<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997
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
------------------------------
COMCAST CABLE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4841 23-2175755
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Classification Identification
incorporation or organization) Code Number) Number)
</TABLE>
1500 MARKET STREET, PHILADELPHIA, PENNSYLVANIA 19102-2148
(215) 665-1700
(Address and telephone number of registrant's principal executive offices)
JOHN R. ALCHIN
COMCAST CABLE COMMUNICATIONS, INC.
1500 MARKET STREET
PHILADELPHIA, PENNSYLVANIA
(215) 665-1700
(Name, address and telephone number of agent for service)
------------------------------
COPIES TO:
BRUCE K. DALLAS
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
------------------------------
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
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
8 1/8% Exchange Notes due 2004........ $300,000,000 100% $1,700,000,000 $515,152
8 3/8% Exchange Notes due 2007........ $600,000,000
8 7/8% Exchange Notes due 2017........ $550,000,000
8 1/2% Exchange Notes due 2027........ $250,000,000
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(f)(2).
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED 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>
SUBJECT TO COMPLETION, DATED JULY 3, 1997
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.
<PAGE>
PROSPECTUS
, 1997
OFFER TO EXCHANGE
8 1/8% EXCHANGE NOTES DUE 2004
FOR ANY AND ALL OUTSTANDING 8 1/8% NOTES DUE 2004
8 3/8% EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING 8 3/8% NOTES DUE 2007
8 7/8% EXCHANGE NOTES DUE 2017
FOR ANY AND ALL OUTSTANDING 8 7/8% NOTES DUE 2017
8 1/2% EXCHANGE NOTES DUE 2027
FOR ANY AND ALL OUTSTANDING 8 1/2% NOTES DUE 2027
OF
COMCAST CABLE COMMUNICATIONS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
Comcast Cable Communications, Inc. (the "Company"), hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of 8 1/8% Exchange Notes due 2004
(the "New Seven-Year Notes") for each $1,000 principal amount of the issued and
outstanding 8 1/8% Notes due 2004 (the "Old Seven-Year Notes" and, together with
the New Seven-Year Notes, the "Seven-Year Notes"); $1,000 principal amount of
8 3/8% Exchange Notes due 2007 (the "New Ten-Year Notes") for each $1,000
principal amount of the issued and outstanding 8 3/8% Notes due 2007 (the "Old
Ten-Year Notes" and, together with the New Ten-Year Notes, the "Ten-Year
Notes"); $1,000 principal amount of 8 7/8% Exchange Notes due 2017 (the "New
Twenty-Year Notes") for each $1,000 principal amount of the issued and
outstanding 8 7/8% Notes due 2017 (the "Old Twenty-Year Notes" and, together
with the New Twenty-Year Notes, the "Twenty-Year Notes") and $1,000 principal
amount of 8 1/2% Exchange Notes due 2027 (the "New Thirty-Year Notes") for each
$1,000 principal amount of the issued and outstanding 8 1/2% Notes due 2027 (the
"Old Thirty-Year Notes" and, together with the New Thirty-Year Notes, the
"Thirty-Year Notes") of the Company. As of the date of this Prospectus, there
were outstanding $300,000,000 principal amount of Old Seven-Year Notes,
$600,000,000 principal amount of Old Ten-Year Notes, $550,000,000 principal
amount of Old Twenty-Year Notes and $250,000,000 principal amount of Old
Thirty-Year Notes (collectively, the "Old Notes"). The terms of the New
Seven-Year Notes, the New Ten-Year Notes, the New Twenty-Year Notes and the New
Thirty-Year Notes (collectively, the "New Notes" and, together with the Old
Notes, the "Notes") are identical in all material respects to the Old Notes,
except that the offer of the New Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act") and, therefore, the
New Notes will not be subject to certain transfer restrictions, registration
rights and related additional interest provisions applicable to the Old Notes.
This Prospectus and Letter of Transmittal will be first sent to all Holders of
Old Notes on or about , 1997.
The New Notes will bear interest from May 1, 1997. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from May 1, 1997 to the date of the issuance of the New Notes. Interest on the
New Notes is payable semi-annually on May 1 and November 1 of each year,
commencing November 1, 1997.
The Seven-Year Notes, the Ten-Year Notes and the Twenty-Year Notes will be
redeemable, in whole or in part, at the option of the Company at any time and
the Thirty-Year Notes will be redeemable, in whole or in part, at the option of
the Company at any time after May 1, 2009, in each case at a redemption price
equal to the greater of (i) 100% of their principal amount, plus accrued
interest thereon to the date of redemption, or (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein), plus accrued interest on the Notes to the date of redemption.
If a redemption date does not fall on an interest payment date, then, with
respect to the interest payment immediately succeeding the redemption date, only
the unaccrued portion of such interest payment as of the redemption date shall
be included in any calculation pursuant to clause (ii). See "Description of the
Notes--Optional Redemption." Each holder of the Thirty-Year Notes may require
the Company to repurchase all or a portion of the Thirty-Year Notes owned by
such holder on May 1, 2009 at a purchase price equal to 100% of the principal
amount thereof.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under Registration Rights Agreements, dated May 1,
1997, among the Company and the other signatories thereto (the "Registration
Rights Agreements"). Based upon interpretations contained in letters issued to
third parties by the staff of the Securities and Exchange Commission (the
"Commission"), the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by each holder thereof (other than a broker-dealer, as set
forth below, and any such holder which is an "affiliate" of the Company 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 holder's
business and such holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes. Eligible holders wishing to
accept the Exchange Offer must represent to the Company in the Letter of
Transmittal that such conditions have been met. 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 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 New Notes received in exchange of
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the consummation of the Exchange Offer, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined herein). In the event the Company terminates the
Exchange Offer and does not accept for exchange any Old Notes, the Company will
promptly return tendered Old Notes to the holders thereof. See "The Exchange
Offer."
Prior to this Exchange Offer, there has been no public market for the Notes.
The Company does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance than an active public market for the New Notes
will develop.
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES
IN THE EXCHANGE OFFER.
---------------------
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.
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes a part of a registration statement (the
"Registration Statement," which term shall encompass any amendments thereto)
filed by the Company with the Commission under the Securities Act. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information contained in the Registration Statement and the exhibits
and schedules thereto and reference is hereby made to the Registration Statement
and the exhibits and schedules thereto for further information with respect to
the Company and the securities offered hereby. Statements contained herein
concerning the provisions of any documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits and schedules thereto can
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
As a result of this Exchange Offer, the Company will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and in accordance therewith will file periodic
reports and other information with the Commission. Such reports and other
information can be inspected and copied at the addresses, and may be accessed
electronically at the Internet address set forth above. The Company 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 Trustee (as defined herein) and, upon request, to any holder or
beneficial owner of Notes annual audited consolidated financial statements and
quarterly unaudited consolidated financial statements, each accompanied by
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, AS USED IN THIS PROSPECTUS, THE "COMPANY" REFERS TO
COMCAST CABLE COMMUNICATIONS, INC., A DELAWARE CORPORATION, AND ITS
SUBSIDIARIES, AND "COMCAST" REFERS TO COMCAST CORPORATION, A PENNSYLVANIA
CORPORATION, AND ITS SUBSIDIARIES, INCLUDING THE COMPANY. IN CONTEMPLATION OF
THE OFFERING OF THE OLD NOTES (THE "OFFERING"), CERTAIN ASSETS THAT WERE OWNED
BY COMCAST WERE TRANSFERRED TO THE COMPANY, AND CERTAIN ASSETS THAT WERE OWNED
BY THE COMPANY WERE TRANSFERRED TO COMCAST (THE "REORGANIZATION"). ALL FINANCIAL
INFORMATION CONTAINED HEREIN IS PRESENTED AS IF THE REORGANIZATION HAD OCCURRED
ON JANUARY 1, 1992. OPERATING CASH FLOW FOR ANY PERIOD IS DEFINED FOR PURPOSES
OF THIS PROSPECTUS AS OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION FOR
SUCH PERIOD.
OVERVIEW
Comcast Cable Communications, Inc. is engaged in the development, management
and operation of cable communications systems. The Company is currently the
fourth-largest cable television system operator in the United States and, as of
March 31, 1997, served 4.3 million customers of the 7.0 million households
passed by the Company's systems. The Company is a wholly owned subsidiary of
Comcast Corporation.
Over 80% of the Company's customers are located in ten regional clusters. By
acquiring and developing systems in geographic proximity, the Company has
realized significant operating efficiencies through the consolidation of various
managerial, administrative and technical functions. Consistent with this
approach, the Company is currently consolidating the majority of its local
customer service call centers into large regional operations. These regional
call centers have technically advanced telephone systems that provide 24-hour
per day call answering, telemarketing and other services. These centers will
allow the Company to better serve its customer base, as well as to cross-market
new products and services to its subscribers.
The Company considers technological innovation to be an important component
of its service offerings and customer satisfaction. Through the use of fiber
optic cable and other technological improvements, the Company has increased
system reliability, channel capacity and its ability to deliver advanced video
and data services. The majority of the Company's subscribers are currently
served by systems that have the capacity to carry in excess of 60 channels. The
Company is currently implementing a significant network upgrade of most of its
cable systems. The upgraded systems will generally have capacity in excess of
100 channels and will have two-way communication and digital transmission
capabilities.
The Company derives the majority of its revenues from recurring subscription
services and generates additional revenues from non-subscription services such
as advertising, pay-per-view, installation and commissions from electronic
retailing. Monthly subscription rates and related charges vary according to the
type of service selected (such as basic cable, premium cable, sports channels
and special interest channels) as well as the type of equipment rented. In
addition, in December 1996, the Company began marketing high-speed Internet
access services provided via cable modems to customers served by two of its
cable systems. The Company expects to expand the marketing of such services in
selected cable systems during 1997.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage of certain subscriber revenues. Comcast
charges each of the Company's subsidiaries for programming on a basis which
generally approximates the amount each such subsidiary would be charged if it
purchased directly from the supplier, subject to limitations imposed by debt
facilities for certain subsidiaries, and did not benefit from the purchasing
power of the Company's consolidated operations.
3
<PAGE>
Programming costs increase in the ordinary course of the Company's business as a
result of increases in the number of subscribers, expansion of the number of
channels provided to customers and contractual rate increases from programming
suppliers. For the three months ended March 31, 1997 and 1996 and for the years
ended December 31, 1996, 1995 and 1994, total programming costs of the Company
were $142.7 million, $101.0 million, $417.0 million, $368.3 million and $264.1
million, respectively.
The Company purchases certain other services, including insurance and
employee benefits, from Comcast under cost-sharing arrangements on terms that
reflect Comcast's actual cost. In addition, Comcast, through management
agreements, manages the operations of the Company's subsidiaries, including
rebuilds and upgrades. Comcast charged the Company's subsidiaries management
fees of $29.0 million and $21.8 million during the three months ended March 31,
1997 and 1996, respectively, and $93.2 million, $83.5 million and $65.9 million
during the years ended December 31, 1996, 1995 and 1994, respectively. See
"Certain Relationships and Related Transactions."
STRATEGIC ACQUISITIONS
From time to time the Company acquires cable television systems. The
Company's most significant recent acquisitions are as follows:
SCRIPPS CABLE
In November 1996, Comcast acquired the cable television operations ("Scripps
Cable") of The E.W. Scripps Company in exchange for 93.048 million shares of
Comcast's Class A Special Common Stock valued at $1.552 billion (the "Scripps
Acquisition"). As of the date of the acquisition, Scripps Cable passed more than
1.2 million homes and served more than 800,000 subscribers, with 60% of its
subscribers located in Sacramento, California and Chattanooga and Knoxville,
Tennessee. Comcast accounted for the Scripps Acquisition under the purchase
method. Following the Scripps Acquisition, Comcast contributed Scripps Cable to
the Company at Comcast's historical cost. Scripps Cable was consolidated with
the Company effective November 1, 1996.
MACLEAN HUNTER
In December 1994, the Company, through Comcast MHCP Holdings, L.L.C. (the
"LLC"), acquired the U.S. cable television and alternate access operations of
Maclean Hunter Limited ("Maclean Hunter") from Rogers Communications Inc. and
all of the outstanding shares of Barden Communications, Inc. (collectively such
acquisitions are referred to as the "Maclean Hunter Acquisition") for $1.249
billion in cash. As of the date of the acquisition, Maclean Hunter passed more
than 1.0 million homes and served more than 540,000 subscribers. The Company and
the California Public Employees' Retirement System ("CalPERS") invested $305.6
million and $250.0 million, respectively, in the LLC, which is owned 55% by the
Company and 45% by CalPERS. The Maclean Hunter Acquisition was financed with
cash contributions from the LLC of $555.6 million and borrowings under a credit
facility of an indirect wholly owned subsidiary of the LLC. At any time after
December 18, 2001, CalPERS may elect to liquidate its interest in the LLC at a
price based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to Comcast's common stock. Except in certain limited
circumstances, Comcast, at its option, may satisfy this liquidity arrangement by
purchasing CalPERS' interest for cash, by issuing its common stock (subject to
certain limitations) or by selling the LLC. The Company accounted for the
Maclean Hunter Acquisition under the purchase method and Maclean Hunter was
consolidated with the Company effective December 22, 1994.
4
<PAGE>
COMCAST
Comcast owns 100% of the Company's outstanding capital stock. Comcast is
principally engaged in the development, management and operation of wired
telecommunications including cable television and telephone services; wireless
telecommunications including cellular, personal communications services and
direct-to-home satellite television; and content through principal ownership of
QVC, Inc., an electronic retailer, through C3 (Comcast Content & Communications
Corporation), through majority ownership of Comcast Spectacor, L.P. and a
controlling interest in E! Entertainment Television, Inc., and other programming
investments. Comcast's consolidated and affiliated operations serve over ten
million customers worldwide. Substantially all of Comcast's domestic cable
operations are conducted through the Company. In addition to the Company's
operations, as of March 31, 1997, Comcast had interests in domestic cable
systems serving 228,000 subscribers and passing 331,000 homes, direct broadcast
satellite operations serving approximately 136,000 subscribers and an interest
in PRIMESTAR Partners L.P., which serves approximately 1.8 million subscribers.
Additional information regarding Comcast is contained in reports filed by
Comcast with the Commission.
THE NOTES ARE OBLIGATIONS ONLY OF THE COMPANY AND ARE NOT GUARANTEED BY AND
DO NOT OTHERWISE CONSTITUTE OBLIGATIONS OF COMCAST.
The Company is a Delaware corporation formed in 1981 and has its principal
executive offices at 1500 Market Street, Philadelphia, Pennsylvania, 19102-2148,
(215) 665-1700.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
NOTES OFFERED................................ Up to $300,000,000 principal amount of 8 1/8%
Exchange Notes due 2004; up to $600,000,000
principal amount of 8 3/8% Exchange Notes due
2007; up to $550,000,000 principal amount of
8 7/8% Exchange Notes due 2017; and up to
$250,000,000 principal amount of 8 1/2%
Exchange Notes due 2027. The terms of the New
Notes and the Old Notes are identical in all
material respects, except that the offer of
the New Notes will have been registered under
the Securities Act and therefore, the New
Notes will not be subject to certain transfer
restrictions, registration rights and related
additional interest provisions applicable to
the Old Notes.
THE EXCHANGE OFFER........................... The Company is offering, upon the terms and
subject to the conditions of the Exchange
Offer, to exchange $1,000 principal amount of
New Notes for each $1,000 principal amount of
Old Notes. See "The Exchange Offer" for a
description of the procedures for tendering
Old Notes. The Exchange Offer is intended to
satisfy obligations of the Company under the
Registration Rights Agreements, dated May 1,
1997, between the Company and Goldman, Sachs
& Co., Bear, Stearns & Co. Inc. and
Donaldson, Lufkin & Jenrette Securities
Corporation (collectively, the "Initial
Purchasers").
TENDERS, EXPIRATION DATE;
WITHDRAWAL................................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997, or
such later date and time to which it is
extended. The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. Any Old
Notes not accepted for exchange for any
reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or
termination of the Exchange Offer.
FEDERAL INCOME TAX
CONSEQUENCES................................. The exchange pursuant to the Exchange Offer
will not result in any income, gain or loss
to the holders or the Company for federal
income tax purposes. See "Certain Federal
Income Tax Consequences."
USE OF PROCEEDS.............................. There will be no proceeds to the Company from
the issuance of the New Notes pursuant to the
Exchange Offer.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
EXCHANGE AGENT............................... Bank of Montreal Trust Company is serving as
Exchange Agent in connection with the
Exchange Offer.
</TABLE>
CONSEQUENCE OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the Commission, the Company believes that, generally, any holder of
Old Notes (other than a broker-dealer, as set forth below, and any holder who is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who exchanges its Old Notes for New Notes pursuant to the
Exchange Offer may offer such New Notes for resale, resell such New Notes, or
otherwise transfer such New Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided such New Notes
are acquired in the ordinary course of the holder's business and such holder has
no arrangement or understanding with any person to participate in a distribution
of such New Notes. Eligible holders wishing to accept the Exchange Offer must
represent to the Company in the Letter of Transmittal that such conditions have
been met and must represent, if such holder is not a broker-dealer, or is a
broker-dealer but will not receive New Notes for its own account in exchange for
Old Notes, that neither such holder nor the person receiving such New Notes, if
other than the holder, is engaged in or intends to participate in the
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must represent that the Old Notes
tendered in exchange therefor were acquired as a result of market-making
activities or other trading activities and must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." To comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register the New Notes prior to offering
or selling such New Notes. The Company does not currently intend to take any
action to register or qualify the New Notes for resale in any such jurisdiction.
If a holder of Old Notes does not exchange such Old Notes for New Notes pursuant
to the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. 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. Any holder who tenders in
the Exchange Offer with the intention to participate, or for the purpose of
participating, in a distribution of New Notes could not rely on the position of
the staff of the Commission enunciated in Exxon Capital Holdings Corporation
(available April 13, 1989) or similar no-action letters and, in the absence of
an exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Failure to comply with such requirements in such instance
may result in such holder incurring liability under the Securities Act for which
the holder is not indemnified by the Company. See "The Exchange
Offer--Consequences of Failure to Exchange" and "Registration Rights; Additional
Interest."
7
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the offer of the New Notes will have been registered under
the Securities Act and, therefore, the New Notes will not be subject to certain
transfer restrictions, registration rights and related additional interest
provisions applicable to the Old Notes.
<TABLE>
<S> <C>
NOTES OFFERED................................ Up to $300,000,000 aggregate principal amount
of 8 1/8% Exchange Notes due 2004 (the "New
Seven-Year Notes"), up to $600,000,000
aggregate principal amount of 8 3/8% Exchange
Notes due 2007 (the "New Ten-Year Notes"), up
to $550,000,000 aggregate principal amount of
8 7/8% Exchange Notes due 2017 (the "New
Twenty-Year Notes") and up to $250,000,000
aggregate principal amount of 8 1/2% Exchange
Notes due 2027 (the "New Thirty Year Notes",
and together with the New Seven-Year Notes,
the New Ten-Year Notes and the New
Twenty-Year Notes, the "New Notes").
MATURITY DATE................................ The New Seven-Year Notes will mature on May
1, 2004, the New Ten-Year Notes will mature
on May 1, 2007, the New Twenty-Year Notes
will mature on May 1, 2017 and the New
Thirty-Year Notes will mature on May 1, 2027.
SCHEDULED INTEREST
PAYMENT DATES................................ May 1 and November 1, commencing November 1,
1997. The New Notes will bear interest from
May 1, 1997. Holders of Old Notes whose Old
Notes are accepted for exchange will be
deemed to have waived the right to receive
any payment in respect of interest on such
Old Notes accrued from May 1, 1997 to the
date of the issuance of the New Notes.
Consequently, holders who exchange their Old
Notes for New Notes will receive the same
interest payment on November 1, 1997 (the
first interest payment date with respect to
the Old Notes and the New Notes) that they
would have received had they not accepted the
Exchange Offer.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
OPTIONAL REDEMPTION.......................... The New Seven-Year Notes, the New Ten-Year
Notes and the New Twenty-Year Notes are
redeemable, in whole or in part, at the
option of the Company at any time and the New
Thirty-Year Notes will be redeemable, in
whole or in part, at the option of the
Company at any time after May 1, 2009, in
each case at a redemption price equal to the
greater of (i) 100% of their principal
amount, plus accrued interest thereon to the
date of redemption, or (ii) the sum of the
present values of the remaining scheduled
payments of principal and interest thereon
discounted to the date of redemption on a
semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus accrued interest
on the Notes to the date of redemption. If a
redemption date does not fall on an interest
payment date, then, with respect to the
interest payment immediately succeeding the
redemption date, only the unaccrued portion
of such interest payment as of the redemption
date shall be included in any calculation
pursuant to clause (ii).
PURCHASE AT OPTION OF
HOLDERS OF NEW THIRTY-YEAR NOTES............. Each holder of the New Thirty-Year Notes may
require the Company to repurchase all or a
portion of the New Thirty-Year Notes owned by
such holder on May 1, 2009 at a purchase
price equal to 100% of the principal amount
thereof.
RANKING...................................... The New Notes are unsecured and
unsubordinated obligations of the Company and
will rank PARI PASSU with all other unsecured
and unsubordinated indebtedness and other
obligations of the Company. The New Notes
will be effectively subordinated to all
liabilities of the Company's subsidiaries,
including trade payables. On a pro forma
basis as of March 31, 1997, after giving
effect to the Offering, the Intercompany Note
Transactions (as defined herein) and the
application of the proceeds therefrom, the
total indebtedness and other liabilities of
the Company's subsidiaries (including trade
payables and accrued liabilities) would have
been approximately $2.4 billion.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
COVENANTS.................................... The indenture for the New Notes, among other
things, contains restrictions (with certain
exceptions) on the ability of the Company and
its Restricted Subsidiaries (as defined
herein) to: (i) make dividend payments or
other restricted payments; (ii) create liens
or enter into sale and leaseback
transactions; and (iii) enter into mergers,
consolidations, or sales of all or
substantially all of their assets.
</TABLE>
RISK FACTORS
Prospective investors should carefully consider the matters set forth under
"Risk Factors."
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<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following summary consolidated financial and other data (other than
operating statistics) as of the dates and for the periods indicated have been
derived from the Company's consolidated financial statements and the Company's
unaudited pro forma financial information. All consolidated financial and
statistical information contained herein is presented as if the Reorganization
had occurred on January 1, 1992. The summary consolidated financial and other
data is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's consolidated financial statements, including the
notes thereto, and the unaudited pro forma financial information of the Company
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996
------------------------ ----------------------- ------------------------
<CAPTION>
PRO PRO PRO
FORMA(1) ACTUAL(2) FORMA(1) ACTUAL(2) FORMA(1) ACTUAL(2) 1995(2)
----------- ----------- ----------- ---------- ----------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income....................... $ 501.1 $ 501.1 $ 457.3 $ 382.3 $ 1,893.8 $ 1,641.0 $ 1,454.9
Operating, selling, general and
administrative expenses............ 340.0 340.0 304.8 245.0 1,237.0 1,034.4 912.5
Depreciation and amortization........ 138.8 138.8 137.7 95.3 561.7 420.3 376.2
Operating income..................... 22.3 22.3 14.8 42.0 95.1 186.3 166.2
Interest expense and preferred stock
dividend requirements.............. 56.7 56.7 56.7 56.7 228.4 228.4 245.6
Loss before extraordinary items and
cumulative effect of accounting
changes............................ (29.2) (29.2) (29.0) (10.7) (85.7) (22.6) (48.9)
Net loss (4)......................... (29.2) (29.2) (29.0) (10.7) (85.7) (22.6) (51.3)
SUPPLEMENTARY FINANCIAL DATA:
Operating income before depreciation
and amortization (5)............... $ 161.1 $ 161.1 $ 152.5 $ 137.3 $ 656.8 $ 606.6 $ 542.4
Capital expenditures................. $ 106.6 $ 106.6 $ 69.0 $ 54.0 $ 352.5 $ 298.2 $ 238.5
Ratio of earnings to fixed charges
(6)................................ -- -- -- -- -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Property and equipment, net.......... $ 1,592.4 $ 1,592.4 $ 1,035.6 $ 1,035.6 $ 1,545.5 $ 1,545.5 $ 1,025.2
Total assets......................... 6,121.5 6,166.5 4,021.9 4,066.9 6,168.3 6,213.3 4,045.0
Long-term debt, less current
portion............................ 3,160.8 3,105.8 3,075.2 3,020.2 3,123.3 3,068.3 3,011.4
Stockholder's equity (deficiency).... 369.4 61.2 (831.9) (1,078.7) 402.4 95.3 (1,065.0)
OPERATING STATISTICS (AT PERIOD END):
Homes passed (000s) (7).............. 7,009 7,009 6,840 5,593 6,975 6,975 5,570
Subscribers (000s) (8)............... 4,312 4,312 4,220 3,429 4,280 4,280 3,407
Penetration (9)...................... 61.5% 61.5% 61.7% 61.3% 61.4% 61.4% 61.2%
<CAPTION>
<S> <C> <C> <C>
1994(2)(3) 1993(2)(3) 1992(2)
----------- ----------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service income....................... $ 1,065.3 $ 1,092.7 $ 714.9
Operating, selling, general and
administrative expenses............ 688.6 655.3 475.1
Depreciation and amortization........ 232.7 241.8 156.6
Operating income..................... 144.0 195.6 83.2
Interest expense and preferred stock
dividend requirements.............. 155.6 162.2 154.1
Loss before extraordinary items and
cumulative effect of accounting
changes............................ (23.0) (6.4) (174.0)
Net loss (4)......................... (23.0) (391.7) (226.3)
SUPPLEMENTARY FINANCIAL DATA:
Operating income before depreciation
and amortization (5)............... $ 376.7 $ 437.4 $ 239.8
Capital expenditures................. $ 173.4 $ 94.3 $ 67.9
Ratio of earnings to fixed charges
(6)................................ -- 1.1 --
BALANCE SHEET DATA (AT PERIOD END):
Property and equipment, net.......... $ 945.2 $ 748.7 $ 742.8
Total assets......................... 4,174.9 2,298.9 2,277.7
Long-term debt, less current
portion............................ 2,853.1 2,059.8 2,127.2
Stockholder's equity (deficiency).... (958.1) (995.1) (604.3)
OPERATING STATISTICS (AT PERIOD END):
Homes passed (000s) (7).............. 5,491 4,211 4,154
Subscribers (000s) (8)............... 3,307 2,648 2,583
Penetration (9)...................... 60.2% 62.9% 62.2%
</TABLE>
- ------------------------
(1) Unaudited pro forma consolidated statement of operations and supplementary
financial data and operating statistics are presented as if the Scripps
Acquisition occurred on January 1, 1996. See "Unaudited Pro Forma Financial
Information" included elsewhere in this Prospectus. Unaudited pro forma
consolidated balance sheet data is presented as if certain transactions
completed between April 1, 1997 and May 1, 1997 occurred on each respective
balance sheet date. These transactions consist of (i) repayment of $100.0
million of the Company's notes payable to affiliates (the "Notes Payable")
with the proceeds from drawdowns under subsidiaries' existing credit
facilities ($55.0 million) and existing cash held by an affiliate ($45.0
million), (ii) exchange of affiliate notes payable and notes receivable, and
the accrued interest thereon, between the Company, Comcast and certain of
their subsidiaries resulting in a reduction in the Company's Notes Payable
of $308.2 million, $246.8 million and $307.1 million as of March 31, 1997
and 1996 and December 31, 1996, respectively, with a corresponding reduction
in the Company's notes receivable from affiliate (the "Notes Receivable"),
and (iii) elimination of the remaining Notes Receivable, and the accrued
interest thereon (aggregating $539.7 million, $200.1 million and $522.8
million as of March 31, 1997 and 1996 and December 31, 1996, respectively),
through a non-cash dividend to Comcast. Collectively, such transactions are
referred to as the "Intercompany Note Transactions."
11
<PAGE>
(2) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of events, principally the Scripps
Acquisition in 1996, the Maclean Hunter Acquisition in 1994 and the
Split-Off (as defined below) in 1992, which affect the comparability of the
information reflected in the above summary consolidated financial and other
data.
(3) The decrease in service income and operating income before depreciation and
amortization from 1993 to 1994 is primarily a result of the effects of rate
regulation imposed by the Cable Television Consumer Protection and
Competition Act of 1992, effective September 1993, which was offset in part
by the effects of subscriber growth and new product offerings. The
Telecommunications Act of 1996 provides for rate deregulation of cable
programming service fees by March 1999. See "Legislation and Regulation."
(4) Net loss for the year ended December 31, 1995 includes an extraordinary
item, net of tax, of $2.4 million relating to the refinancing of certain
indebtedness of a subsidiary. Net loss for the year ended December 31, 1993
includes the cumulative effect of accounting changes, net of tax, of $385.3
million, primarily relating to the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," effective
January 1, 1993. Net loss for the year ended December 31, 1992 includes an
extraordinary item of $52.3 million relating to the Company's equity in net
loss from the early extinguishment of debt by Storer Communications, Inc.
("Storer"), an indirect wholly owned subsidiary of the Company, in
connection with the split-off of Storer between the Company and Storer's
other shareholder in December 1992 (the "Split-Off"). Prior to December
1992, the Company had a 50% interest in Storer which was accounted for under
the equity method.
(5) Operating income before depreciation and amortization is commonly referred
to in the cable communications business as "operating cash flow." Operating
cash flow is a measure of a company's ability to generate cash to service
its obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of the
cable communications business and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in the cable
communications industry. Operating cash flow does not purport to represent
net income or net cash provided by operating activities, as those terms are
defined under generally accepted accounting principles, and should not be
considered as an alternative to such measurements as an indicator of the
Company's performance.
(6) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income (loss) before extraordinary items, cumulative
effect of accounting changes, income tax expense (benefit), equity in net
loss of affiliate (1992 only) and fixed charges. Fixed charges consist of
interest expense, interest expense on notes payable to affiliates and
preferred stock dividend requirements of a subsidiary to an affiliate (1992
only). For the three months ended March 31, 1997 and 1996, earnings, as
defined above, were inadequate to cover fixed charges by $38.5 million and
$14.8 million, respectively. On a pro forma basis, for the three months
ended March 31, 1996 and for the year ended December 31, 1996, earnings, as
defined above, were inadequate to cover fixed charges by $42.0 million and
$118.4 million, respectively. For the years ended December 31, 1996, 1995,
1994 and 1992, earnings, as defined above, were inadequate to cover fixed
charges by $27.1 million, $73.8 million, $24.8 million and $83.7 million,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
(7) A home is deemed "passed" if it can be connected to the distribution system
without further extension of the transmission lines.
(8) A dwelling with one or more television sets connected to a system is counted
as one subscriber.
(9) Penetration is calculated by dividing subscribers by homes passed.
Penetration as of December 31, 1994 decreased from December 31, 1993
principally as a result of the Maclean Hunter Acquisition. As of the date of
the acquisition, Maclean Hunter had lower penetration levels than those of
the Company.
12
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING
MATTERS BEFORE ACCEPTING THE EXCHANGE OFFER.
THIS PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS. READERS ARE CAUTIONED
THAT SUCH FORWARD LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES WHICH COULD
SIGNIFICANTLY AFFECT EXPECTED RESULTS IN THE FUTURE FROM THOSE EXPRESSED IN ANY
SUCH FORWARD LOOKING STATEMENTS MADE BY, OR ON BEHALF OF THE COMPANY. CERTAIN
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, WITHOUT
LIMITATION, THE EFFECTS OF LEGISLATIVE AND REGULATORY CHANGES; THE POTENTIAL FOR
INCREASED COMPETITION; TECHNOLOGICAL CHANGES; THE NEED TO GENERATE SUBSTANTIAL
GROWTH IN THE SUBSCRIBER BASE BY SUCCESSFULLY LAUNCHING, MARKETING AND PROVIDING
SERVICES IN IDENTIFIED MARKETS; PRICING PRESSURES WHICH COULD AFFECT DEMAND FOR
THE COMPANY'S SERVICES; THE COMPANY'S ABILITY TO EXPAND ITS DISTRIBUTION;
CHANGES IN LABOR, PROGRAMMING, EQUIPMENT AND CAPITAL COSTS; THE COMPANY'S
CONTINUED ABILITY TO CREATE OR ACQUIRE PROGRAMMING THAT CUSTOMERS WILL FIND
ATTRACTIVE; FUTURE ACQUISITIONS, STRATEGIC PARTNERSHIPS AND DIVESTITURES;
GENERAL BUSINESS AND ECONOMIC CONDITIONS; AND CERTAIN OTHER RISKS.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New 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, and, except in
certain limited circumstances, will no longer have any registration rights with
respect to the Old Notes. 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 intend to register the Old Notes
under the Securities Act. The Company believes that, based upon interpretations
contained in letters issued to third parties by the staff of the Commission, New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by each holder thereof
(other than a broker-dealer, as set forth below, and any such holder which is an
"affiliate" of the Company 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 holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Eligible holders wishing to accept the Exchange Offer must represent to
the Company in the Letter of Transmittal that such conditions have been met and
must represent, if such holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes, that
neither such holder nor the person receiving such New Notes, if other than the
holder, is engaged in or intends to participate in the distribution of such New
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must represent that the Old Notes tendered in exchange
therefor were acquired as a result of market-making activities or other trading
activities and 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 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 the resales of New 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 Company
has agreed that, for a period of 90 days after the consummation of the Exchange
Offer they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." However, to comply
with the securities laws of certain jurisdictions, if applicable, the New Notes
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any such
jurisdictions. In addition, the tender of Old Notes pursuant to the Exchange
Offer will reduce the principal amount of
13
<PAGE>
the Old Notes outstanding, which may have an adverse effect upon, and increase
the volatility of, the market price of the Old Notes due to a reduction in
liquidity.
FACTORS AFFECTING FUTURE OPERATIONS
The cable communications industry may be affected by, among other things:
(i) changes in government law and regulation; (ii) changes in the competitive
environment; (iii) changes in technology; (iv) franchise related matters; (v)
market conditions that may adversely affect the availability of debt and equity
financing; and (vi) general economic conditions.
The cable communications industry is subject to extensive regulation on the
federal, state and local levels. No assurance can be given as to what future
actions Congress, the Federal Communications Commission ("FCC") or other
regulatory authorities may take or the effects thereof on the cable
communications industry in general or on the Company in particular. See
"Legislation and Regulation."
Cable communications companies operate under franchises granted by local
authorities that are subject to renewal and renegotiation from time to time. No
assurance can be given as to future franchise renewals. See "Legislation and
Regulation."
HOLDING COMPANY STRUCTURE; DEPENDENCE ON PAYMENTS FROM SUBSIDIARIES; EFFECTIVE
SUBORDINATION
The Company is a holding company and conducts all of its operations through
subsidiaries. Consequently, the ability of the Company to pay its obligations,
including its obligation to pay interest on and principal of the Notes, whether
at the maturity thereof or upon an earlier redemption or purchase at the option
of the Company or the holders of the Thirty-Year Notes, will be dependent upon
the repayment to the Company of investments and advances made by the Company and
upon the earnings of its subsidiaries and the distribution of those earnings to
the Company. The subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make funds available therefor. The ability of the subsidiaries to
pay dividends or make other payments or advances to the Company will depend upon
their operating results and will be subject to applicable laws and contractual
restrictions, including, but not limited to, payments due to Comcast pursuant to
certain management agreements (including programming arrangements) and other
arrangements. See "Certain Relationships and Related Transactions." Certain of
the Company's subsidiaries' loan agreements require that certain ratios be
maintained and contain certain restrictions on dividend payments, payment of
management fees and advances of funds to affiliated entities. The Indenture (as
defined herein) will not limit the ability of subsidiaries of the Company to
enter into agreements that prohibit or restrict dividends or other payments or
advances to the Company.
The Notes will be effectively subordinated to all liabilities of the
Company's subsidiaries, including trade payables and the liquidation value of
preferred stock of the Company's subsidiaries, if any, except to the extent that
the Company is itself recognized as a creditor of any such subsidiary, in which
case the Company would still be subordinated to any security interest in the
asset of such subsidiary and any indebtedness of such subsidiary senior to that
held by the Company. On a pro forma basis as of March 31, 1997, after giving
effect to the Offering, the Intercompany Note Transactions (as defined herein)
and the application of the proceeds therefrom, the total indebtedness and other
liabilities of the Company's subsidiaries (including trade payables and accrued
liabilities) would have been approximately $2.4 billion.
RECENT AND ANTICIPATED LOSSES
In recent years, the Company has experienced significant growth through both
strategic acquisitions and growth in its existing businesses. The effects of the
acquisitions have been to increase significantly the Company's revenues and
expenses, resulting in substantial increases in operating income before
depreciation and amortization, depreciation and amortization expense and net
interest expense. As a result of the increases in depreciation and amortization
expense and interest expense
14
<PAGE>
associated with these acquisitions and their financing, it is expected that the
Company will recognize significant losses for the foreseeable future. The
Company's losses before extraordinary items for the three months ended March 31,
1997 and 1996 and for the years ended December 31, 1996, 1995 and 1994 were
$29.2 million, $10.7 million, $22.6 million, $48.9 million and $23.0 million,
respectively. On a pro forma basis as if the Scripps Acquisition (as defined
herein) had occurred on January 1, 1996, the Company's loss for the three months
ended March 31, 1996 and for the year ended December 31, 1996 was $29.0 million
and $85.7 million, respectively. Failure to become profitable in the future
could adversely affect the Company's ability to sustain operations and obtain
additional required funds. Moreover, such a failure would adversely affect the
Company's ability to pay the required payments on the Notes and the Company's
other indebtedness. See "--Substantial Leverage."
COMPETITION
Cable communications systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, interactive online computer
services and home video products, including videotape cassette recorders. The
extent to which a cable communications system is competitive depends, in part,
upon the cable system's ability to provide, at a reasonable price to consumers,
a greater variety of programming and other communications services than are
available off-air or through other alternative delivery sources and upon
superior technical performance and customer service.
The Telecommunication Act of 1996 (the "1996 Telecom Act") makes it easier
for local exchange telephone companies ("LECs") and others to provide a wide
variety of video services competitive with services provided by cable systems
and to provide cable services directly to subscribers. Various LECs currently
are providing video services within and outside their telephone service areas
through a variety of distribution methods, including both the deployment of
broadband wire facilities and the use of wireless transmission facilities. The
Company cannot predict the likelihood of success of video service ventures by
LECs or the impact on the Company of such competitive ventures. Cable
communications systems generally operate pursuant to franchises granted on a
non-exclusive basis. In addition, the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable systems. Well-financed businesses from
outside the cable industry (such as the public utilities that own certain of the
poles on which cable is attached) may become competitors for franchises or
providers of competing services.
The availability of reasonably-priced home satellite dish earth stations
("HSDs") enables individual households to receive many of the
satellite-delivered program services formerly available only to cable
subscribers. Furthermore, the 1992 Cable Act contains provisions, which the FCC
has implemented with regulations, to enhance the ability of cable competitors to
purchase and make available to HSD owners certain satellite-delivered cable
programming at competitive costs. Cable operators face additional competition
from private satellite master antenna television ("SMATV") systems that serve
condominiums, apartment and office complexes and private residential
developments.
The FCC and Congress have adopted policies providing a more favorable
operating environment for new and existing technologies that provide, or have
the potential to provide, substantial competition to cable systems. These
technologies include, among others, direct broadcast satellite ("DBS") service
whereby signals are transmitted by satellite to receiving facilities located on
customer premises. DirecTv, Inc., which includes AT&T Corp. ("AT&T") as an
investor, began offering nationwide high-power DBS service in 1994 accompanied
by extensive marketing efforts. PRIMESTAR Partners L.P. ("Primestar"), a
consortium comprised of cable operators including Comcast and a satellite
company, currently provides digital satellite service including broadcast
signals and pay-per-view service. The Primestar partners recently announced an
agreement to consolidate their DBS assets into a new publicly traded company.
Primestar's services may compete with the services offered by the Company.
Several other major
15
<PAGE>
companies, including EchoStar Communications Corporation ("EchoStar") and
American Sky Broadcasting ("ASkyB"), a joint venture between MCI
Telecommunications Corporation ("MCI") and The News Corporation Limited ("News
Corp."), have begun offering or are currently developing high-power DBS service.
EchoStar has already commenced its domestic DBS service and offers approximately
120 channels of video programming. Recently announced plans for News Corp. to
purchase an interest in EchoStar are currently the subject of litigation between
News Corp. and EchoStar. Primestar, News Corp., MCI and ASkyB recently announced
several agreements in which News Corp., MCI and ASkyB will sell to Primestar two
satellites under construction and MCI will assign to Primestar an FCC DBS
license. The satellites to be sold to Primestar, when operational, are expected
to be capable of providing approximately 200 channels of DBS service in the US.
DBS providers provide significant competition to cable service providers,
including the Company. See "Business--Competition."
Cable communications systems also compete with wireless program distribution
services such as multichannel, multipoint distribution service ("MMDS") which
use low-power microwave frequencies to transmit video programming over-the-air
to subscribers. There are MMDS operators who are authorized to provide or are
providing broadcast and satellite programming to subscribers in areas served by
the Company's cable systems. Several Regional Bell Operating Companies have
acquired significant interests in major MMDS companies operating in certain of
the Company's cable service areas. The Company is unable to predict whether
wireless video services will have a material impact on its operations.
Other new technologies, including Internet-based services, may become
competitive with services that cable communications systems can offer. Advances
in communications technology as well as changes in the marketplace and the
regulatory and legislative environment are constantly occurring. Thus, it is not
possible to predict the effect that ongoing or future developments might have on
the cable communications industry or on the operations of the Company.
SUBSTANTIAL LEVERAGE
The Company has been and will continue to be highly leveraged. On a pro
forma basis as of March 31, 1997, after giving effect to the Intercompany Note
Transactions, the offering of the Old Notes (the "Offering") and the application
of the net proceeds therefrom and the redemption of the Company's 10% Debentures
(as defined herein), due 2003 the Company would have had consolidated
indebtedness of $3.234 billion and stockholder's equity of $352.1 million. See
"Capitalization." For the three months ended March 31, 1997, and, on a pro forma
basis for the year ended December 31, 1996, after giving effect to the Scripps
Acquisition, the Offering, the Intercompany Note Transactions and the
application of the net proceeds therefrom as if they occurred on January 1,
1996, the Company's earnings (as defined herein) would have been insufficient to
cover fixed charges by $38.5 million and $118.4 million, respectively. The
Indenture does not restrict the ability of the Company or any of its
subsidiaries to incur additional indebtedness. The degree to which the Company
is leveraged could have important consequences to holders of the Notes,
including (i) the ability of the Company to obtain any necessary financing in
the future for working capital, capital expenditures, debt service requirements
or other purposes may be limited; (ii) a substantial portion of the Company's
cash flows from operations must be dedicated to the payment of the principal of
and interest on its indebtedness and will not be available for other purposes;
(iii) the Company's level of indebtedness could limit its flexibility in
planning for, or reacting to, changes in its business; (iv) the Company is more
highly leveraged than some of its competitors, which may place it at a
competitive disadvantage; and (v) the Company's high degree of indebtedness will
make it more vulnerable in the event of a downturn in its business.
ABSENCE OF PUBLIC MARKET
The New Notes are a new issue of securities for which there is currently no
trading market. The Company does not intend to apply for listing of the New
Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System. There can be no
assurance that an active trading market for the New Notes will develop. If a
trading market develops for the New Notes, future trading prices of such
securities will depend on many factors, including prevailing interest rates, the
Company's results of operations and financial condition and the market for
similar securities.
16
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited pro forma and as adjusted
consolidated capitalization of the Company as of March 31, 1997. This table
should be read in conjunction with the Company's consolidated financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
PRO AS
FORMA(1) ADJUSTED
----------- -----------
<S> <C> <C>
(DOLLARS IN MILLIONS)
Cash, cash equivalents, short-term investments and
cash held by an affiliate........................................... $ 69.3 $ 74.0(2)
----------- -----------
----------- -----------
Current portion of long-term debt..................................... $ 35.0 $ 35.0
----------- -----------
Long-term debt, less current portion:
Notes offered hereby................................................ 1,690.8(3)
Notes payable to banks and insurance companies...................... 3,032.8 932.7(3)
10% subordinated debentures, due 2003............................... 127.1 (3)
Other............................................................... 0.9 0.9
----------- -----------
3,160.8 2,624.4
----------- -----------
Notes payable to affiliate............................................ 574.3(3)
----------- -----------
Total debt...................................................... 3,195.8 3,233.7
----------- -----------
Stockholder's equity:
Common stock, $1 par value--authorized and issued, 1,000 shares.....
Additional capital.................................................. 3,062.3 3,062.3
Accumulated deficit................................................. (2,692.9) (2,710.2)(4)
----------- -----------
Total stockholder's equity...................................... 369.4 352.1
----------- -----------
Total capitalization.......................................... $ 3,565.2 $ 3,585.8
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) Unaudited pro forma consolidated capitalization of the Company represents
actual capitalization adjusted for the pro forma effects of the Intercompany
Note Transactions.
(2) Increase in cash assumes $9.5 million of remaining net proceeds from the
Offering after repayment of certain notes payable to banks and insurance
companies, offset by $4.8 million in expenses, excluding Initial Purchasers'
discounts and commissions, related to the Offering and the Exchange Offer.
(3) As adjusted information gives effect to (i) the Offering and the application
of the $1.675 billion of net proceeds therefrom and (ii) the redemption of
the Company's 10% Debentures and the repayment of certain notes payable to
banks with the proceeds from the issuance of notes payable to a subsidiary
of Comcast. The terms of the notes payable issued to a subsidiary of Comcast
are substantially the same as those of the 10% Debentures and the notes
payable to banks referred to above. See "Description of Certain
Indebtedness."
(4) As adjusted information gives effect to an extraordinary loss, net of tax,
of approximately $17.3 million to be recorded during the second quarter of
1997 in connection with the repayment of long-term debt with the proceeds
from the Offering and the redemption of the Company's 10% Debentures.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following selected consolidated financial and other data (other than
operating statistics) as of the dates and for the periods indicated have been
derived from the Company's consolidated financial statements and the Company's
unaudited pro forma financial information. All consolidated financial and
statistical information contained herein is presented as if the Reorganization
(as defined herein) had occurred on January 1, 1992. The selected consolidated
financial and other data is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's consolidated financial statements,
including the notes thereto, and the unaudited pro forma financial information
of the Company appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------------------------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996
------------------------ ---------------------- ------------------------
<CAPTION>
PRO PRO PRO
FORMA(1) ACTUAL(2) FORMA(1) ACTUAL(2) FORMA(1) ACTUAL(2) 1995(2) 1994(2)(3)
----------- ----------- ----------- --------- ----------- ----------- --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service income............ $ 501.1 $ 501.1 $ 457.3 $ 382.3 $ 1,893.8 $ 1,641.0 $ 1,454.9 $ 1,065.3
Operating, selling,
general and
administrative
expenses................ 340.0 340.0 304.8 245.0 1,237.0 1,034.4 912.5 688.6
Depreciation and
amortization............ 138.8 138.8 137.7 95.3 561.7 420.3 376.2 232.7
Operating income.......... 22.3 22.3 14.8 42.0 95.1 186.3 166.2 144.0
Interest expense and
preferred stock dividend
requirements............ 56.7 56.7 56.7 56.7 228.4 228.4 245.6 155.6
Loss before extraordinary
items and cumulative
effect of accounting
changes................. (29.2) (29.2) (29.0) (10.7) (85.7) (22.6) (48.9) (23.0)
Net loss (4).............. (29.2) (29.2) (29.0) (10.7) (85.7) (22.6) (51.3) (23.0)
SUPPLEMENTARY FINANCIAL
DATA:
Operating income before
depreciation and
amortization (5)........ $ 161.1 $ 161.1 $ 152.5 $ 137.3 $ 656.8 $ 606.6 $ 542.4 $ 376.7
Capital expenditures...... $ 106.6 $ 106.6 $ 69.0 $ 54.0 $ 352.5 $ 298.2 $ 238.5 $ 173.4
Ratio of earnings to fixed
charges (6)............. -- -- -- -- -- -- -- --
BALANCE SHEET DATA (AT
PERIOD END):
Property and equipment,
net..................... $ 1,592.4 $ 1,592.4 $ 1,035.6 $ 1,035.6 $ 1,545.5 $ 1,545.5 $ 1,025.2 $ 945.2
Total assets.............. 6,121.5 6,166.5 4,021.9 4,066.9 6,168.3 6,213.3 4,045.0 4,174.9
Long-term debt, less
current portion......... 3,160.8 3,105.8 3,075.2 3,020.2 3,123.3 3,068.3 3,011.4 2,853.1
Stockholder's equity
(deficiency)............ 369.4 61.2 (831.9) (1,078.7) 402.4 95.3 (1,065.0) (958.1)
OPERATING STATISTICS (AT
PERIOD END):
Homes passed (000s) (7)... 7,009 7,009 6,840 5,593 6,975 6,975 5,570 5,491
Subscribers (000s) (8).... 4,312 4,312 4,220 3,429 4,280 4,280 3,407 3,307
Penetration (9)........... 61.5% 61.5% 61.7% 61.3% 61.4% 61.4% 61.2% 60.2%
<CAPTION>
<S> <C> <C>
1993(2)(3) 1992(2)
----------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service income............ $ 1,092.7 $ 714.9
Operating, selling,
general and
administrative
expenses................ 655.3 475.1
Depreciation and
amortization............ 241.8 156.6
Operating income.......... 195.6 83.2
Interest expense and
preferred stock dividend
requirements............ 162.2 154.1
Loss before extraordinary
items and cumulative
effect of accounting
changes................. (6.4) (174.0)
Net loss (4).............. (391.7) (226.3)
SUPPLEMENTARY FINANCIAL
DATA:
Operating income before
depreciation and
amortization (5)........ $ 437.4 $ 239.8
Capital expenditures...... $ 94.3 $ 67.9
Ratio of earnings to fixed
charges (6)............. 1.1 --
BALANCE SHEET DATA (AT
PERIOD END):
Property and equipment,
net..................... $ 748.7 $ 742.8
Total assets.............. 2,298.9 2,277.7
Long-term debt, less
current portion......... 2,059.8 2,127.2
Stockholder's equity
(deficiency)............ (995.1) (604.3)
OPERATING STATISTICS (AT
PERIOD END):
Homes passed (000s) (7)... 4,211 4,154
Subscribers (000s) (8).... 2,648 2,583
Penetration (9)........... 62.9% 62.2%
</TABLE>
- ------------------------
(1) Unaudited pro forma consolidated statement of operations and supplementary
financial data and operating statistics are presented as if the Scripps
Acquisition occurred on January 1, 1996. See
"Unaudited Pro Forma Financial Information" included elsewhere in this
Prospectus. Unaudited pro forma consolidated balance sheet data is presented
as if certain transactions completed between April 1, 1997 and May 1, 1997
occurred on each respective balance sheet date. These transactions consist
of (i) repayment of $100.0 million of the Company's notes payable to
affiliates (the "Notes Payable") with the proceeds from drawdowns under
subsidiaries' existing credit facilities ($55.0 million) and existing cash
held by an affiliate ($45.0 million), (ii) exchange of affiliate notes
payable and notes receivable, and the accrued interest thereon, between the
Company, Comcast and certain of their subsidiaries resulting in a reduction
in the Company's Notes Payable of $308.2 million, $246.8 million and $307.1
million as of March 31, 1997 and 1996 and December 31, 1996,
18
<PAGE>
respectively, with a corresponding reduction in the Company's notes
receivable from affiliate (the "Notes Receivable"), and (iii) elimination of
the remaining Notes Receivable, and the accrued interest thereon
(aggregating $539.7 million, $200.1 million and $522.8 million as of March
31, 1997 and 1996 and December 31, 1996, respectively), through a non-cash
dividend to Comcast. Collectively, such transactions are referred to as the
"Intercompany Note Transactions."
(2) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of events, principally the Scripps
Acquisition in 1996, the Maclean Hunter Acquisition (as defined herein) in
1994 and the Split-Off (as defined below) in 1992, which affect the
comparability of the information reflected in the above selected
consolidated financial and other data.
(3) The decrease in service income and operating income before depreciation and
amortization from 1993 to 1994 is primarily a result of the effects of rate
regulation imposed by the 1992 Cable Act, effective September 1993, which
was offset in part by the effects of subscriber growth and new product
offerings. The 1996 Telecom Act provides for rate deregulation of cable
programming service fees by March 1999. See "Legislation and Regulation."
(4) Net loss for the year ended December 31, 1995 includes an extraordinary
item, net of tax, of $2.4 million relating to the refinancing of certain
indebtedness of a subsidiary. Net loss for the year ended December 31, 1993
includes the cumulative effect of accounting changes, net of tax, of $385.3
million, primarily relating to the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," effective
January 1, 1993. Net loss for the year ended December 31, 1992 includes an
extraordinary item of $52.3 million relating to the Company's equity in net
loss from the early extinguishment of debt by Storer Communications, Inc.
("Storer"), an indirect wholly owned subsidiary of the Company, in
connection with the split-off of Storer between the Company and Storer's
other shareholder in December 1992 (the "Split-Off"). Prior to December
1992, the Company had a 50% interest in Storer which was accounted for under
the equity method.
(5) Operating income before depreciation and amortization is commonly referred
to in the cable communications business as "operating cash flow." Operating
cash flow is a measure of a company's ability to generate cash to service
its obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of the
cable communications business and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in the cable
communications industry. Operating cash flow does not purport to represent
net income or net cash provided by operating activities, as those terms are
defined under generally accepted accounting principles, and should not be
considered as an alternative to such measurements as an indicator of the
Company's performance.
(6) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income (loss) before extraordinary items, cumulative
effect of accounting changes, income tax expense (benefit), equity in net
loss of affiliate (1992 only) and fixed charges. Fixed charges consist of
interest expense, interest expense on notes payable to affiliates and
preferred stock dividend requirements of a subsidiary to an affiliate (1992
only). For the three months ended March 31, 1997 and 1996, earnings, as
defined above, were inadequate to cover fixed charges by $38.5 million and
$14.8 million, respectively. On a pro forma basis, for the three months
ended March 31, 1996 and for the year ended December 31, 1996, earnings, as
defined above, were inadequate to cover fixed charges by $42.0 million and
$118.4 million, respectively. For the years ended December 31, 1996, 1995,
1994 and 1992, earnings, as defined above, were inadequate to cover fixed
charges by $27.1 million, $73.8 million, $24.8 million and $83.7 million,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
(7) A home is deemed "passed" if it can be connected to the distribution system
without further extension of the transmission lines.
(8) A dwelling with one or more television sets connected to a system is counted
as one subscriber.
(9) Penetration is calculated by dividing subscribers by homes passed.
Penetration as of December 31, 1994 decreased from December 31, 1993
principally as a result of the Maclean Hunter Acquisition. As of the date of
the acquisition, Maclean Hunter had lower penetration levels than those of
the Company.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements, including the notes thereto, included elsewhere in this
Prospectus. All financial information contained herein is presented as if the
Reorganization had occurred on January 1, 1992.
OVERVIEW
Comcast Cable Communications, Inc. and subsidiaries (the "Company"), a
wholly owned subsidiary of Comcast Corporation ("Comcast"), is a holding company
and conducts all of its operations through subsidiaries. The Company has
experienced significant growth in recent years through both strategic
acquisitions and growth in its existing business. The Company has historically
met its cash needs for operations through its cash flows from operating
activities. Cash requirements for acquisitions and capital expenditures have
been provided through the Company's financing activities, as well as its
existing cash, cash equivalents, short-term investments and cash held by an
affiliate.
GENERAL DEVELOPMENTS OF BUSINESS
DEBT OFFERING
On May 1, 1997, the Company completed the sale of $1.7 billion of notes (the
"Old Notes") through a 144A offering with registration rights. The Old Notes
were issued in four tranches: $300.0 million of
8 1/8% Notes due 2004 (the "Old Seven-Year Notes"), $600.0 million of 8 3/8%
Notes due 2007 (the "Old Ten-Year Notes"), $550.0 million of 8 7/8% Notes due
2017 (the "Old Twenty-Year Notes") and $250.0 million of 8 1/2% Notes due 2027
(the "Old Thirty-Year Notes"). The Company used substantially all of the net
proceeds from the offering to repay certain of its subsidiaries' notes payable
to banks with the balance to be used for subsidiary general purposes.
Interest on the Old Notes is payable semiannually on May 1 and November 1 of
each year, commencing November 1, 1997. The Old Seven-Year Notes, the Old
Ten-Year Notes and the Old Twenty-Year Notes are redeemable, in whole or in
part, at the option of the Company at any time and the Old Thirty-Year Notes are
redeemable, in whole or in part, at the option of the Company at any time after
May 1, 2009, in each case at a redemption price equal to the greater of (i) 100%
of their principal amount, plus accrued interest thereon to the date of
redemption, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate, plus accrued interest on the Old Notes to
the date of redemption. Each holder of the Old Thirty-Year Notes may require the
Company to repurchase all or a portion of the Old Thirty-Year Notes owned by
such holder on May 1, 2009 at a purchase price equal to 100% of the principal
amount thereof.
The Old Notes are unsecured and unsubordinated obligations of the Company
and rank PARI PASSU with all other unsecured and unsubordinated indebtedness and
other obligations of the Company. The Old Notes are effectively subordinated to
all liabilities of the Company's subsidiaries, including trade payables. The Old
Notes are obligations only of the Company and are not guaranteed by and do not
otherwise constitute obligations of Comcast.
The indenture for the Old Notes, among other things, contains restrictions
(with certain exceptions) on the ability of the Company and its Restricted
Subsidiaries (as defined herein) to: (i) make dividend payments or other
restricted payments; (ii) create liens or enter into sale and leaseback
transactions; and (iii) enter into mergers, consolidations, or sales of all or
substantially all of their assets.
20
<PAGE>
SCRIPPS CABLE
In November 1996, Comcast acquired the cable television operations ("Scripps
Cable") of The E.W. Scripps Company in exchange for 93.048 million shares of
Comcast's Class A Special Common Stock valued at $1.552 billion (the "Scripps
Acquisition"). As of the date of the acquisition, Scripps Cable passed more than
1.2 million homes and served more than 800,000 subscribers, with 60% of its
subscribers located in Sacramento, California and Chattanooga and Knoxville,
Tennessee. Comcast accounted for the Scripps Acquisition under the purchase
method. Following the Scripps Acquisition, Comcast contributed Scripps Cable to
the Company (the "Scripps Contribution") at Comcast's historical cost. The
Scripps Contribution was recorded as an increase in additional capital and
Scripps Cable was consolidated with the Company effective November 1, 1996.
MACLEAN HUNTER
In December 1994, the Company, through Comcast MHCP Holdings, L.L.C. (the
"LLC"), acquired the U.S. cable television and alternate access operations of
Maclean Hunter Limited ("Maclean Hunter") from Rogers Communications Inc. and
all of the outstanding shares of Barden Communications, Inc. (collectively such
acquisitions are referred to as the "Maclean Hunter Acquisition") for
approximately $1.249 billion in cash. As of the date of the acquisition, Maclean
Hunter passed more than 1.0 million homes and served more than 540,000
subscribers. The Company and the California Public Employees' Retirement System
("CalPERS") invested $305.6 million and $250.0 million, respectively, in the
LLC, which is owned 55% by the Company and 45% by CalPERS. The Maclean Hunter
Acquisition was financed with cash contributions from the LLC of $555.6 million
and borrowings under a credit facility of an indirect wholly owned subsidiary of
the LLC. The Company accounted for the Maclean Hunter Acquisition under the
purchase method and Maclean Hunter was consolidated with the Company effective
December 22, 1994.
GROSSE POINTE CABLE, INC.
In October 1994, the Company acquired the remaining 75% of issued and
outstanding stock of Grosse Pointe Cable, Inc. ("Grosse Pointe") for $23.4
million, consisting of $21.1 million in cash and a $2.3 million promissory note
due in October 1997. As of the date of the acquisition, Grosse Pointe passed
more than 25,000 homes and served more than 16,000 subscribers. The Company
accounted for the acquisition under the purchase method and Grosse Pointe was
consolidated with the Company effective November 1, 1994.
COMCAST CABLEVISION OF PHILADELPHIA, INC.
In March 1994, a wholly owned subsidiary of Comcast, which held 92% of the
issued and outstanding common stock of Comcast Cablevision of Philadelphia, Inc.
("Phila., Inc.") and which was subsequently contributed to a wholly owned
subsidiary of the Company, completed certain transactions pursuant to which the
then outstanding shares of Phila., Inc. were purchased for approximately $12.9
million in cash. The purchase price, including certain transaction costs, was
primarily funded through a capital contribution from Comcast.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it will be able to meet its current and long-term
liquidity and capital requirements, including fixed charges, through its cash
flows from operating activities, existing cash, cash equivalents, short-term
investments, cash held by an affiliate and lines of credit and other external
financing.
As a result of the Scripps Contribution, the Company no longer has a
stockholder's deficiency. However, the Company expects to continue to recognize
significant losses for the foreseeable future, resulting in decreases in
stockholder's equity. The cable communications industry is experiencing
increasing competition and rapid technological changes. The Company's future
results of operations
21
<PAGE>
will be affected by its ability to react to changes in the competitive
environment and by its ability to implement new technologies. However, the
Company believes that competition, technological changes and its significant
losses will not significantly affect its ability to obtain financing.
CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND CASH HELD BY AN AFFILIATE
Cash, cash equivalents, short-term investments and cash held by an affiliate
as of March 31, 1997 and December 31, 1996 and 1995 were $114.3 million, $113.4
million and $39.2 million, respectively. As of March 31, 1997 substantially all
of the Company's cash, cash equivalents, short-term investments and cash held by
an affiliate was restricted to use by subsidiaries of the Company under
contractual arrangements, including subsidiary credit agreements.
The Company's cash equivalents and short-term investments are recorded at
cost which approximates their fair value. As of December 31, 1996, short-term
investments of $21.5 million included the Company's investment in Time Warner,
Inc. ("Time Warner") common stock (the "Time Warner Stock") recorded at fair
value of $20.7 million. See "--Investments."
In 1995, the Company entered into a custodial account arrangement with
Comcast Financial Agency Corporation ("CFAC"), a wholly owned subsidiary of
Comcast, under which CFAC provides cash management services to the Company.
Under this arrangement, the Company's cash receipts are deposited with and held
by CFAC, as custodian and agent, which invests and disburses such funds at the
direction of the Company. As of March 31, 1997 and December 31, 1996 and 1995,
$66.5 million, $53.5 million and $26.9 million, respectively, of the Company's
cash was held by CFAC. These amounts have been classified as cash held by an
affiliate in the Company's consolidated balance sheet.
INVESTMENTS
In October 1996, the Company received 552,014 shares of Time Warner Stock in
exchange (the "Exchange") for all of the shares of Turner Broadcasting System,
Inc. ("TBS") stock (the "TBS Stock") held by the Company, as a result of the
merger of Time Warner and TBS. As a result of the Exchange, the Company
recognized a pre-tax gain of $19.8 million in 1996, representing the difference
between the Company's historical cost basis in the TBS Stock and the new basis
for the Company's investment in Time Warner Stock of $22.8 million, which was
based on the closing price of the Time Warner Stock on the merger date of
$41.375 per share. In January 1997, the Company sold its entire interest in Time
Warner for $21.2 million. In connection with this sale, the Company recognized a
pre-tax loss of $1.6 million, which is included in net investment income in the
Company's condensed consolidated statement of operations for the three months
ended March 31, 1997.
INVESTMENT RIGHTS
As a result of the Maclean Hunter Acquisition, at any time after December
18, 2001, CalPERS may elect to liquidate its interest in the LLC at a price
based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to Comcast's common stock. Except in certain limited
circumstances, Comcast, at its option, may satisfy this liquidity arrangement by
purchasing CalPERS' interest for cash, by issuing its common stock (subject to
certain limitations) or by selling the LLC. In addition, although the Company
manages Maclean Hunter, certain limited transactions require the approval of
CalPERS.
CAPITAL EXPENDITURES
It is anticipated that, during 1997, the Company will invest approximately
$600 million in capital expenditures, the majority of which will be for the
upgrading and rebuilding of certain of its cable communications systems. The
amount of such capital expenditures for years subsequent to 1997 will depend on
numerous factors, many of which are beyond the Company's control. These factors
include whether competition in a particular market necessitates a cable system
upgrade, whether a particular cable system has sufficient capacity to handle new
product offerings including the offering of cable
22
<PAGE>
modem, cable telephony and telecommunications services, whether and to what
extent the Company will be able to recover its investment under Federal
Communications Commission ("FCC") rate guidelines and other factors, and whether
the Company acquires additional cable systems in need of upgrading or
rebuilding. The Company, however, anticipates capital expenditures for years
subsequent to 1997 will continue to be significant. As of March 31, 1997, the
Company does not have any significant contractual obligations for capital
expenditures.
FINANCING
Other than the Scripps Acquisition, the Company has historically utilized a
strategy of financing its acquisitions and other investing activities through
senior debt at the operating subsidiary level.
The Company has repaid or anticipates repaying a significant portion of its
debt outstanding as of March 31, 1997 with the proceeds from the issuance of the
Old Notes. The following information depicts the impact that these transactions
would have had on certain aspects of the Company's outstanding long-term debt
assuming that, as of March 31, 1997, the Old Notes had been issued and the
Company had made these repayments (dollars in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------
ACTUAL "AS ADJUSTED" (1)
---------- ------------------
<S> <C> <C>
Contractual Maturities of Long-Term Debt:
1997 (2)....................................................................... $ 32.0 $ 32.0
1998........................................................................... 148.3 50.8
1999........................................................................... 370.8 111.6
2000........................................................................... 497.2 124.1
2001........................................................................... 962.2 271.6
Unused Lines of Credit........................................................... 785.0 915.0
Weighted Average Interest Rate................................................... 7.18% 7.93%
</TABLE>
- ------------------------
(1) There can be no assurances that certain of the transactions contemplated by
the "as adjusted" presentation will occur in the manner assumed herein or
occur at all. The impact of the transactions which ultimately occur may
yield results which differ from those presented above.
(2) Represents maturities of long-term debt for the remaining nine months of
1997.
The availability and use of the unused lines of credit is restricted by the
covenants of the related debt agreements and to subsidiary general purposes and
dividend declaration. The Company continually evaluates its debt structure with
the intention of reducing its debt service requirements when desirable.
23
<PAGE>
As of March 31, 1997 and December 31, 1996 and 1995, the Company's long-term
debt, including current portion, was $3.141 billion, $3.184 billion and $3.046
billion, respectively, of which 68.6%, 70.8% and 76.8%, respectively, was at
variable rates. Current portion of long-term debt as of December 31, 1996,
includes $80.0 million relating to optional debt repayments made during the
three months ended March 31, 1997. As of March 31, 1997, the Company and certain
of its subsidiaries had unused irrevocable standby letters of credit totaling
$106.3 million, substantially all of which cover potential fundings relating to
companies in which Comcast, but not the Company, holds an equity interest. The
Company's long-term debt had estimated fair values of $3.215 billion and $3.066
billion as of December 31, 1996 and 1995, respectively. The Company's weighted
average interest rate was 7.18% and 7.48% during the three months ended March
31, 1997 and 1996, respectively, and 7.36%, 8.08% and 6.82% during the years
ended December 31, 1996, 1995 and 1994, respectively.
Between April 1, 1997 and May 1, 1997, the Company (i) repaid $100.0 million
of the its notes payable to affiliates (the "Notes Payable") with the proceeds
from drawdowns under subsidiaries' existing credit facilities ($55.0 million)
and existing cash held by an affiliate ($45.0 million), (ii) completed the
exchange of affiliate notes payable and notes receivable, and the accrued
interest thereon, between the Company, Comcast and certain of their subsidiaries
resulting in a reduction in the Company's Notes Payable of $307.6 million as of
May 1, 1997, with a corresponding reduction in the Company's notes receivable
from affiliate (the "Notes Receivable"), and (iii) eliminated the remaining
Notes Receivable, and the accrued interest thereon (aggregating $546.3 million
as of May 1, 1997), through a non-cash dividend to Comcast. Collectively, such
transactions are referred to as the "Intercompany Note Transactions."
On June 30, 1997, the Company redeemed all of its outstanding 10%
Subordinated Debentures, due 2003 (the "10% Debentures"). An aggregate principal
amount of $139.3 million of the 10% Debentures were redeemed at a redemption
price of 100% of the principal amount thereof, together with accrued interest
thereon. The Company redeemed the 10% Debentures with the proceeds from the
issuance of a note payable to a subsidiary of Comcast. As of March 31, 1997 and
December 31, 1996, the 10% Debentures had an accreted value of $127.1 million
and $126.6 million, respectively.
In connection with the repayment of certain of the Company's subsidiaries'
notes payable to banks and the redemption of the 10% Debentures, during the
second quarter of 1997, the Company will record an extraordinary loss, net of
the related tax benefit, of approximately $17.3 million.
On July 2, 1997, the Company repaid $435.0 million of its long-term debt
outstanding as of March 31, 1997 with the proceeds from the issuance of a note
payable to a subsidiary of Comcast.
The terms of the notes payable issued to a subsidiary of Comcast on June 30,
1997 and July 2, 1997 are substantially the same as those of the 10% Debentures
and the long-term debt referred to above.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to market risk including changes in interest rates.
To manage the volatility relating to these exposures, the Company enters into
various derivative transactions pursuant to the Company's policies in areas such
as counterparty exposure and hedging practices. Positions are monitored using
techniques including market value and sensitivity analyses. The Company does not
hold or issue any derivative financial instruments for trading purposes and is
not a party to leveraged instruments. The credit risks associated with the
Company's derivative financial instruments are controlled through the evaluation
and monitoring of the creditworthiness of the counterparties. Although the
Company may be exposed to losses in the event of nonperformance by the
counterparties, the Company does not expect such losses, if any, to be
significant.
The use of interest rate risk management instruments, such as interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars"), is
24
<PAGE>
required under the terms of certain of the Company's outstanding debt
agreements. The Company's policy is to manage interest costs using a mix of
fixed and variable rate debt. Using Swaps, the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. Caps are
used to lock in a maximum interest rate should variable rates rise, but enable
the Company to otherwise pay lower market rates. Collars limit the Company's
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
The following table summarizes the terms of the Company's existing Swaps,
Caps and Collars as of December 31, 1996 and 1995 (dollars in millions):
<TABLE>
<CAPTION>
NOTIONAL AVERAGE ESTIMATED
AMOUNT MATURITIES INTEREST RATE FAIR VALUE
----------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Variable to Fixed Swaps.................................... $ 530.0 1997-1999 6.14% ($ 1.2)
Caps....................................................... 250.0 1997 8.55%
Collars.................................................... 400.0 1997-1998 7.09%/5.04% 0.2
AS OF DECEMBER 31, 1995
Variable to Fixed Swaps.................................... $ 250.0 1997 6.58% ($ 4.3)
Caps....................................................... 250.0 1997 8.20%
Collars.................................................... 250.0 1997 7.40%/5.11% (0.7)
</TABLE>
The notional amounts of interest rate agreements, as presented in the above
table, are used to measure interest to be paid or received and do not represent
the amount of exposure to credit loss. The estimated fair value approximates the
proceeds (costs) to settle the outstanding contracts. While Swaps, Caps and
Collars represent an integral part of the Company's interest rate risk
management program, their incremental effect on interest expense for the years
ended December 31, 1996, 1995 and 1994 was not significant.
Of the existing derivative financial instruments as of December 31, 1996,
during the three months ended March 31, 1997, a $50.0 million notional amount
Swap with an interest rate of 6.88% and $150.0 million notional amount of Caps
with an average interest rate of 8.50% expired. During the three months ended
March 31, 1997, the Company entered into $160.0 million notional amount of Swaps
that mature in 1998 through 1999 and have an average interest rate of 5.69%.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Cash and cash equivalents increased $8.6 million as of March 31, 1997 from
December 31, 1996 and increased $7.4 million as of March 31, 1996 from December
31, 1995. Changes in cash and cash equivalents resulted from cash flows from
operating, financing and investing activities which are explained below.
Net cash provided by operating activities amounted to $129.2 million and
$90.0 million for the three months ended March 31, 1997 and 1996, respectively.
The increase of $39.2 million was principally due to the increase in the
Company's operating income before depreciation and amortization, including the
effects of the Scripps Contribution, and changes in working capital as a result
of the timing of receipts and disbursements. See "--Results of Operations."
Net cash (used in) provided by financing activities was $(20.0) million and
$35.8 million for the three months ended March 31, 1997 and 1996, respectively.
During the three months ended March 31, 1997, the Company borrowed $40.0 million
under existing lines of credit and repaid $83.7 million of its long-term debt.
In addition, during the three months ended March 31, 1997, net transactions with
affiliates, which primarily resulted from the timing of disbursements, were
$24.3 million. During the three months
25
<PAGE>
ended March 31, 1996, the Company borrowed $63.0 million under existing lines of
credit and repaid $61.7 million of its long-term debt. In addition, during the
three months ended March 31, 1996, net transactions with affiliates, which
primarily resulted from the timing of disbursements, were $34.5 million.
Net cash used in investing activities was $100.6 million and $118.4 million
for the three months ended March 31, 1997 and 1996, respectively. During the
three months ended March 31, 1997, net cash used in investing activities
included capital expenditures of $106.6 million and an increase in cash held by
an affiliate of $13.0 million, offset by the proceeds from the sale of the
Company's shares of Time Warner Stock of $21.2 million. During the three months
ended March 31, 1996, net cash used in investing activities included capital
expenditures of $54.0 million and an increase in cash held by an affiliate of
$59.6 million.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Cash and cash equivalents increased $26.8 million as of December 31, 1996
from December 31, 1995 and decreased $60.9 million as of December 31, 1995 from
December 31, 1994. Changes in cash and cash equivalents resulted from cash flows
from operating, financing and investing activities which are explained below.
Net cash provided by operating activities amounted to $400.0 million, $176.2
million and $300.5 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The increase of $223.8 million from 1995 to 1996 was principally
due to changes in working capital as a result of the timing of receipts and
disbursements, the payment of deferred expenses charged by an affiliate in 1995
and the increase in the Company's operating income before depreciation and
amortization, including the effects of the Scripps Contribution. See "--Results
of Operations." The decrease of $124.3 million from 1994 to 1995 was principally
due to the increase in payments of deferred expenses charged by an affiliate in
1995 and changes in working capital as a result of the timing of receipts and
disbursements, offset by the increase in the Company's operating income before
depreciation and amortization, principally due to the effects of the Maclean
Hunter Acquisition. See "--Results of Operations."
Net cash provided by financing activities was $311.6 million, $106.5 million
and $1.486 billion for the years ended December 31, 1996, 1995 and 1994,
respectively. During 1996, the Company borrowed $448.0 million under existing
lines of credit and repaid $284.5 million of its long-term debt. In addition,
during 1996, the Company received $59.7 million of proceeds from the issuance of
notes payable to affiliates and net transactions with affiliates, which
primarily resulted from the timing of disbursements, were $92.5 million. During
1995, the Company borrowed $720.0 million under new and existing lines of credit
and repaid $665.6 million of its long-term debt, including $490.4 million in
connection with the refinancing of certain indebtedness. In addition, during
1995, the Company received $50.9 million of proceeds from the issuance of notes
payable to affiliates. Proceeds from borrowings of $1.124 billion in 1994
included $1.015 billion relating to the Maclean Hunter Acquisition. During 1994,
the Company repaid $339.5 million of its long-term debt. In 1994, the Company
received capital contributions from Comcast and CalPERS of $305.6 million and
$250.0 million, respectively, in connection with the Maclean Hunter Acquisition.
In addition, during 1994, the Company received $100.7 million of proceeds from
the issuance of notes payable to affiliates and net transactions with
affiliates, which primarily resulted from the timing of disbursements, were
$54.6 million.
Net cash used in investing activities was $684.8 million, $343.6 million and
$1.770 billion for the years ended December 31, 1996, 1995 and 1994,
respectively. During 1996, net cash used in investing activities included an
increase in notes receivable from affiliate of $340.0 million and capital
expenditures of $298.2 million. As the Scripps Contribution was a non-cash
transaction, it had no significant impact on the Company's investing activities
in its 1996 consolidated statement of cash flows. During 1995, net cash used in
investing activities included an increase in notes receivable from affiliate of
$52.2 million and capital expenditures of $238.5 million. Acquisitions in 1994
consisted principally of $1.249 billion paid in connection with the Maclean
Hunter Acquisition. In addition, during 1994, net cash used in investing
activities included an increase in notes receivable from affiliate of $300.0
million and capital expenditures of $173.4 million.
26
<PAGE>
RESULTS OF OPERATIONS
The effects of the Company's recent acquisitions have been to increase
significantly the Company's revenues and expenses, resulting in substantial
increases in its operating income before depreciation and amortization,
depreciation and amortization expense and interest expense. As a result of the
increases in depreciation and amortization expense and interest expense
associated with these acquisitions and their financing, it is expected that the
Company will continue to recognize significant losses for the foreseeable
future.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Summarized consolidated financial information for the Company for the three
months ended March 31, 1997 and 1996 is as follows (dollars in millions, "NM"
denotes percentage is not meaningful):
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/ (DECREASE)
MARCH 31,
---------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 $ %
---------- ---------- --------- ---------
Service income..................................................... $ 501.1 $ 382.3 $ 118.8 31.1%
Operating, selling, general and administrative expenses............ 340.0 245.0 95.0 38.8
---------- ----------
Operating income before depreciation and amortization(1)........... 161.1 137.3 23.8 17.3
Depreciation and amortization...................................... 138.8 95.3 43.5 45.6
---------- ----------
Operating income................................................... 22.3 42.0 (19.7) (46.9)
---------- ----------
Interest expense................................................... 56.7 56.7
Interest expense on notes payable to affiliates.................... 9.1 8.6 0.5 5.8
Investment income, net............................................. (2.7) (2.7) NM
Income tax benefit................................................. (9.3) (4.1) 5.2 NM
Minority interest.................................................. (5.0) (5.8) (0.8) (13.8)
---------- ----------
Net loss........................................................... $ (29.2) $ (10.7) $ 18.5 NM%
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Operating income before depreciation and amortization is commonly referred
to in the cable communications business as "operating cash flow." Operating
cash flow is a measure of a company's ability to generate cash to service
its obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of the
cable communications business and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in the cable
communications industry. Operating cash flow does not purport to represent
net income or net cash provided by operating activities, as those terms are
defined under generally accepted accounting principles, and should not be
considered as an alternative to such measurements as an indicator of the
Company's performance. See "Statement of Cash Flows" above for a discussion
of net cash provided by operating activities.
As a result of the Scripps Contribution, the Company commenced consolidating
the financial results of Scripps Cable effective November 1, 1996. The following
table presents actual financial information for the three months ended March 31,
1997 and pro forma financial information for the three months ended March 31,
1996 as if the Scripps Contribution occurred on January 1, 1996. Pro forma
financial information is presented herein for purposes of analysis and may not
reflect what actual operating
27
<PAGE>
results would have been had the Company owned Scripps Cable since January 1,
1996 (dollars in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, INCREASE
---------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 $ %
---------- ---------- --------- ---------
Service income..................................................... $ 501.1 $ 457.3 $ 43.8 9.6%
Operating, selling, general and administrative expenses............ 340.0 304.8 35.2 11.5
---------- ---------- ---------
Operating income before depreciation and
amortization (a)................................................. $ 161.1 $ 152.5 $ 8.6 5.6%
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
- ------------------------
(a) See footnote (1) on page 27.
Of the $43.8 million pro forma increase in service income for the three
month period from 1996 to 1997, $10.0 million is attributable to subscriber
growth, $32.0 million relates to changes in rates and $1.8 million relates to
other product offerings.
Of the $35.2 million pro forma increase in operating, selling, general and
administrative expenses for the three month period from 1996 to 1997, $9.6
million is attributable to increases in the costs of cable programming as a
result of subscriber growth, additional channel offerings and changes in rates,
$5.0 million is attributable to increases in costs associated with the
implementation of three regional customer service call centers and $20.6 million
results from increases in the cost of labor, other volume related expenses and
costs associated with new product offerings.
The Company receives sales commissions from QVC, Inc. ("QVC"), an electronic
retailer and a majority owned and controlled subsidiary of Comcast, based on a
percentage of QVC sales to the Company's subscribers. In addition, the Company
recognizes revenues relating to the carriage of certain QVC programming. For
each of the three months ended March 31, 1997 and 1996, the Company's service
income includes $1.9 million relating to QVC.
Under management agreements, Comcast charged the Company's subsidiaries
management fees of $29.0 million and $21.8 million during the three months ended
March 31, 1997 and 1996, respectively. Such management fees are included in
selling, general and administrative expenses in the Company's condensed
consolidated statement of operations for the three months ended March 31, 1997
and 1996.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage of certain subscriber revenues. Comcast
charges each of the Company's subsidiaries for programming on a basis which
generally approximates the amount each such subsidiary would be charged if it
purchased directly from the supplier, subject to limitations imposed by debt
facilities for certain subsidiaries, and did not benefit from the purchasing
power of the Company's consolidated operations. Amounts charged to the Company
by Comcast for programming (the "Programming Charges") are included in operating
expenses in the Company's condensed consolidated statement of operations for the
three months ended March 31, 1997 and 1996. The Company purchases certain other
services, including insurance and employee benefits, from Comcast under
cost-sharing arrangements on terms that reflect Comcast's actual cost. The
Company reimburses Comcast for certain other expenses (primarily salaries) under
cost-reimbursement arrangements. Under all of these arrangements, the Company
incurred expenses of $171.4 million and $121.8 million, including $142.7 million
and $101.0 million of Programming Charges, during the three months ended March
31, 1997 and 1996, respectively. The Programming Charges include $9.2 million
and $6.7 million during the three months ended March 31, 1997 and 1996,
respectively, relating to programming purchased by the Company, through Comcast,
from suppliers in which Comcast holds an equity interest. It is anticipated that
the Company's
28
<PAGE>
cost of cable programming will increase in the future as cable programming rates
increase and additional sources of cable programming become available.
The $43.5 million increase in depreciation and amortization expense for the
three month period from 1996 to 1997 is primarily attributable to the effects of
the Scripps Contribution and the effects of capital expenditures.
Interest expense remained consistent for the three month period from 1996 to
1997 due to a decrease in interest rates from 1996 to 1997, offset by the
effects of an increase in the Company's outstanding long-term debt. The Company
anticipates that, for the foreseeable future, interest expense will be a
significant cost to the Company and will have a significant adverse effect on
the Company's ability to realize net earnings. The Company believes it will
continue to be able to meet its obligations through its ability both to generate
operating income before depreciation and amortization and to obtain external
financing.
The $2.7 million decrease in net investment income for the three month
period from 1996 to 1997 is principally due to the loss recognized upon the sale
of the Company's shares of Time Warner Stock in 1997 and a decrease in cash and
short-term investments held by the Company from 1996 to 1997.
The $5.2 million increase for the three month period from 1996 to 1997 in
income tax benefit is primarily attributable to the increase in the Company's
loss before income tax benefit.
For the three months ended March 31, 1997 and 1996, the Company's earnings
before income tax benefit and fixed charges (interest expense and interest
expense on notes payable to affiliates) were $27.3 million and $50.5 million,
respectively. Such earnings were not adequate to cover the Company's fixed
charges of $65.8 million and $65.3 million for the three months ended March 31,
1997 and 1996, respectively. The Company's fixed charges include non-cash
interest expense of $2.2 million and $3.2 million for the three months ended
March 31, 1997 and 1996, respectively. The inadequacy of these earnings to cover
fixed charges is primarily due to the substantial non-cash charges for
depreciation and amortization expense.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Summarized consolidated financial information for the Company for the three
years ended December 31, 1996 is as follows (dollars in millions, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER INCREASE/ (DECREASE)
31,
---------------------- --------------------
<S> <C> <C> <C> <C>
1996 1995 $ %
---------- ---------- --------- ---------
Service income..................................................... $ 1,641.0 $ 1,454.9 $ 186.1 12.8%
Operating, selling, general and administrative expenses............ 1,034.4 912.5 121.9 13.4
---------- ----------
Operating income before depreciation and amortization(a)........... 606.6 542.4 64.2 11.8
Depreciation and amortization...................................... 420.3 376.2 44.1 11.7
---------- ----------
Operating income................................................... 186.3 166.2 20.1 12.1
---------- ----------
Interest expense................................................... 228.4 245.6 (17.2) (7.0)
Interest expense on notes payable to affiliates.................... 32.1 28.2 3.9 13.8
Investment income.................................................. (25.9) (9.2) 16.7 NM
Other.............................................................. 0.5 0.2 0.3 NM
Income tax benefit................................................. (4.5) (24.9) (20.4) (81.9)
Minority interest.................................................. (21.7) (24.8) (3.1) (12.5)
Extraordinary item................................................. (2.4) (2.4) NM
---------- ----------
Net loss........................................................... ($ 22.6) ($ 51.3) ($ 28.7) (55.9%)
---------- ----------
---------- ----------
</TABLE>
(a) See footnote (1) on page 27.
29
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER INCREASE/ (DECREASE)
31,
---------------------- --------------------
<S> <C> <C> <C> <C>
1995 1994 $ %
---------- ---------- --------- ---------
Service income..................................................... $ 1,454.9 $ 1,065.3 $ 389.6 36.6%
Operating, selling, general and administrative expenses............ 912.5 688.6 223.9 32.5
---------- ----------
Operating income before depreciation and amortization(a)........... 542.4 376.7 165.7 44.0
Depreciation and amortization...................................... 376.2 232.7 143.5 61.7
---------- ----------
Operating income................................................... 166.2 144.0 22.2 15.4
---------- ----------
Interest expense................................................... 245.6 155.6 90.0 57.8
Interest expense on notes payable to affiliates.................... 28.2 20.9 7.3 34.9
Investment income.................................................. (9.2) (3.3) 5.9 NM
Other.............................................................. 0.2 (3.4) 3.6 NM
Income tax benefit................................................. (24.9) (1.8) 23.1 NM
Minority interest.................................................. (24.8) (1.0) 23.8 NM
Extraordinary item................................................. (2.4) 2.4 NM
---------- ----------
Net loss........................................................... ($ 51.3) ($ 23.0) $ 28.3 NM
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(a) See footnote (1) on page 27.
The Scripps Acquisition accounted for $52.3 million of the $186.1 million
increase in service income from 1995 to 1996. Of the remaining increase of
$133.8 million, $33.5 million is attributable to subscriber growth, $84.5
million is attributable to changes in rates, $4.7 million is attributable to
growth in cable advertising sales and $11.1 million relates to other product
offerings. The Maclean Hunter Acquisition accounted for $270.1 million of the
$389.6 million increase in service income from 1994 to 1995. Of the remaining
increase of $119.5 million, $46.0 million is attributable to subscriber growth,
$54.6 million relates to changes in rates, which includes the change in the
estimated effects of cable rate regulation, $14.0 million results from growth in
cable advertising sales and $4.9 million relates to growth in other product
offerings.
For the years ended December 31, 1996, 1995 and 1994, the Company's service
income includes $8.3 million, $7.9 million and $4.7 million, respectively,
relating to QVC.
The Scripps Acquisition accounted for $39.6 million of the $121.9 million
increase in operating, selling, general and administrative expenses from 1995 to
1996. Of the remaining increase of $82.3 million, $27.5 million is attributable
to increases in the costs of programming as a result of subscriber growth,
additional channel offerings and changes in rates, $25.3 million is attributable
to increases in costs associated with implementation of three regional customer
service call centers and increases in the cost of labor, $6.8 million, excluding
management fees charged to Scripps Cable, is attributable to an increase in
management fees charged by Comcast as a result of the growth in the Company's
service income, $4.2 million is attributable to growth in cable advertising
sales and $18.5 million is attributable to increases in other volume related
expenses. The Maclean Hunter Acquisition accounted for $162.4 million of the
$223.9 million increase in operating, selling, general and administrative
expenses from 1994 to 1995. Of the remaining increase of $61.5 million, $34.8
million is attributable to increases in the costs of cable programming as a
result of subscriber growth, additional channel offerings and changes in rates,
$5.5 million, excluding management fees charged to Maclean Hunter, is
attributable to an increase in management fees charged by Comcast as a result of
the growth in the Company's service income, $7.2 million is attributable to
increases in expenses associated with the growth in cable advertising sales and
$14.0 million results from increases in the cost of labor and other volume
related expenses. Comcast charged the Company's subsidiaries management fees of
$93.2 million, $83.5 million and $65.9 million during the years ended December
31, 1996, 1995 and 1994, respectively. Such management fees are included in
selling, general and administrative expenses in the Company's consolidated
statement of operations for the years ended December 31, 1996, 1995 and 1994.
30
<PAGE>
Under the cost-sharing and cost-reimbursement arrangements referred to
above, the Company incurred expenses of $505.0 million, $439.4 million and
$327.7 million, including $417.0 million, $368.3 million and $264.1 million of
programming costs, during the years ended December 31, 1996, 1995 and 1994,
respectively. Such programming costs include $26.2 million, $21.7 million and
$16.7 million during the years ended December 31, 1996, 1995 and 1994,
respectively, relating to programming purchased by the Company, through Comcast,
from suppliers in which Comcast holds an equity interest.
The $44.1 million increase in depreciation and amortization expense from
1995 to 1996 is primarily attributable to the effects of capital expenditures
during 1995 and 1996 and the effects of the Scripps Contribution in November
1996. The $143.5 million increase in depreciation and amortization expense from
1994 to 1995 is attributable to the effects of the Maclean Hunter Acquisition in
December 1994 and the effects of capital expenditures during the periods.
The $17.2 million decrease in interest expense from 1995 to 1996 is
primarily attributable to a decrease in interest rates from 1995 to 1996,
offset, in part, by an increase in the Company's outstanding long-term debt. The
$90.0 million increase in interest expense from 1994 to 1995 is primarily due to
increased levels of debt associated with the Maclean Hunter Acquisition.
The $16.7 million increase in investment income from 1995 to 1996 is
principally due to the gain recognized upon the exchange of the shares of TBS
held by the Company for Time Warner Stock in 1996. The $5.9 million increase in
investment income from 1994 to 1995 is principally due to an increase in the
Company's cash, cash equivalents, short-term investments and cash held by an
affiliate as compared to the prior year period.
The $20.4 million decrease from 1995 to 1996 and the $23.1 million increase
from 1994 to 1995 in income tax benefit are primarily attributable to changes in
the Company's loss before income tax benefit.
The $23.8 million increase in minority interest income from 1994 to 1995 is
attributable to minority interest in the net loss of Maclean Hunter as a result
of the Maclean Hunter Acquisition in December 1994.
The Company incurred debt extinguishment costs totaling $3.6 million during
1995 in connection with the refinancing of certain indebtedness of a subsidiary,
resulting in an extraordinary loss, net of tax, of $2.4 million.
For the years ended December 31, 1996, 1995 and 1994, the Company's earnings
before extraordinary items, income tax benefit and fixed charges (interest
expense and interest expense on notes payable to affiliates) were $233.4
million, $200.0 million and $151.7 million, respectively. Such earnings were not
adequate to cover the Company's fixed charges of $260.5 million, $273.8 million
and $176.5 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The Company's fixed charges include non-cash interest expense of
$8.2 million, $7.8 million and $14.3 million for the years ended December 31,
1996, 1995 and 1994, respectively. The inadequacy of these earnings to cover
fixed charges is primarily due to the substantial non-cash charges for
depreciation and amortization expense.
- ------------------------
The Company believes that its losses and inadequacy of earnings to cover
fixed charges will not significantly affect the performance of its normal
business activities because of its existing cash, cash equivalents, short-term
investments and cash held by an affiliate, its ability to generate operating
income before depreciation and amortization and its ability to obtain external
financing.
The Company believes that its operations are not materially affected by
inflation.
31
<PAGE>
REGULATORY DEVELOPMENTS
The Company has settled the majority of outstanding proceedings challenging
its rates charged for regulated cable services. In December 1995, the FCC
adopted an order approving a negotiated settlement of rate complaints pending
against the Company for cable programming service tiers ("CPSTs") which provided
$6.6 million in refunds, plus interest, given in the form of bill credits during
1996, to 1.3 million of the Company's cable subscribers. As part of the
negotiated settlement, the Company agreed to forego certain inflation and
external cost adjustments for systems covered by its cost-of-service filings for
CPSTs. The FCC and the Company recently negotiated an agreement in which the
Company has committed to complete certain system upgrades and improvements by
March 1999 in return for which it may move a limited number of currently
regulated programming services in certain cable systems to a single migrated
product tier on each system that will become an unregulated new product tier
after December 1997. In addition, the Company will also provide free cable
service connections, modems and modem service to certain public and private
schools and to 250 public libraries in its franchise areas. The FCC is seeking
public comment on the proposed agreement and the Company cannot predict the
outcome of this proceeding. See "Legislation and Regulation -- Rate Regulation."
The Company currently is seeking to justify rates for basic cable services and
equipment in certain of its cable systems in the State of Connecticut on the
basis of a cost-of-service showing. The State of Connecticut has ordered the
Company to reduce such rates and to make refunds to subscribers. The Company has
appealed the Connecticut decision to the FCC. Recent pronouncements from the
FCC, which generally support the Company's position on appeal, have caused the
State of Connecticut to reexamine its prior ruling. While the Company cannot
predict the outcome of these matters, the Company believes that the ultimate
resolution of these pending regulatory matters will not have a material adverse
impact on the Company's financial position, results of operations or liquidity.
32
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on 1997; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $300,000,000 aggregate principal amount
of the Old Seven-Year Notes, $600,000,000 aggregate principal amount of the Old
Ten-Year Notes, $550,000,000 aggregate principal amount of the Old Twenty-Year
Notes, and $250,000,000 aggregate principal amount of the Old Thirty-Year Notes
were outstanding. This Prospectus, together with the Letter of Transmittal, is
first being sent on or about the date set forth on the cover page to all holders
of Old Notes at the addresses set forth in the security register with respect to
Old Notes maintained by the Bank of Montreal Trust Company, as Trustee (the
"Trustee"). The Company's obligations to accept Old Notes for exchange pursuant
to the Exchange Offer is subject to certain conditions as set forth under
"Certain Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of any Old Notes, by giving oral or written notice of
such extension to the Exchange Agent (as defined below) and notice of such
extension to the holders as described below. During any such extension, all Old
Notes previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves 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
specified below under "Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to Bank of Montreal Trust Company (the
"Exchange Agent") at one of the addresses set forth below under "Exchange Agent"
on or prior to the Expiration Date. In addition, (i) certificates for such Old
Notes must be received
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by the Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF
OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. 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 TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the person signing the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by, a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder and
signed exactly as the name or names of the registered holder or holders that
appear on the Old Notes and with the signature thereon guaranteed by an Eligible
Institution.
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 Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right in its
sole discretion to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation of the
terms and conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with the tenders of
Old Notes for exchange must be cured within such reasonable period of time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers or corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing and, unless waived by the Company, proper evidence satisfactory to
the Company of its authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the
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distribution of such New Notes, (iii) if the holder is not a broker-dealer, or
is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is engaged
in or intends to participate in the distribution of such New Notes and (iv)
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company. If the tendering holder is a
broker-dealer (whether or not it is also an "affiliate") that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, the holder will not be deemed to admit that it is an
"Underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of New 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 certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted for
any reason set forth in the terms and conditions of the Exchange Offer or if
certificates representing Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Old Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Old Notes tendered by book-entry transfers into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from May 1, 1997, payable semiannually on
May 1 and November 1, of each year commencing on November 1, 1997. Holders of
Old Notes whose Old Notes are accepted for exchange will be deemed to have
waived the right to receive any payment in respect of interest on the Old Notes
accrued from May 1, 1997 until the date of the issuance of the New Notes.
Consequently, holders who exchange their Old Notes for New Notes will receive
the same interest payment on November 1, 1997 (the first payment date with
respect to the Old Notes and the New Notes) that they would have received had
they not accepted the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Old Notes by causing the Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account in
accordance with the Book-Entry Transfer Facility's Automated Tender Offer
Program ("ATOP") procedures for transfer. However, the exchange for the Old
Notes so
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<PAGE>
tendered will only be made after timely confirmation of such book-entry transfer
of Old Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by the Book-Entry Transfer
Facility and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from a participant tendering Old Notes that are the
subject of such Book-Entry Confirmation that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal, and that the
Company may enforce such agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the 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 receives from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, 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 five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates of 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 the Letter
of Transmittal 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 a Book-Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal, are received by the
Exchange Agent within five NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), include a
statement that such a holder is withdrawing its election to have such Old Notes
exchanged, and the name of the registered holder of such Old Notes, and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Company that the person withdrawing the tender
has succeeded to the beneficial ownership of the Old Notes being withdrawn. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, 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 which 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 (or,
in the
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case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility 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 under "Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, such acceptance or issuance would violate applicable
law or any interpretation of the staff of the Commission.
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise the foregoing rights shall not be deemed a waiver of any such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA").
EXCHANGE AGENT
Bank of Montreal Trust Company has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent, addressed as follows:
Deliver To:
BANK OF MONTREAL TRUST COMPANY, EXCHANGE AGENT
By Mail or By Hand:
77 Water Street
New York, New York 10005
Attention: Amy Roberts
By Facsimile:
(212) 701-7684
Confirm by Telephone:
(212) 701-7653
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
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<PAGE>
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Company and its affiliates. No additional compensation
will be paid to any such officers and employees who engage in soliciting
tenders. The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, 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 estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $1.0 million.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer to be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New 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 and, except in
certain limited circumstances, will no longer have any registration rights or be
entitled to the related additional interest with respect to the Old Notes. 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 intend to register the Old Notes under the Securities Act. The Company
believes that, based upon interpretations contained in letters issued to third
parties by the staff of the Commission, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by each holder thereof (other than a broker-dealer, as set
forth below, and any such holder which is an "affiliate" of the Company 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 holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes. If any holder has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on
the applicable interpretation of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any jurisdiction.
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BUSINESS
OVERVIEW
Comcast Cable Communications, Inc. is engaged in the development, management
and operation of cable communications systems. The Company is currently the
fourth-largest cable television system operator in the United States and as of
March 31, 1997, served 4.3 million customers of the 7.0 million households
passed by the Company's systems. The Company is a wholly owned subsidiary of
Comcast Corporation.
Over 80% of the Company's customers are located in ten regional clusters. By
acquiring and developing systems in geographic proximity, the Company has
realized significant operating efficiencies through the consolidation of various
managerial, administrative and technical functions. Consistent with this
approach, the Company is currently consolidating the majority of its local
customer service call centers into large regional operations. These regional
call centers have technically advanced telephone systems that provide 24-hour
per day call answering, telemarketing and other services. These centers will
allow the Company to better serve its customer base, as well as to cross-market
new products and services to its subscribers.
The table below sets forth a summary of homes passed, subscribers and
penetration rates for the Company's ten largest regional clusters as of March
31, 1997 (in thousands, except penetration):
<TABLE>
<CAPTION>
GEOGRAPHIC CLUSTER HOMES PASSED SUBSCRIBERS PENETRATION
- --------------------------------------------------------------------- ----------------- ------------- ---------------
<S> <C> <C> <C>
New Jersey........................................................... 914 585 64.0%
Florida.............................................................. 897 554 61.8
Michigan............................................................. 960 494 51.5
Baltimore Area....................................................... 650 440 67.7
Philadelphia Area.................................................... 493 301 61.1
Southern California.................................................. 506 266 52.6
Tennessee............................................................ 397 257 64.7
Sacramento........................................................... 455 235 51.6
Indianapolis......................................................... 362 224 61.9
Alabama.............................................................. 310 205 66.1
----- -----
SUBTOTAL............................................................. 5,944 3,561 59.9
Other Systems........................................................ 1,065 751 70.5
----- -----
TOTAL................................................................ 7,009 4,312 61.5
----- -----
----- -----
</TABLE>
The Company considers technological innovation to be an important component
of its service offerings and customer satisfaction. Through the use of fiber
optic cable and other technological improvements, the Company has increased
system reliability, channel capacity and its ability to deliver advanced video
and data services. The majority of the Company's subscribers are currently
served by systems that have the capacity to carry in excess of 60 channels. The
Company is currently implementing a significant network upgrade in most of its
cable systems. A typical network upgrade would consist of the following: (i)
deployment of fiber optic cable further into the traditional coaxial cable
distribution system, (ii) reconfiguration and downsizing of the end customer's
node to an approximate 500-1,000 home environment, and (iii) introduction and
activation of two-way communication capability which will allow for signals and
data to be sent from the end customer's home upstream to the cable system
headend, as opposed to traditional one-way broadcast transmission. The upgraded
systems will generally have capacity in excess of 100 channels.
The Company derives the majority of its revenues from recurring subscription
services and generates additional revenues from non-subscription services such
as advertising, pay-per-view, installations
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and commissions from electronic retailing. Monthly subscription rates and
related charges vary according to the type of service selected (such as basic
cable, premium cable, sports channels and special interest channels) as well as
the type of equipment rented. In addition, in December 1996, the Company began
marketing high-speed Internet access services provided via cable modems to
customers served by two of its cable systems. The Company expects to expand the
marketing of such services in selected cable systems during 1997.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage of certain subscriber revenues. Comcast
charges each of the Company's subsidiaries for programming on a basis which
generally approximates the amount each such subsidiary would be charged if it
purchased directly from the supplier, subject to limitations imposed by debt
facilities for certain subsidiaries, and did not benefit from the purchasing
power of the Company's consolidated operations. Programming costs increase in
the ordinary course of the Company's business as a result of increases in the
number of subscribers, expansion of the number of channels provided to customers
and contractual rate increases from programming suppliers.
The Company purchases certain other services, including insurance and
employee benefits, from Comcast under cost-sharing arrangements on terms that
reflect Comcast's actual cost. In addition, Comcast, through management
agreements, manages the operations of the Company's subsidiaries, including
rebuilds and upgrades. Comcast charged the Company's subsidiaries management
fees of $29.0 million and $21.8 million during the three months ended March 31,
1997 and 1996, respectively, and $93.2 million, $83.5 million and $65.9 million
during the years ended December 31, 1996, 1995 and 1994, respectively. See
"Certain Relationships and Related Transactions."
STRATEGIC ACQUISITIONS
From time to time the Company acquires cable television systems. The
Company's most significant recent acquisitions are as follows:
SCRIPPS CABLE
In November 1996, Comcast acquired Scripps Cable from E.W. Scripps in
exchange for 93.048 million shares of Comcast's Class A Special Common Stock
valued at $1.552 billion. As of the date of the acquisition, Scripps Cable
passed more than 1.2 million homes and served more than 800,000 subscribers,
with 60% of its subscribers located in Sacramento, California and Chattanooga
and Knoxville, Tennessee. Comcast accounted for the Scripps Acquisition under
the purchase method. Following the Scripps Acquisition, Comcast contributed
Scripps Cable to the Company at Comcast's historical cost. Scripps Cable was
consolidated with the Company effective November 1, 1996.
MACLEAN HUNTER
In December 1994, the Company, through the LLC, acquired Maclean Hunter from
Rogers Communications Inc. and all of the outstanding shares of Barden
Communications, Inc. for approximately $1.249 billion in cash. As of the date of
the acquisition, Maclean Hunter passed more than 1.0 million homes and served
more than 540,000 subscribers. The Company and CalPERS invested $305.6 million
and $250.0 million, respectively, in the LLC, which is owned 55% by the Company
and 45% by CalPERS. The Maclean Hunter Acquisition was financed with cash
contributions from the LLC of $555.6 million and borrowings under a credit
facility of an indirect wholly owned subsidiary of the LLC. At any time after
December 18, 2001, CalPERS may elect to liquidate its interest in the LLC at a
price based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to Comcast's common stock. Except in certain limited
circumstances, Comcast, at its option, may satisfy this liquidity arrangement by
purchasing CalPERS' interest for cash, by issuing its common stock (subject to
certain limitations) or by selling the LLC. In
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addition, although the Company manages Maclean Hunter, certain limited
transactions require the approval of CalPERS. The Company accounted for the
Maclean Hunter Acquisition under the purchase method and Maclean Hunter was
consolidated with the Company effective December 22, 1994.
GENERAL
A cable communications system receives signals by means of special antennae,
microwave relay systems, earth stations and fiber optics. The system amplifies
such signals, provides locally originated programs and ancillary services and
distributes programs to subscribers through a fiber optic and coaxial cable
system.
Cable communications systems generally offer subscribers the signals of all
national television networks; local and distant independent, specialty and
educational television stations; satellite-delivered non-broadcast channels;
locally originated programs; educational programs; audio programming; electronic
retailing and public service announcements. In addition, each of the Company's
systems offer, for an extra monthly charge, one or more premium services ("Pay
Cable") such as Home Box Office-Registered Trademark-,
Cinemax-Registered Trademark-, Showtime-Registered Trademark-, The Movie
Channel-TM- and Encore-Registered Trademark-, which generally offer, without
commercial interruption, feature motion pictures, live and taped sporting
events, concerts and other special features. Substantially all of the Company's
systems offer pay-per-view services, which permit a subscriber to order, for a
separate fee, individual feature motion pictures and special event programs. The
Company has also started offering or is field testing other cable-based services
including cable modems, video games and data transfer. See "--Online Services."
In the future the Company may offer cable telephony services either using its
existing cable plant or as a reseller.
Cable communications systems are generally constructed and operated under
non-exclusive franchises granted by state or local governmental authorities.
Franchises typically contain many conditions, such as time limitations on
commencement or completion of construction; conditions of service, including
number of channels, types of programming and provision of free services to
schools and other public institutions; and the maintenance of insurance and
indemnity bonds. Cable franchises are subject to the Cable Communications Policy
Act of 1984 (the "1984 Cable Act," and together with the 1992 Cable Act, the
"Cable Acts"), the 1992 Cable Act and the 1996 Telecom Act, as well as FCC,
state and local regulations. See "Legislation and Regulation."
The Company's franchises typically provide for periodic payment of fees to
franchising authorities of 5% of "revenues" (as defined by each franchise
agreement), which fees may be passed on to subscribers. Franchises are generally
non-transferable without the consent of the governmental authority. Many of the
Company's franchises were granted for an initial term of 15 years. Although
franchises historically have been renewed and, under the Cable Acts, should
continue to be renewed for companies that have provided adequate service and
have complied generally with franchise terms, renewal may be more difficult as a
result of the 1992 Cable Act and may include less favorable terms and
conditions. Furthermore, the governmental authority may choose to award
additional franchises to competing companies at any time. See "--Competition"
and "Legislation and Regulation." In addition, under the 1996 Telecom Act,
certain providers of programming services may be exempt from local franchising
requirements.
REVENUE SOURCES
The Company's cable communications systems offer varying levels of
programming service, depending primarily on their respective channel capacities.
As of March 31, 1997, a majority of the Company's subscribers were served by
systems that had the capacity to carry in excess of 60 channels.
Monthly service and equipment rates and related charges vary in accordance
with the type of programming service selected by the subscriber. The Company may
receive an additional monthly fee for Pay Cable service, the charge for which
varies with the type and level of service selected by the subscriber. Additional
charges are often imposed for installation services, commercial subscribers,
program guides and other services. The Company also generates revenue from
advertising, pay-per-
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view services and commissions from electronic retailing. Subscribers typically
pay on a monthly basis and generally may discontinue services at any time. See
"Legislation and Regulation."
PROGRAMMING AND SUPPLIERS
The Company generally pays either a monthly fee per subscriber per channel
or a percentage of certain revenues for programming purchased from Comcast.
Programming costs increase in the ordinary course of the Company's business as a
result of increases in the number of subscribers, expansion of the number of
channels provided to customers and contractual rate increases from programming
suppliers.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts with suppliers, some of which provide volume discount pricing
structures and/or offer marketing support to the Company. The Company
anticipates that future contract renewals will result in programming costs
exceeding current levels, particularly for sports programming.
National manufacturers are the primary sources of supplies, equipment and
materials utilized in the construction, rebuild and upgrade of the Company's
cable communications systems. Construction, rebuild and upgrade costs for these
systems have increased during recent years and are expected to continue to
increase as a result of the need to construct increasingly complex systems,
overall demand for labor and other factors.
The Company anticipates that its programming and construction, rebuild and
upgrade costs will be significant in future periods. The amount of such costs
will depend on numerous factors, many of which are beyond the Company's control.
These factors include the effects of competition, whether a particular system
has sufficient capacity to handle new product offerings including the offering
of communications services, whether and to what extent the Company will be able
to recover its investment under FCC rate guidelines and other factors, and
whether the Company acquires additional systems in need of upgrading or
rebuilding. Increases in such costs may have a significant impact on the
Company's financial position, results of operations and liquidity.
Comcast charges each of the Company's subsidiaries for programming on a
basis which generally approximates the amount each such subsidiary would be
charged if it purchased directly from the supplier, subject to limitations
imposed by debt facilities for certain subsidiaries, and did not benefit from
the purchasing power of the Company's consolidated operations.
MANAGEMENT CONTRACTS
Comcast, through management agreements, manages the operations of the
Company's subsidiaries. The management agreements generally provide that Comcast
will supervise the management and operations of the cable systems (including
expansions or rebuilding), and arrange for and supervise (but not necessarily
perform itself) certain administrative functions. As compensation for such
services, the agreements provide for Comcast to charge management fees of up to
6% of gross revenues. Management fees of $29.0 million and $21.8 million were
charged during the three months ended March 31, 1997 and 1996, respectively, and
management fees of $93.2 million, $83.5 million and $65.9 million were charged
during the years ended December 31, 1996, 1995 and 1994, respectively. See
"Certain Relationships and Related Transactions."
ONLINE SERVICES
In December 1996, the Company began marketing high-speed cable modem
services in areas served by two of its cable systems. High-speed cable modems
are capable of providing access to online information, including the Internet,
at faster speeds than that of conventional or Integrated Service Digital Network
("ISDN") modems. In August 1996, Comcast purchased a 14% interest in the At Home
Corporation ("@Home"), which offers a network that distributes high-speed
interactive content over the
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cable industry's hybrid-fiber coaxial distribution architecture. The Company's
@Home package includes a high-speed cable modem; 24-hour per day unlimited
access to the Internet; electronic mail; an Internet guide designed by @Home,
featuring a menu of local community content, in addition to the vast Internet
content already available. @Home is owned by Comcast, Tele-Communications, Inc.,
Cox Communications, Inc. and Kleiner Perkins Caufield & Byers, a venture capital
firm. The Company expects to expand the marketing of such services in selected
cable systems during 1997. The Company anticipates that competition in the
online services area will be significant. Competitors in this area include LECs,
Internet service providers, long distance carriers and others, many of whom have
more substantial financial resources than the Company.
COMPETITION
Cable communications systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, interactive online computer
services and home video products, including videotape cassette recorders. The
extent to which a cable communications system is competitive depends, in part,
upon the cable system's ability to provide, at a reasonable price to consumers,
a greater variety of programming and other communications services than are
available off-air or through other alternative delivery sources and upon
superior technical performance and customer service. See "Legislation and
Regulation."
The 1996 Telecom Act makes it easier for LECs and others to provide a wide
variety of video services competitive with services provided by cable systems
and to provide cable services directly to subscribers. See "Legislation and
Regulation--The 1996 Telecom Act." Various LECs currently are providing video
services within and outside their telephone service areas through a variety of
distribution methods, including both the deployment of broadband wire facilities
and the use of wireless transmission facilities. Cable systems could be placed
at a competitive disadvantage if the delivery of video services by LECs becomes
widespread since LECs are not required, under certain circumstances, to obtain
local franchises to deliver such video services or to comply with the variety of
obligations imposed upon cable systems under such franchises. See "Legislation
and Regulation." Issues of cross-subsidization by LECs of video and telephony
services also pose strategic disadvantages for cable operators seeking to
compete with LECs which provide video services. The Company cannot predict the
likelihood of success of video service ventures by LECs or the impact on the
Company of such competitive ventures.
Cable communications systems generally operate pursuant to franchises
granted on a non-exclusive basis. The 1992 Cable Act prohibits franchising
authorities from unreasonably denying requests for additional franchises and
permits franchising authorities to operate cable systems. See "Legislation and
Regulation." Well-financed businesses from outside the cable industry (such as
the public utilities that own certain of the poles on which cable is attached)
may become competitors for franchises or providers of competing services. See
"Legislation and Regulation--The 1996 Telecom Act." Competition from other video
service providers exists in the areas served by the Company. In addition, LECs
in various states either have announced plans, obtained local franchise
authorizations or are currently competing with the Company's cable
communications systems in various areas.
The availability of reasonably-priced HSDs enables individual households to
receive many of the satellite-delivered program services formerly available only
to cable subscribers. Furthermore, the 1992 Cable Act contains provisions, which
the FCC has implemented with regulations, to enhance the ability of cable
competitors to purchase and make available to HSD owners certain
satellite-delivered cable programming at competitive costs. The 1996 Telecom Act
and FCC regulations implementing that law preempt certain local restrictions on
the use of HSDs and roof-top antennae to receive satellite programming and
over-the-air broadcasting services. See "Legislation and Regulation--The 1996
Telecom Act."
Cable operators face additional competition from private SMATV systems that
serve condominiums, apartment and office complexes and private residential
developments. The 1996 Telecom Act broadens
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the definition of SMATV systems not subject to regulation as a franchised cable
communications service. SMATV systems offer both improved reception of local
television stations and many of the same satellite-delivered programming
services offered by franchised cable communications systems. SMATV operators
often enter into exclusive agreements with building owners or homeowners'
associations, although some states have enacted laws to provide franchised cable
systems access to such private complexes, and the 1984 Cable Act gives a
franchised cable operator the right to use existing compatible easements within
its franchise area under certain circumstances. These laws have been challenged
in the courts with varying results. In addition, some companies are developing
and/or offering packages of telephony, data and video services to these private
residential and commercial developments. The ability of the Company to compete
for subscribers in residential and commercial developments served by SMATV
operators is uncertain.
The FCC and Congress have adopted policies providing a more favorable
operating environment for new and existing technologies that provide, or have
the potential to provide, substantial competition to cable systems. These
technologies include, among others, DBS service whereby signals are transmitted
by satellite to receiving facilities located on customer premises. Programming
is currently available to the owners of HSDs through conventional, medium and
high-powered satellites. In 1990, Primestar, a consortium comprised of cable
operators, including Comcast and a satellite company, commenced operation of a
medium-power digital satellite system using the Ku portion of the frequency
spectrum and currently provides service consisting of approximately 95 channels
of programming, including broadcast signals and pay-per-view services. In
January 1997, Primestar launched a replacement medium-power digital satellite
which will enable it to increase its capacity to approximately 160 channels. In
addition, through one of its owners which is also a Primestar affiliate,
Primestar has obtained the right to provide service over a high-power DBS
satellite and, using video compression technology, intends initially to offer
approximately 70 channels of video programming in the future. This programming
is intended to be offered to existing cable subscribers as an addition to their
cable service. The Primestar partners recently announced an agreement to
consolidate their DBS assets into a new publicly traded company.
DirecTv, which includes AT&T as an investor, began offering nationwide
high-power DBS service in 1994 accompanied by extensive marketing efforts.
Several other major companies, including EchoStar and ASkyB, a joint venture
between MCI and News Corp., have begun offering or are currently developing
high-power DBS services. EchoStar has already commenced its domestic DBS service
and offers approximately 120 channels of video programming. ASkyB is
constructing satellites that reportedly, when operational, will provide
approximately 200 channels of DBS service in the US. Recently announced plans
for News Corp. to purchase an interest in Echostar are currently the subject of
litigation between News Corp. and EchoStar. Primestar, News Corp., MCI and ASkyB
recently announced several agreements in which News Corp., MCI and ASkyB will
sell to Primestar two satellites under construction and MCI will assign to
Primestar an FCC DBS license.
DBS systems are expected to use video compression technology to increase the
channel capacity of their systems to provide movies, broadcast stations and
other program services comparable to those of cable systems. Digital satellite
service offered by DBS systems currently has certain advantages over cable
systems with respect to programming capacity and digital quality, as well as
certain current disadvantages that include high up-front customer equipment
costs and a lack of local programming, local service and equipment distribution.
While this service presents a competitive threat to cable, the Company currently
is increasing channel capacity in many of its systems and upgrading its local
customer service and technical support. The Company is currently in the process
of implementing ten regional customer service call centers. As of March 31,
1997, three of these call centers were in operation, servicing more than 950,000
subscribers. These upgrades will enable the Company to introduce new premium
channels, pay-per-view programming, interactive computer-based services and
other communications services in order to enhance its ability to compete.
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Cable communications systems also compete with wireless program distribution
services such as MMDS which use low-power microwave frequencies to transmit
video programming over-the-air to subscribers. There are MMDS operators who are
authorized to provide or are providing broadcast and satellite programming to
subscribers in areas served by the Company's cable systems. Several Regional
Bell Operating Companies ("BOCs") have acquired significant interests in major
MMDS companies operating in certain of the Company's cable service areas. Recent
public announcements by Bell Atlantic Corporation ("Bell Atlantic"), a BOC
operating in the northeastern U.S., indicate that plans to compete with the
Company through the use of MMDS technology have been revised. Additionally, the
FCC recently adopted new regulations allocating frequencies in the 28-GHz band
for a new multichannel wireless video service similar to MMDS. The Company is
unable to predict whether wireless video services will have a material impact on
its operations.
Other new technologies, including Internet-based services, may become
competitive with services that cable communications systems can offer. The 1996
Telecom Act directed the FCC to establish, and the FCC has adopted, regulations
and policies for the issuance of licenses for digital television ("DTV") to
incumbent television broadcast licensees. DTV is expected to deliver high
definition television pictures, multiple digital-quality program streams, as
well as CD-quality audio programming and advanced digital services, such as data
transfer or subscription video. The FCC also has authorized television broadcast
stations to transmit textual and graphic information useful both to consumers
and businesses. The FCC also permits commercial and non-commercial FM stations
to use their subcarrier frequencies to provide non-broadcast services including
data transmissions. The FCC established an over-the-air Interactive Video and
Data Service that will permit two-way interaction with commercial and
educational programming along with informational and data services. LECs and
other common carriers also provide facilities for the transmission and
distribution to homes and businesses of interactive computer-based services,
including the Internet, as well as data and other non-video services. The FCC
has conducted spectrum auctions for licenses to provide personal communications
services ("PCS"). PCS will enable license holders, including cable operators, to
provide voice and data services.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environment are constantly occurring. Thus,
it is not possible to predict the effect that ongoing or future developments
might have on the cable communications industry or on the operations of the
Company.
EMPLOYEES
As of March 31, 1997, the Company had a total of approximately 7,800
employees. The Company believes that its relationships with its employees are
good.
PROPERTY
The principal physical assets of a cable communications system consist of a
central receiving apparatus, distribution cables, converters, regional customer
service call centers and local business offices. The Company owns or leases the
receiving and distribution equipment of each system and owns or leases parcels
of real property for the receiving sites, regional customer service call centers
and local business offices. The physical components of cable communications
systems require maintenance and periodic upgrading and rebuilding to keep pace
with technological advances. A significant number of the Company's systems will
be upgraded or rebuilt over the next several years.
The Company's management believes that substantially all of its physical
assets are in good operating condition.
LEGAL PROCEEDINGS
The Company is not party to litigation which, in the opinion of the
Company's management, will have a material adverse effect on the Company's
financial position, results of operations or liquidity.
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LEGISLATION AND REGULATION
The Cable Acts and the 1996 Telecom Act amended the Communications Act of
1934 (as amended, the "Communications Act") and established a national policy to
guide the development and regulation of cable systems. The FCC and state
regulatory agencies are required to conduct numerous rule making and regulatory
proceedings to implement the 1996 Telecom Act, and such proceedings may
materially affect the cable communications industry. The following is a summary
of federal laws and regulations materially affecting the growth and operation of
the cable communications industry and a description of certain state and local
laws.
THE 1996 TELECOM ACT
The 1996 Telecom Act, the most comprehensive reform of the nation's
telecommunications laws since the Communications Act, became effective in
February 1996. Although the long-term goal of this act is to promote competition
and decrease regulation of these industries, in the short-term, the law
delegates to the FCC (and in some cases the states) broad new rule making
authority. The 1996 Telecom Act deregulates rates for CPSTs in March 1999 for
large Multiple System Operators ("MSOs"), such as the Company, and immediately
for certain small operators. Deregulation will occur sooner for systems in
markets where comparable video services, other than DBS, are offered by the
LECs, or their affiliates, or by third parties utilizing the LECs' facilities or
where "effective competition" is established under the 1992 Cable Act. The 1996
Telecom Act also modifies the uniform rate provisions of the 1992 Cable Act by
prohibiting regulation of non-predatory, bulk discount rates offered to
subscribers in commercial and residential developments and permits regulated
equipment rates to be computed by aggregating costs of broad categories of
equipment at the franchise, system, regional or company level. The 1996 Telecom
Act eliminates the right of individual subscribers to file rate complaints with
the FCC concerning certain CPSTs and requires the FCC to issue a final order
within 90 days after receipt of CPST rate complaints filed by any franchising
authority. The 1996 Telecom Act also modifies the existing statutory provisions
governing cable system technical standards, equipment compatibility, subscriber
notice requirements and program access, permits certain operators to include
losses incurred prior to September 1992 in setting regulated rates and repeals
the three-year anti-trafficking prohibition adopted in the 1992 Cable Act. FCC
regulations implementing the 1996 Telecom Act preempt certain local restrictions
on satellite and over-the-air antenna reception of video programming services,
including zoning, land-use or building regulations, or any private covenant,
homeowners' association rule or similar restriction on property within the
exclusive use or control of the antenna user.
The 1996 Telecom Act eliminates the requirement that LECs obtain FCC
approval under Section 214 of the Communications Act before providing video
services in their telephone service areas and removes the statutory telephone
company/cable television cross-ownership prohibition, thereby allowing LECs to
offer video services in their telephone service areas. LECs may provide service
as traditional cable operators with local franchises or they may opt to provide
their programming over unfranchised "open video systems," subject to certain
conditions, including, but not limited to, setting aside a portion of their
channel capacity for use by unaffiliated program distributors and satisfying
certain other requirements. Under limited circumstances, cable operators also
may elect to offer services through open video systems. The 1996 Telecom Act
also prohibits a LEC from acquiring a cable operator in its telephone service
area except in limited circumstances. The 1996 Telecom Act removes barriers to
entry in the local telephone exchange market by preempting state and local laws
that restrict competition and by requiring all LECs to provide nondiscriminatory
access and interconnection to potential competitors, such as cable operators,
wireless telecommunications providers and long distance companies.
The 1996 Telecom Act also contains provisions regulating the content of
video programming and computer services. Specifically, the new law prohibits the
use of computer services to transmit "indecent" material to minors. Several
special three-judge federal district courts have issued preliminary injunctions
enjoining the enforcement of these provisions as unconstitutional to the extent
they regulate
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the transmission of indecent material. The U.S. Supreme Court is currently
reviewing one of these decisions. In accordance with the 1996 Telecom Act, the
television industry recently adopted a voluntary ratings system for violent and
indecent video programming. The 1996 Telecom Act also requires all new
television sets to contain a so-called "V-chip" capable of blocking all programs
with a given rating.
RATE REGULATION
The 1992 Cable Act authorized rate regulation for cable communications
services and equipment in communities that are not subject to "effective
competition," as defined by federal law. Most cable communications systems are
now subject to rate regulation for basic cable service and equipment by local
officials under the oversight of the FCC, which has prescribed detailed criteria
for such rate regulation. The 1992 Cable Act also requires the FCC to resolve
complaints about rates for CPSTs (other than programming offered on a per
channel or per program basis, which programming is not subject to rate
regulation) and to reduce any such rates found to be unreasonable. The 1996
Telecom Act provides for rate deregulation of CPSTs by March 1999. See "--The
1996 Telecom Act."
FCC regulations, which became effective in September 1993, govern rates that
may be charged to subscribers for basic cable service and certain CPSTs
(together, the "Regulated Services"). The FCC uses a benchmark methodology as
the principal method of regulating rates for Regulated Services. Cable operators
are also permitted to justify rates using a cost-of-service methodology. In
1994, the FCC's benchmark regulations required operators to implement rate
reductions for Regulated Services of up to 17% of the rates for such services in
effect on September 30, 1992, adjusted for inflation, programming modifications,
equipment costs and increases in certain operating costs. In July 1994, the
Company reduced rates for Regulated Services in the majority of its cable
systems to comply with the FCC's regulations. The FCC has also adopted
comprehensive and restrictive regulations allowing operators to modify their
regulated rates on a quarterly or annual basis using various methodologies that
account for changes in the number of regulated channels, inflation and increases
in certain external costs, such as franchise and other governmental fees,
copyright and retransmission consent fees, taxes, programming fees and franchise
related obligations. The Company cannot predict whether the FCC will modify
these "going forward" regulations in the future.
Franchising authorities are empowered to regulate the rates charged for
additional outlets and for the installation, lease and sale of equipment used by
subscribers to receive the basic cable service tier, such as converter boxes and
remote control units. The FCC's rules require franchising authorities to
regulate these rates on the basis of actual cost plus a reasonable profit, as
defined by the FCC.
Cable operators required to reduce rates may also be required to refund
overcharges with interest. Rate reductions will not be required where a cable
operator can demonstrate that existing rates for Regulated Services are
reasonable using the FCC's cost-of-service rate regulations which require, among
other things, the exclusion of 34% of system acquisition costs related to
intangible and tangible assets used to provide Regulated Services. The FCC's
cost-of-service regulations contain a rebuttable presumption of an industry-wide
11.25% after tax rate of return on an operator's allowable rate base, but the
FCC has initiated a further rule making 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.
The Company has settled the majority of outstanding proceedings challenging
its rates charged for regulated cable services. In December 1995, the FCC
adopted an order approving a negotiated settlement of rate complaints pending
against the Company for CPSTs which provided $6.6 million in refunds, plus
interest, given in the form of bill credits during 1996, to 1.3 million of the
Company's cable subscribers. As part of the negotiated settlement, the Company
agreed to forego certain inflation and external cost adjustments for systems
covered by its cost-of-service filings for CPSTs. The FCC and the Company
recently negotiated an agreement in which the Company has committed to complete
certain system upgrades and improvements by March 1999 in return for which it
may move a limited number of currently regulated programming services in certain
cable systems to a single migrated product tier on
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each system that will become an unregulated new product tier after December
1997. In addition, the Company will also provide free cable service connections,
modems and modem service to certain public and private schools and to 250 public
libraries in its franchise areas. The FCC is seeking public comment on the
proposed agreement, and the Company cannot predict the outcome of this
proceeding. The Company currently is seeking to justify rates for basic cable
services and equipment in certain of its cable systems in the State of
Connecticut on the basis of a cost-of-service showing. The State of Connecticut
has ordered the Company to reduce such rates and to make refunds to subscribers.
The Company has appealed the Connecticut decision to the FCC. Recent
pronouncements from the FCC, which generally support the Company's position on
appeal, have caused the State of Connecticut to reexamine its prior ruling.
While the Company cannot predict the outcome of this action, the Company
believes that the ultimate resolution of these pending regulatory matters will
not have a material adverse impact on the Company's financial position, results
of operations or liquidity.
"ANTI-BUY THROUGH" PROVISIONS
The 1992 Cable Act requires cable systems to permit subscribers to purchase
video programming offered by the operator on a per channel or a per program
basis without the necessity of subscribing to any tier of service, other than
the basic cable service tier, unless the system's lack of addressable converter
boxes or other technological limitations does not permit it to do so. The
statutory exemption for cable systems that do not have the technological
capability to offer programming in the manner required by the statute is
available until a system obtains such capability, but not later than December
2002. The FCC may waive such time periods, if deemed necessary. Many of the
Company's systems do not have the technological capability to offer programming
in the manner required by the statute and thus currently are exempt from
complying with the requirement.
MUST CARRY/RETRANSMISSION CONSENT
The 1992 Cable Act contains broadcast signal carriage requirements that
allow local commercial television broadcast stations to elect once every three
years to require a cable system to carry the station, subject to certain
exceptions, or to negotiate for "retransmission consent" to carry the station. A
cable system generally is required to devote up to one-third of its activated
channel capacity for the carriage of local commercial television stations
whether pursuant to the mandatory carriage or retransmission consent
requirements of the 1992 Cable Act. Local non-commercial television stations are
also given mandatory carriage rights; however, such stations are not given the
option to negotiate retransmission consent for the carriage of their signals by
cable systems. Additionally, cable systems are required to obtain retransmission
consent for all "distant" commercial television stations (except for commercial
satellite-delivered independent "superstations" such as WTBS), commercial radio
stations and certain low-power television stations carried by such systems after
October 1993. In March 1997, the U.S. Supreme Court affirmed a three-judge
district court decision upholding the constitutional validity of the 1992 Cable
Act's mandatory signal carriage requirements. The FCC will conduct a rule making
in the future to consider the requirements, if any, for mandatory carriage of
DTV signals. The Company cannot predict the ultimate outcome of such a rule
making or the impact of new carriage requirements on the Company or its
business.
DESIGNATED CHANNELS
The Communications Act permits franchising authorities to require cable
operators to set aside certain channels for public, educational and governmental
access programming. The 1984 Cable Act also requires a cable 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. The FCC has adopted rules regulating:
(i) the maximum reasonable rate a cable operator may charge for commercial use
of the designated channel capacity; (ii) the terms and conditions for commercial
use of such channels; and (iii) the procedures for the expedited resolution of
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disputes concerning rates or commercial use of the designated channel capacity.
The U.S. Supreme Court recently held parts of the 1992 Cable Act regulating
"indecent" programming on local access channels to be unconstitutional, but
upheld the statutory right of cable operators to prohibit or limit the provision
of "indecent" programming on commercial leased access channels.
FRANCHISE PROCEDURES
The 1984 Cable Act affirms the right of franchising authorities (state or
local, depending on the practice in individual states) to award one or more
franchises within their jurisdictions and prohibits non-grandfathered cable
systems from operating without a franchise in such jurisdictions. The 1992 Cable
Act encourages competition with existing cable systems by (i) allowing
municipalities to operate their own cable systems without franchises; (ii)
preventing franchising authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area; and (iii) prohibiting (with limited exceptions) the
common ownership of cable systems and co-located MMDS or SMATV systems. In
January 1995, the FCC relaxed its restrictions on ownership of SMATV systems to
permit a cable operator to acquire SMATV systems in the operator's existing
franchise area so long as the programming services provided through the SMATV
system are offered according to the terms and conditions of the cable operator's
local franchise agreement. The 1996 Telecom Act provides that the cable/SMATV
and cable/MMDS cross-ownership rules do not apply in any franchise area where
the operator faces "effective competition" as defined by federal law.
The Cable Acts also provide that in granting or renewing franchises, local
authorities may establish requirements for cable-related facilities and
equipment, but not for video programming or information services other than in
broad categories. The Cable Acts limit the payment of franchise fees to 5% of
revenues derived from cable operations and permit the cable operator to obtain
modification of franchise requirements by the franchise authority or judicial
action if warranted by changed circumstances. The Company's franchises typically
provide for periodic payment of fees to franchising authorities of 5% of
"revenues" (as defined by each franchise agreement), which fees may be passed on
to subscribers. The 1996 Telecom Act generally prohibits franchising authorities
from (i) imposing requirements in the cable franchising process that require,
prohibit or restrict the provision of telecommunications services by an
operator, (ii) imposing franchise fees on revenues derived by the operator from
providing telecommunications services over its cable system, or (iii)
restricting an operator's use of any type of subscriber equipment or
transmission technology.
The 1984 Cable Act contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. The 1992 Cable Act made
several changes to the renewal process which could make it easier for a
franchising authority to deny renewal. Moreover, even if the franchise is
renewed, the franchising authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchising
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for such consent.
Historically, franchises have been renewed for cable operators that have
provided satisfactory services and have complied with the terms of their
franchises. The Company believes that it has generally met the terms of its
franchises and has provided quality levels of service. As such, the Company
anticipates that its future franchise renewal prospects generally will be
favorable.
Various courts have considered whether franchising authorities have the
legal right to limit franchise awards to a single cable operator and to impose
certain substantive franchise requirements (e.g. access channels, universal
service and other technical requirements). These decisions have been somewhat
inconsistent and, until the U.S. Supreme Court rules definitively on the scope
of cable operators' First Amendment protections, the legality of the franchising
process generally and of various specific franchise requirements is likely to be
in a state of flux.
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OWNERSHIP LIMITATIONS
Pursuant to the 1992 Cable Act, the FCC adopted rules prescribing national
subscriber limits and limits on the number of channels that can be occupied on a
cable system by a video programmer in which the operator has an attributable
interest. The effectiveness of these FCC horizontal ownership limits has been
stayed because a federal district court found the statutory limitation to be
unconstitutional. An appeal of that decision has been consolidated with appeals
challenging the FCC's regulatory ownership restrictions and is pending. The 1996
Telecom Act eliminates the statutory prohibition on the common ownership,
operation or control of a cable system and a television broadcast station in the
same service area and directs the FCC to review its broadcast-cable ownership
restrictions to determine if they are necessary in the public interest. Pursuant
to the mandate of the 1996 Telecom Act, the FCC eliminated its regulatory
restriction on cross-ownership of cable systems and national broadcasting
networks.
LEC OWNERSHIP OF CABLE SYSTEMS
The 1996 Telecom Act makes far-reaching changes in the regulation of LECs
that provide cable services. The new law eliminates federal legal barriers to
competition in the local telephone and cable communications businesses, preempts
legal barriers to competition that previously existed in state and local laws
and regulations, and sets basic standards for relationships between
telecommunications providers. See "--The 1996 Telecom Act." The 1996 Telecom Act
generally limits acquisitions and prohibits certain joint ventures between LECs
and cable operators in the same market. The FCC adopted regulations implementing
the 1996 Telecom Act requirement that LECs open their telephone networks to
competition by providing competitors interconnection, access to unbundled
network elements and retail services at wholesale rates. Numerous parties have
appealed these regulations. The appeals have been consolidated and will be
reviewed by the U.S. Court of Appeals for the Eighth Circuit, which has stayed
the FCC's pricing and nondiscrimination regulations. The ultimate outcome of
these rule makings, and the ultimate impact of the 1996 Telecom Act or any final
regulations adopted pursuant to the new law on the Company or its businesses
cannot be determined at this time.
POLE ATTACHMENT
The Communications Act requires the FCC to regulate the rates, terms and
conditions imposed by public utilities for cable systems' use of utility pole
and conduit space unless state authorities can demonstrate that they adequately
regulate pole attachment rates, as is the case in certain states in which the
Company operates. In the absence of state regulation, the FCC administers pole
attachment rates on a formula basis. In some cases, utility companies have
increased pole attachment fees for cable systems that have installed fiber optic
cables and that are using such cables for the distribution of non-video
services. The FCC 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 Communications Act does not permit
disparate rates based on the type of service provided over the equipment
attached to the utility's pole. The 1996 Telecom Act and the FCC's implementing
regulations modify the current pole attachment provisions of the Communications
Act by immediately permitting certain providers of telecommunications services
to rely upon the protections of the current law and by requiring that utilities
provide cable systems and telecommunications carriers with nondiscriminatory
access to any pole, conduit or right-of-way controlled by the utility. The FCC
recently initiated a rulemaking to consider revisions to its existing rate
formula, which revisions may increase the fees paid by cable operators to
utilities for pole attachments and conduit space. Additionally, within two years
of enactment of the 1996 Telecom Act, the FCC is required to adopt new
regulations to govern the charges for pole attachments used by companies
providing telecommunications services, including cable operators. These new pole
attachment rate regulations will become effective five years after enactment of
the 1996 Telecom Act, and any increase in attachment rates resulting from the
FCC's new regulations will be phased in over equal annual increments over a
period of five years beginning on the effective date of the new FCC
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regulations. The ultimate outcome of these rulemakings and the ultimate impact
of any revised FCC rate formula or of any new pole attachment rate regulations
on the Company or its businesses cannot be determined at this time.
OTHER STATUTORY PROVISIONS
The 1992 Cable Act, the 1996 Telecom Act and FCC regulations preclude any
satellite video programmer affiliated with a cable company, or with a common
carrier providing video programming directly to its subscribers, from favoring
an affiliated company over competitors and requires such programmers to sell
their programming to other multichannel video distributors. These provisions
limit the ability of program suppliers affiliated with cable companies or with
common carriers providing satellite delivered video programming directly to
their subscribers to offer exclusive programming arrangements to their
affiliates. The 1992 Cable Act requires operators to block fully both the video
and audio portion of sexually explicit or indecent programming on channels that
are primarily dedicated to sexually oriented programming or alternatively to
carry such programming only at "safe harbor" time, periods currently defined by
the FCC as the hours between 10 p.m. to 6 a.m. Several adult-oriented cable
programmers have challenged the constitutionality of this statutory provision,
but the U.S. Supreme Court recently refused to overturn a lower court's denial
of a preliminary injunction motion seeking to enjoin the enforcement of this
law. The FCC's regulations implementing this statutory provision became
effective in May 1997. The Communications Act also includes provisions, among
others, concerning horizontal and vertical ownership of cable systems, customer
service, subscriber privacy, marketing practices, equal employment opportunity,
obscene or indecent programming, regulation of technical standards and equipment
compatibility.
OTHER FCC REGULATIONS
The FCC has numerous rule making proceedings pending that will implement
various provisions of the 1996 Telecom Act; it also has adopted regulations
implementing various provisions of the 1992 Cable Act and the 1996 Telecom Act
that are the subject of petitions requesting reconsideration of various aspects
of its rule making proceedings. In addition to the FCC regulations noted above,
there are other FCC regulations covering such areas as equal employment
opportunity, syndicated program exclusivity, network program non-duplication,
registration of cable systems, maintenance of various records and public
inspection files, microwave frequency usage, lockbox availability, origination
cable casting and sponsorship identification, antenna structure notification,
marking and lighting, carriage of local sports broadcast programming,
application of rules governing political broadcasts, limitations on advertising
contained in non-broadcast children's programming, consumer protection and
customer service, ownership of home wiring, indecent programming, programmer
access to cable systems, programming agreements, technical standards, consumer
electronics equipment compatibility and DBS implementation. The FCC has the
authority to enforce its regulations through the imposition of substantial
fines, the issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in connection with cable
operations.
Other bills and administrative proposals pertaining to cable communications
have previously been introduced in Congress or considered by other governmental
bodies over the past several years. It is probable that further attempts will be
made by Congress and other governmental bodies relating to the regulation of
communications services.
COPYRIGHT
Cable communications systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenues to a
federal copyright royalty pool, cable operators can obtain blanket permission to
retransmit copyrighted material on broadcast signals. The nature and amount of
future payments for
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broadcast signal carriage cannot be predicted at this time. The possible
simplification, modification or elimination of the compulsory copyright license
is the subject of continuing legislative review. The elimination or substantial
modification of the cable compulsory license could adversely affect the
Company's ability to obtain suitable programming and could substantially
increase the cost of programming that remained available for distribution to the
Company's subscribers. The Company cannot predict the outcome of this
legislative activity.
Cable operators distribute programming and advertising that use music
controlled by the two major music performing rights organizations, ASCAP and
BMI. In October 1989, the special rate court of the U.S. District Court for the
Southern District of New York imposed interim rates on the cable industry's use
of ASCAP-controlled music. The same federal district court recently established
a special rate court for BMI. BMI and cable industry representatives recently
concluded negotiations for a standard licensing agreement covering the
performance of BMI music contained in advertising and other information inserted
by operators into cable programming and on certain local access and origination
channels carried on cable systems. The Company's settlement with BMI did not
have a significant impact on the Company's financial position, results of
operations or liquidity. ASCAP and cable industry representatives have met to
discuss the development of a standard licensing agreement covering
ASCAP-controlled music in local origination and access channels and pay-per-view
programming. Although the Company cannot predict the ultimate outcome of these
industry negotiations or the amount of any license fees it may be required to
pay for past and future use of ASCAP-controlled music, it does not believe such
license fees will be significant to the Company's financial position, results of
operations or liquidity.
STATE AND LOCAL REGULATION
Because a cable communications system uses local streets and rights-of-way,
cable systems are subject to state and local regulation, typically imposed
through the franchising process. Cable communications systems generally are
operated pursuant to non-exclusive franchises, permits or licenses granted by a
municipality or other state or local government entity. Franchises generally are
granted for fixed terms and in many cases are terminable if the franchisee fails
to comply with material provisions. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction. Each franchise generally contains
provisions governing cable service rates, franchise fees, franchise term, system
construction and maintenance obligations, system channel capacity, design and
technical performance, customer service standards, franchise renewal, sale or
transfer of the franchise, territory of the franchisee, indemnification of the
franchising authority, use and occupancy of public streets and types of cable
services provided. A number of states subject cable communications systems to
the jurisdiction of centralized state governmental agencies, some of which
impose regulation of a character similar to that of a public utility. Attempts
in other states to regulate cable communications systems are continuing and can
be expected to increase. To date, those states in which the Company operates
that have enacted such state level regulation are Connecticut, New Jersey and
Delaware. State and local franchising jurisdiction is not unlimited, however,
and must be exercised consistently with federal law. The 1992 Cable Act
immunizes franchising authorities from monetary damage awards arising from
regulation of cable systems or decisions made on franchise grants, renewals,
transfers and amendments.
The foregoing does not purport to describe all present and proposed federal,
state, and local regulations and legislation affecting the cable industry. Other
existing federal regulations, copyright licensing, and, in many jurisdictions,
state and local franchise requirements, are currently the subject of judicial
proceedings, legislative hearings and administrative proposals which could
change, in varying degrees, the manner in which cable communications systems
operate. Neither the outcome of these proceedings nor their impact upon the
cable communications industry or the Company can be predicted at this time.
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MANAGEMENT
DIRECTORS AND DESIGNATED EXECUTIVE OFFICERS
The Company has no executive officers. Comcast, through management
agreements with the Company's subsidiaries, manages the Company's operations.
Certain officers of Comcast, however, are deemed by the Company to be executive
officers of the Company (the "Designated Executive Officers") for purposes of
the U.S. federal securities laws. See "Management Compensation" and "Certain
Relationships and Related Transactions."
The following table sets forth certain information with respect to directors
and certain officers, including the Designated Executive Officers, of the
Company as of June 1, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------- --- -----------------------------------------------------------------------------------
<S> <C> <C>
Ralph J. Roberts 77 Chairman, Director
Julian A. Brodsky 63 Vice Chairman, Director
Brian L. Roberts 37 Vice Chairman, Director
Lawrence S. Smith 49 Executive Vice President
John R. Alchin 49 Senior Vice President and Treasurer
Stanley L. Wang 56 Senior Vice President and Secretary, Director
</TABLE>
Ralph J. Roberts has served as a Director and Chairman of the Board of
Comcast and as a Director and Chairman of the Company for more than five years.
Mr. Roberts has been the President and a Director of Sural Corporation, a
privately-held investment company ("Sural") and Comcast's largest shareholder,
for more than five years. Mr. Roberts devotes a significant portion of his time
to the business and affairs of the Company. Mr. Roberts currently has voting
control of Sural. Mr. Ralph J. Roberts has indicated his intention to transfer
control of Sural to Mr. Brian L. Roberts upon receipt of various regulatory and
other approvals required in connection with such transfer. Mr. Roberts is also a
Director of Comcast UK Cable Partners Limited and Storer Communications, Inc.
Julian A. Brodsky has served as a Director and Vice Chairman of both the
Company and Comcast for more than five years. Mr. Brodsky presently serves as
the Treasurer and a Director of Sural. Mr. Brodsky devotes a significant portion
of his time to the business and affairs of the Company. Mr. Brodsky is also a
Director of Comcast UK Cable Partners Limited, Storer Communications, Inc. and
RBB Fund, Inc.
Brian L. Roberts has served as a Director of both the Company and Comcast
for more than five years. Mr. Roberts has also served as the Company's Vice
Chairman for more than five years. Mr. Roberts presently serves as President of
Comcast and as Vice President and a Director of Sural. Mr. Roberts devotes a
significant portion of his time to the affairs of the Company. Mr. Roberts is
also a Director of Teleport Communications Group, Inc., Comcast UK Cable
Partners Limited and Storer Communications, Inc. He is a son of Ralph J.
Roberts.
Lawrence S. Smith was named Executive Vice President of both the Company and
Comcast in December 1995. Prior to that time, Mr. Smith served as Senior Vice
President of both the Company and Comcast for more than five years. Mr. Smith is
the Principal Accounting Officer of the Company and Comcast. Mr. Smith is a
Director of Teleport Communications Group, Inc. and Comcast UK Cable Partners
Limited and is a Partnership Board Representative of Sprint Spectrum Holding
Company, L.P.
John R. Alchin has served as Treasurer and Senior Vice President of both the
Company and Comcast for more than five years. Mr. Alchin is the Principal
Financial Officer of the Company and Comcast. Mr. Alchin is a Director of
Comcast UK Cable Partners Limited.
Stanley L. Wang has served as a Director of the Company and as Senior Vice
President and Secretary of both the Company and Comcast for more than five
years. Mr. Wang is a Director of Storer Communications, Inc. and is Comcast's
General Counsel.
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MANAGEMENT COMPENSATION
All of the Company's directors and Designated Executive Officers are
employees of and are compensated by Comcast, and will receive no separate
compensation from the Company. The Company reimburses all directors for expenses
incurred in performing their duties as directors.
PRINCIPAL STOCKHOLDERS
Comcast owns 100% of the Company's outstanding capital stock. The following
tables provide certain information regarding the beneficial ownership, as
defined in Rule 13d-3 of the Exchange Act, of Comcast's Common Stock as of June
1, 1997 by (i) each stockholder known to the Company to be the beneficial owner
of 5% or more of any class of Comcast's voting securities, (ii) each of the
Company's directors and Designated Executive Officers and (iii) all directors
and Designated Executive Officers as a group. So far as is known to the Company,
the persons named in the tables below as beneficially owning the shares set
forth therein have sole voting power and sole investment power with respect to
such shares, unless otherwise indicated.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
CLASS
A COMMON STOCK
---------------------------
<S> <C> <C>
AMOUNT
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
- ---------------------------------------------------------------------------------------- ------------ -------------
The Capital Group Companies, Inc........................................................ 2,654,000(1) 8.3%
333 South Hope Street
Los Angeles, CA 90071
Neuberger & Berman LLC.................................................................. 1,642,000(2) 5.2%
605 Third Avenue
New York, NY 10158-3698
</TABLE>
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY OWNED(3) PERCENT OF CLASS(3)
-------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS CLASS
NAME OF BENEFICIAL OWNER CLASS A A SPECIAL CLASS B CLASS A A SPECIAL CLASS B
- ---------------------------- ----------- ------------- ---------------- ----------- ------------- -----------
Alchin, John R. ............ 239,125(7) (13) (13)
Brodsky, Julian A. ......... 280,559(4) 1,811,242 (13) (13)
Roberts, Brian L. .......... 4,061(5) 516,362(8) (13) (13)
Roberts, Ralph J. .......... 2,164,107(6) 10,506,929(9) 9,444,375(12) 6.8% 3.6% 100%
Smith, Lawrence S. ......... 319,784 10) (13) (13)
Wang, Stanley L. ........... 40,891 205,039 11) (13) (13)
All directors and Designated
Executive Officers as a
group (6 persons)......... 2,489,618 13,598,481 9,444,375(12) 7.8% 4.7% 100%
(4)(5)(6) (7)(8)(9)(10)
(11)
</TABLE>
- ------------------------
(1) The information contained in this table with respect to The Capital Group
Companies, Inc. ("TCG") is based upon filings made on Form 13F by TCG and
its wholly owned subsidiaries, Capital Research and Management Company
("Capital Research") and Capital Guardian Trust Company ("Capital
Guardian"), setting forth information as of March 31, 1997. Based upon such
filings, 1,950,000 and 704,000 of these shares are beneficially owned by
Capital Research and Capital Guardian, respectively.
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<PAGE>
(2) The information contained in this table with respect to Neuberger & Berman
LLC ("Neuberger") is based upon filings made on Form 13F by Neuberger, its
wholly owned subsidiary, Neuberger & Berman Management, Inc., and Neuberger
& Berman Institutional Asset Management, setting forth information as of
March 31, 1997. Based upon such filings, 575,000 shares are beneficially
owned by Neuberger and 1,000,000 and 67,000 shares are beneficially owned by
Neuberger & Berman Management, Inc. and Neuberger & Berman Institutional
Asset Management, respectively.
(3) With respect to each beneficial owner, the shares issuable upon exercise of
his currently exercisable options and options exercisable within 60 days of
June 1, 1997 are deemed to be outstanding for purposes of computing the
percentage of the class of Common Stock owned. Includes the following shares
of Class A Special Common Stock and Class B Common Stock, respectively, for
which the named individuals, and all directors and Designated Executive
Officers as a group, hold currently exercisable options or options
exercisable within 60 days of June 1, 1997: John R. Alchin, 189,565 shares
and none; Julian A. Brodsky, 984,646 shares and none; Brian L. Roberts,
374,517 shares and none; Ralph J. Roberts, 4,412,566 and 658,125 shares;
Lawrence S. Smith, 275,555 shares and none; Stanley L. Wang, 144,652 shares
and none; and all directors and Designated Executive Officers as a group,
6,381,501 and 658,125 shares.
(4) Includes 20,000 shares of Class A Common Stock owned by a charitable
foundation of which he and members of his family are directors and officers,
as to which shares he disclaims beneficial ownership.
(5) Includes 1,356 shares of Class A Common Stock owned by his wife, as to which
shares he disclaims beneficial ownership.
(6) At June 1, 1997, Sural owned 1,845,037 shares of Class A Common Stock. Mr.
Roberts, Chairman of the Board of Directors of Comcast, and members of his
family own all of the voting securities of Sural. Pursuant to Rule 13d-3 of
the Exchange Act, Mr. Roberts is deemed to be the beneficial owner of the
shares of Class A Common Stock owned by Sural. Also includes 319,070 shares
owned directly by Mr. Roberts. See also the last two sentences of note (12)
below.
(7) Includes 15 shares of Class A Special Common Stock owned in the Comcast
Corporation Retirement-Investment Plan, as to which shares he disclaims
beneficial ownership.
(8) Includes 678 shares of Class A Special Common Stock owned by his wife,
20,542 shares owned in the Comcast Corporation Retirement-Investment Plan,
and 58,140 shares owned by a charitable foundation of which he and his wife
are directors and officers, as to all of which shares he disclaims
beneficial ownership.
(9) Includes 5,315,772 shares of Class A Special Common Stock owned by Sural and
61,800 shares owned by a charitable foundation of which he and his wife are
trustees and as to which shares he disclaims beneficial ownership. See also
the last sentence of Note (12) below.
(10) Includes 20,901 shares of Class A Special Common Stock owned in a Keogh
Plan, as to which shares he disclaims beneficial ownership.
(11) Includes 15 shares of Class A Special Common Stock owned in the Comcast
Corporation Retirement-Investment Plan, as to which shares he disclaims
beneficial ownership.
(12) At June 1, 1997, Sural was the sole owner of Comcast's Class B Common
Stock. Pursuant to Rule 13d-3 of the Exchange Act, Mr. Ralph J. Roberts is
deemed to be the beneficial owner of the shares of Class B Common Stock
owned by Sural. In addition to the shares owned by Sural, Mr. Roberts has
options to purchase 658,125 shares of Class B Common Stock, all of which are
currently exercisable. Since each share of Class B Common Stock is entitled
to fifteen votes, the shares of Class A Common Stock and Class B Common
Stock owned by Sural constitute approximately 82% of the voting power of the
two classes of Comcast's voting Common Stock combined
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(83% if all other shares of Class A Common Stock which he is deemed to
beneficially own and shares underlying his options to purchase Class B
Common Stock currently exercisable or exercisable within 60 days of June 1,
1997 are included). The Class B Common Stock is convertible on a
share-for-share basis into Class A Common Stock or Class A Special Common
Stock. If Sural and Mr. Roberts were to convert the Class B Common Stock
which they are deemed to beneficially own into Class A Common Stock, Mr.
Roberts would beneficially own 11,608,482 shares of Class A Common Stock
(approximately 28% of the Class A Common Stock). Mr. Ralph J. Roberts has
indicated his intention to transfer control of Sural to Mr. Brian L. Roberts
upon receipt of various regulatory and other approvals required in
connection with such transfer.
(13) Less than one percent of the applicable class.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Comcast, through management agreements, manages the operations of the
Company's subsidiaries, including rebuilds and upgrades. The management
agreements generally provide that Comcast will supervise the management and
operations of the cable systems, and arrange for and supervise (but not
necessarily perform itself) certain administrative functions. As compensation
for such services, the agreements provide for Comcast to charge management fees
of up to 6% of gross revenues. Comcast charged the Company's subsidiaries
management fees of $29.0 million and $21.8 million during the three months ended
March 31, 1997 and 1996, respectively, and $93.2 million, $83.5 million and
$65.9 million during the years ended December 31, 1996, 1995 and 1994,
respectively.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage of certain subscriber revenues. Comcast
charges each of the Company's subsidiaries for programming on a basis which
generally approximates the amount each such subsidiary would be charged if it
purchased directly from the supplier, subject to limitations imposed by debt
facilities for certain subsidiaries, and did not benefit from the purchasing
power of the Company's consolidated operations. The Company purchases certain
other services, including insurance and employee benefits, from Comcast under
cost-sharing arrangements on terms that reflect Comcast's actual cost. The
Company reimburses Comcast for certain other costs (primarily salaries) under
cost-reimbursement arrangements. Under all of these arrangements, the Company
incurred total expenses of $171.4 million, $121.8 million, $505.0 million,
$439.4 million and $327.7 million, including $142.7 million, $101.0 million,
$417.0 million, $368.3 million and $264.1 million of programming costs, during
the three months ended March 31, 1997 and 1996 and during the years ended
December 31, 1996, 1995 and 1994, respectively. Such programming costs include
$9.2 million, $6.7 million, $26.2 million, $21.7 million and $16.7 million
during the three months ended March 31, 1997 and 1996 and during the years ended
December 31, 1996, 1995 and 1994, respectively, relating to programming
purchased by the Company, through Comcast, from suppliers in which Comcast holds
an equity interest.
Comcast has agreed to permit certain subsidiaries of the Company to defer
payment of a portion of the management fees and programming expenses charged to
the Company. As of March 31, 1997 and December 31, 1996 and 1995, $319.5
million, $291.8 million and $225.2 million, respectively, were deferred under
these arrangements.
The Company receives sales commissions from QVC, an electronic retailer and
a majority owned and controlled subsidiary of Comcast, based on a percentage of
QVC sales to the Company's subscribers. In addition, the Company recognizes
revenues relating to the carriage of certain QVC programming. For the three
months ended March 31, 1997 and 1996 and for the years ended December 31, 1996,
1995 and 1994, the Company's service income includes $1.9 million, $1.9 million,
$8.3 million, $7.9 million and $4.7 million, respectively, relating to QVC.
In 1995, the Company entered into a custodial account arrangement with
Comcast Financial Agency Corporation ("CFAC"), a wholly owned subsidiary of
Comcast, under which CFAC provides cash management services to the Company.
Under this arrangement, the Company's cash receipts are deposited with and held
by CFAC, as custodian and agent, which invests and disburses such funds at the
direction of the Company. As of March 31, 1997 and December 31, 1996 and 1995,
$66.5 million, $53.5 million and $26.9 million, respectively, of the Company's
cash was held by CFAC.
The Company and its 80% or more owned subsidiaries join with Comcast in
filing a consolidated federal income tax return. Comcast allocates income tax
expense or benefit to the Company as if the Company were filing a separate
federal income tax return. Subsequent to the Company's initial adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," effective January 1, 1993, tax benefits from both losses and tax credits
are made available to the Company as it is able to realize such benefits on a
separate return basis. The subsidiaries of the Company pay Comcast
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<PAGE>
for income taxes an amount equal to the amount of tax each subsidiary would pay
if they filed separate tax returns, subject to limitations for certain
subsidiaries.
Certain of the Company's subsidiaries' loan agreements contain restrictive
covenants which, among other things, limit the Company's ability to enter into
arrangements for the acquisition or disposition of property and equipment,
investments, mergers and the incurrence of additional debt. Certain of these
agreements require that certain ratios and cash flow levels be maintained and
contain certain restrictions on dividend payments, payment of management fees
and advances of funds to affiliated entities. In addition, the stock of certain
subsidiaries is pledged as collateral for notes payable to banks and insurance
companies.
As of March 31, 1997, the Company and certain of its subsidiaries had unused
irrevocable standby letters of credit totaling $106.3 million, substantially all
of which cover potential fundings relating to companies in which Comcast, but
not the Company, holds an equity interest.
Between April 1, 1997 and May 1, 1997, the Company (i) repaid $100.0 million
of the Notes Payable with the proceeds from drawdowns under subsidiaries'
existing credit facilities ($55.0 million) and existing cash held by an
affiliate ($45.0 million), (ii) completed the exchange of affiliate notes
payable and notes receivable, and the accrued interest thereon, between the
Company, Comcast and certain of their subsidiaries resulting in a reduction in
the Company's Notes Payable of $307.6 million as of May 1, 1997, with a
corresponding reduction in the Company's Notes Receivable, and (iii) eliminated
the remaining Notes Receivable, and accrued interest thereon (aggregating $546.3
million as of May 1, 1997), through a non-cash dividend to Comcast. Interest
income accrued on the Notes Receivable during the three months ended March 31,
1997 and 1996 and during the years ended December 31, 1996, 1995 and 1994 was
$18.0 million, $9.9 million, $52.9 million, $40.1 million and $3.9 million,
respectively. Interest expense on the Notes Payable during the three months
ended March 31, 1997 and 1996 and during the years ended December 31, 1996, 1995
and 1994 was $9.1 million, $8.6 million, $32.1 million, $28.2 million and $20.9
million, respectively.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SUBSIDIARY CREDIT AGREEMENTS
As of May 31, 1997, certain of the Company's subsidiaries are party to
credit agreements (each a "Subsidiary Credit Agreement" and collectively the
"Subsidiary Credit Agreements") pursuant to which such subsidiaries may borrow
an aggregate of up to $2.050 billion. As of May 31, 1997, an aggregate amount of
$1.155 billion was outstanding under these credit agreements. The obligations of
the financial institutions to lend under Subsidiary Credit Agreement revolving
facilities expire, and amounts, if any, outstanding thereunder are due and
payable, on the following dates with respect to the following committed amounts:
$600.0 million in January 2002, $750.0 million in December 2003 and $700.0
million in September 2004. On July 2, 1997, the Company repaid $435.0 million of
its long-term debt outstanding under a Subsidiary Credit Agreement as of May 31,
1997 with the proceeds from the issuance of a note payable to a subsidiary of
Comcast.
Loans under the Subsidiary Credit Agreements bear interest at floating
rates. As of May 31, 1997, the weighted average effective interest rate on
amounts outstanding under the Subsidiary Credit Agreements was 6.74% per annum.
The Company has pledged the shares of common stock of certain of its
subsidiaries to secure the obligations of such subsidiary under the relevant
Subsidiary Credit Agreement. In addition, under one of the Subsidiary Credit
Agreements, the subsidiary has pledged the shares of each of its direct
subsidiaries to secure its obligations under such Subsidiary Credit Agreement.
Each of the Subsidiary Credit Agreements include customary covenants,
including restrictive covenants which, subject to certain exceptions, impose
certain limitations on the subsidiaries' (and their respective subsidiaries')
abilities to, among other things: (a) guaranty obligations of others, (b) incur
liens, (c) pay dividends or redeem or repurchase capital stock, (d) merge with
certain other entities, (e) dispose of a material portion of such subsidiary's
assets (other than in the ordinary course of business), (f) incur indebtedness,
(g) engage in certain transactions with affiliates, (h) allow any of its
subsidiaries to enter into restrictions on their ability to pay dividends, (i)
allow any of its subsidiaries to issue capital stock or (j) acquire the business
or assets of other entities. Certain of the Subsidiary Credit Agreements provide
for subordination of amounts due to affiliates to the obligations of the
subsidiary under such Subsidiary Credit Agreement. Each of the Subsidiary Credit
Agreements includes financial covenants requiring the subsidiary to maintain
certain financial ratios at specified levels.
Each of the Subsidiary Credit Agreements contains customary events of
default, including but not limited to (a) nonpayment of principal, interest,
fees or other amounts when due, (b) violation of covenants, (c) failure of any
representation or warranty to be true in all material respects when made, (d)
cross-default and cross-acceleration, (e) bankruptcy events, (f) judgments
rendered against such subsidiary in excess of certain amounts and (g) change of
control.
As of March 31, 1997, the Company and each subsidiary party to a Subsidiary
Credit Agreement was in substantial compliance with their obligations under the
Subsidiary Credit Agreements and related documents.
10% DEBENTURES DUE 2003
Pursuant to an Indenture dated as of May 15, 1983, between Storer
Communications, Inc. ("Storer"), an indirect wholly owned subsidiary of the
Company, and The Chase Manhattan Bank, N.A. as Trustee, Storer issued 10%
Subordinated Debentures, due May 15, 2003 (the "10% Debentures"). On June 30,
1997, the Company redeemed the 10% Debentures. An aggregate principal amount of
$139.3 million of the 10% Debentures were redeemed at a redemption price of 100%
of the principal amount thereof, together with accrued interest thereon. The
Company redeemed the 10% Debentures with the proceeds from the issuance of a
note payable to a subsidiary of Comcast. As of March 31, 1997 and
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December 31, 1996, the 10% Debentures had an accreted value of $127.1 million
and $126.6 million, respectively.
OTHER
Between April 1, 1997 and May 1, 1997, the Company (i) repaid $100.0 million
of the Notes Payable with the proceeds from drawdowns under subsidiaries'
existing credit facilities ($55.0 million) and existing cash held by an
affiliate ($45.0 million), (ii) completed the exchange of affiliate notes
payable and notes receivable, and the accrued interest thereon, between the
Company, Comcast and certain of their subsidiaries resulting in a reduction in
the Company's Notes Payable of $307.6 million as of May 1, 1997, with a
corresponding reduction in the Company's Notes Receivable, and (iii) eliminated
the remaining Notes Receivable, and accrued interest thereon (aggregating $546.3
million as of May 1, 1997), through a non-cash dividend to Comcast. Interest
income accrued on the Notes Receivable during the three months ended March 31,
1997 and 1996 and during the years ended December 31, 1996, 1995 and 1994 was
$18.0 million, $9.9 million, $52.9 million, $40.1 million and $3.9 million,
respectively. Interest expense on the Notes Payable during the three months
ended March 31, 1997 and 1996 and during the years ended December 31, 1996, 1995
and 1994 was $9.1 million, $8.6 million, $32.1 million, $28.2 million and $20.9
million, respectively.
The terms of the notes payable issued to a subsidiary of Comcast on June 30,
1997 and July 2, 1997 are substantially the same as those of the 10% Debentures
and the long-term debt referred to above.
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DESCRIPTION OF THE NOTES
The New Notes are to be issued under an Indenture, dated as of May 1, 1997
(the "Indenture"), between the Company and Bank of Montreal Trust Company, as
Trustee, which has been filed as an exhibit to the Registration Statement, of
which the Prospectus constitutes a part. The following summary of certain
provisions of the Indenture and the Notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the Indenture, including the definitions of certain terms therein and those
terms made a part thereof by the TIA. References in this "Description of the
Notes" to the "Company" are to Comcast Cable Communications, Inc. and not any of
its subsidiaries. All defined terms used hereunder and not previously defined
are defined under " --Certain Definitions." Copies of the Indenture are
available at the corporate trust office of the Trustee.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, if the Exchange
Offer is not consummated by October 28, 1997, holders that have complied with
their obligations under the Registration Rights Agreements will be entitled,
subject to certain exceptions, to additional interest at a rate in an amount
equal to 25 basis points per annum on Old Notes held by such holder. The rate of
additional interest will increase by an additional 25 basis points per each
subsequent 90-day period until the Exchange Offer is consummated, up to a
maximum rate of additional interest of 100 basis points.
GENERAL
The Indenture provides for issuance from time to time of debentures, notes
(including the Notes) or other evidences of indebtedness of the Company
("Securities") in an unlimited amount. Additional Securities may be issued under
the Indenture from time to time.
The New Notes will be unsecured and unsubordinated obligations of the
Company and will rank PARI PASSU with all other unsecured and unsubordinated
indebtedness and other obligations of the Company. The New Notes will be
effectively subordinated to all liabilities of the Company's subsidiaries,
including trade payables. On a pro forma basis as of March 31, 1997, after
giving effect to the Offering, the Intercompany Note Transactions and the
application of the proceeds therefrom, the total indebtedness and other
liabilities of the Company's subsidiaries (including trade payables and accrued
liabilities) would have been approximately $2.4 billion.
The New Notes will bear interest at the rates per annum shown on the front
cover of this Prospectus from May 1, 1997, payable semiannually (to holders of
record at the close of business on April 15 or October 15 immediately preceding
the interest payment date) on May 1 and November 1 of each year commencing
November 1, 1997. The Seven-Year Notes will mature on May 1, 2004; the Ten-Year
Notes will mature on May 1, 2007; the Twenty-Year Notes will mature on May 1,
2017 and the Thirty-Year Notes will mature on May 1, 2027.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee at 77 Water Street, 4th Floor, New
York, New York, 10005); PROVIDED that, at the option of the Company, payment of
interest may be made by check mailed to the address of the holder as such
address appears in the security register.
The New Notes will be issued only in registered form in denominations of
$1,000 and integral multiples thereof. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
The Company is a holding company and conducts all of its operations through
subsidiaries. Consequently, the ability of the Company to pay its obligations,
including its obligation to pay interest on
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and principal of the Notes, whether at the maturity thereof or upon an earlier
redemption or purchase at the option of the Company or the holders of the
Thirty-Year Notes, will be dependent upon the repayment to the Company of
investments and advances made by the Company and upon the earnings of its
subsidiaries and the distribution of those earnings to the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Notes or to make
funds available therefor. The ability of the subsidiaries to pay dividends or
make other payments or advances to the Company will depend upon their operating
results and will be subject to applicable laws and contractual restrictions,
including, but not limited to, payments due to Comcast pursuant to certain
management agreements (including programming arrangements) and other
arrangements. Certain of the Company's subsidiaries' loan agreements require
that certain ratios and cash flow levels be maintained and contain certain
restrictions on dividend payments, payment of management fees and advances of
funds to affiliated entities. The Indenture will not limit the ability of
subsidiaries of the Company to enter into agreements that prohibit or restrict
dividends or other payments or advances to the Company. See "Risk
Factors--Holding Company Structure; Dependence on Payments from Subsidiaries;
Effective Subordination."
PURCHASE AT OPTION OF HOLDERS OF THIRTY-YEAR NOTES
Each holder of the Thirty-Year Notes will have the right to require the
Company to repurchase all or a portion of the Thirty-Year Notes owned by such
holder (the "Put Option") on May 1, 2009 (the "Put Option Exercise Date") at a
purchase price equal to 100% of the principal amount of the Thirty-Year Notes
tendered by such holder plus accrued interest thereon. On or before the Put
Option Exercise Date, the Company shall deposit with a paying agent (or the
Trustee) money sufficient to pay the principal of and any accrued interest on
any Thirty-Year Notes tendered for repayment. On and after the Put Option
Exercise Date, interest will cease to accrue on the Thirty-Year Notes or any
portion thereof tendered for purchase, unless the Company fails to pay the
purchase price.
If a holder elects to exercise the Put Option, such holder must provide the
Company with notice of its intention to exercise the Put Option during the
period from and including March 1, 2009 through and including April 1, 2009.
Such notice, once given, will be irrevocable unless waived by the Company.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act if required and will file
Schedule 13E-4 or any other schedule if required thereunder in connection with
any offer by the Company to purchase the Thirty-Year Notes.
BOOK-ENTRY NOTES
With respect to Thirty-Year Notes held under the book-entry system
maintained by the Depositary Trust Company ("DTC"), DTC, its nominee, Cede & Co.
or any of DTC's direct or indirect participants (as defined herein) as
registered holders of the Thirty-Year Notes, will be entitled to tender the
Thirty-Year Notes on the Put Option Exercise Date for repayment and any such
tenders will be effected by means of DTC's Repayment Option Procedures. During
the period from and including March 1, 2009 to and including April 1, 2009 or,
if such April 1, 2009 is not a business day, the next succeeding business day,
DTC will receive instructions from its participants (acting on behalf of owners
of beneficial interests in the Thirty-Year Notes) to tender the Thirty-Year
Notes for repayment under DTC's Repayment Option Procedures. Such tenders for
repayment will be made by DTC by means of a book-entry credit of the Thirty-Year
Notes to the account of the Trustee, provided that DTC receives instructions
from tendering participants by Noon on April 1, 2009. Promptly after the
recording of any such book-entry credit, DTC will provide the Trustee an Agent
Put Daily Activity Report in accordance with its Repayment Option Procedures,
identifying the Thirty-Year Notes and the aggregate principal amount thereof as
to which such tenders for repayment have been made. OWNERS OF BENEFICIAL
INTERESTS IN THIRTY-YEAR NOTES WHO WISH TO EFFECTUATE THE TENDER AND REPAYMENT
OF SUCH THIRTY-YEAR NOTES
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MUST INSTRUCT THEIR RESPECTIVE DTC PARTICIPANT OR PARTICIPANTS A REASONABLE
PERIOD OF TIME IN ADVANCE OF APRIL 1, 2009.
CERTIFICATED NOTES
Tenders for repayment of Notes not held under the book-entry system on the
Put Option Exercise Date shall be made according to the following procedures.
The Trustee must receive at the principal office of the Trustee in New York
City, during the period from and including March 1, 2009 to and including April
1, 2009 or if such April 1, 2009 is not a business day, the next succeeding
business day, (i) the Thirty-Year Notes with the form entitled "Option to Elect
Repayment" on the reverse of the Thirty-Year Notes duly completed, or (ii) a
telegram, telex, facsimile transmission or letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc., or
a commercial bank or a trust company in the United States of America, setting
forth the name of the registered holder of the Thirty-Year Notes, the principal
amount of the Thirty-Year Notes to be repaid, the certificate number or a
description of the tenor and terms of the Thirty-Year Notes, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Thirty-Year Notes to be repaid with the form entitled "Option to Elect
Repayment" on the reverse of the Thirty-Year Notes duly completed will be
received by the Trustee not later than five business days after the date of such
telegram, telex, facsimile transmission or letter and such Thirty-Year Notes and
form duly completed are received by the Trustee by such fifth business day. Any
such notice received by the Trustee during the period from and including March
1, 2009 to and including April 1, 2009 shall be irrevocable, unless waived by
the Company. All questions as to the validity, eligibility (including time of
receipt) and the acceptance of any Thirty-Year Notes for repayment will be
determined by the Company, whose determination will be final and binding absent
manifest error.
OPTIONAL REDEMPTION
The Seven-Year Notes, Ten-Year Notes and Twenty-Year Notes will be
redeemable, in whole or in part, at the option of the Company at any time and
the Thirty-Year Notes will be redeemable, in whole or in part, at the option of
the Company at any time after May 1, 2009, in each case at a redemption price
equal to the greater of (i) 100% of the principal amount of the Notes, plus
accrued interest thereon to the date of redemption, or (ii) as determined by a
Quotation Agent (as defined below), the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus accrued interest on
the Notes to the date of redemption. If a redemption date does not fall on an
interest payment date, then, with respect to the interest payment immediately
succeeding the redemption date, only the unaccrued portion of such interest
payment as of the redemption date shall be included in any calculation pursuant
to clause (ii).
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains three or fewer such Reference Treasury
Dealer Quotations, the average of all such Quotations.
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"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.; Bear,
Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation and
their respective successors; PROVIDED, HOWEVER, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (iii) any other Primary Treasury Dealer selected by
the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
If less then all the Notes are to be redeemed, the Trustee shall select, in
such manner as it shall deem fair and appropriate, the particular Notes to be
redeemed or any portion thereof that is an integral multiple of $1,000.
The Notes will not be entitled to any sinking fund.
CERTAIN COVENANTS
LIMITATION ON LIENS SECURING INDEBTEDNESS
The Company shall not, and shall not permit any Restricted Subsidiary to,
create, incur or assume any Lien (other than any Permitted Lien) on Restricted
Property to secure the payment of Indebtedness of the Company or any Subsidiary
if immediately after the creation, incurrence or assumption of such Lien, the
aggregate outstanding principal amount of all Indebtedness of the Company and
the Subsidiaries that is secured by Liens (other than Permitted Liens) on
Restricted Property (other than (x) Indebtedness that is so secured equally and
ratably with (or on a basis subordinated to) the Notes and (y) the Notes), plus
the aggregate amount of all Attributable Debt of the Company and the Restricted
Subsidiaries with respect to all Sale and Leaseback Transactions outstanding at
such time (other than Sale and Leaseback Transactions permitted by the second
paragraph under "--Limitation on Sale and Leaseback Transactions"), would exceed
four times Annualized Cash Flow, unless the Company secures the outstanding
Notes equally and ratably with (or prior to) all Indebtedness secured by such
Lien, so long as such Indebtedness shall be so secured.
LIMITATION ON RESTRICTED PAYMENTS
The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Restricted Payment if (a) at the time of such proposed Restricted
Payment, a Default or Event of Default shall have occurred and be continuing or
shall occur as a consequence of such Restricted Payment or (b) immediately after
giving effect to such Restricted Payment, the aggregate of all Restricted
Payments that shall have been made on or after April 1, 1997 would exceed the
sum of:
(i) $200 million plus
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(ii) an amount equal to the difference between (A) the Cumulative Cash Flow
Credit and (B) 1.2 multiplied by Cumulative Interest Expense.
For purposes of this "Limitation on Restricted Payments" covenant, the
amount of any Restricted Payment, if other than cash, shall be its fair market
value as determined by the Board of Directors of the Company, whose good faith
determination shall be conclusive.
The foregoing provisions do not prevent: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at such date of
declaration such payment complied with the above provisions and (ii) the
retirement or redemption of any shares of the Company's Capital Stock or
warrants, rights or options to acquire Capital Stock of the Company, in exchange
for, or out of the proceeds of a substantially concurrent sale of, Qualified
Stock or warrants, rights or options to acquire Qualified Stock. For purposes of
determining the aggregate permissible amount of Restricted Payments in
accordance with clause (b) of the first paragraph of this covenant, all amounts
expended pursuant to clause (i) of this paragraph shall be included to the
extent that such amounts were not previously included in calculating Restricted
Payments and all retirements, redemptions, exchanges and sales pursuant to
clause (ii) of this paragraph shall be excluded.
If the Company makes a Restricted Payment which, at the time of the making
of such Restricted Payment, would in the good faith determination of the Company
be permitted under the requirements of this covenant, such Restricted Payment
shall be deemed to have been made in compliance with this covenant
notwithstanding any subsequent adjustments made in good faith to the Company's
financial statements affecting Cumulative Cash Flow Credit or Cumulative
Interest Expense for any period.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Company shall not, and shall not permit any Restricted Subsidiary to,
enter into any Sale and Leaseback Transaction involving any Principal Property
or any part thereof after the date of original issuance of the Notes unless,
after giving effect to such Sale and Leaseback Transaction, the aggregate amount
of all Attributable Debt of the Company and the Restricted Subsidiaries with
respect to all Sale and Leaseback Transactions outstanding at such time (other
than Sale and Leaseback Transactions permitted by the next paragraph), plus the
aggregate principal amount of all Indebtedness of the Company and the
Subsidiaries that is secured by Liens (other than Permitted Liens) on Restricted
Property (other than (x) Indebtedness that is so secured equally and ratably
with (or on a basis subordinated to) the Notes and (y) the Notes), would not
exceed four times Annualized Cash Flow.
The restriction in the foregoing paragraph shall not apply to any Sale and
Leaseback Transaction if (i) the lease is for a period of not in excess of three
years, including renewal of rights, (ii) the lease secures or relates to
industrial revenue or similar financing, (iii) the transaction is solely between
the Company and a Restricted Subsidiary or between or among Restricted
Subsidiaries, or (iv) the Company or such Restricted Subsidiary, within 270 days
after the sale is completed, applies an amount equal to or greater of (a) the
net proceeds of the sale of the Principal Property or part thereof leased or (b)
the fair market value of the Principal Property or part thereof leased (as
determined in good faith by the Board of Directors of the Company) either to (1)
the retirement (or open market purchase) of Notes, other long-term Indebtedness
of the Company ranking on a parity with or senior to the Notes or long-term
Indebtedness of a Restricted Subsidiary or (2) the purchase by the Company or
any Restricted Subsidiary of other property, plant or equipment related to the
business of the Company or any Restricted Subsidiary having a value at least
equal to the value of the Principal Property or part thereof leased.
FINANCIAL INFORMATION
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company shall prepare, and shall deliver to any holder or
beneficial owner of Notes upon request (without charge) and to the Trustee, no
later than 15 calendar days after the dates specified in such Sections were the
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Company subject thereto, annual audited consolidated financial statements and
quarterly unaudited consolidated financial statements, each accompanied by a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" written report, similar to those that would be required to be filed
with the Commission if the Company were subject to Section 13(a) or 15(d) of the
Exchange Act. In addition, for so long as any Notes remain outstanding, the
Company shall furnish to holders of Notes and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any
beneficial owner of the Notes, if not obtainable from the Commission,
information of the type described above, upon the request of any such holder.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease, or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to any person (other than a
consolidation with or merger with or into or a sale, conveyance, transfer, lease
or other disposition to a Wholly Owned Restricted Subsidiary with a positive net
worth; PROVIDED that, in connection with any such merger of the Company with a
Wholly Owned Restricted Subsidiary, no consideration (other than common stock in
the surviving person or the Company) shall be issued or distributed to the
stockholders of the Company) or permit any person to merge with or into the
Company unless: (i) the Company shall be the continuing person, or the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws of
the United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company on all of the Notes and under the Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iii) the Company delivers to
the Trustee an officers' certificate and opinion of counsel, in each case
stating that such consolidation, merger, or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with;
PROVIDED, HOWEVER, that the foregoing limitations shall not apply if, in the
good faith determination of the board of directors of the Company, whose
determination shall be evidenced by a board resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company; and
PROVIDED further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
EVENTS OF DEFAULT
An Event of Default will occur with respect to an issue of Notes if: (a) the
Company defaults in the payment of principal of (or premium if any, on) any such
Note when the same becomes due and payable at maturity, upon acceleration,
redemption, or otherwise; (b) the Company defaults in the payment of interest
(including additional interest under the Registration Rights Agreement) on any
such Note when the same becomes due and payable, and such default continues for
a period of 30 days; (c) the Company defaults in the performance of or breaches
any other covenant or agreement of the Company in the Indenture with respect to
such Notes or under such Notes and such default or breach continues for a period
of 30 consecutive days after written notice by the Trustee or by the holders (as
defined in the Indenture) of 25% or more in aggregate principal amount of such
Notes; (d) there occurs with respect to any issue or issues of Indebtedness of
the Company or any Subsidiary (other than such Notes) having an outstanding
principal amount of $50 million or more in the aggregate for all such issues of
all such persons, whether such Indebtedness now exists or shall hereafter be
created, (A) an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its stated maturity and/or (B)
the failure to make a principal payment at the final (but not any interim) fixed
maturity; (e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $50
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million in the aggregate for all such final judgments or orders (treating any
deductibles, self-insurance, or retention as not so covered) shall be rendered
against the Company or any Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such persons to
exceed $50 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; (f) a
court having jurisdiction enters a decree or order for (i) relief in respect of
the Company or any Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law now or hereafter in effect, (ii)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official of the Company or any Subsidiary or for all or
substantially all of the property and assets of the Company or any Subsidiary or
(iii) the winding up or liquidation of the affairs of the Company or any
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (g) the Company or any Subsidiary
(i) commences a voluntary case under any applicable bankruptcy, insolvency, or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (ii) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official of the Company or any
Subsidiary or for all or substantially all of the property and assets of the
Company or any Subsidiary or (iii) effects any general assignment for the
benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(f) or (g) above that occurs with respect to the Company) occurs with respect to
an issue of Notes and is continuing under the Indenture, then, and in each and
every such case, either the Trustee or the holders of not less than 25% in
aggregate principal amount of such Notes then outstanding under the Indenture by
written notice to the Company (and to the Trustee if such notice is given by the
holders (the "Acceleration Notice")), may, and the Trustee at the request of
such holders shall, declare the principal amount of and accrued interest, if
any, on such Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal amount of and accrued interest, if any, on such
Notes shall be immediately due and payable. If an Event of Default specified in
clause (f) or (g) above occurs with respect to the Company, the principal amount
of and accrued interest, if any, on each issue of Notes then outstanding shall
be and become immediately due and payable without any notice or other action on
the part of the Trustee or any holder. Upon certain conditions such declarations
may be rescinded and annulled and past defaults may be waived by the holders of
a majority in aggregate principal amount of an issue of Notes that has been
accelerated. Furthermore, subject to various provisions in the Indenture, the
holders of at least a majority in aggregate principal amount of an issue of
Notes by notice to the Trustee, may waive an existing Default or Event of
Default with respect to such Notes and its consequences, except a Default in the
payment of principal of or interest on such Notes or in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the holders of each such Notes. Upon any such waiver, such Default
shall cease to exist, and any Event of Default with respect to such Notes shall
be deemed to have been cured, for every purpose of the Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto. For information as to the waiver of
defaults, see "--Modification and Waiver."
The holders of at least a majority in aggregate principal amount of an issue
of Notes may direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to such Notes. However, the Trustee may refuse to
follow any direction that conflicts with law or the Indenture, that may involve
the Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of holders of such issue of Notes not
joining in the giving of such direction and may take any other action it deems
proper that is not inconsistent with any such direction received from holders of
such issue of Notes. A holder may not pursue any remedy with respect to the
Indenture or any issue of Notes unless: (i) the holder gives the Trustee written
notice of a continuing Event of Default; (ii) the holders of at least 25% in
aggregate principal amount of such Notes make a written request to the Trustee
to pursue the
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remedy; (iii) such holder or holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability, or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the holders of a majority
in aggregate principal amount of such Notes do not give the Trustee a direction
that is inconsistent with the request. However, such limitations do not apply to
the right of any holder of a Note to receive payment of the principal of or
interest, if any, on such Note, or to bring suit for the enforcement of any such
payment, on or after the due date expressed in the Notes, which right shall not
be impaired or affected without the consent of the holder.
The Indenture will require certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, as to
their knowledge of the compliance of the Company with all conditions and
covenants under the Indenture, such compliance to be determined without regard
to any period of grace or requirement of notice provided under the Indenture.
DEFEASANCE
The Indenture provides that, except as otherwise provided in this paragraph,
the Company may terminate its obligations with respect to an issue of Notes and
the Indenture with respect to such Notes if: (i) all such Notes previously
authenticated and delivered with certain exceptions, have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by it under
the Indenture; or (ii)(A) such Notes mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (B) the Company irrevocably
deposits in trust with the Trustee, as trust funds solely for the benefit of the
holders of such Notes, for that purpose, money or U.S. government obligations or
a combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee), without
consideration of any reinvestment, to pay principal of and interest on such
Notes to maturity or redemption, as the case may be, and to pay all other sums
payable by it under the Indenture, and (C) the Company delivers to the Trustee
an officers' certificate and an opinion of counsel, in each case stating that
all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the Indenture with respect to such Notes have been
complied with.
With respect to the foregoing clause (i), only the Company's obligations to
compensate and indemnify the Trustee and its right to recover excess money held
by the Trustee under the Indenture shall survive. With respect to the foregoing
clause (ii), only the Company's obligations with respect to the issue of
defeased Notes to execute and deliver such Notes for authentication, to set the
terms of such Notes, to maintain an office or agency in respect of such Notes,
to have moneys held for payment in trust, to register the transfer or exchange
of such Notes, to deliver such Notes for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and its
right to recover excess money held by the Trustee shall survive until such Notes
are no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the Trustee, and its right to recover excess money held
by the Trustee shall survive.
The Indenture provides that, except as otherwise provided in this paragraph,
the Company (i) will be deemed to have paid and will be discharged from any and
all obligations in respect of an issue of Notes, and the provisions of the
Indenture will no longer be in effect with respect to such Notes ("legal
defeasance") and (ii) may omit to comply with any term, provision or condition
of the Indenture described above under "--Certain Covenants" and such omission
shall be deemed not to be an Event of Default under clause (c) of the first
paragraph of "--Events of Default" with respect to such Notes ("covenant
defeasance"); PROVIDED that the following conditions shall have been satisfied:
(A) the Company has irrevocably deposited in trust with the Trustee as trust
funds solely for the benefit of the holders of such Notes, for payment of the
principal of and interest on such Notes, money or U.S. government obligations or
a combination thereof sufficient (unless such funds consist solely of money,
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in the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee) without
consideration of any reinvestment and after payment of all federal, state and
local taxes or other charges and assessments in respect thereof payable by the
Trustee, to pay and discharge the principal of and accrued interest on such
Notes to maturity or earlier redemption (irrevocably provided for under
arrangements satisfactory to the Trustee), as the case may be; (B) such deposit
will not result in a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which the Company is
a party or by which it is bound; (C) no Default or Event of Default with respect
to such Notes shall have occurred and be continuing on the date of such deposit;
(D) the Company shall have delivered to the Trustee an opinion of counsel that
(1) the holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of the Company's exercise of its option
under this provision of the Indenture and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (which opinion, in
the case of a legal defeasance, shall be based upon a change in law) and (2) the
Holders of such Notes have a valid security interest in the trust funds subject
to no prior liens under the Uniform Commercial Code, and (E) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel, in
each case stating that all conditions precedent provided for in the Indenture
relating to the defeasance contemplated of such Notes have been complied with.
In the case of legal defeasance under clause (i) above, the opinion of counsel
referred to in clause (D)(1) above may be replaced by a ruling directed to the
Trustee received from the Internal Revenue Service to the same effect.
Subsequent to legal defeasance under clause (i) above, the Company's obligations
with respect to the issue of defeased Notes to execute and deliver such Notes
for authentication, to set the terms of such Notes, to maintain an office or
agency in respect of such Notes, to have moneys held for payment in trust, to
register the transfer or exchange of such Notes, to deliver such Notes for
replacement or to be canceled, to compensate and indemnify the Trustee and to
appoint a successor trustee, and its right to recover excess money held by the
Trustee shall survive until such Notes are no longer outstanding. After such
Notes are no longer outstanding, in the case of legal defeasance under clause
(i) above, only the Company's obligations to compensate and indemnify the
Trustee and its right to recover excess money held by the Trustee shall survive.
MODIFICATION AND WAIVER
The Company and the Trustee may amend or supplement the Indenture or the
Notes without notice to or the consent of any holder: (i) to cure any ambiguity,
defect, or inconsistency in the Indenture; PROVIDED that such amendments or
supplements shall not adversely affect the interests of the holders in any
material respect; (ii) to comply with the provisions described under "--Certain
Covenants--Consolidation, Merger and Sale of Assets"; (iii) to comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act; (iv) to evidence and provide for the
acceptance of appointment hereunder by a successor Trustee; (v) to establish the
form or forms or terms of the Notes as permitted by the Indenture; (vi) to
provide for uncertificated Notes and to make all appropriate changes for such
purpose; (vii) to secure the Notes pursuant to the provisions of "--Certain
Covenants--Limitation on Liens Securing Indebtedness"; or (viii) to make any
change that does not materially and adversely affect the rights of any holder.
Subject to certain conditions, without prior notice to any holder of an
issue of Notes, modifications and amendments of the Indenture may be made by the
Company and the Trustee with the written consent of the holders of a majority in
principal amount of such Notes, and compliance by the Company with any provision
of the Indenture with respect to such Notes may be waived by written notice to
the Trustee by the holders of a majority in principal amount of such Notes
outstanding; PROVIDED, HOWEVER, that no such modification, amendment or waiver
may, without the consent of each holder affected thereby, (i) change the stated
maturity of the principal of, or any installment of interest on, any Note; (ii)
reduce the principal amount of, or premium, if any, or interest on, any Note;
(iii) change the place or
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currency of payment of principal of, or premium, if any, or interest on, any
Note; (iv) change the provisions for calculating the optional redemption price,
including the definitions relating thereto; (v) impair the right to institute
suit for the enforcement of any payment of any Note on or after the due date
therefor; (vi) reduce the above-stated percentage of outstanding Notes the
consent of whose holders is necessary to modify or amend or to waive certain
provisions of or defaults under the Indenture; (vii) waive a default in the
payment of principal of or interest on the Notes; or (viii) modify any of the
provisions of this paragraph, except to increase any required percentage or to
provide that certain other provisions cannot be modified or waived with the
consent of the holder of each Note affected thereby. It shall not be necessary
for the consent of the holders under this section of the Indenture to approve
the particular form of any proposed amendment, supplement, or waiver, but it
shall be sufficient if such consent approves the substance thereof. After an
amendment, supplement, or waiver under this section of the Indenture becomes
effective, the Company shall give to the holders affected thereby a notice
briefly describing the amendment, supplement, or waiver. The Company will mail
supplemental indentures to holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.
With respect to any issue of Notes, neither the Company 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 such Note for or as an inducement to any consent, waiver, or amendment of
any of the terms or provisions of such Notes or the Indenture with respect to
such Notes unless such consideration is offered to be paid or agreed to be paid
to all holders of such 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.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse shall be had under or upon any
obligation, covenant, or agreement of the Company in the Indenture or any
supplemental indenture, or in any of the Notes or because of the creation of any
indebtedness represented thereby, against any incorporator, stockholder,
officer, director, employee of the Company or of any successor person thereof
under any law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise. Each holder, by
accepting the Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the TIA incorporated by reference therein
contain limitations on the rights of the Trustee, should it become a creditor of
the Company, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as security or
otherwise. The Trustee is permitted to engage in other transactions; PROVIDED,
HOWEVER, that if it acquires any conflicting interest, it must eliminate such
conflict or resign.
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CERTAIN DEFINITIONS
"Affiliate" means, as applied to any person, any other person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by,"
and "under common control with"), as applied to any person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract, or otherwise.
"Annualized Cash Flow" means, at any date, Operating Cash Flow for the last
two fiscal quarters for which financial statements are available immediately
prior or on such date multiplied by two.
"Attributable Debt" means, with respect to a lease in a Sale and Leaseback
Transaction, the total net amount of rent required to be paid during the
remaining primary term of such lease, discounted at a rate per annum equal to
the interest rate implicit in such lease, calculated in accordance with GAAP.
The net amount of rent required to be paid under any such lease for any such
period shall be the aggregate amount of rent payable by the lessee with respect
to such period after excluding amounts required to be paid on account of
maintenance, repairs, insurance, taxes, assessments, utility, operating and
labor costs and similar charges.
"Capitalized Lease" means, as applied to any person, any lease of any
property (whether real, personal, or mixed) of which the discounted present
value of the rental obligations of such person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such person; and
"Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, or other equivalents (however designated, whether
voting or non-voting) of such person's capital stock or other ownership
interests, whether now outstanding or issued after the date of the Indenture,
including, without limitation, all common stock and preferred stock.
"Commission" means the Securities and Exchange Commission.
"Cumulative Cash Flow Credit" means:
(a) cumulative Operating Cash Flow during the period commencing on April
1, 1997 and ending on the last day of the most recent month preceding the
date of the proposed Restricted Payment for which financial information is
available or, if cumulative Operating Cash Flow for such period is negative,
minus the amount by which cumulative Operating Cash Flow is less than zero,
plus
(b) the aggregate net proceeds received by the Company from the issue or
sale (other than to a Subsidiary) of Qualified Stock on or after April 1,
1997, plus
(c) the aggregate net proceeds received by the Company from the issuance
or sale (other than to a Subsidiary) of Qualified Stock on or after April 1,
1997, upon the conversion of, or exchange for, Indebtedness of the Company
or any Subsidiary or from the exercise of any options, warrants or other
rights to acquire Capital Stock of the Company, plus
(d) the aggregate amount of contributions to the capital of the Company
on or after April 1, 1997 other than in connection with the Intercompany
Note Transactions, plus
(e) dividends or similar distributions received in cash by the Company
or any Restricted Subsidiary from any Unrestricted Subsidiary.
For purposes of this definition, the net proceeds in property other than
cash received by the Company as contemplated by clauses (b), (c) and (d) above
shall be valued at the fair market value of such property (as determined by the
Board of Directors of the Company, whose good faith determination
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shall be conclusive) at the date of receipt by the Company. For purposes of this
definition, the net proceeds from the issuance of shares of Qualified Stock of
the Company upon conversion of Indebtedness shall be deemed to be an amount
equal to (i) the accreted value of such Indebtedness on the date of such
conversion and (ii) the additional consideration, if any, received by the
Company upon such conversion thereof, less any cash payment on account of
fractional shares (such consideration, if in property other than cash, to be
determined by the Board of Directors of the Company, whose good faith
determination shall be conclusive).
"Cumulative Interest Expense" means, for the period commencing on April 1,
1997 and ending on the last day of the most recent month preceding the proposed
Restricted Payment for which financial information is available, the aggregate
of the interest expense of the Company and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with generally accepted
accounting principles, including interest expense attributable to Capitalized
Lease Obligations.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, or other similar agreement or arrangement designed to protect against
fluctuation in currency values.
"Default" means an event or condition that, with the passage of time or the
giving of notice or both, would become an Event of Default.
"Disqualified Capital Stock" means, with respect to any person, with respect
to any issue of Notes, Capital Stock of such person that, by its terms or by the
terms of any security into which it is convertible, exercisable, or
exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased (including at the option of the
holder thereof) by such person or any of its Subsidiaries, in whole or in part,
on or prior to the Stated Maturity of such Notes; PROVIDED that Capital Stock
will not be deemed to be Disqualified Capital Stock if it may only be so
redeemed or repurchased solely in consideration of Qualified Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the date of determination, including,
without limitation, those 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 approved by
a significant segment of the accounting profession. All ratios and computations
contained in the Indenture shall be computed in conformity with GAAP applied on
a consistent basis.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities, or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Indebtedness" means, with respect to any person at any date of
determination (without duplication), (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes, or other similar instruments, (iii) all obligations of such
person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
person to pay the deferred and unpaid purchase price of
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property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), (v) all obligations of
such person as lessee under Capitalized Leases, (vi) all Indebtedness of other
persons secured by a Lien on any asset of such person, whether or not such
Indebtedness is assumed by such person; PROVIDED that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other persons Guaranteed by such person to the extent such
Indebtedness is Guaranteed by such person, (viii) all Disqualified Capital Stock
of such person, and (ix) to the extent not otherwise included in this
definition, obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, PROVIDED (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) that Indebtedness shall not
include any liability for federal, state, local, or other taxes.
"Interest Rate Agreements" means any obligations of any person pursuant to
any interest rate swaps, caps, collars, and similar arrangements providing
protection against fluctuations in interest rates. For purposes of the
Indenture, the amount of such obligations shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such person, based on the assumption that such obligation had terminated at the
end of such fiscal quarter, and in making such determination, if any agreement
relating to such obligation provides for the netting of amounts payable by and
to such person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such person, then in each such case, the amount of
such obligations shall be the net amount so determined, plus any premium due
upon default by such person.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset. For the purposes of the Indenture, the Company or any
Subsidiary shall be deemed to own subject to a Lien any asset that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Operating Cash Flow" means, for any period, the sum of the following for
the Company and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted principles: (i)
aggregate operating revenues minus (ii) aggregate operating expenses (including
technical, programming, sales, selling, general and administrative expenses and
salaries and other compensation paid to any general partner, director, officer
or employee of the Company or any Subsidiary, but excluding interest,
depreciation and amortization and the amount of non-cash compensation in respect
of the Company's employee incentive stock programs for such period and, to the
extent otherwise included in operating expenses, any losses resulting from a
writeoff or write down of investments by the Company or any Subsidiary in
Affiliates); PROVIDED, HOWEVER, that Operating Cash Flow for any period shall be
calculated after giving effect on a PRO FORMA basis (in accordance with
Regulation S-X promulgated under the Exchange Act) for the acquisition or
disposition of any assets (other than in the ordinary course of business) as if
such acquisition or disposition occurred at the beginning of such period.
Operating Cash Flow as defined herein may differ from "operating cash flow" as
reported by the Company as Supplementary Financial Data.
"Permitted Liens" means (i) any Lien on any Restricted Property acquired
after the date of the Indenture (including by way of merger or consolidation) by
the Company or any Restricted Subsidiary, which Lien is created, incurred or
assumed contemporaneously with such acquisition, or within 270 days thereafter,
to secure or provide for the payment or financing of any part of the purchase
price thereof, or any Lien upon any Restricted Property acquired after the date
of the Indenture existing at the
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time of such acquisition, (whether or not assumed by the Company or any
Restricted Subsidiary), PROVIDED that every such Lien referred to in this clause
(i) shall attach only to the Restricted Property so acquired; (ii) any Lien on
any Restricted Property in favor of the Company or any Restricted Subsidiary;
(iii) any Lien on Restricted Property incurred in connection with the issuance
of tax-exempt governmental obligations (including, without limitation,
industrial revenue bonds and similar financings); (iv) any Lien granted by any
Restricted Subsidiary on Restricted Property to the extent limitations on the
incurrence of such Liens are prohibited by any agreement to which such
Restricted Subsidiary is subject as of the date of the Indenture; and (v) any
renewal of or substitution for any Lien permitted by any of the preceding
clauses (i) through (iv), including any Lien securing reborrowing of amounts
previously secured within 270 days of the repayment thereof, PROVIDED that no
such renewal or substitution shall extend to any Restricted Property other than
the Restricted Property covered by the Lien being renewed or substituted.
"Principal Property" means, as of any date of determination, any property or
assets used primarily for the provision of cable communications services owned
by the Company or any Restricted Subsidiary other than (1) any such property
which, in the good faith opinion of the Board of Directors, is not of material
importance to the business conducted by the Company and the Restricted
Subsidiaries taken as a whole and (2) any shares of any class of stock or any
other security of any Unrestricted Subsidiary.
"Qualified Stock" means any Capital Stock of the Company other than
Disqualified Capital Stock.
"Restricted Payment" means the payment or declaration of any dividend by the
Company, either in cash or in property (except dividends payable in common stock
or common shares of Capital Stock of the Company), or the making by the Company
of any other distribution, on account of any shares of any class of its Capital
Stock, now or hereafter outstanding, or the redemption, purchase, retirement or
other acquisition for value by the Company or any Restricted Subsidiary,
directly or indirectly, of any shares of any class of the Company's Capital
Stock, now or hereafter outstanding (it being understood that the dividend of
Notes Receivable in connection with the Intercompany Note Transactions shall not
be deemed a Restricted Payment).
"Restricted Property" means, as of any date of determination, any Principal
Property (or any portion thereof), any shares of stock of a Restricted
Subsidiary owned by the Company or a Restricted Subsidiary or any Indebtedness
of a Restricted Subsidiary owed to the Company or a Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary organized and existing under
the laws of the United States of America and the principal business of which is
the cable communications industry carried on within the United States of America
other than:
(i) each Subsidiary the major part of whose business consists of
finance, banking, credit, leasing, insurance, financial services or other
similar operations, or any combination thereof; and
(ii) each Subsidiary formed or acquired after the date hereof for the
purpose of acquiring the business or assets of another person and which does
not acquire all or any substantial part of the business or assets of the
Company or any Restricted Subsidiary;
PROVIDED, HOWEVER, that any Subsidiary may be designated a Restricted Subsidiary
by board resolution, effective as of the date such board resolution is adopted
and delivered to the Trustee, if, after giving effect to such designation as if
such designation were the incurrence at such time of all Indebtedness of such
Subsidiary and the entering into at such time of all Sale and Leaseback
Transactions to which such Subsidiary is a party, the Company would be in
compliance with the covenants under "--Certain Covenants--Limitation on Liens
Securing Indebtedness" and "--Limitation on Sale and Leaseback Transactions";
PROVIDED FURTHER, that any such designation may be revoked by further board
resolution, effective as of the date such further board resolution is adopted
and delivered to the Trustee if, after giving effect to such revocation as if
such revocation were the incurrence at such time of all Indebtedness of the
Company and the Restricted Subsidiaries and the entering into at such time of
all Sale and Leaseback Transactions to which the Company or any Restricted
Subsidiary is a party, the Company
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would be in compliance with the covenants under "--Certain Covenants--Limitation
on Liens Securing Indebtedness" and "--Limitation on Sale and Leaseback
Transactions."
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of any property, whether owned by the
Company or such Restricted Subsidiary at the date of the original issuance of
the Notes or later acquired, which has been or is to be sold or transferred by
the Company or such Restricted Subsidiary to such Person or to any other Person
by whom funds have been or are to be advanced on the security of such property.
"Stated Maturity" means (i) with respect to any Indebtedness, the date
specified in such Indebtedness as the fixed date on which the final installment
of principal of such Indebtedness is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any Indebtedness, the
date specified in such Indebtedness as the fixed date on which such installment
is due and payable.
"Subsidiary" means with respect to any person, any corporation, association
or other business entity of which more than 50% of all votes represented by all
classes of outstanding Voting Stock is owned directly or indirectly, by such
person and one or more other Subsidiaries of such person. Unless specified
otherwise, "Subsidiary" shall be deemed to refer to a Subsidiary of the Company.
"Unrestricted Subsidiary" means any Subsidiary of the Company other than a
Restricted Subsidiary. All Subsidiaries of an Unrestricted Subsidiary shall be
Unrestricted Subsidiaries.
"Voting Stock" means, with respect to any person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers, or other voting members of the governing body of such person.
"Wholly Owned" means, with respect to any Subsidiary of any person, such
Subsidiary if all of the outstanding common stock or other similar equity
ownership interests (but not including preferred stock that is not Voting Stock)
in such Subsidiary (other than any director's qualifying shares or investments
by foreign nationals mandated by applicable law) is owned directly or indirectly
by such person.
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The New Notes will be represented by one or more notes in registered, global
form without interest coupons (collectively, the "Global Notes"). The Global
Notes will be deposited upon issuance with the Trustee as custodian for DTC in
New York, New York, and registered in the name of DTC, or its nominee, in each
case, for credit to an account of a direct or indirect participant in DTC as
described below. A beneficial interest in a Global Note may not be exchanged for
a New Note in certificated form unless (i) DTC (x) notifies the Company that it
is unwilling or unable to continue as Depositary for the Global Note or (y) has
ceased to be a clearing agency registered under the Exchange Act, and in either
case the Company is unable to locate a qualified successor within 90 days, (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of the New Notes in certificated form or (iii) there shall
have occurred and be continuing an Event of Default with respect to the New
Notes. In all cases, certificated New Notes delivered in exchange for any Global
Note or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures). Any certificated New Note issued in
exchange for an interest in a Global Note will bear the legend restricting
transfers that is borne by such Global Note. Any such exchange will be effected
through the DWAC system and an appropriate adjustment will be made in the
records of the Security Registrar to reflect a decrease in the principal amount
of the relevant Global Note.
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CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES
THE DESCRIPTIONS OF THE OPERATIONS AND PROCEDURES OF DTC THAT FOLLOW ARE
PROVIDED SOLELY AS A MATTER OF CONVENIENCE. THESE OPERATIONS AND PROCEDURES ARE
SOLELY WITHIN THE CONTROL OF DTC AND ARE SUBJECT TO CHANGES BY IT FROM TIME TO
TIME. THE COMPANY TAKES NO RESPONSIBILITY FOR THESE OPERATIONS AND PROCEDURES
AND URGES INVESTORS TO CONTACT DTC OR ITS PARTICIPANTS DIRECTLY TO DISCUSS THESE
MATTERS.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Company that its current practice, upon the issuance of
Global Notes, is to credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Notes
to the accounts with DTC of the participants through which such interests are to
be held. Ownership of beneficial interests in Global Notes will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by DTC or its nominees (with respect to interests of participants) and the
records of participants and indirect participants (with respect to interests of
persons other than participants).
As long as DTC, or its nominee, is the registered holder of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner and
holder of the Notes represented by such Global Note for all purposes under the
Indenture and the Notes. Except in the limited circumstances described above
under "Exchanges of Book-Entry Notes for Certificated Notes," owners of
beneficial interests in a Global Note will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes.
NOTICES
Notices to holders of Notes will be given by mail to the addresses of such
holders as they may appear in the applicable Register.
76
<PAGE>
REGISTRATION RIGHTS; ADDITIONAL INTEREST
Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. Holders of Old Notes are entitled to certain
registration rights pursuant to the Registration Rights Agreements. Pursuant to
the Registration Rights Agreements, the Company has agreed to file with the
Commission and have declared effective on or prior to September 28, 1997 a
registration statement (the "Exchange Offer Registration Statement") under the
Securities Act with respect to the Exchange Offer. The Company also agreed that,
after the effectiveness of the Exchange Offer Registration Statement, it would,
subject to certain conditions, offer to the holders of Old Notes who are able to
make certain representations the opportunity to exchange their Old Notes for New
Notes. In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer ("Commission
Blockage") or do not permit any holder of Old Notes, subject to certain
limitations, to participate in such Exchange Offer, the Company has agreed to
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") to cover resales of the applicable Old Notes. The Registration
Statement of which this Prospectus is a part constitutes the Exchange Offer
Registration Statement.
The Registration Rights Agreements provide that (i) the Company will use its
reasonable best efforts to have the Exchange Offer Registration Statement (and,
if applicable, a Shelf Registration Statement) declared effective by the
Commission on or prior to September 28, 1997. If the Exchange Offer has not been
consummated by October 28, 1997 (unless there exists a Commission Blockage)
(such event, a "Registration Default"), the Company will pay additional interest
to each holder of Old Notes, during the first 90-day period immediately
following the occurrence of such Registration Default at a rate equal to 25
basis points per annum on Old Notes held by such holder. The rate of additional
interest will increase by an additional 25 basis points for each subsequent
90-day period until the Exchange Offer is consummated, up to a maximum rate of
additional interest of 100 basis points. All accrued additional interest shall
be paid to holders in the same manner as interest payments on the Notes on
semi-annual payment dates which correspond to interest payment dates for the
Notes. Following the cure of all Registration Defaults, the payment of
additional interest will cease.
The Registration Rights Agreements also provide that the Company (i) shall
make available for a period of 90 days after the consummation of the Exchange
Offer a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any resale of New Notes and (ii) shall
pay all expenses incident to the Exchange Offer (including the expenses of one
counsel to the holders of the Notes) and will indemnify certain holders of the
Notes (including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreements) 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 Agreements in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
additional interest discussed above. In addition, for so long as the Old Notes
are outstanding, the Company will continue to provide to holders of Old Notes
and to prospective purchasers of the Old Notes the information required by Rule
144A(d)(4). The Company will provide a copy of the Registration Rights
Agreements to prospective investors upon request.
77
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following summary describes the material federal income tax considerations
applicable to the exchange of Old Notes for New Notes and the ownership and
disposition of the New Notes by holders who acquire the New Notes. The summary
applies only to a holder of Old Notes that acquired such Old Notes from the
Company pursuant to their original issuance and will be an initial holder of the
New Notes pursuant to the exchange hereunder. This discussion is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change, possibly retroactively. The discussion does not cover all aspects of
federal income taxation that may be relevant to holders, in light of their
specific circumstances, particularly holders who own 10% or more of the stock of
the Company or holders subject to special treatment under the federal income tax
laws (such as insurance companies, financial institutions, tax exempt
organizations, foreign persons and taxpayers subject to the alternative minimum
tax). It also does not address state, local, foreign or other tax laws. The
description assumes that holders of the New Notes will hold the New Notes as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code").
TAX CONSEQUENCES TO U.S. HOLDERS
EXCHANGE OF NOTES
There will be no federal income tax consequences to holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer and a holder will have the
same adjusted basis and holding period in the New Notes as it had in the Old
Notes immediately before the exchange.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a New Note, a holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such holder's adjusted tax basis in the New
Note. A holder's adjusted tax basis in a New Note will equal the cost of the Old
Note to such holder reduced by any payments on the Note received by the holder.
EACH HOLDER SHOULD CONSULT HIS TAX ADVISOR IN DETERMINING THE FEDERAL,
STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF THE
EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW
NOTES.
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 Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 90 days after
the consummation of the Exchange Offer it will make this Prospectus, as amended
or supplemented, available to any such broker-dealer for use in connection with
any such resale. The Company will not receive any proceeds from any sale of New
Notes by broker-dealers. New Notes received by broker-dealer 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
78
<PAGE>
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 Securities Act and any profit on 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 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 period of 90 days after the consummation of the Exchange Offer the
Company 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 Company has agreed in the Registration Rights Agreement to indemnify
each broker-dealer reselling New Notes pursuant to this Prospectus, and their
officers, directors and controlling persons, against certain liabilities in
connection with the offer and sale of the New Notes, including liabilities under
the Securities Act, or to contribute to payments that such broker-dealers may be
required to make in respect thereof.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for the Company by Davis Polk
& Wardwell.
EXPERTS
The consolidated balance sheet of the Company as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholder's equity
(deficiency) and of cash flows for each of the three years in the period ended
December 31, 1996 and the consolidated balance sheet of Comcast SCH Holdings,
Inc. and subsidiaries as of December 31, 1996 and the related consolidated
statements of operations, stockholder's equity and of cash flows for the period
from November 1, 1996 to December 31, 1996, as well as the combined balance
sheet of the Predecessor Corporation as of December 31, 1995 and the related
combined statements of operations, stockholder's deficiency and of cash flows
for the period from January 1, 1996 to October 31, 1996 and for the years ended
December 31, 1995 and 1994 appearing in this registration statement and the
related financial statement schedules included elsewhere in the registration
statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the registration
statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
79
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND UNAUDITED PRO FORMA
FINANCIAL INFORMATION
<TABLE>
<S> <C>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet as of March 31, 1997 and December 31, 1996
(unaudited)....................................................................... F-2
Condensed Consolidated Statement of Operations for the three months ended March 31,
1997 and 1996 (unaudited)......................................................... F-3
Condensed Consolidated Statement of Cash Flows for the three months ended March 31,
1997 and 1996 (unaudited)......................................................... F-4
Condensed Consolidated Statement of Stockholder's Equity for the three months ended
March 31, 1997 (unaudited)........................................................ F-5
Notes to Condensed Consolidated Financial Statements for the three months ended
March 31, 1997 and 1996 (unaudited)............................................... F-6
Independent Auditors' Report........................................................ F-12
Consolidated Balance Sheet as of December 31, 1996 and 1995......................... F-13
Consolidated Statement of Operations for the years ended December 31, 1996, 1995 and
1994.............................................................................. F-14
Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1995 and
1994.............................................................................. F-15
Consolidated Statement of Stockholder's Equity (Deficiency) for the years ended
December 31, 1996, 1995 and 1994.................................................. F-16
Notes to Consolidated Financial Statements for the years ended December 31, 1996,
1995 and 1994..................................................................... F-17
Unaudited Pro Forma Financial Information........................................... F-32
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1996........................................................... F-33
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three
months ended March 31, 1996....................................................... F-34
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations........ F-35
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
Independent Auditors' Report........................................................ F-37
Consolidated and Combined Balance Sheet as of
December 31, 1996 and 1995........................................................ F-38
Consolidated Statement of Operations for the period from November 1, 1996 to
December 31, 1996................................................................. F-39
Combined Statement of Operations for the period from January 1, 1996 to October 31,
1996 and for the years ended December 31, 1995 and 1994........................... F-40
Consolidated Statement of Cash Flows for the period from November 1, 1996 to
December 31, 1996................................................................. F-41
Combined Statement of Cash Flows for the period from January 1, 1996 to October 31,
1996 and for the years ended December 31, 1995 and 1994........................... F-42
Consolidated and Combined Statement of Stockholders' Equity (Deficiency) for the
period from November 1, 1996 to December 31, 1996, for the period from January 1,
1996 to October 31, 1996 and for the years ended December 31, 1995 and 1994....... F-43
Notes to Consolidated and Combined Financial Statements for the periods from January
1, 1996 to October 31, 1996 and November 1, 1996 to December 31, 1996 and for the
years ended December 31, 1995 and 1994............................................ F-44
</TABLE>
F-1
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, DECEMBER 31,
PRO FORMA (SEE NOTE 10) 1997 1996
------------------------ ----------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 47.0 $ 47.0 $ 38.4
Short-term investments.............................. 0.8 0.8 21.5
Cash held by an affiliate........................... 21.5 66.5 53.5
Accounts receivable, less allowance for doubtful
accounts of $13.1, $13.1 and $12.0................ 54.3 54.3 70.4
Inventories......................................... 28.6 28.6 28.1
Other current assets................................ 17.7 17.7 19.8
---------- ----------- --------------
Total current assets.............................. 169.9 214.9 231.7
---------- ----------- --------------
INVESTMENTS........................................... 1.2 1.2 1.2
---------- ----------- --------------
PROPERTY AND EQUIPMENT................................ 2,488.2 2,488.2 2,401.6
Accumulated depreciation............................ (895.8) (895.8) (856.1)
---------- ----------- --------------
Property and equipment, net......................... 1,592.4 1,592.4 1,545.5
---------- ----------- --------------
DEFERRED CHARGES 5,588.9 5,588.9 5,586.7
Accumulated amortization............................ (1,230.9) (1,230.9) (1,151.8)
---------- ----------- --------------
Deferred charges, net............................... 4,358.0 4,358.0 4,434.9
---------- ----------- --------------
$ 6,121.5 $ 6,166.5 $ 6,213.3
---------- ----------- --------------
---------- ----------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses............... $ 226.2 $ 226.2 $ 230.7
Accrued interest.................................... 27.0 27.0 25.5
Current portion of long-term debt................... 35.0 35.0 115.7
Current portion of notes payable to affiliates...... 2.4 2.6
Due to affiliates................................... 176.6 176.6 152.3
---------- ----------- --------------
Total current liabilities......................... 464.8 467.2 526.8
---------- ----------- --------------
LONG-TERM DEBT, less current portion.................. 3,160.8 3,105.8 3,068.3
---------- ----------- --------------
MINORITY INTEREST AND OTHER........................... 239.5 239.5 246.3
---------- ----------- --------------
NOTES PAYABLE TO AFFILIATES, less current portion..... 405.8 404.5
---------- ----------- --------------
DUE TO AFFILIATE...................................... 319.5 319.5 291.8
---------- ----------- --------------
DEFERRED INCOME TAXES, due to affiliate............... 1,567.5 1,567.5 1,580.3
---------- ----------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, $1 par value--authorized and
issued, 1,000 shares..............................
Additional capital.................................. 3,062.3 3,062.3 3,050.6
Accumulated deficit................................. (2,692.9) (2,153.2) (2,124.0)
Unrealized loss on marketable securities............ (1.4)
Notes receivable from affiliate..................... (847.9) (829.9)
---------- ----------- --------------
Total stockholder's equity........................ 369.4 61.2 95.3
---------- ----------- --------------
$ 6,121.5 $ 6,166.5 $ 6,213.3
---------- ----------- --------------
---------- ----------- --------------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
<S> <C> <C>
--------------------
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
SERVICE INCOME........................................................ $ 501.1 $ 382.3
--------- ---------
COSTS AND EXPENSES
Operating........................................................... 225.3 161.6
Selling, general and administrative................................. 114.7 83.4
Depreciation and amortization....................................... 138.8 95.3
--------- ---------
478.8 340.3
--------- ---------
OPERATING INCOME...................................................... 22.3 42.0
OTHER (INCOME) EXPENSE
Interest expense.................................................... 56.7 56.7
Interest expense on notes payable to affiliates..................... 9.1 8.6
Investment income, net.............................................. (2.7)
--------- ---------
65.8 62.6
--------- ---------
LOSS BEFORE INCOME TAX BENEFIT AND
MINORITY INTEREST................................................... (43.5) (20.6)
INCOME TAX BENEFIT.................................................... (9.3) (4.1)
--------- ---------
LOSS BEFORE MINORITY INTEREST......................................... (34.2) (16.5)
MINORITY INTEREST..................................................... (5.0) (5.8)
--------- ---------
NET LOSS.............................................................. ($ 29.2) ($ 10.7)
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
OPERATING ACTIVITIES
Net loss............................................................. ($ 29.2) ($ 10.7)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.................................... 138.8 95.3
Non-cash interest expense........................................ 0.5 0.4
Non-cash interest expense on notes payable to affiliates......... 1.7 2.8
Deferred expenses charged by an affiliate........................ 27.7 15.9
Loss on sale of investment....................................... 1.6
Minority interest................................................ (5.0) (5.8)
Deferred income tax benefit, due to affiliate.................... (19.8) (14.0)
--------- ---------
116.3 83.9
Decrease in accounts receivable.................................. 16.1 10.9
Increase in inventories.......................................... (0.5)
Decrease in other current assets................................. 2.1 0.6
Decrease in accounts payable and accrued expenses................ (4.5) (19.1)
Increase in accrued interest..................................... 1.5 13.7
Decrease in other non-current liabilities........................ (1.8)
--------- ---------
Net cash provided by operating activities...................... 129.2 90.0
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings........................................... 40.0 63.0
Repayments of long-term debt....................................... (83.7) (61.7)
Proceeds from notes payable to affiliates.......................... 2.0
Repayment of notes payable to affiliates........................... (0.6) (0.6)
Net transactions with affiliates................................... 24.3 34.5
Other.............................................................. (1.4)
--------- ---------
Net cash (used in) provided by financing activities............ (20.0) 35.8
--------- ---------
INVESTING ACTIVITIES
Sale (purchases) of short-term investments......................... 21.2 (0.9)
Capital expenditures............................................... (106.6) (54.0)
Increase in cash held by an affiliate.............................. (13.0) (59.6)
Other.............................................................. (2.2) (3.9)
--------- ---------
Net cash used in investing activities.......................... (100.6) (118.4)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS................................ 8.6 7.4
CASH AND CASH EQUIVALENTS, beginning of period....................... 38.4 11.6
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................. $ 47.0 $ 19.0
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
UNREALIZED NOTES
LOSS ON RECEIVABLE
ADDITIONAL ACCUMULATED MARKETABLE FROM
CAPITAL DEFICIT SECURITIES AFFILIATE TOTAL
----------- ------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.................... $ 3,050.6 ($2,124.0) ( $1.4) ( $829.9) $ 95.3
Net loss.................................. (29.2) (29.2)
Change in unrealized loss on marketable
securities, net of deferred taxes of
$0.7.................................... 1.4 1.4
Interest income on notes receivable from
affiliate............................... 18.0 (18.0 )
Income taxes on interest income on notes
receivable from affiliate............... (6.3 ) (6.3)
----------- ------------- ----- ----------- ---------
BALANCE, MARCH 31, 1997..................... $ 3,062.3 ( $2,153.2 ) $ ( $847.9 ) $ 61.2
----------- ------------- ----- ----------- ---------
----------- ------------- ----- ----------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-5
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The condensed consolidated balance sheet as of December 31, 1996 has been
condensed from the audited balance sheet as of that date. The condensed
consolidated balance sheet as of March 31, 1997 and the condensed consolidated
statements of operations and of cash flows for the three months ended March 31,
1997 and 1996 and the condensed consolidated statement of stockholder's equity
for the three months ended March 31, 1997 have been prepared by Comcast Cable
Communications, Inc. (the "Company") and have not been audited by the Company's
independent auditors. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows as of March 31, 1997
and for all periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
Company's December 31, 1996 audited financial statements. The results of
operations for the period ended March 31, 1997 are not necessarily indicative of
operating results for the full year.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all wholly owned or controlled subsidiaries. All significant intercompany
accounts and transactions among consolidated entities have been eliminated.
On April 24, 1997, Comcast Corporation ("Comcast"), the Company's parent,
completed a restructuring of the legal organization of certain of its
subsidiaries (the "Reorganization"). The Reorganization involved Comcast's
contribution to the Company of ownership interests in certain of its
consolidated subsidiaries, all of which were under Comcast's direct or indirect
control (the "Contributed Subsidiaries"). The Reorganization has been accounted
for in a manner similar to a pooling of interests. Accordingly, the Company's
consolidated financial statements include the accounts of the Contributed
Subsidiaries for all periods presented.
In addition, certain expenses directly related to the Company's operations
which were historically paid by Comcast on behalf of the Company have been
reflected in the Company's consolidated statement of operations for all periods
presented.
2. ACQUISITION
In November 1996, Comcast acquired the cable television operations ("Scripps
Cable") of The E.W. Scripps Company ("E.W. Scripps") in exchange for 93.048
million shares of Comcast's Class A Special Common Stock valued at $1.552
billion (the "Scripps Acquisition"). Comcast accounted for the Scripps
Acquisition under the purchase method. Following the Scripps Acquisition,
Comcast contributed Scripps Cable to the Company (the "Scripps Contribution") at
Comcast's historical cost and Scripps Cable was consolidated with the Company
effective November 1, 1996.
The allocation of the purchase price to the assets and liabilities of
Scripps Cable is preliminary pending a final appraisal and the final purchase
price adjustment between the Company and E.W. Scripps. The terms of the Scripps
Acquisition provide for, among other things, the indemnification of the
F-6
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --CONTINUED
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Company by E.W. Scripps for certain liabilities, including tax liabilities,
relating to Scripps Cable prior to the acquisition date.
UNAUDITED PRO FORMA INFORMATION
The following unaudited pro forma information for the three months ended
March 31, 1996 has been presented as if the Scripps Contribution had occurred on
January 1, 1996. This unaudited pro forma information is based on historical
results of operations adjusted for acquisition costs and, in the opinion of
management, is not necessarily indicative of what the results would have been
had the Company operated Scripps Cable since January 1, 1996 (dollars in
millions).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
---------------------
<S> <C>
Service income....................................................... $ 457.3
Net loss............................................................. (29.0)
</TABLE>
3. INVESTMENTS
In October 1996, the Company received 552,014 shares of Time Warner, Inc.
("Time Warner") Common Stock (the "Time Warner Stock") in exchange (the
"Exchange") for all of the shares of the Turner Broadcasting System, Inc.
("TBS") Stock (the "TBS Stock") held by the Company as a result of the merger of
Time Warner and TBS. As a result of the Exchange, the Company recognized a
pre-tax gain of $19.8 million in 1996, representing the difference between the
Company's historical cost basis in the TBS Stock and the new basis for the
Company's investment in Time Warner Stock of $22.8 million, which was based on
the closing price of the Time Warner Stock on the merger date of $41.375 per
share. As of December 31, 1996, the shares of Time Warner Stock held by the
Company were recorded at their fair value of $20.7 million and were included in
short-term investments in the Company's condensed consolidated balance sheet.
The unrealized loss on this investment of $2.1 million was reported in the
Company's December 31, 1996 condensed consolidated balance sheet as a decrease
in stockholder's equity, net of deferred income tax benefit of $0.7 million. In
January 1997, the Company sold its entire interest in Time Warner for $21.2
million. In connection with this sale, the Company recognized a pre-tax loss of
$1.6 million, which is included in net investment income in the Company's
condensed consolidated statement of operations.
4. LONG-TERM DEBT
DEBT OFFERING
On May 1, 1997, the Company completed the sale of $1.7 billion of notes (the
"Old Notes") through a 144A offering with registration rights. The Old Notes
were issued in four tranches: $300.0 million of 8 1/8% Notes due 2004 (the "Old
Seven-Year Notes"), $600.0 million of 8 3/8% Notes due 2007 (the "Old Ten-Year
Notes"), $550.0 million of 8 7/8% Notes due 2017 (the "Old Twenty-Year Notes")
and $250.0 million of 8 1/2% Notes due 2027 (the "Old Thirty-Year Notes"). The
Company used substantially all of the net proceeds from the offering to repay
certain of its subsidiaries' notes payable to banks with the balance to be used
for subsidiary general purposes.
Interest on the Old Notes is payable semiannually on May 1 and November 1 of
each year, commencing November 1, 1997. The Old Seven-Year Notes, the Old
Ten-Year Notes and the Old Twenty-Year Notes are redeemable, in whole or in
part, at the option of the Company at any time and the Old Thirty-Year Notes are
redeemable, in whole or in part, at the option of the Company at any time after
F-7
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --CONTINUED
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
May 1, 2009, in each case at a redemption price equal to the greater of (i) 100%
of their principal amount, plus accrued interest thereon to the date of
redemption, or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the date of redemption
on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate (as defined), plus accrued interest on the
Old Notes to the date of redemption. Each holder of the Old Thirty-Year Notes
may require the Company to repurchase all or a portion of the Old Thirty-Year
Notes owned by such holder on May 1, 2009 at a purchase price equal to 100% of
the principal amount thereof.
The Old Notes are unsecured and unsubordinated obligations of the Company
and rank PARI PASSU with all other unsecured and unsubordinated indebtedness and
other obligations of the Company. The Old Notes are effectively subordinated to
all liabilities of the Company's subsidiaries, including trade payables. The Old
Notes are obligations only of the Company and are not guaranteed by and do not
otherwise constitute obligations of Comcast.
The Indenture for the Old Notes, among other things, contains restrictions
(with certain exceptions) on the ability of the Company and its Restricted
Subsidiaries (as defined) to: (i) make dividend payments or other restricted
payments; (ii) create liens or enter into sale and leaseback transactions; and
(iii) enter into mergers, consolidations, or sales of all or substantially all
of their assets.
DEBT REPAYMENTS
On June 30, 1997, the Company redeemed all of its outstanding 10%
Subordinated Debentures, due 2003 (the "10% Debentures"). An aggregate principal
amount of $139.3 million of the 10% Debentures were redeemed at a redemption
price of 100% of the principal amount thereof, together with accrued interest
thereon. The Company redeemed the 10% Debentures with the proceeds from the
issuance of a note payable to a subsidiary of Comcast. As of March 31, 1997 and
December 31, 1996, the 10% Debentures had an accreted value of $127.1 million
and $126.6 million, respectively.
On July 2, 1997, the Company repaid $435.0 million of its long-term debt
outstanding as of March 31, 1997 with the proceeds from the issuance of a note
payable to a subsidiary of Comcast.
The terms of the notes payable issued to a subsidiary of Comcast on June 30,
1997 and July 2, 1997 are substantially the same as those of the 10% Debentures
and the long-term debt referred to above.
EXTRAORDINARY LOSS
In connection with the repayment of certain of the Company's subsidiaries'
notes payable to banks and the redemption of the 10% Debentures, during the
second quarter of 1997, the Company will record an extraordinary loss, net of
the related tax benefit, of approximately $17.3 million.
DEBT ASSUMPTION
During the three months ended March 31, 1996, a wholly owned subsidiary of
Comcast assumed a $27.0 million note payable to a bank and $0.6 million of
accrued interest thereon. In return, the Company became liable under a $27.6
million note payable to the subsidiary of Comcast (see Note 5).
5. NOTES PAYABLE TO AFFILIATES
As of March 31, 1997 and December 31, 1996, notes payable to affiliates (the
"Notes Payable") include $382.8 million and $383.4 million, respectively,
principal amount of Notes Payable to Comcast and certain of its wholly owned
subsidiaries. During the three months ended March 31, 1996, the
F-8
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --CONTINUED
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Company borrowed $29.6 million from certain wholly owned subsidiaries of
Comcast. The 1996 borrowings include $27.6 million associated with the debt
assumption described in Note 4. During each of the three months ended March 31,
1997 and 1996, the Company repaid $0.6 million principal amount of Notes
Payable.
The Notes Payable bear interest at rates ranging from the prime rate to
11.81% (weighted average interest rate of 9.31% as of March 31, 1997). No
interest is due on certain of the Notes Payable until their maturity and
accordingly, accrued interest relating to such Notes Payable of $25.4 million
and $23.7 million as of March 31, 1997 and December 31, 1996, respectively, has
been added to principal.
See Note 10--"Unaudited Pro Forma Condensed Consolidated Balance Sheet."
6. NOTES RECEIVABLE FROM AFFILIATE
As of March 31, 1997 and December 31, 1996, notes receivable from affiliate
(the "Notes Receivable") include $730.7 million principal amount of notes
receivable from Comcast. The Notes Receivable bear interest at rates ranging
from 9.25% to 15.00% (weighted average interest rate of 9.83% as of March 31,
1997). No interest is due on the Notes Receivable until their maturity and
accordingly, accrued interest on the Notes Receivable of $117.2 million and
$99.2 million as of March 31, 1997 and December 31, 1996, respectively, has been
added to principal.
See Note 10--"Unaudited Pro Forma Condensed Consolidated Balance Sheet."
7. RELATED PARTY TRANSACTIONS
The Company receives sales commissions from QVC, Inc. ("QVC"), an electronic
retailer and a majority owned and controlled subsidiary of Comcast, based on a
percentage of QVC sales to the Company's subscribers. In addition, the Company
recognizes revenues relating to the carriage of certain QVC programming. For
each of the three months ended March 31, 1997 and 1996, the Company's service
income includes $1.9 million relating to QVC.
Comcast, through management agreements, manages the operations of the
Company's subsidiaries, including rebuilds and upgrades. The management
agreements generally provide that Comcast will supervise the management and
operations of the cable systems and arrange for and supervise (but not
necessarily perform itself) certain administrative functions. As compensation
for such services, the agreements provide for Comcast to charge management fees
of up to 6% of gross revenues. Comcast charged the Company's subsidiaries
management fees of $29.0 million and $21.8 million during the three months ended
March 31, 1997 and 1996, respectively. These management fees are included in
selling, general and administrative expenses in the Company's condensed
consolidated statement of operations. Comcast has agreed to permit certain
subsidiaries of the Company to defer payment of a portion of these expenses with
the deferred portion being treated as a subordinated long-term liability due to
affiliate which will not be paid until the subsidiaries' existing long-term debt
is retired. In addition, payment of certain of these expenses has been deferred
until the California Public Employees' Retirement System ("CalPERS") no longer
has an interest in Comcast MHCP Holdings, L.L.C. (the "LLC"), a majority owned
subsidiary of the Company. Management fees deferred during the three months
ended March 31, 1997 and 1996, were $1.3 million and $1.0 million, respectively.
Deferred management fees were $133.5 million and $132.2 million as of March 31,
1997 and December 31, 1996, respectively.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage
F-9
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --CONTINUED
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
of certain subscriber revenues. Comcast charges each of the Company's
subsidiaries for programming on a basis which generally approximates the amount
each such subsidiary would be charged if it purchased directly from the
supplier, subject to limitations imposed by debt facilities for certain
subsidiaries, and did not benefit from the purchasing power of the Company's
consolidated operations. Amounts charged to the Company by Comcast for
programming (the "Programming Charges") are included in operating expenses in
the Company's condensed consolidated statement of operations. The Company
purchases certain other services, including insurance and employee benefits,
from Comcast under cost-sharing arrangements on terms that reflect Comcast's
actual cost. The Company reimburses Comcast for certain other costs (primarily
salaries) under cost-reimbursement arrangements. Under all of these
arrangements, the Company incurred total expenses of $171.4 million and $121.8
million, including $142.7 million and $101.0 million of Programming Charges,
during the three months ended March 31, 1997 and 1996, respectively. The
Programming Charges include $9.2 million and $6.7 million during the three
months ended March 31, 1997 and 1996, respectively, relating to programming
purchased by the Company, through Comcast, from suppliers in which Comcast holds
an equity interest.
Comcast has agreed to permit certain of the Company's subsidiaries to defer
payment of a portion of the Programming Charges with the deferred portion being
treated as a subordinated long-term liability due to affiliate which will not be
payable until the subsidiaries' existing long-term debt is retired. In addition,
payment of certain of the Programming Charges has been deferred until CalPERS no
longer has an interest in the LLC. Programming Charges deferred during the three
months ended March 31, 1997 and 1996 were $26.4 million and $14.9 million,
respectively. Deferred Programming Charges were $186.0 million and $159.6
million as of March 31, 1997 and December 31, 1996, respectively.
Current due to affiliates in the Company's consolidated balance sheet
primarily consists of amounts due to Comcast and its affiliates under the
cost-sharing arrangements described above and amounts payable to Comcast and its
affiliates as reimbursement for payments made, in the ordinary course of
business, by such affiliates on behalf of the Company.
The Company has entered into a custodial account arrangement with Comcast
Financial Agency Corporation ("CFAC"), a wholly owned subsidiary of Comcast,
under which CFAC provides cash management services to the Company. Under this
arrangement, the Company's cash receipts are deposited with and held by CFAC, as
custodian and agent, which invests and disburses such funds at the direction of
the Company. As of March 31, 1997 and December 31, 1996, $66.5 million and $53.5
million, respectively, of the Company's cash was held by CFAC. These amounts
have been classified as cash held by an affiliate in the Company's condensed
consolidated balance sheet. During the three months ended March 31, 1997 and
1996, the Company recognized investment income of $1.1 million and $1.0 million,
respectively, on cash held by CFAC.
8. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest on its long-term debt of $54.7
million and $42.6 million during the three months ended March 31, 1997 and 1996,
respectively. The Company made cash payments for interest on the Notes Payable
of $7.4 million and $5.8 million during the three months ended March 31, 1997
and 1996, respectively.
The Company made cash payments to the respective state taxing authorities
for state income taxes of $0.8 million and $2.0 million during the three months
ended March 31, 1997 and 1996, respectively.
F-10
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONCLUDED
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
9. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
The Federal Communications Commission ("FCC") and the Company recently
negotiated an agreement in which the Company has committed to complete certain
system upgrades and improvements by March 1999 in return for which it may move a
limited number of currently regulated programming services in certain cable
systems to a single migrated product tier on each system that will become an
unregulated new product tier after December 1997. In addition, the Company will
also provide free cable service connections, modems and modem service to certain
public and private schools and to 250 public libraries in its franchise areas.
The FCC is seeking public comment on the proposed agreement and the Company
cannot predict the outcome of this proceeding. The Company currently is seeking
to justify rates for basic cable services and equipment in certain of its cable
systems in the State of Connecticut on the basis of a cost-of-service showing.
The State of Connecticut has ordered the Company to reduce such rates and to
make refunds to subscribers. The Company has appealed the Connecticut decision
to the FCC. Recent pronouncements from the FCC, which generally support the
Company's position on appeal, have caused the State of Connecticut to reexamine
its prior ruling. While the Company cannot predict the outcome of these actions,
the Company believes that the ultimate resolution of these pending regulatory
matters will not have a material adverse impact on the Company's financial
position, results of operations or liquidity.
10. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet as of March 31,
1997 (the "Pro Forma Balance Sheet") is presented as if certain transactions
completed between April 1, 1997 and May 1, 1997 occurred on March 31, 1997.
These transactions consist of (i) repayment of $100.0 million of the Notes
Payable from the proceeds from drawdowns under subsidiaries' existing credit
facilities ($55.0 million) and existing cash held by an affiliate ($45.0
million), (ii) exchange of affiliate notes payable and notes receivable, and the
accrued interest thereon, between the Company, Comcast and certain of their
subsidiaries resulting in a reduction in the Company's Notes Payable of $308.2
million as of March 31, 1997, with a corresponding reduction in the Company's
Notes Receivable, and (iii) elimination of the remaining Notes Receivable, and
the accrued interest thereon (aggregating $539.7 million as of March 31, 1997),
through a non-cash dividend to Comcast.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Comcast Cable Communications, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of Comcast Cable
Communications, Inc. (a wholly owned subsidiary of Comcast Corporation) and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholder's equity (deficiency) and of cash flows
for each of the three years in the period ended December 31, 1996. 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 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Comcast Cable Communications,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in 1997,
Comcast Corporation completed a restructuring of the legal organization of
certain of its subsidiaries. The Company's consolidated financial statements
have been presented giving effect to the reorganization for all periods
presented in a manner similar to a pooling of interests.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
April 24, 1997 (except for Note 5, as to
which the date is May 1, 1997)
F-12
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31,
UNAUDITED --------------------
PRO FORMA (SEE NOTE 12) 1996 1995
------------------------ --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 38.4 $ 38.4 $ 11.6
Short-term investments.................................... 21.5 21.5 0.7
Cash held by an affiliate................................. 8.5 53.5 26.9
Accounts receivable, less allowance for doubtful
accounts of $12.0, $12.0 and $10.7...................... 70.4 70.4 56.1
Inventories............................................... 28.1 28.1 15.2
Other current assets...................................... 19.8 19.8 11.9.....
---------- --------- ---------
Total current assets.................................... 186.7 231.7 122.4
---------- --------- ---------
INVESTMENTS................................................. 1.2 1.2 20.2
---------- --------- ---------
PROPERTY AND EQUIPMENT...................................... 2,401.6 2,401.6 1,784.3
Accumulated depreciation.................................. (856.1) (856.1) (759.1)
---------- --------- ---------
Property and equipment, net............................... 1,545.5 1,545.5 1,025.2
---------- --------- ---------
DEFERRED CHARGES
Franchise acquisition costs............................... 3,812.9 3,812.9 2,549.1
Excess of cost over net assets acquired and other......... 1,773.8 1,773.8 1,251.8
---------- --------- ---------
5,586.7 5,586.7 3,800.9
Accumulated amortization.................................. (1,151.8) (1,151.8) (923.7)
---------- --------- ---------
Deferred charges, net..................................... 4,434.9 4,434.9 2,877.2
---------- --------- ---------
$ 6,168.3 $ 6,213.3 $ 4,045.0
---------- --------- ---------
---------- --------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... $ 230.7 $ 230.7 $ 171.0
Accrued interest.......................................... 25.5 25.5 13.5
Current portion of long-term debt......................... 115.7 115.7 34.1
Current portion of notes payable to affiliates............ 2.6 1.4
Due to affiliates......................................... 152.3 152.3 60.5
---------- --------- ---------
Total current liabilities............................... 524.2 526.8 280.5
---------- --------- ---------
LONG-TERM DEBT, less current portion........................ 3,123.3 3,068.3 3,011.4
---------- --------- ---------
MINORITY INTEREST AND OTHER................................. 246.3 246.3 267.8
---------- --------- ---------
NOTES PAYABLE TO AFFILIATES, less current portion........... 404.5 313.6
---------- --------- ---------
DUE TO AFFILIATE............................................ 291.8 291.8 225.2
---------- --------- ---------
DEFERRED INCOME TAXES, due to affiliate..................... 1,580.3 1,580.3 1,011.5
---------- --------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIENCY)
Common stock, $1 par value--authorized and
issued, 1,000 shares....................................
Additional capital........................................ 3,050.6 3,050.6 1,463.7
Accumulated deficit....................................... (2,646.8) (2,124.0) (2,101.4)
Unrealized (loss) gain on marketable securities........... (1.4) (1.4) 9.7
Notes receivable from affiliate........................... (829.9) (437.0)
---------- --------- ---------
Total stockholder's equity (deficiency)................. 402.4 95.3 (1,065.0)
---------- --------- ---------
$ 6,168.3 $ 6,213.3 $ 4,045.0
---------- --------- ---------
---------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
SERVICE INCOME............................................... $ 1,641.0 $ 1,454.9 $ 1,065.3
--------- --------- ---------
COSTS AND EXPENSES
Operating.................................................. 667.8 598.8 440.6
Selling, general and administrative........................ 366.6 313.7 248.0
Depreciation and amortization.............................. 420.3 376.2 232.7
--------- --------- ---------
1,454.7 1,288.7 921.3
--------- --------- ---------
OPERATING INCOME............................................. 186.3 166.2 144.0
OTHER (INCOME) EXPENSE
Interest expense........................................... 228.4 245.6 155.6
Interest expense on notes payable to affiliates............ 32.1 28.2 20.9
Investment income.......................................... (25.9) (9.2) (3.3)
Other...................................................... 0.5 0.2 (3.4)
--------- --------- ---------
235.1 264.8 169.8
--------- --------- ---------
LOSS BEFORE INCOME TAX BENEFIT,
MINORITY INTEREST AND
EXTRAORDINARY ITEM......................................... (48.8) (98.6) (25.8)
INCOME TAX BENEFIT........................................... (4.5) (24.9) (1.8)
--------- --------- ---------
LOSS BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM......................................... (44.3) (73.7) (24.0)
MINORITY INTEREST............................................ (21.7) (24.8) (1.0)
--------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM............................... (22.6) (48.9) (23.0)
EXTRAORDINARY ITEM........................................... (2.4)
--------- --------- ---------
NET LOSS..................................................... ($ 22.6) ($ 51.3) ($ 23.0)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
OPERATING ACTIVITIES
Net loss.................................................. ($ 22.6) ($ 51.3) ($ 23.0)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 420.3 376.2 232.7
Non-cash interest expense............................... 2.0 1.9 6.2
Non-cash interest expense on notes payable to
affiliates............................................ 6.2 5.9 8.1
Deferred expenses charged by an affiliate............... 66.6 103.3 79.0
Payments of deferred expenses charged by an affiliate... (115.8) (13.7)
Gain on investment...................................... (19.8)
Minority interest....................................... (21.7) (24.8) (1.0)
Extraordinary item...................................... 2.4
Deferred income tax benefit, due to affiliate........... (44.6) (49.4) (12.7)
--------- --------- ---------
386.4 248.4 275.6
Increase in accounts receivable......................... (5.8) (12.0) (5.1)
Increase in inventories................................. (2.6) (5.6) (0.4)
Increase in other current assets........................ (3.5) (0.5) (3.6)
Decrease in accounts payable and accrued expenses....... (2.2) (53.0) (1.9)
Increase (decrease) in accrued interest................. 12.6 (7.6) 3.1
Increase in other non-current liabilities............... 15.1 6.5 32.8
--------- --------- ---------
Net cash provided by operating activities............. 400.0 176.2 300.5
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings.................................. 448.0 720.0 1,124.1
Repayments of long-term debt.............................. (284.5) (665.6) (339.5)
Proceeds from notes payable to affiliates................. 59.7 50.9 100.7
Repayment of notes payable to affiliates.................. (1.4) (7.0) (14.0)
Capital contributions..................................... 0.3 1.4 314.1
Equity contribution to a subsidiary....................... 250.0
Net transactions with affiliates.......................... 92.5 10.9 54.6
Other..................................................... (3.0) (4.1) (4.0)
--------- --------- ---------
Net cash provided by financing activities............. 311.6 106.5 1,486.0
--------- --------- ---------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired........................ (5.0) (11.3) (1,284.9)
Capital expenditures...................................... (298.2) (238.5) (173.4)
Cash held by an affiliate................................. (26.6) (26.9)
Increase in notes receivable from affiliates, net......... (340.0) (52.2) (300.0)
Other..................................................... (15.0) (14.7) (11.3)
--------- --------- ---------
Net cash used in investing activities................. (684.8) (343.6) (1,769.6)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.......................................... 26.8 (60.9) 16.9
CASH AND CASH EQUIVALENTS, beginning of year................ 11.6 72.5 55.6
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year...................... $ 38.4 $ 11.6 $ 72.5
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
UNREALIZED
(LOSS) NOTES
GAIN ON RECEIVABLE
ADDITIONAL ACCUMULATED MARKETABLE FROM
CAPITAL DEFICIT SECURITIES AFFILIATE TOTAL
---------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994.................... $1,073.0 ($2,027.1) $ ($ 40.8) ($ 994.9)
Net loss.................................. (23.0) (23.0)
Capital contributions..................... 355.8 355.8
Unrealized gain on marketable securities,
net of deferred taxes of $2.9........... 5.4 5.4
Interest income on notes receivable from
affiliates.............................. 3.9 (3.9)
Income taxes on interest income on notes
receivable from affiliates.............. (1.4) (1.4)
Increase in notes receivable from
affiliates.............................. (300.0) (300.0)
<CAPTION>
--------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994.................. 1,431.3 (2,050.1) 5.4 (344.7) (958.1)
Net loss.................................. (51.3) (51.3)
Capital contributions..................... 6.3 6.3
Unrealized gain on marketable securities,
net of deferred taxes of $2.3........... 4.3 4.3
Interest income on notes receivable from
affiliates.............................. 40.1 (40.1)
Income taxes on interest income on notes
receivable from affiliates.............. (14.0) (14.0)
Increase in notes receivable from
affiliates, net......................... (52.2) (52.2)
<CAPTION>
--------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995.................. 1,463.7 (2,101.4) 9.7 (437.0) (1,065.0)
Net loss.................................. (22.6) (22.6)
Capital contributions..................... 1,552.5 1,552.5
Unrealized loss on marketable securities,
net of deferred taxes of ($6.0)......... (11.1) (11.1)
Interest income on notes receivable from
affiliate............................... 52.9 (52.9)
Income taxes on interest income on notes
receivable from affiliate............... (18.5) (18.5)
Increase in notes receivable from
affiliate............................... (340.0) (340.0)
<CAPTION>
--------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996.................. $3,050.6 ($2,124.0) ($1.4) ($829.9) $ 95.3
<CAPTION>
--------- ------------ ---------- ---------- -------
--------- ------------ ---------- ---------- -------
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. BUSINESS
Comcast Cable Communications, Inc., a Delaware corporation, and subsidiaries
(the "Company") is a wholly owned subsidiary of Comcast Corporation ("Comcast").
The Company and its subsidiaries are engaged in the development, management and
operation of cable communications systems. The Company's systems served
approximately 4.3 million subscribers and passed approximately 7.0 million homes
as of December 31, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all wholly owned or controlled subsidiaries. All significant intercompany
accounts and transactions among consolidated entities have been eliminated.
On April 24, 1997, Comcast completed a restructuring of the legal
organization of certain of its subsidiaries (the "Reorganization"). The
Reorganization involved Comcast's contribution to the Company of ownership
interests in certain of its consolidated subsidiaries, all of which were under
Comcast's direct or indirect control (the "Contributed Subsidiaries"). The
Reorganization has been accounted for in a manner similar to a pooling of
interests. Accordingly, the Company's consolidated financial statements include
the accounts of the Contributed Subsidiaries for all periods presented.
In addition, certain expenses directly related to the Company's operations
which were historically paid by Comcast on behalf of the Company have been
reflected in the Company's consolidated statement of operations for all periods
presented.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUES
The estimated fair value amounts presented in these notes to consolidated
financial statements have been determined by the Company using available market
information and appropriate methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. Such fair value estimates are based on
pertinent information available to management as of December 31, 1996 and 1995,
and have not been comprehensively revalued for purposes of these consolidated
financial statements since such dates.
A reasonable estimate of fair value of the amounts due to/from affiliates in
the Company's consolidated balance sheet is not practicable to obtain because of
the related party nature of these items and the lack of quoted market prices.
F-17
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND CASH HELD BY AN AFFILIATE
Cash equivalents principally consist of repurchase agreements with
maturities of three months or less when purchased. Short-term investments
consist of certificates of deposit with maturities of greater than three months
when purchased. The carrying amounts of the Company's cash equivalents and
short-term investments, classified as available for sale securities, approximate
their fair values. As of December 31, 1996, short-term investments also include
the Company's investment in Time Warner, Inc. ("Time Warner") common stock (the
"Time Warner Stock") (see Note 4). Cash held by an affiliate consists of cash
held by a subsidiary of Comcast under a cash management program (see Note 8).
INVENTORIES
Inventories, which include materials and supplies, are stated at average
cost which is less than market.
INVESTMENTS
The Company's unrestricted publicly traded investment is classified as
available for sale and is recorded at its fair value, with unrealized gains or
losses resulting from changes in fair value between measurement dates recorded
as a component of stockholder's equity (deficiency). Investments in privately
held companies are stated at cost, adjusted for any known diminution in value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings and improvements..................................... 15-40 years
Operating facilities........................................... 5-20 years
Other equipment................................................ 2-10 years
</TABLE>
Improvements that extend asset lives are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related accumulated
depreciation applicable to assets sold or retired are removed from the accounts
and the gain or loss on disposition is recognized as a component of depreciation
expense.
In connection with the rebuild and upgrade of cable systems, the Company
depreciates the remaining net book value of the assets over the estimated
rebuild or upgrade period. Under this policy, the Company recorded additional
depreciation expense of $20.3 million, $14.2 million and $7.4 million during the
years ended December 31, 1996, 1995 and 1994, respectively.
DEFERRED CHARGES
Franchise acquisition costs are amortized on a straight-line basis over
their legal or estimated useful lives of 12 to 40 years. The excess of cost over
the fair value of net assets acquired is being amortized on a straight-line
basis over estimated useful lives of 20 to 40 years. Debt acquisition costs are
being amortized on a straight-line basis over the term of the related debt of up
to 10 years.
F-18
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
VALUATION OF LONG-LIVED ASSETS
The Company periodically evaluates the recoverability of its long-lived
assets, including property and equipment and deferred charges, using objective
methodologies. Such methodologies include evaluations based on the cash flows
generated by the underlying assets or other determinants of fair value.
NOTES RECEIVABLE FROM AFFILIATE
The notes receivable from affiliate (the "Notes Receivable") are due from
Comcast and are presented in the Company's consolidated balance sheet as a
component of stockholder's equity (deficiency) due to their related party nature
(see Note 7). The Notes Receivable are increased by interest due under the terms
of the notes and any additional amounts loaned to Comcast and are reduced by any
cash payments of interest or principal. Interest due under the terms of the
Notes Receivable, net of any related income taxes, has been recorded as an
increase in additional capital.
REVENUE RECOGNITION
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to customers who are delinquent.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The estimated costs of retiree benefits and benefits for former or inactive
employees, after employment but before retirement, are accrued and recorded as a
charge to operations during the years the employees provide services. The
Company's retiree benefit obligation is unfunded and all benefits are provided
and paid by Comcast. Accordingly, the Company's liability for these costs is
included in due to affiliates.
A wholly owned subsidiary of the Company has agreements with certain former
key executives that provide for supplemental retirement benefits. The actuarial
present value of benefits payable under these agreements has been accrued.
INVESTMENT INCOME
Investment income includes interest income and gains, net of losses, on the
sale or exchange of long-term investments. Gross realized gains and losses are
recognized using the specific identification method.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities and expected benefits of utilizing net
operating loss carryforwards. The impact on deferred taxes of changes in tax
rates and laws, if any, applied to the years during which temporary differences
are expected to be settled, are reflected in the consolidated financial
statements in the period of enactment.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, including interest rate
exchange agreements ("Swaps"), interest rate cap agreements ("Caps") and
interest rate collar agreements ("Collars"), to
F-19
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
manage its exposure to fluctuations in interest rates. Swaps, Caps and Collars
are matched with either fixed or variable rate debt and periodic cash payments
are accrued on a settlement basis as an adjustment to interest expense. Any
premiums associated with these instruments are amortized over their term.
The Company does not hold or issue any derivative financial instruments for
trading purposes and is not a party to leveraged instruments (see Note 5). The
credit risks associated with the Company's derivative financial instruments are
controlled through the evaluation and monitoring of the creditworthiness of the
counterparties. Although the Company may be exposed to losses in the event of
nonperformance by the counterparties, the Company does not expect such losses,
if any, to be significant.
3. ACQUISITIONS
SCRIPPS CABLE
In November 1996, Comcast acquired the cable television operations ("Scripps
Cable") of The E.W. Scripps Company ("E.W. Scripps") in exchange for 93.048
million shares of Comcast's Class A Special Common Stock valued at $1.552
billion (the "Scripps Acquisition"). As of the date of the acquisition, Scripps
Cable passed more than 1.2 million homes and served more than 800,000
subscribers, with 60% of its subscribers located in Sacramento, California and
Chattanooga and Knoxville, Tennessee. Comcast accounted for the Scripps
Acquisition under the purchase method. Following the Scripps Acquisition,
Comcast contributed Scripps Cable to the Company (the "Scripps Contribution") at
Comcast's historical cost. The Scripps Contribution was recorded as an increase
in additional capital and Scripps Cable was consolidated with the Company
effective November 1, 1996. As the Scripps Contribution was a non-cash
transaction, it had no significant impact on the Company's consolidated
statement of cash flows.
The allocation of the purchase price to the assets and liabilities of
Scripps Cable is preliminary pending a final appraisal and the final purchase
price adjustment between the Company and E.W. Scripps. The terms of the Scripps
Acquisition provide for, among other things, the indemnification of the Company
by E.W. Scripps for certain liabilities, including tax liabilities, relating to
Scripps Cable prior to the acquisition date.
MACLEAN HUNTER
In December 1994, the Company, through Comcast MHCP Holdings, L.L.C. (the
"LLC"), acquired the U.S. cable television and alternate access operations of
Maclean Hunter Limited ("Maclean Hunter") from Rogers Communications Inc. and
all of the outstanding shares of Barden Communications, Inc. (collectively such
acquisitions are referred to as the "Maclean Hunter Acquisition") for
approximately $1.249 billion in cash. As of the date of the acquisition, Maclean
Hunter passed more than 1.0 million homes and served more than 540,000
subscribers. The Company and the California Public Employees' Retirement System
("CalPERS" and together with the Company, the "Members") invested $305.6 million
and $250.0 million, respectively, in the LLC, which is owned 55% by the Company
and 45% by CalPERS. The Maclean Hunter Acquisition was financed with cash
contributions from the LLC of $555.6 million and borrowings under a credit
facility of an indirect wholly owned subsidiary of the LLC. The Company
accounted for the Maclean Hunter Acquisition under the purchase method and
Maclean Hunter was consolidated with the Company effective December 22, 1994.
F-20
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
GROSSE POINTE CABLE, INC.
In October 1994, the Company acquired the remaining 75% of issued and
outstanding stock of Grosse Pointe Cable, Inc. ("Grosse Pointe") for $23.4
million, consisting of $21.1 million in cash and a $2.3 million promissory note
due in October 1997. As of the date of the acquisition, Grosse Pointe passed
more than 25,000 homes and served more than 16,000 subscribers. The Company
accounted for the acquisition under the purchase method and Grosse Pointe was
consolidated with the Company effective November 1, 1994.
COMCAST CABLEVISION OF PHILADELPHIA, INC.
In March 1994, a wholly owned subsidiary of Comcast, which held 92% of the
issued and outstanding common stock of Comcast Cablevision of Philadelphia, Inc.
("Phila., Inc.") and which was subsequently contributed to a wholly owned
subsidiary of the Company, completed certain transactions pursuant to which the
then outstanding shares of Phila., Inc. were purchased for approximately $12.9
million in cash. The purchase price, including certain transaction costs, was
primarily funded through a capital contribution from Comcast.
UNAUDITED PRO FORMA INFORMATION
The following unaudited pro forma information for the years ended December
31, 1996 and 1995 has been presented as if the Scripps Contribution had occurred
on January 1, 1995. This unaudited pro forma information is based on historical
results of operations adjusted for acquisition costs and, in the opinion of
management, is not necessarily indicative of what the results would have been
had the Company operated Scripps Cable since January 1, 1995 (dollars in
millions).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Service income...................................................... $ 1,893.8 $ 1,734.4
Loss before extraordinary item...................................... (85.7) (124.5)
Net loss............................................................ (85.7) (126.9)
</TABLE>
4. INVESTMENTS
As of December 31, 1995, the Company's investment in Turner Broadcasting
System, Inc. ("TBS") stock (the "TBS Stock"), classified as available for sale,
had an historical cost of $3.0 million and was recorded at its estimated fair
value of $17.9 million, which was based on its quoted market price. The
unrealized gain on this investment of $14.9 million has been reported in the
Company's 1995 consolidated balance sheet as a decrease in stockholder's
deficiency, net of deferred income taxes of $5.2 million.
In October 1996, the Company received 552,014 shares of Time Warner Stock in
exchange (the "Exchange") for all of the shares of the TBS Stock held by the
Company as a result of the merger of Time Warner and TBS. As a result of the
Exchange, the Company recognized a pre-tax gain of $19.8 million in 1996,
representing the difference between the Company's historical cost basis in the
TBS Stock and the new basis for the Company's investment in Time Warner Stock of
$22.8 million, which was based on the closing price of the Time Warner Stock on
the merger date of $41.375 per share. As of December 31,
F-21
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996, the shares of Time Warner Stock held by the Company were recorded at fair
value of $20.7 million and were included in short-term investments in the
Company's consolidated balance sheet. The unrealized loss on this investment of
$2.1 million has been reported in the Company's 1996 consolidated balance sheet
as a decrease in stockholder's equity, net of deferred income tax benefit of
$0.7 million. In January 1997, the Company sold its entire interest in Time
Warner for $21.2 million and recognized a pre-tax loss of $1.6 million.
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1996 1995
------------ ------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Notes payable to banks and insurance companies, due in
installments through 2004...................................... $ 3,054.1 $ 2,917.5
10% Subordinated Debentures, due 2003, net of unamortized
discount of $12.7 and $14.7.................................... 126.6 124.6
Other debt, due in installments principally through 1997......... 3.3 3.4
------------ ------------
3,184.0 3,045.5
Less current portion............................................. 115.7 34.1
------------ ------------
$ 3,068.3 $ 3,011.4
------------ ------------
------------ ------------
</TABLE>
During the period from January 1, 1997 to April 4, 1997, subsidiaries of the
Company borrowed $95.0 million under existing credit facilities. Current portion
of long-term debt as of December 31, 1996 includes $80.0 million relating to
optional debt repayments made from January 1, 1997 through April 4, 1997.
Maturities of long-term debt outstanding as of December 31, 1996 for the
four years after 1997 are as follows (dollars in millions):
<TABLE>
<S> <C>
1998............................................................... $ 146.7
1999............................................................... 366.2
2000............................................................... 491.1
2001............................................................... 944.2
</TABLE>
10% SUBORDINATED DEBENTURES
The principal amount of the 10% Subordinated Debentures of $139.3 million
matures in May 2003. The provision for mandatory annual sinking fund payments of
$17.3 million has been satisfied through 1997. The debentures are subject to
redemption at the option of the Company, at par, and are junior in right of
payment to certain of the notes payable to banks and insurance companies.
DEBT EXTINGUISHMENT
The Company incurred debt extinguishment costs totaling $3.6 million during
1995 in connection with the refinancing of certain indebtedness of a subsidiary
(the "Refinancing"), resulting in an extraordinary loss, net of tax, of $2.4
million.
F-22
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
DEBT ASSUMPTION
In 1996, a wholly owned subsidiary of Comcast assumed a $27.0 million note
payable to a bank and $0.6 million of accrued interest thereon. In return, the
Company became liable under a $27.6 million note payable to the subsidiary of
Comcast (see Note 6).
INTEREST RATES
Fixed interest rates on notes payable to banks and insurance companies range
from 8.60% to 10.57%. Variable interest rates on notes payable to banks vary
based upon one or more of the following rates at the option of the Company:
Base Rate (higher of federal funds rate plus 1/2% or prime rate) to Base
Rate plus 3/4%;
London Interbank Offered Rate (LIBOR) plus 3/8% to 1 7/8%;
Certificate of deposit rate plus 3/4% to 1 5/8%.
As of December 31, 1996 and 1995, the Company's effective weighted average
interest rate on its outstanding variable rate notes payable to banks was 6.58%
and 6.86%, respectively.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to market risk including changes in interest rates.
To manage the volatility relating to these exposures, the Company enters into
various derivative transactions pursuant to the Company's policies in areas such
as counterparty exposure and hedging practices. Positions are monitored using
techniques including market value and sensitivity analyses.
The use of interest rate risk management instruments, such as Swaps, Caps
and Collars, is required under the terms of certain of the Company's outstanding
debt agreements. The Company's policy is to manage interest costs using a mix of
fixed and variable rate debt. Using Swaps, the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. Caps are
used to lock in a maximum interest rate should variable rates rise, but enable
the Company to otherwise pay lower market rates. Collars limit the Company's
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
The following table summarizes the terms of the Company's existing Swaps,
Caps and Collars as of December 31, 1996 and 1995 (dollars in millions):
<TABLE>
<CAPTION>
NOTIONAL AVERAGE ESTIMATED
AMOUNT MATURITIES INTEREST RATE FAIR VALUE
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Variable to Fixed Swaps.................... $ 530.0 1997-1999 6.14% ($ 1.2)
Caps....................................... 250.0 1997 8.55%
Collars.................................... 400.0 1997-1998 7.09%/5.04% 0.2
AS OF DECEMBER 31, 1995
Variable to Fixed Swaps.................... $ 250.0 1997 6.58% ($ 4.3)
Caps....................................... 250.0 1997 8.20%
Collars.................................... 250.0 1997 7.40%/5.11% (0.7)
</TABLE>
F-23
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The notional amounts of interest rate agreements, as presented in the above
table, are used to measure interest to be paid or received and do not represent
the amount of exposure to credit loss. The estimated fair value approximates the
proceeds (costs) to settle the outstanding contracts. While Swaps, Caps and
Collars represent an integral part of the Company's interest rate risk
management program, their incremental effect on interest expense for the years
ended December 31, 1996, 1995 and 1994 was not significant.
Of the existing derivative financial instruments as of December 31, 1996,
during the three months ended March 31, 1997, a $50.0 million notional amount
Swap with an interest rate of 6.88% and $150.0 million notional amount of Caps
with an average interest rate of 8.50% expired. During the three months ended
March 31, 1997, the Company entered into $160.0 million notional amount of Swaps
that mature in 1998 and have an average interest rate of 5.69%.
ESTIMATED FAIR VALUE
The Company's long-term debt had estimated fair values of $3.215 billion and
$3.066 billion as of December 31, 1996 and 1995, respectively. The estimated
fair value of the Company's publicly traded debt is based on the quoted market
price for that debt. Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues for which quoted market prices are not
available.
DEBT COVENANTS
Certain of the Company's subsidiaries' loan agreements contain restrictive
covenants which, among other things, limit the Company's ability to enter into
arrangements for the acquisition or disposition of property and equipment,
investments, mergers and the incurrence of additional debt. Certain of these
agreements require that certain ratios be maintained and contain certain
restrictions on dividend payments, payment of management fees and advances of
funds to affiliated entities. The Company's subsidiaries were in compliance with
such restrictive covenants for all periods presented. In addition, the stock of
certain subsidiary companies is pledged as collateral for the notes payable to
banks and insurance companies.
As of December 31, 1996, substantially all of the Company's cash, cash
equivalents, short-term investments and cash held by an affiliate is restricted
to use by subsidiaries of the Company under contractual arrangements, including
subsidiary credit agreements.
Restricted net assets of the Company's subsidiaries were approximately $2.0
billion as of December 31, 1996. The restricted net assets of subsidiaries
exceeds the Company's consolidated net assets as certain of the Company's
subsidiaries have a stockholder's deficiency.
LINES AND LETTERS OF CREDIT
As of March 31, 1997, certain subsidiaries of the Company had unused lines
of credit of $785.0 million. The availability and use of these unused lines of
credit is restricted by the covenants of the related debt agreements and to
subsidiary general purposes and dividend declaration.
As of March 31, 1997, the Company and certain of its subsidiaries had unused
irrevocable standby letters of credit totaling $106.3 million, substantially all
of which cover potential fundings relating to companies in which Comcast, but
not the Company, holds an equity interest.
F-24
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
DEBT OFFERING
On May 1, 1997, the Company completed the sale of $1.7 billion of notes (the
"Old Notes") through a 144A offering with registration rights. The Old Notes
were issued in four tranches: $300.0 million of 8 1/8% Notes due 2004, $600.0
million of 8 3/8% Notes due 2007, $550.0 million of 8 7/8% Notes due 2017 and
$250.0 million of 8 1/2% Notes due 2027. The Company used substantially all of
the net proceeds from the offering to repay certain of its subsidiaries' notes
payable to banks with the balance to be used for subsidiary general purposes.
6. NOTES PAYABLE TO AFFILIATES
As of December 31, 1996 and 1995, notes payable to affiliates (the "Notes
Payable") include $383.4 million and $297.5 million, respectively, principal
amount of Notes Payable to Comcast and certain of its wholly owned subsidiaries.
During the years ended December 31, 1996, 1995 and 1994, the Company borrowed
$87.3 million, $50.9 million and $100.7 million, respectively, from Comcast and
certain wholly owned subsidiaries of Comcast. The 1996 borrowings include $27.6
million associated with the debt assumption described in Note 5. The remaining
borrowings in 1996 and the 1995 and 1994 borrowings were used by the Company for
debt service requirements and general purposes. During the years ended December
31, 1996, 1995 and 1994, the Company repaid $1.4 million, $7.0 million and $14.0
million principal amount of Notes Payable, respectively. During the year ended
December 31, 1994, a Note Payable with a principal amount of $38.0 million was
contributed to additional capital.
The outstanding Notes Payable as of December 31, 1996 mature on various
dates between 1997 and 2002. Maturities of Notes Payable as of December 31, 1996
for the four years after 1997 are as follows (dollars in millions):
<TABLE>
<S> <C>
1998................................................................ $1.7
1999................................................................ 177.7
2000................................................................ 0.5
2001................................................................ 12.8
</TABLE>
The Notes Payable bear interest at rates ranging from the prime rate to
11.81% (weighted average interest rate of 9.31% and 9.79% as of December 31,
1996 and 1995, respectively). No interest is due on certain of the Notes Payable
until their maturity and accordingly, accrued interest relating to such Notes
Payable of $23.7 million and $17.5 million as of December 31, 1996 and 1995,
respectively, has been added to principal.
See Note 12--"Unaudited Pro Forma Consolidated Balance Sheet."
F-25
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. NOTES RECEIVABLE FROM AFFILIATE
As of December 31, 1996 and 1995, the Notes Receivable include $730.7
million and $390.7 million, respectively, principal amount of notes receivable
from Comcast. During the years ended December 31, 1996, 1995 and 1994, the
Company loaned $340.0 million, $80.0 million and $300.0 million, respectively,
to Comcast to fund certain of Comcast's acquisitions and investments and for
Comcast's general corporate purposes. During the year ended December 31, 1995,
the Company received $27.8 million as repayment on a note receivable from a
subsidiary of Comcast.
The outstanding Notes Receivable as of December 31, 1996 mature on various
dates between 1998 and 2006 (substantially all of the Notes Receivable mature
after 2003) and bear interest at rates ranging from 9.25% to 15.00% (weighted
average interest rate of 9.83% and 10.14% as of December 31, 1996 and 1995,
respectively). No interest is due on the Notes Receivable until their maturity
and accordingly, accrued interest on the Notes Receivable of $99.2 million and
$46.3 million as of December 31, 1996 and 1995, respectively, has been added to
principal.
See Note 12--"Unaudited Pro Forma Consolidated Balance Sheet."
8. RELATED PARTY TRANSACTIONS
The Company receives sales commissions from QVC, Inc. ("QVC"), an electronic
retailer and a majority owned and controlled subsidiary of Comcast, based on a
percentage of QVC sales to the Company's subscribers. In addition, the Company
recognizes revenues relating to the carriage of certain QVC programming. For the
years ended December 31, 1996, 1995 and 1994, the Company's service income
includes $8.3 million, $7.9 million and $4.7 million, respectively, relating to
QVC.
Comcast, through management agreements, manages the operations of the
Company's subsidiaries, including rebuilds and upgrades. The management
agreements generally provide that Comcast will supervise the management and
operations of the cable systems and arrange for and supervise (but not
necessarily perform itself) certain administrative functions. As compensation
for such services, the agreements provide for Comcast to charge management fees
of up to 6% of gross revenues. Comcast charged the Company's subsidiaries
management fees of $93.2 million, $83.5 million and $65.9 million in 1996, 1995
and 1994, respectively. These management fees are included in selling, general
and administrative expenses in the Company's consolidated statement of
operations. Comcast has agreed to permit certain subsidiaries of the Company to
defer payment of a portion of these expenses with the deferred portion being
treated as a subordinated long-term liability due to affiliate which will not be
paid until the subsidiaries' existing long-term debt is retired. In addition,
payment of certain of these expenses has been deferred until CalPERS no longer
has an interest in the LLC. Management fees deferred in 1996, 1995 and 1994 were
$4.3 million, $45.2 million and $35.7 million, respectively. In 1995, in
connection with the Refinancing, a subsidiary of the Company repaid $14.9
million of previously deferred management fees. Deferred management fees were
$132.2 million and $127.8 million as of December 31, 1996 and 1995,
respectively.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee per
subscriber per channel or a percentage of certain subscriber revenues. Comcast
charges each of the Company's subsidiaries for programming on a basis which
generally approximates the amount each such subsidiary would be charged if it
F-26
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
purchased directly from the supplier, subject to limitations imposed by debt
facilities for certain subsidiaries, and did not benefit from the purchasing
power of the Company's consolidated operations. Amounts charged to the Company
by Comcast for programming (the "Programming Charges") are included in operating
expenses in the Company's consolidated statement of operations. The Company
purchases certain other services, including insurance and employee benefits,
from Comcast under cost-sharing arrangements on terms that reflect Comcast's
actual cost. The Company reimburses Comcast for certain other costs (primarily
salaries) under cost-reimbursement arrangements. Under all of these
arrangements, the Company incurred total expenses of $505.0 million, $439.4
million and $327.7 million, including $417.0 million, $368.3 million and $264.1
million of Programming Charges, in 1996, 1995 and 1994, respectively. The
Programming Charges include $26.2 million, $21.7 million and $16.7 million in
1996, 1995 and 1994, respectively, relating to programming purchased by the
Company, through Comcast, from suppliers in which Comcast holds an equity
interest.
Comcast has agreed to permit certain of the Company's subsidiaries to defer
payment of a portion of the Programming Charges with the deferred portion being
treated as a subordinated long-term liability due to affiliate which will not be
payable until the subsidiaries' existing long-term debt is retired. In addition,
payment of certain of the Programming Charges has been deferred until CalPERS no
longer has an interest in the LLC. Programming Charges deferred in 1996, 1995
and 1994 were $62.3 million, $58.1 million and $43.3 million, respectively. In
1995 and 1994, in connection with the Refinancing and a new financing,
subsidiaries of the Company repaid $89.2 million and $13.7 million,
respectively, of previously deferred Programming Charges. Deferred Programming
Charges were $159.6 million and $97.4 million as of December 31, 1996 and 1995,
respectively.
Current due to affiliates in the Company's consolidated balance sheet
primarily consists of amounts due to Comcast and its affiliates under the
cost-sharing arrangements described above and amounts payable to Comcast and its
affiliates as reimbursement for payments made, in the ordinary course of
business, by such affiliates on behalf of the Company.
In 1995, the Company entered into a custodial account arrangement with
Comcast Financial Agency Corporation ("CFAC"), a wholly owned subsidiary of
Comcast, under which CFAC provides cash management services to the Company.
Under this arrangement, the Company's cash receipts are deposited with and held
by CFAC, as custodian and agent, which invests and disburses such funds at the
direction of the Company. As of December 31, 1996 and 1995, $53.5 million and
$26.9 million, respectively, of the Company's cash was held by CFAC. These
amounts have been classified as cash held by an affiliate in the Company's
consolidated balance sheet. During the years ended December 31, 1996 and 1995,
the Company recognized investment income of $4.1 million and $0.5 million,
respectively, on cash held by CFAC.
9. INCOME TAXES
The Company and its 80% or more owned subsidiaries join with Comcast in
filing a consolidated federal income tax return. Comcast allocates income tax
expense or benefit to the Company as if the Company was filing a separate
federal income tax return. Subsequent to the Company's initial adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," effective January 1, 1993, tax benefits from both losses and tax credits
are made available to the Company as it is able to realize such benefits on a
separate return basis. The subsidiaries of the Company pay Comcast for income
taxes an amount equal to the amount of tax each subsidiary would pay if they
filed separate tax returns, subject to limitations for certain subsidiaries.
F-27
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The LLC is treated as a partnership for income tax purposes. As such, any
taxable income or loss attributable to the LLC, excluding any income or loss
from its subsidiaries, flows through to the Members based on their respective
ownership percentages. The direct subsidiary of the LLC files a separate
consolidated federal income tax return.
As a result of the Company's recent acquisitions, the Company's deferred
income tax liability and deferred charges were increased for temporary
differences between the financial reporting basis and the income tax reporting
basis of the assets acquired at the dates of their acquisition, as follows
(dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1996 1994
--------- ---------
Scripps Cable.............................................. $ 499.2 $
Maclean Hunter............................................. 488.0
Grosse Pointe.............................................. 8.7
</TABLE>
At the date of acquisition, Scripps Cable had a net deferred income tax
liability of $101.7 million, which was assumed by the Company.
Income tax benefit consists of the following components (dollars in
millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Current expense
Federal..................................................... $ 32.8 $ 19.7 $ 5.0
State....................................................... 7.3 4.8 5.9
--------- --------- ---------
40.1 24.5 10.9
--------- --------- ---------
Deferred expense (benefit)
Federal..................................................... (48.3) (49.9) (11.2)
State....................................................... 3.7 0.5 (1.5)
--------- --------- ---------
(44.6) (49.4) (12.7)
--------- --------- ---------
Income tax benefit.......................................... ($ 4.5) ($ 24.9) ($ 1.8)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective income tax benefit of the Company differs from the statutory
amount because of the effect of the following items (dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Federal tax at statutory rate............................... ($ 17.1) ($ 34.5) ($ 9.0)
Non-deductible depreciation and amortization................ 12.5 11.1 3.3
State income taxes, net of federal benefit.................. 7.2 3.4 2.9
Interest income, taxable to Members......................... (5.9) (5.3) (0.1)
Other....................................................... (1.2) 0.4 1.1
--------- --------- ---------
Income tax benefit.......................................... ($ 4.5) ($ 24.9) ($ 1.8)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-28
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Deferred income tax benefit resulted from the following differences between
financial and income tax reporting (dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Depreciation and amortization............................... ($ 54.9) ($ 50.4) ($ 25.4)
Accrued expenses not currently deductible................... (1.0) (9.5)
Deductible costs accrued in prior years..................... 6.5 2.2
Non-taxable temporary differences associated with sale or
exchange of securities.................................... 6.9
Change in net operating loss carryforwards.................. (4.4) (2.7) 22.4
Change in valuation allowance and other..................... 2.3 1.5 (0.2)
--------- --------- ---------
Deferred income tax benefit................................. ($ 44.6) ($ 49.4) ($ 12.7)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Significant components of the Company's net deferred tax liability are as
follows (dollars in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Deferred tax assets:
Net operating loss carryforwards...................................... $ 176.9 $ 191.0
Less valuation allowance.............................................. (97.5) (132.1)
--------- ---------
79.4 58.9
--------- ---------
Deferred tax liabilities, principally differences between book and tax
basis of property and equipment and deferred charges.................. 1,659.7 1,070.4
--------- ---------
Net deferred tax liability............................................ $ 1,580.3 $ 1,011.5
--------- ---------
--------- ---------
</TABLE>
The Company's valuation allowance against deferred tax assets includes
approximately $60.0 million for which any subsequent tax benefit recognized will
be allocated to reduce goodwill and other noncurrent intangible assets. For
income tax reporting purposes, certain subsidiaries of the Company have net
operating loss carryforwards for which an aggregate deferred tax asset has been
recorded of approximately $225 million, which would expire on a separate return
basis through 2011.
10. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest on its long-term debt of $214.4
million, $251.3 million and $146.3 million in 1996, 1995 and 1994, respectively.
The Company made cash payments for interest on the Notes Payable of $25.9
million, $22.3 million and $12.8 million in 1996, 1995 and 1994, respectively.
The Company made cash payments to Comcast for federal income taxes of $19.9
million, $5.1 million and $7.6 million in 1996, 1995 and 1994, respectively. The
Company made cash payments to the respective state taxing authorities for state
income taxes of $6.6 million, $7.1 million and $5.7 million in 1996, 1995 and
1994, respectively.
F-29
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
11. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
As a result of the Maclean Hunter Acquisition, at any time after December
18, 2001, CalPERS may elect to liquidate its interest in the LLC at a price
based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to Comcast's common stock. Except in certain limited
circumstances, Comcast, at its option, may satisfy this liquidity arrangement by
purchasing CalPERS' interest for cash, by issuing its common stock (subject to
certain limitations) or by selling the LLC. In addition, although the Company
manages Maclean Hunter, certain limited transactions require the approval of
CalPERS.
In December 1996, an indirect majority owned subsidiary of the Company
entered into an operating lease agreement granting certain rights of use of
certain non-cable assets to the counterparty for a period of five years, subject
to certain conditions. Pursuant to this agreement, the Company received an
advance payment of $17.0 million, representing the total minimum lease payments
to be received over the lease term. The Company has recorded this amount in
other long-term liabilities in its consolidated balance sheet which will be
amortized to service income over the remaining lease term on a straight-line
basis.
Minimum annual rental commitments for office space and equipment under
noncancelable operating leases are as follows (dollars in millions):
<TABLE>
<S> <C>
1997................................................................. $ 7.6
1998................................................................. 5.8
1999................................................................. 5.0
2000................................................................. 4.6
2001................................................................. 4.4
Thereafter........................................................... 7.9
</TABLE>
Pole rentals have been excluded from the above schedule as they are
generally cancelable after an initial period by either party upon notice.
Rental expense (including pole rentals) of $19.7 million, $17.8 million and
$14.8 million has been charged to operations in 1996, 1995 and 1994,
respectively.
CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
The Company has settled the majority of outstanding proceedings challenging
its rates charged for regulated cable services. In December 1995, the Federal
Communications Commission ("FCC") adopted an order approving a negotiated
settlement of rate complaints pending against the Company for cable programming
service tiers ("CPSTs") which provided $6.6 million in refunds, plus interest,
given in the form of bill credits during 1996, to 1.3 million of the Company's
cable subscribers. As part of the negotiated settlement, the Company agreed to
forego certain inflation and external cost adjustments for systems covered by
its cost-of-service filings for CPSTs. The Company currently is seeking to
justify rates for basic cable services and equipment in certain of its cable
systems in the State of Connecticut on
F-30
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
the basis of a cost-of-service showing. The State of Connecticut has ordered the
Company to reduce such rates and to make refunds to subscribers. The Company has
appealed the Connecticut decision to the FCC. Recent pronouncements from the
FCC, which generally support the Company's position on appeal, have caused the
State of Connecticut to reexamine its prior ruling. While the Company cannot
predict the outcome of this action, the Company believes that the ultimate
resolution of these pending regulatory matters will not have a material adverse
impact on the Company's financial position, results of operations or liquidity.
12. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet as of December 31, 1996
(the "Pro Forma Balance Sheet") is presented as if certain transactions
completed between April 1, 1997 and May 1, 1997 occurred on December 31,1996.
These transactions consist of (i) repayment of $100.0 million of the Notes
Payable from the proceeds from drawdowns under subsidiaries' existing credit
facilities ($55.0 million) and cash held by an affiliate ($45.0 million), (ii)
exchange of affiliate notes payable and notes receivable, and the accrued
interest thereon, between the Company, Comcast and certain of their subsidiaries
resulting in a reduction in the Company's Notes Payable of $307.1 million as of
December 31, 1996, with a corresponding reduction in the Company's Notes
Receivable, and (iii) elimination of the remaining Notes Receivable, and the
accrued interest thereon (aggregating $522.8 million as of December 31, 1996),
through a non-cash dividend to Comcast.
F-31
<PAGE>
UNAUDITED PRO FORMA
FINANCIAL INFORMATION
In November 1996, Comcast Corporation ("Comcast") acquired the cable
television operations ("Scripps Cable") of The E.W. Scripps Company ("E.W.
Scripps") in exchange for 93.048 million shares of Comcast's Class A Special
Common Stock valued at $1.552 billion (the "Scripps Acquisition"). Following the
Scripps Acquisition, Comcast contributed Scripps Cable to Comcast Cable
Communications, Inc. (the "Company"), a wholly owned subsidiary of Comcast. For
a further description of the Scripps Acquisition and certain related
transactions, see the notes to unaudited pro forma condensed consolidated
statements of operations (the "Pro Forma Statements").
The Pro Forma Statements reflect the consolidated operations of the Company
and Scripps Cable for the year ended December 31, 1996 and for the three months
ended March 31, 1996 and assume that the Scripps Acquisition occurred on January
1, 1996. See the notes to the Pro Forma Statements for a description of the
assumptions used in the preparation of these statements.
The Pro Forma Statements should be read in conjunction with the historical
consolidated financial statements of the Company and the historical consolidated
and combined financial statements of Comcast SCH Holdings, Inc. included in this
Prospectus. The results presented in the Pro Forma Statements are not
necessarily indicative of the results which actually would have occurred had the
Scripps Acquisition occurred on January 1, 1996 or which may result in the
future.
F-32
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
(B)
THE COMPANY SCRIPPS CABLE PRO FORMA THE COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Service Income.................................................. $1,641.0 $252.8 $ $1,893.8
----------- ------------- ------- -----------
Operating, Selling, General and Administrative Expenses......... 1,034.4 149.6 53.0(C.1.) 1,237.0
Depreciation and Amortization................................... 420.3 45.9 95.5(C.2.) 561.7
----------- ------------- ------- -----------
1,454.7 195.5 148.5 1,798.7
----------- ------------- ------- -----------
Operating Income................................................ 186.3 57.3 (148.5) 95.1
Other (Income) Expense
Interest expense.............................................. 228.4 228.4
Interest expense on notes payable to affiliates............... 32.1 28.5 (28.5)(C.3.) 32.1
Investment income............................................. (25.9) (25.9)
Other......................................................... 0.5 13.7 (13.6)(C.4.) 0.6
----------- ------------- ------- -----------
235.1 42.2 (42.1) 235.2
----------- ------------- ------- -----------
(Loss) Income Before Income Tax (Benefit) Expense and Minority
Interest...................................................... (48.8) 15.1 (106.4) (140.1)
Income Tax (Benefit) Expense.................................... (4.5) 7.7 (35.9)(C.5.) (32.7)
Minority Interest............................................... (21.7) (21.7)
----------- ------------- ------- -----------
(Loss) Income from Continuing Operations........................ ($ 22.6) $ 7.4 ($70.5) ($ 85.7)
----------- ------------- ------- -----------
----------- ------------- ------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated statements of
operations.
F-33
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
(B) THE
THE COMPANY SCRIPPS CABLE PRO FORMA COMPANY
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
Service Income.................................................. $ 382.3 $ 75.0 $ $ 457.3
----------- ------------- ------- ----------
Operating, Selling, General and Administrative Expenses......... 245.0 43.6 16.2(C.1.) 304.8
Depreciation and Amortization................................... 95.3 15.5 26.9(C.2.) 137.7
----------- ------------- ------- ----------
340.3 59.1 43.1 442.5
----------- ------------- ------- ----------
Operating Income................................................ 42.0 15.9 (43.1) 14.8
Other (Income) Expense
Interest expense.............................................. 56.7 56.7
Interest expense on notes payable to affiliates............... 8.6 8.7 (8.7)(C.3.) 8.6
Investment income............................................. (2.7) (2.7)
----------- ------------- ------- ----------
62.6 8.7 (8.7) 62.6
----------- ------------- ------- ----------
(Loss) Income Before Income Tax (Benefit) Expense and Minority
Interest...................................................... (20.6) 7.2 (34.4) (47.8)
Income Tax (Benefit) Expense.................................... (4.1) 2.9 (11.8)(C.5.) (13.0)
Minority Interest............................................... (5.8) (5.8)
----------- ------------- ------- ----------
(Loss) Income from Continuing Operations........................ ($ 10.7) $ 4.3 ($22.6) ($ 29.0)
----------- ------------- ------- ----------
----------- ------------- ------- ----------
</TABLE>
See notes to unaudited pro forma condensed consolidated statements of
operations.
F-34
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
A. SUMMARY OF TRANSACTIONS
In November 1996, Comcast Corporation ("Comcast") acquired the cable
television operations ("Scripps Cable") of The E.W. Scripps Company ("E.W.
Scripps") in exchange for 93.048 million shares of Comcast's Class A Special
Common Stock valued at $1.552 billion (the "Scripps Acquisition"). As of the
date of the acquisition, Scripps Cable passed more than 1.2 million homes and
served more than 800,000 subscribers, with 60% of its subscribers located in
Sacramento, California and Chattanooga and Knoxville, Tennessee. Comcast
accounted for the Scripps Acquisition under the purchase method. Following the
Scripps Acquisition, Comcast contributed Scripps Cable (the "Scripps
Contribution") to Comcast Cable Communications, Inc. (the "Company"), a wholly
owned subsidiary of Comcast. The Scripps Contribution was recorded as an
increase in additional capital and Scripps Cable was consolidated with the
Company effective November 1, 1996.
The allocation of the purchase price to the assets and liabilities of
Scripps Cable is preliminary pending a final appraisal and the final purchase
price adjustment between the Company and E.W. Scripps. The terms of the Scripps
Acquisition provide for, among other things, the indemnification of the Company
by E.W. Scripps for certain liabilities, including tax liabilities, relating to
Scripps Cable prior to the acquisition date.
B. BASIS OF PRESENTATION
E.W. Scripps has historically been the holding company for its cable
television operations along with other operations. In connection with the
Scripps Acquisition, in which E.W. Scripps was merged with and into Comcast (the
"Merger"), E.W. Scripps contributed its non-cable television operations to
Scripps Howard, Inc. ("SHI"), a wholly owned subsidiary of E.W. Scripps, and
distributed the shares of SHI to its shareholders (the "Distribution"). The
Distribution occurred immediately prior to the closing of the Merger.
Accordingly, when Comcast acquired E.W. Scripps, it only purchased Scripps
Cable. The historical statements of operations of Scripps Cable included in the
unaudited pro forma condensed consolidated statements of operations (the "Pro
Forma Statements") exclude the results of operations of the non-cable television
operations of E.W. Scripps.
The historical statements of operations of Scripps Cable included in the Pro
Forma Statements reflect certain reclassifications made to conform with those
classifications used by the Company.
C. PRO FORMA ADJUSTMENTS
The following adjustments and elimination entries have been made to the Pro
Forma Statements to reflect the Scripps Acquisition:
1. Represents management fees, programming charges and certain other
expenses (aggregating $60.3 million and $16.8 million for the year ended
December 31, 1996 and for the three months ended March 31, 1996,
respectively), that would have been charged to Scripps Cable by Comcast had
the Scripps Acquisition occurred on January 1, 1996, offset, in part, by the
elimination of operating, selling, general and administrative expenses
related to entities not acquired in the Scripps Acquisition ($7.3 million
and $0.6 million for the year ended December 31, 1996 and for the three
months ended March 31, 1996, respectively).
2. Represents additional depreciation and amortization expense
resulting from the increased fair value of the assets acquired in excess of
their historical book values and amortization of goodwill
F-35
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONCLUDED)
arising from the acquisition, offset, in part, by the elimination of Scripps
Cable's historical goodwill amortization. Depreciation expense is based on a
weighted average property and equipment life of approximately 10 years.
Property and equipment of Scripps Cable principally consists of operating
facilities, which are typically depreciated over a period of 12 years by the
Company. Amortization expense is based on an average life for deferred
charges and goodwill of 12 and 20 years, respectively. Deferred charges of
Scripps Cable principally consist of franchise acquisition costs and
subscriber lists.
3. Represents the elimination of Scripps Cable's historical interest
expense on balances due to affiliates.
4. Represents the elimination of certain expenses, directly related to
the Scripps Acquisition, incurred by E.W. Scripps and charged to Scripps
Cable prior to the Scripps Acquisition.
5. Represents adjustments to the provision for income taxes resulting
from the above pro forma adjustments.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder
Comcast SCH Holdings, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheet of Comcast SCH
Holdings, Inc. (an indirect wholly owned subsidiary of Comcast Corporation) and
subsidiaries as of December 31, 1996 and the related consolidated statements of
operations, stockholder's equity and of cash flows for the period from November
1, 1996 to December 31, 1996, as well as the combined balance sheet of the
Predecessor Corporation (see Note 2) as of December 31, 1995 and the related
combined statements of operations, stockholders' deficiency and of cash flows
for the period from January 1, 1996 to October 31, 1996 and for the years ended
December 31, 1995 and 1994. 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 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, such consolidated and combined financial statements present
fairly, in all material respects, the financial position of Comcast SCH
Holdings, Inc. and subsidiaries as of December 31, 1996, the financial position
of the Predecessor Corporation as of December 31, 1995, and the results of their
operations and their cash flows for the periods stated above, in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 4 to the consolidated and combined financial
statements, in November 1996, Comcast Corporation acquired the Predecessor
Corporation which resulted in the establishment of a new cost basis for the
assets and liabilities of the acquired entities.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 28, 1997 (except for Note 6, as to
which the date is May 1, 1997)
F-37
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(PREDECESSOR
CORPORATION)
--------------
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 3,047 $ 3,085
Short-term investments.................................... 106
Cash held by an affiliate................................. 9,475
Accounts receivable, less allowance for doubtful accounts
of $1,439 and $1,288.................................... 9,870 12,107
Inventories............................................... 9,427 12,822
Other current assets...................................... 1,790 5,956
-------------- --------------
Total current assets.................................. 33,715 33,970
-------------- --------------
PROPERTY AND EQUIPMENT...................................... 422,922 600,822
Accumulated depreciation.................................. (7,417) (305,715)
-------------- --------------
Property and equipment, net............................... 415,505 295,107
-------------- --------------
DEFERRED CHARGES............................................ 1,765,029 214,125
Accumulated amortization.................................. (21,458) (120,629)
-------------- --------------
Deferred charges, net..................................... 1,743,571 93,496
-------------- --------------
$ 2,192,791 $ 422,573
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued expenses..................... $ 47,483 $ 33,675
Accrued interest.......................................... 250
Due to affiliates......................................... 942 1,599
-------------- --------------
Total current liabilities............................. 48,675 35,274
-------------- --------------
LONG-TERM DEBT.............................................. 125,000
-------------- --------------
OTHER LIABILITIES........................................... 9,325
-------------- --------------
DUE TO AFFILIATES........................................... 4,413 312,737
-------------- --------------
DEFERRED INCOME TAXES, due to affiliate..................... 593,777 80,193
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock.............................................. 1,801
Additional capital........................................ 1,431,578 35,144
Accumulated deficit....................................... (10,652) (51,901)
-------------- --------------
Total stockholders' equity (deficiency)............... 1,420,926 (14,956)
-------------- --------------
$ 2,192,791 $ 422,573
-------------- --------------
-------------- --------------
</TABLE>
See notes to consolidated and combined financial statements.
F-38
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 1
TO
DECEMBER 31, 1996
-------------------
<S> <C>
SERVICE INCOME......................................................... $ 52,364
--------
COSTS AND EXPENSES
Operating, selling, general and administrative....................... 39,633
Depreciation and amortization........................................ 28,989
--------
68,622
--------
OPERATING LOSS......................................................... (16,258)
OTHER (INCOME) EXPENSE
Interest expense..................................................... 1,253
Investment income.................................................... (139)
Other................................................................ (96)
--------
1,018
--------
LOSS BEFORE INCOME TAX BENEFIT......................................... (17,276)
INCOME TAX BENEFIT..................................................... (6,624)
--------
NET LOSS............................................................... ($ 10,652)
--------
--------
</TABLE>
See notes to consolidated and combined financial statements.
F-39
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR CORPORATION
---------------------------------------
<S> <C> <C> <C>
YEAR ENDED
JANUARY 1 DECEMBER 31,
TO --------------------
OCTOBER 31, 1996 1995 1994
----------------- --------- ---------
SERVICE INCOME...................................... $ 257,393 $ 279,482 $ 255,356
----------------- --------- ---------
COSTS AND EXPENSES
Operating, selling, general and administrative.... 154,166 162,810 164,721
Depreciation and amortization..................... 45,964 54,099 57,331
----------------- --------- ---------
200,130 216,909 222,052
----------------- --------- ---------
OPERATING INCOME.................................... 57,263 62,573 33,304
OTHER (INCOME) EXPENSE
Interest expense.................................. 27 343 342
Intercompany interest expense..................... 28,530 34,915 33,447
Corporate management fee.......................... 2,957
Merger expenses................................... 13,566
Gain on sale of cable television system........... (1,502)
Other, net........................................ 108 (786) 69
----------------- --------- ---------
42,231 32,970 36,815
----------------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT)................................. 15,032 29,603 (3,511)
INCOME TAX EXPENSE (BENEFIT)........................ 7,644 11,913 (10,590)
----------------- --------- ---------
NET INCOME.......................................... $ 7,388 $ 17,690 $ 7,079
----------------- --------- ---------
----------------- --------- ---------
</TABLE>
See notes to consolidated and combined financial statements.
F-40
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 1
TO
DECEMBER 31, 1996
-------------------
<S> <C>
OPERATING ACTIVITIES
Net loss............................................................. ($ 10,652)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization...................................... 28,989
Non-cash operating expenses charged by an affiliate................ 4,413
Deferred income tax benefit........................................ (7,106)
----------
15,644
Decrease in accounts receivable, inventories and other current
assets........................................................... 145
Increase in accounts payable and accrued expenses and accrued
interest......................................................... 5,174
----------
Net cash provided by operating activities........................ 20,963
----------
FINANCING ACTIVITIES
Proceeds from borrowing.............................................. 150,000
Repayment of long-term debt.......................................... (25,000)
Net transactions with affiliates..................................... (2,174)
Return of capital to parent.......................................... (120,000)
----------
Net cash provided by financing activities........................ 2,826
----------
INVESTING ACTIVITIES
Capital expenditures and other....................................... (11,267)
Cash held by an affiliate............................................ (9,475)
----------
Net cash used in investing activities............................ (20,742)
----------
INCREASE IN CASH....................................................... 3,047
CASH, beginning of period..............................................
----------
CASH, end of period.................................................... $ 3,047
----------
----------
</TABLE>
See notes to consolidated and combined financial statements.
F-41
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR CORPORATION
---------------------------------------
<S> <C> <C> <C>
YEAR ENDED
JANUARY 1 DECEMBER 31,
TO --------------------
OCTOBER 31, 1996 1995 1994
----------------- --------- ---------
OPERATING ACTIVITIES
Net income.......................................... $ 7,388 $ 17,690 $ 7,079
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 45,964 54,099 57,331
Merger expenses................................. 13,566
Gain on sale of cable television system......... (1,502)
Adjustment of liability for prior year income
taxes........................................... (11,800)
Payment of prior year income taxes to parent.... (7,400)
Prepaid franchise fees.......................... 2,576 2,574
Refundable property taxes....................... 10,400 (6,612)
Commitments and contingencies and other, net.... (2,932) (5,368) 11,921
Deferred income tax benefit..................... (8,212) (449) (657)
-------- --------- ---------
55,774 77,446 52,436
Other changes in working capital accounts:
Accounts receivable........................... (268) (2,193) (2,064)
Inventories................................... 2,407 (2,389) 3,946
Accounts payable.............................. (6,048) (2,671) 2,142
Other, net.................................... (4,024) 1,822 238
-------- --------- ---------
Net cash provided by operating activities... 47,841 72,015 56,698
-------- --------- ---------
FINANCING ACTIVITIES
Advances from parent................................ 69,108 13,455
Repayments of advances from parent.................. (1,894) (23,595) (2,102)
Other, net.......................................... (625) (2,500) (1,875)
-------- --------- ---------
Net cash provided by (used in) financing
activities................................ 66,589 (26,095) 9,478
-------- --------- ---------
INVESTING ACTIVITIES
Acquisitions........................................ (62,099) (384) (26,501)
Capital expenditures................................ (54,283) (47,484) (41,616)
Proceeds from sale of cable television system....... 2,800
Other, net.......................................... 422 130 1,948
-------- --------- ---------
Net cash used in investing activities....... (115,960) (44,938) (66,169)
-------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... (1,530) 982 7
CASH AND CASH EQUIVALENTS, beginning of period........ 3,085 2,103 2,096
-------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.............. $ 1,555 $ 3,085 $ 2,103
-------- --------- ---------
-------- --------- ---------
</TABLE>
See notes to consolidated and combined financial statements.
F-42
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON ADDITIONAL ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
PREDECESSOR CORPORATION
BALANCE, JANUARY 1, 1994................. $ 1,801 $ 35,144 ($ 76,670) ($ 39,725)
Net income............................... 7,079 7,079
----------- ---------- ------------- ----------
BALANCE, DECEMBER 31, 1994............... 1,801 35,144 (69,591) (32,646)
Net income............................... 17,690 17,690
----------- ---------- ------------- ----------
BALANCE, DECEMBER 31, 1995............... 1,801 35,144 (51,901) (14,956)
Net income............................... 7,388 7,388
----------- ---------- ------------- ----------
BALANCE, OCTOBER 31, 1996................ $ 1,801 $ 35,144 ($ 44,513) ($ 7,568)
----------- ---------- ------------- ----------
----------- ---------- ------------- ----------
SUCCESSOR CORPORATION
Capital contribution..................... $ $1,551,578 $ $1,551,578
Net loss................................. (10,652) (10,652)
Return of capital to parent.............. (120,000) (120,000)
----------- ---------- ------------- ----------
BALANCE, DECEMBER 31, 1996............... $ $1,431,578 ($ 10,652) $1,420,926
----------- ---------- ------------- ----------
----------- ---------- ------------- ----------
</TABLE>
See notes to consolidated and combined financial statements.
F-43
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
1. ORGANIZATION
Comcast SCH Holdings, Inc. and subsidiaries (the "Company"), a Colorado
corporation formerly known as Scripps Howard Cable Company ("SHCC") (see Note
2), is a wholly owned subsidiary of Comcast Cable Communications, Inc. ("CCCI"),
which is a wholly owned subsidiary of Comcast Corporation ("Comcast"). The
Company is engaged in the development, management and operation of cable
communications systems located in California, Tennessee, Georgia, West Virginia,
Florida, Kentucky and Colorado. As of December 31, 1996, the Company's systems
served more than 800,000 subscribers and passed more than 1.3 million homes,
with 60% of its subscribers located in Sacramento, California and Chattanooga
and Knoxville, Tennessee.
2. MERGER OF E.W. SCRIPPS COMPANY
In November 1996, Comcast acquired the Company in a merger (the "Merger")
with The E.W. Scripps Company ("EWS") in exchange for 93.048 million shares of
Comcast's Class A Special Common Stock valued at $1.552 billion (the "Scripps
Acquisition"). Comcast accounted for the Scripps Acquisition under the purchase
method. Following the Scripps Acquisition, Comcast contributed the Company to
CCCI at Comcast's historical cost (the "Scripps Contribution"). As the Scripps
Contribution was a non-cash transaction, it had no significant impact on the
Company's consolidated statement of cash flows.
Cash and certain liabilities (primarily income taxes payable, accruals for
commitments and contingencies and amounts due to affiliates) included in the
combined financial statements of the Predecessor Corporation were not assumed by
Comcast in the Scripps Acquisition. Accordingly, such cash and liabilities are
not reflected in the Company's consolidated balance sheet as of December 31,
1996.
EWS had historically been the holding company for its cable television
operations along with other operations. EWS' subsidiaries which provided cable
television operations included SHCC, EWS Cable Inc. ("EWS Cable"), a Colorado
corporation, L-R Cable, Inc. ("L-R Cable"), a Colorado corporation, and Scripps
Howard Cable Company of Sacramento ("Sacramento Cable"), a Delaware corporation
(collectively, SHCC, EWS Cable, L-R Cable and Sacramento Cable represent the
"Predecessor Corporation"). In connection with the Scripps Acquisition, EWS
restructured its operations with each of EWS Cable, L-R Cable and Sacramento
Cable becoming wholly owned subsidiaries of SHCC. In addition, SHCC was
transferred by Scripps Howard, Inc. ("SHI"), an Ohio corporation and a wholly
owned subsidiary of EWS, to EWS. Immediately prior to the closing of the Merger,
EWS distributed all of the outstanding shares of SHI, which held all of EWS'
non-cable television operations, to its shareholders (the "Distribution").
Accordingly, when Comcast merged with EWS, it only acquired the Predecessor
Corporation. Subsequent to the Scripps Acquisition, SHI changed its name to E.W.
Scripps Co. ("New Scripps").
The Company would have reported unaudited pro forma revenues of $309.8
million and $279.5 million and unaudited pro forma net loss of $73.8 million and
$75.7 million for the years ended December 31, 1996 and 1995, respectively, had
the Scripps Acquisition occurred on January 1, 1995. This unaudited pro forma
information is based on historical results of operations adjusted for
acquisition costs and, in the opinion of management, is not necessarily
indicative of what the results would have been had the Company operated the
acquired entities since January 1, 1995.
F-44
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
3. BASIS OF PRESENTATION
BASIS OF CONSOLIDATION
The consolidated balance sheet as of December 31, 1996 and the consolidated
statements of operations, cash flows and stockholder's equity for the period
from November 1, 1996 to December 31, 1996 represent the consolidated financial
position, results of operations, changes in stockholder's equity and cash flows
of the Company and its wholly and majority owned subsidiaries subsequent to the
Scripps Acquisition. All significant intercompany accounts and transactions
among consolidated entities have been eliminated.
BASIS OF COMBINATION
The combined balance sheet as of December 31, 1995 and the combined
statements of operations, cash flows and stockholders' deficiency for the period
from January 1, 1996 to October 31, 1996 and for the years ended December 31,
1995 and 1994 represent the combined financial position, results of operations,
changes in stockholders' deficiency and cash flows of the Predecessor
Corporation. All significant intercompany accounts and transactions among
combined entities have been eliminated. The Predecessor Corporation financial
statements exclude the results of operations of the non-cable television
operations of SHI.
Prior to the Scripps Acquisition, EWS Cable and L-R Cable were wholly owned
subsidiaries of SHI and SHCC and Sacramento Cable were wholly owned subsidiaries
of Scripps Howard Broadcasting Company ("SHB"). Prior to 1994, SHI owned
approximately 92% of SHB. EWS acquired the remaining minority interest in SHB in
1994 (see Note 5).
The historical basis in assets and liabilities of the cable television
systems of EWS were not altered by the combination. The historical combined
financial statements do not necessarily reflect the results of operations or
financial position that would have existed if the Predecessor Corporation were
an independent company. SHI provided certain legal, treasury, accounting, tax,
risk management and other corporate services to the Predecessor Corporation (see
Note 10).
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PURCHASE PRICE ALLOCATION
Under the purchase method, the purchase price was allocated to the fair
value of the assets acquired and the liabilities assumed. This allocation is
preliminary pending a final appraisal and the final purchase price adjustment
between CCCI and New Scripps. The terms of the Scripps Acquisition provide for,
among other things, the indemnification by New Scripps for certain liabilities,
including tax liabilities, relating to the Predecessor Corporation prior to the
acquisition date.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements
F-45
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUES
The estimated fair value amounts discussed in these notes to consolidated
and combined financial statements have been determined by the Company and the
Predecessor Corporation using available market information and appropriate
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. The estimates discussed herein are
not necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. Such fair value estimates are based on pertinent information available
to management as of December 31, 1996 and 1995, and have not been
comprehensively revalued for purposes of these consolidated and combined
financial statements since such dates.
A reasonable estimate of fair value of the amounts due to affiliates in the
consolidated and combined balance sheet is not practicable to obtain because of
the related party nature of these items and the lack of quoted market prices.
CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND CASH HELD BY AN AFFILIATE
Cash equivalents consist of investments with maturities of three months or
less when purchased. Short-term investments consist of certificates of deposit
with maturities of greater than three months when purchased. The carrying
amounts of the Company's and the Predecessor Corporation's cash equivalents and
short-term investments, classified as available for sale securities, approximate
their fair values, which are based on quoted market prices. Cash held by an
affiliate consists of cash held by a subsidiary of Comcast under a cash
management program (see Note 10).
INVENTORIES
As of December 31, 1996, inventories, which include materials and supplies,
are stated at average cost which is less than market. As of December 31, 1995,
inventories are stated at the lower of cost, which was determined using the
first in, first out method, or market.
REFUNDABLE PROPERTY TAXES
In 1991, the property tax valuation of the Sacramento cable television
system was increased. The Predecessor Corporation disputed the amount and basis
for the increased valuation. Refundable property taxes represent additional
property taxes paid by the Predecessor Corporation while the valuation was under
appeal. The appeal was settled in favor of the Predecessor Corporation in 1995.
As a result, the Predecessor Corporation received property tax refunds totaling
$10.4 million, excluding interest.
F-46
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
PROPERTY AND EQUIPMENT
Prior to the Scripps Acquisition, property and equipment were stated at
cost. Depreciation was provided on a straight-line basis over estimated useful
lives as follows:
<TABLE>
<S> <C>
Buildings...................................................... 35 years
Operating facilities........................................... 10-15 years
Other equipment................................................ 3-10 years
</TABLE>
Upon consummation of the Scripps Acquisition, property and equipment were
adjusted based on an estimate of their fair values as of the date of
acquisition. Subsequent to the Scripps Acquisition, the Company's property and
equipment are estimated to have weighted average estimated useful lives of ten
years, which is estimated based on the useful lives of similar assets of other
subsidiaries of CCCI. Upon receipt of a final appraisal, the Company will adjust
the basis and estimated useful lives of its property and equipment accordingly.
Improvements that extend asset lives are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related accumulated
depreciation applicable to assets sold or retired are removed from the accounts
and the gain or loss on disposition is recognized as a component of depreciation
expense.
DEFERRED CHARGES
Deferred charges as of December 31, 1996 consist principally of franchise
acquisition costs, debt acquisition costs and the excess of cost over the fair
value of net assets acquired (goodwill). Franchise acquisition costs and
goodwill are being amortized on a straight-line basis over their estimated
useful lives of 12 and 20 years, respectively. Debt acquisition costs are being
amortized on a straight-line basis over the term of the related debt (see Note
6).
Deferred charges of the Predecessor Corporation consisted principally of
franchise acquisition costs, which were being amortized on a straight-line basis
over the terms of the related franchise agreements, and goodwill, which was
being amortized on a straight-line basis over periods of up to 40 years.
VALUATION OF LONG-LIVED ASSETS
The Company and the Predecessor Corporation periodically evaluate the
recoverability of long-lived assets, including property and equipment and
deferred charges, using objective methodologies. Such methodologies may include
evaluations based on the cash flows generated by the underlying assets or other
determinants of fair value.
REVENUE RECOGNITION
Service income is recognized as service is provided. Credit risk is managed
by disconnecting services to customers who are delinquent.
F-47
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The estimated costs of retiree benefits and benefits for former or inactive
employees, after employment but before retirement, are accrued and recorded as a
charge to operations during the years that employees provide services.
Subsequent to the Scripps Acquisition, the Company's retiree benefit obligation
is unfunded and all benefits are paid by Comcast. Accordingly, as of December
31, 1996, the Company's liability for these costs is included in current due to
affiliates.
INCOME TAXES
The Company and the Predecessor Corporation recognize deferred tax assets
and liabilities for temporary differences between the financial reporting basis
and the tax basis of the Company's assets and liabilities and expected benefits
of utilizing net operating loss carryforwards. The impact on deferred taxes of
changes in tax rates and laws, if any, applied to the years during which
temporary differences are expected to be settled, are reflected in the
consolidated and combined financial statements in the period of enactment.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' combined
financial statements to conform to those classifications used in 1996.
5. ACQUISITIONS AND DIVESTITURE
In 1995, the Predecessor Corporation reached an agreement to acquire cable
television systems adjacent to certain of its systems in Knoxville and
Chattanooga, Tennessee for $62.5 million (the "Mid-Tenn Purchase"). The Mid-Tenn
Purchase was completed in January 1996.
During 1995 and 1994, the Predecessor Corporation acquired several cable
television systems adjacent to its existing service areas. In addition, during
1994, EWS acquired the remaining minority interest in SHB that it had not
previously owned and subsequently allocated a portion of the purchase price to
the Predecessor Corporation.
F-48
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
The following table presents additional information about these acquisitions
(in thousands):
<TABLE>
<CAPTION>
PREDECESSOR CORPORATION
-------------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER
JANUARY 1 TO 31,
OCTOBER 31, ----------------------
1996 1995 1994
------------- ----- ---------
Goodwill and other intangible assets acquired................ $ 50,606 $ 247 $ 233
Other assets acquired........................................ 11,681 137 152
------------- ----- ---------
62,287 384 385
Liabilities assumed.......................................... (188)
------------- ----- ---------
Total cable television system acquisitions................... 62,099 384 385
Excess of cost over book value of SHB stock allocated to the
Predecessor Corporation and paid to SHI.................... 26,116
------------- ----- ---------
$ 62,099 $ 384 $ 26,501
------------- ----- ---------
------------- ----- ---------
</TABLE>
The acquisitions have been accounted for under the purchase method. The
acquired operations have been included in the combined statements of operations
from the dates of acquisition. Pro forma results are not presented because the
combined results of operations would not be significantly different from the
reported amounts.
During 1995, the Predecessor Corporation sold its cable television system in
Barbourville, Kentucky. The sale resulted in a pre-tax gain of $1.5 million.
6. LONG-TERM DEBT
In November 1996, the Company entered into a $600.0 million Revolving Credit
Facility (the "Credit Facility"). Initial borrowings under the Credit Facility
of $150.0 million were principally used to pay a return of capital to CCCI in
the amount of $120.0 million. The Company repaid $25.0 million of borrowings
under the Credit Facility in December 1996. On May 1, 1997, the Company repaid
the amounts outstanding under the Credit Facility with the proceeds from a loan
from a subsidiary of CCCI. Amounts outstanding under the Credit Facility are due
in 2002. The stock of the Company has been pledged as collateral for borrowings
under the Credit Facility.
The interest rate on borrowings under the Credit Facility is based on either
of the following at the option of the Company:
Higher of the federal funds rate plus 1/2% or prime rate;
London Interbank Offered Rate (LIBOR) plus 3/8% or 7/8%.
As of December 31, 1996, the weighted average interest rate on borrowings
under the Credit Facility was 5.94%.
The difference between the carrying value and estimated fair value of the
Company's long-term debt was not significant as of December 31, 1996. Interest
rates that are currently available to the Company for issuance of debt with
similar terms and remaining maturities are used to estimate fair value as quoted
market prices are not available.
F-49
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
The Credit Facility contains restrictive covenants which, among other
things, limit the Company's ability to enter into arrangements for the
acquisition or disposition of property and equipment, investments, mergers and
the incurrence of additional indebtedness. The restrictive covenants also
require that certain ratios and cash flow levels be maintained, as defined, and
limit dividend payments, payment of management fees and advances of funds to
affiliated entities.
7. CAPITAL STRUCTURE
As of December 31, 1996, common stock in the Company's consolidated balance
sheet consists of 100 shares of no-par common stock authorized, with 80 shares
issued and outstanding.
As of December 31, 1995, common stock in the Predecessor Corporation's
combined balance sheet includes the following:
EWS Cable--100 shares of no-par common stock authorized, 50 shares issued
and outstanding;
L-R Cable--100 shares of no-par common stock authorized, 50 shares issued
and outstanding;
SHCC--100 shares of no-par common stock authorized, 80 shares issued and
outstanding; and
Sacramento Cable--2,000 shares of no-par common stock authorized, 100 shares
issued and
outstanding.
8. INCOME TAXES
Subsequent to the Scripps Acquisition, the Company joins with Comcast in
filing a consolidated federal income tax return. Comcast allocates income tax
expense or benefit to the Company as if the Company was filing a separate
federal income tax return. Tax benefits from both losses and tax credits are
made available to the Company as it is able to realize such benefits on a
separate return basis. The Company is required to pay Comcast for income taxes
an amount equal to that amount of tax the Company would pay if it filed a
separate tax return. The current provision for income taxes for the period from
November 1, 1996 to December 31, 1996 is due to Comcast and is included in due
to affiliates.
The Predecessor Corporation was included in the consolidated federal tax
return of EWS. The provision for income taxes was generally prepared as if the
Predecessor Corporation filed a separate return, however tax benefits for
taxable losses and other deductions that would be limited if the Predecessor
Corporation were an independent company were recognized currently if such losses
and benefits were utilized in the consolidated EWS provision. If the tax
provision were prepared on a separate return basis, the tax provision (benefit)
in the accompanying combined statement of operations would have been $5.9
million and ($10.6) million for the years ended December 31, 1995 and 1994,
respectively. Such amounts differ from the reported amounts due to the timing of
the recognition of benefits for taxable losses and investment tax credits. There
would not have been a significant change to the tax provision for the period
from January 1, 1996 to October 31, 1996 had the tax provision been prepared on
a separate return basis.
The Company's and the Predecessor Corporation's deferred income tax
liability as of December 31, 1996 and 1995 principally results from the tax
effects of differences between the book and tax basis of property and equipment
and deferred charges (excluding goodwill).
As a result of the Scripps Acquisition, the Company recorded an increase in
its deferred income tax liability and deferred charges of $499.2 million for
temporary differences between the financial reporting
F-50
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
basis and the tax basis of the assets of the Company as of the date of the
acquisition. At the date of acquisition, the Predecessor Corporation had an
existing deferred income tax liability of $101.7 million, which was assumed by
the Company.
In 1994, the Internal Revenue Service ("IRS") proposed adjustments related
to certain intangible assets and a deduction related to the 1986 redemption of a
partnership interest in certain of the Predecessor Corporation's cable systems.
Based upon the proposed adjustments, management of the Predecessor Corporation
changed its estimate of the tax liability for prior years. The resulting change
in the liability for prior year income taxes and the deferred income tax
liability increased 1994 net income by $11.8 million. In 1995, EWS reached
agreement with the IRS to settle the audits of its 1985 through 1987 tax
returns. The settlement payment was charged to the prior years' tax liability.
The liability was not adjusted as a result of the settlement.
Income tax (benefit) expense consists of the following components (dollars
in thousands):
<TABLE>
<CAPTION>
PREDECESSOR CORPORATION
-----------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED
NOVEMBER 1 TO JANUARY 1 TO DECEMBER 31,
DECEMBER 31, OCTOBER 31, --------------------
1996 1996 1995 1994
--------------- ------------- --------- ---------
Current expense (benefit)
Federal................................ $ 482 $ 14,297 $ 11,777 ($ 10,290)
State.................................. 1,559 585 357
------- ------------- --------- ---------
482 15,856 12,362 (9,933)
------- ------------- --------- ---------
Deferred (benefit) expense
Federal................................ (6,085) (8,410) (2,579) (2,482)
State.................................. (1,021) 198 2,130 1,825
------- ------------- --------- ---------
(7,106) (8,212) (449) (657)
------- ------------- --------- ---------
Income tax (benefit) expense............. ($ 6,624) $ 7,644 $ 11,913 ($ 10,590)
------- ------------- --------- ---------
------- ------------- --------- ---------
</TABLE>
F-51
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
The effective income tax (benefit) expense of the Company and the
Predecessor Corporation differs from the statutory amount because of the effects
of the following items (dollars in thousands):
<TABLE>
<CAPTION>
PREDECESSOR CORPORATION
-----------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED
NOVEMBER 1 TO JANUARY 1 TO DECEMBER 31,
DECEMBER 31, OCTOBER 31, --------------------
1996 1996 1995 1994
--------------- ------------- --------- ---------
Federal tax at statutory rate............ ($ 6,047) $ 5,261 $ 10,361 ($ 1,229)
State income taxes, net of federal
benefit................................ (664) 1,142 1,765 1,418
Non-deductible depreciation and
amortization........................... 1,456 272 326 1,064
Change in estimated tax liability for
prior years............................ (11,807)
Other.................................... (1,369) 969 (539) (36)
------- ------------- --------- ---------
Income tax (benefit) expense............. ($ 6,624) $ 7,644 $ 11,913 ($ 10,590)
------- ------------- --------- ---------
------- ------------- --------- ---------
</TABLE>
9. PENSION PLANS
Prior to the Scripps Acquisition, substantially all employees of the
Predecessor Corporation were covered by a defined benefit plan and a defined
contribution plan sponsored by SHI. A portion of the expenses related to these
plans were allocated to the Predecessor Corporation by SHI. Such expenses
totaled $1.0 million, $1.3 million and $1.5 million during the period from
January 1, 1996 to October 31, 1996 and the years ended December 31, 1995 and
1994, respectively.
As of December 31, 1995, the Predecessor Corporation's share of the defined
benefit plan sponsored by SHI had a projected benefit obligation of $6.4 million
and plan assets of $2.9 million.
10. RELATED PARTY TRANSACTIONS
THE COMPANY
Subsequent to the Scripps Acquisition, management fees are charged by
Comcast based on the Company's gross revenues. Such management fees, totaling
$2.5 million, are included in operating, selling, general and administrative
expenses.
Subsequent to the Scripps Acquisition, the Company has entered into
cost-sharing agreements with Comcast for certain services including programming,
insurance and benefits. Under these arrangements, the Company incurred expenses
of $19.2 million during 1996. Comcast charges the Company for certain of these
expenses on the same basis that approximates what the Company would be charged
if it purchased directly from the supplier. Comcast has agreed to permit the
Company to defer payment of a portion of these expenses with the deferred
portion being treated as a subordinated long-term liability due to affiliate
which will not be payable until the Company's Credit Facility is retired. Such
deferred costs totaled $4.4 million during 1996.
Subsequent to the Scripps Acquisition, the Company entered into a custodial
account arrangement with Comcast Financial Agency Corporation ("CFAC"), a wholly
owned subsidiary of Comcast, under
F-52
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
which CFAC provides cash management services to the Company. Under this
arrangement, the Company's cash receipts are deposited with and held by CFAC, as
custodian and agent, which invests and disburses such funds at the direction of
the Company. As of December 31, 1996, $9.5 million of the Company's cash
equivalents were represented by deposits with CFAC. Such amount has been
classified as cash held by an affiliate in the Company's consolidated balance
sheet. During the period from November 1, 1996 to December 31, 1996, the Company
recognized investment income of $138,000 on these custodial investments.
PREDECESSOR CORPORATION
DUE TO AFFILIATES
As of December 31, 1995, due to affiliates in the combined balance sheet
includes a $125.4 million principal amount 9.5% note, payable to EWS, a $66.1
million principal amount 11% note, payable to EWS and variable rate borrowings
from SHI of $121.2 million. Interest on the variable rate borrowings from SHI
was charged at 1% over the prime rate, except for interest on portions related
to cash deficiencies (see below). Amounts due to affiliates were not assumed by
Comcast in the Scripps Acquisition.
The Predecessor Corporation participated in a cash management program with
SHI under which SHI managed its daily flow of cash. Cash excesses or
deficiencies earned or incurred interest at appropriate short-term market rates.
Cash deficiencies were included in variable rate borrowings from SHI. The
Predecessor Corporation also participated in SHI's controlled disbursement
system, where the bank sent daily notification of checks presented for payment
and SHI transferred funds to cover such checks. Payments were charged against
excesses or added to cash deficiencies as checks were issued.
Interest charged on amounts due to affiliates, which included advances and
cash deficiencies, was $28.5 million, $34.9 million and $33.4 million during the
period from January 1, 1996 to October 31, 1996 and the years ended December 31,
1995 and 1994, respectively. Interest accrued on amounts due to affiliates was
$1.6 million as of December 31, 1995.
OTHER CHARGES
SHI provided management services, including legal, treasury, accounting,
tax, risk management and other services, to the Predecessor Corporation. The
cost of such services, which included the costs of EWS' corporate office, was
allocated on the basis of revenues. The Predecessor Corporation's share of the
cost of such services was $3.0 million during the year ended December 31, 1994.
The Predecessor Corporation was not charged for such services during the period
from January 1, 1996 to October 31, 1996 and the year ended December 31, 1995.
In 1996, EWS allocated certain costs associated with the Scripps Acquisition
to the Predecessor Corporation. These charges of $13.6 million, primarily
relating to professional fees, were classified as merger expenses in the
Predecessor Corporation's combined statement of operations for the period from
January 1, 1996 to October 31, 1996.
F-53
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
11. STATEMENT OF CASH FLOWS--SUPPLEMENTAL INFORMATION
The Company made cash payments for interest on its Credit Facility of $1.0
million during the period from November 1, 1996 to December 31, 1996.
The Predecessor Corporation made cash payments for interest on balances due
to affiliates of $28.5 million, $35.1 million and $33.5 million during the
period from January 1, 1996 to October 31, 1996 and the years ended December 31,
1995 and 1994, respectively.
The Predecessor Corporation made cash payments for income taxes to EWS of
$15.9 million, $12.7 million and $10.9 million during the period from January 1,
1996 to October 31, 1996 and the years ended December 31, 1995 and 1994,
respectively.
12. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Minimum annual rental commitments for office space and equipment under
noncancellable operating leases are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997................................................................. $ 871
1998................................................................. 788
1999................................................................. 778
2000................................................................. 800
2001................................................................. 792
Thereafter........................................................... 777
</TABLE>
Pole rentals have been excluded from the above schedule as they are
generally cancelable after an initial period by either party upon notice.
Rental expense (including pole rentals) of $872,000, $4.3 million, $4.4
million and $3.8 million has been charged to operations during the period from
November 1, 1996 to December 31, 1996, the period from January 1, 1996 to
October 31, 1996 and the years ended December 31, 1995 and 1994, respectively.
CONTINGENCIES
THE COMPANY
The Company is subject to claims and legal proceedings which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or liquidity of the Company.
PREDECESSOR CORPORATION
In 1994, the Predecessor Corporation accrued $6.5 million as an estimate of
the ultimate costs, including attorneys' fees and settlements, of certain
lawsuits against the Sacramento cable television system related primarily to
employment issues and to the timing and amount of late-payment fees assessed to
subscribers. In 1995, the Predecessor Corporation accrued an additional $1.4
million based
F-54
<PAGE>
COMCAST SCH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONCLUDED)
PERIODS FROM JANUARY 1, 1996 TO OCTOBER 31, 1996 AND
NOVEMBER 1, 1996 TO DECEMBER 31, 1996 AND YEARS ENDED
DECEMBER 31, 1995 AND 1994
upon a reassessment of the probable costs of these and additional
employment-related lawsuits. As of December 31, 1995, amounts accrued are
included in accounts payable and accrued expenses in the combined balance sheet.
In May 1996, the Predecessor Corporation agreed to settle the late-payment fee
lawsuits. The settlement did not result in an additional charge. In 1996, the
Predecessor Corporation accrued an additional $4.0 million based upon further
reassessment of the probable costs of these and additional lawsuits. Pursuant to
the terms of the Merger, New Scripps has indemnified Comcast and the Company
against losses related to these lawsuits.
F-55
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information..................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 13
Capitalization............................ 17
Selected Consolidated Financial and Other
Data.................................... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 20
The Exchange Offer........................ 33
Business.................................. 39
Legislation and Regulation................ 46
Management................................ 53
Principal Stockholders.................... 54
Certain Relationships and Related
Transactions............................ 57
Description of Certain Indebtedness....... 59
Description of the Notes.................. 61
Registration Rights; Additional
Interest................................ 77
Certain Federal Income Tax Consequences... 78
Plan of Distribution...................... 78
Validity of the Notes..................... 79
Experts................................... 79
Index to Financial Statements and
Unaudited Pro Forma Financial
Information............................. F-1
</TABLE>
--------------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE HEREOF), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$1,700,000,000
COMCAST CABLE
COMMUNICATIONS, INC.
$300,000,000 8 1/8% EXCHANGE NOTES DUE 2004
$600,000,000 8 3/8% EXCHANGE NOTES DUE 2007
$550,000,000 8 7/8% EXCHANGE NOTES DUE 2017
$250,000,000 8 1/2% EXCHANGE NOTES DUE 2027
---------------------
[LOGO]
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a corporation organized under the General Corporation Law of
the State of Delaware.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify 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 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, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
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 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 no
cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to 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 such person acted in
any of the capacities set forth above, 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 may 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
that despite the adjudication of liability but in view of all the circumstances
of the case such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) or (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification or advancement of expenses provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; and empowers the corporation to purchase
and maintain insurance on behalf of a director, officer, employee or agent of
the corporation against any liability asserted against him or incurred by him in
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 liabilities under
Section 145.
Section 7-1 of the Company's By-Laws provides that the Company will
indemnify any director or officer of the Company or any director or officer who
is or was serving at the request of the Company as a director, officer, employee
or agent of another Company, partnership, joint venture, trust or other
enterprise (any such person is hereinafter referred to as a "director or
officer") against expenses (including, but not limited to, attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such director or officer, to the fullest extent now or hereafter
permitted by law in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), brought or threatened to be brought against such director or
officer by reason of the fact that he or she is or was serving in any such
capacity or in any other capacity on behalf of the Company, its parent or any of
its subsidiaries.
II-1
<PAGE>
Section 7-2 of the Company's By-Laws provides that expenses incurred by any
director or officer in defending a Proceeding will be paid by the Company in
advance of the final disposition of such Proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking, by or on
behalf of such director or officer, to repay such amount without interest if it
is ultimately determined that he or she is not entitled to be indemnified by the
Company as authorized by law.
Section 7-4 of the Company's By-Laws provides that the Company may purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the Company against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the Company would have the power to indemnify him or her
against such liability under law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
3.1(a) Certificate of Incorporation filed on April 2, 1981.
3.1(b) Certificate of Resignation of Registered Agent filed October 29, 1996.
3.2 By-Laws.
4.1(a) Indenture dated as of May 1, 1997 between the Company and Bank of Montreal Trust
Company.
4.1(b) Form of Exchange Notes.
5 Opinion and Consent of Davis Polk & Wardwell regarding the validity of the
Securities being registered.
8 Opinion and Consent of Davis Polk & Wardwell regarding certain tax matters.
10.1/*/ Credit Agreement, dated as of September 19, 1995, between Comcast Holdings,
Inc., the banks listed therein, The Chase Manhattan Bank, N.A., as Arranging
Agent, Bank of Montreal, CIBC Inc., The Long-term Credit Bank of Japan, Limited,
Royal Bank of Canada and Societe Generale, as Managing Agents, and The Chase
Manhattan Bank, N.A., as Administrative Agent.
10.2 Tax Sharing Agreement, dated as of December 2, 1992, among Storer
Communications, Inc., TKR Cable I, Inc., TKR Cable II, Inc., TKR Cable III,
Inc., Tele-Communications, Inc., Comcast Corporation and each of the Departing
Subsidiaries that are signatories thereto (incorporated by reference to Exhibit
4 to Comcast Corporation's Current Report on Form 8-K filed on December 17,
1992, as amended by Form 8 filed January 8, 1993).
10.3 Tax Sharing Agreement, dated December 2, 1992, between Comcast Corporation and
Comcast Storer, Inc. (incorporated by reference to Exhibit 9 to Comcast
Corporation's Current Report on Form 8-K filed on December 17, 1992, as amended
by Form 8 filed January 8, 1993).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
10.4(a) Share Purchase Agreement, dated June 18, 1994, between Comcast Corporation and
Rogers Communications Inc. (incorporated by reference to Exhibit 10(3) to
Comcast Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994).
10.4(b) First Amendment to Share Purchase Agreement, dated as of December 22, 1994, by
and between Comcast Corporation and Rogers Communications Inc., to the Share
Purchase Agreement dated June 18, 1994 (incorporated by reference to Exhibit
10.9 to Comcast Corporation's Current Report on Form 8-K filed on January 6,
1995).
10.5 Comcast MHCP Holdings, L.L.C. Amended and Restated Limited Liability Company
Agreement, dated as of December 18, 1994, among the Company, The California
Public Employees' Retirement System and, for certain limited purposes, Comcast
Corporation (incorporated by reference to Exhibit 10.1 to Comcast Corporation's
Current Report on Form 8-K filed on January 6, 1995).
10.6 Credit Agreement, dated as of December 22, 1994, among Comcast MH Holdings,
Inc., the banks listed therein, The Chase Manhattan Bank (National Association),
NationsBank of Texas, N.A. and the Toronto-Dominion Bank, as Arranging Agents,
The Bank of New York, The Bank of Nova Scotia, Canadian Imperial Bank of
Commerce and Morgan Guaranty Trust Company of New York, as Managing Agents and
NationsBank of Texas, N.A., as Administrative Agent (incorporated by reference
to Exhibit 10.2 to Comcast Corporation's Current Report on Form 8-K filed on
January 6, 1995).
10.7 Pledge Agreement, dated as of December 22, 1994, between Comcast MH Holdings,
Inc. and NationsBank of Texas, N.A., as the secured party (incorporated by
reference to Exhibit 10.3 to Comcast Corporation's Current Report on Form 8-K
filed on January 6, 1995).
10.8 Pledge Agreement dated as of December 22, 1994, between Comcast Communications
Properties, Inc. and NationsBank of Texas, N.A., as the Secured Party
(incorporated by reference to Exhibit 10.4 to Comcast Corporation's Current
Report on Form 8-K filed on January 6, 1995).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
10.9 Affiliate Subordination Agreement (as the same may be amended, modified,
supplemented, waived, extended or restated from time to time, this "Agreement"),
dated as of December 22, 1994, among Comcast Corporation, Comcast MH Holdings,
Inc. (the "Borrower"), any affiliate of the Borrower that shall have become a
party thereto and NationsBank of Texas, N.A., as Administrative Agent under the
Credit Agreement dated as of December 22, 1994, among the Borrower, the Banks
listed therein, The Chase Manhattan Bank (National Association), NationsBank of
Texas, N.A. and The Toronto-Dominion Bank, as Arranging Agents, The Bank of New
York, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Morgan
Guaranty Trust Company of New York, as Managing Agents, and the Administrative
Agent (incorporated by reference to Exhibit 10.5 to Comcast Corporation's
Current Report on Form 8-K filed on January 6, 1995).
10.10 Registration Rights and Price Protection Agreement, dated as of December 22,
1994, by and between Comcast Corporation and The California Public Employees'
Retirement System (incorporated by reference to Exhibit 10.8 to Comcast
Corporation's Current Report on Form 8-K filed on January 6, 1995).
10.11 Agreement and Plan of Merger by and among The E.W. Scripps Company, Scripps
Howard, Inc., and Comcast Corporation dated as of October 28, 1995 (incorporated
by reference to Exhibit 2.1 to Comcast Corporation's Registration Statement on
Form S-4 filed, as amended, on November 13, 1996).
10.12/*/ Credit Agreement, dated as of November 15, 1996, among Comcast SCH Holdings,
Inc., the banks listed therein, Nationsbank of Texas, N.A., as Documentation
Agent, The Chase Manhattan Bank, as Syndication Agent, The Bank of New York, The
Chase Manhattan Bank and Nationsbank of Texas, N.A., as Managing Agents, and The
Bank of New York, as Administrative Agent.
10.13 Management Agreement, dated as of April 24, 1997, between Comcast Cable
Communications, Inc. and Comcast Corporation.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consents of Davis Polk & Wardwell (see exhibits 5 and 8).
25 Statement of eligibility of Bank of Montreal Trust Company on Form T-1.
27 Financial Data Schedules.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Instruction to Registered Holder and/or Book-entry Transfer of Participant.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
99.4 Form of Letter to Clients.
99.5 Form of Letter to Registered Holders and Depository Trust Company Participants.
</TABLE>
- ------------------------
/*/ Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant agrees
to furnish a copy of the referenced agreement to the Commission upon request.
(B) FINANCIAL STATEMENT SCHEDULES:
Schedule I--Condensed Financial Information of Registrant Unconsolidated
(Parent Only).
Schedule II--Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) 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 and 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 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) 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;
(2) 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.
(3) 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has 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 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 registrant will, unless in the opinion of their
II-5
<PAGE>
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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.
(d) The undersigned registrant hereby undertakes 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.
II-6
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Philadelphia, Pennsylvania, on July 3,
1997.
<TABLE>
<S> <C> <C>
COMCAST CABLE COMMUNICATIONS, INC.
By: /s/ BRIAN L. ROBERTS
-----------------------------------------
Name: Brian L. Roberts
Title: Vice Chairman; Director
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ralph J. Roberts, Brian L. Roberts, Julian
A. Brodsky, Lawrence S. Smith, John R. Alchin, Stanley Wang and Arthur R. Block
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that 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 below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
/s/ RALPH J. ROBERTS
------------------------------------------- Chairman of the Board of Directors; July 3, 1997
Ralph J. Roberts Director
/s/ JULIAN A. BRODSKY
------------------------------------------- Vice Chairman; Director July 3, 1997
Julian A. Brodsky
/s/ BRIAN L. ROBERTS
------------------------------------------- Vice Chairman; Director (Principal July 3, 1997
Brian L. Roberts Executive Officer)
/s/ LAWRENCE S. SMITH
------------------------------------------- Executive Vice President (Principal July 3, 1997
Lawrence S. Smith Accounting Officer)
/s/ JOHN R. ALCHIN
------------------------------------------- Senior Vice President and Treasurer July 3, 1997
John R. Alchin (Principal Financial Officer)
/s/ STANLEY L. WANG
------------------------------------------- Senior Vice President and Secretary; July 3, 1997
Stanley L. Wang Director
</TABLE>
II-7
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED BALANCE SHEET
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................. $ $ 4.5
Other current assets.................................................................. 2.7 4.7
----------- -----------
Total current assets.............................................................. 2.7 9.2
Investments in and amounts due to/from subsidiaries eliminated upon consolidation,
net................................................................................. 265.4
Deferred income taxes................................................................. 7.5 3.2
----------- -----------
$ 275.6 $ 12.4
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Current liabilities................................................................... $ 1.4 $ 1.2
----------- -----------
Investments in and amounts due to/from subsidiaries eliminated upon consolidation,
net................................................................................. 897.3
----------- -----------
Notes payable to affiliate............................................................ 178.9 178.9
----------- -----------
Stockholder's equity (deficiency)
Common stock, $1 par value--authorized and issued, 1,000 shares.....................
Additional capital.................................................................. 3,050.6 1,463.7
Accumulated deficit................................................................. (2,124.0) (2,101.4)
Unrealized (loss) gain on marketable securities held by a subsidiary................ (1.4) 9.7
Notes receivable from affiliate held by subsidiaries................................ (829.9) (437.0)
----------- -----------
Total stockholder's equity (deficiency)........................................... 95.3 (1,065.0)
----------- -----------
$ 275.6 $ 12.4
----------- -----------
----------- -----------
</TABLE>
II-8
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OTHER (INCOME) EXPENSE
Interest expense on notes payable to affiliate.......................... $ 16.4 $ 14.1 $ 6.0
Investment income, net.................................................. (0.6) (1.1) (1.1)
Equity in net losses of affiliates...................................... 5.1 36.3 19.7
----------- ----------- -----------
20.9 49.3 24.6
----------- ----------- -----------
LOSS BEFORE INCOME TAX EXPENSE (BENEFIT).................................. (20.9) (49.3) (24.6)
INCOME TAX EXPENSE (BENEFIT).............................................. 1.7 2.0 (1.6)
----------- ----------- -----------
NET LOSS.................................................................. (22.6) (51.3) (23.0)
ACCUMULATED DEFICIT
Beginning of year....................................................... (2,101.4) (2,050.1) (2,027.1)
----------- ----------- -----------
End of year............................................................. ($2,124.0) ($2,101.4) ($2,050.1)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
II-9
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF
REGISTRANT UNCONSOLIDATED (PARENT ONLY)
CONDENSED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... ($ 22.6) ($ 51.3) ($ 23.0)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in net losses of affiliates............................................. 5.1 36.3 19.7
Deferred income tax (benefit) expense.......................................... (4.3) 0.2 (1.5)
--------- --------- ---------
(21.8) (14.8) (4.8)
Decrease (increase) in other current assets.................................... 2.0 (1.6) (1.9)
Increase (decrease) in current liabilities..................................... 0.2 (0.4)
--------- --------- ---------
Net cash used in operating activities........................................ (19.6) (16.4) (7.1)
FINANCING ACTIVITIES
Proceeds from notes payable to affiliate......................................... 48.2 100.7
Capital contributions............................................................ 0.3 1.4 314.1
--------- --------- ---------
Net cash provided by financing activities.................................... 0.3 49.6 414.8
--------- --------- ---------
INVESTING ACTIVITIES
Net transactions with affiliates................................................. 14.8 (41.3) (413.9)
--------- --------- ---------
Net cash provided by (used in) investing activities.......................... 14.8 (41.3) (413.9)
--------- --------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS.............................................. (4.5) (8.1) (6.2)
CASH AND CASH EQUIVALENTS, beginning of year....................................... 4.5 12.6 18.8
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year............................................. $ $ 4.5 $ 12.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
II-10
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING EFFECT OF COSTS AND FROM AT END
OF YEAR ACQUISITIONS EXPENSES RESERVES(A) OF YEAR
----------- ------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
1996........................................ $ 10.7 $ 1.4 $ 15.7 $ 15.8 $ 12.0
1995........................................ 8.4 23.3 21.0 10.7
1994........................................ 9.2 1.8 14.2 16.8 8.4
</TABLE>
- ------------------------
(A) Uncollectible accounts and obsolete inventory written off.
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
3.1(a) Certificate of Incorporation filed on April 2, 1981.
3.1(b) Certificate of Resignation of Registered Agent filed October 29, 1996.
3.2 By-Laws.
4.1(a) Indenture dated as of May 1, 1997 between the Company and Bank of Montreal Trust
Company.
4.1(b) Form of Exchange Notes.
5 Opinion and Consent of Davis Polk & Wardwell regarding the validity of the
Securities being registered.
8 Opinion and Consent of Davis Polk & Wardwell regarding certain tax matters.
10.1/*/ Credit Agreement, dated as of September 19, 1995, between Comcast Holdings,
Inc., the banks listed therein, The Chase Manhattan Bank, N.A., as Arranging
Agent, Bank of Montreal, CIBC Inc., The Long-term Credit Bank of Japan, Limited,
Royal Bank of Canada and Societe Generale, as Managing Agents, and The Chase
Manhattan Bank, N.A., as Administrative Agent.
10.12/*/ Credit Agreement, dated as of November 15, 1996, among Comcast SCH Holdings,
Inc., the banks listed therein, Nationsbank of Texas, N.A., as Documentation
Agent, The Chase Manhattan Bank, as Syndication Agent, The Bank of New York, The
Chase Manhattan Bank and Nationsbank of Texas, N.A., as Managing Agents, and The
Bank of New York, as Administrative Agent.
10.13 Management Agreement, dated as of April 24, 1997, between Comcast Cable
Communications, Inc. and Comcast Corporation.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consents of Davis Polk & Wardwell (see exhibits 5 and 8).
25 Statement of eligibility of Bank of Montreal Trust Company on Form T-1.
27 Financial Data Schedules.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Instruction to Registered Holder and/or Book-entry Transfer of Participant.
99.4 Form of Letter to Clients.
99.5 Form of Letter to Registered Holders and Depository Trust Company Participants.
</TABLE>
- ------------------------
/*/ Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant agrees
to furnish a copy of the referenced agreement to the Commission upon request.
<PAGE>
Exhibit 3.1(a)
CERTIFICATE OF INCORPORATION
OF
COMCAST CABLE COMMUNICATIONS, INC.
FIRST: The name of the corporation is: COMCAST CABLE COMMUNICATIONS,
INC.
SECOND: The address of its registered office in the State of Delaware is:
100 West Tenth Street, Wilmington, County of New Castle, Delaware, 19801. The
name of its registered agent at such address is: THE CORPORATION TRUST COMPANY.
THIRD: The nature of the business or purposes to be conducted or
promoted is:
To have unlimited power to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law 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, par
value One Dollar ($1.00) per share, amounting in the aggregate to One Thousand
Dollars ($1,000.00).
FIFTH: The name and mailing address of the incorporator is as follows:
Name Address
---- -------
Florence B. Owens 12th Floor Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-Laws of the corporation.
<PAGE>
SEVENTH: Elections of directors need not be by written ballot unless the
By-Laws of the corporation shall so provide.
IN WITNESS THEREOF, I have hereunto set my hand and seal this 31st day of
March, 1981.
/s/ Florence B. Owens (SEAL)
----------------------------------
Florence B. Owens
2
<PAGE>
Exhibit 3.1(b)
CERTIFICATE OF RESIGNATION
OF REGISTERED AGENT WITH APPOINTMENT
OF A SUCCESSOR REGISTERED AGENT PURSUANT
TO SECTION 135 OF TITLE 8 OF THE DELAWARE CODE
Pursuant to the provisions of Section 135 of Title 8 of the Delaware
Code, the undersigned agent for service of process, in order to resign as
agent and appoint a successor agent, hereby certifies that
1. The name of the resigning agent is:
The Corporation Trust Company
2 The name of the successor agent is:
Comcast Delaware Services, Inc.
3. The address of the successor agent is:
1105 N. Market Steet
Wilmington, (New Castle County) Delaware 19801
4. Attached to this certificate is a statement from each such corporation
ratifying and approving such change of Registered Agent.
IN WITNESS WHEREOF, the undersigned agent has caused this certificate to be
signed on its behalf by its officer this 24th of October, 1996.
------ ---------
/s/ Ann J. William
------------------------------
Title: Ann J. William
Assistant Vice President
<PAGE>
Exhibit 3.2
BY-LAWS OF
COMCAST CABLE COMMUNICATIONS, INC.
(DELAWARE)
ARTICLE I - OFFICES
-------------------
Section 1-1. Registered Office and Registered Agent. The Corporation
shall maintain a registered office and registered agent within the State of
Delaware, which may be changed by the Board of Directors from time to time.
Section 1-2. Other Offices. The Corporation may also have offices at such
other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
-----------------------------------
Section 2-1. Place of Stockholders' Meetings. Meetings of stockholders
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such
place is designated by the Board of Directors, meetings of the stockholders
shall be held at the registered office of the Corporation in the State of
Delaware.
Section 2-2. Annual Meeting. A meeting of the stockholders of the
Corporation shall be held in each calendar year, commencing with the year 1994,
on the 2nd Thursday of June at 10 o'clock a.m. if not a legal holiday, and if
such day is a legal holiday, then such meeting shall be held on the next
business day.
<PAGE>
At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
Unless the Board of Directors shall deem it advisable, financial reports of
the Corporation's business need not be sent to the stockholders and need not be
presented at the annual meeting. If any report is deemed advisable by the
Board of Directors, such report may contain such information as the Board of
Directors shall determine and need not be certified by a Certified Public
Accountant unless the Board of Directors shall so direct.
Section 2-3. Special Meetings. Except as otherwise specifically provided
by law, special meetings of the stockholders may be called at any time:
(a) By the Board of Directors; or
(b) By the President of the Corporation; or
(c) By the holders of record of not less than a majority of all the shares
outstanding and entitled to vote.
Upon the written request of any person entitled to call a special meeting,
which request shall set forth the purpose for which the meeting is desired, it
shall be the duty of the Secretary to give prompt written notice of such
meeting to be held at such time as the Secretary may fix, subject to the
provisions of Section 2-4 hereof. If the Secretary shall fail to fix such
date and give notice within ten (10) days after receipt of such request, the
person or persons making such request may do so.
2
<PAGE>
Section 2-4. Notice of Meetings and Adjourned Meetings. Written notice
stating the place, date and hour of any meeting shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice is given when
deposited in the United States Mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Such notice may be given by or at the direction of the person or persons
authorized to call the meeting.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2-5. Quorum. Unless otherwise provided in the Certificate of
Incorporation or in a By-law adopted by the stockholders or by the Board of
Directors (or the Incorporators if no first Directors were named in the
Certificate of Incorporation) at its organization meeting following the filing
of the Articles of Incorporation, the presence, in person or by proxy, of the
holders of a majority of the outstanding shares entitled to vote shall
constitute a quorum but in no event shall a quorum consist of less than
one-third (1/3) of the shares entitled to vote at a meeting. The stockholders
present at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough
3
<PAGE>
stockholders to leave less than a quorum. If a meeting cannot be organized
because of the absence of a quorum, those present may, except as otherwise
provided by law, adjourn the meeting to such time and place as they may
determine. In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in this Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.
Section 2-6. Voting List; Proxies. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (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.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. All proxies shall
be
4
<PAGE>
executed in writing and shall be filed with the Secretary of the Corporation
not later than the day on which exercised. No proxy shall be voted or acted
upon after three (3) years from its date, unless the proxy provides for a longer
period.
Except as otherwise specifically provided by law, all matters coming before
the meeting shall be determined by a vote by shares. All elections of Directors
shall be by written ballot unless otherwise provided in the Certificate of
Incorporation. Except as otherwise specifically provided by law, all other
votes may be taken by voice unless a stockholder demands that it be taken by
ballot, in which latter event the vote shall be taken by written ballot.
Section 2-7. Informal Action by Stockholders. Unless otherwise provided
by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders or members, who have not consented in writing.
5
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 3-1. Number. The Board of Directors shall consist of such number
of directors, not less than two (2) nor more than seven (7), as may be
determined from time to time by resolution of the Board of Directors.
Section 3-2. Place of Meeting. Meetings of the Board of Directors may be
held at such place either within or without the State of Delaware, as a majority
of the Directors may from time to time designate or as may be designated in the
notice calling the meeting.
Section 3-3. Regular Meetings. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
Corporation. In addition to such regular meeting, the Board of Directors shall
have the power to fix, by resolution, the place, date and hour of other regular
meetings of the Board.
Section 3-4. Special Meetings. Special meetings of the Board of Directors
shall be held whenever ordered by the President, by a majority of the members of
the executive committee, if any, or by a majority of the Directors in office.
Section 3-5. Notices of Meetings of Board of Directors.
(a) Regular Meetings. No notice shall be required to be given of any
regular meeting, unless the same be held at other than the time or place for
holding
6
<PAGE>
such meetings as fixed in accordance with Section 3-3 of these by-laws, in
which event one (1) day's notice shall be given of the time and place of such
meeting.
(b) Special Meetings. At least one (1) day's notice shall be given of the
time, place and purpose for which any special meeting of the Board of Directors
is to be held.
Section 3-6. Quorum. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If there be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
and place to place and shall cause notice of each such adjourned meeting to be
given to all absent Directors.
Section 3-7. Informal Action by the Board of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 3-8. Powers.
(a) General Powers. The Board of Directors shall have all powers
necessary or appropriate to the management of the business and affairs of the
Corporation, and, in addition to the power and authority conferred by these
by-laws, may exercise all powers of the Corporation and do all such lawful acts
7
<PAGE>
and things as are not by statute, these by-laws or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
(b) Specific Powers. Without limiting the general powers conferred by the
last preceding clause and the powers conferred by the Certificate of
Incorporation and by-laws of the Corporation, it is hereby expressly declared
that the Board of Directors shall have the following powers:
(i) To confer upon any officer or officers of the Corporation the
power to choose, remove or suspend assistant officers, agents or
servants.
(ii) To appoint any person, firm or corporation to accept and hold in
trust for the Corporation any property belonging to the Corporation or
in which it is interested, and to authorize any such person, firm or
corporation to execute any documents and perform any duties that may
be requisite in relation to any such trust.
(iii) To appoint a person or persons to vote shares of another
corporation held and owned by the Corporation.
(iv) By resolution adopted by a majority of the full Board of
Directors, to designate one (1) or more of its number to constitute an
executive committee which, to the extent provided in such resolution,
shall have and may exercise the power of the Board of Directors in the
management of the business and affairs of the
8
<PAGE>
Corporation and may authorize the seal of the Corporation to be
affixed.
(v) By resolution passed by a majority of the whole Board of
Directors, to designate one (1) or more additional committees, each to
consist of one (1) or more Directors, to have such duties, powers and
authority as the Board of Directors shall determine. All committees
of the Board of Directors, including the executive committee, shall
have the authority to adopt their own rules of procedure. Absent the
adoption of specific procedures, the procedures applicable to the
Board of Directors shall also apply to committees thereof.
(vi) To fix the place, time and purpose of meetings of stockholders.
(vii) To purchase or otherwise acquire for the Corporation any
property, rights or privileges which the Corporation is authorized to
acquire, at such prices, on such terms and conditions and for such
consideration as it shall from time to time see fit, and, at its
discretion, to pay any property or rights acquired by the Corporation,
either wholly or partly in money or in stocks, bonds, debentures or
other securities of the Corporation.
(viii) To create, make and issue mortgages, bonds, deeds of trust,
trust agreements and negotiable or transferable instruments and
9
<PAGE>
securities, secured by mortgage or otherwise, and to do every other
act and thing necessary to effectuate the same.
(ix) To appoint and remove or suspend such subordinate officers,
agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time
to time change, their salaries or emoluments, and to require security
in such instances and in such amounts as it thinks fit.
(x) To determine who shall be authorized on the Corporation's behalf
to sign bills, notes, receipts, acceptances, endorsements, checks,
releases, contracts and documents.
Section 3-9. Compensation of Directors. Compensation of Directors and
reimbursement of their expenses incurred in connection with the business of the
Corporation, if any, shall be as determined from time to time by resolution of
the Board of Directors.
Section 3-10. Removal of Directors by Stockholders. The entire Board of
Directors or any individual Director may be removed from office without
assigning any cause by a majority vote of the holders of the outstanding shares
entitled to vote. In case the Board of Directors or any one (1) or more
Directors be so removed, new Directors may be elected at the same time.
Section 3-11. Resignations. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take
10
<PAGE>
effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall not be required to make it
effective.
Section 3-12. Vacancies. Vacancies and new created directorships
resulting from any increase in the authorized number of Directors elected by
all of the stockholders having the right to vote as a single class may be
filled by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director, and each person so elected shall be a
Director until his successor is elected and qualified or until his earlier
resignation or removal.
Section 3-13. Participation by Conference Telephone. Directors may
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.
ARTICLE IV - OFFICERS
---------------------
Section 4-1. Election and Office. The Corporation shall have a President,
a Secretary and a Treasurer who shall be elected by the Board of Directors.
The Board of Directors may elect such additional officers as it may deem
proper, including a Chairman and a Vice Chairman of the Board of Directors,
one (1) or more Vice Presidents, a Controller and one (1) or more assistant
or honorary officers. Any number of offices may be held by the same person.
11
<PAGE>
Section 4-2. Term. The President, the Secretary and the Treasurer shall
each serve for a term of one (1) year and until their respective successors are
chosen and qualified, unless removed from office by the Board of Directors
during their respective tenures. The term of office of any other officer shall
be as specified by the Board of Directors.
Section 4-3. Powers and Duties of the President. Unless otherwise
determined by the Board of Directors, the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations of the laws of the State of Delaware, these by-laws, and the
actions of the Board of Directors, he may appoint, suspend and discharge
employees and agents, shall preside at all meetings of the stockholders at
which he shall be present, and, unless there is a Chairman of the Board of
Directors, shall preside at all meetings of the Board of Directors and, unless
otherwise specified by the Board of Directors, shall be a member of all
committees. He shall also do and perform such other duties as from time to
time may be assigned to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock, and, at any such meeting, shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
12
<PAGE>
stock and which, as the owner thereof, the Corporation might have possessed and
exercised.
Section 4-4. Powers and Duties of the Secretary. Unless otherwise
determined by the Board of Directors, the Secretary shall record all
proceedings of the meetings of the Corporation, the Board of Directors and all
committees, in books to be kept for that purpose, and shall attend to the
giving and serving of all notices for the Corporation. He shall have charge
of the corporate seal, the certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors may direct. He shall
perform all other duties ordinarily incident to the office of Secretary and
shall have such other powers and perform such other duties as may be assigned
to him by the Board of Directors.
Section 4-5. Powers and Duties of the Treasurer. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all
the funds and securities of the Corporation which may come into his hands.
When necessary or proper, unless otherwise ordered by the Board of Directors,
he shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
in such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly, in books of the Corporation
to be kept by him for that purpose, a full and accurate account of all moneys
received and
13
<PAGE>
paid by him on account of the Corporation. Whenever required by the Board of
Directors, he shall render a statement of the financial condition of the
Corporation. He shall at all reasonable times exhibit his books and accounts
to any Director of the Corporation, upon application at the office of the
Corporation during business hours. He shall have such other powers and shall
perform such other duties as may be assigned to him from time to time by the
Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the Board of Directors and
any such bond shall remain in the custody of the President.
Section 4-6. Powers and Duties of the Chairman of the Board of Directors.
Unless otherwise determined by the Board of Directors, the Chairman of the
Board of Directors, if any, shall preside at all meetings of Directors. He
shall have such other powers and perform such further duties as may be assigned
to him by the Board of Directors, including, without limitation, acting as
Chief Executive Officer of the Corporation. To be eligible to serve, the
Chairman of the Board must be a Director of the Corporation.
Section 4-7. Powers and Duties of Vice Presidents and Assistant Officers.
Unless otherwise determined by the Board of Directors, each Vice President and
each assistant officer shall have the powers and perform the duties of his
respective superior officer. Vice Presidents and assistant officers shall have
such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his absence, or upon his
disability or when so directed by
14
<PAGE>
such superior officer or by the Board of Directors. Vice Presidents may be
designated as having responsibility for a specific aspect of the Corporation's
affairs, in which event each such Vice President shall be superior to the other
Vice Presidents in relation to matters within his aspect. The President shall
be the superior officer of the Vice Presidents. The Treasurer and the
Secretary shall be the superior officers of the Assistant Treasurers and
Assistant Secretaries, respectively.
Section 4-8. Delegation of Office. The Board of Directors may delegate
the powers or duties of any officer of the Corporation to any other officer or
to any Director from time to time.
Section 4-9. Vacancies. The Board of Directors shall have the power to
fill any vacancies in any office occurring from whatever reason.
Section 4-10. Resignations. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the
time so fixed. The acceptance of a resignation shall not be required to make
it effective.
Section 4-11. Designation of Chief Financial Officer. The Board of
Directors shall have the power to designate from among the Chairman, any Vice
Chairman, President, any Vice President or the Treasurer of this Corporation a
Chief Financial Officer who shall be deemed the principal financial and
accounting officer and who shall have the ultimate responsibility to oversee
the financial
15
<PAGE>
operation and performance of the Corporation. In the event that the Treasurer
is not designated by the Board of Directors as the Chief Financial Officer, the
Treasurer shall report to the Chief Financial Officer from time to time
concerning all duties which the Treasurer is obligated to perform and the Chief
Financial Officer shall, at his election, assume such of the duties of the
Treasurer as are provided herein as he shall deem appropriate. The Chief
Financial Officer shall have the power to modify and/or amend any and all
actions taken by the Treasurer and shall have such other powers and perform
such other duties as may be assigned to him by the Board of Directors.
ARTICLE V - CAPITAL STOCK
-------------------------
Section 5-l. Stock Certificates. Shares of the Corporation shall be
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by a
transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, 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 be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at
the date of issue.
16
<PAGE>
Section 5-2. Determination of Stockholders of Record. The Board of
Directors may fix, in advance, a record date to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action. Such date shall be not more than sixty (60) nor less
than ten (10) days before the date of any such meeting, nor more than sixty
(60) days prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
The record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
17
<PAGE>
Section 5-3. Transfer of Shares. Transfer of shares shall be made on the
books of the Corporation only upon surrender of the share certificate, duly
endorsed and otherwise in proper form for transfer, which certificate shall be
cancelled at the time of the transfer. No transfer of shares shall be made on
the books of this Corporation if such transfer is in violation of a lawful
restriction noted conspicuously on the certificate.
Section 5-4. Lost, Stolen or Destroyed Share Certificates. The
Corporation may issue a new certificate of stock, or uncertified shares in
place of any certificate therefore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen, or destroyed certificate, or his legal representative to give the
Corporation a bond sufficient to indemnify it against claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
ARTICLE VI - NOTICES
--------------------
Section 6-l. Contents of Notice. Whenever any notice of a meeting is
required to be given pursuant to these by-laws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting or where otherwise required
by law, the general nature of the business to be transacted at such meeting.
Section 6-2. Method of Notice. All notices shall be given to each person
entitled thereto, either personally or by sending a copy thereof through the
mail or
18
<PAGE>
by telegraph, charges prepaid, to his address as it appears on the records of
the Corporation, or supplied by him to the Corporation for the purpose of
notice. If notice is sent by mail or telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in the United States
Mail or with the telegraph office for transmission. If no address for a
stockholder appears on the books of the Corporation and such stockholder has
not supplied the Corporation with an address for the purpose of notice, notice
deposited in the United States Mail addressed to such stockholder care of
General Delivery in the city in which the principal office of the Corporation
is located shall be sufficient.
Section 6-3. Wavier of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or by-laws of
the Corporation, a written waiver, 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 shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, Directors, or members of a
committee of Directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation.
19
<PAGE>
ARTICLE VII- INDEMNIFICATION OF DIRECTORS AND
---------------------------------------------
OFFICERS AND OTHER PERSONS
--------------------------
Section 7-l. Indemnification. The Corporation shall indemnify any person
who is a Director or officer of the Corporation or any Director or officer who
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (any such person is hereinafter referred to in this Article
VII as a "Director or officer") against expenses (including, but not limited
to, attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred by such Director or officer ("liabilities"), to the
fullest extent now or hereafter permitted by law in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (as used in this Article VII,
"Proceeding" or, in the plural, "Proceedings"), brought or threatened to be
brought against such Director or officer by reason of the fact that he or she
is or was serving in any such capacity or in any other capacity on behalf of
the Corporation, its parent or any of its subsidiaries.
The Board of Directors by resolution adopted in each specific instance may
similarly indemnify any person other than a Director or officer (any such
person is hereinafter referred to in this Article VII as an "Other Person") for
liabilities incurred by him or her in connection with services rendered by him
or her for or at the request of the Corporation, its parent or any of its
subsidiaries.
20
<PAGE>
Section 7-2. Advances. Expenses (including, but not limited to,
attorneys' fees) incurred by any Director or officer in defending a Proceeding
shall be paid by the Corporation in advance of the final disposition of such
Proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking, by or on behalf of such Director or officer, to
repay such amount without interest if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Corporation as authorized by
law. Advance expenses (including, but not limited to, attorneys' fees) incurred
by Other Persons may be paid if the Board of Directors deems appropriate and
upon such terms and conditions, including the giving of an undertaking, as the
Board of Directors deems appropriate.
Section 7-3. Applicability; Survival. The provisions of Sections 7-1 and
7-2 shall be applicable to all Proceedings commenced before or after the
adoption of this Article VII, whether such arise out of acts or omissions which
occurred prior or subsequent to such adoption and shall continue as to a person
who has ceased to be a Director or officer (or, where and so long as the Board
of Directors has authorized indemnification or advancement of expenses to an
Other Person in accordance with this Article VII, to an Other Person who has
ceased to render services for or at the request of the Corporation its parent
or subsidiaries) and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 7-4. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, officer, or Other
21
<PAGE>
Person of the Corporation, or is or was serving at the request 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 or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under law.
Section 7-5. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VII, shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under these bylaws, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
ARTICLE VIII - SEAL
-------------------
The form of the seal of the Corporation,
called the corporate seal of the Corporation, [Form of Seal]
shall be as impressed adjacent hereto.
ARTICLE IX - FISCAL YEAR
------------------------
The Board of Directors shall have the power by resolution to fix the fiscal
year of the Corporation. If the Board of Directors shall fail to do so, the
President shall fix the fiscal year.
22
<PAGE>
ARTICLE X - AMENDMENTS
----------------------
The original or other by-laws may be adopted, amended or repealed by the
stockholders entitled to vote thereon at any regular or special meeting or, if
the Certificate of Incorporation so provides, by the Board of Directors. The
fact that such power has been so conferred upon the Board of Directors shall
not divest the stockholders of the power nor limit their power to adopt, amend
or repeal by-laws.
ARTICLE XI - INTERPRETATION OF BY-LAWS
--------------------------------------
All words, terms and provisions of these by-laws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter.
23
<PAGE>
Exhibit 4.1(a)
- -------------------------------------------------------------------------
Comcast Cable Communications, Inc.
and
Bank of Montreal Trust Company
___________________________________
Indenture
Dated as of May 1, 1997
___________________________________
- -------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS (1)
-------------
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
Section 1.01. Definitions.....................................................1
Section 1.02. Other Definitions...............................................6
Section 1.03. Incorporation by Reference of Trust Indenture Act...............7
Section 1.04. Rules of Construction...........................................8
ARTICLE 2
The Securities
Section 2.01. Form............................................................8
Section 2.02. Execution and Authentication....................................8
Section 2.03. Amount Unlimited; Issuable in Series...........................10
Section 2.04. Denomination and Date of Securities; Payments of Interest......12
Section 2.05. Registrar and Paying Agent; Agents Generally...................13
Section 2.06. Paying Agent to Hold Money in Trust............................13
Section 2.07. Transfer and Exchange..........................................14
Section 2.08. Replacement Securities.........................................17
Section 2.09. Outstanding Securities.........................................18
Section 2.10. Temporary Securities...........................................19
Section 2.11. Cancellation...................................................19
Section 2.12. CUSIP Numbers..................................................20
Section 2.13. Defaulted Interest.............................................20
Section 2.14. Series May Include Tranches....................................20
Section 2.15. Computation of Interest........................................20
ARTICLE 3
Redemption
Section 3.01. Applicability of Article.......................................21
Section 3.02. Notice of Redemption; Partial Redemptions......................21
Section 3.03. Payment of Securities Called for Redemption....................23
Section 3.04. Exclusion of Certain Securities from Eligibility for Selection
for Redemption.................................................24
- ----------------
(1) Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
<PAGE>
Page
----
Section 3.05. Mandatory and Optional Sinking Funds...........................24
ARTICLE 4
Covenants
Section 4.01. Payment of Securities..........................................27
Section 4.02. Maintenance of Office or Agency................................28
Section 4.03. Certificate to Trustee.........................................29
Section 4.04. Reports by the Company.........................................29
ARTICLE 5
Successor Corporation
Section 5.01. When Company May Merge, Etc....................................29
Section 5.02. Successor Substituted..........................................30
ARTICLE 6
Default and Remedies
Section 6.01. Events of Default..............................................31
Section 6.02. Acceleration...................................................32
Section 6.03. Other Remedies.................................................33
Section 6.04. Waiver of past Defaults........................................33
Section 6.05. Control by Majority............................................34
Section 6.06. Limitation on Suits............................................34
Section 6.07. Rights of Holders to Receive Payment...........................35
Section 6.08. Collection Suit by Trustee.....................................35
Section 6.09. Trustee May File Proofs of Claim...............................35
Section 6.10. Application of Proceeds........................................36
Section 6.11. Restoration of Rights and Remedies.............................37
Section 6.12. Undertaking for Costs..........................................37
Section 6.13. Rights and Remedies Cumulative.................................37
Section 6.14. Delay or Omission Not Waiver...................................38
ARTICLE 7
Trustee
Section 7.01. General........................................................38
Section 7.02. Certain Rights of Trustee......................................38
Section 7.03. Individual Rights of Trustee...................................40
Section 7.04. Trustee's Disclaimer...........................................40
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Page
----
Section 7.05. Notice of Default..............................................41
Section 7.06. Reports by Trustee to Holders..................................41
Section 7.07. Compensation and Indemnity.....................................41
Section 7.08. Replacement of Trustee.........................................42
Section 7.09. Successor Trustee by Merger, Etc...............................43
Section 7.10. Eligibility....................................................44
Section 7.11. Money Held in Trust............................................44
ARTICLE 8
Discharge of Indenture
Section 8.01. Defeasance Within One Year of Payment..........................44
Section 8.02. Defeasance.....................................................45
Section 8.03. Covenant Defeasance............................................46
Section 8.04. Application of Trust Money.....................................47
Section 8.05. Repayment to Company...........................................48
ARTICLE 9
Amendments, Supplements and Waivers
Section 9.01. Without Consent of Holders.....................................48
Section 9.02. With Consent of Holders........................................49
Section 9.03. Effect of Consent..............................................51
Section 9.04. Notation on or Exchange of Securities..........................52
Section 9.05. Trustee to Sign Amendments, Etc................................52
Section 9.06. Conformity with Trust Indenture Act............................52
ARTICLE 10
Miscellaneous
Section 10.01. Trust Indenture Act of 1939...................................52
Section 10.02. Notices.......................................................52
Section 10.03. Certificate and Opinion as to Conditions Precedent............54
Section 10.04. Statements Required in Certificate or Opinion.................54
Section 10.05. Evidence of Ownership.........................................54
Section 10.06. Rules by Trustee, Paying Agent or Registrar...................55
Section 10.07. Payment Date Other Than a Business Day........................55
Section 10.08. Governing Law.................................................56
Section 10.09. No Adverse Interpretation of Other Agreements.................56
Section 10.10. Successors....................................................56
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Page
----
Section 10.11. Duplicate Originals...........................................56
Section 10.12. Separability..................................................56
Section 10.13. Table of Contents, Headings, Etc..............................56
Section 10.14. Incorporators, Stockholders, Officers and Directors of Company
Exempt from Individual Liability..............................56
Section 10.15. Judgment Currency.............................................57
SIGNATURES
iv
<PAGE>
INDENTURE, dated as of May 1, 1997, between Comcast Cable Communications,
Inc., a Delaware corporation (the "Company"), and Bank of Montreal Trust
Company, a New York banking corporation (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the issue from time to time of its
debentures, notes or other evidences of indebtedness to be issued in one or more
series (the "Securities") up to such principal amount or amounts as may from
time to time be authorized in accordance with the terms of this Indenture and to
provide, among other things, for the authentication, delivery and administration
of the Securities, the Company has duly authorized the execution and delivery of
this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid indenture and
agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the
holders thereof, the Company and the Trustee mutually covenant and agree for the
equal and proportionate benefit of the respective holders from time to time of
the Securities or of any and all series thereof and of the coupons, if any,
appertaining thereto as follows:
ARTICLE 1
Definitions and Incorporation by Reference
Section 1.01. Definitions. Unless otherwise provided by or pursuant to a
Board Resolution or supplemental indenture establishing the terms of one or more
series of Securities the following terms, as used herein, shall have the
following meanings:
"Agent" means any Registrar, Paying Agent, transfer agent or Authenticating
Agent.
"Authorized Newspaper" means (i) The Wall Street Journal (Eastern Edition),
or, if The Wall Street Journal is no longer customarily printed at least once a
day for at least five days in each calendar week or no longer is of general
circulation in the City of New York, then another newspaper published in English
customarily published at least once a day for at least five days in each
calendar
<PAGE>
week and of general circulation in The City of New York, or (ii) the Luxembourg
Wort, but only with respect to notices to be given to Holders of Securities
other than Registered Securities. If it shall be impractical in the opinion of
the Trustee to make any publication of any notice required hereby in an
Authorized Newspaper, any publication or other notice in lieu thereof which is
made or given with the approval of the Trustee shall constitute a sufficient
publication of such notice.
"Board Resolution" means one or more resolutions of the board of directors
of the Company or any authorized committee thereof, certified by the secretary
or an assistant secretary of the Company to have been duly adopted and to be in
full force and effect on the date of certification, and delivered to the
Trustee.
"Business Day" means, with respect to any Security, a day that is not a day
on which banking institutions are authorized or required by law or regulation to
close, in the city (or in any of the cities, if more than one) unless otherwise
specified, in which amounts are payable, as specified in the form of such
Security.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital stock or equity, including,
without limitation, all Common Stock and Preferred Stock.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article 5 of this Indenture
and thereafter means the successor.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 77 Water
2
<PAGE>
Street, 4th Floor, New York, New York, 10005, Attention: Corporate Trust
Department.
"Default" means any Event of Default as defined in Section 6.01 and any
event that is, or after notice or passage of time or both would be, an Event of
Default.
"Depositary" means, with respect to the Securities of any series issuable
or issued in the form of one or more Registered Global Securities, the Person
designated as Depositary by the Company pursuant to Section 2.03 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or include
each Person who is then a Depositary hereunder, and if at any time there is more
than one such Person, "Depositary" as used with respect to the Securities of any
such series shall mean the Depositary with respect to the Registered Global
Securities of that series.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America at the date of any computation required or permitted
hereunder.
"Holder" or "Securityholder" means the registered holder of any Security
with respect to Registered Securities and the bearer of any Unregistered
Security or any coupon appertaining thereto, as the case may be.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture and shall include the forms and terms of the Securities of each series
established as contemplated pursuant to Sections 2.01 and 2.03.
"Officer" means, with respect to the Company, the chairman of the board of
directors, the chairman, any vice chairman, the president, the executive vice
president, any senior vice president, the treasurer or any assistant treasurer,
or the secretary or any assistant secretary.
"Officers' Certificate" means a certificate signed in the name of the
Company (i) by the chairman of the board of directors, the chairman, any vice
chairman, the president, the executive vice president or any senior vice
president and (ii) by the treasurer or any assistant treasurer, or the secretary
or any assistant secretary, complying with Section 10.04 and delivered to the
Trustee. Each such certificate shall comply with Section 314 of the Trust
Indenture Act and include
3
<PAGE>
(except as otherwise expressly provided in this Indenture) the statements
provided in Section 10.04.
"Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, satisfactory to the Trustee and
complying with Section 10.04. Each such opinion shall comply with Section 314 of
the Trust Indenture Act and include the statements provided in Section 10.04, if
and to the extent required thereby.
"original issue date" of any Security (or portion thereof) means the
earlier of (a) the date of authentication of such Security or (b) the date of
any Security (or portion thereof) for which such Security was issued (directly
or indirectly) on registration of transfer, exchange or substitution.
"Periodic Offering" means an offering of Securities of a series from time
to time, the specific terms of which Securities, including, without limitation,
the rate or rates of interest, if any, thereon, the stated maturity or
maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Company or its agents upon the issuance of such
Securities.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference stock, whether
now outstanding or issued after the date of the Indenture, including, without
limitation, all series and classes of such preferred or preference stock.
"Principal" of a Security means the principal amount of, and, unless the
context indicates otherwise, includes any premium payable on, the Security.
"Registered Global Security" means a Security evidencing all or a part of a
series of Registered Securities, issued to the Depositary for such series in
accordance with Section 2.02, and bearing the legend prescribed in Section 2.02.
"Registered Security" means any Security registered on the Security
Register (as defined in Section 2.05).
"Responsible Officer" means, when used with respect to the Trustee, any
vice president, assistant vice president, treasurer, assistant treasurer,
secretary,
4
<PAGE>
assistant secretary or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company organized and
existing under the laws of the United States of America and the principal
business of which is the cable communications industry carried on within the
United States of America other than:
(i) each Subsidiary the major part of whose business consists of
finance, banking, credit, leasing, insurance, financial services or other
similar operations, or any combination thereof; and
(ii) each Subsidiary formed or acquired after the date hereof for the
purpose of acquiring the business or assets of another person and which
does not acquire all or any substantial part of the business or assets of
the Company or any Restricted Subsidiary;
provided, however, that any Subsidiary may be declared a Restricted
Subsidiary by Board Resolution, effective as of the date such Board
Resolution is adopted; provided, further, that any such declaration may be
rescinded by further Board Resolution, effective as of the date such further
Board Resolution is adopted.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture and, unless the context indicates otherwise, shall include any
coupon appertaining thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of all votes
represented by all classes of outstanding Voting Stock is owned, directly or
indirectly, by such Person and one or more other Subsidiaries of such Person.
"Trustee" means the party named as such in the first paragraph of this
Indenture until replaced by a successor or successors in accordance with the
provisions of Article 7 and thereafter means such successor or successors.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
it may be amended from time to time.
5
<PAGE>
"UCC" means the Uniform Commercial Code, as in effect in each applicable
jurisdiction.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended and as codified in Title 11 of the United States Code, as amended from
time to time hereafter, or any successor federal bankruptcy law.
"Unregistered Security" means any Security other than a Registered
Security.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly-Owned" is defined to mean, with respect to any Subsidiary of any
person, such Subsidiary if all of the outstanding common stock or other similar
equity ownership interests (but not including preferred stock) in such
Subsidiary (other than any director's qualifying shares or investments by
foreign nationals mandated by applicable law) is owned directly or indirectly by
such person.
Section 1.02. Other Definitions. Each of the following terms is defined in
the section set forth opposite such term:
Term Section
---- -------
Authenticating Agent 2.2
cash transaction 7.3
Dollars 4.2
6
<PAGE>
Event of Default 6.1
Judgment Currency 10.15
mandatory sinking fund payment 3.5
optional sinking fund payment 3.5
Paying Agent 2.5
record date 2.4
Registrar 2.5
Required Currency 10.15
Security Register 2.5
self-liquidating paper 7.3
sinking fund payment date 3.5
tranche 2.14
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the Trust Indenture Act, the provision
is incorporated by reference in and made a part of this Indenture. The following
terms used in this Indenture that are defined by the Trust Indenture Act have
the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by reference in the Trust Indenture Act to another
statute or defined by a rule of the Commission and not otherwise defined herein
have the meanings assigned to them therein. If any provision of this Indenture
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, or would be so required were this Indenture duly qualified under the Trust
Indenture Act, such required provision shall control.
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Section 1.04. Rules of ConstructionUnless the context otherwise requires:
(i) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(ii) words in the singular include the plural, and words in the
plural include the singular;
(iii) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(iv) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated; and
(v) use of masculine, feminine or neuter pronouns should not be
deemed a limitation, and the use of any such pronouns should be construed
to include, where appropriate, the other pronouns.
ARTICLE 2
The Securities
Section 2.01. Form. The Securities of each series shall be substantially
in such form or forms (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions or in one or more
indentures supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have imprinted or otherwise reproduced thereon such
legend or legends or endorsements, not inconsistent with the provisions of this
Indenture, as may be required to comply with any law, or with any rules of any
securities exchange or usage, all as may be determined by the officers executing
such Securities as evidenced by their execution of the Securities. Unless
otherwise so established, Unregistered Securities shall have coupons attached.
Section 2.02. Execution and Authentication. The chairman of the board of
directors, the chairman, any vice chairman, the president, the executive vice
president, any senior vice president, the treasurer or any assistant treasurer
shall execute the Securities (other than coupons) for the Company by facsimile
or manual signature in the name and on behalf of the Company. The seal of the
Company, if any, shall be reproduced on the Securities. If an Officer whose
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signature is on a Security no longer holds that office at the time the Security
is authenticated, the Security shall nevertheless be valid. Delivery by
facsimile transmission shall not affect the validity of the Securities.
The Trustee, at the expense of the Company, may appoint an authenticating
agent (the "Authenticating Agent") to authenticate Securities (other than
coupons). The Authenticating Agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such Authenticating Agent.
A Security (other than coupons) shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on the
Security. The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series having attached
thereto appropriate coupons, if any, executed by the Company to the Trustee for
authentication together with the applicable documents referred to below in this
Section, and the Trustee shall thereupon authenticate and make available for
delivery such Securities to or upon the written order of the Company. In
authenticating any Securities of a series, the Trustee shall be entitled to
receive prior to the first authentication of any Securities of such series, and
(subject to Article 7) shall be fully protected in relying upon, unless and
until such documents have been superseded or revoked:
(1) any Board Resolution and/or executed supplemental indenture referred
to in Sections 2.01 and 2.03 by or pursuant to which the forms and terms of
the Securities of that series were established;
(2) an Officers' Certificate setting forth the form or forms and terms of
the Securities, stating that the form or forms and terms of the Securities
of such series have been, or will be when established in accordance with
such procedures as shall be referred to therein, established in compliance
with this Indenture; and
(3) an Opinion of Counsel substantially to the effect that the form or
forms and terms of the Securities of such series have been, or will be when
established in accordance with such procedures as shall be referred to
therein, established in compliance with this Indenture and that the
supplemental indenture, to the extent applicable, and Securities have been
duly authorized and, if executed and authenticated in accordance with the
provisions of the Indenture and delivered to and duly paid for by the
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purchasers thereof on the date of such opinion, would be entitled to the
benefits of the Indenture and would be valid and binding obligations of the
Company, enforceable against the Company in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting creditors' rights
generally, general principles of equity, and such other matters as shall be
specified therein.
If the Company shall establish pursuant to Section 2.03 that the Securities
of a series or a portion thereof are to be issued in the form of one or more
Registered Global Securities, then the Company shall execute and the Trustee
shall authenticate and make available for delivery one or more Registered Global
Securities that (i) shall represent and shall be denominated in an amount equal
to the aggregate principal amount of all of the Securities of such series issued
in such form and not yet canceled, (ii) shall be registered in the name of the
Depositary for such Registered Global Security or Securities or the nominee of
such Depositary, (iii) shall be delivered by the Trustee to such Depositary or
its custodian or pursuant to such Depositary's instructions and (iv) shall bear
a legend substantially to the following effect: "Unless and until it is
exchanged in whole or in part for Securities in definitive registered form, this
Security may not be transferred except as a whole by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary."
Section 2.03. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series and each such series
shall rank equally and pari passu with all other unsecured and unsubordinated
debt of the Company. There shall be established in or pursuant to a Board
Resolution or one or more indentures supplemental hereto, prior to the initial
issuance of Securities of any series (subject to the last sentence of this
Section 2.03),
(1) the designation of the Securities of the series, which shall
distinguish the Securities of the series from the Securities of all other
series;
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
and any limitation on the ability of the Company to increase such aggregate
principal amount after the initial issuance of the Securities of that
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series (except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, or upon redemption of,
other Securities of the series pursuant hereto);
(3) the date or dates on which the Principal of the Securities of the
series is payable (which date or dates may be fixed or extendible);
(4) the rate or rates (which may be fixed or variable) per annum at
which the Securities of the series shall bear interest, if any, the date or
dates from which such interest shall accrue, on which such interest shall
be payable and (in the case of Registered Securities) on which a record
shall be taken for the determination of Holders to whom interest is payable
and/or the method by which such rate or rates or date or dates shall be
determined;
(5) if other than as provided in Section 4.02, the place or places
where the Principal of and any interest on Securities of the series shall
be payable, any Registered Securities of the series may be surrendered for
exchange, notices, demands to or upon the Company in respect of the
Securities of the series and this Indenture may be served and notice to
Holders may be published;
(6) the right, if any, of the Company to redeem Securities of the
series, in whole or in part, at its option and the period or periods within
which, the price or prices at which and any terms and conditions upon which
Securities of the series may be so redeemed, pursuant to any sinking fund
or otherwise;
(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of a Holder thereof
and the price or prices at which and the period or periods within which and
any of the terms and conditions upon which Securities of the series shall
be redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if the Securities of the series are issuable in whole or in part
as one or more Registered Global Securities, the identity of the Depositary
for such Registered Global Security or Securities;
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(10) any exceptions or additional conditions applicable to the
provisions of Section 5.01;
(11) any other events of default or covenants with respect to the
Securities of the series; and
(12) any other terms of the Securities of the series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series and coupons, if any, appertaining
thereto shall be substantially identical, except in the case of Registered
Securities as to date and denomination, except in the case of any Periodic
Offering and except as may otherwise be provided by or pursuant to the Board
Resolution referred to above or as set forth in any such indenture
supplemental hereto. All Securities of any one series need not be issued at
the same time and may be issued from time to time, consistent with the terms
of this Indenture, if so provided by or pursuant to such Board Resolution or
in any such indenture supplemental hereto and any forms and terms of
Securities to be issued from time to time may be completed and established
from time to time prior to the issuance thereof by procedures described in
such Board Resolution or supplemental indenture.
Section 2.04. Denomination and Date of Securities; Payments of
Interest. The Securities of each series shall be issuable as Registered
Securities or Unregistered Securities in denominations established as
contemplated by Section 2.03 or, if not so established with respect to
Securities of any series, in denominations of $1,000 and any integral
multiple thereof. The Securities of each series shall be numbered, lettered
or otherwise distinguished in such manner or in accordance with such plan as
the Officers of the Company executing the same may determine, as evidenced by
their execution thereof.
Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and
such interest and shall be payable on the dates, established as contemplated
by Section 2.03.
The person in whose name any Registered Security of any series is
registered at the close of business on any record date applicable to a
particular series with respect to any interest payment date for such series
shall be entitled to receive the interest, if any, payable on such interest
payment date notwithstanding any transfer or exchange of such Registered
Security subsequent to the record date and prior to such interest payment
date, except if and to the extent the Company shall default in the payment of
the interest due on such interest payment date for such series, in which case
the provisions of Section 2.13 shall apply. The term
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"record date" as used with respect to any interest payment date (except a
date for payment of defaulted interest) for the Securities of any series
shall mean the date specified as such in the terms of the Registered
Securities of such series established as contemplated by Section 2.03, or, if
no such date is so established, the fifteenth day next preceding such
interest payment date, whether or not such record date is a Business Day.
Section 2.05. Registrar and Paying Agent; Agents Generally. The
Company shall maintain an office or agency where Securities may be presented
for registration, registration of transfer or exchange (the "Registrar") and
an office or agency where Securities may be presented for payment (the
"Paying Agent"), which shall be in the Borough of Manhattan, The City of New
York. The Company shall cause the Registrar to keep a register of the
Registered Securities and of their registration, transfer and exchange (the
"Security Register"). The Company may have one or more additional Paying
Agents or transfer agents with respect to any series.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture and the Trust Indenture Act that relate to such
Agent. The Company shall give prompt written notice to the Trustee of the
name and address of any Agent and any change in the name or address of an
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such. The Company may remove any Agent upon written
notice to such Agent and the Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a successor
Agent to such Agent as evidenced by an appropriate agency agreement entered
into by the Company and such successor Agent and delivered to the Trustee or
(ii) notification to the Trustee that the Trustee shall serve as such Agent
until the appointment of a successor Agent in accordance with clause (i) of
this proviso. The Company or any affiliate of the Company may act as Paying
Agent or Registrar; provided that neither the Company nor an affiliate of the
Company shall act as Paying Agent in connection with the defeasance of the
Securities or the discharge of this Indenture under Article 8.
The Company initially appoints the Trustee as Registrar and Paying
Agent. If, at any time, the Trustee is not the Registrar, the Registrar shall
make available to the Trustee ten days prior to each interest payment date
and at such other times as the Trustee may reasonably request the names and
addresses of the Holders as they appear in the Security Register.
Section 2.06. Paying Agent to Hold Money in Trust. Not later than
10:00 a.m., New York City time, on each due date of any Principal or interest
on
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any Securities, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such Principal or interest. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust for the benefit of the
Holders of such Securities or the Trustee all money held by the Paying Agent
for the payment of Principal of and interest on such Securities and shall
promptly notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing
so, the Paying Agent shall have no further liability for the money so paid
over to the Trustee. If the Company or any affiliate of the Company acts as
Paying Agent, it will, on or before each due date of any Principal of or
interest on any Securities, segregate and hold in a separate trust fund for
the benefit of the Holders thereof a sum of money sufficient to pay such
Principal or interest so becoming due until such sum of money shall be paid
to such Holders or otherwise disposed of as provided in this Indenture, and
will promptly notify the Trustee in writing of its action or failure to act
as required by this Section.
Section 2.07. Transfer and Exchange. Unregistered Securities (except
for any temporary global Unregistered Securities) and coupons (except for
coupons attached to any temporary global Unregistered Securities) shall be
transferable by delivery.
At the option of the Holder thereof, Registered Securities of any series
(other than a Registered Global Security, except as set forth below) may be
exchanged for a Registered Security or Registered Securities of such series
and tenor having authorized denominations and an equal aggregate principal
amount, upon surrender of such Registered Securities to be exchanged at the
agency of the Company that shall be maintained for such purpose in accordance
with Section 2.05 and upon payment, if the Company shall so require, of the
charges hereinafter provided. If the Securities of any series are issued in
both registered and unregistered form, except as otherwise established
pursuant to Section 2.03, at the option of the Holder thereof, Unregistered
Securities of any series may be exchanged for Registered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Unregistered Securities to be
exchanged at the agency of the Company that shall be maintained for such
purpose in accordance with Section 4.02, with, in the case of Unregistered
Securities that have coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Company
shall so require, of the charges hereinafter provided. At the option of the
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Holder thereof, if Unregistered Securities of any series, maturity date,
interest rate and original issue date are issued in more than one authorized
denomination, except as otherwise established pursuant to Section 2.03, such
Unregistered Securities may be exchanged for Unregistered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Unregistered Securities to be
exchanged at the agency of the Company that shall be maintained for such
purpose in accordance with Section 4.02, with, in the case of Unregistered
Securities that have coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Company
shall so require, of the charges hereinafter provided. Registered Securities
of any series may not be exchanged for Unregistered Securities of such
series. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
All Registered Securities presented for registration of transfer,
exchange, redemption or payment shall be duly endorsed by, or be accompanied
by a written instrument or instruments of transfer in form satisfactory to
the Company and the Trustee duly executed by, the holder or his attorney duly
authorized in writing.
The Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange
or registration of transfer of Securities. No service charge shall be made
for any such transaction.
Notwithstanding any other provision of this Section 2.07, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Registered Global Security representing all or a portion
of the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or
by such Depositary or any such nominee to a successor Depositary for such
series or a nominee of such successor Depositary.
If at any time the Depositary for any Registered Global Securities of
any series notifies the Company that it is unwilling or unable to continue as
Depositary for such Registered Global Securities or if at any time the
Depositary for such Registered Global Securities shall no longer be eligible
under applicable law, the Company shall appoint a successor Depositary
eligible under applicable law with respect to such Registered Global
Securities. If a successor Depositary eligible under applicable law for such
Registered Global Securities is not appointed by the Company within 90 days
after the Company receives such notice or becomes
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aware of such ineligibility, the Company will execute, and the Trustee, upon
receipt of the Company's order for the authentication and delivery of
definitive Registered Securities of such series and tenor, will authenticate
and make available for delivery Registered Securities of such series and
tenor, in any authorized denominations, in an aggregate principal amount
equal to the principal amount of such Registered Global Securities, in
exchange for such Registered Global Securities.
The Company may at any time and in its sole discretion determine that
any Registered Global Securities of any series shall no longer be maintained
in global form. In such event, or in the event that there shall have occurred
and be continuing an Event of Default with respect to a series of Securities,
the Company will, upon the request of any Holder, execute, and the Trustee,
upon receipt of the Company's order for the authentication and delivery of
definitive Registered Securities of such series and tenor, will authenticate
and make available for delivery, Registered Securities of such series and
tenor in any authorized denominations, in an aggregate principal amount equal
to the principal amount of such Registered Global Securities, in exchange for
such Registered Global Securities.
Any time the Registered Securities of any series are not in the form of
Registered Global Securities pursuant to the preceding two paragraphs, the
Company agrees to supply the Trustee with a reasonable supply of certificated
Registered Securities without the legend required by Section 2.02 and the
Trustee agrees to hold such Registered Securities in safekeeping until
authenticated and delivered pursuant to the terms of this Indenture.
If established by the Company pursuant to Section 2.03 with respect to
any Registered Global Security, the Depositary for such Registered Global
Security may surrender such Registered Global Security in exchange in whole
or in part for Registered Securities of the same series and tenor in
definitive registered form on such terms as are acceptable to the Company and
such Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, without service charge,
(i) to the Person specified by such Depositary new Registered
Securities of the same series and tenor, of any authorized denominations
as requested by such Person, in an aggregate principal amount equal to
and in exchange for such Person's beneficial interest in the Registered
Global Security; and
(ii) to such Depositary a new Registered Global Security in a
denomination equal to the difference, if any, between the principal amount
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of the surrendered Registered Global Security and the aggregate principal
amount of Registered Securities authenticated and delivered pursuant to
clause (i) above.
Registered Securities issued in exchange for a Registered Global
Security pursuant to this Section 2.07 shall be registered in such names and
in such authorized denominations as the Depositary for such Registered Global
Security, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Trustee or an agent of the Company or the
Trustee. The Trustee or such agent shall deliver such Securities to or as
directed by the Persons in whose names such Securities are so registered.
All Securities issued upon any transfer or exchange of Securities shall
be valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Securities surrendered upon
such transfer or exchange.
Notwithstanding anything herein or in the forms or terms of any
Securities to the contrary, none of the Company, the Trustee or any agent of
the Company or the Trustee shall be required to exchange any Unregistered
Security for a Registered Security if such exchange would result in adverse
Federal income tax consequences to the Company (such as, for example, the
inability of the Company to deduct from its income, as computed for Federal
income tax purposes, the interest payable on the Unregistered Securities)
under then applicable United States Federal income tax laws. The Trustee and
any such agent shall be entitled to rely on an Officers' Certificate or an
Opinion of Counsel in determining such result.
Neither the Registrar nor the Company shall be required (i) to issue,
authenticate, register the transfer of or exchange Securities of any series
for a period of 15 days before a selection of such Securities to be redeemed
or (ii) to register the transfer of or exchange any Security selected for
redemption in whole or in part.
Section 2.08. Replacement Securities. If a defaced or mutilated
Security of any series is surrendered to the Trustee or if a Holder claims
that its Security of any series has been lost, destroyed or wrongfully taken,
the Company shall, subject to the further provisions of this Section 2.08,
issue and the Trustee shall authenticate a replacement Security of such
series and tenor and principal amount bearing a number not contemporaneously
outstanding. The Company may charge such Holder for any tax or other
governmental charge that may be imposed as a result of or in connection with
replacing a Security and for its expenses and the expenses of the Trustee
(including without limitation attorneys' fees and expenses)
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in replacing a Security. In case any such mutilated, defaced, lost, destroyed
or wrongfully taken Security has become or is about to become due and
payable, the Company in its discretion may pay such Security instead of
issuing a new Security in replacement thereof. If required by the Trustee or
the Company, (i) an indemnity bond must be furnished that is sufficient in
the judgment of both the Trustee and the Company to protect the Company, the
Trustee and any Agent from any loss that any of them may suffer if a Security
is replaced or paid as provided in this Section 2.08 and (ii) in the case of
lost, destroyed or wrongfully taken Security, evidence must be furnished to
the satisfaction of both the Trustee and the Company of the loss, destruction
or wrongful taking of such Security. Notwithstanding the foregoing, the
Company and the Trustee shall have no obligation to replace or pay a Security
pursuant to this Section 2.08 if either the Company or the Trustee has notice
that such Security has been acquired by a bona fide purchaser.
Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture equally and
proportionately with any and all other Securities of such series duly
authenticated and delivered hereunder.
To the extent permitted by law, the foregoing provisions of this Section
are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities.
Section 2.09. Outstanding Securities. Securities outstanding at any
time are all Securities that have been authenticated by the Trustee except
for those Securities canceled by it, those Securities delivered to it for
cancellation, those paid pursuant to Section 2.08 and those Securities
described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a holder in due
course.
If the Paying Agent (other than the Company or an affiliate of the
Company) holds on the maturity date or any redemption date or date for
repurchase of the Securities money sufficient to pay Securities payable or to
be redeemed or repurchased on such date, then on and after such date such
Securities shall cease to be outstanding and interest on them shall cease to
accrue.
A Security does not cease to be outstanding because the Company or one
of its affiliates holds such Security, provided, however, that, in
determining whether the Holders of the requisite principal amount of the
outstanding Securities
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shall have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any affiliate
of the Company shall be disregarded and deemed not to be outstanding, except
that, in determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or
waiver, only Securities as to which a Responsible Officer of the Trustee has
received written notice to be so owned shall be so disregarded. Any
Securities so owned which are pledged by the Company, or by any affiliate of
the Company, as security for loans or other obligations, otherwise than to
another such affiliate of the Company, shall be deemed to be outstanding, if
the pledgee is entitled pursuant to the terms of its pledge agreement and is
free to exercise in its discretion the right to vote such securities,
uncontrolled by the Company or by any such affiliate.
Section 2.10. Temporary Securities. Until definitive Securities of any
series are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities of such series. Temporary Securities of any
series shall be substantially in the form of definitive Securities of such
series but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary
Securities, as evidenced by their execution of such temporary Securities. If
temporary Securities of any series are issued, the Company will cause
definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of any series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series and tenor upon surrender of such temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any series the
Company shall execute and the Trustee shall authenticate and make available
for delivery in exchange therefor a like principal amount of definitive
Securities of such series and tenor and authorized denominations. Until so
exchanged, the temporary Securities of any series shall be entitled to the
same benefits under this Indenture as definitive Securities of such series.
Section 2.11. Cancellation. The Company at any time may deliver to the
Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar, any transfer agent and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee shall cancel all Securities surrendered for transfer, exchange,
payment or cancellation and shall deliver such canceled Securities to the
Company. The Company may not issue new Securities to replace Securities it
has paid in full or delivered to the Trustee for cancellation.
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Section 2.12. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee
shall use CUSIP numbers or CINS numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders and no representation
shall be made as to the correctness of such numbers either as printed on the
Securities or as contained in any notice of redemption or exchange.
Section 2.13. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, it shall pay, or shall deposit with the Paying
Agent money in immediately available funds sufficient to pay, the defaulted
interest plus (to the extent lawful) any interest payable on the defaulted
interest (as may be specified in the terms thereof, established pursuant to
Section 2.03) to the Persons who are Holders on a subsequent special record
date, which shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before such special record date, the Company
shall mail to each Holder and to the Trustee a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.
Section 2.14. Series May Include Tranches. A series of Securities may
include one or more tranches (each a "tranche") of Securities, including
Securities issued in a Periodic Offering. The Securities of different
tranches may have one or more different terms, including authentication dates
and public offering prices, but all the Securities within each such tranche
shall have identical terms, including authentication date and public offering
price. Notwithstanding any other provision of this Indenture, with respect to
Sections 2.02 (other than the fourth paragraph thereof) through 2.04, 2.07,
2.08, 2.10, 3.01 through 3.05, 4.02, 6.01 through 6.14, 8.01 through 8.05 and
9.02, if any series of Securities includes more than one tranche, all
provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of Securities in the
same manner as though originally designated a series unless otherwise
provided with respect to such series or tranche pursuant to Section 2.03. In
particular, and without limiting the scope of the next preceding sentence,
any of the provisions of such sections which provide for or permit action to
be taken with respect to a series of Securities shall also be deemed to
provide for and permit such action to be taken instead only with respect to
Securities of one or more tranches within that series (and such provisions
shall be deemed satisfied thereby), even if no comparable action is taken
with respect to Securities in the remaining tranches of that series.
Section 2.15. Computation of Interest. Except as otherwise specified
pursuant to Section 2.03 for Securities of any series, interest on the
Securities of
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each series shall be computed on the basis of a 360-day year of twelve 30-day
months.
ARTICLE 3
Redemption
Section 3.01. Applicability of Article. The provisions of this Article
shall be applicable to the Securities of any series which are redeemable
before their maturity or to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 2.03 for
Securities of such series.
Section 3.02. Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Registered Securities of any series to be
redeemed as a whole or in part at the option of the Company shall be given by
mailing notice of such redemption by first class mail, postage prepaid, at
least 30 days and not more than 60 days prior to the date fixed for
redemption to such Holders of Registered Securities of such series at their
last addresses as they shall appear upon the Security Register of the
Company. Notice of redemption to the Holders of Unregistered Securities of
any series to be redeemed as a whole or in part, who have filed their names
and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust
Indenture Act, shall be given by mailing notice of such redemption, by first
class mail, postage prepaid, at least 30 days and not more than 60 days prior
to the date fixed for redemption, to such Holders at such addresses as were
so furnished to the Trustee (and, in the case of any such notice given by the
Company, the Trustee shall make such information available to the Company for
such purpose). Notice of redemption to all other Holders of Unregistered
Securities of any series to be redeemed as a whole or in part shall be
published in an Authorized Newspaper, once in each of three successive
calendar weeks, the first publication to be not less than 30 days nor more
than 60 days prior to the date fixed for redemption. Any notice which is
mailed or published in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives the
notice. Failure to give notice by mail, or any defect in the notice to the
Holder of any Security of a series designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of
any other Security of such series.
The notice of redemption to each such Holder shall specify the principal
amount of each Security of such series held by such Holder to be redeemed,
the CUSIP and CINS numbers of the Securities to be redeemed, the date fixed
for redemption, the redemption price, the place or places of payment, that
payment will be made upon presentation and surrender of such Securities and,
in the case of
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Securities with coupons attached thereto, of all coupons appertaining thereto
maturing after the date fixed for redemption, that such redemption is
pursuant to the mandatory or optional sinking fund, or both, if such be the
case, that interest accrued to the date fixed for redemption will be paid as
specified in such notice and that on and after said date interest thereon or
on the portions thereof to be redeemed will cease to accrue. In case any
Security of a series is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and
shall state that on and after the date fixed for redemption, upon surrender
of such Security, a new Security or Securities of such series and tenor in
principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at
the option of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
On or before 10:00 a.m. New York City time on the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more Paying Agents (or,
if the Company is acting as its own Paying Agent, set aside, segregate and
hold in trust as provided in Section 2.06) an amount of money sufficient to
redeem on the redemption date all the Securities of such series so called for
redemption at the appropriate redemption price, together with accrued
interest to the date fixed for redemption. If all of the outstanding
Securities of a series are to be redeemed, the Company will deliver to the
Trustee at least 10 days prior to the last date on which notice of redemption
may be given to Holders pursuant to the first paragraph of this Section 3.02
(or such shorter period as shall be acceptable to the Trustee) an Officers'
Certificate stating that all such Securities are to be redeemed. If less than
all the outstanding Securities of a series are to be redeemed, the Company
will deliver to the Trustee at least 15 days prior to the last date on which
notice of redemption may be given to Holders pursuant to the first paragraph
of this Section 3.02 (or such shorter period as shall be acceptable to the
Trustee) an Officers' Certificate stating the aggregate principal amount of
such Securities to be redeemed. In case of a redemption at the election of
the Company prior to the expiration of any restriction on such redemption,
the Company shall deliver to the Trustee, prior to the giving of any notice
of redemption to Holders pursuant to this Section, an Officers' Certificate
stating that such redemption is not prohibited by such restriction.
If less than all the Securities of a series are to be redeemed, the
Trustee shall select, pro rata, by lot or in such manner as it shall deem
appropriate and fair, Securities of such series to be redeemed in whole or in
part. Securities may be redeemed in part in multiples equal to the minimum
authorized denomination for
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Securities of such series or any multiple thereof. The Trustee shall promptly
notify the Company in writing of the Securities of such series selected for
redemption and, in the case of any Securities of such series selected for
partial redemption, the principal amount thereof to be redeemed. For all
purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case
of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
Section 3.03. Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date
and at the place stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after such date (unless the Company shall default in the payment of such
Securities at the redemption price, together with interest accrued to such
date) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue, and the unmatured coupons, if any,
appertaining thereto shall be void and, except as provided in Sections 7.11
and 8.04, such Securities shall cease from and after the date fixed for
redemption to be entitled to any benefit under this Indenture, and the
Holders thereof shall have no right in respect of such Securities except the
right to receive the redemption price thereof and unpaid interest to the date
fixed for redemption. On presentation and surrender of such Securities at a
place of payment specified in said notice, together with all coupons, if any,
appertaining thereto maturing after the date fixed for redemption, said
Securities or the specified portions thereof shall be paid and redeemed by
the Company at the applicable redemption price, together with interest
accrued thereon to the date fixed for redemption; provided that payment of
interest becoming due on or prior to the date fixed for redemption shall be
payable in the case of Securities with coupons attached thereto, to the
Holders of the coupons for such interest upon surrender thereof, and in the
case of Registered Securities, to the Holders of such Registered Securities
registered as such on the relevant record date subject to the terms and
provisions of Sections 2.04 and 2.13 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the Principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate of
interest borne by such Security.
If any Security with coupons attached thereto is surrendered for
redemption and is not accompanied by all appurtenant coupons maturing after
the date fixed for redemption, the surrender of such missing coupon or
coupons may
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be waived by the Company and the Trustee, if there be furnished to each of
them such security or indemnity as they may require to save each of them
harmless.
Upon presentation of any Security of any series redeemed in part only,
the Company shall execute and the Trustee shall authenticate and make
available for delivery to or on the order of the Holder thereof, at the
expense of the Company, a new Security or Securities of such series and tenor
(with any unmatured coupons attached), of authorized denominations, in
principal amount equal to the unredeemed portion of the Security so presented.
Section 3.04. Exclusion of Certain Securities from Eligibility for
Selection for Redemption. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and
certificate number in a written statement signed by an Officer of the Company
and delivered to the Trustee at least 40 days prior to the last date on which
notice of redemption may be given as being owned of record and beneficially
by, and not pledged or hypothecated by either (a) the Company or (b) an
entity specifically identified in such written statement as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company.
Section 3.05. Mandatory and Optional Sinking Funds. The minimum amount
of any sinking fund payment provided for by the terms of the Securities of
any series is herein referred to as a "mandatory sinking fund payment," and
any payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment." The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date."
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Company may at its
option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except through a mandatory sinking fund
payment) by the Company or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except
as aforesaid) by the Company and delivered to the Trustee for cancellation
pursuant to Section 2.11, (b) receive credit for optional sinking fund
payments (not previously so credited) made pursuant to this Section, or (c)
receive credit for Securities of such series (not previously so credited)
redeemed by the Company through any optional sinking fund payment. Securities
so delivered or credited shall be received or credited by the Trustee at the
sinking fund redemption price specified in such Securities.
On or before the sixtieth day next preceding each sinking fund payment
date for any series, or such shorter period as shall be acceptable to the
Trustee, the
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Company will deliver to the Trustee an Officers' Certificate (a) specifying
the portion of the mandatory sinking fund payment to be satisfied by payment
of cash and the portion to be satisfied by credit of specified Securities of
such series and the basis for such credit, (b) stating that none of the
specified Securities of such series has theretofore been so credited, (c)
stating that no defaults in the payment of interest or Events of Default with
respect to such series have occurred (which have not been waived or cured)
and are continuing and (d) stating whether or not the Company intends to
exercise its right to make an optional sinking fund payment with respect to
such series and, if so, specifying the amount of such optional sinking fund
payment which the Company intends to pay on or before the next succeeding
sinking fund payment date. Any Securities of such series to be credited and
required to be delivered to the Trustee in order for the Company to be
entitled to credit therefor as aforesaid which have not theretofore been
delivered to the Trustee shall be delivered for cancellation pursuant to
Section 2.11 to the Trustee with such Officers' Certificate (or reasonably
promptly thereafter if acceptable to the Trustee). Such Officers' Certificate
shall be irrevocable and upon its receipt by the Trustee the Company shall
become unconditionally obligated to make all the cash payments or delivery of
Securities therein referred to, if any, on or before the next succeeding
sinking fund payment date. Failure of the Company, on or before any such
sixtieth day, to deliver such Officer's Certificate and Securities specified
in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Company
(i) that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without
the option to deliver or credit Securities of such series in respect thereof
and (ii) that the Company will make no optional sinking fund payment with
respect to such series as provided in this Section.
If the sinking fund payment or payments (mandatory or optional or both)
to be made in cash on the next succeeding sinking fund payment date plus any
unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 (or a lesser sum if the Company shall so request with respect
to the Securities of any series), such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price thereof together with accrued
interest thereon to the date fixed for redemption. If such amount shall be
$50,000 (or such lesser sum) and the Company makes no such request then it
shall be carried over until a sum in excess of $50,000 (or such lesser sum)
is available. The Trustee shall select, in the manner provided in Section
3.02, for redemption on such sinking fund payment date a sufficient principal
amount of Securities of such series to absorb said cash, as nearly as may be,
and shall (if requested in writing by the Company) inform the Company of the
serial numbers of the Securities of such series (or portions thereof) so
selected. Securities shall be excluded from eligibility for redemption
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under this Section if they are identified by registration and certificate
number in an Officers' Certificate delivered to the Trustee at least 60 days
prior to the sinking fund payment date as being owned of record and
beneficially by, and not pledged or hypothecated by either (a) the Company or
(b) an entity specifically identified in such Officers' Certificate as
directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company. The Trustee, in the name and at the
expense of the Company (or the Company, if it shall so request the Trustee in
writing) shall cause notice of redemption of the Securities of such series to
be given in substantially the manner provided in Section 3.02 (and with the
effect provided in Section 3.03) for the redemption of Securities of such
series in part at the option of the Company. The amount of any sinking fund
payments not so applied or allocated to the redemption of Securities of such
series shall be added to the next cash sinking fund payment for such series
and, together with such payment, shall be applied in accordance with the
provisions of this Section. Any and all sinking fund moneys held on the
stated maturity date of the Securities of any particular series (or earlier,
if such maturity is accelerated), which are not held for the payment or
redemption of particular Securities of such series shall be applied, together
with other moneys, if necessary, sufficient for the purpose, to the payment
of the Principal of, and interest on, the Securities of such series at
maturity.
On or before 10:00 a.m. New York City time on each sinking fund payment
date, the Company shall pay to the Trustee in cash or shall otherwise provide
for the payment of all interest accrued to the date fixed for redemption on
Securities to be redeemed on the next following sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of a
series with sinking fund moneys or mail any notice of redemption of
Securities of such series by operation of the sinking fund during the
continuance of a Default in payment of interest on such Securities or of any
Event of Default except that, where the mailing of notice of redemption of
any Securities shall theretofore have been made, the Trustee shall redeem or
cause to be redeemed such Securities, provided that it shall have received
from the Company a sum sufficient for such redemption. Except as aforesaid,
any moneys in the sinking fund for such series at the time when any such
Default or Event of Default shall occur, and any moneys thereafter paid into
the sinking fund, shall, during the continuance of such Default or Event of
Default, be deemed to have been collected under Article 6 and held for the
payment of all such Securities. In case such Event of Default shall have been
waived as provided in Section 6.04 or the Default cured on or before the
sixtieth day preceding the sinking fund payment date in any year, such moneys
shall thereafter be applied on the next succeeding sinking fund payment date
in accordance with this Section to the redemption of such Securities.
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ARTICLE 4
Covenants
Section 4.01. Payment of Securities. The Company shall pay the
Principal of and interest on the Securities on the dates and in the manner
provided in the Securities and this Indenture. The interest on Securities
with coupons attached (together with any additional amounts payable pursuant
to the terms of such Securities) shall be payable only upon presentation and
surrender of the several coupons for such interest installments as are
evidenced thereby as they severally mature. The interest on any temporary
Unregistered Securities (together with any additional amounts payable
pursuant to the terms of such Securities) shall be paid, as to the
installments of interest evidenced by coupons attached thereto, if any, only
upon presentation and surrender thereof, and, as to the other installments of
interest, if any, only upon presentation of such Unregistered Securities for
notation thereon of the payment of such interest. The interest on Registered
Securities (together with any additional amounts payable pursuant to the
terms of such Securities) shall be payable only to the Holders thereof and at
the option of the Company may be paid by mailing checks for such interest
payable to or upon the written order of such Holders at their last addresses
as they appear on the Security Register of the Company.
Notwithstanding any provisions of this Indenture and the Securities of
any series to the contrary, if the Company and a Holder of any Registered
Security so agree or if expressly provided pursuant to Section 2.03, payments
of interest on, and any portion of the Principal of, such Holder's Registered
Security (other than interest payable at maturity or on any redemption or
repayment date or the final payment of Principal on such Security) shall be
made by the Paying Agent, upon receipt from the Company of immediately
available funds by 11:00 a.m., New York City time (or such other time as may
be agreed to between the Company and the Paying Agent), directly to the
Holder of such Security (by Federal funds wire transfer or otherwise) if the
Holder has delivered written instructions to the Trustee 15 days prior to
such payment date requesting that such payment will be so made and
designating the bank account to which such payments shall be so made and in
the case of payments of Principal surrenders the same to the Trustee in
exchange for a Security or Securities aggregating the same principal amount
as the unredeemed principal amount of the Securities surrendered. The Trustee
shall be entitled to rely on the last instruction delivered by the Holder
pursuant to this Section 4.01 unless a new instruction is delivered 15 days
prior to a payment date. The Company will indemnify and hold each of the
Trustee and any Paying Agent harmless against any loss, liability or expense
(including attorneys' fees) resulting from any act or omission to act on the
part of the Company or any such Holder in connection with any such agreement
or from making any payment in accordance with any such agreement.
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The Company shall pay interest on overdue Principal, and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
specified in the Securities.
Section 4.02. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or
agency where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company hereby initially
designates the Corporate Trust Office of the Trustee, located in the Borough
of Manhattan, The City of New York, as such office or agency of the Company.
The Company will 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
Company 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 address of the
Trustee set forth in Section 10.02.
The Company will maintain one or more agencies in a city or cities
located outside the United States (including any city in which such an agency
is required to be maintained under the rules of any stock exchange on which
the Securities of any series are listed) where the Unregistered Securities,
if any, of each series and coupons, if any, appertaining thereto may be
presented for payment. No payment on any Unregistered Security or coupon will
be made upon presentation of such Unregistered Security or coupon at an
agency of the Company within the United States nor will any payment be made
by transfer to an account in, or by mail to an address in, the United States
unless, pursuant to applicable United States laws and regulations then in
effect, such payment can be made without adverse tax consequences to the
Company. Notwithstanding the foregoing, if full payment in United States
Dollars ("Dollars") at each agency maintained by the Company outside the
United States for payment on such Unregistered Securities or coupons
appertaining thereto is illegal or effectively precluded by exchange controls
or other similar restrictions, payments in Dollars of Unregistered Securities
of any series and coupons appertaining thereto which are payable in Dollars
may be made at an agency of the Company maintained in the Borough of
Manhattan, The City of New York.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of any series may be presented or
surrendered for any or all such purposes and may from time to time rescind
such designations; provided that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York for such purposes.
The Company will 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.
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Section 4.03. Certificate to Trustee. The Company will furnish to the
Trustee annually, on or before a date not more than ninety days after the end
of its fiscal year (which, on the date hereof, is a calendar year), a brief
certificate (which need not contain the statements required by Section 10.04)
from its principal executive, financial or accounting officer as to his or
her knowledge of the compliance of the Company with all conditions and
covenants under this Indenture (such compliance to be determined without
regard to any period of grace or requirement of notice provided under this
Indenture) which certificate shall comply with the requirements of the Trust
Indenture Act.
Section 4.04. Reports by the Company. The Company covenants to file
with the Trustee, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the
information, documents and other reports which the Company may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act. 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 Company's
compliance with any of the covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE 5
Successor Corporation
Section 5.01. When Company May Merge, Etc. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as
an entirety or substantially as an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation with or
merger with or into or a sale, conveyance, transfer, lease or other
disposition to a Wholly-Owned Restricted Subsidiary with a positive net
worth; provided that, in connection with any such merger of the Company with
a Wholly-Owned Restricted Subsidiary, no consideration (other than common
stock) in the surviving person or the Company) shall be issued or distributed
to the stockholders of the Company) or permit any Person to merge with or
into the Company (subject to such exceptions as may be established pursuant
to Section 2.03 with respect to the Securities of all series then
Outstanding) unless:
(i) either (x) the Company shall be the continuing Person or (y) the
Person (if other than the Company) formed by such consolidation or
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into which the Company is merged or that acquired or leased such property
and assets of the Company shall be a corporation organized and validly
existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the obligations
of the Company on all of the Securities and under this Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Company delivers to the Trustee an Officers' Certificate
and Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this
Section 5.01 and that all conditions precedent provided for herein
relating to such transaction have been complied with; and
(iv) such other conditions as may be established pursuant to Section
2.03 with respect to the Securities of any series then Outstanding.
provided, however, that the foregoing limitations shall not apply if, in the
good faith determination of the board of directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the state of incorporation of the Company;
and provided further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
Section 5.02. Successor Substituted. Upon any consolidation or merger,
or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance
with Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein.
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ARTICLE 6
Default and Remedies
Section 6.01. Events of Default. An "Event of Default" shall occur with
respect to the Securities of any series if:
(a) the Company defaults in the payment of all or any part of the
Principal of (or premium if any, on) any Security of such series when the
same becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, including as a sinking fund installment, or
otherwise;
(b) the Company defaults in the payment of any interest on any
Security of such series when the same becomes due and payable, and such
default continues for a period of 30 days;
(c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture with respect to any
Security of such series or in the Securities of such series and such
default or breach continues for a period of 30 consecutive days after
written notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by the Holders of 25% or more in aggregate
principal amount of the Securities of such series;
(d) there occurs with respect to any issue or issues of indebtedness
of the Company or any of its Subsidiaries (other than any Security of such
series) having an outstanding principal amount of $50,000,000 or more in
the aggregate for all such issues of all such persons, whether such
indebtedness exists at the date of this Indenture or shall hereafter be
created (A) an event of default, as defined in any such indebtedness, that
has caused the holder thereof to declare such indebtedness to be due and
payable prior to its stated maturity and/or (B) the failure to make a
principal payment at final (but not any interim) fixed maturity;
(e) any court, administrative panel, commission or similar entity
shall render any final judgment or order (not covered by insurance) for
the payment of money in excess of $50,000,000 in the aggregate for all
such final judgments or orders (treating any deductibles, self-insurance,
or retention as not so covered) against the Company or any of its
Subsidiaries and such judgment or order shall not be paid or discharged,
and there shall be any period of 60 consecutive days following entry of
the final judgment or order that causes the aggregate amount for all such
final judgements or
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orders outstanding and not paid or discharged against all such Persons to
exceed $50,000,000 during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect;
(f) a court having jurisdiction enters a decree or order for (A)
relief in respect of the Company or any of its Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency, or other
similar law in effect as of the date of this Indenture or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official of the Company or any of its
Subsidiaries or for all or substantially all of the property and assets of
the Company or any of its Subsidiaries or (C) the winding up or
liquidation of the affairs of the Company or any of its Subsidiaries and,
in each case, such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days;
(g) the Company or any of its Subsidiaries (A) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any of its
Subsidiaries or for all or substantially all of the property and assets of
the Company or any of its Subsidiaries or (C) effects any general
assignment for the benefit of creditors; or
(h) any other Event of Default established pursuant to Section 2.03
with respect to the Securities of such series occurs.
Section 6.02. Acceleration. If an Event of Default (other than an Event
of Default specified in clause (f) or (g) of Section 6.01 with respect to the
Company) occurs with respect to the Securities of any series then outstanding
and is continuing, then, and in each and every such case, except for any
series of Securities the Principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of any such affected series then
outstanding hereunder (each such series treated as a separate class) by
notice in writing to the Company (and to the Trustee if given by
Securityholders), may, and the Trustee at the request of such Holders shall,
declare the entire principal amount of all Securities of such affected
series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable.
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(b) If an Event of Default described in clauses (f) or (g) of Section
6.01 with respect to the Company occurs and is continuing, then the principal
amount of all the Securities then outstanding and interest accrued thereon,
if any, shall be and become immediately due and payable, without any notice
or other action by any Holder or the Trustee, to the full extent permitted by
applicable law.
The foregoing provisions, however, are subject to the condition that if,
at any time after the principal amount of the Securities of any series (or of
all the Securities, as the case may be) shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company
shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Securities of each such series
(or of all the Securities, as the case may be) and the Principal of any and
all Securities of each such series (or of all the Securities, as the case may
be) which shall have become due otherwise than by acceleration (with interest
upon such Principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Securities of each such
series to the date of such payment or deposit) and such amount as shall be
sufficient to cover all amounts owing the Trustee under Section 7.07, and if
any and all Events of Default under the Indenture, other than the non-payment
of the Principal of Securities which shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided herein, then
and in every such case the Holders of a majority in aggregate principal
amount of all the then outstanding Securities of all such series that have
been accelerated (each such series voting as a separate class), by written
notice to the Company and to the Trustee, may waive all defaults with respect
to such series (or with respect to all the Securities, as the case may be)
and rescind and annul such declaration and its consequences, but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
Section 6.03. Other Remedies. If a payment default or an Event of
Default with respect to the Securities of any series occurs and is
continuing, the Trustee may pursue, in its own name or as trustee of an
express trust, any available remedy by proceeding at law or in equity to
collect the payment of Principal of and interest on the Securities of such
series or to enforce the performance of any provision of the Securities of
such series or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding.
Section 6.04. Waiver of past Defaults. Subject to Sections 6.02, 6.07
and 9.02, the Holders of at least a majority in principal amount of the
outstanding
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Securities of any series affected (each series voting as a separate class),
by notice to the Trustee, may waive an existing Default or Event of Default
with respect to the Securities of such series and its consequences, except a
Default in the payment of Principal of or interest on any Security as
specified in clauses (a) or (b) of Section 6.01 or in respect of a covenant
or provision of this Indenture which cannot be modified or amended without
the consent of the Holder of each outstanding Security affected. This
Section 6.04 shall be in lieu of Trust Indenture Act Section 316(a)(1)(B),
and such Section 316(a)(1)(B) is hereby expressly excluded from this
Indenture and the Securities, as permitted by the Trust Indenture Act. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
with respect to the Securities of such series 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 Event of Default or
impair any right consequent thereto.
Section 6.05. Control by Majority. Subject to Sections 7.01 and
7.02(v), the Holders of at least a majority in aggregate principal amount of
the outstanding Securities of each series affected (each series voting as a
separate class) may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Securities of such series
by this Indenture; provided, that the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders of Securities of such
series not joining in the giving of such direction or to the Holders of the
Securities of any other series; and provided further, that the Trustee may
take any other action it deems proper that is not inconsistent with any
directions received from Holders of Securities pursuant to this Section 6.05.
This Section 6.05 shall be in lieu of Trust Indenture Act Section
316(a)(1)(A) and such Section 316(a)(1)(A) is hereby expressly excluded from
this Indenture and the Securities, as permitted by the Trust Indenture Act.
Section 6.06. Limitation on Suits. No Holder of any Security of any
series may institute any proceeding, judicial or otherwise, with respect to
this Indenture or the Securities of such series, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given to the Trustee written notice
of a continuing Event of Default with respect to the Securities of such
series;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Securities of such series shall have made written request to
the
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Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liabilities or
expenses to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities of such series
have not given the Trustee a direction that is inconsistent with such
written request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
Section 6.07. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Security to
receive payment of Principal of or interest, if any, on such Holder's
Security on or after the respective due dates expressed on such Security, 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.
Section 6.08. Collection Suit by Trustee. If an Event of Default with
respect to the Securities of any series in payment of Principal or interest
specified in clause (a) or (b) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount of Principal of, and accrued
interest remaining unpaid on, together with interest on overdue Principal of,
and, to the extent that payment of such interest is lawful, interest on
overdue installments of interest on, the Securities of such series, in each
case at the rate specified in such Securities, and such further amount as
shall be sufficient to cover all amounts owing the Trustee under Section 7.07.
Section 6.09. Trustee May File Proofs of Claim The Trustee may 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
amounts due the Trustee under Section 7.07) and the Holders allowed in any
judicial proceedings relative to the Company (or any other obligor on the
Securities), its creditors or its property and shall be entitled and
empowered to collect and receive any moneys, securities or other property
payable or deliverable
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upon conversion or exchange of the Securities or upon any such claims and to
distribute the same, and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official 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 under Section 7.07. Nothing herein contained shall be deemed to empower
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 Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the
Holders, vote for the election of a trustee in bankruptcy or similar official.
Section 6.10. Application of Proceeds. Any moneys collected by the
Trustee pursuant to this Article in respect of the Securities of any series
shall be applied in the following order at the date or dates fixed by the
Trustee and, in case of the distribution of such moneys on account of
Principal or interest, upon presentation of the several Securities and
coupons appertaining to such Securities in respect of which moneys have been
collected and noting thereon the payment, or issuing Securities of such
series and tenor in reduced principal amounts in exchange for the presented
Securities of such series and tenor if only partially paid, or upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 7.07;
SECOND: In case the Principal of the Securities of such series
in respect of which moneys have been collected shall not have become
and be then due and payable, to the payment of interest on the
Securities of such series in default in the order of the maturity of
the installments of such interest, with interest (to the extent that
such interest has been collected by the Trustee) upon the overdue
installments of interest at the same rate as the rate of interest
specified in such Securities, such payments to be made ratably to the
persons entitled thereto, without discrimination or preference;
THIRD: In case the Principal of the Securities of such series in
respect of which moneys have been collected shall have become and
shall be then due and payable, to the payment of the whole amount
then owing and unpaid upon all the Securities of such series for
Principal and interest, with interest upon the overdue Principal,
and (to the extent that such interest has been collected by the
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Trustee) upon overdue installments of interest at the same rate as
the rate of interest specified in the Securities of such series; and
in case such moneys shall be insufficient to pay in full the whole
amount so due and unpaid upon the Securities of such series, then to
the payment of such Principal and interest, without preference or
priority of Principal over interest, or of interest over Principal,
or of any installment of interest over any other installment of
interest, or of any Security of such series over any other Security
of such series, ratably to the aggregate of such Principal and
accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Company
or any other person lawfully entitled thereto.
Section 6.11. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder,
then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored to
their former positions hereunder and thereafter all rights and remedies of
the Company, Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 6.12. 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 Trustee, in either case in respect
to the Securities of any series, a court may require any party litigant in
such suit (other than the Trustee) to file an undertaking to pay the costs of
the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant (other than the
Trustee) in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.12 does not
apply to a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the outstanding Securities of such
series.
Section 6.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Securities in Section 2.08, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not
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prevent the concurrent assertion or employment of any other appropriate right
or remedy.
Section 6.14. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right
and remedy given by this Article 6 or by law to the Trustee or to the Holders
may be exercised from time to time, and as often as may be deemed expedient,
by the Trustee or by the Holders, as the case may be.
ARTICLE 7
Trustee
Section 7.01. General. The duties and responsibilities of the Trustee
shall be as provided by the Trust Indenture Act and as set forth herein.
Notwithstanding the foregoing, no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, unless it receives indemnity
satisfactory to it against any loss, liability or expense. Whether or not
therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article 7.
Section 7.02. Certain Rights of Trustee. Subject to Trust Indenture Act
Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any Officers' Certificate, Opinion of Counsel
(or both), resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed or presented by the proper
person or persons. The Trustee need not investigate any fact or matter
stated in the document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see
fit;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and/or an Opinion of Counsel, which shall conform
to Section 10.04. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on such certificate or opinion.
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Whenever in the administration of the trusts of this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering or omitting to take any action
hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad
faith on the part of the Trustee, be deemed to be conclusively proved
and established by an Officers' Certificate delivered to the Trustee,
and such certificate, in the absence of negligence or bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action
taken, suffered or omitted to be taken by it under the provisions of
this Indenture upon the faith thereof;
(iii) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the misconduct
or negligence of any agent or attorney appointed with due care;
(iv) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any Board Resolution may be evidenced to
the Trustee by a copy thereof certified by the secretary or an assistant
secretary of the Company;
(v) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request,
order 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, order or direction;
(vi) 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
its rights or powers or for any action it takes or omits to take in
accordance with the direction of the Holders in accordance with Section
6.05 relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture;
(vii) the Trustee may consult with counsel of its selection and
the written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted to be taken by it hereunder in good faith and
in reliance thereon; and
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(viii) prior to the occurrence of an Event of Default hereunder
and after the curing or waiving of all Events of Default, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, Officers' Certificate, Opinion of
Counsel, Board Resolution, statement, instrument, opinion, report,
notice, request, consent, order, approval, appraisal, bond, debenture,
note, coupon, security, or other paper or document unless requested in
writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities of all series affected then
outstanding; provided that, if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, the Trustee may require reasonable
indemnity against such expenses or liabilities as a condition to
proceeding.
Section 7.03. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to Trust Indenture Act
Sections 310(b) and 311. For purposes of Trust Indenture Act Section
311(b)(4) and (6), the following terms shall mean:
(a) "cash transaction" means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the
goods or securities in currency or in checks or other orders drawn upon banks
or bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured
by documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale of
the goods, wares or merchandise previously constituting the security,
provided the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from the
making, drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
Section 7.04. Trustee's Disclaimer. The recitals contained herein and
in the Securities (except the Trustee's certificate of authentication) shall
be taken as statements of the Company and not of the Trustee and the Trustee
assumes no
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responsibility for the correctness of the same. Neither the Trustee nor any
of its agents (i) makes any representation as to the validity or adequacy of
this Indenture or the Securities and (ii) shall be accountable for the
Company's use or application of the proceeds from the Securities.
Section 7.05. Notice of Default. If any Default with respect to the
Securities of any series occurs and is continuing and if such Default is
known to the actual knowledge of a Responsible Officer with the corporate
trust department of the Trustee, the Trustee shall give to each Holder of
Securities of such series notice of such Default within 90 days after it
occurs (i) if any Unregistered Securities of such series are then
outstanding, to the Holders thereof, by publication at least once in an
Authorized Newspaper and (ii) to all Holders of Securities of such series in
the manner and to the extent provided in Section 313(c) of the Trust
Indenture Act, unless such Default shall have been cured or waived before the
mailing or publication of such notice; provided, however, that, except in the
case of a Default in the payment of the Principal of or interest on any
Security, the Trustee shall be protected in withholding such notice if the
Trustee in good faith determines that the withholding of such notice is in
the interests of the Holders.
Section 7.06. Reports by Trustee to Holders. Within 120 days after the
close of the fiscal year ending December 31, 1997, and within 120 days after
the close of each fiscal year thereafter, the Trustee shall mail to each
Holder as and to the extent provided in Trust Indenture Act Section 313(c) a
brief report dated as of the close of such fiscal year, if required by Trust
Indenture Act Section 313(a).
Section 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing from time to
time for its services. The compensation of the Trustee shall not be limited
by any law on compensation of a Trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by it (including the
reasonable compensation and expenses of its agents, counsel and other persons
not regularly in its employ) except to the extent any such expense,
disbursement or advance may arise from its negligence or bad faith.
The Company shall indemnify the Trustee for, and hold it harmless
against, any and all loss, damage, claim or liability or expense including
taxes (other than taxes based on the income of the Trustee) incurred by it
without negligence or bad faith on its part arising out of or in connection
with the acceptance or administration of this Indenture and the Securities or
the issuance of the Securities or a series thereof or the trusts hereunder
and the performance of its duties under this Indenture and the Securities,
including the costs and expenses of defending
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itself against or investigating any claim or liability and of complying with
any process served upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties under this Indenture
and the Securities.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay Principal of, and interest on particular
Securities.
The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder and shall survive
the satisfaction and discharge of this Indenture or the rejection or
termination of this Indenture under bankruptcy law. Such additional
indebtedness shall be a senior claim to that of the Securities upon all
property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Securities or
coupons, and the Securities are hereby subordinated to such senior claim. If
the Trustee renders services and incurs expenses following an Event of
Default under Section 6.01(f) or Section 6.01(g) hereof, the parties hereto
and the Holders by their acceptance of the Securities hereby agree that such
expenses are intended to constitute expenses of administration under any
bankruptcy law.
Section 7.08. Replacement of Trustee. A resignation or removal of the
Trustee as Trustee with respect to the Securities of any series and
appointment of a successor Trustee as Trustee with respect to the Securities
of any series shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign as Trustee with respect to the Securities of any
series at any time by so notifying the Company in writing. The Holders of a
majority in principal amount of the outstanding Securities of any series may
remove the Trustee as Trustee with respect to the Securities of such series
by so notifying the Trustee and the Company in writing and may appoint a
successor Trustee with respect thereto with the consent of the Company. The
Company may remove the Trustee as Trustee with respect to the Securities of
any series if: (i) the Trustee is no longer eligible under Section 7.11 of
this Indenture; (ii) the Trustee is adjudged a bankrupt or insolvent; (iii) a
receiver or other public officer takes charge of the Trustee or its property;
or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed as Trustee with respect to the
Securities of any series, or if a vacancy exists in the office of Trustee
with respect
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to the Securities of any series for any reason, the Company shall promptly
appoint a successor Trustee with respect thereto. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount
of the outstanding Securities of such series may appoint a successor Trustee
in respect of such Securities to replace the successor Trustee appointed by
the Company. If the successor Trustee with respect to the Securities of any
series does not deliver its written acceptance required by the next
succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Securities of
such series may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect thereto.
A successor Trustee with respect to the Securities of any series shall
deliver a written acceptance of its appointment to the retiring Trustee and
to the Company. Immediately after the delivery of such written acceptance,
subject to the lien provided for in Section 7.07, (i) the retiring Trustee
shall transfer all property held by it as Trustee in respect of the
Securities of such series to the successor Trustee, (ii) the resignation or
removal of the retiring Trustee in respect of the Securities of such series
shall become effective and (iii) the successor Trustee shall have all the
rights, powers and duties of the Trustee in respect of the Securities of such
series under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder of Securities of such series.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in the preceding paragraph.
The Company shall give notice of any resignation and any removal of the
Trustee with respect to the Securities of any series and each appointment of
a successor Trustee in respect of the Securities of such series to all
Holders of Securities of such series. Each notice shall include the name of
the successor Trustee and the address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee with respect to the
Securities of any series pursuant to this Section 7.08, the Company's
obligations under Section 7.07 shall continue for the benefit of the retiring
Trustee.
Section 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national
banking association, the resulting, surviving or transferee corporation or
national banking association without any further act shall be the successor
Trustee with the same effect as if the
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successor Trustee had been named as the Trustee herein; provided that such
successor Trustee shall be otherwise qualified and eligible under this
Article 7.
Section 7.10. Eligibility. This Indenture shall always have a Trustee
who satisfies the requirements of Trust Indenture Act Section 310(a). The
Trustee shall have a combined capital and surplus of at least $10,000,000 as
set forth in its most recent published annual report of condition. The
Trustee shall comply with Trust Indenture Act Section 310(b). If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately as Trustee with respect to the Securities of such series in the
manner and with the effect specified in this Article.
Section 7.11. Money Held in Trust. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree in
writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except
for money held in trust under Article 8 of this Indenture.
ARTICLE 8
Discharge of Indenture
Section 8.01. Defeasance Within One Year of Payment. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities of any series and this Indenture with
respect to Securities of such series if:
(i) all Securities of such series previously authenticated and
delivered (other than destroyed, lost or wrongfully taken Securities of
such series that have been replaced or Securities of such series that
are paid pursuant to Section 4.01 or Securities of such series for whose
payment money or securities have theretofore been held in trust and
thereafter repaid to the Company, as provided in Section 8.05) have been
delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder; or
(ii) (A) the Securities of such series mature within one year or
all of them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of
redemption, (B) the Company irrevocably deposits in trust with the
Trustee, as trust funds solely for the benefit of the Holders of such
Securities for that purpose, money or U.S. Government Obligations or a
combination thereof sufficient
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(unless such funds consist solely of money, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee), without
consideration of any reinvestment, to pay Principal of and interest on
the Securities of such series to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder, and (C) the
Company delivers to the Trustee an Officers' Certificate and an Opinion
of Counsel, in each case stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of this Indenture
with respect to the Securities of such series have been complied with.
With respect to the foregoing clause (i), only the Company's obligations
under Sections 7.07 and 8.05 in respect of the Securities of such series
shall survive. With respect to the foregoing clause (ii), only the Company's
obligations in Sections 2.02 through 2.12, 4.02, 7.07, 7.08 and 8.05 in
respect of the Securities of such series shall survive until such Securities
of such series are no longer outstanding. Thereafter, only the Company's
obligations in Sections 7.07 and 8.05 in respect of the Securities of such
series shall survive. After any such irrevocable deposit, the Trustee shall
acknowledge in writing the discharge of the Company's obligations under the
Securities of such series and this Indenture with respect to the Securities
of such series except for those surviving obligations specified above.
Section 8.02. Defeasance. Except as provided below, the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Securities of any series and the provisions of this Indenture
will no longer be in effect with respect to the Securities of such series
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same); provided that the following conditions
shall have been satisfied:
(i) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the
Securities of such series, for payment of the Principal of and interest
on the Securities of such series, money or U.S. Government Obligations
or a combination thereof sufficient (unless such funds consist solely of
money, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee) without consideration of any reinvestment and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, to pay and
discharge the Principal of and accrued interest on the outstanding
Securities of such series to maturity or earlier redemption (irrevocably
provided for under arrangements satisfactory to the Trustee), as the
case may be;
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(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a party or by which it
is bound;
(iii) no Default or Event of Default with respect to the
Securities of such series shall have occurred and be continuing on the
date of such deposit;
(iv) the Company shall have delivered to the Trustee (1) either
(x) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders of the Securities of such series
will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option under this Section
8.02 and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred or (y) an Opinion of
Counsel to the same effect as the ruling described in clause (x) above
and based upon a change in law and (2) an Opinion of Counsel to the
effect that the Holders of the Securities of such series have a valid
security interest in the trust funds subject to no prior liens under the
UCC; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 of the Securities of such series have
been complied with.
The Company's obligations in Sections 2.02 through 2.12, 4.02, 7.07,
7.08 and 8.05 with respect to the Securities of such series shall survive
until such Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07 and 8.05 shall survive.
Section 8.03. Covenant Defeasance. The Company may omit to comply with
any term, provision or condition set forth in Section 4.03 (or any other
specific covenant relating to the Securities of any series provided for in a
Board Resolution or supplemental indenture pursuant to Section 2.03 which may
by its terms be defeased pursuant to this Section 8.03), and such omission
shall be deemed not to be an Event of Default under clause (c) of Section
6.01, with respect to the outstanding Securities of such series if:
(i) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the
Securities
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of such series, for payment of the Principal of and interest, if any, on
the Securities of such series, money or U.S. Government Obligations or a
combination thereof in an amount sufficient (unless such funds consist
solely of money, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee) without consideration of any
reinvestment and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the Trustee,
to pay and discharge the Principal of and interest on the outstanding
Securities of such series to maturity or earlier redemption (irrevocably
provided for under arrangements satisfactory to the Trustee), as the
case may be;
(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a party or by which it
is bound;
(iii) no Default or Event of Default with respect to the
Securities of such series shall have occurred and be continuing on the
date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the Holders of the Securities of such
series have a valid security interest in the trust funds subject to no
prior liens under the UCC and (B) such Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not
occurred; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the covenant
defeasance contemplated by this Section 8.03 of the Securities of such
series have been complied with.
Section 8.04. Application of Trust Money. Subject to Section 8.05, the
Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, in respect of the Securities of any series and shall apply the
deposited money and the proceeds from deposited U.S. Government Obligations
in accordance with the Securities of such series and this Indenture to the
payment of Principal of and interest on the Securities of such series; but
such money need not be segregated from other funds except to the extent
required by law. The Company shall pay and
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indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to
Section 8.01, 8.02 or 8.03, as the case may be, or the principal and interest
received in respect thereof, other than any such tax, fee or other charge
that by law is for the account of the Holders.
Section 8.05. Repayment to Company. Subject to Sections 7.07, 8.01,
8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any money held by
them at any time and not required to make payments hereunder and thereupon
shall be relieved from all liability with respect to such money. Subject to
applicable escheat or abandoned property laws, the Trustee and the Paying
Agent shall pay to the Company upon written request any money held by them
and required to make payments hereunder under this Indenture that remains
unclaimed for two years; provided that the Trustee or such Paying Agent
before being required to make any payment may cause to be published at the
expense of the Company once in an Authorized Newspaper or mail to each Holder
entitled to such money at such Holder's address (as set forth in the Security
Register) notice that such money remains unclaimed and that after a date
specified therein (which shall be at least 30 days from the date of such
publication or mailing) any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company, Holders entitled
to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
ARTICLE 9
Amendments, Supplements and Waivers
Section 9.01. Without Consent of Holders. The Company and the Trustee
may amend or supplement this Indenture or the Securities of any series
without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not
materially and adversely affect the interests of the Holders;
(2) to comply with Article 5;
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(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust
Indenture Act;
(4) to evidence and provide for the acceptance of appointment
hereunder with respect to the Securities of any or all series by a
successor Trustee;
(5) to establish the form or forms or terms of Securities of any
series or of the coupons appertaining to such Securities as permitted by
Section 2.03;
(6) to provide for uncertificated or Unregistered Securities and
to make all appropriate changes for such purpose;
(7) to make any change that does not materially and adversely
affect the rights of any Holder; or
(8) as provided by or pursuant to a Board Resolution or indenture
supplemental hereto establishing the terms of one or more series of
Securities.
Section 9.02. With Consent of Holders. Subject to Sections 6.04 and
6.07, without prior notice to any Holders, the Company and the Trustee may
amend this Indenture and the Securities of any series with the written
consent of the Holders of a majority in principal amount of the outstanding
Securities of all series affected by such amendment (each such series voting
as a separate class), and the Holders of a majority in principal amount of
the outstanding Securities of all series affected thereby (each such series
voting as a separate class) by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the
Securities of such series.
Notwithstanding the provisions of this Section 9.02, without the consent
of each Holder affected thereby, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the stated maturity of the Principal of, or any sinking
fund obligation or any installment of interest on, such Holder's
Security,
(ii) reduce the Principal thereof or the rate of interest thereon,
or any premium payable with respect thereto,
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(iii) change any place of payment where, or the currency in which,
any Security or any premium or the interest thereon is payable,
(iv) change the provisions for calculating the optional redemption
price, including the definitions relating thereto;
(v) make any change to Section 6.04 or 6.07 (except to include
other provisions subject to Section 6.04);
(vi) reduce the percentage in principal amount of outstanding
Securities of the relevant series the consent of whose Holders is
required for any such supplemental indenture, for any waiver of
compliance with any provisions of this Indenture or any Defaults and
their consequences provided for in this Indenture;
(vii) waive a Default in the payment of Principal of or interest
on any Security of such Holder (except pursuant to a rescission of
acceleration pursuant to the second paragraph of Section 6.02(b));
(viii) adversely affect the rights of such Holder under any
mandatory redemption or repurchase provision or any right of redemption
or repurchase at the option of such Holder;
(ix) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent of
the Holder of each outstanding Security affected thereby; or
(x) change or waive any provision that, pursuant to a Board
Resolution or indenture supplemental hereto establishing the terms of
one or more series of Securities, is prohibited to be so changed or
waived.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely
for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series with respect to
such covenant or provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series or of the
coupons appertaining to such Securities.
It shall not be necessary for the consent of any Holder under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company or, at the Company's request, the Trustee shall give
to the Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. The Company or, at the Company's request, the Trustee
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
Section 9.03. Effect of Consent. Until an amendment or waiver becomes
effective, a consent to it by a Holder is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the Security of the consenting Holder, even if
notation of the consent is not made on any Security. An amendment,
supplement or waiver shall become effective with respect to any Securities
affected thereby on receipt by the Trustee of written consents from the
requisite Holders of outstanding Securities affected thereby.
The Company may, but shall not be obligated to, fix a record date (which
may be not less than 10 nor more than 60 days prior to the solicitation of
consents) for the purpose of determining the Holders of the Securities of any
series affected entitled to consent to any amendment, supplement or waiver.
If a record date is fixed, then, notwithstanding the immediately preceding
paragraph, those Persons who were such Holders at such record date (or their
duly designated proxies) and only those Persons shall be entitled to consent
to such amendment, supplement or waiver, whether or not such Persons continue
to be such Holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective with respect
to the Securities of any series affected thereby, it shall bind every Holder
of such Securities unless it is of the type described in any of clauses (i)
through (x) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (x) of Section 9.02, the amendment or
waiver shall bind each such Holder who has consented to it and every
subsequent Holder of a Security that evidences the same indebtedness as the
Security of the consenting Holder.
Neither the Company 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 Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Securities that
consent, waive or agree to amend in the time frame
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set forth in the solicitation documents relating to such consent, waiver or
agreement.
Section 9.04. Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of any Security, the Trustee may
require the Holder thereof to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Security about the changed terms and
return it to the Holder and the Trustee may place an appropriate notation on
any Security of such series thereafter authenticated. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security of the
same series and tenor that reflects the changed terms.
Section 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article 9 is authorized or permitted by this
Indenture, stating that all requisite consents have been obtained or that no
consents are required and stating that such supplemental indenture
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
customary exceptions. Subject to the preceding sentence, the Trustee shall
sign such amendment, supplement or waiver if the same does not adversely
affect the rights of the Trustee. The Trustee may, but shall not be obligated
to, execute any such amendment, supplement or waiver that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.06. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article 9 shall conform to the
requirements of the Trust Indenture Act as then in effect.
ARTICLE 10
Miscellaneous
Section 10.01. Trust Indenture Act of 1939. This Indenture shall
incorporate and be governed by the provisions of the Trust Indenture Act that
are required to be part of and to govern indentures qualified under the Trust
Indenture Act.
Section 10.02. Notices. Any notice or communication shall be
sufficiently given if written and (a) if delivered in person, when received
or (b) if
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mailed by first class mail, 5 days after mailing, or (c) as between the
Company and the Trustee if sent by facsimile transmission, when transmission
is confirmed, in each case addressed as follows:
if to the Company:
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Telecopy: (215) 981-7744
Attention: Treasurer
if to the Trustee:
77 Water Street
4th Floor
New York, New York 10005
Telecopy: (201) 701-7684
Attention: Corporate Trust Department
The Company or the Trustee by written notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication shall be sufficiently given to Holders of
any Unregistered Securities by publication at least once in an Authorized
Newspaper, and by mailing to the Holders thereof who have filed their names
and addresses with the Trustee pursuant to Section 313(c)(2) of the Trust
Indenture Act at such addresses as were so furnished to the Trustee (and in
the case of any notice given by the Company, the Trustee shall make such
information available to the Company for such purpose) and to Holders of
Registered Securities by mailing to such Holders at their addresses as they
shall appear on the Security Register. Notice mailed shall be sufficiently
given if so mailed within the time prescribed. Copies of any such
communication or notice to a Holder shall also be mailed to the Trustee and
each Agent at the same time.
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. Except as
otherwise provided in this Indenture, if a notice or communication is mailed
in the manner provided in this Section 10.02, it is duly given, whether or
not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of
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notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
In case it shall be impracticable to give notice as herein contemplated,
then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
Section 10.03. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 10.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public officials.
Section 10.05. Evidence of Ownership. The Company, the Trustee and any
agent of the Company or the Trustee may deem and treat the Holder of any
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Unregistered Security and the Holder of any coupon as the absolute owner of
such Unregistered Security or coupon (whether or not such Unregistered
Security or coupon shall be overdue) for the purpose of receiving payment
thereof or on account thereof and for all other purposes, and neither the
Company, the Trustee, nor any agent of the Company or the Trustee shall be
affected by any notice to the contrary. The fact of the holding by any Holder
of an Unregistered Security, and the identifying number of such Security and
the date of his holding the same, may be proved by the production of such
Security or by a certificate executed by any trust company, bank, banker or
recognized securities dealer wherever situated satisfactory to the Trustee,
if such certificate shall be deemed by the Trustee to be satisfactory. Each
such certificate shall be dated and shall state that on the date thereof a
Security bearing a specified identifying number was deposited with or
exhibited to such trust company, bank, banker or recognized securities dealer
by the person named in such certificate. Any such certificate may be issued
in respect of one or more Unregistered Securities specified therein. The
holding by the person named in any such certificate of any Unregistered
Securities specified therein shall be presumed to continue for a period of
one year from the date of such certificate unless at the time of any
determination of such holding (1) another certificate bearing a later date
issued in respect of the same Securities shall be produced or (2) the
Security specified in such certificate shall be produced by some other
Person, or (3) the Security specified in such certificate shall have ceased
to be outstanding. Subject to Article 7, the fact and date of the execution
of any such instrument and the amount and numbers of Securities held by the
Person so executing such instrument may also be proven in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or
in any other manner which the Trustee may deem sufficient.
The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the person in whose name any Registered Security shall be
registered upon the Security Register for such series as the absolute owner
of such Registered Security (whether or not such Registered Security shall be
overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the
Principal of and, subject to the provisions of this Indenture, interest on
such Registered Security and for all other purposes; and neither the Company
nor the Trustee nor any agent of the Company or the Trustee shall be affected
by any notice to the contrary.
Section 10.06. Rules by Trustee, Paying Agent or Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
Section 10.07. Payment Date Other Than a Business Day. If any date for
payment of Principal or interest on any Security shall not be a Business Day
at
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any place of payment, then payment of Principal of or interest on such
Security, as the case may be, need not be made on such date, but may be made
on the next succeeding Business Day at any place of payment with the same
force and effect as if made on such date and no interest shall accrue in
respect of such payment for the period from and after such date.
Section 10.08. Governing Law. The laws of the State of New York
(without regard to conflicts of laws principles thereof) shall govern this
Indenture and the Securities.
Section 10.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture or loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture
or agreement may not be used to interpret this Indenture. No Board
Resolution or supplemental indenture with respect of the Securities of any
series may be used to interpret any Board Resolution or supplemental
indenture with respect to the Securities of any other series.
Section 10.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
Section 10.11. Duplicate 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 10.12. Separability. In case any provision in this Indenture or
in the Securities 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.
Section 10.13. Table of Contents, Headings, Etc. The Table of Contents
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
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.
Section 10.14. Incorporators, Stockholders, Officers and Directors of
Company Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture or any
indenture supplemental hereto, or in any Security or any coupons appertaining
thereto, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such, or against any past, present or future
stockholder, officer, director or employee, as such, of the Company or of any
successor, either directly
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or through the Company or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance of the Securities and the
coupons appertaining thereto by the holders thereof and as part of the
consideration for the issue of the Securities and the coupons appertaining
thereto.
Section 10.15. Judgment Currency. The Company agrees, to the fullest
extent that it may effectively do so under applicable law, that (a) if for
the purpose of obtaining judgment in any court it is necessary to convert the
sum due in respect of the Principal of or interest on the Securities of any
series (the "Required Currency") into a currency in which a judgment will be
rendered (the "Judgment Currency"), the rate of exchange used shall be the
rate at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the day on which final unappealable judgment is entered, unless
such day is not a Business Day in The City of New York, then, to the extent
permitted by applicable law, the rate of exchange used shall be the rate at
which in accordance with normal banking procedures the Trustee could purchase
in The City of New York the Required Currency with the Judgment Currency on
the Business Day in The City of New York preceding the day on which final
unappealable judgment is entered and (b) its obligations under this Indenture
to make payments in the Required Currency (i) shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment (whether or
not entered in accordance with subsection (a)), in any currency other than
the Required Currency, except to the extent that such tender or recovery
shall result in the actual receipt, by the payee, of the full amount of the
Required Currency expressed to be payable in respect of such payments, (ii)
shall be enforceable as an alternative or additional cause of action for the
purpose of recovering in the Required Currency the amount, if any, by which
such actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this Indenture.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
COMCAST CABLE COMMUNICATIONS, INC.
/s/ Stanley Wang
----------------------------------
By:
Name: Stanley Wang
Title: Senior Vice President
BANK OF MONTREAL TRUST COMPANY
/s/ Therese Gaballah
------------------------------
By:
Name: Therese Gaballah
Title: Vice Pesident
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Exhibit 4.1(b)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC.
8 1/8% Exchange Note due 2004
CUSIP No.:
No. $
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum
of DOLLARS, on May 1, 2004.
Interest Payment Dates: May 1 and November 1 (each, an "Interest Payment
Date"), commencing on November 1, 1997.
Interest Record Dates: April 15 and October 15 (each, an "Interest Record
Date")
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
COMCAST CABLE COMMUNICATIONS,
INC.
By:___________________________
Name:
Title:
Attest:___________________
Name:
Title:
This is one of the 8 1/8% Exchange Notes due 2004 described in the
within-mentioned Indenture.
Dated:
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By:____________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
COMCAST CABLE COMMUNICATIONS, INC.
8 1/8% Exchange Note due 2004
1. Interest.
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing November 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
May 1, 1997 (the "Indenture"), between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and holders of Securities are referred to the
Indenture and the TIA for a statement of them. The Securities are general
obligations of the Company limited in aggregate principal amount to
$300,000,000.
-2-
<PAGE>
5. Optional Redemption.
The Securities will be redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of the Securities, plus accrued interest thereon to the
date of redemption, or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below), plus accrued interest on the
Securities to the date of redemption. If a redemption date does not fall on an
Interest Payment Date, then, with respect to the interest payment immediately
succeeding the redemption date, only the unaccrued portion of such interest
payment as of the redemption date shall be included in any calculation pursuant
to clause (ii).
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Securities to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains three or fewer such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.; Bear,
Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (iii) any other Primary Treasury Dealer selected by
the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Dealer at 5:00 p.m. on the third Business Day
preceding such redemption date.
6. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer
of or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
-3-
<PAGE>
7. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
8. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its written request. After that, all liability of the Trustee and such Paying
Agent with respect to such funds shall cease.
9. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Securities and
under the Indenture with respect to the Securities except for certain provisions
thereof, and may be discharged from obligations to comply with certain covenants
contained in the Securities and in the Indenture with respect to the Securities,
in each case upon satisfaction of certain conditions specified in the Indenture.
10. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Securities and the provision of the
Indenture relating to the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture and the Securities to, among other things,
cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities or comply with
any requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, or make any other change that does not
materially and adversely affect the rights of any Holder of a Security.
11. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and the Restricted Subsidiaries to make restricted
payments, to incur liens securing indebtedness, or to enter sale and leaseback
transactions and of the Company to merge or sell all or substantially all of its
assets. The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
12. Defaults and Remedies.
If an Event of Default (other than certain bankruptcy Events of Default
with respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. If a bankruptcy
Event of Default with respect to the Company occurs and is continuing, all the
Securities shall be immediately due and payable immediately in the manner and
with the effect provided in the Indenture without any notice or other action on
the part of the Trustee or any Holder. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Securities unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
-4-
<PAGE>
13. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
14. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company or any of its Affiliates shall have any liability for any obligation
of the Company under the Securities or the Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
15. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
16. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
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. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
18. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security thereof without regard to principles of conflicts of laws.
-5-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: _________________________________
Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC.
8 3/8% Exchange Note due 2007
CUSIP No.:
No. $
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of DOLLARS,
on May 1, 2007.
Interest Payment Dates: May 1 and November 1 (each, an "Interest Payment
Date"), commencing on November 1, 1997.
Interest Record Dates: April 15 and October 15 (each, an "Interest Record
Date")
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
COMCAST CABLE COMMUNICATIONS,
INC.
By: __________________________
Name:
Title:
Attest: ________________________
Name:
Title:
This is one of the 8 3/8% Exchange Notes due 2007 described in the
within-mentioned Indenture.
Dated:
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By: ____________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
COMCAST CABLE COMMUNICATIONS, INC.
8 3/8% Exchange Note due 2007
1. Interest.
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing November 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of May 1,
1997 (the "Indenture"), between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general obligations of the
Company limited in aggregate principal amount to $600,000,000.
-2-
<PAGE>
5. Optional Redemption.
The Securities will be redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of the Securities, plus accrued interest thereon to the
date of redemption, or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below), plus accrued interest on the
Securities to the date of redemption. If a redemption date does not fall on an
Interest Payment Date, then, with respect to the interest payment immediately
succeeding the redemption date, only the unaccrued portion of such interest
payment as of the redemption date shall be included in any calculation pursuant
to clause (ii).
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Securities to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of such Securities.
"Comparable Treasury Price" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains three or fewer such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.; Bear,
Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (iii) any other Primary Treasury Dealer selected by
the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Dealer at 5:00 p.m. on the third Business Day
preceding such redemption date.
6. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer
of or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Securities or
portions thereof selected for redemption, except the unredeemed portion of any
security being redeemed in part.
-3-
<PAGE>
7. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
8. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its written request. After that, all liability of the Trustee and such Paying
Agent with respect to such funds shall cease.
9. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Securities and
under the Indenture with respect to the Securities except for certain provisions
thereof, and may be discharged from obligations to comply with certain covenants
contained in the Securities and in the Indenture with respect to the Securities,
in each case upon satisfaction of certain conditions specified in the Indenture.
10. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Securities and the provision of the
Indenture relating to the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture and the Securities to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities or comply with
any requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, or make any other change that does not
materially and adversely affect the rights of any Holder of a Security.
11. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and the Restricted Subsidiaries to make restricted
payments, to incur liens securing indebtedness, or to enter sale and leaseback
transactions and of the Company to merge or sell all or substantially all of its
assets. The limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with
such limitations.
12. Defaults and Remedies.
If an Event of Default (other than certain bankruptcy Events of Default
with respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately
in the manner and with the effect provided in the Indenture. If a bankruptcy
Event of Default with respect to the Company occurs and is continuing, all the
Securities shall be immediately due and payable immediately in the manner and
with the effect provided in the Indenture without any notice or other action on
the part of the Trustee or any Holder. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Securities unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
-4-
<PAGE>
13. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
14. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company or any of its Affiliates shall have any liability for any obligation
of the Company under the Securities or the Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
15. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
16. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
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. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
18. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security thereof without regard to principles of conflicts of laws.
-5-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _____________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC.
8 7/8% Exchange Note due 2017
CUSIP No.:
No. $
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of DOLLARS,
on May 1, 2017.
Interest Payment Dates: May 1 and November 1 (each, an "Interest Payment
Date"), commencing on November 1, 1997.
Interest Record Dates: April 15 and October 15 (each, an "Interest Record
Date")
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
COMCAST CABLE COMMUNICATIONS,
INC.
By: _____________________________
Name:
Title:
Attest: ___________________
Name:
Title:
This is one of the 8 7/8% Exchange Notes due 2017 described in the
within-mentioned Indenture.
Dated:
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By: ______________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
COMCAST CABLE COMMUNICATIONS, INC.
8 7/8% Exchange Note due 2017
1. Interest.
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing November 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of May 1,
1997 (the "Indenture"), between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and holders of Securities are referred to the
Indenture and the TIA for a statement of them. The Securities are general
obligations of the Company limited in aggregate principal amount to
$550,000,000.
-2-
<PAGE>
5. Optional Redemption.
The Securities will be redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of the Securities, plus accrued interest thereon to
the date of redemption, or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below), plus accrued interest on the
Securities to the date of redemption. If a redemption date does not fall on an
Interest Payment Date, then, with respect to the interest payment immediately
succeeding the redemption date, only the unaccrued portion of such interest
payment as of the redemption date shall be included in any calculation pursuant
to clause (ii).
"Adjusted Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Securities to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains three or fewer such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.; Bear,
Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (iii) any other Primary Treasury Dealer selected by
the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Dealer at 5:00 p.m. on the third Business Day
preceding such redemption date.
6. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection therewith as permitted by
the Indenture. The Registrar need not register the transfer of or exchange
any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
-3-
<PAGE>
7. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it for
all purposes.
8. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
9. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Securities
and under the Indenture with respect to the Securities except for certain
provisions thereof, and may be discharged from obligations to comply with
certain covenants contained in the Securities and in the Indenture with respect
to the Securities, in each case upon satisfaction of certain conditions
specified in the Indenture.
10. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Securities and the provision of the
Indenture relating to the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture and the Securities to, among other things,
cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities or comply with
any requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, or make any other change that does not
materially and adversely affect the rights of any Holder of a Security.
11. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and the Restricted Subsidiaries to make restricted
payments, to incur liens securing indebtedness, or to enter sale and leaseback
transactions and of the Company to merge or sell all or substantially all of
its assets. The limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
12. Defaults and Remedies.
If an Event of Default (other than certain bankruptcy Events of Default
with respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. If a bankruptcy Event
of Default with respect to the Company occurs and is continuing, all the
Securities shall be immediately due and payable immediately in the manner and
with the effect provided in the Indenture without any notice or other action on
the part of the Trustee or any Holder. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Securities unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
-4-
<PAGE>
13. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
14. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company or any of its Affiliates shall have any liability for any obligation
of the Company under the Securities or the Indenture or for any claim based on,
in respect of or by reason of, such obligations or their creation. Each Holder
of a Security by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of the
Securities.
15. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
16. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
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. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
18. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security thereof without regard to principles of conflicts of laws.
-5-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY.
<PAGE>
COMCAST CABLE COMMUNICATIONS, INC.
8 1/2% Exchange Note due 2027
CUSIP No.:
No. $
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of DOLLARS,
on May 1, 2027.
Interest Payment Dates: May 1 and November 1 (each, an "Interest Payment
Date"), commencing on November 1, 1997.
Interest Record Dates: April 15 and October 15 (each, an "Interest Record
Date")
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
COMCAST CABLE COMMUNICATIONS,
INC.
By: ___________________________
Name:
Title:
Attest: ________________
Name:
Title:
This is one of the 8 1/2% Exchange Notes due 2027 described in the
within-mentioned Indenture.
Dated:
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By: _____________________________
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
COMCAST CABLE COMMUNICATIONS, INC.
8 1/2% Exchange Note due 2027
1. Interest.
COMCAST CABLE COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. Cash interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing November 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date
even if the Securities are canceled on registration of transfer or registration
of exchange after such Interest Record Date. Holders must surrender Securities
to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire transfer of Federal
funds (provided that the Paying Agent shall have received wire instructions on
or prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of May 1,
1997 (the "Indenture"), between the Company and the Trustee. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general obligations of the
Company limited in aggregate principal amount to $250,000,000.
-2-
<PAGE>
5. Optional Redemption.
The Securities will be redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of the Securities, plus accrued interest thereon to the
date of redemption, or (ii) as determined by a Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined below), plus accrued interest on the
Securities to the date of redemption. If a redemption date does not fall on an
Interest Payment Date, then, with respect to the interest payment immediately
succeeding the redemption date, only the unaccrued portion of such interest
payment as of the redemption date shall be included in any calculation pursuant
to clause (ii).
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Securities to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Securities.
"Comparable Treasury Price" means, with respect to any redemption date,
(A) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains three or fewer such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means one of the Reference Treasury Dealers appointed by
the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.; Bear,
Stearns & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation and
their respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer; and (iii) any other Primary Treasury Dealer selected by
the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Dealer at 5:00 p.m. on the third Business Day
preceding such redemption date.
6. Purchase at Option of Holders of Securities
Each holder of the Notes will have the right to require the Company to
repurchase all or a portion of the Securities owned by such holder (the "Put
Option") on May 1, 2009 (the "Put Option Exercise Date") at a purchase price
equal to 100% of the principal amount of the Securities tendered by such holder
plus accrued interest thereon. On or before the Put Option Exercise Date, the
Company shall deposit with a paying agent (or the Trustee) money sufficient to
pay the principal of and any accrued interest on any Securities tendered for
repayment. On and after the Put Option Exercise Date, interest will cease to
accrue on the Securities or any portion thereof tendered for purchase, unless
the Company fails to pay the purchase price.
-3-
<PAGE>
If a holder elects to exercise the Put Option, such holder must provide
the Company with notice of its intention to exercise the Put Option during the
period from and including March 1, 2009 through and including April 1, 2009.
Such notice, once given, will be irrevocable unless waived by the Company.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act if required and will file
Schedule 13E-4 or any other schedule if required thereunder in connection with
any offer by the Company to purchase the Securities.
7. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the unredeemed
portion of any security being redeemed in part.
8. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
9. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its written request. After that, all liability of the Trustee and such Paying
Agent with respect to such funds shall cease.
10. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Securities and
under the Indenture with respect to the Securities except for certain provisions
thereof, and may be discharged from obligations to comply with certain covenants
contained in the Securities and in the Indenture with respect to the Securities,
in each case upon satisfaction of certain conditions specified in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Securities and the provision of the
Indenture relating to the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture and the Securities to, among other things,
cure any ambiguity, defect or inconsistency, provide for uncertificated
Securities in addition to or in place of certificated Securities or comply with
any requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, or make any other change that does not
materially and adversely affect the rights of any Holder of a Security.
12. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and the Restricted Subsidiaries to make restricted
payments, to incur liens securing indebtedness, or to
-4-
<PAGE>
enter sale and leaseback transactions and of the Company to merge or sell all
or substantially all of its assets. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
13. Defaults and Remedies.
If an Event of Default (other than certain bankruptcy Events of Default
with respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately
in the manner and with the effect provided in the Indenture. If a bankruptcy
Event of Default with respect to the Company occurs and is continuing, all the
Securities shall be immediately due and payable immediately in the manner and
with the effect provided in the Indenture without any notice or other action on
the part of the Trustee or any Holder. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Securities unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Securities then outstanding to direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
14. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
15. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company or any of its Affiliates shall have any liability for any
obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Securities.
16. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
17. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
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).
18. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
-5-
<PAGE>
19. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security thereof without regard to principles of conflicts of laws.
-6-
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ______________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
ON MAY 1, 2009
If you elect to have this Security purchased by the Company on May 1, 2009,
check the box: / /
If you elect to have only part of this Security purchased by the Company
on May 1, 2009, state the amount (multiples of $1,000 only) to be purchased:
$________________
Dated: ___________________
Signed: __________________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant is a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
Exhibit 5
Davis Polk & Wardwell
450 Lexington Avenue
New York, N.Y. 10017
212-450-4000
July 3, 1997
Comcast Cable Communications, Inc.
1500 Market Street
Philadelphia, PA 19102-2148
Ladies and Gentlemen:
We have acted as special counsel to Comcast Cable Communications, Inc.
(the "Company") in connection with the Company's offer (the "Exchange Offer")
to exchange its 8 1/8% Exchange Notes due 2004, 8 3/8% Exchange Notes due
2007, 8 7/8% Exchange Notes due 2017 and 8 1/2% Exchange Notes due 2027
(collectively, the "New Notes"), for a like principal amount of any or all of
its outstanding 8 1/8% Notes due 2004, 8 3/8% Notes due 2007, 8 7/8% Notes
due 2017 and 8 1/2% Notes due 2027 (collectively, the "Old Notes").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary or
advisable for the purpose of rendering this opinion.
Upon the basis of the foregoing and assuming the due execution and
delivery of the New Notes, we are of the opinion that when the New Notes are
executed, authenticated and delivered in accordance with the Indenture dated
May 1, 1997 among the Company and Bank of Montreal Trust Company, as trustee,
and delivered in exchange for the Old Notes in accordance with the Exchange
Offer, the New Notes will be valid and binding obligations of the Company
enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and similar laws
affecting creditors' rights generally and equitable principles.
<PAGE>
2
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Exchange Offer. We also consent to
the reference to us under the caption "Validity of the Notes" in the
Prospectus contained in such Registration Statement.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
/s/ Davis Polk & Wardwell
<PAGE>
Exhibit 8
Davis Polk & Wardwell
450 Lexington Avenue
New York, N.Y. 10017
212-450-4380
July 3, 1997
Comcast Cable Communications, Inc.
1500 Market Street
Philadelphia, PA 19102-2148
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus") contained in the
registration statement on Form S-4 being furnished by Comcast Cable
Communications, Inc. to the Securities and Exchange Commission on the date
hereof in connection with the exchange of Old Notes for New Notes
(the "Exchange"), all as described in the Prospectus.
The discussion contained under the caption "Certain Federal Income Tax
Consequences" in the Prospectus constitutes the opinion of Davis Polk &
Wardwell, subject to the qualifications stated therein.
We hereby consent to the use of our name under the caption "Certain Federal
Income Tax Consequences" in the Prospectus. The issuance of such consent does
not concede that we are an "Expert" for the purposes of the Securities Act of
1933.
Very truly yours,
/s/ Davis Polk & Wardwell
<PAGE>
Exhibit 10.13
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT is between COMCAST CABLE
COMMUNICATIONS, INC., a Delaware corporation ("Cable") and
COMCAST CORPORATION, a Pennsylvania corporation ("Comcast").
BACKGROUND
WHEREAS, subsidiaries of Cable own at least a
majority interest in the cable communications systems listed
on Schedule A attached hereto and may in the future own at
least a majority interest in certain other cable
communications systems (collectively, the "Systems"); and
WHEREAS, Comcast is experienced in the management
and operation of cable communications systems, and Cable, on
behalf and for the benefit of the Systems, has requested
Comcast to render management services in connection with the
management and operation of the Systems' multichannel video
business and any other businesses the Systems are or may be
engaged in, and Comcast is willing to do so on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Comcast will use its best efforts to supervise the
management and operation of the day-to-day activities of the
Systems, including the expansion or rebuilding of the
Systems. Schedule A will be amended by the parties from
time to time to reflect the addition or deletion of Systems
as to which this Agreement will apply. The parties agree
that Cable's subsidiaries listed on Schedule A as owning the
Systems are intended to be third party beneficiaries and
third party obligors of this Agreement with respect to the
System or Systems owned; Comcast agrees that (at the request
of Cable) it will enter into agreements with such
subsidiaries to effect such relationships. Cable agrees
that Comcast may cause one or more of its subsidiaries
(other than Cable and its subsidiaries) to provide services
under this Agreement, and that (at the request of Comcast),
Cable will enter into agreements with such subsidiaries to
effect such relationships.
2. Specifically, and without limiting the generality
of the foregoing, Comcast will provide or arrange for and
supervise the performance of the following functions or
services:
(a) establishing procedures for the maintenance,
construction, expansion and rebuilding of the Systems;
<PAGE>
(b) purchasing equipment and materials and providing
labor and other services for the maintenance, construction,
expansion or rebuilding of the Systems;
(c) interviewing, hiring, discharging and training
personnel;
(d) establishing office management procedures and the
administration thereof;
(e) preparing projections including (i) a breakdown of
capital requirements, (ii) annual operating budgets and
(iii) cash flow analyses;
(f) preparing sales and marketing programs,
including newspaper, radio and other advertising, direct
selling and special events activities;
(g) preparing monthly reports regarding operations and
general developments in the cable communications industry;
(h) providing accounting, computer, tax, internal
audit, risk management, finance, treasury, investor
relations, legal and regulatory services;
(i) providing programming; and
(j) hiring and conducting the relationships with
consultants, accountants, lenders, technical advisors,
attorneys, investment bankers and appraisers.
3. As compensation for such services, Comcast will be
paid the following fees:
(a) An annual management fee in an amount equal
to six percent (6%) of gross revenues from all sources of
the Systems.
(b) An annual accounting services fee in the amounts
indicated in Cable's books and records for fiscal years 1992
to 1996, and in an amount of up to one percent (1%) of the
gross revenues from all sources of the Systems for each
fiscal year after 1996. Of such fee, six percent (6%) has
been and will be paid on account of related computer and
information services.
(c) Each such fee will be paid in monthly
installments in arrears based on good faith estimates, and
appropriate adjustments based on actual gross revenues will
be made following completion of the Systems' financial
statements for a fiscal year.
4. Comcast will be entitled to reimbursement from
Cable for Comcast's actual costs in rendering services
hereunder, including without limitation salaries and
benefits (including without limitation health and welfare,
retirement investment plan
2
<PAGE>
(401K) and restricted stock) of Cable Division divisional, regional and area
employees; rent, leasehold, office and related expenses of Cable Division
divisional, regional and area offices; and insurance (including any
retainages or deductibles paid). Such reimbursement will be made monthly in
arrears.
5. (a) Notwithstanding the provisions of paragraph 4, and in addition
to the payments required to be made pursuant to paragraph 4, Cable will pay
Comcast for programming (other than pay-per-view) provided by Comcast to a
System an amount which will not exceed that which the System would pay in an
arm's-length transaction to the provider of the programming services if such
System were a stand-alone operator of a cable television system with a
subscriber base equal to that of such System. Such payment will be made
monthly in arrears.
(b) Comcast will remit to Cable or its
subsidiaries promptly following its receipt by Comcast, any
amount received by Comcast on or for the account of the
Systems (including without limitation any commissions on
sales of merchandise by a home shopping service to the
Systems' subscribers) to which Comcast is not entitled to be
paid hereunder.
6. Notwithstanding the provisions of paragraph 4, and
in addition to the payments required to be made pursuant to
paragraph 4, Cable will pay Comcast in respect of income
taxes of Comcast or any of its other subsidiaries as Comcast
directs, provided that the cumulative sum of such payments
will not exceed the cumulative sum of income taxes which
Cable and its subsidiaries would have paid: (a) in respect
of federal and state income taxes if Cable and its
subsidiaries had at all times (including at all times prior
to the date hereof) filed a separate consolidated federal
income tax return, with Cable as the "common parent" (within
the meaning of Section 1504 of the Internal Revenue Code);
and (b) taking into account all net operating loss
carryforwards pursuant to Section 172 of the Internal
Revenue Code that would have been available to Cable and its
subsidiaries had they filed a separate return.
7. (a) The parties acknowledge that Comcast or a
subsidiary has entered into the agreements listed on
Schedule B attached hereto (the "Other Agreements") pursuant
to which Comcast or the subsidiary provides management,
programming, tax sharing and other services to the
subsidiary of Cable indicated on Schedule B. The parties
agree that the terms and conditions of this Agreement
supercede and supplement the terms and conditions of the
Other Agreements to the extent that they are not
inconsistent or in conflict with, or limited, restricted or
prohibited by, the terms and conditions of the Other
Agreements, or to the extent that their application requires
a consent of a third party under the Other Agreements or any
other agreement (in which case the terms and conditions of
the Other Agreements will prevail).
(b) The parties acknowledge that certain
subsidiaries of Cable have entered into, or may in the
future enter into, agreements with lenders to the Systems
which limit, restrict or prohibit such subsidiaries from
providing funds to Cable for
3
<PAGE>
Cable's use in its making payments to Comcast hereunder. The parties
acknowledge that for so long as they remain in effect, the terms and
conditions of such agreements will be complied with by such subsidiaries but
such compliance will not relieve Cable of any of its obligations under this
Agreement.
(c) Any amounts which are not paid when they
otherwise would have been paid as a result of the operation
of this paragraph 7 will be paid (without interest thereon)
as soon as the provision which prohibited payment lapses,
expires or terminates.
8. Comcast may, in connection with the management and
operation of the Systems, be requested to render services or
furnish facilities or equipment beyond the services to be
performed under this Agreement. In such case, if Comcast
agrees to perform as requested, it will be entitled to be
paid for such services, facilities or equipment in addition
to the compensation or reimbursement to be paid pursuant to
this Agreement, at rates to be agreed by Comcast and Cable.
9. Comcast will not, under any circumstances, be held
liable for the results of operations or liabilities of the
Systems, so long as Comcast performs its duties hereunder in
good faith. Comcast will not be held to have incurred any
liability to Cable, any of Cable's subsidiaries or any third
party by virtue of any action taken or omitted to be taken
in good faith by Comcast in discharge of its duties
hereunder, and Cable agrees to indemnify Comcast and hold
Comcast harmless with respect to any and all claims that may
be made against Comcast in respect thereof.
10. Cable acknowledges that Comcast is engaged
directly or through subsidiaries and affiliates in various
other businesses. Nothing herein will be construed to
prevent the continued involvement of Comcast or any of its
subsidiaries or affiliates in other businesses, whether such
involvement now exists or occurs in the future.
11. This Agreement will be deemed effective as of
January 1, 1992 and will terminate on such date as Comcast
no longer directly or indirectly owns at least a majority
interest in Cable.
IN WITNESS WHEREOF, the parties hereto have executed and
4
<PAGE>
delivered this Management Agreement on April 24, 1997.
COMCAST CABLE COMMUNICATIONS, INC.
By: /s/ Arthur R. Block
------------------------------
Title: VICE PRESIDENT
---------------------------
COMCAST CORPORATION
By: /s/ Arthur R. Block
-------------------------------
Title: VICE PRESIDENT
----------------------------
5
<PAGE>
Exhibit 12
COMCAST CABLE COMMUNICATIONS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------------------- ----------------------------------------------------
1996 1996
-------------------- ---------------------
PRO PRO
1997 FORMA (1) ACTUAL FORMA (1) ACTUAL 1995 1994 1993
--------- ------------- -------- ------------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before fixed charges
(2):
Loss before extraordinary items and
cumulative effect of accounting
changes........................... ($29.2) ($29.0) ($10.7) ($85.7) ($22.6) ($48.9) ($23.0) ($6.4)
Income tax (benefit) expense........ (9.3) (13.0) (4.1) (32.7) (4.5) (24.9) (1.8) 23.5
Equity in net loss of affiliate.....
Fixed charges....................... 65.8 65.3 65.3 260.5 260.5 273.8 176.5 181.3
-------- --------- --------- --------- ------- ------- ------- -------
$27.3 $23.3 $50.5 $142.1 $233.4 $200.0 $151.7 $198.4
-------- --------- --------- --------- ------- ------- ------- -------
-------- --------- --------- --------- ------- ------- ------- -------
Fixed charges (2):
Interest expense and preferred stock
dividend requirements............. $56.7 $56.7 $56.7 $228.4 $228.4 $245.6 $155.6 $162.2
Interest expense on notes payable to
affiliates........................ 9.1 8.6 8.6 32.1 32.1 28.2 20.9 19.1
-------- --------- --------- --------- ------- ------- ------- -------
$65.8 $65.3 $65.3 $260.5 $260.5 $273.8 $176.5 $181.3
-------- --------- --------- --------- ------- ------- ------- -------
-------- --------- --------- --------- ------- ------- ------- -------
Ratio of earnings to fixed charges
(3)............................... -- -- -- -- -- -- -- 1.1
</TABLE>
<TABLE>
<CAPTION>
1992
--------
<S> <C>
Earnings (loss) before fixed charges
(2):
Loss before extraordinary items and
cumulative effect of accounting
changes........................... ($174.0)
Income tax (benefit) expense........ 12.3
Equity in net loss of affiliate..... 78.0
Fixed charges....................... 172.6
---------
$88.9
---------
---------
Fixed charges (2):
Interest expense and preferred stock
dividend requirements............. $154.1
Interest expense on notes payable to
affiliates........................ 18.5
---------
$172.6
---------
---------
Ratio of earnings to fixed charges
(3)............................... --
</TABLE>
- ------------------------
(1) Pro forma ratio of earnings to fixed charges information is presented as if
the Scripps Acquisition (as defined herein) occurred on January 1, 1996.
(2) For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income (loss) before extraordinary items, cumulative
effect of accounting changes, income tax expense (benefit), equity in net
loss of affiliate (1992 only) and fixed charges. Fixed charges consist of
interest expense, interest expense on notes payable to affiliates and
preferred stock dividend requirements of a subsidiary to an affiliate (1992
only).
(3) For the three months ended March 31, 1997 and 1996, earnings, as defined
above, were inadequate to cover fixed charges by $38.5 million and $14.8
million, respectively. On a pro forma basis, for the three months ended
March 31, 1996 and for the year ended December 31, 1996, earnings, as
defined above, were inadequate to cover fixed charges by $42.0 million and
$118.4 million, respectively. For the years ended December 31, 1996, 1995,
1994 and 1992, earnings, as defined above, were inadequate to cover fixed
charges by $27.1 million, $73.8 million, $24.8 million and $83.7 million,
respectively.
2
<PAGE>
Exhibit 21
Cablevision Investment of Detroit, Inc. (MI)
California Ad Sales, Inc. (DE)
Clinton Cable TV Investors, Inc. (MI)
Coastal Cable TV, Inc. (CT)
COM Indiana, Inc. (DE)
COM Indianapolis, Inc. (DE)
COM Inkster, Inc. (MI)
COM Maryland, Inc. (DE)
COM MH, Inc. (DE)
COM Philadelphia, Inc. (DE)
COM South, Inc. (CO)
Comcast Business Online Communications, Inc. (DE)
Comcast Cable Communications, Inc. (PA)
Comcast Cable Funding, Inc. (DE)
Comcast Cable Investors, Inc. (DE)
Comcast Cable of Indiana, Inc. (DE)
Comcast Cable of Maryland, Inc. (DE)
Comcast Cable Tri-Holdings, Inc. (DE)
Comcast Cablevision Corporation of Alabama (AL)
Comcast Cablevision Corporation of California (CA)
Comcast Cablevision Corporation of Connecticut (CT)
Comcast Cablevision Corporation of Florida (FL)
Comcast Cablevision Corporation of the Southeast (FL)
Comcast Cablevision of Arkansas, Inc. (DE)
Comcast Cablevision of Boca Raton, Inc. (DE)
Comcast Cablevision of Broward County, Inc. (DE)
Comcast Cablevision of Bryant, Inc. (AR)
Comcast Cablevision of Burlington County, Inc. (DE)
Comcast Cablevision of Carolina, Inc. (SC)
Comcast Cablevision of Central New Jersey, Inc. (DE)
Comcast Cablevision of Chesterfield County, Inc. (VA)
Comcast Cablevision of Clinton (MI)
Comcast Cablevision of Clinton, Inc. (CT)
Comcast Cablevision of Clinton, Inc. (MI)
Comcast Cablevision of Danbury, Inc. (DE)
Comcast Cablevision of Delmarva, Inc. (DE)
Comcast Cablevision of Detroit (MI)
Comcast Cablevision of Detroit, Inc. (MI)
Comcast Cablevision of Dothan, Inc. (AL)
Comcast Cablevision of Flint, Inc. (MI)
Comcast Cablevision of Fontana, Inc. (DE)
Comcast Cablevision of Fort Wayne Limited Partnership (IN)
Comcast Cablevision of Gadsden, Inc. (AL)
Comcast Cablevision of Gloucester County, Inc. (DE)
Comcast Cablevision of Grosse Pointe, Inc. (MI)
Comcast Cablevision of Groton, Inc. (CT)
Page 1
<PAGE>
Comcast Cablevision of Hallandale, Inc. (FL)
Comcast Cablevision of Harford County, Inc. (MD)
Comcast Cablevision of Hopewell Valley, Inc. (NJ)
Comcast Cablevision of Howard County, Inc. (MD)
Comcast Cablevision of Huntsville, Inc. (AL)
Comcast Cablevision of Indianapolis, Inc. (DE)
Comcast Cablevision of Indianapolis, L.P. (DE)
Comcast Cablevision of Inkster Limited Partnership (MI)
Comcast Cablevision of Inland Valley, Inc. (DE)
Comcast Cablevision of Jersey City, Inc. (NJ)
Comcast Cablevision of Laurel, Inc. (MS)
Comcast Cablevision of Lawrence, Inc. (NJ)
Comcast Cablevision of Little Rock, Inc. (AR)
Comcast Cablevision of Lompoc, Inc. (DE)
Comcast Cablevision of Lower Merion, Inc. (PA)
Comcast Cablevision of Macomb County, Inc. (MI)
Comcast Cablevision of Macomb, Inc. (MI)
Comcast Cablevision of Marianna, Inc. (DE)
Comcast Cablevision of Maryland Limited Partnership (MD)
Comcast Cablevision of Mercer County, Inc. (NJ)
Comcast Cablevision of Meridian, Inc. (MS)
Comcast Cablevision of Middletown, Inc. (DE)
Comcast Cablevision of Mobile, Inc. (AL)
Comcast Cablevision of Monmouth County, Inc. (DE)
Comcast Cablevision of Mt. Clemens (MI)
Comcast Cablevision of Mt. Clemens, Inc. (MI)
Comcast Cablevision of New Haven, Inc. (CT)
Comcast Cablevision of New Jersey, Inc. (NJ)
Comcast Cablevision of Newport Beach, Inc. (DE)
Comcast Cablevision of North Orange, Inc. (DE)
Comcast Cablevision of Northwest New Jersey, Inc. (DE)
Comcast Cablevision of Ocean County, Inc. (DE)
Comcast Cablevision of Paducah, Inc. (KY)
Comcast Cablevision of Panama City, Inc. (DE)
Comcast Cablevision of Perry, Inc. (DE)
Comcast Cablevision of Philadelphia, Inc. (PA)
Comcast Cablevision of Philadelphia, L.P. (PA)
Comcast Cablevision of Plainfield, Inc. (DE)
Comcast Cablevision of Quincy, Inc. (DE)
Comcast Cablevision of Sacramento (CA)
Comcast Cablevision of Sacramento, Inc. (DE)
Comcast Cablevision of San Bernardino, Inc. (DE)
Comcast Cablevision of Santa Ana, Inc. (DE)
Comcast Cablevision of Santa Maria, Inc. (DE)
Comcast Cablevision of Seal Beach, Inc. (DE)
Comcast Cablevision of Shelby, Inc. (MI)
Comcast Cablevision of Simi Valley, Inc. (DE)
Page 2
<PAGE>
Comcast Cablevision of Southeast Michigan, Inc. (DE)
Comcast Cablevision of Sterling Heights, Inc. (MI)
Comcast Cablevision of Tallahassee, Inc. (DE)
Comcast Cablevision of Taylor, Inc. (MI)
Comcast Cablevision of the Meadowlands, Inc. (NJ)
Comcast Cablevision of the Shoals, Inc. (AL)
Comcast Cablevision of the South (CO)
Comcast Cablevision of the South, Inc. (CO)
Comcast Cablevision of Tupelo, Inc. (MS)
Comcast Cablevision of Tuscaloosa, Inc. (AL)
Comcast Cablevision of Utica, Inc. (MI)
Comcast Cablevision of Warren (MI)
Comcast Cablevision of Warren, Inc. (MI)
Comcast Cablevision of West Florida, Inc. (DE)
Comcast Cablevision of West Palm Beach, Inc. (DE)
Comcast Cablevision of Westmoreland, Inc. (PA)
Comcast Cablevision of Willow Grove, Inc. (PA)
Comcast Communications Properties, Inc. (DE)
Comcast Holdings, Inc. (DE)
Comcast Internet Access Services, Inc. (DE)
Comcast Internet Services, Inc. (DE)
Comcast MH Business Online Communications, Inc. (DE)
Comcast MH Holdings, Inc. (DE)
Comcast MH Online Communications, Inc. (DE)
Comcast MH Telephony Communications of Florida, Inc. (FL)
Comcast MH Telephony Communications of Michigan, Inc. (MI)
Comcast MH Telephony Communications of New Jersey, Inc. (NJ)
Comcast MHCP Holdings, L.L.C. (DE)
Comcast Michigan Holdings, Inc. (MI)
Comcast Philadelphia Interconnect Partner, Inc. (DE)
Comcast Real Estate Holdings of Alabama, Inc. (AL)
Comcast Real Estate Holdings, Inc. (DE)
Comcast SCH Delaware Holdings, Inc. (DE)
Comcast SCH Holdings, Inc. (CO)
Comcast Storer Finance Sub, Inc. (DE)
Comcast Storer, Inc. (DE)
Comcast Telephony Communications Holdings, Inc. (DE)
First Television Corporation (DE)
M H Lightnet Inc. (DE)
Mt. Clemens Cable TV Investors, Inc. (MI)
New England Microwave, Inc. (CT)
Philadelphia Cable Investment Corporation (DE)
SCI 11, Inc. (DE)
SCI 34, Inc. (DE)
SCI 36, Inc. (DE)
SCI 37, Inc. (DE)
Page 3
<PAGE>
SCI 38, Inc. (DE)
SCI 48, Inc. (DE)
SCI 55, Inc. (DE)
Selkirk Communications (Delaware) Corporation (DE)
Storer Communications, Inc. (DE)
Westmoreland Financial Corporation (DE)
Page 4
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Comcast Cable
Communications, Inc. and subsidiaries on Form S-4 of our report dated April
24, 1997 (except for Note 5, as to which the date is May 1, 1997) relating to
the consolidated financial statements of Comcast Cable Communications, Inc.,
and of our report dated February 28, 1997 (except for Note 6, as to which the
date is May 1, 1997) relating to the consolidated financial statements of
Comcast SCH Holdings, Inc., appearing in the Prospectus, which is part of
this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Our audits of the consolidated financial statements of Comcast Cable
Communications, Inc. referred to in our aforementioned report also included
the financial statement schedules of Comcast Cable Communications, Inc.
listed in Item 21(b). These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
July 3, 1997
<PAGE>
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM T-1
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)___
BANK OF MONTREAL TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-4941093
(State of incorporation or organization (I.R.S. employer
if not a U.S. national bank) identification no.)
77 Water Street
New York, New York 10005
(Address of trustee's principal executive offices) (Zip code)
Mark F. McLaughlin
Bank of Montreal Trust Company
77 Water Street, New York, NY 10005
(212) 701-7602
(Name, address and telephone number of agent for service)
____________________________________
COMCAST CABLE COMMUNICATIONS, INC.
(Exact name of obligor as specified in its charter)
Delaware 23-2175755
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
150 Market Street
Philadelphia, PA 19102-2148
(Address of principal executive offices)
______________________________________
8-1/8% Notes due 2004
8-3/8% Notes due 2007
8-7/8% Notes due 2017
8-1/2% Notes due 2027
(Title of Indenture Securities)
<PAGE>
- 2 -
Item 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.
Federal Reserve Bank of New York
33 Liberty Street, New York NY 10045
State of New York Banking Department
2 Rector Street, New York, NY 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust
Company to transact business and exercise corporate trust
powers; incorporated herein by reference as Exhibit "A"
filed with Form T-1 Statement, Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust
Company; incorporated herein by reference as Exhibit "B"
filed with Form T-1 Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the
Act; incorporated herein by reference as Exhibit "C" with
Form T-1 Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal
Trust Company published pursuant to law or the requirements
of its supervising or examining authority, attached hereto
as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939
the Trustee, Bank of Montreal Trust Company, 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 12th of June, 97.
BANK OF MONTREAL TRUST COMPANY
By /s/ Amy Roberts
-------------------------------
Amy Roberts
Assistant Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
ASSETS
Due From Banks................................................. $ 740,801
-----------
Investment Securities:
State & Municipal............................................ 16,888,571
Other........................................................ 100
-----------
Total Securities........................................... 16,888,671
-----------
Loans and Advances
Federal Funds Sold........................................... 4,300,000
Overdrafts................................................... 3,591
-----------
Total Loans and Advances................................... 4,303,591
-----------
Investment in Harris Trust, NY................................. 7,516,776
Premises and Equipment......................................... 173,475
Other Assets................................................... 2,304,743
-----------
9,994,994
-----------
TOTAL ASSETS............................................... $31,928,057
-----------
-----------
LIABILITIES
Trust Deposits................................................. $ 8,602,958
Other Liabilities.............................................. 784,769
-----------
TOTAL LIABILITIES.......................................... 9,387,727
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and Fully Paid-10,000 Shares
of $100 Each................................................. 1,000,000
Surplus........................................................ 4,222,188
Retained Earnings.............................................. 17,289,810
Equity-Municipal Gain/Loss..................................... 28,332
-----------
TOTAL CAPITAL ACCOUNTS..................................... 22,540,330
-----------
TOTAL LIABILITIES AND CAPITAL ACCOUNTS.................... $31,928,057
-----------
-----------
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
December 31, 1996
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declared that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS AND CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 38 47
<SECURITIES> 75 67
<RECEIVABLES> 82 67
<ALLOWANCES> (12) (13)
<INVENTORY> 28 29
<CURRENT-ASSETS> 232 215
<PP&E> 2,402 2,488
<DEPRECIATION> (856) (896)
<TOTAL-ASSETS> 6,213 6,167
<CURRENT-LIABILITIES> 527 467
<BONDS> 3,068 3,106
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 95 61
<TOTAL-LIABILITY-AND-EQUITY> 6,213 6,167
<SALES> 1,641 501
<TOTAL-REVENUES> 1,641 501
<CGS> 0 0
<TOTAL-COSTS> (1,455) (479)
<OTHER-EXPENSES> (1) 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (261) (66)
<INCOME-PRETAX> (49)<F1> (44)<F2>
<INCOME-TAX> 5 9
<INCOME-CONTINUING> (23) (29)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (23) (29)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>LOSS BEFORE INCOME TAX EXPENSE AND OTHER ITEMS EXCLUDES THE EFFECT OF MINORITY
INTERESTS, NET OF TAX, OF $21.7.
<F2>LOSS BEFORE INCOME TAX EXPENSE AND OTHER ITEMS EXCLUDES THE EFFECT OF MINORITY
INTERESTS, NET OF TAX, OF $5.0.
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
Offer to Exchange
8 1/8% Exchange Notes due 2004
for Any and All Outstanding 8 1/8% Notes due 2004
8 3/8% Exchange Notes due 2007
for Any and All Outstanding 8 3/8% Notes due 2007
8 7/8% Exchange Notes due 2017
for Any and All Outstanding 8 7/8% Notes due 2017
8 1/2% Exchange Notes due 2027
for Any and All Outstanding 8 1/2% Notes due 2027
of
Comcast Cable Communications, Inc.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00P.M.,
NEW YORK CITY TIME ON [EXPIRATION DATE], 1997
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY COMCAST CABLE COMMUNICATIONS, INC.
EXCHANGE AGENT:
BANK OF MONTREAL TRUST COMPANY
By Mail, by Overnight
Courier or by Hand
By Hand: By Mail or Overnight Courier:
Bank of Montreal Trust Company Bank of Montreal Trust Company
77 Water Street, 77 Water Street, 4th Floor
5th Floor Window Attn: Amy Roberts
New York, NY 10005 Corporate Trust Department
New York, NY 10005
By Facsimile:
(212) 701-7684
Confirm by Telephone:
(212) 701-7650
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of Instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated [DATE], 1997
(the "Prospectus") of Comcast Cable Communications, Inc. (the "Company") which,
together with this Letter of Transmittal (the "Letter of Transmittal"),
describes the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of
<PAGE>
a new series of 8 1/8% Exchange Notes due 2004 (the "New Seven-Year Notes")
for each $1,000 in principal amount of outstanding 8 1/8% Notes due 2004 (the
"Old Seven-Year Notes"); $1,000 in principal amount of a new series of 8 3/8%
Exchange Notes due 2007 (the "New Ten-Year Notes") for each $1,000 in
principal amount of outstanding 8 3/8% Notes due 2007 (the "Old Ten-Year
Notes"); $1,000 in principal amount of a new series of 8 7/8% Exchange Notes
due 2017 (the "New Twenty-Year Notes") for each $1,000 in principal amount of
outstanding 8 7/8% Notes due 2017 (the "Old Twenty-Year Notes") and $1,000 in
principal amount of a new series of 8 1/2% Exchange Notes due 2027 (the "New
Thirty-Year Notes" and, together with the New Seven-Year Notes, the New
Ten-Year Notes and the New Twenty-Year Notes, the "New Notes") for each
$1,000 in principal amount of outstanding 8 1/2% Notes due 2027 (the "Old
Thirty-Year Notes" and, together with the Old Seven-Year Notes, the Old
Ten-Year Notes and the Old Twenty-Year Notes, the "Old Notes").
The terms of the New Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the Old
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the offering of the New Notes will have been registered under the
Securities Act of 1933, as amended, and, therefore, the New Notes will not bear
legends restricting the transfer thereof.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OR TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
2
<PAGE>
- ------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- ------------------------------------------------------------------------------
Name(s) and Address(es) Series of Certificate Aggregate Principal
of Registered Holder(s) Note(s) Number(s)* Principal Amount
(Please fill in) Amount Tendered**
Represented
by Notes*
---------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------
*Need not be completed by book-entry holders.
**Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by Old Notes. See Instruction 2.
- ------------------------------------------------------------------------------
3
<PAGE>
This Letter of Transmittal is to be used either if certificates for Old
Notes are to be forwarded herewith or if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" in the Prospectus. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder or any person whose Old
Notes are held of record by DTC who desires to deliver such Old Notes by
book-entry transfer at DTC.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution________________________________________
_____________________________________________________________________
The Depository Trust Company
Account Number_______________________________________________________
Transaction Code Number______________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)_________________________________________
_____________________________________________________________________
Name of Eligible Institution that Guaranteed Delivery
_____________________________________________________________________
4
<PAGE>
If Deivered by Book-Entry Transfer:
Account 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.
Nme:_________________________________________________________________
Address:_____________________________________________________________
_____________________________________________________________________
5
<PAGE>
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 Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order or, the Company all right, title and interest in
and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that said Exchange Agent acts as the agent
of the undersigned in connection with the Exchange Offer) to cause the Old Notes
to be assigned, transferred and exchanged. The undersigned represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the Old Notes and to acquire New Notes issuable upon the exchange of
such tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Old Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Old Notes or transfer ownership of such Old Notes on the
account books maintained by the Depository Trust Company.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer." The undersigned recognizes
that as a result of these conditions (which may be waived, in whole or in part,
by the Company), as more particularly set forth in the Prospectus, the Company
may not be required to exchange any of the Old Notes tendered hereby and, in
such event, the Old Notes not exchanged will be returned to the undersigned at
the address shown below the signature of the undersigned.
By tendering, each holder of Old Notes represents to the Company that (i)
the New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the person receiving such New 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 with any person to participate
in the distribution of such New Notes, (iii) if the holder is not a
broker-dealer, or is a broker-dealer but will not receive new Notes for its own
account in exchange for Old Notes, neither the holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the holder nor any such other person is an "affiliate", as defined
in Rule 405 under the Securities Act of 1933, as amended (the "Act"), of the
Company. If the tendering holder is a broker-dealer (whether or not it is also
an "affiliate") that will receive New Notes for its own account in exchange for
Old Notes, 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 that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale
6
<PAGE>
of such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes, the undersigned is not deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy 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. Tendered Old Notes may be withdrawn
at any time prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old Notes
and any Old Notes delivered herewith but not exchanged, in each case registered
in the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
7
<PAGE>
TENDERING HOLDER(S) SIGN HERE
______________________________________________________________________________
______________________________________________________________________________
Signature(s) of Holder(s)
Dated: _________________________________, 199_
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith or, if the Old
Notes are held of record by DTC, the person in whose name such Old Notes are
registered on the books of DTC. If signature by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 3.
Name(s):______________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (full title):________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.___________________________________________________
______________________________________________________________________________
Tax Identification No.
GUARANTEE OF SIGNATURE(S)
(If Required--See Instruction 3)
Authorized Signature:_________________________________________________________
Name:_________________________________________________________________________
Title:________________________________________________________________________
Address:______________________________________________________________________
Name of Firm:_________________________________________________________________
Area Code and Telephone No.___________________________________________________
Dated:_________________, 199_
8
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1 Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Old Notes or confirmation of any
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company of Old Notes tendered by book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at any of its addresses set forth herein on
or prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the Old Notes and any
other required documents is at the election and risk of the holder and, except
as otherwise provided below, the delivery will be deemed made only when actually
received by the Exchange Agent. If such delivery is by mail, it is suggested
that registered mail with return receipt requested, properly insured, be used.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date or comply with book-entry transfer procedures on a
timely basis may tender their Old Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures." Pursuant to such procedure:(i) such tender must be made
by or through an Eligible Institution (as defined therein);(ii) on or prior to
the Expiration Date the Exchange Agent must have received from such Eligible
Institution, a letter, telegram or facsimile transmission setting forth the name
and address of the tendering holder, the names in which such Old Notes are
registered, and, if possible, the certificate numbers of the Old Notes to be
tendered; and (iii) all tendered Old Notes (or a confirmation of any book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company) as well as this Letter of Transmittal and all other documents
required by this Letter of Transmittal must be received by the Exchange Agent
within five New York Stock Exchange trading days after the date of execution of
such letter, telegram or facsimile transmission, all as provided in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2 Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted
in all denominations of $1,000 and integral multiples in excess thereof. If
less than the entire principal amount of Old Notes evidenced by a submitted
certificate is tendered, the tendering holder must fill in the principal amount
tendered in the box entitled "Principal Amount Tendered." A newly issued
certificate for the principal amount of Old Notes submitted but not tendered
will be sent to such holder as soon as practicable after the
9
<PAGE>
Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent. Any such notice of withdrawal must specify the person named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of the Old Notes to be withdrawn, the principal amount of
Old Notes delivered for exchange, a statement that such a holder is withdrawing
its election to have such Old Notes exchanged, and the name of the registered
holder of such Old Notes, and must be signed by the holder in the same manner as
the original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Company
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Old Notes being withdrawn. The Exchange Agent will return the properly
withdrawn Old Notes promptly following receipt of notice of withdrawal. 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 The
Depository Trust Company to be credited with the withdrawn Old Notes or
otherwise comply with The Depository Trust Company's procedures.
3 Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Old Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative
10
<PAGE>
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority
so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes and the certificates for New Notes to be issued in
exchange therefor are to be issued (or any untendered amount of Old Notes are to
be reissued) to the registered holder; or (ii) for the account of any Eligible
Institution.
4 Transfer Taxes. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Notes to it or its order pursuant
to the Exchange Offer. If, however, New Notes 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 a transfer tax is imposed for any
reason other than the transfer of Old Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception
therefrom is not submitted herewith the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5 Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6 Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated below for further instructions.
7 Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth below. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Company at 1500 Market Street, Philadelphia, Pennsylvania 19102-2148,
Attention: Secretary, (215) 665-1700.
8 Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all Letters
of Transmittal or tenders that are not in
11
<PAGE>
proper form or the acceptance of which would, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to the particular Old Notes covered
by any Letter of Transmittal or tendered pursuant to such letter. None of
the Company, 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. The Company's
interpretation of the terms and conditions of the Exchange Offer shall be
final and binding.
9 Definitions. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with
certificates for Old Notes or confirmation of book-entry transfer and all other
required documents) or a Notice of Guaranteed Delivery must be received by the
Exchange Agent on or prior to the Expiration Date.
12
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
for
Offer to Exchange
8 1/8% Exchange Notes due 2004
for Any and All Outstanding 8 1/8% Notes due 2004
8 3/8% Exchange Notes due 2007
for Any and All Outstanding 8 3/8% Notes due 2007
8 7/8% Exchange Notes due 2017
for Any and All outstanding 8 7/8% Notes due 2017
8 1/2% Exchange Notes due 2027
for Any and All Outstanding 8 1/2% Notes due 2027
of
Comcast Cable Communications, Inc.
Registered holders of outstanding 8 1/8% Notes due 2004, 8 3/8% Notes due
2007, 8 7/8% Notes due 2017 and 8 1/2% Notes due 2027 (collectively, the "Old
Notes") who wish to tender their Old Notes in exchange for a like principal
amount of 8 1/8% Exchange Notes due 2004, 8 3/8% Exchange Notes due 2007, 8 7/8%
Exchange Notes due 2017 and 8 1/2% Exchange Notes due 2027 (collectively, the
"New Notes") and, in each case, whose Old Notes are not immediately available
or who cannot deliver their Old Notes and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to Bank of Montreal
Trust Company (the "Exchange Agent") prior to the Expiration Date, may use
this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight delivery) or by mail to the Exchange Agent.
See "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
BANK OF MONTREAL TRUST COMPANY
By Hand: By Mail or Overnight Courier:
Bank of Montreal Trust Company Bank of Montreal Trust Company
77 Water Street, 77 Water Street, 4th Floor
5th Floor Window Attn: Amy Roberts,
New York, NY 10005 Corporate Trust Department
New York, NY 10005
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 701-7684
To Confirm by Telephone
or for Information Call:
(212) 701-7650
<PAGE>
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear
in the applicable space provided on the Letter of Transmittal for Guarantee
of Signatures.
2
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Note to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within five New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:_____________________ ___________________________________
(Authorized Signature)
Address:__________________________ Title:_____________________________
__________________________________ Name:______________________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:_____________________________
__________________________________
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
3
<PAGE>
Exhibit 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER OF PARTICIPANT FROM OWNER
OF
COMCAST CABLE COMMUNICATIONS, INC.
8 1/8% Notes due 2004
8 3/8% Notes due 2007
8 7/8% Notes due 2017
8 1/2% Notes due 2027
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Comcast Cable Communications, Inc., a
Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer"). Capitalized terms used but not
defined herein have the meaning as ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$__________________ of the 8 1/8% Notes due 2004
$__________________ of the 8 3/8% Notes due 2007
$__________________ of the 8 7/8% Notes due 2017
$__________________ of the 8 1/2% Notes due 2027
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/ / To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, if any):
$__________________ of the 8 1/8% Notes due 2004
$__________________ of the 8 3/8% Notes due 2007
$__________________ of the 8 7/8% Notes due 2017
$__________________ of the 8 1/2% Notes due 2027
<PAGE>
/ / NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations, that
(i) the New Notes acquired pursuant to the Exchange Offer are being acquired
in the ordinary course of business of the undersigned, (ii) the undersigned
does not have an arrangement or understanding with any person to participate
in the distribution of such New Notes, (iii) if the undersigned is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its
own account in exchange for Old Notes, the undersigned is not engaged in and
does not intend to participate in the distribution of such New Notes and (iv)
the undersigned is not an "affiliate", as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
If the undersigned is a broker-dealer (whether or not it is also an
"affiliate") that will receive New Notes for its own account in exchange for
Old Notes, it represents that such Old Notes were acquired as a result of
market-making activities or other trading activities, and it acknowledges
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such New Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
2
<PAGE>
SIGN HERE
Name of beneficial owner(s): _________________________________________________
Signature(s): ________________________________________________________________
Name(s) (please print): ______________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
Telephone Number: ____________________________________________________________
Taxpayer Identification or Social Security Number: ___________________________
______________________________________________________________________________
Date: ________________________________________________________________________
3
<PAGE>
Exhibit 99.4
Offer to Exchange
8 1/8% Exchange Notes due 2004
for Any and All Outstanding 8 1/8% Notes due 2004
8 3/8% Exchange Notes due 2007
for Any and All Outstanding 8 3/8% Notes due 2007
8 7/8% Exchange Notes due 2017
for Any and All outstanding 8 7/8% Notes due 2017
8 1/2% Exchange Notes due 2027
for Any and All Outstanding 8 1/2% Notes due 2027
of
Comcast Cable Communications, Inc.
To Our Clients:
We are enclosing herewith a Prospectus, dated [ ], 1997, of
Comcast Cable Communications, Inc., a Delaware corporation (the "Company"),
and a related Letter of Transmittal (which together constitute the "Exchange
Offer") relating to the offer by the Company to exchange its 8 1/8% Exchange
Notes due 2004, 8 3/8% Exchange Notes due 2007, 8 7/8% Exchange Notes due 2017
and 8 1/2% Exchange Notes due 2027 (collectively, the "New Notes"), pursuant
to an offering registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
8 1/8% Notes due 2004, 8 3/8% Notes due 2007, 8 7/8% Notes due 2017 and 8 1/2%
Notes due 2027 (collectively, the "Old Notes") upon the terms and subject to
the conditions set forth in the Exchange Offer.
Please note that the Offer will expire at 5:00 p.m., New York City time,
on [ ], 1997, unless extended.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Old Notes held by us for your account. A tender of such Old Notes
can be made only by us as the record holder and/or participant in the
book-entry transfer facility and pursuant to your instructions. The Letter of
Transmittal is furnished to you for your information only and cannot be used
by you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and
conditions of the
<PAGE>
Exchange Offer. We also request that you confirm that we
may on your behalf make the representations contained in the Letter of
Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder,
(ii) neither the holder of the Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, (iii) if the holder is not a broker-dealer or
is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is
engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the holder nor any such other person is an "affiliate", as
defined in Rule 405 under the Securities Act, of the Company. If the
tendering holder is a broker-dealer (whether or not it is also an
"affiliate") that will receive New Notes for its own account in exchange for
Old Notes, 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 that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such New Notes, the holder is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Very truly yours,
COMCAST CABLE COMMUNICATIONS, INC.
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<PAGE>
Exhibit 99.5
Offer to Exchange
8 1/8% Exchange Notes due 2004
for Any and All Outstanding 8 1/8% Notes due 2004
8 3/8% Exchange Notes due 2007
for Any and All Outstanding 8 3/8% Notes due 2007
8 7/8% Exchange Notes due 2017
for Any and All outstanding 8 7/8% Notes due 2017
8 1/2% Exchange Notes due 2027
for Any and All Outstanding 8 1/2% Notes due 2027
of
Comcast Cable Communications, Inc.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by Comcast Cable Communications, Inc. (the "Company"), a Delaware
corporation, to exchange its 8 1/8% Exchange Notes due 2004, 8 3/8% Exchange
Notes due 2007, 8 7/8% Exchange Notes due 2017 and 8 1/2% Exchange Notes due
2027 (collectively, the "New Notes"), pursuant to an offering registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like principal amount of its issued and outstanding 8 1/8% Notes due 2004,
8 3/8% Notes due 2007, 8 7/8% Notes due 2017 and 8 1/2% Notes due 2027
(collectively, the "Old Notes") upon the terms and subject to the conditions
set forth in the Company's Prospectus, dated [ ], 1997, and the
related Letter of Transmittal (which together constitute the "Exchange
Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner; and
5. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee, to
accompany the instruction form referred to above, for obtaining
such client's instruction with regard to the Exchange Offer.
<PAGE>
We urge you to contact your clients promptly. Please note that the
Offer will expire at 5:00 p.m., New York City time, on [ ], 1997,
unless extended.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder,
(ii) neither the holder of the Old Notes nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, (iii) if the holder is not a broker-dealer,
or is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is
engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the holder nor any such other person is an "affiliate", as
defined in Rule 405 under the Securities Act, of the Company. If the
tendering holder is a broker-dealer (whether or not it is also an
"affiliate") that will receive New Notes for its own account in exchange for
Old Notes, you will represent on behalf of such broker-dealer 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 acknowledge on
behalf of such broker-dealer that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner contains an authorization by the beneficial owners of
the Old Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Offer. The Company will
pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 4 of the enclosed
Letter of Transmittal.
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<PAGE>
Additional copies of the enclosed material may be obtained from the
Exchange Agent, Bank of Montreal Trust Company, telephone (212) 701-7650.
Very truly yours,
COMAST CABLE COMMUNICATIONS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU THE
AGENT OF COMCAST CABLE COMMUNICATIONS, INC. OR THE BANK OF MONTREAL TRUST
COMPANY OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR
BEHALF IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
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