affiliates, subsidiaries, agents
or assigns, the indemnified party will cause notice thereof to be promptly given
to the indemnifying party, unless the indemnified party shall have been advised
by counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party.
If the indemnifying party accepts defense of any tendered claim, the
indemnifying party will pay all amounts resulting therefrom to the extent of the
indemnification required hereunder. If the indemnified party does not accept the
defense of any tendered claim for the reason referred to above or the
indemnifying party does not accept the defense of a tendered claim, the
indemnifying party will nevertheless provide reasonable cooperation to the
indemnified party in the defense of same and will pay all amounts resulting from
the indemnified party's defense to the extent of the indemnification required
hereunder, and the indemnified party will consult with the indemnifying party
prior to effecting any settlement thereof. Each 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 other party, which shall not be unreasonably
withheld or delayed.
11.4 The terms and conditions of this Section 11 shall survive the
expiration or termination of this Agreement, regardless of the reason for such
expiration or termination.
12. LIMITATION OF LIABILITY.
SSI shall not be liable to Operator or any other party with respect to
any nonperformance or delay in performance of its obligations hereunder if such
failure or delay is due wholly or in part to failure of equipment, action or
claims by any third party, labor dispute or any cause beyond SSI's reasonable
control.
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13. 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 SSI may assign its rights and delegate its obligations
of performance hereunder, without the prior consent of Operator, to an affiliate
of SSI. Any such assignment or delegation without such prior approval except as
provided in the previous sentence shall be null and void.
14. NOTICES.
Any notice or communication given pursuant to this Agreement shall be
in writing and delivered personally or via courier service or mailed by
certified mail, return receipt requested, postage prepaid or via facsimile
transmission as follows:
If to SSI to:
Satellite Services, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Fax: (303) 488-3208
Attention: President
With a copies to the same address, marked:
Attention: Vice President of Programming
Administration
If to Operator to:
InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, California 94104
Fax Number: (415) 397-3978
Attention: Leo J. Hindery, Jr., General Partner
With a copy to the same address, marked:
Attention: Legal Department
or to such other address or addresses as either party may designate by notice
given pursuant hereto. Such notice shall be deemed given when received by the
other party, except in the case of mailed notices which shall be deemed given
three days after the date when duly mailed and except in the case of
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<PAGE> 20
notices sent by overnight courier which shall be deemed given on the business
day next succeeding the day presented to such overnight courier for delivery and
except in the case of facsimile transmission, which shall be deemed given on the
date of transmission if a business day, or on the next business day after the
day of transmission if not transmitted on a business day.
15. CONFIDENTIALITY
Neither Operator nor SSI shall disclose (whether orally or in writing,
or by press release or otherwise) to any third party (other than their
respective officers, directors and employees, in their capacity as such, and if
Operator is a partnership or joint venturer, the managing general partner of
Operator (and if such managing general partner is not an individual, but rather
a business entity, then the senior, executive individual in direct control of
the operations of such business entity), the respective auditors and attorneys
of SSI and Operator; provided, however, that the disclosing party agrees to be
responsible for any breach of the provisions of this Section 15 by such
permitted third parties, any information with respect to the terms and
provisions of this Agreement, and Operator shall not disclose any information
with respect to the rates for SSI Programming Services, the terms and provisions
of the Procedures, or any Affiliation Agreement, and SSI shall not disclose any
information obtained in any inspection and/or audit of Operator's books and
records, except: (i) to the extent necessary (but redacted to the greatest
extent possible) to comply with the valid order of a court of competent
jurisdiction, in which event the party making such disclosure shall so notify
the other as promptly as practicable (and, if possible, prior to making such
disclosure) and shall seek confidential treatment of such information; (ii) as
part of its normal reporting or review procedure to its parent company, its
auditors and its attorneys; provided, however, that the disclosing party agrees
to be responsible for any breach of the provisions of this Section 15 by such
parent company, its auditors and attorneys; (iii) in order to enforce its rights
or perform its obligations pursuant to this Agreement; or (iv) if mutually
agreed by SSI and Operator, in advance of such disclosure, in writing. Further,
Operator hereby acknowledges the extraordinarily confidential nature of the
Affiliation Agreements and hereby fully waives any and all rights, now or
existing in the future, to ever see or have disclosed to it any term or
provision of any Affiliation Agreement of SSI except as required (and then,
redacted to the greatest extent possible) by a final order of a court of
competent jurisdiction. The provisions of this Section 15 shall survive the
expiration or termination (for any reason) of this Agreement.
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<PAGE> 21
16. MISCELLANEOUS.
16.1 Amendments; Waivers. This Agreement may be amended, modified or
canceled, 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 or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
16.2 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.
16.3 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.
16.4 Enforceability. 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 and the parties further agree hereby to negotiate in good faith with
respect to an equitable modification of the provisions or application thereof
held to be invalid.
16.5 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 choice of laws.
16.6 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.
16.7 Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and, subject to Section 13, 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.
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<PAGE> 22
16.8 No Inference Against Author. Operator and SSI each acknowledge
that this Agreement was fully negotiated by the parties and, therefore, no
provision of this Agreement shall be interpreted against any party because such
party or its legal representative drafted such provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SATELLITE SERVICES, INC., a
Delaware corporation
By /s/ Nancy Valentine
-----------------------------------
Nancy Valentine
Its: Vice President of Programming
Administration
INTERMEDIA PARTNERS IV, L.P., a
California limited partnership
By InterMedia Capital Management IV, L.P.
Its: General Partner
By /s/ Leo J. Hindery, Jr.
--------------------------------
Its: Managing General Partner
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<PAGE> 23
EXHIBIT A
to
SATELLITE SERVICES, INC.
PROGRAMMING SUPPLY AGREEMENT
by and between
Satellite Services, Inc. and
InterMedia Partners IV, L.P.
Dated as of January 28, 1996
OWNERSHIP INTEREST OF TCI COMMUNICATIONS, INC. IN OPERATOR
TCI Communications, Inc. has a 33% partnership interest in Operator.
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<PAGE> 24
EXHIBIT B
to
SATELLITE SERVICES, INC.
PROGRAMMING SUPPLY AGREEMENT
by and between
Satellite Services, Inc. and
InterMedia Partners IV, L.P
Dated as of January 28, 1996
SYSTEM HEADENDS AND OPERATOR'S OWNERSHIP INTERESTS THEREIN
Operator owns 100% of the assets of the systems served by the headends listed
below:
Gibbs, TN
Thompson, TN
Baggett, TN
Hendersonville, TN
Waverly, TN
Montery, TN
Ft. Campbell, TN
Kingsport, TN
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<PAGE> 25
EXHIBIT C
to
SATELLITE SERVICES, INC.
PROGRAMMING SUPPLY AGREEMENT
by and between
Satellite Services, Inc. and
InterMedia Partners IV, L.P
Dated as of January 28, 1996
PROGRAMMING SERVICES
TO BE DETERMINED
-25-
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this "Agreement"), made and entered into
as of the 19th day of March, 1996 by and between INTERMEDIA MANAGEMENT, INC., a
California corporation ("IMI"), INTERMEDIA CAPITAL PARTNERS IV, L.P., a
California limited partnership ("ICP"), and INTERMEDIA PARTNERS IV, L.P., a
California limited partnership ("IP-IV")(ICP and IP-IV, each a "Partnership" and
collectively, the "Partnerships") with reference to the following facts and
circumstances,
W I T N E S S E T H:
WHEREAS, the Partnerships are engaged in the businesses of owning and
operating subsidiaries (the "Businesses"), which subsidiaries own and operate
cable television systems; and
WHEREAS, the Partnerships desire to retain IMI to provide certain
administrative services in connection with the management and operation of the
Businesses:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Engagement. the Partnerships hereby engage IMI to provide
the administration services set forth in Section 3 hereof in connection with the
Businesses, and IMI hereby accepts such engagement, subject to and upon the
terms and conditions hereof.
Section 2. Term. The term of this Agreement shall commence on the date
hereof and shall continue until terminated, with or without cause, by any party,
at any time, on at least one hundred twenty (120) days' prior written notice to
the other parties. In the event of any such termination by the Partnerships, the
provisions of Paragraph 5(b) shall apply.
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<PAGE> 2
Section 3. Duties and Authority of IMI. IMI shall provide the following
administrative services with respect to the operation of the Businesses during
the term of this Agreement:
(a) Establishment and maintenance of all accounting,
bookkeeping, billing, collections and other financial systems and
records relating to the Businesses and the preparation of appropriate
monthly financial reports to be furnished to the Partnerships;
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<PAGE> 3
(b) Payment of all expenses and expenditures of the
Partnerships in accordance with the respective budgets (each a "Budget
and together the "Budgets") of the Partnerships; provided, however,
that any modification or deviation of greater than ten percent (10%)
from any Budget item shall require the approval of the respective
Partnership;
(c) Preparation of all periodic reports to governmental and
regulatory agencies, and maintenance of all records, documents and
reports of operations, including employment and personnel activities,
in compliance with applicable laws and regulations, including, but not
limited to, any equal employment opportunity compliance reporting;
(d) Establishment and maintenance of all other
records relative to the operation of the Businesses;
(e) Administration of the Partnerships' employee benefit
plans, including any plans, programs, agreements, policies, commitments
or other arrangements which provide benefits to the employees of the
Partnerships, and ensuring compliance with applicable laws governing
the administration and operation of such employee benefit plans;
(f) Preparation of all required tax returns, reports or
statements of any nature related to taxable periods or portions thereof
that occur during the term hereof, including without limitation,
governmental charges, assessments and required contributions of the
Partnerships with respect to their business; and
(g) Maintenance of casualty, liability and other
insurance covering the business and assets of the
Partnerships.
All records and reports established, prepared or maintained by IMI for
the Partnerships shall be the property of the Partnerships, and the Partnerships
and their duly authorized representatives, employees, partners, agents and
attorneys shall have reasonable access thereto.
-3-
<PAGE> 4
Section 4. System Operating Accounts. IMI shall establish and maintain
with one or more banks reasonably acceptable to each Partnership, one or more
checking accounts ("Accounts") in the name and for the account of each
Partnership, for the deposit of all funds collected by the respective
Businesses. IMI shall have the authority to make deposits to the Accounts. IMI
shall have the authority to make disbursements and withdrawals therefrom for the
expenses and expenditures of the Partnerships in accordance with paragraph 3(b)
and to make payment to IMI of its fees earned under this Agreement.
-4-
<PAGE> 5
Section 5. Administrative Fee.
(a) In consideration of the services to be provided to the Partnerships
by IMI pursuant to this Agreement, IMI shall be reimbursed such portion of IMI's
expenses (not including a profit but including: all out-of-pocket expenses,
salaries and benefits, and reimbursement of equipment costs as IMI deems is
reasonably related to the time and expense actually devoted by IMI to the
Partnerships hereunder, and general overhead expenses of IMI attributable to the
services provided to the Partnerships) reasonably incurred in connection with
its services to the Partnerships hereunder as described in Section 4 hereof. IMI
shall not be entitled to any other fees or compensation for its services
pursuant to this Agreement.
(b) Notwithstanding any termination of this Agreement pursuant to
Section 2, IMI shall remain entitled (i) to receive the fee set forth in
Paragraph 5(a) until the termination notice period set forth in Section 2
lapses; and (ii) the Partnerships shall assume such portion of all of IMI's
contracts and obligations as IMI determines is comparable to the amount of such
contracts and obligations the Partnerships had been charged prior to such
termination, including without limitation a portion of its leases, equipment
contracts and personnel obligations for the remainder of the then applicable
term of such obligations or until the total number of basic subscribers served
by systems for which IMI provides administrative services similar to those
provided hereunder reaches the level of basic subscribers served by IMI
immediately prior to the termination of this Agreement by the Partnerships;
provided, however, that the Partnerships shall continue to be liable for such
obligations if the corresponding rights are not assigned to IMI.
Section 6. Indemnification by the Partnerships. the Partnerships shall
indemnify IMI, its officers, directors, employees and control persons and hold
them harmless to the fullest extent permitted by law from any and all claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees
and court costs) which they may incur by reason of IMI's duties or obligations
hereunder except with respect to gross negligence or criminal misconduct.
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<PAGE> 6
Section 7. Return of Information Upon Termination.
Upon termination of this Agreement, all books and records in the
possession of IMI relating to the maintenance and operation of and accounting
for the Businesses together with all supplies and other items of property owned
by the Partnerships and in IMI's possession shall be delivered to the
Partnerships, and IMI's right to compensation shall cease; provided, however,
that IMI shall be entitled to be fully compensated for services rendered prior
to the date of termination as set forth in Section 5 hereof; and provided
further, that the provisions of Section 6 hereof shall remain in full force and
effect and shall survive such termination.
Section 8. Miscellaneous Provisions.
(a) Assignment. IMI shall be entitled to assign as collateral its right
to receive compensation hereunder, but may not assign this Agreement and its
other rights, duties and obligations hereunder to any person, other than: (i) a
wholly owned subsidiary of InterMedia Capital Partners IV, L.P., a California
limited partnership or of InterMedia Capital Management IV, L.P., a California
limited partnership; (ii) a corporation, partnership or individual which owns
100% of the stock in IMI immediately prior to such assignment; or (iii) a wholly
owned subsidiary of the corporation, partnership or individual referred to in
clause (ii) immediately above, without the consent of the Partnerships;
provided, however, that any assignment to an entity described in clause (i),
(ii) or (iii) immediately above may be made (x) only in the event that the
management of such assignee shall be essentially the same as IMI immediately
prior to such assignment and (y) only upon the consent of the Partnerships,
which consent shall not be unreasonably withheld. This Agreement may not
otherwise be assigned by any party hereto without the consent of the other
party.
(b) Successors Bound. Subject to the provisions of Section 8(a)
immediately above, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
(c) Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when
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<PAGE> 7
personally delivered, sent by overnight courier or deposited in the mail,
postage prepaid, sent certified or registered, return receipt requested, and
addressed as set forth below or to such other address as any party shall have
previously designated by such a notice. Any notice so delivered personally shall
be deemed to be received on the date of delivery; any notice so sent by
overnight courier shall be deemed to be received one (1) business day after the
date sent; and any notice so mailed shall be deemed to be received on the date
shown on the return receipt (evidence of rejection of delivery or inability to
deliver because of a changed address of which no notice was given pursuant to
the provisions of this Agreement shall be deemed to be a receipt).
If to either of InterMedia Partners
the Partnerships: 235 Montgomery St.
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
With copy to: Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120
Attn.: Gregg Vignos, Esq.
If to IMI: InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
With copy to: Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120
Attn.: Gregg Vignos, Esq.
(d) Section Headings. The section headings in this Agreement are for
reference purposes only and shall not affect the interpretation of this
Agreement.
(e) Entire Agreement. This Agreement represents the
entire agreement among the parties relating to the subject
matter hereof.
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<PAGE> 8
(f) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which shall constitute the same instrument.
(g) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of
California.
(h) Severability. If any provision herein is found to be unenforceable,
invalid or illegal, such provision shall be deemed deleted from this Agreement,
and the remainder of this Agreement shall not be affected or impaired thereby.
(i) Attorneys' Fees. If any action, including, without limitation,
arbitration, should arise among the parties hereto under this Agreement, the
prevailing party in such action shall be reimbursed for all reasonable expenses
incurred in connection with such action, including reasonable attorneys' fees.
(j) Further Assurances. The parties hereto agree to execute any and all
such further agreements, instruments or documents, and to take any and all such
further action, as may be necessary or desirable to carry into effect the
purpose and intent of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands effective as of
the date first written above.
INTERMEDIA CAPITAL PARTNERS IV, L.P., a
California limited partnership
By InterMedia Capital Management IV,
L.P., a California limited partnership,
Its Managing General Partner
By /s/ Leo J. Hindery, Jr.
-------------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
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<PAGE> 9
INTERMEDIA PARTNERS IV, L.P., a
California limited partnership
By InterMedia Capital Management IV,
L.P., a California limited
partnership, Its Managing General
Partner
By /s/ Leo J. Hindery, Jr.
-------------------------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA MANAGEMENT, INC.,
a California corporation
By /s/ Leo J. Hindery, Jr.
-------------------------------------------
Leo J. Hindery, Jr.
President
-9-
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this "Agreement"), made and
entered into as of the 30th day of July, 1996 by and between INTERMEDIA
MANAGEMENT, INC., a California corporation ("IMI"), and INTERMEDIA PARTNERS
SOUTHEAST, a California general partnership ("IPSE"), with reference to the
following facts and circumstances,
W I T N E S S E T H:
WHEREAS, IPSE is the owner or purchaser of cable television systems
located in and around Nashville, Tennessee (such systems, together with any
other cable television systems acquired by IPSE in the future, the "Systems");
and
WHEREAS, IPSE desires to retain IMI to provide certain administrative
services in connection with the management and operation of the Systems:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Engagement. IPSE hereby engages IMI to provide the
administration services set forth in Section 3 hereof in connection with the
Systems, and IMI hereby accepts such engagement, subject to and upon the terms
and conditions hereof.
Section 2. Term. The term of this Agreement shall commence on the date
hereof and shall continue until terminated, with or without cause, by either
party, at any time, on at least one hundred twenty (120) days' prior written
notice to the other party. In the event of any such termination, the provisions
of Paragraph 5(b) shall apply.
Section 3. Duties and Authority of IMI. IMI shall provide the following
administrative services with respect to the operation of the Systems during the
term of this Agreement:
(a) Establishment and maintenance of all accounting,
bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate
monthly financial reports to be furnished to IPSE;
(b) Payment of all expenses and expenditures of IPSE in
accordance with the budget (the "Budget") of IPSE; provided, however,
that any modification or
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<PAGE> 2
deviation of greater than ten percent (10%) from any Budget item shall
require the approval of IPSE;
(c) Preparation of all periodic reports to governmental and
regulatory agencies, and maintenance of all records, documents and
reports of operations, including employment and personnel activities,
in compliance with applicable laws and regulations, including, but not
limited to, any equal employment opportunity compliance reporting;
(d) Establishment and maintenance of all other records
relative to the operation of the Systems;
(e) Administration of IPSE's employee benefit plans, including
any plans, programs, agreements, policies, commitments or other
arrangements which provide benefits to the employees of IPSE, and
ensuring compliance with applicable laws governing the administration
and operation of such employee benefit plans;
(f) Preparation of all required tax returns, reports or
statements of any nature related to taxable periods or portions thereof
that occur during the term hereof, including without limitation,
governmental charges, assessments and required contributions of IPSE
with respect to its business; and
(g) Maintenance of casualty, liability and other insurance
covering the business and assets of IPSE.
All records and reports established, prepared or maintained by IMI for
IPSE shall be the property of IPSE, and IPSE and its duly authorized
representatives, employees, partners, agents and attorneys shall have reasonable
access thereto.
Section 4. System Operating Accounts. IMI shall establish and maintain
with one or more banks reasonably acceptable to IPSE one or more checking
accounts ("System Operating Accounts") in the name and for the account of IPSE,
for the deposit of all funds collected by the Systems. IMI shall have the
authority to make deposits to the System Operating Accounts. IMI shall have the
authority to make disbursements and withdrawals therefrom for the expenses and
expenditures of IPSE in accordance with paragraph 3(b) and to make payment to
IMI of its fees earned under this Agreement.
Section 5. Administrative Fee.
(a) In consideration of the services to be provided to IPSE by IMI
pursuant to this Agreement, IMI shall be reimbursed such portion of IMI's
expenses (not including a profit but including: out-of-pocket expenses, salaries
and benefits, and
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<PAGE> 3
reimbursement of equipment costs as IMI deems is reasonably related to the time
and expense actually devoted by IMI to IPSE hereunder; and general overhead
expenses of IMI attributable to the services provided to IPSE based on the ratio
of basic subscribers of IPSE to all basic subscribers served by systems for
which IMI provides administrative services similar to those provided hereunder)
reasonably incurred in connection with its services to IPSE hereunder as
described in Section 3 hereof. IMI shall not be entitled to any other fees or
compensation for its services pursuant to this Agreement.
(b) Notwithstanding any termination of this Agreement pursuant to
Section 2, IMI shall remain entitled (i) to receive the fee set forth in
Paragraph 5(a) until the termination notice period set forth in Section 2
lapses; and (ii) IPSE shall assume such portion of all of IMI's contracts and
obligations as IMI determines is comparable to the amount of such contracts and
obligations IPSE had been charged prior to such termination, including without
limitation a portion of its leases, equipment contracts and personnel
obligations for the remainder of the then applicable term of such obligations or
until the total number of basic subscribers served by systems for which IMI
provides administrative services similar to those provided hereunder reaches the
level of basic subscribers served by IMI immediately prior to the termination of
this Agreement by IPSE; provided, however, that IPSE shall continue to be liable
for such obligations if the corresponding rights are not assigned to IMI.
Section 6. Indemnification by IPSE. IPSE shall indemnify IMI, its
officers, directors, employees and control persons and hold them harmless to the
fullest extent permitted by law from any and all claims, damages, liabilities,
costs and expenses (including reasonable attorneys' fees and court costs) which
they may incur by reason of IMI's duties or obligations hereunder except with
respect to gross negligence or criminal misconduct.
Section 7. Return of Information Upon Termination.
Upon termination of this Agreement, all books and records in the
possession of IMI relating to the maintenance and operation of and accounting
for the Systems together with all supplies and other items of property owned by
IPSE and in IMI's possession shall be delivered to IPSE, and IMI's right to
compensation shall cease; provided, however, that IMI shall be entitled to be
fully compensated for services rendered prior to the date of termination as set
forth in Section 5 hereof; and provided further, that the provisions of Section
6 hereof shall remain in full force and effect and shall survive such
termination.
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<PAGE> 4
Section 8. Miscellaneous Provisions.
(a) Assignment. IMI shall be entitled to assign as collateral its right
to receive compensation hereunder, but may not assign this Agreement and its
other rights, duties and obligations hereunder to any person, other than: (i) a
wholly owned subsidiary of InterMedia Partners IV, L.P., a California limited
partnership, of InterMedia Capital Partners IV, L.P., a California limited
partnership, or of InterMedia Capital Management IV, L.P., a California limited
partnership; (ii) a corporation, partnership or individual which owns 100% of
the stock in IMI immediately prior to such assignment; or (iii) a wholly owned
subsidiary of the corporation, partnership or individual referred to in clause
(ii) immediately above, without the consent of IPSE; provided, however, that any
assignment to an entity described in clause (i), (ii) or (iii) immediately above
may be made only in the event that the management of such assignee shall be
essentially the same as IMI immediately prior to such assignment. This Agreement
may not otherwise be assigned by any party hereto without the consent of the
other party.
(b) Successors Bound. Subject to the provisions of Section 8(a)
immediately above, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
(c) Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by overnight courier or deposited in the mail, postage prepaid, sent certified
or registered, return receipt requested, and addressed as set forth below or to
such other address as any party shall have previously designated by such a
notice. Any notice so delivered personally shall be deemed to be received on the
date of delivery; any notice so sent by overnight courier shall be deemed to be
received one (1) business day after the date sent; and any notice so mailed
shall be deemed to be received on the date shown on the return receipt (evidence
of rejection of delivery or inability to deliver because of a changed address of
which no notice was given pursuant to the provisions of this Agreement shall be
deemed to be a receipt).
If to IPSE: InterMedia Partners Southeast
235 Montgomery St.
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
With copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn.: Gregg Vignos, Esq.
-4-
<PAGE> 5
If to IMI: InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
With copy to: Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attn.: Gregg Vignos, Esq.
(d) Section Headings. The section headings in this Agreement are for
reference purposes only and shall not affect the interpretation of this
Agreement.
(e) Entire Agreement. This Agreement represents the entire agreement
among the parties relating to the subject matter hereof.
(f) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute the same
instrument.
(g) Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of California.
(h) Severability. If any provision herein is found to be unenforceable,
invalid or illegal, such provision shall be deemed deleted from this Agreement,
and the remainder of this Agreement shall not be affected or impaired thereby.
(i) Attorneys' Fees. If any action, including, without limitation,
arbitration, should arise among the parties hereto under this Agreement, the
prevailing party in such action shall be reimbursed for all reasonable expenses
incurred in connection with such action, including reasonable attorneys' fees.
(j) Further Assurances. The parties hereto agree to execute any and all
such further agreements, instruments or
-5-
<PAGE> 6
documents, and to take any and all such further action, as may be necessary or
desirable to carry into effect the purpose and intent of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands effective as of
the date first written above.
INTERMEDIA PARTNERS SOUTHEAST,
California limited partnership:
By InterMedia Capital Management
IV, L.P., a California
limited partnership, Its
Managing General Partner
By /s/ Leo J. Hindery, Jr.
-----------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA MANAGEMENT, INC.,
a California corporation
By /s/ Leo J. Hindery, Jr.
-----------------------------
Leo J. Hindery, Jr.
President
-6-
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EXHIBIT 10.7
EXECUTION COPY
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this "Agreement"), made and
entered into as of the 19th day of January, 1995 by and between INTERMEDIA
MANAGEMENT, INC., a California corporation ("IMI"), and INTERMEDIA PARTNERS OF
TENNESSEE, a California general partnership ("IP Tennessee"), with reference to
the following facts and circumstances,
W I T N E S S E T H:
WHEREAS, IP Tennessee is the owner or purchaser of cable television
systems serving the areas in and around Kingsport, Hendersonville, Waverly,
Monterey, Dixon, Cheatham, Robertson and Davidson County, Tennessee and Fort
Campbell, Kentucky (such systems, together with any other cable television
systems acquired by IP Tennessee in the future, the "Systems"); and
WHEREAS, IP Tennessee desires to retain IMI to provide certain
administrative services in connection with the management and operation of the
Systems:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Engagement. IP Tennessee hereby engages IMI to provide the
administration services set forth in Section 3 hereof in connection with the
Systems, and IMI hereby accepts such engagement, subject to and upon the terms
and conditions hereof.
Section 2. Term. The term of this Agreement shall commence on the date
hereof and shall continue until terminated, with or without cause, by either
party, at any time, on at least one hundred twenty (120) days' prior written
notice to the other party. In the event of any such termination by IP Tennessee,
the provisions of Paragraph 5(b) shall apply.
Section 3. Duties and Authority of IMI. IMI shall provide the following
administrative services with respect to the operation of the Systems during the
term of this Agreement:
(a) Establishment and maintenance of all accounting,
bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate
monthly financial reports to be furnished to IP Tennessee;
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<PAGE> 2
(b) Payment of all expenses and expenditures of IP Tennessee
in accordance with the budget (the "Budget") of IP Tennessee; provided,
however, that any modification or deviation of greater than ten percent
(10%) from any Budget item shall require the approval of IP Tennessee;
(c) Preparation of all periodic reports to governmental and
regulatory agencies, and maintenance of all records, documents and
reports of operations, including employment and personnel activities,
in compliance with applicable laws and regulations, including, but not
limited to, any equal employment opportunity compliance reporting;
(d) Establishment and maintenance of all other records
relative to the operation of the Systems;
(e) Administration of IP Tennessee's employee benefit plans,
including any plans, programs, agreements, policies, commitments or
other arrangements which provide benefits to the employees of IP
Tennessee, and ensuring compliance with applicable laws governing the
administration and operation of such employee benefit plans;
(f) Preparation of all required tax returns, reports or
statements of any nature related to taxable periods or portions thereof
that occur during the term hereof, including without limitation,
governmental charges, assessments and required contributions of IP
Tennessee with respect to its business; and
(g) Maintenance of casualty, liability and other insurance
covering the business and assets of IP Tennessee.
All records and reports established, prepared or maintained by IMI for
IP Tennessee shall be the property of IP Tennessee, and IP Tennessee and its
duly authorized representatives, employees, partners, agents and attorneys shall
have reasonable access thereto.
Section 4. System Operating Accounts. IMI shall establish and maintain
with one or more banks reasonably acceptable to IP Tennessee one or more
checking accounts ("System Operating Accounts") in the name and for the account
of IP Tennessee, for the deposit of all funds collected by the Systems. IMI
shall have the authority to make deposits to the System Operating Accounts. IMI
shall have the authority to make disbursements and withdrawals therefrom for the
expenses and expenditures of IP Tennessee in accordance with paragraph 3(b) and
to make payment to IMI of its fees earned under this Agreement.
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<PAGE> 3
Section 5. Administrative Fee.
(a) In consideration of the services to be provided to IP Tennessee by
IMI pursuant to this Agreement, IMI shall be reimbursed such portion of IMI's
expenses; (not including a profit but including: out-of-pocket expenses,
salaries and benefits, and reimbursement of equipment costs as IMI deems is
reasonably related to the time and expense actually devoted by IMI to IP
Tennessee hereunder; and general overhead expenses of IMI attributable to the
services provided to IP Tennessee based on the ratio of basic subscribers of IP
Tennessee to all basic subscribers served by systems for which IMI provides
administrative services similar to those provided hereunder) reasonably incurred
in connection with its services to IP Tennessee hereunder as described in
Section 4 hereof. IMI shall not be entitled to any other fees or compensation
for its services pursuant to this Agreement.
(b) Notwithstanding any termination of this Agreement pursuant to
Section 2, IMI shall remain entitled (i) to receive the fee set forth in
Paragraph 5(a) until the termination notice period set forth in Section 2
lapses; and (ii) IP Tennessee shall assume such portion of all of IMI's
contracts and obligations as IMI determines is comparable to the amount of such
contracts and obligations IP Tennessee had been charged prior to such
termination, including without limitation a portion of its leases, equipment
contracts and personnel obligations for the remainder of the then applicable
term of such obligations or until the total number of basic subscribers served
by systems for which IMI provides administrative services similar to those
provided hereunder reaches the level of basic subscribers served by IMI
immediately prior to the termination of this Agreement by IP Tennessee;
provided, however, that IP Tennessee shall continue to be liable for such
obligations if the corresponding rights are not assigned to IMI.
Section 6. Indemnification by IP Tennessee. IP Tennessee shall
indemnify IMI, its officers, directors, employees and control persons and hold
them harmless to the fullest extent permitted by law from any and all claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees
and court costs) which they may incur by reason of IMI's duties or obligations
hereunder except with respect to gross negligence or criminal misconduct.
Section 7. Return of Information Upon Termination.
Upon termination of this Agreement, all books and records in the
possession of IMI relating to the maintenance and operation of and accounting
for the Systems together with all supplies and other items of property owned by
IP Tennessee and in IMI's possession shall be delivered to IP Tennessee, and
IMI's right to compensation shall cease; provided, however, that
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<PAGE> 4
IMI shall be entitled to be fully compensated for services rendered prior to the
date of termination as set forth in Section 5 hereof; and provided further, that
the provisions of Section 6 hereof shall remain in full force and effect and
shall survive such termination.
Section 8. Miscellaneous Provisions.
(a) Assignment. IMI shall be entitled to assign as collateral its right
to receive compensation hereunder, but may not assign this Agreement and its
other rights, duties and obligations hereunder to any person, other than: (i) a
wholly owned subsidiary of InterMedia Partners IV, L.P., a California limited
partnership or of InterMedia Capital Management IV, L.P., a California limited
partnership; (ii) a corporation, partnership or individual which owns 100% of
the stock in IMI immediately prior to such assignment; or (iii) a wholly owned
subsidiary of the corporation, partnership or individual referred to in clause
(ii) immediately above, without the consent of IP Tennessee; provided, however,
that any assignment to an entity described in clause (i), (ii) or (iii)
immediately above may be made (x) only in the event that the management of such
assignee shall be essentially the same as IMI immediately prior to such
assignment and (y) only upon the consent of IP Tennessee, which consent shall
not be unreasonably withheld. This Agreement may not otherwise be assigned by
any party hereto without the consent of the other party.
(b) Successors Bound. Subject to the provisions of Section 8(a)
immediately above, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
(c) Notices. Any notice or demand desired or required to be given
hereunder shall be in writing and deemed given when personally delivered, sent
by overnight courier or deposited in the mail, postage prepaid, sent certified
or registered, return receipt requested, and addressed as set forth below or to
such other address as any party shall have previously designated by such a
notice. Any notice so delivered personally shall be deemed to be received on the
date of delivery; any notice so sent by overnight courier shall be deemed to be
received one (1) business day after the date sent; and any notice so mailed
shall be deemed to be received on the date shown on the return receipt (evidence
of rejection of delivery or inability to deliver because of a changed address of
which no notice was given pursuant to the provisions of this Agreement shall be
deemed to be a receipt).
If to IP Tennessee: InterMedia Partners of Tennessee
235 Montgomery St.
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
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<PAGE> 5
With copy to: Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120
Attn.: Gregg Vignos, Esq.
If to IMI: InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
With copy to: Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120
Attn.: Gregg Vignos, Esq.
(d) Section Headings. The section headings in this Agreement are for
reference purposes only and shall not affect the interpretation of this
Agreement.
(e) Entire Agreement. This Agreement represents the entire agreement
among the parties relating to the subject matter hereof.
(f) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute the same
instrument.
(g) Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of California.
(h) Severability. If any provision herein is found to be unenforceable,
invalid or illegal, such provision shall be deemed deleted from this Agreement,
and the remainder of this Agreement shall not be affected or impaired thereby.
(i) Attorneys' Fees. If any action, including, without limitation,
arbitration, should arise among the parties hereto under this Agreement, the
prevailing party in such action shall be reimbursed for all reasonable expenses
incurred in connection with such action, including reasonable attorneys' fees.
(j) Further Assurances. The parties hereto agree to execute any and all
such further agreements, instruments or
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<PAGE> 6
documents, and to take any and all such further action, as may be necessary or
desirable to carry into effect the purpose and intent of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands effective as of
the date first written above.
INTERMEDIA PARTNERS OF TENNESSEE:
By InterMedia Capital Management
IV, L.P., a California limited
partnership
Its Managing General Partner
By /s/ Leo J. Hindery, Jr.
----------------------------
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA MANAGEMENT, INC.,
a California corporation
By /s/ Leo J. Hindery, Jr.
---------------------------
Leo J. Hindery, Jr.
President
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<PAGE> 1
EXHIBIT 10.8
Execution Copy
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
THIS AMENDED AND RESTATED ADMINISTRATION AGREEMENT (this
"Agreement"), made and entered into as of the 27th day of December, 1990 by and
between INTERMEDIA MANAGEMENT, INC., a California corporation ("IMI"), and
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P., a California limited partnership
("West Tennessee"), with reference to the following facts and circumstances,
W I T N E S S E T H:
Whereas West Tennessee is the owner of cable television
systems in various locations in the United States (such systems, together with
any other cable television systems acquired by West Tennessee in the future, the
"Systems"); and
Whereas West Tennessee desires to retain IMI to provide
certain administrative services in connection with the management and operation
of the Systems; and
Whereas West Tennessee understands that IMI is a multi-purpose
corporation and will be providing similar services to other cable systems:
N o w, T h e r e f o r e, in consideration of the foregoing
and the mutual covenants herein set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Engagement. West Tennessee hereby engages IMI to
provide the administration services set forth in Section 3 hereof in connection
with the Systems, and IMI hereby accepts such engagement, subject to and upon
the terms and conditions hereof.
Section 2. Term. The initial term of this Agreement (the
"Initial Term") shall commence on the date hereof and shall continue until the
earlier of (i) three (3) years from the date hereof and (ii) the date this
Agreement is terminated by either party hereto in accordance with Section 6
hereof. Notwithstanding the foregoing, this Agreement shall be automatically
extended following the Initial Term for successive terms of six (6) months in
duration, unless one of the parties hereto has given at
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<PAGE> 2
least thirty (30) days' notice to the other that it wishes to terminate this
Agreement pursuant to Section 6(c) hereof.
Section 3. Duties and Authority of IMI. IMI shall provide the
following administrative services with respect to the operation of the Systems
during the term of this Agreement:
(a) Establishment and maintenance of all accounting,
bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate
monthly financial reports to be furnished to West Tennessee;
(b) Preparing and filing, or causing to be prepared and filed,
all periodic reports to governmental and regulatory agencies, preparing
and maintaining, or causing to be prepared and maintained, all records,
documents and reports of operations, including employment and personnel
activities, in compliance with applicable laws and regulations,
including, but not limited to, any equal employment opportunity
compliance reporting;
(c) Establishment and maintenance of all other records
relative to the operation of the Systems; and
(d) Administration of West Tennessee's employee benefit plans,
including any plans, programs, agreements, policies, commitments or
other arrangements which provide benefits to the employees of West
Tennessee, and ensuring compliance with applicable laws governing the
administration and operation of such employee benefit plans.
All records and reports established, prepared or maintained by
IMI for West Tennessee shall be the property of West Tennessee, and West
Tennessee and its duly authorized representatives, partners, agents and
attorneys shall have reasonable access thereto.
Section 4. Direct Cost Reimbursement and
Administrative Fee.
(a) In consideration of the services to be provided to West
Tennessee by IMI pursuant to this Agreement, IMI shall be reimbursed for the
cost of IMI's Directly Allocated Expenditures ("Direct Expenditures") which are
incurred by IMI for the direct benefit of West Tennessee (including, but not
limited to, out-of-pocket expenses, insurance costs and consulting fees as IMI
deems
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<PAGE> 3
is directly related to the administration of West Tennessee).
(b) In consideration of the services to be provided to West
Tennessee by IMI pursuant to this Agreement, (i) IMI shall receive cost plus two
percent (2%) of such portion of IMI's General Overhead Expenditures ("Overhead")
which are incurred by IMI for the direct benefit of West Tennessee (including,
but not limited to, salaries and benefits; office rental and other costs
incurred to provide financial records); and (ii) IMI shall receive the cost, as
measured by the associated depreciation or amortization (as claimed in the
federal income tax return of IMI), plus two percent (2%) thereof, of such
portion of IMI's Capital Expenditures ("Capital Expenditures") which are
incurred by IMI in connection with the Overhead as incurred by IMI for the
direct benefit of West Tennessee (including, but not limited to, furniture,
computers and leasehold improvements.) All charges for the direct benefit of
West Tennessee under this subparagraph (b) shall be determined based on the
ratio of basic subscribers of West Tennessee to all basic subscribers served by
systems for which IMI provides administrative services similar to those provided
hereunder. The determination of which category an expenditure under either
subparagraph (a) or (b) relates to shall be determined by IMI. IMI shall not be
entitled to any other fees or compensation for its services pursuant to this
Agreement.
(c) Fifteen (15) days after the end of each month, IMI will
notify West Tennessee of the cost of the Direct Expenditures applicable to West
Tennessee. West Tennessee shall make payment to IMI of such costs within fifteen
(15) days of receipt of such notice.
(d) Fifteen (15) days after the end of each month, IMI will
notify West Tennessee of the cost of the Overhead applicable to West Tennessee.
West Tennessee shall make payment to IMI of such costs within fifteen (15) days
of receipt of such notice. The payment of the charge of two percent (2%) above
the cost of the Overhead shall be deferred as set forth in subparagraph (f)
below.
(e) Fifteen (15) days after the end of each year, IMI will
notify West Tennessee of the cost of the Capital Expenditures applicable to West
Tennessee and West Tennessee shall make payment to IMI within fifteen (15) days
of receipt of such notice. The payment of the charge of two percent (2%) above
the cost of the Capital Expenditures shall be deferred as set forth in
subparagraph (f) below.
(f) Payment of all remaining fees owing to IMI under this
Agreement after payment as provided for in
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<PAGE> 4
subparagraphs (d) and (e) above shall be deferred until the later of (i) the
sale of all or substantially all of the assets of West Tennessee; or (ii)
payment of all debt of West Tennessee which is currently outstanding or which is
incurred under that certain Loan Agreement dated as of September 11, 1990, among
West Tennessee, Robin Cable Systems, L.P. and General Electric Capital
Corporation.
(g) Notwithstanding any termination of this Agreement pursuant
to Section 2, IMI shall remain entitled (i) to receive the fees set forth in
Paragraphs 4(a) and 4(b) until the termination notice period set forth in
Section 2 lapses; (ii) to receive any amounts deferred under subparagraphs (d)
or (e), which shall be paid in accordance with subparagraph (f); and (iii) West
Tennessee shall assume such portion of all of IMI's contracts and obligations as
IMI determines is comparable to the amount of such contracts and obligations
West Tennessee had been charged prior to such termination, including without
limitation a portion of its leases, equipment contracts and personnel
obligations for the remainder of the then applicable term of such obligations.
Section 5. Indemnification by West Tennessee. West Tennessee
shall indemnify IMI, its officers, directors, employees and control persons and
hold them harmless from any and all claims, damages, liabilities, costs and
expenses (including reasonable attorneys' fees and court costs) which they may
incur by reason of IMI's duties or obligations hereunder, except that
indemnification shall not be permitted for acts constituting gross negligence or
willful misconduct.
Section 6. Termination.
(a) Termination at Option of West Tennessee. This Agreement
shall be terminable at the option of West Tennessee at any time in the event (i)
IMI is convicted of a felony crime which becomes final following expiration of
the applicable appeal period; (ii) IMI shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other law or regulation relating to
bankruptcy, insolvency or other relief for debtors; or shall seek to consent to
or acquiesce in the appointment of any trustee, receiver or liquidator or shall
make any general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due; (iii) a
court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed against IMI seeking any reorganization, dissolution
or similar relief under any
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<PAGE> 5
federal, state or other statute, law or regulation relating to bankruptcy,
insolvency or other relief for debtors, and such order, judgment or decree shall
remain unvacated and unstayed for an aggregate of sixty (60) days (whether or
not consecutive) from the first date of entry thereof; or any trustee, receiver
or liquidator of IMI shall be appointed without the consent or acquiescence of
IMI and such appointment shall remain unvacated and unstayed for an aggregate of
sixty (60) days (whether or not consecutive); (iv) a final judgment shall be
rendered against IMI in which it is determined that IMI has engaged in
fraudulent conduct (x) materially and adversely affecting IMI's ability to
discharge its obligations under this Agreement or (y) against West Tennessee and
had a material adverse impact on the operations (or the results of operations)
of the Systems; or (v) IMI shall have engaged in an act of gross negligence or
of willful misconduct, or in a pattern of conduct wherein it shall have failed
to perform its duties hereunder, such that such gross negligence, willful
misconduct or pattern of conduct, as the case may be, has resulted or would
result in a materially adverse impact on the operations (or the results of
operations) of the Systems. West Tennessee's rights to terminate this Agreement
set forth in this Section 6 are independent of each other and the giving or
receipt of notice to terminate this Agreement as provided in one clause of this
Section 6 shall not preclude West Tennessee earlier terminating this Agreement
as provided in any other clause of this Section 6. The giving or receipt of
notice to terminate shall not relieve IMI of its obligations during the period
prior to the time such termination takes effect.
(b) Termination at Option of IMI. This Agreement shall be
terminable at the option of IMI at any time in the event that West Tennessee
fails to pay the fees or reimburse the expenses within the time provided
hereunder and such failure to pay continues for thirty (30) days following
notice to West Tennessee of such failure.
(c) Termination After Initial Term. This Agreement may be
terminated by either West Tennessee or IMI (for any reason, with or without
cause) after the Initial Term by not less than thirty (30) days' written notice
delivered to the other party; provided that such termination shall be effective
only as of the end of the Initial Term (if such notice is given at least thirty
(30) days prior to the end of the Initial Term) or as of the end of any
successive six (6) month term thereafter (if such notice is given after the end
of the Initial Term or less than thirty (30) days prior to the end of the
Initial Term).
(d) Return of Information. Upon termination of this Agreement,
all books and records in the possession of IMI relating to the maintenance and
operation of and
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<PAGE> 6
accounting for the Systems together with all supplies and other items of
property owned by West Tennessee and in IMI's possession shall be delivered to
West Tennessee, and IMI's right to compensation shall cease; provided, however,
that IMI shall be entitled to be fully compensated for services rendered prior
to the date of termination; and provided further, that the provisions of Section
5 hereof shall remain in full force and effect and shall survive such
termination.
Section 7. Miscellaneous Provisions.
(a) Assignment. IMI shall be entitled to assign as collateral
its right to receive compensation hereunder, but may not assign this Agreement
and its other rights, duties and obligations hereunder to any person, other
than: (i) a wholly owned subsidiary of IMI; (ii) a corporation or partnership
which owns 100% of the stock in IMI immediately prior to such assignment; or
(iii) a wholly owned subsidiary of the corporation or partnership referred to in
clause (ii) immediately above, without the consent of West Tennessee; provided,
however, that any assignment to an entity described in clause (i), (ii) or (iii)
immediately above may be made (x) only in the event that the management of such
assignee shall be essentially the same as IMI immediately prior to such
assignment and (y) only upon the consent of West Tennessee, which consent shall
not be unreasonably withheld. This Agreement may not otherwise be assigned by
any party hereto without the consent of the other party.
(b) Successors Bound. Subject to the provisions of Section
7(a) immediately above, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(c) Notices. Any notice or demand desired or required to be
given hereunder shall be in writing and deemed given when personally delivered,
sent by overnight courier or deposited in the mail, postage prepaid, sent
certified or registered, return receipt requested, and addressed as set forth
below or to such other address as any party shall have previously designated by
such a notice. Any notice so delivered personally shall be deemed to be received
on the date of delivery; any notice so sent by overnight courier shall be deemed
to be received one (1) business day after the date sent; and any notice so
mailed shall be deemed to be received on the date shown on the return receipt
(evidence of rejection of delivery or inability to deliver because of a changed
address of which no notice was given pursuant to the provisions of this
Agreement shall be deemed to be a receipt).
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<PAGE> 7
If to West Tennessee: InterMedia Partners
of West Tennessee, L.P.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn: Leo J. Hindery, Jr.
If to IMI: InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn: Leo J. Hindery, Jr.
Both with Pillsbury, Madison & Sutro
copy to: P.O. Box 7880
San Francisco, CA 94120
Attn: Gregg Vignos, Esq.
(d) Section Headings. The section headings in this Agreement
are for reference purposes only and shall not affect the interpretation of this
Agreement.
(e) Entire Agreement. This Agreement represents the entire
agreement among the parties relating to the subject matter hereof.
(f) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
(g) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California.
(h) Severability. If any provision herein is found to be
unenforceable, invalid or illegal, such provision shall be deemed deleted from
this Agreement, and the remainder of this Agreement shall not be affected or
impaired thereby.
(i) Attorneys' Fees. If any action, including, without
limitation, arbitration, should arise among the parties hereto under this
Agreement, the prevailing party in such action shall be reimbursed for all
reasonable expenses incurred in connection with such action, including
reasonable attorneys' fees.
(j) Further Assurances. The parties hereto agree to execute
any and all such further agreements, instruments or
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<PAGE> 8
documents, and to take any and all such further action, as may be necessary or
desirable to carry into effect the purpose and intent of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands effective
as of January 1, 1990.
INTERMEDIA PARTNERS OF WEST
TENNESSEE, L.P.
By INTERMEDIA PARTNERS, a
California limited partnership
Its General Partner
By INTERMEDIA CAPITAL MANAGEMENT,
a California limited
partnership
Its General Partner
By /s/ Leo J. Hindery, Jr.
__________________________
Leo J. Hindery, Jr.
Managing General Partner
INTERMEDIA MANAGEMENT, INC.,
a California corporation
By /s/ Leo J. Hindery, Jr.
____________________________
Leo J. Hindery, Jr.
President
-8-
<PAGE> 1
EXHIBIT 10.9
EXECUTION COPY
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this "Agreement"), made and
entered into as of the 30th day of April, 1992 by and between INTERMEDIA
MANAGEMENT, INC., a California corporation ("IMI"), and ROBIN MEDIA GROUP, INC.,
a Nevada corporation ("RMG"), with reference to the following facts and
circumstances,
W I T N E S S E T H:
Whereas RMG directly or indirectly operates those certain
cable television systems serving residents in or near Knoxville and Nashville,
Tennessee (such systems, together with any other cable television systems
acquired by RMG in the future, the "Systems"); and
Whereas RMG desires to retain IMI to provide certain
administrative services in connection with the management and operation of the
Systems:
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Engagement. RMG hereby engages IMI to provide the
administration services set forth in Section 3 hereof in connection with the
Systems, and IMI hereby accepts such engagement, subject to and upon the terms
and conditions hereof.
Section 2. Term. The term of this Agreement shall commence on
the date hereof and shall continue until terminated, with or without cause, by
RMG or IMI, at any time, on at least one hundred twenty (120) days' prior
written notice to the other party. In the event of any such termination by RMG,
the provisions of Paragraph 5(b) shall apply.
Section 3. Duties and Authority of IMI. IMI shall provide the
following administrative services with respect to the operation of the Systems
during the term of this Agreement:
(a) Establishment and maintenance of all accounting,
bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate
monthly financial reports to be furnished to RMG;
(b) Payment of all expenses and expenditures of RMG in
accordance with the budget attached hereto as
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<PAGE> 2
Exhibit A (the "Budget"); provided, however, that any modification or
deviation of greater than ten percent (10%) from any Budget item shall
require the approval of RMG;
(c) Preparation of all periodic reports to governmental and
regulatory agencies, and maintenance of all records, documents and
reports of operations, including employment and personnel activities,
in compliance with applicable laws and regulations, including, but not
limited to, any equal employment opportunity compliance reporting;
(d) Establishment and maintenance of all other records
relative to the operation of the Systems;
(e) Administration of RMG's employee benefit plans, including
any plans, programs, agreements, policies, commitments or other
arrangements which provide benefits to the employees of RMG, and
ensuring compliance with applicable laws governing the administration
and operation of such employee benefit plans;
(f) Preparation of all required tax returns, reports or
statements of any nature related to taxable periods or portions thereof
that occur during the term hereof, including without limitation,
governmental charges, assessments and required contributions of RMG
with respect to its business; and
(g) Maintenance of casualty, liability and other insurance
covering the business and assets of RMG.
All records and reports established, prepared or maintained by
IMI for RMG shall be the property of RMG, and RMG and its duly authorized
representatives, partners, agents and attorneys shall have reasonable access
thereto.
Section 4. System Operating Accounts. IMI shall establish and
maintain with one or more banks reasonably acceptable to RMG one or more
checking accounts ("System Operating Accounts") in the name and for the account
of RMG, for the deposit of all funds collected by the Systems. IMI shall have
the authority to make deposits to the System Operating Accounts. IMI shall have
the authority to make disbursements and withdrawals therefrom for the expenses
and expenditures of RMG in accordance with paragraph 3(b) and to make payment to
IMI of its fees earned under this Agreement.
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<PAGE> 3
Section 5. Administrative Fee.
(a) In consideration of the services to be provided to RMG by
IMI pursuant to this Agreement, IMI shall receive (i) cost plus two percent (2%)
of such portion of IMI's general overhead expenditures, including, but not
limited to, salaries, benefits, office rental and other costs incurred to
provide financial records by IMI for the direct benefit of RMG ("Overhead"); and
(ii) cost, as measured by the associated depreciation or amortization (as
claimed in the federal income tax return of IMI), plus two percent (2%) of such
portion of IMI's capital expenditures as are incurred in connection with the
Overhead for the direct benefit of RMG, including, but not limited to,
furniture, computers and leasehold improvements ("Capital Expenditures"). All
charges for the direct benefit of RMG under this subparagraph (b) shall be
determined based on the ratio of basic subscribers of RMG to all basic
subscribers served by systems for which IMI provides administrative services
similar to those provided hereunder. The determination of which category an
expenditure under either subparagraph (a) or (b) relates to shall be determined
by IMI. IMI shall not be entitled to any other fees or compensation for its
services pursuant to this Agreement.
(b) Notwithstanding any termination of this Agreement pursuant
to Section 2, IMI shall remain entitled (i) to receive the fees set forth in
Paragraph 5(a) until the termination notice period set forth in Section 2
lapses; and (ii) RMG shall assume such portion of all of IMI's contracts and
obligations as IMI determines is comparable to the amount of such contracts and
obligations RMG had been charged prior to such termination, including without
limitation a portion of its leases, equipment contracts and personnel
obligations for the remainder of the then applicable term of such obligations or
until the total number of basic subscribers served by systems for which IMI
provides administrative services similar to those provided hereunder reaches the
level of basic subscribers served by IMI immediately prior to the termination of
this Agreement by RMG; provided, however, that RMG shall continue to be liable
for such obligations if the corresponding rights are not assigned to IMI.
Section 6. Indemnification by RMG. RMG shall indemnify IMI,
its officers, directors, employees and control persons and hold them harmless to
the fullest extent permitted by law from any and all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and court
costs) which they may incur by reason of IMI's duties or obligations hereunder.
Section 7. Return of Information Upon Termination.
Upon termination of this Agreement, all books and records in
the possession of IMI relating to the maintenance and operation of and
accounting for the Systems together with all
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supplies and other items of property owned by RMG and in IMI's possession shall
be delivered to RMG, and IMI's right to compensation shall cease; provided,
however, that IMI shall be entitled to be fully compensated for services
rendered prior to the date of termination; and provided further, that the
provisions of Section 6 hereof shall remain in full force and effect and shall
survive such termination.
Section 8. Miscellaneous Provisions.
(a) Assignment. IMI shall be entitled to assign as collateral
its right to receive compensation hereunder, but may not assign this Agreement
and its other rights, duties and obligations hereunder to any person, other
than: (i) a wholly owned subsidiary of InterMedia Partners, a California limited
partnership or of InterMedia Capital Management, a California limited
partnership; (ii) a corporation or partnership which owns 100% of the stock in
IMI immediately prior to such assignment; or (iii) a wholly owned subsidiary of
the corporation or partnership referred to in clause (ii) immediately above,
without the consent of RMG; provided, however, that any assignment to an entity
described in clause (i), (ii) or (iii) immediately above may be made (x) only in
the event that the management of such assignee shall be essentially the same as
IMI immediately prior to such assignment and (y) only upon the consent of RMG,
which consent shall not be unreasonably withheld. This Agreement may not
otherwise be assigned by any party hereto without the consent of the other
party.
(b) Successors Bound. Subject to the provisions of Section
8(a) immediately above, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(c) Notices. Any notice or demand desired or required to be
given hereunder shall be in writing and deemed given when personally delivered,
sent by overnight courier or deposited in the mail, postage prepaid, sent
certified or registered, return receipt requested, and addressed as set forth
below or to such other address as any party shall have previously designated by
such a notice. Any notice so delivered personally shall be deemed to be received
on the date of delivery; any notice so sent by overnight courier shall be deemed
to be received one (1) business day after the date sent; and any notice so
mailed shall be deemed to be received on the date shown on the return receipt
(evidence of rejection of delivery or inability to deliver because of a changed
address of which no notice was given pursuant to the provisions of this
Agreement shall be deemed to be a receipt).
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If to RMG: Robin Media Group, Inc.
235 Montgomery St.
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
If to IMI: InterMedia Management, Inc.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Attn.: Leo J. Hindery, Jr.
Both with
copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn.: Gregg Vignos, Esq.
(d) Section Headings. The section headings in this Agreement
are for reference purposes only and shall not affect the interpretation of this
Agreement.
(e) Entire Agreement. This Agreement represents the entire
agreement among the parties relating to the subject matter hereof.
(f) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
(g) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California.
(h) Severability. If any provision herein is found to be
unenforceable, invalid or illegal, such provision shall be deemed deleted from
this Agreement, and the remainder of this Agreement shall not be affected or
impaired thereby.
(i) Attorneys' Fees. If any action, including, without
limitation, arbitration, should arise among the parties hereto under this
Agreement, the prevailing party in such action shall be reimbursed for all
reasonable expenses incurred in connection with such action, including
reasonable attorneys' fees.
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<PAGE> 6
(j) Further Assurances. The parties hereto agree to execute
any and all such further agreements, instruments or documents, and to take any
and all such further action, as may be necessary or desirable to carry into
effect the purpose and intent of this Agreement.
IN WITNESS WHEREOF, the parties have set their hands effective
as of the date first written above.
ROBIN MEDIA GROUP, INC.
By /s/ Leo J. Hindery, Jr.
____________________________
Leo J. Hindery, Jr.
President
INTERMEDIA MANAGEMENT, INC.
By /s/ Leo J. Hindery, Jr.
____________________________
Leo J. Hindery, Jr.
President
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<PAGE> 1
EXHIBIT 10.10
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Management Agreement") is made and
entered into as of the 30th day of July, 1996, by and between INTERMEDIA
PARTNERS OF WEST TENNESSEE, L.P., a California limited partnership ("IPWT"), and
INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a California limited partnership (the
"Manager").
W I T N E S S E T H:
Whereas the Manager is the general partner of InterMedia Partners IV,
L.P., a California limited partnership ("IP-IV"), a limited partner and the
general partner of IPWT; and
Whereas IPWT is the owner and operator of certain cable television
systems servicing areas located in Tennessee (such systems, together with any
other cable television systems acquired by IPWT in the future, the "Systems");
and
Whereas the Manager has experience in the operation and management of
cable television systems such as the Systems; and
Whereas IPWT and the Manager have agreed to enter into this Management
Agreement, pursuant to which the Manager, from and after the date hereof, shall
manage the Systems:
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements contained herein and the mutual benefits to be derived
therefrom, IPWT and the Manager hereby agree as follows:
I. Appointment of Manager. IPWT hereby designates the Manager and the
Manager hereby accepts the designation as exclusive manager of the Systems on
behalf of IPWT, upon the conditions and for the term and compensation set forth
herein.
II. Term. The appointment of the Manager shall become effective as of
the date hereof, and shall continue for the duration of IPWT's existence,
subject to Section 8 below.
III. Duties of Manager. Subject to the limitations on the authority of
the Manager set forth in Section 4 and subject to the right of IPWT, after
consultation with the Manager, to perform certain functions itself and to direct
the Manager to take or omit to take actions specified by
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IPWT and/or to otherwise supervise the conduct of the business by the Manager,
and in each case where the same would not violate any existing franchise,
license, contract, law or regulation applicable to the Systems, the Manager
shall have the following authority:
A. Supervision and Consulting. The Manager shall supervise and conduct
the day-to-day operations of the Systems in the ordinary course of business.
B. Programming. Subject to the provisions of all applicable franchises
or ordinances or other binding contracts or legislation, the Manager shall
select, provide and price, at the lowest cost available to IPWT, all programming
and services to be provided to the customers of the Systems; provided, however,
all costs and expenses incurred for programming and services will be borne by
IPWT. Authority is hereby confirmed on the Manager to enter into programming
contracts on behalf of IPWT or the Systems with such parties as the Manager
deems appropriate. To its knowledge the Manager believes that the services of
Satellite Services, Inc. ("SSI") will be available to the Systems. The Manager
shall use its best efforts to make the services of SSI available to the Systems
and shall use all reasonable efforts to retain access to SSI on behalf of the
Systems.
C. Maintenance and Construction of Systems. The Manager shall maintain
the Systems in good working order and repair and shall cause to be made such
capital improvements as (i) are necessary or appropriate to maintain the Systems
in compliance with the franchises for the Systems or (ii) are consistent with
the past practices of the Systems.
D. Employees. The Manager shall select, determine the compensation of,
supervise, instruct, discharge and otherwise manage all servants, employees,
agents, attorneys, accountants, engineers, consultants or contractors considered
by the Manager to be necessary for the efficient operation of the Systems
subject to the approval of IPWT. All such servants, employees, agents,
attorneys, engineers, consultants or contractors shall remain and be in the
employ of and be compensated by IPWT.
E. Negotiations of Contracts. The Manager shall assist IPWT in the
negotiation of all contracts and the performance of all tasks necessary for the
financing, operation, construction, installation, maintenance, budgeting,
servicing, repair, protection, improvement, expansion, upkeep and other
management of the Systems, which contracts may be executed by the Manager on
behalf of IPWT as owner of the Systems, provided IPWT would have the authority
to execute such contracts under the terms of IPWT's Amended and
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<PAGE> 3
Restated Agreement of Limited Partnership dated as of October 3, 1994 (the "IPWT
Agreement").
F. Filings. The Manager shall assist IPWT in the timely filing of all
federal, state and local reports with respect to the Systems as may be required
by franchise ordinances, Federal Communications Commission regulations or
copyright regulations.
G. Records. The Manager shall keep or cause to be kept all necessary
and appropriate books and records of all affairs relating to the Systems.
Originals or copies of such books and records shall be maintained at the
principal office of the Manager and shall be open to inspection and examination
by IPWT or its representatives at any reasonable time during the term of this
Agreement.
H. Accounting. The Manager shall establish and/or maintain all
accounting, bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate monthly
financial reports to be furnished to IPWT.
I. Representation. To the extent appropriate, the Manager shall
represent IPWT and the Systems before all governmental authorities with respect
to any matter necessary or desirable to the efficient management thereof.
J. Other Responsibilities. The Manager shall perform all other
management services necessary or desirable for the management, operation and
maintenance of the Systems as the Manager, in its reasonable discretion deems
appropriate or necessary in order to manage and operate the Systems. The
enumeration of services to be performed by the Manager herein shall not be
deemed to be exclusive, nor shall such enumeration prevent the Manager from
delegating its authority hereunder to IPWT.
K. Cooperation. IPWT shall cooperate with the Manager in the
performance of the Manager's duties hereunder and shall execute such documents,
instruments and certificates as may be necessary to evidence the Manager's
authority hereunder, to permit it to collect all revenue of the Systems, or to
permit the Manager to finalize necessary reports, filings, contracts or other
matters.
IV. Authority of Manager. Notwithstanding any provision of this
Agreement to the contrary, the Manager shall not take any action under this
Agreement without the consent of the limited partner of IPWT if the Manager is
prohibited from taking such action without the consent of the limited partner of
IPWT under the terms of the IPWT Agreement. The Manager shall be authorized to
perform all services necessary for the management of the Systems, subject to the
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preceding sentence and except that the Manager shall not have the authority to
sell or trade any assets of the Systems. To the extent IPWT has entered into an
agreement with InterMedia Management, Inc., a California corporation ("IMI"), to
provide administrative services to the Systems, the Manager shall not be
responsible for providing such services and shall coordinate with IMI with
regard to the administration of the Systems.
V. Compensation of Manager. As compensation for its services hereunder,
the Manager shall be entitled to receive in cash an annual fee equal to one
percent (1%) of the total capital contributions that have been made to IPWT
determined as of the beginning of each calendar quarter. The fee shall be paid
quarterly in advance, one-fourth of one percent (.25%) per quarter, on the first
business day of each calendar quarter. Any portion of the such fee which shall
be past due shall bear interest from the date due until paid at the lower of a
rate of ten percent (10%) per annum or the highest amount permitted by law.
VI. Bank Account.
A. Consolidation Accounts. The Manager shall create and maintain bank
accounts (hereinafter referred to as the "Consolidation Accounts") in which the
funds generated by the Systems shall be deposited. All funds in said accounts
from time to time shall be the property of the Systems, but said funds shall be
disbursed from said account by the Manager on the Systems' behalf in accordance
with the provisions of this Management Agreement. Only such person or persons as
are designated by the Manager or IPWT shall have authority to draw checks or
drafts upon or make withdrawals from said accounts.
B. Payments. The Manager shall make or cause to be made all payments of
costs, expenses and charges payable with respect to the operations of the
Systems.
VII. Indemnification.
A. Indemnification by IPWT. IPWT shall indemnify and defend the
Manager, its partners, employees and control persons and hold them harmless from
any and all claims, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and court costs) which they may incur by reason of
the performance of the Manager's duties on behalf of IPWT hereunder, except
where such claims, damages, liabilities, costs and expenses are due to the gross
negligence, fraud or willful misconduct of the Manager and/or such persons.
Notwithstanding the foregoing, the Manager shall not be entitled to
indemnification hereunder with respect to any action or omission by the Manager
to the extent that the Manager would not be entitled to
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<PAGE> 5
indemnification with respect to such action or omission under the IPWT
Agreement, had such action or omission been taken by the Manager.
B. Indemnification by Manager. The Manager shall indemnify, defend and
hold IPWT harmless from any and all claims, damages, liabilities, costs and
expenses (including reasonable attorneys' fees and court costs) suffered by IPWT
as a result of the Manager's performance of its duties on behalf of IPWT
hereunder only where such claims, damages, liabilities, costs and expenses are
due to the gross negligence, fraud or willful misconduct of the Manager, its
partners, employees or control persons, provided, however, the Manager shall not
be responsible for the acts or omissions of employees hired and supervised with
due care.
VIII. Termination.
A. Termination at Option of IPWT. This Agreement shall be terminable at
the option of IPWT in the event: (i) the Manager is convicted of a felony which
becomes final following expiration of the applicable appeal period; (ii) the
Manager shall file a voluntary petition in bankruptcy or shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state, or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors; or shall seek to consent to or acquiesce in the
appointment of any trustee, receiver or liquidator or shall make any general
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due; (iii) a court of competent
jurisdiction shall enter an order, judgment or decree approving a petition filed
against the Manager seeking any reorganization, dissolution or similar relief
under any present or future federal, state or other statute, law or regulation
relating to bankruptcy, insolvency or other relief for debtors, and such order,
judgment or decree shall remain unvacated and unstayed for an aggregate of sixty
(60) days (whether or not consecutive) from the first date of entry thereof; or
any trustee, receiver or liquidator of the Manager shall be appointed without
the consent or acquiescence of the Manager and such appointment shall remain
unvacated and unstayed for an aggregate of sixty (60) days (whether or not
consecutive); (iv) a final judgment shall be rendered against the Manager in
which it is determined that the Manager has engaged in fraudulent conduct (a)
materially and adversely affecting the Manager's ability to discharge its
obligations under this Agreement or (b) against IPWT; (v) the Manager shall have
engaged in an act of gross negligence, fraud or willful misconduct, or in a
pattern of conduct wherein it shall have failed to perform
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<PAGE> 6
its duties hereunder; (vi) the dissolution of the Manager; or (vii) the
occurrence of any event permitting the Manager to be removed as general partner
of IPWT under the Amended and Restated Limited Partnership Agreement of IPWT,
dated as of October 3, 1994. This Agreement shall also be terminable at the
option of IPWT upon not less than ninety (90) days' prior written notice to the
Manager if: 1. IPWT sells or enters into a contract to sell substantially all of
the assets of the Systems; or 2. any third party service contracts to be entered
into by the Manager on behalf of IPWT, which were taken into consideration by
the parties hereto in determining to enter into this Agreement, are not entered
into or are materially changed or the operating economics of IPWT are otherwise
materially adversely affected. The giving or receipt of notice to terminate
shall not relieve the Manager of its obligations during the period prior to the
time such termination takes effect.
B. Return of Information. Upon termination of this Management
Agreement, all books and records in the possession of the Manager relating to
the maintenance and operation of and accounting for the Systems together with
all supplies and other items of property owned by IPWT and in the Manager's
possession shall be delivered to IPWT, and the Manager's right to compensation
shall cease; provided, however, that the Manager shall be entitled to be fully
compensated for services rendered prior to the date of termination and shall be
entitled to retain copies of any records necessary to the Manager; and provided
further, that the provisions of Section 9 hereof shall remain in full force and
effect and shall survive such termination.
IX. Confidentiality. The terms of this Management Agreement and all
information furnished or made available by the Manager or IPWT to the other in
connection with this Management Agreement, whether before or after the date
hereof, are confidential and such terms or information or any part thereof may
not be disclosed to any person or entity other than officers, directors and
employees of the parties hereto, and their accountants, attorneys and investment
bankers and other persons or entities to the extent that such disclosure is
necessary for a party to perform its obligations under this Management
Agreement. The obligations with respect to the disclosure of confidential
information set forth in this Section 9, are not applicable to confidential
information which, according to tangible evidence, (i) becomes available from a
source, other than a party to this Management Agreement, who has no obligation
of confidentiality with respect to the confidential information and who did not
obtain such information pursuant to a breach of this Section 9; (ii) is
developed independently or is within the knowledge of the party to whom it is
delivered prior to receipt thereof; (iii) is within, or later falls within, the
public domain without breach of this Management
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<PAGE> 7
Agreement by the party hereto receiving such information; or (iv) is required to
be disclosed in connection with any legal proceeding pending before a court or
other governmental entity of competent jurisdiction, provided that the party
required to make such disclosure shall give immediate notice that it is
compelled to make such disclosure so that the other party may, if it so desires,
seek a protective order with respect to the confidentiality of the information
covered thereby. Each party to this Management Agreement agrees to use its
reasonable efforts to protect the confidential information and prevent its
disclosure, publication, or dissemination to third parties. No party shall be
liable for the inadvertent or accidental disclosure by it of confidential
information if such disclosure occurs despite the exercise of its reasonable
efforts to protect the confidentiality of such information.
X. Miscellaneous.
A. Notices. Except as otherwise provided in this Management Agreement,
any notice, approval, consent, waiver or other communication required or
permitted to be given or to be served upon any person in connection with this
Management Agreement shall be in writing and shall be hand delivered (including
by messenger or recognized commercial delivery or courier service), sent
facsimile transmission or sent by registered or certified mail, postage prepaid,
with return receipt requested addressed to the party intended at the address set
forth below or at such other address as such party may designate by notice given
to the other parties in the manner aforesaid and shall be deemed given and
received on the date it is delivered, in the case of delivery by hand or by
facsimile, or, in the case of delivery by mail, actual delivery as shown by the
addressee's return receipt. Rejection or other refusal to accept or inability to
deliver because of a change of address of which no notice was given shall be
deemed to be receipt of the notice.
To IPWT:
InterMedia Partners of West Tennessee, L.P.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Telecopy: (415) 397-3978
Attention: Mr. Leo J. Hindery, Jr.
With a copy to:
Pillsbury Madison & Sutro LLP
Post Office Box 7880
San Francisco, CA 94120-7880
Attention: Gregg Vignos, Esq.
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To the Manager:
InterMedia Capital Management IV, L.P.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Telecopy: (415) 397-3978
Attention: Mr. Leo J. Hindery, Jr.
B. Successors and Assigns. This Management Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns subject to all restrictions on the transfer of the
interests set forth in this Management Agreement.
C. Governing Law. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO
CONFLICTS OR CHOICE OF LAW PRINCIPLES.
D. Independent Contractor. The Manager and IPWT are not partners or
joint venturers with each other and nothing herein shall be construed so as to
make them such partners or joint ventures or impose any liability as such on
either of them.
E. Assignment. No party hereto shall have the right to assign this
Management Agreement without the written consent of the other party, nor shall
this Management Agreement or any of the rights or obligations of the parties
hereunder be transferable by operation of law or otherwise, except that either
party's interest may be assigned to: (i) a wholly owned subsidiary of such
party; (ii) a corporation or partnership which owns 100% of the capital interest
(either stock or partnership interest, as the case may be) in such party
immediately prior to such assignment; or (iii) a wholly owned subsidiary of the
corporation or partnership referred to in clause (ii) above; provided, however,
that any assignment to any entity described in clause (i), (ii) or (iii)
immediately above may be made only in the event that the management of such
assignee shall be essentially the same as the management of the assigning party
immediately prior to such assignment.
F. Amendment. This Management Agreement may not be modified, altered or
amended in any manner except by agreement in writing duly executed by the
parties hereto.
G. Attorneys' Fees. If any action, suit or proceeding is brought by any
of the parties hereto arising out of or relating to the Management Agreement or
its breach, the successful or prevailing party in any such actions, suit or
proceeding shall be entitled to the full amount of its reasonable expenses,
including all court costs and attorneys
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<PAGE> 9
fees paid or incurred in connection therewith, in addition to such other relief
as such party shall be entitled.
H. Counterparts. This Management Agreement may be signed in any number
of counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Management Agreement
as of the day and year first above written.
IPWT:
INTERMEDIA PARTNERS OF WEST TENNESSEE,
L.P., a California limited
partnership
By InterMedia Partners IV,
L.P., a California limited
partnership, its general
partner
By InterMedia Capital
Management IV, L.P., a
California limited partnership,
its general partner
By /s/ Leo J. Hindery, Jr.
_________________________________
Leo J. Hindery, Jr.
Managing General Partner
THE MANAGER:
INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a
California limited partnership
By /s/ Leo J. Hindery, Jr.
__________________________________________
Leo J. Hindery, Jr.
Managing General Partner
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EXHIBIT 10.11
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into
as of the 30th day of July, 1996, by and between ROBIN MEDIA GROUP, INC., a
Nevada corporation ("RMG"), and INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a
California limited partnership (the "Manager").
W I T N E S S E T H:
WHEREAS, the Manager is the managing general partner of InterMedia
Partners IV, L.P., a California limited partnership ("IP-IV"), the owner of
ninety percent (90%) of the common stock of RMG; and
WHEREAS, RMG is the owner and operator of certain cable television
systems servicing areas located in Tennessee (such systems, together with any
other cable television systems acquired by RMG in the future, the "Systems");
and
WHEREAS, the Manager has experience in the operation and
management of cable television systems such as the Systems; and
WHEREAS, RMG and the Manager have agreed to enter into this Agreement,
pursuant to which the Manager, from and after the date hereof, shall manage the
Systems:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and the mutual benefits to be derived
therefrom, RMG and the Manager hereby agree as follows:
I. Appointment of Manager. RMG hereby designates the Manager and the
Manager hereby accepts the designation as exclusive manager of the Systems on
behalf of RMG, upon the conditions and for the term and compensation set forth
herein.
II. Term. The appointment of the Manager shall become effective as of
the date hereof, and shall continue for the duration of RMG's existence, subject
to Section 8 below.
III. Duties of Manager. Subject to the limitations on the authority of
the Manager set forth in Section 4 and subject to the right of RMG, after
consultation with the Manager, to perform certain functions itself and to direct
the Manager to take or omit to take actions specified by RMG and/or to otherwise
supervise the conduct of the business by the Manager, and in each case where the
same would not violate any existing franchise, license, contract, law or
regulation applicable to the Systems, the Manager shall have the following
authority:
1
<PAGE> 2
A. Supervision and Consulting. The Manager shall supervise and conduct
the day-to-day operations of the Systems in the ordinary course of business.
B. Programming. Subject to the provisions of all applicable franchises
or ordinances or other binding contracts or legislation, the Manager shall
select, provide and price, at the lowest cost available to RMG, all programming
and services to be provided to the customers of the Systems; provided, however,
all costs and expenses incurred for programming and services will be borne by
RMG. Authority is hereby confirmed on the Manager to enter into programming
contracts on behalf of RMG or the Systems with such parties as the Manager deems
appropriate. To its knowledge the Manager believes that the services of
Satellite Services, Inc. ("SSI") will be available to the Systems. The Manager
shall use its best efforts to make the services of SSI available to the Systems
and shall use all reasonable efforts to retain access to SSI on behalf of the
Systems.
C. Maintenance and Construction of Systems. The Manager shall maintain
the Systems in good working order and repair and shall cause to be made such
capital improvements as (i) are necessary or appropriate to maintain the Systems
in compliance with the franchises for the Systems or (ii) are consistent with
the past practices of the Systems.
D. Employees. The Manager shall select, determine the compensation of,
supervise, instruct, discharge and otherwise manage all servants, employees,
agents, attorneys, accountants, engineers, consultants or contractors considered
by the Manager to be necessary for the efficient operation of the Systems
subject to the approval of RMG. All such servants, employees, agents, attorneys,
engineers, consultants or contractors shall remain and be in the employ of and
be compensated by RMG.
E. Negotiations of Contracts. The Manager shall assist RMG in the
negotiation of all contracts and the performance of all tasks necessary for the
financing, operation, construction, installation, maintenance, budgeting,
servicing, repair, protection, improvement, expansion, upkeep and other
management of the Systems, which contracts may be executed by the Manager on
behalf of RMG as owner of the Systems, provided RMG would have the authority to
execute such contracts under the terms of RMG's [Articles of Incorporation and
Bylaws] (collectively, the "RMG Articles").
F. Filings. The Manager shall assist RMG in the timely filing of all
federal, state and local reports with respect to the Systems as may be required
by franchise ordinances, Federal Communications Commission regulations or
copyright regulations.
G. Records. The Manager shall keep or cause to be kept all necessary
and appropriate books and records of all affairs
2
<PAGE> 3
relating to the Systems. Originals or copies of such books and records shall be
maintained at the principal office of the Manager and shall be open to
inspection and examination by RMG or its representatives at any reasonable time
during the term of this Agreement.
H. Accounting. The Manager shall establish and/or maintain all
accounting, bookkeeping, billing, collections and other financial systems and
records relating to the Systems and the preparation of appropriate monthly
financial reports to be furnished to RMG.
I. Representation. To the extent appropriate, the Manager shall
represent RMG and the Systems before all governmental authorities with respect
to any matter necessary or desirable to the efficient management thereof.
J. Other Responsibilities. The Manager shall perform all other
management services necessary or desirable for the management, operation and
maintenance of the Systems as the Manager, in its reasonable discretion deems
appropriate or necessary in order to manage and operate the Systems. The
enumeration of services to be performed by the Manager herein shall not be
deemed to be exclusive, nor shall such enumeration prevent the Manager from
delegating its authority hereunder to RMG.
K. Cooperation. RMG shall cooperate with the Manager in the performance
of the Manager's duties hereunder and shall execute such documents, instruments
and certificates as may be necessary to evidence the Manager's authority
hereunder, to permit it to collect all revenue of the Systems, or to permit the
Manager to finalize necessary reports, filings, contracts or other matters.
IV. Authority of Manager. Notwithstanding any provision of this
Agreement to the contrary, the Manager shall not take any action under this
Agreement without the consent of the officers of RMG if the Manager is
prohibited from taking such action without the consent of the officers of RMG
under the terms of RMG's Articles. The Manager shall be authorized to perform
all services necessary for the management of the Systems, subject to the
preceding sentence and except that the Manager shall not have the authority to
sell or trade any assets of the Systems. To the extent RMG has entered into an
agreement with InterMedia Management, Inc., a California corporation ("IMI"), to
provide administrative services to the Systems, the Manager shall not be
responsible for providing such services and shall coordinate with IMI with
regard to the administration of the Systems.
V. Compensation of Manager. As compensation for its services hereunder,
the Manager shall be entitled to receive an annual fee of thirty-six thousand
nine hundred eighty four
3
<PAGE> 4
dollars ($36,984) payable in quarterly installments in advance on the first
business day of each quarter. Any portion of the such fee which shall be past
due shall bear interest from the date due until paid at the lower of a rate of
ten percent (10%) per annum or the highest amount permitted by law.
VI. Bank Account.
A. Consolidation Accounts. The Manager shall create and maintain bank
accounts (hereinafter referred to as the "Consolidation Accounts") in which the
funds generated by the Systems shall be deposited. All funds in said accounts
from time to time shall be the property of the Systems, but said funds shall be
disbursed from said account by the Manager on the Systems' behalf in accordance
with the provisions of this Agreement. Only such person or persons as are
designated by the Manager or RMG shall have authority to draw checks or drafts
upon or make withdrawals from said accounts.
B. Payments. The Manager shall make or cause to be made all payments of
costs, expenses and charges payable with respect to the operations of the
Systems.
VII. Indemnification.
A. Indemnification by RMG. RMG shall indemnify and defend the Manager,
its partners, employees and control persons and hold them harmless from any and
all claims, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and court costs) which they may incur by reason of the
performance of the Manager's duties on behalf of RMG hereunder, except where
such claims, damages, liabilities, costs and expenses are due to the gross
negligence, fraud or willful misconduct of the Manager and/or such persons.
Notwithstanding the foregoing, the Manager shall not be entitled to
indemnification hereunder with respect to any action or omission by the Manager
to the extent that the Manager would not be entitled to indemnification with
respect to such action or omission under the RMG Articles, had such action or
omission been taken by the Manager.
B. Indemnification by Manager. The Manager shall indemnify, defend and
hold RMG harmless from any and all claims, damages, liabilities, costs and
expenses (including reasonable attorneys' fees and court costs) suffered by RMG
as a result of the Manager's performance of its duties on behalf of RMG
hereunder only where such claims, damages, liabilities, costs and expenses are
due to the gross negligence, fraud or willful misconduct of the Manager, its
partners, employees or control persons, provided, however, the Manager shall not
be responsible for the acts or omissions of employees hired and supervised with
due care.
4
<PAGE> 5
VIII. Termination.
A. Termination at Option of RMG. This Agreement shall be terminable at
the option of RMG in the event: (i) the Manager is convicted of a felony which
becomes final following expiration of the applicable appeal period; (ii) the
Manager shall file a voluntary petition in bankruptcy or shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state, or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors; or shall seek to consent to or acquiesce in the
appointment of any trustee, receiver or liquidator or shall make any general
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due; (iii) a court of competent
jurisdiction shall enter an order, judgment or decree approving a petition filed
against the Manager seeking any reorganization, dissolution or similar relief
under any present or future federal, state or other statute, law or regulation
relating to bankruptcy, insolvency or other relief for debtors, and such order,
judgment or decree shall remain unvacated and unstayed for an aggregate of sixty
(60) days (whether or not consecutive) from the first date of entry thereof; or
any trustee, receiver or liquidator of the Manager shall be appointed without
the consent or acquiescence of the Manager and such appointment shall remain
unvacated and unstayed for an aggregate of sixty (60) days (whether or not
consecutive); (iv) a final judgment shall be rendered against the Manager in
which it is determined that the Manager has engaged in fraudulent conduct (a)
materially and adversely affecting the Manager's ability to discharge its
obligations under this Agreement or (b) against RMG; (v) the Manager shall have
engaged in an act of gross negligence, fraud or willful misconduct, or in a
pattern of conduct wherein it shall have failed to perform its duties hereunder;
or (vi) the dissolution of the Manager. This Agreement shall also be terminable
at the option of RMG upon not less than ninety (90) days' prior written notice
to the Manager if: 1. RMG sells or enters into a contract to sell substantially
all of the assets of the Systems; or 2. any third party service contracts to be
entered into by the Manager on behalf of RMG, which were taken into
consideration by the parties hereto in determining to enter into this Agreement,
are not entered into or are materially changed or the operating economics of RMG
are otherwise materially adversely affected. The giving or receipt of notice to
terminate shall not relieve the Manager of its obligations during the period
prior to the time such termination takes effect.
B. Return of Information. Upon termination of this Agreement, all books
and records in the possession of the Manager relating to the maintenance and
operation of and accounting for the Systems together with all supplies and other
5
<PAGE> 6
items of property owned by RMG and in the Manager's possession shall be
delivered to RMG, and the Manager's right to compensation shall cease; provided,
however, that the Manager shall be entitled to be fully compensated for services
rendered prior to the date of termination and shall be entitled to retain copies
of any records necessary to the Manager; and provided further, that the
provisions of Section 9 hereof shall remain in full force and effect and shall
survive such termination.
IX. Confidentiality. The terms of this Agreement and all information
furnished or made available by the Manager or RMG to the other in connection
with this Agreement, whether before or after the date hereof, are confidential
and such terms or information or any part thereof may not be disclosed to any
person or entity other than officers, directors and employees of the parties
hereto, and their accountants, attorneys and investment bankers and other
persons or entities to the extent that such disclosure is necessary for a party
to perform its obligations under this Agreement. The obligations with respect to
the disclosure of confidential information set forth in this Section 9, are not
applicable to confidential information which, according to tangible evidence,
(i) becomes available from a source, other than a party to this Agreement, who
has no obligation of confidentiality with respect to the confidential
information and who did not obtain such information pursuant to a breach of this
Section 9; (ii) is developed independently or is within the knowledge of the
party to whom it is delivered prior to receipt thereof; (iii) is within, or
later falls within, the public domain without breach of this Agreement by the
party hereto receiving such information; or (iv) is required to be disclosed in
connection with any legal proceeding pending before a court or other
governmental entity of competent jurisdiction, provided that the party required
to make such disclosure shall give immediate notice that it is compelled to make
such disclosure so that the other party may, if it so desires, seek a protective
order with respect to the confidentiality of the information covered thereby.
Each party to this Agreement agrees to use its reasonable efforts to protect the
confidential information and prevent its disclosure, publication, or
dissemination to third parties. No party shall be liable for the inadvertent or
accidental disclosure by it of confidential information if such disclosure
occurs despite the exercise of its reasonable efforts to protect the
confidentiality of such information.
X. Miscellaneous.
A. Notices. Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing and shall be hand delivered (including by messenger or recognized
commercial delivery or courier service), sent facsimile transmission or sent by
registered or certified mail,
6
<PAGE> 7
postage prepaid, with return receipt requested addressed to the party intended
at the address set forth below or at such other address as such party may
designate by notice given to the other parties in the manner aforesaid and shall
be deemed given and received on the date it is delivered, in the case of
delivery by hand or by facsimile, or, in the case of delivery by mail, actual
delivery as shown by the addressee's return receipt. Rejection or other refusal
to accept or inability to deliver because of a change of address of which no
notice was given shall be deemed to be receipt of the notice.
To RMG:
Robin Media Group, Inc.
c/o InterMedia Partners
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Telecopy: (415) 397-3978
Attention: Mr. Leo J. Hindery, Jr.
With a copy to:
Pillsbury Madison & Sutro LLP
Post Office Box 7880
San Francisco, CA 94120-7880
Attention: Gregg Vignos, Esq.
To the Manager:
InterMedia Capital Management IV, L.P.
235 Montgomery Street
Suite 420
San Francisco, CA 94104
Telecopy: (415) 397-3978
Attention: Mr. Leo J. Hindery, Jr.
With a copy to:
Pillsbury Madison & Sutro LLP
Post Office Box 7880
San Francisco, CA 94120-7880
Attention: Gregg Vignos, Esq.
B. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns subject to all restrictions on the transfer of the interests set forth
in this Agreement.
C. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OR
CHOICE OF LAW PRINCIPLES.
7
<PAGE> 8
D. Independent Contractor. The Manager and RMG are not partners or
joint venturers with each other and nothing herein shall be construed so as to
make them such partners or joint ventures or impose any liability as such on
either of them.
E. Assignment. No party hereto shall have the right to assign this
Agreement without the written consent of the other party, nor shall this
Agreement or any of the rights or obligations of the parties hereunder be
transferable by operation of law or otherwise, except that either party's
interest may be assigned to: (i) a wholly owned subsidiary of such party; (ii) a
corporation or partnership which owns 100% of the capital interest (either stock
or partnership interest, as the case may be) in such party immediately prior to
such assignment; or (iii) a wholly owned subsidiary of the corporation or
partnership referred to in clause (ii) above; provided, however, that any
assignment to any entity described in clause (i), (ii) or (iii) immediately
above may be made only in the event that the management of such assignee shall
be essentially the same as the management of the assigning party immediately
prior to such assignment.
F. Amendment. This Agreement may not be modified, altered or amended in
any manner except by agreement in writing duly executed by the parties hereto.
G. Attorneys' Fees. If any action, suit or proceeding is brought by any
of the parties hereto arising out of or relating to the Agreement or its breach,
the successful or prevailing party in any such actions, suit or proceeding shall
be entitled to the full amount of its reasonable expenses, including all court
costs and attorneys fees paid or incurred in connection therewith, in addition
to such other relief as such party shall be entitled.
H. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RMG:
ROBIN MEDIA GROUP, INC., a Nevada
corporation
By /s/ Leo J. Hindery, Jr.
------------------------------
Leo J. Hindery, Jr.
President
THE MANAGER:
INTERMEDIA CAPITAL MANAGEMENT IV, L.P.,
a California limited partnership
By /s/ Leo J. Hindery, Jr.
-------------------------------
Leo J. Hindery, Jr.
Managing General Partner
9
<PAGE> 1
INTERMEDIA CAPITAL PARTNERS IV, L.P.
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 11.1
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
Year Six Months
Ended Ended
December 31, June 30,
1995 1996
------------ ----------
<S> <C> <C>
Pre-tax loss from continuing operations (125,598) (55,984)
-------- -------
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 77,209 38,605
Rentals:
Rent expense(1) 1,436 571
-------- -------
Total fixed charges 78,645 39,176
-------- -------
Loss before income taxes, interest
and fixed charges (46,953) (16,808)
======== =======
Ratio of earnings to fixed charges - -
======== =======
</TABLE>
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 2
INTERMEDIA CAPITAL PARTNERS IV, L.P.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six months
ended
June 30,
1996
----------
<S> <C>
Pre-tax loss from continuing operations (4,436)
------
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 4,002
Rentals:
Rent expense(1) 50
------
Total fixed charges 4,052
------
Loss before income taxes, interest
and fixed charges (384)
======
Ratio of earnings to fixed charges --
======
</TABLE>
- ----------
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 3
PREVIOUSLY AFFILIATED ENTITIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION> Six Months
Year ended December 31, Ended June 30,
____________________________________________________ _______________
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax loss from continuing operations (21,081) (70,280) (77,648) (79,047) (62,412) (31,418) (39,231)
------- ------- ------- ------- ------- ------- -------
Fix charges:
Interest expenses and amortization of
debt discount and premium on all
indebtedness 8,640 32,357 44,760 44,278 48,835 24,161 36,970
Rentals:
Rent expense(1) 137 404 585 666 952 485 510
------- ------- ------- ------- ------- ------- -------
Total fixed charges 8,777 32,761 45,345 44,944 49,787 24,646 37,480
------- ------- ------- ------- ------- ------- -------
Loss before income taxes, interest
and fixed charges (12,304) (37,519) (32,303) (34,103) (12,625) (6,772) (1,751)
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges -- -- -- -- -- -- --
======= ======= ======= ======= ======= ======= =======
</TABLE>
- -----------------------------------
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 4
GREENVILLE/SPARTANBURG SYSTEM
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31, Period
---------------------------- 1/1/95-
1991 1992 1993 1994 1/26/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Pre-tax income from
continuing operations 4,748 6,607 7,979 5,621 234
----- ----- ------ ----- ---
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 2,980 2,068 1,932 2,150 161
Rentals:
Rent expense(1) 157 159 167 183 15
----- ----- ------ ----- ---
Total fixed charges 3,137 2,227 2,099 2,333 176
----- ----- ------ ----- ---
Earnings before income taxes, interest
and fixed charges 7,885 8,834 10,078 7,954 410
===== ===== ====== ===== ===
Ratio of earnings to fixed charges 2.5 4.0 4.8 3.4 2.3
===== ===== ====== ===== ===
</TABLE>
- --------
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 5
KINGSPORT SYSTEM
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Month
Year Ended December 31, Ended Ended
-------------------------------------------- June 30, January 31,
1992 1993 1994 1995 1995 1996
---- ---- ---- ---- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income continuing operations 4,605 4,126 4,230 3,268 2,291 193
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 0 0 0 856 0 90
Rentals:
Rent expense(1) 58 73 85 83 36 8
----- ----- ----- ----- ---- ---
Total fixed charges 58 73 85 939 36 98
----- ----- ----- ----- ---- ---
Earnings before income taxes, interest
and fixed charges 4,663 4,199 4,315 4,207 2,327 291
===== ===== ===== ===== ===== ===
Ratio of earnings to fixed charges 80.4 57.5 50.8 4.5 64.6 3.0
===== ===== ===== ===== ===== ===
</TABLE>
- ----------
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 6
PAR CABLE SYSTEM
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Month
Year Ended December 31, Ended Ended
------------------------------------ June 30, January 31,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income from continuing operations 921 1,154 336 826 903 595 63
---- ----- ---- ---- ---- ---- ----
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 0 0 0 18 0 0 0
Rentals:
Rent expense(1) 32 41 35 34 36 18 3
---- ----- ---- ---- ---- ---- ----
Total fixed charges 32 41 35 52 36 18 3
---- ----- ---- ---- ---- ---- ----
Earnings before income taxes, interest
and fixed charges 953 1,195 371 878 939 613 66
==== ===== ==== ==== ==== ==== ====
Ratio of earnings to fixed charges 29.8 29.1 10.6 16.9 26.1 34.1 22.0
==== ===== ==== ==== ==== ==== ====
</TABLE>
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 7
VIACOM NASHVILLE SYSTEM
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax loss from continuing operations 2,607 7,060 9,743 8,013 8,452 4,142 3,859
------ ------ ------ ------ ------ ----- -----
Fix charges:
Gross Interest Expense 7,165 4,972 3,662 4,391 5,544 2,790 2,736
Rentals:
Rent expense(1) 321 277 327 307 350 127 165
------ ------ ------ ------ ------ ----- -----
Total fixed charges 7,486 5,249 3,989 4,698 5,894 2,917 2,901
------ ------ ------ ------ ------ ----- -----
Earnings before income taxes, interest
and fixed charges 10,093 12,309 13,732 12,711 14,346 7,059 6,760
====== ====== ====== ====== ====== ===== =====
Ratio of earnings to fixed charges 1.3 2.3 3.4 2.7 2.4 2.4 2.3
====== ====== ====== ====== ====== ===== =====
</TABLE>
- -----------------------------------
(1) For leases where the interest factor can be specifically identified, the
actual interest factor was used. For all other leases, the interest factor
is estimated at one-third of total rent expense for the applicable period,
which management believes represents a reasonable approximation of the
interest factor.
<PAGE> 1
EXHIBIT 21.1
INTERMEDIA CAPITAL PARTNERS IV, L.P.
SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF INCORPORATION DBA AND ITS
ENTITY OR REGISTRATION STATE OF OPERATION
<S> <C> <C>
InterMedia Partners IV, Capital Corp.* DE
InterMedia Partners IV, L.P. CA
InterMedia Partners Southeast N/A because entity is a
General Partnership
InterMedia Partners of Tennessee N/A because entity is a
General Partnership
InterMedia Partners of West Tennessee, L.P. CA Volunteer Cable Vision, L.P.: TN
Robin Media Group NV
</TABLE>
- --------
* InterMedia Partners IV, Capital Corp. does not have any subsidiaries.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of InterMedia Capital Partners IV, L.P. and
InterMedia Partners IV, Capital Corp. of our reports dated June 28, 1996
relating to the consolidated balance sheet of InterMedia Capital Partners IV,
L.P., the balance sheet of InterMedia Capital Management IV, L.P., the combined
financial statements of the Previously Affiliated Entities, and the
consolidated financial statements of Robin Media Holdings, Inc.; of our report
dated April 5, 1996 relating to the financial statements of InterMedia Partners
of West Tennessee, L.P. and of our report dated March 8, 1996 relating to the
combined financial statements of TeleCable - South Carolina Group which appear
in such Prospectus. We also consent to the references to us under the heading
"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------------
PRICE WATERHOUSE LLP
San Francisco, California
September 11, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of InterMedia Capital Partners IV, L.P. and
InterMedia Partners IV, Capital Corp. of our report dated April 5, 1996,
relating to the financial statements of VSC Cable Inc. (a wholly owned
subsidiary of Viacom International Inc.) which appears in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------------
PRICE WATERHOUSE LLP
San Jose, California
September 9, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 11, 1996 in the Registration Statement (Form S-4)
and related Prospectus of InterMedia Capital Partners IV, L.P. and InterMedia
Partners IV, Capital Corp. for the registration of $292,000,000 11 1/4% Senior
Notes due 2006.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Denver, Colorado
September 10, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
TCI of Greenville, Inc.,
TCI of Spartanburg, Inc., and
TCI of Piedmont, Inc.:
We consent to the inclusion in the registration statement on Form S-4 of
InterMedia Capital Partners IV, L.P. and InterMedia Partners IV, Capital Corp.
of our report, dated March 1, 1996, relating to the combined balance sheet of
TCI of Greenville, Inc., TCI of Spartanburg, Inc., and TCI of Piedmont, Inc.
(indirect wholly-owned subsidiaries of TCI Communications, Inc.) as of December
31, 1995, and the related combined statements of operations and accumulated
deficit and cash flows for the period from January 27, 1995 to December 31,
1995, and to the reference to our firm under the heading "Experts" in the
registration statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
September 9, 1996
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
____________________________________________________________________________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
</TABLE>
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
________________________________________________________________________________
INTERMEDIA PARTNERS IV, CAPITAL CORP.
(Exact name of obligor as specified in its charter)
Delaware 94-3247948
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
235 Montgomery Street, Suite 420
San Francisco, California 94563
(Address of principal executive offices) (Zip code)
________________________________________________________________________________
INTERMEDIA CAPITAL PARTNERS IV, L.P.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
California 94-3247750
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
</TABLE>
235 Montgomery Street, Suite 420
San Francisco, California 94563
(Address of principal executive offices) (Zip code)
11 1/4% Senior Notes Due 2006
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
<TABLE>
<CAPTION>
Name Address
- -------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE
24 OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 2 -
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 23rd day of August, 1996.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
- 3 -
<PAGE> 4
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1996, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
in Thousands
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................. $ 2,461,550
Interest-bearing balances .......... 835,563
Securities:
Held-to-maturity securities ........ 802,064
Available-for-sale securities ...... 2,051,263
Federal funds sold in domestic offices
of the bank:
Federal funds sold ................... 3,885,475
Loans and lease financing receivables:
Loans and leases, net of unearned
income ........................... 27,820,159
LESS: Allowance for loan and lease
losses ..................... 509,817
LESS: Allocated transfer risk
reserve..................... 1,000
Loans and leases, net of unearned
income, allowance, and reserve 27,309,342
Assets held in trading accounts ...... 837,118
Premises and fixed assets (including
capitalized leases) ................ 614,567
Other real estate owned .............. 51,631
Investments in unconsolidated
subsidiaries and associated
companies .......................... 225,158
Customers' liability to this bank on
acceptances outstanding ............ 800,375
Intangible assets .................... 436,668
Other assets ......................... 1,247,908
-----------
Total assets ......................... $41,558,682
===========
LIABILITIES
Deposits:
In domestic offices ................ $18,851,327
Noninterest-bearing ................ 7,102,645
Interest-bearing ................... 11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 10,965,604
Noninterest-bearing ................ 37,855
Interest-bearing ................... 10,927,749
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank and
of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ............ 1,224,886
Securities sold under agreements
to repurchase .................... 29,728
Demand notes issued to the U.S.
Treasury ........................... 118,870
Trading liabilities .................. 673,944
Other borrowed money:
With original maturity of one year
or less .......................... 2,713,248
With original maturity of more than
one year ......................... 20,780
Bank's liability on acceptances
executed and outstanding ........... 803,292
Subordinated notes and debentures .... 1,022,860
Other liabilities .................... 1,590,564
-----------
Total liabilities .................... 38,015,103
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 2,078,197
Net unrealized holding gains (losses)
on available-for-sale securities... 3,197
Cumulative foreign currency transla-
tion adjustments .................. (5,765)
-----------
Total equity capital ................ 3,543,579
-----------
Total liabilities and equity
capital ........................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank, do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief. Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> INTERMEDIA CAPITAL PARTNERS IV, L.P.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 0 739
<SECURITIES> 0 0
<RECEIVABLES> 0 1,911
<ALLOWANCES> 0 (177)
<INVENTORY> 0 153
<CURRENT-ASSETS> 0 2,697
<PP&E> 0 14,559<F1>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 707 115,484
<CURRENT-LIABILITIES> 1,332 120,642
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (625) (5,158)
<TOTAL-LIABILITY-AND-EQUITY> 707 115,484
<SALES> 0 7,934
<TOTAL-REVENUES> 0 7,934
<CGS> 0 2,483<F2>
<TOTAL-COSTS> 0 8,819
<OTHER-EXPENSES> 0 (451)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 4,002
<INCOME-PRETAX> 0 (4,436)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 (4,436)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>PP&E IS SHOWN NET OF ACCUMULATED DEPRECIATION.
<F2> Includes program fees and other direct expenses
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> Previously Affiliated Entities
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 4,883 5,115
<SECURITIES> 0 0
<RECEIVABLES> 9,183 9,115
<ALLOWANCES> (853) (674)
<INVENTORY> 2,940 4,541
<CURRENT-ASSETS> 17,070 19,467
<PP&E> 102,668 108,120<F1>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 590,494 581,391
<CURRENT-LIABILITIES> 30,908 16,773
<BONDS> 407,176 424,343<F2>
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 37,249 23,271
<TOTAL-LIABILITY-AND-EQUITY> 590,494 581,391
<SALES> 128,971 69,325
<TOTAL-REVENUES> 128,971 69,325
<CGS> 41,535 23,025<F3>
<TOTAL-COSTS> 143,013 71,628
<OTHER-EXPENSES> (465) (42)<F4>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 48,835 36,970
<INCOME-PRETAX> (62,412) (39,231)
<INCOME-TAX> 17,502 12,320
<INCOME-CONTINUING> (44,910) (26,911)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (44,910) (26,911)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>PP&E IS SHOWN NET OF ACCUMULATED DEPRECIATION.
<F2> Includes long term debt and note payable to affilate.
<F3> Includes program fees and other direct expenses.
<F4> Includes Interest and other income, loss on disposal of fixed assets and
other expense.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
INTERMEDIA CAPITAL PARTNERS IV, L.P.
INTERMEDIA PARTNERS IV, CAPITAL CORP.
11 1/4% Senior Notes Due 2006
in Exchange for
11 1/4% Senior Subordinated Notes Due 2006,
Which Have Been Registered Under
the Securities Act of 1933, as Amended,
Pursuant to the Exchange Offer, dated , 1996
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
================================================================================
The Bank of New York, Exchange Agent
By Mail:
Reorganization Section
The Bank of New York
101 Barclay Street - 7E
New York, New York 10286
Attention: Enrique Lopez
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street-Lobby Level
Corporate Trust Services Window
New York, New York 10286
Attention: Enrique Lopez
By Facsimile:
(212) 571-3080
Attention: Enrique Lopez
Confirm by Telephone:
(212) 815-7242
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated , 1996 (the "Prospectus"), of InterMedia Capital
Partners IV, L.P., a California limited partnership ("ICP-IV") and InterMedia
Partners IV, Capital Corp., a Delaware corporation ("IPCC," and together with
ICP-IV, the "Issuers"), and this Letter of Transmittal (the "Letter"), which
together constitute the Issuer's offer (the "Exchange Offer") to exchange an
aggregate principal amount of up to $292,000,000 of the Issuers' 11 1/4%
Senior Notes Due 2006, which have been registered under the Securities Act of
1933, as amended (the "New Notes"), for a like principal amount of the issued
and outstanding 11 1/4% Senior Notes Due 2006 (the "Old Notes") of the Issuers
from the registered holders (the "Holders") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from July 30, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
whose Old Notes are accepted for exchange will not receive any payment in
respect of accrued interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
-2-
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers, the aggregate principal amount of Old
Notes indicated below. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of the Issuers all right, title and interest
in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Issuers will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Issuers. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the Holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the Holder of such Old Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Issuers.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any such Holder which is an "affiliate" of the
Issuers within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business and such Holders have no arrangement with any person
to participate in a distribution of such Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of Notes and has no arrangement
or understanding to participate in a distribution of New Notes. If any Holder is
an affiliate of the Issuers, is engaged in or intends to engage in, or has any
arrangement or understanding with any person to participate in, a distribution
of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i)
could not rely on the applicable interpretations of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. If the undersigned
is a broker-dealer that will receive New Notes for its own account pursuant to
the Exchange Offer, it represents that the Old Notes to be exchanged for the New
Notes were acquired by it as a result of market-making activities or other
trading activities and acknowledges
-3-
<PAGE> 4
that it will deliver a prospectus in connection with any resale of such New
Notes and will indemnify, defend and hold harmless ICP-IV and IPCC for the
undersigned's failure to do so; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuers to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Terms of the Exchange
Offer" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not changed) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
-4-
<PAGE> 5
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX BELOW.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
===============================================================================================================================
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s) Certificate Aggregate Principal Principal Amount
(Please fill in, if blank) Number(s)* Amount of Old Note(s) Tendered**
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes
indicated in column 2. See Instruction 2. Old Notes tendered hereby
must be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
================================================================================
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number ________________ Transaction Code Number________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)________________________________________
Window Ticket Number (if any)__________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________
Name of Institution Which Guaranteed Delivery__________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number ________________ Transaction Code Number________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name___________________________________________________________________
Address________________________________________________________________
-5-
<PAGE> 6
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of and sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter below, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange are
to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)_________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________________
(Zip Code)
(Complete Substitute Form W-9)
/ / Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
________________________________________________________________________________
(Book-Entry Transfer Facility)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter below or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: New Notes and/or Old Notes to:
Name(s)________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address________________________________________________________________________
________________________________________________________________________________
(Zip Code)
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
-6-
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
Dated:___________________________________________________________, 1996
X __________________________________ ___________________________, 1996
X __________________________________ ___________________________, 1996
Signature(s) of Owner Date
Area Code and Telephone Number:__________________________________
If a holder is tendering any Old Notes, this letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):_______________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity:______________________________________________________________________
Address:_______________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE (If required
by Instruction 3)
Signature(s) Guaranteed by an Eligible Institution:____________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name and Firm)
Dated: ____________________________________________________________, 1996
-7-
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer for
the 11 1/4% Senior Notes Due 2006 of
InterMedia Partners IV, Capital Corp.
and
InterMedia Capital Partners IV, L.P.
for the 11 1/4% Senior Notes Due 2006 of InterMedia Partners
IV, Capital Corp.
and
InterMedia Capital Partners IV, L.P.
Which Have Been Registered Under the Securities Act of 1933, as Amended
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer
- -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such
procedures, (i) such tender must be made through an Eligible Institution, (ii)
on or prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Issuers (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered stating that the tender
is being made thereby and guaranteeing that within three New York Stock Exchange
("NYSE") trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case
may be, and all other documents required by this Letter, are deposited by the
Eligible Institution within three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is
-8-
<PAGE> 9
suggested that the mailing be registered mail, properly insured, with return
receipt requested, and made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to noteholders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Old Notes to be tendered in the box above entitled
"Description of Old Notes -- Principal Amount Tendered." A reissued certificate
representing the balance of nontendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box of this Letter,
promptly after the Expiration Date. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter, Bond Powers and Endorsements, Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder
or holders of any certificate(s) specified herein, such certificate(s) must be
endorsed accompanied by appropriate bond powers, in either case signed exactly
as the name or names of the registered holder or holders appear(s) on the
certificate(s) and signatures on such certificate(s) must be guaranteed by an
Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary
-9-
<PAGE> 10
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, proper evidence satisfactory to the Issuers of
their authority to so act must be submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program (each, an "Eligible Institution").
Signatures on this letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer identification
or social security number of the person named must also be indicated.
Noteholders tendering Old Notes by book-entry transfer may request that Old
Notes not exchanged be credited to such account maintained at the Book-Entry
Transfer Facility as such noteholder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name and address of the person signing this Letter.
5. Tax Identification Number
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Issuers (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Issuers are not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See
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<PAGE> 11
the enclosed Guidelines of Certification of Taxpayer Identification Number on
Substitute Form W-9 (the "W-9 Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to a backup withholding as a result of a failure to report all interest
or dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Issuers a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide a TIN to the Issuers within 60
days, backup withholding will begin and continue until such holder furnishes its
TIN to the Issuers.
6. Transfer Taxes.
The Issuers will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to them or their order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of Old
Notes to the Issuers or their order pursuant to the Exchange Offer, the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Issuers reserve the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
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<PAGE> 12
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Although the Issuers intend to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Issuers, the
Exchange Agent nor any other person shall incur any liability for failure to
give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. Withdrawal of Tenders.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth above prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the holder
in the same manner as the original signature on this Letter (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes that have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following the procedures described
above at any time on or prior to 5:00 p.m., New York City time, on the
Expiration Date.
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<PAGE> 13
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus, this Letter and other related documents
may be directed to Edon V. Hartley, Chief Financial Officer of InterMedia
Partners IV, Capital Corp., at 235 Montgomery Street, Suite 420, San Francisco,
CA 94104 (facsimile (415) 397-3978).
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<PAGE> 14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: ____________________
<TABLE>
<CAPTION>
==========================================================================================================================
<S> <C> <C>
| SUBSTITUTE | PART I -- PLEASE PROVIDE | |
| | YOUR TIN IN THE BOX AT | TIN: _____________________________ |
| FORM W-9 | RIGHT AND CERTIFY BY | Social Security Number or |
| | SIGNING AND DATING BELOW | Employer Identification Number |
| | | |
| | | |
| Department of the Treasury |--------------------------------------------------------------------------------|
| Internal Revenue Service | PART II -- TIN Applied for |_| |
| | |
| |--------------------------------------------------------------------------------|
| | CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY |
| Payor's Request for Taxpayer | THAT: |
| Identification Number ("TIN") | |
| and Certification | (1) The number shown on this form is my correct Taxpayer |
| | Identification Number (or I am waiting for a number to be issued |
| | to me); |
| | |
| | (2) I am not subject to backup withholding either because: (a) |
| | I am exempt from backup withholding, or (b) I have not |
| | been notified by the Internal Revenue Service (the "IRS") that |
| | I am subject to backup withholding as a result of failure to |
| | report all interest or dividends, or (c) the IRS has notified |
| | me that I am no longer subject to backup withholding; and |
| | |
| | (3) any other information provided on this form is true and correct. |
| | |
| | Signature:__________________________________ Date: ____________________ |
| | |
| | |
- --------------------------------------------------------------------------------------------------------------------------|
| You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to |
| backup withholding because of under reporting of interest or dividends on your tax return and you have not been |
| notified by the IRS that you are no longer subject to backup withholding. |
===========================================================================================================================
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
================================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- -------------------------------------- --------------------------------------
Signature Date
===============================================================================
-14-
<PAGE> 1
EXHIBIT 99.2
___________, 1996
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
InterMedia Partners IV, Capital Corp. and InterMedia Capital Partners
IV, L.P. (together, the "Issuers") propose to make an offer (the "Exchange
Offer") to exchange their 11 1/4% Senior Notes Due 2006 issued pursuant to a
144A offering (the "Old Notes") for their 11 1/4% Senior Notes Due 2006 to be
registered with the Securities and Exchange Commission (the "Exchange Notes"),
respectively. The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated ____________, 1996 (the
"Prospectus"), proposed to be distributed to all record holders of the Old
Notes. The Old Notes and the Exchange Notes are collectively referred to herein
as the "Notes."
The Issuers hereby appoint The Bank of New York to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Issuers on or
about ____________, 1996. The Letter of Transmittal accompanying the Prospectus
(or in the case of book entry securities, the ATOP system) is to be used by the
holders of the Old Notes to accept the Exchange Offer, and contains
instructions with respect to the delivery of certificates for Old Notes
tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
___________, 199__ or on such later date or time to which the Issuers may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions
set forth in the Prospectus, the Issuers expressly reserve the right to extend
the Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the business day following the previously scheduled Expiration
Date.
The Issuers expressly reserve the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer
-1-
<PAGE> 2
specified in the Prospectus under the caption "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Issuers will give oral (confirmed in
writing) or written notice of any amendment, termination or nonacceptance to you
as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into your account in
accordance with the Book-Entry Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Notes (or confirmation of book-entry transfer into your
account at the Book-Entry Transfer Facility) and any other documents delivered
or mailed to you by or for holders of the Old Notes to ascertain whether: (i)
the Letters of Transmittal and any such other documents are duly executed and
properly completed in accordance with instructions set forth therein and (ii)
the Old Notes have otherwise been properly tendered. In each case where the
Letter of Transmittal or any other document has been improperly completed or
executed or any of the certificates for Old Notes are not in proper form for
transfer or some other irregularity in connection with the acceptance of the
Exchange Offer exists, you will endeavor to inform the presenters of the need
for fulfillment of all requirements and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
4. With the approval of the general partner, President, Senior Vice
President, Executive Vice President, or any Vice President of one of the Issuers
(such approval, if given orally, to be confirmed in writing) or any other party
designated by such an officer or general partner in writing, you are authorized
to waive any irregularities in connection with any tender of Old Notes pursuant
to the Exchange Offer.
5. Tenders of Old Notes may be made only as set forth in the Letter of
Transmittal and in the section of the Prospectus captioned "The Exchange
Offer--Terms of the Exchange Offer-- Procedures for Tendering Old Notes", and
Old Notes shall be
-2-
<PAGE> 3
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Notes which the
general partner, President, Senior Vice President, Executive Vice President, or
any Vice President of one of the Issuers shall approve as having been properly
tendered shall be considered to be properly tendered (such approval, if given
orally, shall be confirmed in writing).
6. You shall advise the Issuers with respect to any Old Notes received
subsequent to the Expiration Date and accept their instructions with respect to
disposition of such Old Notes.
7. You shall accept tenders:
(a) in cases where the Old Notes are registered in two or more names
only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old Notes provided
that customary transfer requirements, including any applicable transfer taxes,
are fulfilled.
You shall accept partial tenders of Old Notes where so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Old Notes to
the transfer agent for split-up and return any untendered Old Notes to the
holder (or such other person as may be designated in the Letter of Transmittal)
as promptly as practicable after expiration or termination of the Exchange
Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Issuers will notify you (such notice if given orally, to be confirmed
in writing) of their acceptance, promptly after the Expiration Date, of all Old
Notes properly tendered and you, on behalf of the Issuers, will exchange such
Old Notes for Exchange Notes and cause such Old Notes to be canceled. Delivery
of Exchange Notes will be made on behalf of the Issuers by you at the rate of
$1,000 principal amount of Exchange Notes for each $1,000 principal amount of
the corresponding series of Old Notes tendered promptly after notice (such
notice if given orally, to be confirmed in writing) of acceptance of said Old
Notes by the Issuers; provided, however, that in all cases, Old Notes tendered
pursuant to the Exchange Offer will be exchanged only after timely receipt by
you of certificates for such Old Notes (or confirmation of book-entry transfer
into your account at the Book-Entry Transfer Facility), a properly completed and
duly executed Letter of Transmittal (or
-3-
<PAGE> 4
facsimile thereof) with any required signature guarantees and any other required
documents. You shall issue Exchange Notes only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
10. The Issuers shall not be required to exchange any Old Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Issuers not to exchange any Old Notes tendered
shall be given (and confirmed in writing) by the Issuers to you.
11. If, pursuant to the Exchange Offer, the Issuers do not accept for
exchange all or part of the Old Notes tendered because of an invalid tender, the
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer--Conditions of the Exchange Offer" or otherwise, you shall
as soon as practicable after the expiration or termination of the Exchange Offer
return those certificates for unaccepted Old Notes (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Old Notes, unaccepted Old Notes or
for Exchange Notes shall be forwarded by (a) first-class certified mail, return
receipt requested under a blanket surety bond protecting you and the Issuers
from loss or liability arising out of the non-receipt or non-delivery of such
certificates or (b) by registered mail insured separately for the replacement
value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those specifically
set forth herein or as may be subsequently agreed to in writing by you and the
Issuers;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates or the Old Notes represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
-4-
<PAGE> 5
representation as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability, unless you
shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in reliance
upon any certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution and
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a proper person
or persons;
(f) may rely on and shall be protected in acting upon written or oral
instructions from any officer of the Issuers;
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities and the advice or opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by you hereunder in good faith
and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Notes pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the market value
or decline or appreciation in market value of any Old Notes.
15. You shall take such action as may from time to time be requested by
the Issuers or their counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Issuers, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Issuers will furnish you with copies of such documents at your request. All
other requests for information relating to the Exchange Offer shall be directed
to the Issuers, Attention: Edon V. Hartley, Chief Financial Officer.
-5-
<PAGE> 6
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to the Chief Financial Officer of the
Issuers and such other person or persons as they may request, daily (and more
frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the number
of Old Notes which have been tendered pursuant to the Exchange Offer and the
items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Issuers or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as they or
he or she reasonably requests. Such cooperation shall include, without
limitation, the granting by you to the Issuers and such person as the Issuers
may request of access to those persons on your staff who are responsible for
receiving tenders, in order to ensure that immediately prior to the Expiration
Date the Issuers shall have received information in sufficient detail to enable
them to decide whether to extend the Exchange Offer. You shall prepare a final
list of all persons whose tenders were accepted, the aggregate principal amount
of Old Notes tendered, the aggregate principal amount of Old Notes accepted and
deliver said list to the Issuers.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Issuers.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Issuers, or any of their subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
-6-
<PAGE> 7
21. The Issuers covenant and agree to indemnify and hold you harmless
in your capacity as Exchange Agent hereunder against any loss, liability, cost
or expense, including attorneys' fees and expenses arising out of or in
connection with any act, omission, delay or refusal made by you in reliance upon
any signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Old Notes reasonably believed by you in good faith to be authorized,
and in delaying or refusing in good faith to accept any tenders or effect any
transfer of Old Notes; provided, however, that the Issuers shall not be liable
for indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence or willful misconduct. In no case
shall the Issuers be liable under this indemnity with respect to any claim
against you unless the Issuers shall be notified by you, by letter or cable or
by facsimile confirmed by letter, of the written assertion of a claim against
you or of any other action commenced against you, promptly after you shall
have received any such written assertion or notice of commencement of action.
The Issuers shall be entitled to participate at their own expense in the
defense of any such claim or other action, and, if the Issuers so elect, the
Issuers shall assume the defense of any suit brought to enforce any such claim.
In the event that the Issuers shall assume the defense of any such suit, the
Issuers shall not be liable for the fees and expenses of any additional
counsel thereafter retained by you so long as the Issuers shall retain counsel
satisfactory to you to defend such suit.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Issuers understand that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner to
each governmental authority to which any transfer taxes are payable in respect
of the exchange of Old Notes, your check in the amount of all transfer taxes so
payable, and the Issuers shall reimburse you for the amount of any and all
transfer taxes payable in respect of the exchange of Old Notes; provided,
however, that you shall reimburse the Issuers for amounts refunded to you in
respect of your payment of any such transfer taxes, at such time as such refund
is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the
-7-
<PAGE> 8
laws of the State of New York applicable to agreements made and to be performed
entirely within such state, and without regard to conflicts of law principles,
and shall insure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Issuers:
InterMedia Capital Partners IV, L.P.
InterMedia Partners IV, Capital Corp.
235 Montgomery Street, Suite 420
San Francisco, CA 94104
Facsimile: (415) 397-3978
Attention: Edon V. Hartley
Chief Financial Officer
With a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Facsimile: (415) 983-1200
Attention: Gregg Vignos, Esq.
-8-
<PAGE> 9
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Issuers any certificates for Notes, funds or property then held by you as
Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
[Signature page follows]
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<PAGE> 10
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
INTERMEDIA PARTNERS IV, CAPITAL
CORP.
By:
--------------------------------
Leo J. Hindery, Jr.
President
INTERMEDIA CAPITAL PARTNERS IV, L.P.
By InterMedia Capital Management IV,
L.P., its General Partner
By:
----------------------------
Leo J. Hindery, Jr.
Managing General Partner
Accepted as the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
------------------------------------
Name:
Title:
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<PAGE> 11
SCHEDULE I
FEES
<PAGE> 1
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
for Tender of
11 1/4% Senior Notes Due 2006
(including those in book-entry form)
of
INTERMEDIA PARTNERS IV, CAPITAL CORP.
and
INTERMEDIA CAPITAL PARTNERS IV, L.P.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of InterMedia Partners IV, Capital Corp. and InterMedia
Capital Partners IV, L.P. (the "Issuers") made pursuant to the Prospectus, dated
____________, 1996 (the "Prospectus"), if certificates for the outstanding 11
1/4% Senior Notes Due 2006 of the Issuers (the "Old Notes") are not immediately
available or if the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date of
the Exchange Offer. Such form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to The Bank of New York (the "Exchange
Agent") as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Old Notes pursuant to the Exchange Offer, a
completed, signed and dated Letter of Transmittal (or facsimile thereof) must
also be received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date. Capitalized terms not defined herein are defined in
the Prospectus.
The Bank of New York, Exchange Agent.
By Mail:
The Bank of New York
101 Barclay Street - 7E
New York, New York 10286
Attention: Enrique Lopez
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street-Lobby Level
Corporate Trust Services Window
New York, New York 10286
Attention: Enrique Lopez
By Facsimile:
(212) 571-3080
Attention: Enrique Lopez
Confirm by Telephone:
(212) 815-2742
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Issuers the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer - Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Old Notes Tendered:*
$________________________________________________
<PAGE> 2
Certificate Nos. (if available):
_________________________________________________
Total Principal Amount Represented by
Certificate(s):
$________________________________________________
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE> 3
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
________________________________________________________________________________
PLEASE SIGN HERE
X___________________________________________ _______________________________
X___________________________________________ _______________________________
Signature(s) of Owners(s) Date
or Authorized Signatory
Area Code and Telephone Number:________________________________________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
Please print name(s) and addresses)
Name(s): ____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
Capacity: ____________________________________________________________
____________________________________________________________
Address (es): ____________________________________________________________
____________________________________________________________
Account Number: ____________________________________________________________
____________________________________________________________
Account Number: ____________________________________________________________
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<PAGE> 4
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Old Notes being tendered hereby or confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company, in proper form for transfer, together with any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the Expiration Date.
Name of Firm ____________________________________________________________
Address ____________________________________________________________
____________________________________________________________
Area Code & Telephone No. ___________________________________________________
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
(Please Type or Print)
Title ____________________________________________________________________
Dated ________________________
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL
-3-
