<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
DELAWARE 4841 84-1432334
DELAWARE 4841 84-1432976
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBERS)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1777 SOUTH HARRISON STREET, SUITE P-200, DENVER, COLORADO 80210 (303) 757-1588
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
---------------
JAMES C. VAUGHN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FRONTIERVISION INC.
1777 SOUTH HARRISON STREET, SUITE P-200
DENVER, COLORADO 80210
(303) 757-1588
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' AGENT FOR SERVICE)
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PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
EDWARD J. O'CONNELL, ESQ. GERALD S. TANENBAUM, ESQ.
DOW, LOHNES & ALBERTSON CAHILL GORDON & REINDEL
1200 NEW HAMPSHIRE AVENUE, N.W. 80 PINE STREET
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10005
(202) 776-2000 (212) 701-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the securities being registered on this Form are being offered in connec-
tion with the formation of a holding company and there is compliance with Gen-
eral Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering pur-
suant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) un-
der the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
AMOUNT OFFERING MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
11 7/8% Senior Discount
Notes due 2007........ $237,650,000 63.262% $150,342,143 $45,560
</TABLE>
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(1) An indeterminate amount is also being registered for resale by dealers in
connection with market-making activities. See "Explanatory Note."
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933, as amended.
(3) Calculated pursuant to Rule 457(f)(2) based upon the book value on Septem-
ber 26, 1997 of the Notes to be received by the Registrants in the ex-
change described herein.
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRA-
TION 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 PURSU-
ANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of $237,650,000 aggre-
gate Principal Amount at Maturity (as defined) of 11 7/8% Senior Discount
Notes due 2007 (the "Exchange Notes"), which are being issued by
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation
(collectively, the "Issuers") in exchange for 11 7/8% Senior Discount Notes
due 2007 with terms substantially identical to the Exchange Notes (the "Old
Notes"). The Old Notes were previously issued and sold by the Issuers in an
offering exempt from the registration requirements of the Securities Act of
1933, as amended. The complete Prospectus contained herein relates to the is-
suance and exchange of the Exchange Notes for the Old Notes. Immediately fol-
lowing the complete Prospectus are certain alternate pages of the Prospectus
relating to the sale of the Exchange Notes by J.P. Morgan Securities Inc. and
First Union Capital Markets Corp. in market-making transactions, including an
alternate front cover page and a section entitled "Plan of Distribution."
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion
Dated September 26, 1997
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
[LOGO]
OFFER TO EXCHANGE 11 7/8% SENIOR DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING 11 7/8% SENIOR DISCOUNT NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON OCTOBER , 1997, UNLESS EXTENDED
FrontierVision Holdings, L.P., a Delaware limited partnership ("Holdings"), and
FrontierVision Holdings Capital Corporation, a Delaware corporation ("Holdings
Capital") (each of Holdings and Holdings Capital being sometimes referred to
herein individually as an "Issuer" and collectively as the "Issuers"), hereby
offer, upon the terms and subject to the conditions set forth in this Prospec-
tus and the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange $1,000 original Principal Amount at Maturity (as
defined) of 11 7/8% Senior Discount Notes due 2007 of the Issuers (the "Ex-
change Notes") for each $1,000 original Principal Amount at Maturity of the Is-
suers' issued and outstanding 11 7/8% Senior Discount Notes due 2007 (the "Old
Notes," and collectively with the Exchange Notes, the "Notes"). As of the date
of this Prospectus, $237,650,000 aggregate original Principal Amount at Matu-
rity of the Old Notes are outstanding.
The form and terms of the Exchange Notes are the same as the form and terms of
the Old Notes except that (i) the issuance of the Exchange Notes will have been
registered under the Securities Act and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) holders of the Exchange
Notes will not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement (as defined). The Exchange Notes will evidence
the same debt as the Old Notes (which they replace) and will be issued under
and be entitled to the benefits of the Indenture, dated as of September 19,
1997 (the "Indenture"), by and among the Issuers and U.S. Bank National Associ-
ation d/b/a Colorado National Bank, as Trustee, governing the Old Notes. See
"The Exchange Offer" and "Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will expire
at 5:00 p.m., New York City time, on October , 1997, unless the Issuers, in
their sole discretion, extend the Exchange Offer (as such date may be so ex-
tended, the "Expiration Date"), in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended. Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date; otherwise such tenders are irrevocable.
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS 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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Notes mature on September 15, 2007, unless previously redeemed. The Notes
were issued at a price of $631.18 per $1,000 original Principal Amount at Matu-
rity, representing a yield to maturity of 11 7/8% (computed on a semiannual
bond-equivalent basis). Unless the Issuers have previously made the Cash Inter-
est Election (as defined), the Notes will not accrue cash interest until Sep-
tember 15, 2001. Cash interest on the Notes will accrue at a rate of 11 7/8%
per annum and will be payable on a semiannual basis on each March 15 and Sep-
tember 15, commencing on the earlier of the Interest Payment Date (as defined)
following the Cash Interest Election or March 15, 2002. The Notes are not re-
deemable prior to September 15, 2001, except as set forth below. The Notes will
be redeemable at the option of the Issuers, in whole or in part, at any time on
or after September 15, 2001, at the redemption prices set forth herein, to-
gether with accrued and unpaid interest to the redemption date. In addition,
prior to September 15, 2000, the Issuers may redeem up to 35% of the Principal
Amount at Maturity of the Notes with the net cash proceeds received from one or
more Public Equity Offerings or Strategic Equity Investments (as such terms are
defined) at a redemption price of 111.875% of the Accreted Value thereof, plus
accrued and unpaid interest, if any, to the redemption date; provided, however,
that at least 65% in aggregate Principal Amount at Maturity of the Notes origi-
nally issued remains outstanding immediately after any such redemption. Upon a
Change of Control (as defined), the Issuers will be required to make an offer
to purchase all of the outstanding Notes at 101% of the Accreted Value thereof,
together with accrued and unpaid interest to the purchase date.
The Exchange Offer is being made to satisfy certain obligations of the Issuers
under the Registration Rights Agreement, dated as of September 19, 1997 (the
"Registration Rights Agreement"), among the Issuers and J.P. Morgan Securities
Inc., Chase Securities Inc., CIBC Wood Gundy Securities Corp. and First Union
Capital Markets Corp., as the initial purchasers of the Old Notes (the "Initial
Purchasers"). Upon consummation of the Exchange Offer, holders of Old Notes
that were not prohibited from participating in the Exchange Offer and did not
tender their Old Notes will not have any registration rights under the Regis-
tration Rights Agreement with respect to such nontendered Old Notes and, ac-
cordingly, such Old Notes will continue to be subject to the restrictions on
transfer contained in the legend thereon.
(Cover page continued on following page)
, 1997
<PAGE>
(Cover page continued)
Based upon interpretations by the staff of the Securities and Exchange Commis-
sion (the "Commission") set forth in certain no-action letters issued to third
parties, the Issuers believe that the Exchange Notes issued pursuant to the Ex-
change Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such holder that is
an "affiliate" of the Issuers within the meaning of Rule 405 under the Securi-
ties Act of 1933, as amended (the "Securities Act")) without compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that at the time of the consummation of the Exchange Of-
fer such holder has no arrangement or understanding with any person to partici-
pate in the distribution of such Exchange Notes. See "The Exchange Offer--Re-
sale of the Exchange Notes." Holders of Old Notes wishing to accept the Ex-
change Offer must represent to the Issuers, as required by the Registration
Rights Agreement, that such conditions have been met and that such holder is
not an "affiliate" of the Issuers within the meaning of Rule 405 under the Se-
curities Act. Each broker-dealer that is the beneficial owner (within the mean-
ing of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), of Exchange Notes received by such broker-dealer for its own
account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securi-
ties Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by any person subject to the prospectus delivery requirements
of the Securities Act (other than a Participating Broker Dealer (an "Excluded
Participating Broker Dealer") who either (x) acquired Notes other than for its
own account as a result of market-making activities or other trading activities
or (y) has entered into any arrangement or understanding with any Issuer or any
affiliate of any Issuer to distribute the Exchange Notes). The Issuers have
agreed that, for a period of up to 180 days, they will use their reasonable
best efforts to keep the Exchange Offer Registration Statement (as defined) ef-
fective and to amend and supplement this Prospectus in order to permit this
Prospectus to be lawfully delivered by all persons subject to the prospectus
delivery requirements of the Securities Act (provided that, as set forth in the
Letter of Transmittal, such persons shall have expressed that they may be sub-
ject to such requirements and have undertaken to use their reasonable best ef-
forts to notify Holdings when they are no longer subject to such requirements).
See "Plan of Distribution."
The Old Notes were originally issued and sold on September 19, 1997 in an of-
fering of $237,650,000 aggregate original Principal Amount at Maturity of the
Notes (the "Offering,"). The Offering was exempt from registration under the
Securities Act in reliance upon the exemptions provided by Section 4(2), Rule
144A and Regulation S of the Securities Act. Accordingly, the Old Notes may not
be reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an exemption from the registration
requirements of the Securities Act and applicable state securities laws is
available.
The Issuers have not entered into any arrangement or understanding with any
person to distribute the Exchange Notes to be received in the Exchange Offer,
and to the best of the Issuers' information and belief, each person participat-
ing in the Exchange Offer is acquiring the Exchange Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes to be received in the Ex-
change Offer. Any holder who is an "affiliate" of the Issuers (within the mean-
ing of Rule 405 under the Securities Act), who does not acquire the Exchange
Notes in the ordinary course of business or who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes could
not rely on the position of the staff of the Commission enunciated in the 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 any resale transaction. Failure to comply with such require-
ments in such instance may result in such holder incurring liability under the
Securities Act for which the holder is not indemnified by the Issuers.
There has not previously been any public market for the Old Notes or the Ex-
change Notes. The Issuers do not intend to list the Exchange Notes on any secu-
rities exchange or to seek approval for quotation through any automated quota-
tion system. There can be no assurance that an active market for the Exchange
Notes will develop. See "Risk Factors." Moreover, to the extent that Old Notes
are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
2
<PAGE>
(Cover page continued)
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT SURREN-
DERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LET-
TER OF TRANSMITTAL NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUM-
STANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR-
RECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING
IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN AD-
DITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Exchange Notes will be available initially only in book-entry form and the
Issuers expect that the Exchange Notes issued pursuant to the Exchange Offer
will be represented by one or more Global Notes (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and reg-
istered in its name or in the name of Cede & Co., its nominee. Beneficial in-
terests in the Global Notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants. After the
initial issuance of the Global Notes, notes in certificated form will be is-
sued in exchange for the Global Notes only under limited circumstances as set
forth in the Indenture. See "Book-Entry; Delivery and Form."
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................................................... 5
Risk Factors.......................................................... 19
Use of Proceeds....................................................... 25
Capitalization........................................................ 26
Selected Financial and Operating Data
of the Company....................................................... 27
Pro Forma Financial Data.............................................. 29
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................................... 35
Business.............................................................. 44
Legislation and Regulation............................................ 58
Management............................................................ 65
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Certain Relationships and Related Transactions........................ 69
Principal Security Holders............................................ 70
The Partnership Agreements............................................ 71
Description of Other Indebtedness..................................... 74
The Exchange Offer.................................................... 80
Description of the Notes.............................................. 88
Certain Federal Income Tax Considerations............................. 114
Plan of Distribution.................................................. 119
Legal Matters......................................................... 120
Experts............................................................... 120
Available Information................................................. 121
Glossary.............................................................. 122
Index to Financial Statements......................................... F-1
</TABLE>
DISCLOSURE REGARDING FORWARDING-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPEC-
TUS, INCLUDING WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE "PROSPECTUS
SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RE-
SULTS OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING THE
ISSUERS' FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE FORWARD-LOOK-
ING STATEMENTS. ALTHOUGH THE ISSUERS BELIEVE THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THEY CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE ISSUERS' EXPECTATIONS ("CAU-
TIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMI-
TATION IN CONJUNCTION WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPEC-
TUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE ISSUERS OR PERSONS ACTING ON THEIR BEHALF ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed infor-
mation and financial statements and notes thereto appearing elsewhere in this
Prospectus. As used in this Prospectus, "Holdings" refers to FrontierVision
Holdings, L.P., a Delaware limited partnership which is a newly organized hold-
ing company. Holdings was recently formed to be an issuer of the Notes and ac-
quired directly or indirectly all of the outstanding partnership interests in
FVOP immediately prior to the issuance of the Old Notes (the "Formation Trans-
action"). All information contained in this Prospectus gives effect, unless
otherwise noted, to the formation of Holdings and the Formation Transaction.
"FVOP" refers to FrontierVision Operating Partners, L.P., a Delaware limited
partnership which directly owns and operates cable television systems. "Hold-
ings Capital" refers to FrontierVision Holdings Capital Corporation, a Delaware
corporation which is a wholly owned subsidiary of Holdings formed to be an is-
suer of the Notes; "FVOP Capital" refers to FrontierVision Capital Corporation,
a Delaware corporation which is a wholly owned subsidiary of FVOP; and "FVOP
Inc." refers to FrontierVision Operating Partners, Inc., a Delaware corporation
which is a wholly owned subsidiary of Holdings. "FVP" or the "General Partner"
refers to FrontierVision Partners, L.P., a Delaware limited partnership which
owns directly and indirectly all of the partnership interests of Holdings. See
"--Ownership Structure." As used herein, the "Company" or "FrontierVision" re-
fers collectively to Holdings, Holdings Capital, FVOP, FVOP Inc. and FVOP Capi-
tal. As used in this Prospectus, the term "Acquisition Systems" includes, among
other systems, the cable television system acquired from an affiliate of Phoe-
nix Cable on August 29, 1997 and from Blue Ridge Cablesystems, L.P. on Septem-
ber 3, 1997, and the term "Acquisitions" includes the purchase of such systems.
See "Glossary" for the definitions of certain terms used herein.
THE COMPANY
FrontierVision was organized in 1995 to own, operate and develop cable televi-
sion systems in small and medium-sized suburban and exurban communities in geo-
graphically concentrated operating clusters. The Company has established three
primary operating clusters--New England, Ohio and Kentucky--with a fourth,
smaller group of cable television systems in the Southeast. Since closing its
first acquisition in November 1995, the Company has completed 15 acquisitions
and has substantially achieved its initial acquisition objective of acquiring
at least 500,000 subscribers in operating clusters serving 100,000 or more sub-
scribers. In meeting its growth objective, the Company has taken advantage of a
market opportunity to acquire cable properties in small to medium-sized commu-
nities at historically attractive values. FrontierVision is currently one of
the 25 largest multiple system cable operators ("MSOs") in the United States;
the cable television systems owned by the Company on June 30, 1997 (the "Exist-
ing Systems") passed approximately 559,300 homes in 12 states and served ap-
proximately 390,350 basic subscribers as of such date.
Recently, the Company has begun to exploit a new market opportunity to acquire
larger cable systems which are contiguous or in close proximity to the Existing
Systems. The Company expects this strategy will enable it to further consoli-
date its market areas, increase subscriber density within its operating clus-
ters and achieve economies of scale and operating efficiencies. These acquisi-
tion opportunities are primarily presented by larger MSOs, which the Company
believes are divesting or trading "non-core" systems in an effort to concen-
trate their own geographic clusters in larger urban and suburban markets. The
Company has entered into agreements or has substantially completed negotiations
to acquire, for an aggregate purchase price of approximately $323.2 million
(subject to adjustment), additional systems (the "Acquisition Systems") which
passed approximately 250,800 homes and served approximately 175,150 basic sub-
scribers as of June 30, 1997. The Acquisition Systems primarily consist of cer-
tain significant cable television systems to be acquired from affiliates of Ca-
blevision Systems, Inc. ("Cablevision"), Tele-Communications, Inc. ("TCI") and
Cox Communications, Inc. ("Cox"). As of June 30, 1997, the Cablevision systems
served approximately 53,400 subscribers in Maine, the TCI systems served ap-
proximately 14,900 subscribers in New Hampshire and 7,200 subscribers in Ver-
mont and the Cox systems served approximately 87,550 subscribers in Ohio.
The Company is currently the second largest MSO in Kentucky, and, after giving
pro forma effect to the purchase of the Acquisition Systems, as of June 30,
1997, the Company would be the largest MSO in Maine and one of the top five
MSOs in Ohio. In the Southeast, the Company has accumulated attractive systems
which it expects either to consolidate with subsequent system acquisitions,
trade for systems within the Company's primary operating regions or divest at
favorable
5
<PAGE>
prices. As of June 30, 1997, after giving pro forma effect to the purchase of
the Acquisition Systems (the "Acquisitions"), the Company's cable television
systems passed approximately 810,100 homes and served approximately 565,500 ba-
sic subscribers, representing a basic penetration level of 69.8%. On such a pro
forma basis, for the six months ended June 30, 1997 and for the year ended De-
cember 31, 1996, the Company had revenues of approximately $102.5 million and
$198.1 million, respectively, and EBITDA (as defined) of approximately $47.4
million and $93.9 million, respectively.
Through continued acquisitions and internal growth, the Company seeks to own
and operate cable systems serving at least 750,000 subscribers in geographi-
cally concentrated clusters, each of which serves at least 150,000 subscribers.
By continuing to focus on increasing subscriber density within its operating
clusters through selective acquisitions, integrating and streamlining business
operations, and making significant investment and improvements in technical
plant, the Company believes it can further enhance the operational and finan-
cial performance of its cable systems as well as effectively position the prop-
erties for the development of existing and new cable and broadband telecommuni-
cations services.
BUSINESS STRATEGY
The Company's objective is to increase its subscriber base and operating cash
flow through selective acquisitions of cable television systems that can be in-
tegrated with the Company's Existing Systems and to enhance enterprise value
through operating improvements and revenue growth. To achieve its objective,
the Company pursues the following business strategies:
TARGET CLUSTERS IN SMALL AND MEDIUM-SIZED MARKETS. The Company has acquired
contiguous clusters of cable television systems serving small and medium-sized
suburban and exurban markets which are generally within 50 to 100 miles of
larger urban and suburban communities. The Company believes that such markets
have many of the beneficial attributes of larger urban and suburban markets,
including moderate to high household growth, economic stability, attractive
subscriber demographics and favorable potential for additional clustering.
Moreover, in such markets, the Company believes that (i) it will face less di-
rect competition given the lower population densities and higher costs per sub-
scriber of installing cable service; (ii) it will maintain higher subscriber
penetration levels and lower customer turnover based on fewer competing enter-
tainment alternatives; and (iii) its overhead and operating costs will gener-
ally be lower than similar costs incurred in larger markets.
GROW THROUGH STRATEGIC AND OPPORTUNISTIC ACQUISITIONS. In seeking to become the
consolidator of cable television systems within its targeted geographic areas,
the Company has systematically implemented a focused acquisition and consolida-
tion strategy within its three primary operating clusters of New England, Ohio
and Kentucky and its systems group in the Southeast. Recently, the Company has
significantly increased the size and scale of its operating clusters by enter-
ing into agreements to acquire larger cable systems deemed "non-core" by larger
MSOs. The Company will also continue to pursue "fill-in" acquisitions of
smaller systems in its operating clusters. The Company believes that such ac-
quisition targets will have diminished strategic value to other prospective
buyers given the Company's geographic prominence in these regions. Consequent-
ly, the Company believes these acquisition targets can be purchased at favora-
ble prices.
IMPLEMENT OPERATING EFFICIENCIES AND INCREASE OPERATING CASH FLOW THROUGH RE-
GIONAL CONSOLIDATION. Upon acquiring a system, FrontierVision implements exten-
sive management, operational and technical changes designed to improve operat-
ing efficiencies and increase operating cash flow. By centralizing and upgrad-
ing customer support functions, the Company has begun to reduce administrative
costs and better manage and train employees, while providing a higher level of
customer service than was previously provided by smaller, dispersed offices.
Within the Existing Systems and Acquisition Systems, the Company plans to con-
solidate up to 58 customer service and sales offices into five regional service
centers and 17 local payment offices. The Company also seeks to reduce techni-
cal operating costs and capital expenditures by consolidating headend facili-
ties. In the Existing Systems and the Acquisition Systems, the Company plans to
eliminate over 40% of the 249 headends. By serving more subscribers from a sin-
gle distribution point, FrontierVision has begun to decrease ongoing technical
maintenance expenses, improve system reliability and enhance cost-efficiencies
in adding new channels and services.
PROMOTE AND EXPAND SERVICE OFFERINGS. Because many of the Company's customers
received limited service offerings prior to acquisition, the Company believes
that a significant opportunity exists to increase service revenue by increasing
the programming and pricing options available to its customers. Towards this
end, the Company has created new basic and premium packages and launched sev-
eral lower priced premium channels such as Disney, Starz! and Encore. The
6
<PAGE>
Company also aggressively promotes and expands services to add and retain cus-
tomers and increase revenue per customer. The Company employs a coordinated ar-
ray of marketing techniques, including direct door-to-door sales,
telemarketing, direct mail, print and broadcast advertising, flyers and billing
inserts and cross-channel promotion. In April 1997, the Company established a
centralized, in-house telemarketing center initially focusing on telemarketing
premium service packages to its customers in Ohio and Maine. The Company is
also actively engaged in sales audit programs targeted at its markets with low
cable penetration. As systems are consolidated and technically enhanced, the
Company will also continue to expand addressability, which is currently only
available in systems serving 36.9% of the Company's subscribers, and seek to
increase revenues derived from pay-per-view movies and events, as well as new
pay services such as interactive video games. In addition, with the expanded
advertising market delivery afforded by larger, contiguous system clusters, the
Company plans to intensify local spot advertising sales efforts, which gener-
ated only $0.64 per subscriber per month in the second quarter of 1997.
STRATEGICALLY UPGRADE SYSTEMS. The Company will selectively upgrade its cable
systems to increase channel capacities, enhance signal quality and improve
technical reliability. The Company believes that such technical upgrades will
not only enhance the potential for increasing revenues, but also will improve
customer and community relations and further solidify the Company's incumbent
position as the preeminent local provider of video services. Over the next five
years, the Company intends to establish a technical platform of 400 MHz to 550
MHz (54 to 78 analog channels) in most of its systems and 750 MHz (110 analog
channels) in its larger markets. Subsequent to this upgrade plan, approximately
two-thirds of the Company's subscribers will be served by systems with 550 MHz
to 750 MHz plant. Over the same period, the Company plans to invest substantial
amounts in addressable converters. Given the scope of its engineering activi-
ties, the Company is in the process of hiring in-house construction and techni-
cal management personnel to improve efficiencies and expedite the completion of
engineering projects. The Company continually monitors and evaluates new tech-
nological developments to anticipate the introduction of new services and pro-
gram delivery capabilities, such as the Headend-in-the-Sky ("HITS") digital
programming system and cable Internet access. As a result, the Company may de-
termine to reallocate the investment of its capital in order to deploy such
technology and to make optimal use of its assets.
POSITION THE SYSTEMS FOR BROADBAND SERVICES. By implementing a hybrid fiber
optic/coaxial cable design ("HFC") across the majority of its cable plant, the
Company will effectively position itself for the introduction of new broadband
video, voice and data services. Given its fiber-rich local infrastructure and
the expanded bandwidth provided by coaxial cable, the Company believes it will
enjoy distinct advantages over competitive service providers, which include
higher speed, increased capacity, greater selectivity and better technical re-
liability. The Company's full service broadband HFC networks will enable it to
offer a wide range of new services that include video applications such as dig-
ital programming, regional advertising insertion and interactive video games,
as well as telecommunications and data services such as cable Internet access,
virtual LAN applications, high speed point-to-point data transmission and com-
petitive telephone access. In addition, the Company is initiating limited beta
tests of digital programming systems and cable modems to assess the viability
of a more widespread roll-out.
FOCUS ON THE CUSTOMER. FrontierVision continually seeks to provide superior
customer service and improve programming and service choices for its subscrib-
ers. By centralizing customer service at the regional level, all functions that
directly impact subscribers, including sales and marketing, customer service
and administration and technical support, are implemented as close to the cus-
tomer as possible. In addition, as a result of its consolidation efforts, the
Company has been able to enhance its customer service by increasing hours of
operation for its customer service functions, better coordinating technical
service and installation calls, speeding responsiveness to customer inquiries
and standardizing maintenance procedures. While centralizing and improving cus-
tomer service, the Company has opened local payment and technical offices to
maintain its local presence and visibility within its communities. In addition,
as part of the Company's plans to upgrade its acquired cable systems,
FrontierVision regularly evaluates the programming packages, pricing options
and add-on services available to its customers.
7
<PAGE>
THE EXISTING SYSTEMS AND THE ACQUISITION SYSTEMS
The following table illustrates certain subscriber and operating statistics for
the Existing Systems and the Acquisition Systems as of June 30, 1997:
<TABLE>
<CAPTION>
---------------------------------------------------------
AVG. MONTHLY
REVENUE PER
HOMES BASIC BASIC PREMIUM BASIC
PASSED SUBSCRIBERS PENETRATION PENETRATION SUBSCRIBER(1)
------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing Systems(2):
New England........... 95,675 68,350 71.4% 35.3% $30.58
Ohio.................. 201,100 140,225 69.7% 47.5% 31.41
Kentucky.............. 167,800 124,925 74.5% 38.1% 32.36
Southeast............. 94,725 56,850 60.0% 46.0% 27.66
------- -------- ------- ------- ---------
Total Existing
Systems............ 559,300 390,350 69.8% 42.1% 30.99
Acquisition Systems(3):
Cablevision........... 89,400 53,400 59.7% 59.8% 29.47
TCI................... 28,450 22,100 77.7% 37.3% 33.07
Cox................... 116,450 87,550 75.2% 66.9% 32.89
Other................. 16,500 12,100 73.3% 28.7% 27.53
------- -------- ------- ------- ---------
Total Acquisition
Systems............ 250,800 175,150 69.8% 58.4% 31.50
------- -------- ------- ------- ---------
Total Systems....... 810,100 565,500 69.8% 47.2% $31.15
======= ======== ======= ======= =========
</TABLE>
- --------------
(1) Average monthly revenue per basic subscriber equals revenue for the month
ended June 30, 1997 divided by the number of basic subscribers as of the end
of such period.
(2) The cable television systems owned by the Company as of June 30, 1997. See
"Business--Development of the Systems."
(3) The Acquisition Systems primarily include systems to be acquired from
Cablevision, TCI and Cox. See "--The Acquisition Systems."
THE ACQUISITION SYSTEMS
Cablevision Systems. The Company has entered into an agreement with Cablevision
to acquire systems (the "Cablevision Systems") serving approximately 53,400
subscribers as of June 30, 1997 in Maine for $78.2 million. The Company intends
to operate the Cablevision Systems as part of its New England cluster. The Ca-
blevision Systems primarily serve the cities of Bangor and Lewiston, Maine and
outlying communities from four headend facilities. Bangor and Lewiston, respec-
tively, are the second and third largest cities in Maine. The Cablevision Sys-
tems are contiguous to certain of the Existing Systems which served approxi-
mately 19,000 subscribers as of June 30, 1997. Up to 18 headend facilities
serving these Existing Systems are expected to be interconnected as part of the
Company's overall upgrade plan, resulting in approximately 70,000 subscribers
being served by two headend facilities.
TCI New England Systems. The Company has entered into an agreement with TCI to
acquire systems (the "TCI New England Systems") serving approximately 22,100
subscribers as of June 30, 1997 in Vermont and New Hampshire for $34.5 million.
The Company intends to operate the TCI New England Systems as part of its New
England cluster. The New Hampshire systems are located in communities within 60
miles of Concord, the state capital. The Lebanon, New Hampshire system will be-
come the Company's largest system in the state. The Vermont systems are located
north and northeast of Burlington, the state's largest city, and will establish
the Company's presence in Vermont.
Cox Central Ohio Systems. The Company has entered into a letter of intent and
has substantially completed negotiations with Cox to acquire systems (the "Cox
Central Ohio Systems") serving approximately 87,550 subscribers as of June 30,
1997 in Central Ohio for $193.0 million. The nine systems are located primarily
in communities between Columbus and Akron, Ohio and are contiguous to eight of
the Existing Systems which served approximately 8,000 subscribers as of
8
<PAGE>
June 30, 1997. The acquisition of the Cox Central Ohio Systems, which will be
operated as part of the Company's Ohio cluster, will significantly expand the
Company's presence in central Ohio and increase the average system size in the
Company's Ohio cluster.
Other Acquisitions. In addition to the acquisition of the Cablevision Systems,
the TCI New England Systems and the Cox Central Ohio Systems, the Company re-
cently has entered into agreements to acquire systems serving approximately
12,100 subscribers as of June 30, 1997 for $17.5 million. On August 29, 1997,
the Company purchased from an affiliate of Phoenix Cable ("Phoenix") a system
(the "Phoenix Michigan System") serving approximately 7,600 subscribers as of
June 30, 1997 in southeast Michigan for $13.5 million, which the Company in-
tends to operate as part of its Ohio cluster. In addition, on September 3,
1997, the Company purchased from SRW, Inc.'s Blue Ridge Cablesystems, L.P.
("Blue Ridge") systems (the "Blue Ridge Systems") serving approximately 4,500
subscribers as of June 30, 1997 in northwest North Carolina and eastern Tennes-
see for $4.0 million, which the Company intends to operate as part of its
Southeast systems.
In addition to the purchase price for the Acquisition Systems of $323.2 mil-
lion, the Company anticipates spending approximately $2.0 million in transac-
tion costs and accruing for approximately $0.5 million of restructuring costs.
The Company's purchase of each of the Acquisition Systems is subject to, among
other things, the satisfaction of customary closing conditions and the receipt
of certain third-party or governmental approvals, including the consent of
franchising authorities, and, in certain cases, the ultimate purchase price may
be adjusted if the systems have met, or failed to meet, certain operating and
subscriber benchmarks. In the case of the Cox Central Ohio Systems, the trans-
action is also conditioned upon the completion of a definitive asset purchase
agreement. Although there can be no assurances that such closing conditions
will be satisfied or that any of these transactions will be consummated, it is
anticipated that these acquisitions will be completed in the fourth quarter of
1997. See "Risk Factors--Risks Relating to Acquisition Strategy."
The Company believes that other acquisition opportunities exist, and the Com-
pany is continuously engaged in discussions with other cable television system
owners and operators to explore such potential opportunities. Some of these po-
tential opportunities may involve systems serving substantial numbers of sub-
scribers. Although the Company does not currently have definitive agreements to
acquire systems other than those described herein, the Company has entered into
non-binding letters of intent to acquire additional systems serving approxi-
mately 37,900 subscribers located primarily in Ohio for aggregate consideration
of approximately $65.9 million. The Company intends to continue the process of
negotiating definitive asset purchase agreements for these systems and to pur-
sue, on an opportunistic basis, additional strategic acquisitions, joint ven-
ture arrangements and smaller "fill-in" acquisitions within its existing oper-
ating clusters to enhance further their operational and financial performance.
9
<PAGE>
OWNERSHIP STRUCTURE
Holdings has been formed to be an issuer of the Notes. All of the outstanding
interests of Holdings are held directly or indirectly by FVP and, immediately
prior to the issuance of the Old Notes, Holdings acquired directly or indi-
rectly all of the outstanding interests of FVOP in connection with the Forma-
tion Transaction. Upon consummation of the Formation Transaction, Holdings be-
came successor to, and owner of, all of FVP's interests in FVOP. Prior to the
Formation Transaction, Holdings had nominal assets and liabilities and no oper-
ations. After the Formation Transaction, FVP currently has substantially no as-
sets other than its interests in Holdings and no operations other than in con-
nection with its ownership of such interests. The following chart illustrates
the ownership structure of the Company (shaded portions indicate the Issuers):
[FLOWCHART APPEARS HERE]
The Company's headquarters are located at 1777 South Harrison Street, Suite P-
200, Denver, Colorado 80210, its telephone number is (303) 757-1588 and its e-
mail address is [email protected].
10
<PAGE>
THE OFFERING
OLD NOTES.................... The Old Notes were sold by the Issuers on Sep-
tember 19, 1997 to the Initial Purchasers pur-
suant to a Purchase Agreement, dated September
16, 1997 (the "Purchase Agreement"), among the
Issuers and the Initial Purchasers. The Initial
Purchasers subsequently placed the Old Notes
with (i) qualified institutional buyers pursu-
ant to Rule 144A under the Securities Act and
(ii) qualified buyers outside the United States
in reliance upon Regulation S under the Securi-
ties Act.
REGISTRATION RIGHTS
AGREEMENT.................... Pursuant to the Purchase Agreement, the Issuers
and the Initial Purchasers entered into a Reg-
istration Rights Agreement, dated as of Septem-
ber 19, 1997 (the "Registration Rights Agree-
ment"), which grants the holders of the Old
Notes certain exchange and registration rights.
The Exchange Offer is intended to satisfy such
exchange rights, which terminate upon the con-
summation of the Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED........... $237,650,000 aggregate original Principal
Amount at Maturity of 11 7/8% Senior Discount
Notes due 2007 (the "Exchange Notes"); provided
that if the Issuers make the Cash Interest
Election, the Principal Amount at Maturity of
the Exchange Notes will be the Accreted Value
thereof as of the Interest Payment Date (as de-
fined) on which the Cash Interest Election is
made.
THE EXCHANGE OFFER........... $1,000 original Principal Amount at Maturity of
Exchange Notes in exchange for each $1,000
original Principal Amount at Maturity of Old
Notes. As of the date hereof, $237,650,000 ag-
gregate original Principal Amount at Maturity
of Old Notes are outstanding. The Issuers will
issue the Exchange Notes to holders on or
promptly after the Expiration Date.
Based upon interpretations by the staff of the
Commission set forth in certain no-action let-
ters issued to third parties, the Issuers be-
lieve that Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder that is an "affiliate" of the
Issuers within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery require-
ments of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that at
the time of the consummation of the Exchange
Offer such holder has no arrangement or under-
standing with any person to participate in the
distribution of such Exchange Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account may be a statu-
tory underwriter. Each Participating Broker-
Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must ac-
knowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospec-
tus, a Participating 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 supple-
mented from time to time, may be
11
<PAGE>
used by any person subject to the prospectus
delivery requirements of the Securities Act
(other than an Excluded Participating Broker
Dealer). The Issuers have agreed that, for a
period of up to 180 days, they will use their
reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to
amend and supplement this Prospectus in order
to permit this Prospectus to be lawfully deliv-
ered by all persons subject to the prospectus
delivery requirements of the Securities Act
(provided that, as set forth in the Letter of
Transmittal, such persons shall have expressed
that they may be subject to such requirements
and have undertaken to use their reasonable
best efforts to notify Holdings when they are
no longer subject to such requirements). See
"Plan of Distribution."
Any holder who is an "affiliate" of the Issuers
(within the meaning of Rule 405 under the Secu-
rities Act), who does not acquire the Exchange
Notes in the ordinary course of business or who
tenders in the Exchange Offer for the purpose
of participating in a distribution of the Ex-
change Notes could not rely on the position of
the staff of the Commission enunciated in the
no-action letters and, in the absence of an ex-
emption therefrom, must comply with the regis-
tration and prospectus delivery requirements of
the Securities Act in connection with any re-
sale transaction. Failure to comply with such
requirements in such instance may result in
such holder incurring liability under the Secu-
rities Act for which the holder is not indemni-
fied by the Issuers.
EXPIRATION DATE.............. 5:00 p.m., New York City time, on October ,
1997 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Of-
fer is extended.
ACCRETED VALUE ON THE
EXCHANGE NOTES AND THE OLD
NOTES........................ Each Exchange Note will have an Accreted Value
equal to that of the Old Note for which it is
exchanged.
CONDITIONS TO THE EXCHANGE
OFFER........................ The Exchange Offer is subject to certain cus-
tomary conditions, which may be waived by the
Issuers. See "The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING OLD
NOTES........................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a fac-
simile thereof, or transmit an Agent's Message
(as defined) in connection with a book-entry
transfer, in accordance with the instructions
contained herein and therein, and mail or oth-
erwise deliver such Letter of Transmittal, or
such facsimile, or such Agent's Message, to-
gether with the Old Notes and any other re-
quired documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal or Agent's
Message, each holder will be deemed to repre-
sent to the Issuers that, among other things,
the Exchange Notes acquired pursuant to the Ex-
change Offer are being obtained in the ordinary
course of business of the person receiving such
Exchange Notes, whether or not such person is
the holder, that neither the holder nor any
such other person has any arrangement or under-
standing with any person to participate in the
distribution of such Exchange Notes and that
neither the holder nor any such other person is
an "affiliate," as defined under Rule 405 of
the Securities Act, of the Issuers. See "The
Exchange Offer--Purpose and Effect of the Ex-
change Offer" and "--Procedures for Tendering."
12
<PAGE>
UNTENDERED OLD NOTES......... Following the consummation of the Exchange Of-
fer, holders of Old Notes eligible to partici-
pate but who do not tender their Old Notes will
not have any further exchange rights and such
Old Notes will continue to be subject to cer-
tain restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes
could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE..................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Issuers, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act, (iii) outside the United
States to a foreign person pursuant to the re-
quirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective registra-
tion statement under the Securities Act. See
"The Exchange Offer--Consequences of Failure to
Exchange."
SHELF REGISTRATION
STATEMENT.................... If (1) prior to the consummation of the Ex-
change Offer, the Issuers or holders of a ma-
jority in aggregate Principal Amount at Matu-
rity of the Old Notes determine that (a) in the
opinion of counsel, the Exchange Notes would
not, upon receipt, be tradeable by such holders
who are not affiliates of the Issuers or Ex-
cluded Participating Broker Dealers without
registration under the Securities Act and with-
out registration under applicable blue sky or
state securities laws or (b) in the opinion of
counsel, the Commission is unlikely to permit
the consummation of the Exchange Offer and/or
(2) an Initial Purchaser so requests with re-
spect to certain Notes held by it after consum-
mation of the Exchange Offer and/or (3) the Ex-
change Offer is commenced and not consummated
prior to the 210th day after the date of issu-
ance of the Old Notes, then the Issuers shall
file a shelf registration statement (the "Shelf
Registration Statement") covering the Old Notes
(which Shelf Registration Statement, only in
the circumstances contemplated by clause (2),
will relate solely to the Notes held by an Ini-
tial Purchaser). The Issuers have agreed to use
their reasonable best efforts to maintain the
effectiveness of the Shelf Registration State-
ment until the date which is two years from the
date of issuance of the Old Notes.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............ Any beneficial owner whose Old Notes are regis-
tered in the name of a broker, dealer, commer-
cial bank, trust company or other nominee and
who wishes to tender should contact such regis-
tered holder promptly and instruct such regis-
tered holder to tender on such beneficial own-
er's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take con-
siderable time.
GUARANTEED DELIVERY
PROCEDURES................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not immedi-
ately available or who cannot deliver their Old
Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal
to the Exchange Agent (or comply with the pro-
cedures for book-entry transfer) prior to the
Expiration Date must tender their Old Notes ac-
cording to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
13
<PAGE>
WITHDRAWAL RIGHTS............ Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expira-
tion Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE NOTES... The Issuers will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the Expi-
ration Date. See "The Exchange Offer--Terms of
the Exchange Offer."
FEDERAL INCOME TAX
CONSEQUENCES................. The exchange pursuant to the Exchange Offer
should not be a taxable event for federal in-
come tax purposes. See "Certain Federal Income
Tax Consequences."
USE OF PROCEEDS.............. There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange Of-
fer.
EXCHANGE AGENT............... U.S. Bank National Association d/b/a Colorado
National Bank.
THE EXCHANGE NOTES
GENERAL...................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old Notes
(which they replace) except that (i) the Ex-
change Notes have been registered under the Se-
curities Act and, therefore, will not bear leg-
ends restricting the transfer thereof, and (ii)
the holders of Exchange Notes will not be enti-
tled to certain rights under the Registration
Rights Agreement, including the provisions pro-
viding for an increase in the interest rate on
the Old Notes in certain circumstances relating
to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer
is consummated. See "The Exchange Offer--Pur-
pose and Effect of the Exchange Offer." The Ex-
change Notes will evidence the same debt as the
Old Notes and will be entitled to the benefits
of the Indenture. See "Description of the
Notes."
ISSUE PRICE.................. $631.18 per $1,000 original Principal Amount at
Maturity of the Exchange Notes.
ISSUERS...................... The Exchange Notes are the joint and several
obligations of Holdings and Holdings Capital.
MATURITY DATE................ September 15, 2007
YIELD AND INTEREST........... 11 7/8% per annum (computed on a semiannual
bond-equivalent basis) calculated from Septem-
ber 19, 1997. Cash interest will not be re-
quired to accrue prior to September 15, 2001;
provided that the Company may elect to have the
Notes accrue cash interest prior to September
15, 2001 beginning on any Interest Payment
Date, with notice to the Trustee and the hold-
ers of the Notes (a "Cash Interest Election").
Commencing on the earlier of the Interest Pay-
ment Date following the Cash Interest Election
or March 15, 2002, cash interest will be pay-
able semiannually on March 15 and September 15
(an "Interest Payment Date").
14
<PAGE>
ORIGINAL ISSUE DISCOUNT...... Each Note is being issued at an original issue
discount for federal income tax purposes. Thus,
although cash interest is not expected to ac-
crue on the Notes prior to September 15, 2001
and there are not expected to be any periodic
payments of interest on the Notes prior to
March 15, 2002, original issue discount (i.e.,
the difference between the stated redemption
price at maturity and the issue price of such
Notes) will accrue from the issue date of such
Notes up to September 15, 2001 and will be
includable as interest income periodically in a
holder's gross income for federal income tax
purposes in advance of receipt of the cash pay-
ments to which the income is attributable. See
"Certain Federal Income Tax Considerations--
Original Issue Discount; Special Interest".
OPTIONAL REDEMPTION BY THE
ISSUERS...................... The Notes are not redeemable prior to September
15, 2001, except as set forth below. The Notes
will be redeemable at the option of the Is-
suers, in whole or in part, at any time on or
after September 15, 2001, at the redemption
prices set forth herein, together with accrued
and unpaid interest to the redemption date. In
addition, prior to September 15, 2000, the Is-
suers may redeem up to 35% of the Principal
Amount at Maturity of the Notes with the net
cash proceeds from one or more Public Equity
Offerings or Strategic Equity Investments (as
defined in the Indenture governing the Notes
(the "Indenture")) at a redemption price of
111.875% of the Accreted Value thereof, plus
accrued and unpaid interest, if any, to the re-
demption date; provided, however, that at least
65% in aggregate Principal Amount at Maturity
of the Notes originally issued remains out-
standing immediately after any such redemption.
MANDATORY REDEMPTION BY THE
ISSUERS...................... None.
CHANGE OF CONTROL OFFER...... Upon a Change of Control, the Issuers will be
required to make an offer to purchase all out-
standing Notes at 101% of the Accreted Value
thereof, together with accrued and unpaid in-
terest to the purchase date.
RANKING...................... The Notes will be senior obligations of the Is-
suers and will rank pari passu in right of pay-
ment to all existing and future indebtedness of
the Issuers, other than indebtedness that by
its terms is expressly subordinated in right
and priority of payment to the Notes. Holdings
is a holding company that conducts all of its
business through its subsidiaries, and the
Notes will be effectively subordinated to all
existing and future indebtedness and other lia-
bilities (including trade payables) of Hold-
ings' subsidiaries, as well as effectively sub-
ordinated to secured debt of Holdings. At June
30, 1997, as adjusted to give effect to the Of-
fering and the Acquisitions, the aggregate con-
solidated indebtedness of Holdings' subsidiar-
ies would have been approximately $604.4 mil-
lion (including $395.8 million of indebtedness
under the New Credit Facility, which will be
secured by all of the assets of Holdings). As
of the date of this Prospectus, the Issuers do
not have any indebtedness expressly subordi-
nated by its terms in right and priority of
payment to the Notes.
CERTAIN COVENANTS............ The Indenture will contain certain covenants
that, among other things, limit the ability of
Holdings and certain of its Subsidiaries to in-
cur additional Indebtedness, create certain
Liens, make certain Restricted Payments, enter
into certain transactions with Affiliates, per-
mit dividend or
15
<PAGE>
other payment restrictions to apply to certain
Subsidiaries or consummate certain merger, con-
solidation or similar transactions. In addi-
tion, in certain circumstances, the Issuers
will be required to offer to purchase Notes at
100% of the Accreted Value thereof, together
with accrued and unpaid interest, if any, to
the purchase date, with the net proceeds of
certain asset sales. These covenants are sub-
ject to a number of significant exceptions and
qualifications. See "Description of the Notes."
REGISTRATION REQUIREMENTS.... The Issuers are obligated to commence this Ex-
change Offer pursuant to an effective registra-
tion statement or cause the resale of the Notes
to be registered under the Securities Act and,
if (i) the Exchange Offer Registration State-
ment (as defined) is not filed with the Commis-
sion on or prior to the 60th day following the
original issuance of the Notes, (ii) the Ex-
change Offer Registration Statement is not de-
clared effective by the Commission on or prior
to the 180th day following the original issu-
ance of the Notes, (iii) the Exchange Offer is
not consummated on or prior to the 210th day
following the original issuance of the Notes or
(iv) a registration statement with respect to
resale of the Notes (if required) is not de-
clared effective within the specified period,
then certain additional interest (in addition
to the original issue discount or interest oth-
erwise accruing on the Notes) will accrue on
the Notes and will be payable in cash. Upon the
subsequent consummation of the Exchange Offer
or the declaration of effectiveness of such re-
sale registration statement with respect to
such Notes, such additional interest will cease
accruing. See "Description of the Notes--Regis-
tration Rights."
USE OF PROCEEDS.............. The Issuers will not receive any proceeds from
the Exchange Offer. Substantially all of the
net proceeds to Holdings from the Offering were
contributed by Holdings to FVOP as a capital
contribution. FVOP used this capital contribu-
tion to repay approximately $30.5 million of
indebtedness outstanding under the Senior
Credit Facility's reducing revolving credit fa-
cility. The remaining net proceeds of approxi-
mately $113.5 million received by Holdings are
being held in escrow by FVOP, and FVOP will use
such proceeds to finance pending acquisitions
or to reduce outstanding indebtedness at a
later date. The Company also expects that FVOP
will reborrow amounts used to repay the reduc-
ing revolving line of credit facility under the
Senior Credit Facility at a subsequent date to
effect acquisitions. See "Use of Proceeds". On
September 15, 1997, FVOP received a commitment
from its principal lenders under the Senior
Credit Facility to enter into a new replacement
senior credit facility (the "New Credit Facili-
ty"), which will refinance and replace the Se-
nior Credit Facility. The commitment will pro-
vide that the lenders will extend up to $650.0
million aggregate principal amount of revolving
credit and term loan financing to FVOP. The
Company expects FVOP to enter into the New
Credit Facility in the fourth quarter of 1997.
See "Risk Factors--Substantial Leverage" and
"Description of Other Indebtedness."
For the definitions of certain capitalized
terms used in this summary, see "Description of
the Notes."
RISK FACTORS
Holders of the Old Notes should carefully consider the risks set forth under
"Risk Factors" in addition to the other information contained in this Prospec-
tus before tendering the Old Notes in exchange for Exchange Notes.
16
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA OF THE COMPANY
The following table presents summary financial data derived from FVOP's finan-
cial statements as of and for the year ended December 31, 1996 which have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, and
selected unaudited operating data for such period. The following tables also
present unaudited summary financial data as of and for the six months ended
June 30, 1997 derived from the unaudited financial statements of FVOP and se-
lected unaudited operating data for such periods. In the opinion of management,
the unaudited interim financial statements have been prepared on the same basis
as the audited financial statements and include all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position and the results of operations for the interim period. Financial and
operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the full year.
In addition, the following tables present unaudited pro forma summary financial
and operating data for the Company as of and for the six months ended June 30,
1997 and the year ended December 31, 1996, as adjusted to give pro forma effect
to (i) in the case of statement of operations data, (a) the Formation Transac-
tion, the Offering and the purchase of certain of the Existing Systems as if
such transactions had been consummated on January 1, 1996 and (b) the Formation
Transaction, the Offering and the purchase of certain of the Existing Systems
and Acquisition Systems as if such transactions had been consummated on January
1, 1996 and (ii) in the case of balance sheet data, (a) the Formation Transac-
tion and the Offering as if such transactions had been consummated on June 30,
1997 and (b) the Formation Transaction, the Offering and the purchase of the
Acquisition Systems as if such transactions had been consummated on June 30,
1997. See "Pro Forma Financial Data." The unaudited pro forma financial and op-
erating data presented below are based upon the historical financial statements
of FVOP and certain of the Existing Systems and the Acquisition Systems. The
unaudited pro forma data give effect to the Acquisitions under the purchase
method of accounting, certain other operating assumptions and the impact of the
Offering. See "Pro Forma Financial Data."
The unaudited pro forma financial data presented do not consider any future
events which may occur after the Acquisitions have been consummated. The Com-
pany believes revenue and operating expense synergies and purchasing and other
cost reductions of the combined operations of the Existing Systems and the Ac-
quisition Systems will be realized after the Company has completed the Acquisi-
tions and has installed its management controls, systems and marketing pro-
grams. However, for purposes of the unaudited pro forma financial data pre-
sented herein, these synergies have not been reflected because their realiza-
tion cannot be assured.
The unaudited summary pro forma financial data do not purport to represent what
the Company's results of operations or financial condition would have actually
been or what operations of the Company in any future period would be if the
transactions that give rise to the pro forma adjustments had occurred on the
dates assumed. The following information is qualified by reference to and
should be read in conjunction with "Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.
17
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30 YEAR ENDED DECEMBER 31
------------------------------------ -------------------------------------
PRO FORMA PRO FORMA
FOR EXISTING FOR EXISTING
SYSTEMS, PRO FORMA SYSTEMS, PRO FORMA
ACQUISITION FOR EXISTING ACQUISITION FOR EXISTING
SYSTEMS AND SYSTEMS AND ACTUAL SYSTEMS AND SYSTEMS AND
THE OFFERING THE OFFERING FVOP THE OFFERING THE OFFERING ACTUAL
1997 1997 1997 1996 1996 FVOP 1996
------------ ------------ -------- ------------ ------------ ---------
In thousands, except ratios and operating statistical data
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $102,470 $ 70,547 $ 65,636 $198,072 $137,261 $ 76,464
Operating expenses...... 52,335 36,726 34,462 98,848 68,776 39,181
Corporate administrative
expenses............... 2,741 2,049 2,049 5,298 3,672 2,930
Depreciation and
amortization........... 45,919 31,048 29,191 90,903 61,161 35,336
-------- -------- -------- -------- -------- ---------
Operating income
(loss)................. 1,475 724 (66) 3,023 3,652 (983)
Interest expense,
net(1)................. (38,143) (29,681) (21,302) (75,598) (59,044) (22,422)
Other income (expense).. (131) (46) (47) (654) (629) (396)
-------- -------- -------- -------- -------- ---------
Net income (loss)....... $(36,799) $(29,003) $(21,415) $(73,229) $(56,021) $ (23,801)
======== ======== ======== ======== ======== =========
BALANCE SHEET DATA
(END OF PERIOD):
Total assets............ $921,952 $717,411 $597,911 $ 549,168
Total debt.............. 754,405 548,596 429,096 398,194
Partners' capital....... 139,608 146,264 146,264 130,003
FINANCIAL RATIOS AND
OTHER DATA:
EBITDA(2)............... $ 47,394 $ 31,772 $ 29,125 $ 93,926 $ 64,813 $ 34,353
EBITDA margin(2)........ 46.3% 45.0% 44.4% 47.4% 47.2% 44.9%
Annualized EBITDA(3).... 98,392 65,212 57,752
Cash interest paid(4)... 27,778 20,366 20,603
Total debt to Annualized
EBITDA(5).............. 7.67 6.58 6.89
Annualized EBITDA to
interest expense(6).... 1.29 1.61 1.43
Net cash flows from
operating activities... $ 9,100 $ 18,911
Net cash flows from
investing activities... (74,203) (418,215)
Net cash flows from
financing activities... 67,963 400,293
Deficiency of earnings
to fixed charges(7).... $ 36,799 $ 29,003 $ 21,415 $ 73,229 $ 56,021 $ 23,801
OPERATING STATISTICAL
DATA (END OF
PERIOD EXCEPT AVERAGE):
Homes passed............ 810,100 559,300 559,300 807,935 559,200 498,900
Basic subscribers....... 565,500 390,350 390,350 565,575 392,000 356,400
Basic penetration....... 69.8% 69.8% 69.8% 70.0% 70.1% 71.4%
Premium units........... 266,750 164,525 164,525 270,746 172,176 152,100
Premium penetration..... 47.2% 42.1% 42.1% 47.8% 43.9% 42.7%
Average monthly revenue
per basic
subscriber(8).......... $ 31.15 $ 30.99 $ 30.99 $ 29.60 $ 29.47 $ 29.73
</TABLE>
- ---------
(1) Interest expense was net of interest income of $192, $192, $191, $671, $653
and $471, respectively (dollars in thousands).
(2) EBITDA is defined as net income before interest, taxes, depreciation and
amortization. The Company believes that EBITDA is a meaningful measure of
per-formance because it is commonly used in the cable television industry to
ana-lyze and compare cable television companies on the basis of operating
perfor-mance, leverage and liquidity. In addition, the Company's Senior
Credit Facili-ty, the Indenture for the Notes and the FVOP Notes Indenture
(as defined here-in) contain certain covenants, compliance with which is
measured by computa-tions substantially similar to those used in determining
EBITDA. See "Descrip-tion of Other Indebtedness" and "Description of the
Notes." However, EBITDA is not intended to be a performance measure that
should be regarded as an alterna-tive either to operating income or net
income as an indicator of operating per-formance or to cash flows as a
measure of liquidity, as determined in accor-dance with generally accepted
accounting principles. EBITDA margin represents the percentage of EBITDA to
revenue.
(3) Annualized EBITDA is EBITDA for the most recent quarter multiplied by four,
except for actual FVOP 1997 and actual FVOP 1996, which is EBITDA for the
most recent quarter adjusted for the pro forma effect of the pre-acquisition
results of operations for those systems purchased by the Company during the
quarter multiplied by four.
(4) Cash interest paid represents "interest expense, net" adjusted to exclude
amortization of deferred financing fees, the accretion of interest on the
Notes and on the UVC Note.
(5) This presentation is consistent with the incurrence of indebtedness tests
in the Indenture for the Notes and the FVOP Notes Indenture. In addition,
this ratio is commonly used in the cable television industry as a measure of
leverage.
(6) For purposes of this computation, interest expense is annualized for the
quarter ended June 30, 1997 and includes certain pro forma adjustments made
to include the effect of debt incurred to purchase those systems acquired by
the Company during the quarter. This ratio is commonly used in the cable
television industry as a measure of coverage.
(7) For purposes of this computation, earnings are defined as income (loss) be-
fore income taxes and fixed charges. Fixed charges are defined as the sum of
(i) interest costs (including an estimated interest component of rental ex-
pense) and (ii) amortization of deferred financing costs.
(8) Average monthly revenue per basic subscriber equals revenue for the last
month of the period divided by the number of basic subscribers as of the
end of such period.
18
<PAGE>
RISK FACTORS
Ownership of the Notes involves a high degree of risk. Holders of the Old Notes
should consider carefully the principal risk factors set forth below, as well
as the other information contained in this Prospectus before tendering the Old
Notes in exchange for Exchange Notes.
SUBSTANTIAL LEVERAGE
The Company is, and will continue to be, highly leveraged as a result of the
substantial indebtedness it has incurred, and intends to incur, to finance ac-
quisitions and expand its operations. As of June 30, 1997, the Company's aggre-
gate consolidated indebtedness outstanding was approximately $429.1 million. As
of June 30, 1997, on a pro forma basis, the Company would have had approxi-
mately $754.4 million of aggregate consolidated indebtedness outstanding. See
"Pro Forma Financial Data". All of the Company's indebtedness, other than the
Notes, represents indebtedness of FVOP. In addition, subject to the restric-
tions in the Senior Credit Facility, the Indenture and the FVOP Notes Inden-
ture, the Company plans to incur additional indebtedness from time to time, to
finance acquisitions in the future, for capital expenditures or for general
business purposes. On September 15, 1997, FVOP received a commitment from its
principal lenders under the Senior Credit Facility to enter into the New Credit
Facility, which will refinance and replace the Senior Credit Facility. The com-
mitment will provide that the lenders will extend up to $650.0 million aggre-
gate principal amount of revolving credit and term loan financing to FVOP. The
Company expects FVOP to enter into the New Credit Facility in the fourth quar-
ter of 1997. The proceeds from the New Credit Facility will be used, in part,
to finance the acquisition of the Cox Central Ohio Systems, as well as to refi-
nance the Senior Credit Facility. The New Credit Facility is subject to numer-
ous conditions, including the execution and delivery of definitive documenta-
tion by December 12, 1997. There can be no assurance that consummation of the
New Credit Facility will occur. See "Description of Other Indebtedness." The
Company anticipates that, in light of the amount of its existing and planned
indebtedness, it will continue to be highly leveraged for the foreseeable fu-
ture. The Company's highly leveraged capital structure could adversely affect
the Issuers' ability to service the Notes and could significantly limit the
Company's ability to finance its operations and fund its capital expenditure
requirements, to compete effectively, to expand its business, to comply with
its obligations under its franchise agreements, or to operate under adverse
economic conditions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
The combined historical earnings of the Company were insufficient to cover its
fixed charges for the six months ended June 30, 1997 and for the year ended De-
cember 31, 1996 by $21.4 million and $23.8 million, respectively. On a pro
forma basis, the Company's earnings before income taxes and fixed charges would
have been insufficient to cover its fixed charges for the six months ended June
30, 1997 and for the year ended December 31, 1996 by $36.8 million and $73.2
million, respectively. See "Pro Forma Financial Data." However, for both peri-
ods, earnings are reduced by substantial non-cash charges, principally consist-
ing of depreciation and amortization.
Since its founding in 1995, the Company's cash from equity investments, bank
borrowings and other debt issued by FVOP has been sufficient to finance the
Company's acquisitions and, together with cash generated from operating activi-
ties, also has been sufficient to meet the Company's debt service, working cap-
ital and capital expenditure requirements. The ability of the Company to meet
its debt service and other obligations will depend upon the future performance
of the Company which, in turn, is subject to general economic conditions and to
financial, political, competitive, regulatory and other factors, many of which
are beyond the Company's control. The Company's ability to meet its debt serv-
ice and other obligations also may be affected by changes in prevailing inter-
est rates, as borrowings under the Senior Credit Facility or the New Credit Fa-
cility, as the case may be, will bear interest at floating rates, subject to
certain interest rate protection agreements. The Company believes that it will
continue to generate cash and obtain financing sufficient to meet such require-
ments in the future; however, there can be no assurances that the Company will
be able to meet its debt service and other obligations. If the Company were un-
able to do so, it would have to refinance its indebtedness or obtain new fi-
nancing. Although in the past the Company has been able to obtain financing
through equity investments, bank borrowings and other debt issuances, there can
be no assurances that the Company will be able to do so in the future or that,
if the Company were able to do so, the terms available will be favorable to the
Company. See "Selected Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Description of Other In-
debtedness" and "Description of the Notes."
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
Holdings is a holding company which has no significant assets other than its
direct and indirect equity interests in FVOP. Holdings Capital, a wholly-owned
subsidiary of Holdings, was formed solely for the purpose of serving as a co-
issuer of the
19
<PAGE>
Notes and has no operations or assets from which it will be able to repay the
Notes. Accordingly, the Issuers must rely entirely upon distributions from FVOP
to generate the funds necessary to meet their obligations, including the pay-
ment of Accreted Value or principal and interest of the Notes. The Senior
Credit Facility prohibits the distribution of funds by FVOP to Holdings. In ad-
dition, the FVOP Notes Indenture contains, and the New Credit Facility will
contain, significant restrictions on the ability of FVOP to distribute funds to
Holdings. See "Description of Other Indebtedness." There can be no assurance
that the Senior Credit Facility, the FVOP Notes Indenture, the New Credit Fa-
cility or any agreement governing indebtedness that refinances such indebted-
ness or other indebtedness of FVOP will permit FVOP to distribute funds to
Holdings in amounts sufficient to pay the Accreted Value or principal or inter-
est on the Notes when the same become due (whether at maturity, upon accelera-
tion or otherwise).
The only significant assets of Holdings are the partnership interests in FVOP
owned by it. All of such interests in FVOP are pledged by Holdings as collat-
eral under the Senior Credit Facility and will remain so pledged under the New
Credit Facility. Therefore, if Holdings were unable to pay the Accreted Value
or principal or interest on the Notes when due (whether at maturity, upon ac-
celeration or otherwise), the ability of the holders of the Notes to proceed
against the partnership interests of FVOP to satisfy such amounts would be sub-
ject to the ability of such holders to obtain a judgment against Holdings and
the prior satisfaction in full of all amounts owing under the Senior Credit Fa-
cility or the New Credit Facility, as the case may be. Any action to proceed
against the FVOP partnership interests by or on behalf of the holders of Notes
would constitute an event of default under the Senior Credit Facility or the
New Credit Facility, as the case may be, entitling the lenders thereunder to
declare all amounts owing to be immediately due and payable, which event would
in turn constitute an event of default under the FVOP Notes Indenture, enti-
tling the holders thereof to declare the principal and accrued interest of the
FVOP Notes to be immediately due and payable. In addition, as a secured credi-
tor, the lenders under the Senior Credit Facility or the New Credit Facility,
as the case may be, would control the disposition and sale of the FVOP partner-
ship interests after an event of default under the Senior Credit Facility or
the New Credit Facility, as the case may be, and would not be legally required
to take into account the interests of unsecured creditors of Holdings, such as
the holders of the Notes, with respect to any such disposition or sale. There
can be no assurance that the assets of Holdings, after the satisfaction of
claims of its secured creditors, would be sufficient to satisfy any amounts ow-
ing with respect to the Notes.
Since Holdings is a holding company and conducts its business through subsidi-
aries, the Notes will be effectively subordinated to all existing and future
claims of creditors of Holdings' subsidiaries, including the lenders under the
Senior Credit Facility and the New Credit Facility, the holders of the FVOP
Notes and FVOP's trade creditors. At June 30, 1997, as adjusted to give effect
to the Offering and the Acquisitions, such subsidiaries had approximately
$632.3 million of total liabilities, including approximately $604.4 million of
indebtedness. The rights of the Issuers and their creditors, including the
holders of the Notes, to realize upon the assets of any of the Company's sub-
sidiaries upon any such subsidiary's liquidation or reorganization (and the
consequent rights of the holders of the Notes to participate in the realization
of those assets) will be subject to the prior claims of such subsidiary's re-
spective creditors, including, in the case of FVOP, the lenders under the Se-
nior Credit Facility and the New Credit Facility and the holders of the FVOP
Notes. In such event, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. See "Description of
the Notes--Ranking" and "Description of Other Indebtedness." The Indenture for
the Notes will permit the Company's subsidiaries to incur additional indebted-
ness under certain circumstances. See "Description of the Notes."
The FVOP Notes and all amounts owing under the Senior Credit Facility, and
amounts that are expected to be owing under the New Credit Facility, will ma-
ture prior to the maturity of the Notes. The Indenture will require that any
agreements (including the agreements for the New Credit Facility) governing in-
debtedness that refinances the FVOP Notes or the Senior Credit Facility contain
restrictions on the ability of FVOP to make distributions to Holdings that are
either no more restrictive than those contained in the FVOP Notes Indenture or
that do not prohibit distributions to Holdings to make regularly scheduled in-
terest payments (commencing March 15, 2002) and the payment of principal at the
stated maturity of the Notes unless a default or event of default has occurred
under the New Credit Facility. There can be no assurance that if FVOP is re-
quired to refinance the FVOP Notes or any amounts under the Senior Credit Fa-
cility, it will be able to do so upon acceptable terms, if at all.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture relating to the Notes, the Senior Credit Facility and the FVOP
Notes Indenture impose, and the New Credit Facility will impose, restrictions
that, among other things, limit the amount of additional indebtedness that may
be incurred by the Company or will impose limitations on, among other things,
investments, loans and other payments, certain transactions with affiliates and
certain mergers and acquisitions. FVOP's Senior Credit Facility also requires,
and the New Credit
20
<PAGE>
Facility will require, FVOP to maintain specified financial ratios and meet
certain financial tests. The ability of FVOP to comply with such covenants and
restrictions can be affected by events beyond its control, and there can be no
assurances that the Company will achieve operating results that would permit
compliance with such provisions. The breach of any of the provisions of the Se-
nior Credit Facility or the New Credit Facility would, under certain circum-
stances, result in defaults thereunder, permitting the lenders thereunder to
prevent distributions to Holdings and to accelerate the indebtedness thereun-
der. If FVOP were unable to pay the amounts due in respect of the Senior Credit
Facility or the New Credit Facility, as the case may be, the lenders thereunder
could foreclose upon any assets pledged to secure such payment, and such lend-
ers and the holders of the FVOP Notes could prevent the distribution of funds
to Holdings. In such event, the holders of the Notes might not be able to re-
ceive any payments, if ever, until the payment default was cured or waived, any
such acceleration was rescinded or the indebtedness under the Senior Credit Fa-
cility or the New Credit Facility, as the case may be, or the FVOP Notes Inden-
ture or the New Credit Facility, as the case may be, was discharged or paid in
full. Any of such events would adversely affect the Issuers' ability to service
the Notes, including but not limited to the Issuers' ability to pay cash inter-
est on the Notes.
KEY PERSONNEL
The Company's business is substantially dependent upon the performance of cer-
tain key individuals, including Mr. Vaughn and Mr. Koo. Although the Company
maintains a strong management team, the loss of the services of Mr. Vaughn or
Mr. Koo could have a material adverse effect on the Company.
LIMITED OPERATING HISTORY
The Company was formed in July 1995 and has grown principally through acquisi-
tions. Prospective investors, therefore, have limited historical financial in-
formation about the Company, and about the results that can be achieved by the
Company in managing the cable systems not previously managed by the Company,
upon which to base an evaluation of its performance and an investment in the
Notes. In addition, as a result of the Company's rapid growth through acquisi-
tions, past operating history is not necessarily indicative of future results.
Further, there can be no assurance that the Company will be able to success-
fully implement its business strategy.
SIGNIFICANT CAPITAL EXPENDITURES
Consistent with its business strategy, the Company expects to upgrade a signif-
icant portion of its cable television distribution systems over the next sev-
eral years to, among other things, increase bandwidth and channel capacity. The
Company's inability to upgrade its cable television systems could have a mate-
rial adverse effect on its operations and competitive position. See "Manage-
ment's Discussion and Analysis of Financial Condition and Results of Opera-
tions--Liquidity and Capital Resources" and "Business."
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY
Cable television systems face competition from alternative methods of receiving
and distributing television signals and from other sources of news, information
and entertainment, such as off-air television broadcast programming, newspa-
pers, movie theaters, live sporting events, online computer services and home
video products, including videotape cassette recorders. Because the Company's
franchises are generally non-exclusive, there is the potential for competition
with the Company's systems from other operators of cable television systems,
including systems operated by local governmental authorities, and from other
distribution systems capable of delivering programming to homes or businesses,
including direct broadcast satellite ("DBS") systems and multichannel,
multipoint distribution service ("MMDS") systems. In recent years, there has
been significant national growth in the number of subscribers to DBS services.
Subscribership to MMDS also is increasing and can be expected to grow. Addi-
tionally, recent changes in federal law and recent administrative and judicial
decisions have removed certain of the restrictions that have limited entry into
the cable television business by potential competitors such as telephone compa-
nies, registered utility holding companies and their subsidiaries. Such devel-
opments will enable local telephone companies to provide a wide variety of
video services in the telephone company's own service area which will be di-
rectly competitive with services provided by cable television systems. Other
new technologies, including Internet-based services, may also become competi-
tive with services that cable operators can offer.
Many of the Company's potential competitors have substantially greater re-
sources than the Company, and the Company cannot predict the extent to which
competition will materialize in its franchise areas from other cable television
operators, other distribution systems for delivering video programming and
other broadband telecommunications services to the home,
21
<PAGE>
or from other potential competitors, or, if such competition materializes, the
extent of its effect on the Company. See "Business--Competition" and "Legisla-
tion and Regulation."
RISKS RELATING TO NEW LINES OF BUSINESS
The Company will selectively upgrade its cable systems to increase channel ca-
pacity and expand addressability in part to enhance the potential for increas-
ing revenues through the introduction of new technologies, services and program
delivery capabilities, such as pay-per-view movies and events, HITS digital
programming, cable Internet access and telephony. See "Business--Strategically
Upgrade Systems" and "Business--Technological Developments." While the Company
is optimistic about the prospects for these new lines of business, there can be
no assurances that it will be able to enter them successfully or to generate
additional cash flow. Moreover, many of these new lines of business are likely
to have significant competition from businesses that may have significant fi-
nancial resources and market presence such as DBS services, local telephone
companies, long distance interexchange carriers and traditional online Internet
service providers.
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under franchises granted by local authori-
ties which are subject to renewal and renegotiation from time to time. The
Company's business is dependent upon the retention and renewal of its local
franchises. A franchise is generally granted for a fixed term ranging from five
to 15 years, but in many cases is terminable if the franchisee fails to comply
with the material provisions thereof. The Company's franchises typically impose
conditions relating to the use and operation of the cable television system,
including requirements relating to the payment of fees, system bandwidth capac-
ity, customer service requirements, franchise renewal and termination. The Ca-
ble Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") prohibits franchising authorities from granting exclusive cable televi-
sion franchises and from unreasonably refusing to award additional competitive
franchises; it also permits municipal authorities to operate cable television
systems in their communities without franchises. The Cable Communications Pol-
icy Act of 1984 (the "1984 Cable Act" and collectively with the 1992 Cable Act,
the "Cable Acts") provides, among other things, for an orderly franchise re-
newal process in which franchise renewal will not be unreasonably withheld or,
if renewal is denied and the franchising authority acquires ownership of the
system or effects a transfer of the system to another person, the operator gen-
erally is entitled to the "fair market value" for the system covered by such
franchise. Although the Company believes that it generally has good relation-
ships with its franchise authorities, no assurances can be given that the Com-
pany will be able to retain or renew such franchises or that the terms of any
such renewals will be on terms as favorable to the Company as the Company's ex-
isting franchises. The non-renewal or termination of franchises relating to a
significant portion of the Company's subscribers could have a material adverse
effect on the Company's results of operations. See "Business--Franchises."
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state governmental agencies. The Cable Acts, both
of which amended the Communications Act of 1934 (as amended, the "Communica-
tions Act"), established a national policy to guide the development and regula-
tion of cable television systems. The Communications Act was recently substan-
tially amended by the Telecommunications Act of 1996 (the "1996 Telecom Act").
Principal responsibility for implementing the policies of the Cable Acts and
the 1996 Telecom Act has been allocated between the Federal Communications Com-
mission (the "FCC") and state or local regulatory authorities. Advances in com-
munications 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 ca-
ble communications industry or on the operations of the Company.
Federal Law and Regulation
The 1992 Cable Act and the FCC's rules implementing that act generally have in-
creased the administrative and operational expenses of cable television systems
and have resulted in additional regulatory oversight by the FCC and local or
state franchise authorities. The Cable Acts and the corresponding FCC regula-
tions have established, among other things, (i) rate regulations, (ii) manda-
tory carriage and retransmission consent requirements that require a cable sys-
tem under certain circumstances to carry a local broadcast station or to obtain
consent to carry a local or distant broadcast station, (iii) rules for fran-
chise renewals and transfers, and (iv) other requirements covering a variety of
operational areas such as equal employment opportunity and technical standards
and customer service requirements.
22
<PAGE>
The 1996 Telecom Act deregulates rates for certain cable programming services
tiers ("CPSTs") in 1999 for most MSOs (including the Company) and, for certain
small cable operators, immediately eliminates rate regulation of CPSTs, and, in
certain circumstances, basic services and equipment. The FCC is currently de-
veloping permanent regulations to implement the rate deregulation provisions of
the 1996 Telecom Act. The Company is currently unable to predict the ultimate
effect of the 1992 Cable Act or the 1996 Telecom Act, the ultimate outcome of
the various FCC rulemaking proceedings, or the litigation challenging various
aspects of this federal legislation and the FCC's regulations implementing the
legislation.
State and Local Regulation
Cable television systems generally operate pursuant to non-exclusive fran-
chises, permits or licenses granted by a municipality or other state or local
governmental entity. The terms and conditions of franchises vary materially
from jurisdiction to jurisdiction. A number of states subject cable systems to
the jurisdiction of centralized state governmental agencies. To date, no state
in which the Company currently operates has enacted state level regulation. The
Company cannot predict whether any of the states in which it currently operates
will engage in such regulation in the future. However, upon completion of the
acquisition of the TCI New England Systems, the Company will be subject to the
jurisdiction of the Vermont Public Service Board. See "Legislation and Regula-
tion."
RISKS RELATING TO ACQUISITION STRATEGY
A significant element of the Company's acquisition strategy is to expand in
certain regions of the United States by acquiring cable television systems lo-
cated in reasonable proximity to existing systems or of a sufficient size to
enable the acquired system to serve as the basis for a new local cluster. Any
acquisition may have an adverse effect upon the Company's operating results or
cash flow, particularly for acquisitions of new systems which must be inte-
grated with the Company's existing operations. There can be no assurances that
the Company will be able to integrate successfully any acquired business with
its existing operations or realize any efficiencies therefrom. There can also
be no assurances that any such acquisition, if consummated, will be profitable
or that the Company will be able to obtain any required financing to acquire
additional systems in the future. In addition, the Company's purchase of the
Acquisition Systems is subject to, among other things, the satisfaction of cus-
tomary closing conditions, the receipt of certain third-party or governmental
approvals, including the consent of franchising authorities, and, in the case
of those Acquisition Systems (including the Cox Central Ohio Systems) which are
the subject of non-binding letters of intent, the negotiation and execution of
definitive acquisition agreements. There can be no assurances that any such
closing conditions will be satisfied, that such definitive purchase agreements
will be entered into or that the consummation of the purchase of any of the Ac-
quisition Systems will not otherwise be unduly delayed. See "Business--Business
Strategy" and "Business--Development of the Systems--The Acquisition Systems."
In addition, the Company intends to finance the acquisition of the Cox Central
Ohio Systems with proceeds from the New Credit Facility. If the New Credit Fa-
cility is not consummated, the Company may not otherwise have the ability to
finance such acquisiton. See "Risk Factors--Substantial Leverage."
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in the Indenture), the
Issuers are required to make an offer to purchase all outstanding Notes at a
purchase price equal to 101% of the Accreted Value thereof, together with ac-
crued and unpaid interest, if any, to the purchase date. If a Change of Control
were to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the purchase
price for all Notes tendered by holders thereof. In addition, both the Senior
Credit Facility and the FVOP Notes Indenture include, and the New Credit Facil-
ity will include, "change of control" provisions that permit, in the case of
the Senior Credit Facility and the New Credit Facility, the lenders thereunder
to accelerate the repayment of indebtedness thereunder and that require, in the
case of the FVOP Notes Indenture, FVOP to offer to purchase all of the out-
standing FVOP Notes. Any acceleration of the obligations of FVOP under the Se-
nior Credit Facility or the New Credit Facility or the obligation of FVOP to
offer to purchase the FVOP Notes would make it unlikely that FVOP could make
adequate distributions to the Issuers so as to permit the Issuers to effect a
purchase of the Notes upon a Change of Control. See "Description of Other In-
debtedness" and "Description of the Notes." Any future credit agreements or
other agreements relating to other indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from repurchasing
Notes, the Company could seek the consent of its lenders to repurchase Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowing, the Company would
remain prohibited from repurchasing Notes. In such case, the Company's failure
to repurchase tendered Notes would constitute an Event of Default under the In-
denture. See "Description of the Notes--Change of Control."
23
<PAGE>
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to the Exchange Offer, there has been no public market for the Old Notes,
and there can be no assurance as to (i) the liquidity of any such market that
may develop, (ii) the ability of holders of Notes to sell their Notes or (iii)
the price at which the holders of Notes would be able to sell their Notes. If
such a market were to exist, the Notes could trade at prices that may be higher
or lower than their accreted value, or principal amount or purchase price, de-
pending on many factors, including prevailing interest rates, the market for
similar notes and the financial performance of the Company. It is expected that
the Notes will be designated for trading among qualified institutional buyers
in the Private Offering, Resales and Trading through Automated Linkages ("POR-
TAL") Market. The Company has been advised by the Initial Purchasers that, fol-
lowing completion of the Offering, they presently intend to make a market in
the Old Notes and, if issued, the Exchange Notes. However, the Initial Purchas-
ers are not obligated to do so, and any market-making activity with respect to
the Old Notes or, if issued, the Exchange Notes, may be discontinued at any
time without notice. In addition, such market-making activity will be subject
to the limits imposed by the Securities Act and the Exchange Act and may be
limited during the exchange offer for the Old Notes or the pendency of an ap-
plicable shelf registration statement. See "Description of the Notes--Registra-
tion Rights." There can be no assurance that, even following registration of
the Exchange Notes or the Old Notes, as the case may be, an active trading mar-
ket will exist for the Exchange Notes or the Old Notes, as the case may be, or
that such trading market will be liquid.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE NOTES
The Notes will be issued at a substantial discount from their principal amount
at maturity. Consequently, the purchasers of the Notes generally will be re-
quired to include amounts in gross income for federal income tax purposes in
advance of receipt of the cash payments to which such income is attributable.
See "Certain Federal Income Tax Considerations" for a more detailed discussion
of the U.S. federal income tax consequences to the holders of the Notes of the
purchase, ownership and disposition of the Notes.
If a bankruptcy case is commenced by or against the Issuers under the U.S.
Bankruptcy Code after the issuance of the Notes, the claim of a holder of Notes
with respect to the principal amount thereof may be limited to an amount equal
to the sum of (i) the initial offering price and (ii) that portion of the orig-
inal issue discount which is not deemed to constitute "unmatured interest" for
purposes of the U.S. Bankruptcy Code. Any original issue discount that was not
amortized as of any such bankruptcy filing would constitute "unmatured inter-
est."
CONSEQUENCES OF EXCHANGING OR FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES
Based upon interpretations by the staff of the Commission set forth in certain
no-action letters issued to third parties, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the reg-
istration and prospectus delivery requirements of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and that at the time of the consummation of the Exchange Offer such
holder has no arrangement or understanding with any person to participate in
the distribution of such Exchange Notes.
Any Participating Broker-Dealer that acquired Old Notes for its own account may
be a statutory underwriter. Each Participating Broker-Dealer that receives Ex-
change Notes for its own account pursuant to the Exchange Offer must acknowl-
edge that it will deliver a prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating 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 any person subject to the prospectus delivery requirements of the Secu-
rities Act (other than an Excluded Participating Broker Dealer). The Issuers
have agreed that, for a period of up to 180 days, they will use their reason-
able best efforts to keep the Exchange Offer Registration Statement effective
and to amend and supplement this Prospectus in order to permit this Prospectus
to be lawfully delivered by all persons subject to the prospectus delivery re-
quirements of the Securities Act (provided that, as set forth in the Letter of
Transmittal, such persons shall have expressed that they may be subject to such
requirements and have undertaken to use their reasonable best efforts to notify
Holdings when they are no longer subject to such requirements). See "Plan of
Distribution."
Any holder who is an "affiliate" of the Issuers (within the meaning of Rule 405
under the Securities Act), who does not acquire the Exchange Notes in the ordi-
nary course of business or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes could not rely on the po-
sition of the staff of the
24
<PAGE>
Commission enunciated in no-action letters and, in the absence of an exemption
therefrom, must comply with the registration and prospectus delivery require-
ments of the Securities Act in connection with any 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 in-
demnified by the Issuers.
To comply with the securities laws of certain jurisdictions, it may be neces-
sary to qualify for sale or register the Exchange Notes prior to offering or
selling such Exchange Notes. Upon consummation of the Exchange Offer, holders
that were not prohibited from participating in the Exchange Offer and did not
tender their Old Notes will not have any registration rights under the Regis-
tration Rights Agreement with respect to such nontendered Old Notes, and ac-
cordingly, such Old Notes will continue to be subject to the restrictions on
transfer contained in the legend thereon. In general, Old Notes may only be
offered or sold pursuant to Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the Securities Act and applicable state
securities laws or pursuant to an effective registration statement under the
Securities Act. See "The Exchange Offer--Consequences of Failure to Exchange."
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Issuers of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Issuers are under no duty to give notifi-
cation of defects or irregularities with respect to the tenders of Old Notes
for exchange. Old Notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof, and, upon consummation of
the Exchange Offer, certain registration rights with respect to the Notes un-
der the Registration Rights Agreement will terminate. In addition, any holder
of Old Notes who tenders in the Exchange Offer for the purpose of participat-
ing in a distribution of the Exchange Notes may be deemed to have received re-
stricted securities, and if so, will be required to comply with the registra-
tion and prospectus delivery requirements of the Securities Act in connection
with any resale transaction. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Old Notes, where such Old Notes were ac-
quired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in con-
nection with any resale of such Exchange Notes. See "Plan of Distribution." To
the extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Issuers' obligations
under the Registration Rights Agreement. The Issuers will not receive any cash
proceeds from the issuance of the Exchange Notes offered hereby. In considera-
tion for issuing the Exchange Notes contemplated in this Prospectus, the Is-
suers will receive Old Notes in like original Principal Amount at Maturity,
the form and terms of which are the same as the form and terms of the Exchange
Notes (which replace the Old Notes), except as otherwise described herein.
The net proceeds received by Holdings from the Offering were approximately
$144.0 million. Holdings contributed substantially all of such net proceeds to
FVOP as a capital contribution. FVOP used this capital contribution to repay
approximately $30.5 million of indebtedness outstanding under the Senior
Credit Facility's reducing revolving credit facility. This $75.0 million re-
ducing revolving credit facility, which matures in June 2004, had an effective
interest rate of 8.19% at June 30, 1997. Approximately $113.5 million of the
remaining net proceeds received by Holdings are being held in escrow by FVOP,
and FVOP will use such proceeds to finance pending acquisitions or to reduce
outstanding indebtedness at a later date. The Company also expects that FVOP
will reborrow amounts used to repay the reducing revolving line of credit fa-
cility under the Senior Credit Facility at a subsequent date to effect the ac-
quisitions. On September 15, 1997, FVOP received a commitment from its princi-
pal lenders under the Senior Credit Facility to enter into the New Credit Fa-
cility, which will refinance and replace the Senior Credit Facilty. The com-
mitment will provide that the lenders will extend up to $650.0 million aggre-
gate principal amount of revolving credit and term loan financing to FVOP. The
Company expects FVOP to enter into the New Credit Facility in the fourth quar-
ter of 1997. See "Description of Other Indebtedness."
Approximately $9.2 million of the net proceeds of the Offering used to reduce
Senior Credit Facility indebtedness were paid to certain affiliates of the
Initial Purchasers which are lenders under the Senior Credit Facility. See
"Plan of Distribution" and "Description of Other Indebtedness--The Senior
Credit Facility."
25
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company at
June 30, 1997, (ii) the Company's capitalization at June 30, 1997 as adjusted
to give effect to the Offering as if it had been consummated as of June 30,
1997, and (iii) the Company's capitalization on a pro forma basis to give ef-
fect to the Offering and the Acquisitions as if each such transaction had been
consummated as of June 30, 1997. See "Use of Proceeds," "Pro Forma Financial
Data" and "Description of Other Indebtedness."
<TABLE>
<CAPTION>
---------------------------------
AS OF JUNE 30, 1997
---------------------------------
ACTUAL PRO
ACTUAL AS ADJUSTED (1) FORMA
-------- --------------- --------
In thousands
<S> <C> <C> <C>
FVOP INDEBTEDNESS:
Senior Credit Facility(2).............. $220,500 $190,000 $395,809
11% Senior Subordinated Notes due
2006.................................. 200,000 200,000 200,000
UVC Note(3)............................ 8,596 8,596 8,596
-------- -------- --------
Total FVOP indebtedness.............. 429,096 398,596 604,405
HOLDINGS INDEBTEDNESS:
11 7/8% Senior Discount Notes due 2007 -- 150,000 150,000
-------- -------- --------
Total indebtedness................... 429,096 548,596 754,405
PARTNERS' CAPITAL:
Partnership interests.................. 146,264 146,264 139,608
-------- -------- --------
Total partners' capital.............. 146,264 146,264 139,608
-------- -------- --------
Total capitalization................. $575,360 $644,860 $894,013
======== ======== ========
</TABLE>
- ---------------
(1) FVOP applied $30.5 million of the net proceeds of the Offering to repay
outstanding indebtedness under the reducing revolving credit facility portion
of the Senior Credit Facility. Substantially all of the remaining net proceeds
are being held by FVOP in an escrow account and have been reflected as a de-
posit in the unaudited pro forma combined balance sheet as of June 30, 1997.
(2) On September 15, 1997, FVOP received a commitment from its principal lend-
ers under the Senior Credit Facility to enter into the New Credit Facility, un-
der which such lenders will extend up to $650.0 million aggregate principal
amount of revolving credit and term loan financing to FVOP. The Company expects
FVOP to enter into the New Credit Facility in the fourth quarter of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of Op-
erations--Liquidity and Capital Resources" and "Description of Other Indebted-
ness."
(3) In connection with the Company's acquisition of systems from UVC, FVOP is-
sued a subordinated promissory note to UVC in November 1995 in the original
principal amount of $7.2 million (the "UVC Note"). See "Description of Other
Indebtedness."
26
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA OF THE COMPANY
The following tables present selected financial data derived from FVOP's finan-
cial statements as of December 31, 1996 and 1995 and for the year ended Decem-
ber 31, 1996 and the period from inception (April 17, 1995) through December
31, 1995 which have been audited by KPMG Peat Marwick LLP, independent certi-
fied public accountants, and selected unaudited operating data for such peri-
ods. The following tables also present unaudited selected financial data as of
and for the six months ended June 30, 1997 derived from the unaudited financial
statements of FVOP and selected unaudited operating data for such periods. In
the opinion of management, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial position and the results of operations for the in-
terim period. Financial and operating results for the six months ended June 30,
1997 are not necessarily indicative of the results that may be expected for the
full year.
In addition, the following tables present unaudited pro forma summary financial
and operating data for the Company as of and for the six months ended June 30,
1997 and the year ended December 31, 1996, as adjusted to give pro forma effect
to (i) in the case of statement of operations data, (a) the Formation Transac-
tion, the Offering and the purchase of certain of the Existing Systems as if
such transactions had been consummated on January 1, 1996 and (b) the Formation
Transaction, the Offering and the purchase of certain of the Existing Systems
and the Acquisition Systems as if such transactions had been consummated on
January 1, 1996 and (ii) in the case of balance sheet data, (a) the Formation
Transaction and the Offering as if such transactions had been consummated on
June 30, 1997 and (b) the Formation Transaction, the Offering and the purchase
of the Acquisition Systems as if such transactions had been consummated on June
30, 1997. See "Pro Forma Financial Data." The unaudited pro forma financial and
operating data presented below are based upon the historical financial state-
ments of FVOP and certain of the Existing Systems and the Acquisition Systems.
The unaudited pro forma data give effect to the acquisitions under the purchase
method of accounting and certain other operating assumptions and the impact of
the Offering. See "Pro Forma Financial Data."
The unaudited pro forma financial data presented do not consider any future
events which may occur after the Acquisitions have been consummated. The Com-
pany believes revenue and operating expense synergies and purchasing and other
cost reductions of the combined operations of the Existing Systems and the Ac-
quisition Systems will be realized after the Company has completed the Acquisi-
tions and has installed its management controls, systems and marketing pro-
grams. However, for purposes of the unaudited pro forma financial data pre-
sented herein, these synergies have not been reflected because their realiza-
tion cannot be assured.
The unaudited summary pro forma financial data do not purport to represent what
the Company's results of operations or financial condition would have actually
been or what operations of the Company in any future period would be if the
transactions that give rise to the pro forma adjustments had occurred on the
dates assumed. The following information is qualified by reference to and
should be read in conjunction with "Pro Forma Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.
27
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
APRIL 17 TO
SIX MONTHS ENDED JUNE 30 YEAR ENDED DECEMBER 31 DECEMBER 31
------------------------------------ ------------------------------------- -----------
PRO FORMA PRO FORMA
FOR EXISTING FOR EXISTING
SYSTEMS, PRO FORMA SYSTEMS, PRO FORMA
ACQUISITION FOR EXISTING ACQUISITION FOR EXISTING
SYSTEMS AND SYSTEMS AND ACTUAL SYSTEMS AND SYSTEMS AND ACTUAL
THE OFFERING THE OFFERING FVOP THE OFFERING THE OFFERING ACTUAL FVOP
1997 1997 1997 1996 1996 FVOP 1996 1995
------------ ------------ -------- ------------ ------------ --------- -----------
In thousands, except ratios and operating statistical data
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $102,470 $ 70,547 $ 65,636 $198,072 $137,261 $ 76,464 $ 4,369
Operating expenses...... 52,335 36,726 34,462 98,848 68,776 39,181 2,311
Corporate administrative
expenses............... 2,741 2,049 2,049 5,298 3,672 2,930 127
Depreciation and
amortization........... 45,919 31,048 29,191 90,903 61,161 35,336 2,308
Preacquisition
expenses............... 940
-------- -------- -------- -------- -------- --------- ---------
Operating income
(loss)................. 1,475 724 (66) 3,023 3,652 (983) (1,317)
Interest expense,
net(1)................. (38,143) (29,681) (21,302) (75,598) (59,044) (22,422) (1,386)
Other income (expense).. (131) (46) (47) (654) (629) (396)
-------- -------- -------- -------- -------- --------- ---------
Net income (loss)....... $(36,799) $(29,003) $(21,415) $(73,229) $(56,021) $ (23,801) $ (2,703)
======== ======== ======== ======== ======== ========= =========
BALANCE SHEET DATA
(END OF PERIOD):
Total assets............ $921,952 $717,411 $597,911 $ 549,168 $ 143,512
Total debt.............. 754,405 548,596 429,096 398,194 93,159
Partners' capital....... 139,608 146,264 146,264 130,003 46,407
FINANCIAL RATIOS AND
OTHER DATA:
EBITDA(2)............... $ 47,394 $ 31,772 $ 29,125 $ 93,926 $ 64,813 $ 34,353 $ 991
EBITDA margin(2)........ 46.3% 45.0% 44.4% 47.4% 47.2% 44.9% 22.7%
Annualized EBITDA(3).... 98,392 65,212 57,752
Cash interest paid(4)... 27,778 20,366 20,603
Total debt to Annualized
EBITDA(5).............. 7.67 6.58 6.89
Annualized EBITDA to
interest expense(6).... 1.29 1.61 1.43
Net cash flows from
operating activities... $ 9,100 $ 18,911 $ 1,907
Net cash flows from
investing activities... (74,203) (418,215) (131,345)
Net cash flows from
financing activities... 67,963 400,293 132,088
Deficiency of earnings
to fixed charges(7).... $ 36,799 $ 29,003 $ 21,415 $ 73,229 $ 56,021 $ 23,801 $ 2,703
OPERATING STATISTICAL
DATA (END OF
PERIOD EXCEPT AVERAGE):
Homes passed............ 810,100 559,300 559,300 807,935 559,200 498,900 125,295
Basic subscribers....... 565,500 390,350 390,350 565,575 392,000 356,400 92,736
Basic penetration....... 69.8% 69.8% 69.8% 70.0% 70.1% 71.4% 74.0%
Premium units........... 266,750 164,525 164,525 270,746 172,176 152,100 35,677
Premium penetration..... 47.2% 42.1% 42.1% 47.8% 43.9% 42.7% 38.5%
Average monthly revenue
per basic
subscriber(8).......... $ 31.15 $ 30.99 $ 30.99 $ 29.60 $ 29.47 $ 29.73 $ 27.76
</TABLE>
- ---------
(1) Interest expense was net of interest income of $192, $192, $191, $671, $653,
$471 and $60 respectively (dollars in thousands).
(2) EBITDA is defined as net income before interest, taxes, depreciation and
amortization. The Company believes that EBITDA is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
perfor-mance, leverage and liquidity. In addition the Senior Credit
Facility, the Indenture for the Notes and the FVOP Notes Indenture contain
certain covenants, compliance with which is measured by computations
substantially similar to those used in determining EBITDA. See "Description
of Other Indebtedness" and "Description of the Notes." However, EBITDA is
not intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as an indicator of
operating performance or to cash flows as a measure of liquidity, as
determined in accordance with generally accepted account-ing principles.
EBITDA margin represents the percentage of EBITDA to revenue.
(3) Annualized EBITDA is EBITDA for the most recent quarter multiplied by four,
except for actual FVOP 1997 and actual FVOP 1996, which is EBITDA for the
most recent quarter adjusted for the pro forma effect of the preacquisition
results of operations for those systems purchased by the Company during the
quarter multiplied by four.
(4) Cash interest paid represents "interest expense, net" adjusted to exclude
amortization of deferred financing fees, the accretion of interest on the
Notes and on the UVC Note.
(5) This presentation is consistent with the incurrence of indebtedness test in
the Indenture for the Notes and the FVOP Notes Indenture. In addition, this
ratio is commonly used in the cable television industry as a measure of
leverage.
(6) For purposes of this computation, interest expense is annualized for the
quarter ended June 30, 1997 and includes certain pro forma adjustments made
to include the effect of debt incurred to purchase those systems acquired by
the Company during the quarter. This ratio is commonly used in the cable
television industry as a measure of coverage.
(7) For purposes of this computation, earnings are defined as income (loss) be-
fore income taxes and fixed charges. Fixed charges are defined as the sum of
(i) interest costs (including an estimated interest component of rental ex-
pense) and (ii) amortization of deferred financing costs.
(8) Average monthly revenue per basic subscriber equals revenue for the last
month of the period divided by the number of basic subscribers as of the end
of such period.
28
<PAGE>
PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data presented below are derived from the
historical financial statements of FVOP and certain of the Existing Systems and
the Acquisition Systems. The unaudited pro forma balance sheet data as of June
30, 1997 give pro forma effect to (a) the Formation Transaction and the Offer-
ing as if such transactions had been consummated on June 30, 1997 and (b) the
Formation Transaction, the Offering and the Acquisitions as if such transac-
tions had been consummated on June 30, 1997. The unaudited pro forma consoli-
dated statement of operations data for the six months ended June 30, 1997 and
for the year ended December 31, 1996 give pro forma effect to (a) the Formation
Transaction, the Offering and the purchase of certain Existing Systems as if
such transactions had been consummated on January 1, 1996 and (b) the Formation
Transaction, the Offering and the purchase of certain of the Existing Systems
and the Acquisition Systems as if such transactions had been consummated on
January 1, 1996.
The unaudited pro forma financial data give effect to the Acquisitions de-
scribed above under the purchase method of accounting and are based upon the
assumptions and adjustments described in the accompanying notes to the unau-
dited pro forma financial statements presented on the following pages. The al-
locations of the total purchase price for the Acquisition Systems presented are
based on preliminary estimates and are subject to final allocation adjustments.
The unaudited pro forma financial data presented do not consider any future
events which may occur after the Acquisitions have been consummated. The Com-
pany believes revenue and operating expense synergies and purchasing and other
cost reductions of the combined operations of the Existing Systems and the Ac-
quisition Systems will be realized after the Company has completed the Acquisi-
tions and has installed its management controls, systems and marketing pro-
grams. However, for purposes of the unaudited pro forma financial data pre-
sented herein, these synergies have not been reflected because their realiza-
tion cannot be assured.
The unaudited pro forma financial data do not purport to represent what the
Company's results of operations or financial condition would have actually been
or what operations would be if the transactions that give rise to the pro forma
adjustments had occurred on the dates assumed. The unaudited pro forma finan-
cial data presented below should be read in conjunction with the audited and
unaudited historical financial statements and related notes thereto of FVOP and
certain of the Existing Systems and the Acquisition Systems and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in-
cluded elsewhere in this Prospectus.
29
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
(In $ thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
SUBTOTAL
COMPANY PRO
FVOP PRO FORMA FORMA
AND ADJUSTMENTS OFFERING AND
SUBSIDIARY FOR THE EXISTING
ACTUAL OFFERING(A) SYSTEMS
---------- ----------- ------------
<S> <C> <C> <C>
Cash and cash
equivalents...... 6,499 6,499
Accounts
receivable, net.. 5,850 5,850
Prepaid
expenses......... 2,604 2,604
Property and
equipment, net... 212,875 212,875
Franchise costs
and intangible
assets, net...... 349,659 349,659
Deferred
financing costs
and other, net... 12,165 6,000 18,165
Deposits......... 8,259 113,500 121,759
------- ------- -------
Total assets.... 597,911 119,500 717,411
======= ======= =======
Accounts payable
and accrued
liabilities...... 14,930 14,930
Subscriber
prepayments and
deposits......... 1,929 1,929
Accrued interest
payable.......... 5,692 5,692
Deferred income
taxes............
Debt............. 429,096 (30,500) 548,596
150,000
Partners'
capital.......... 146,264 146,264
------- ------- -------
Total
liabilities and
partners'
capital......... 597,911 119,500 717,411
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
ACQUISITION SYSTEMS
--------------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
FOR THE
TCI NEW BLUE RIDGE AND COX ACQUISITION
CABLEVISION ENGLAND PHOENIX--MI CENTRAL OHIO SYSTEMS AND PRO FORMA
SYSTEMS SYSTEMS SYSTEMS SYSTEMS NEW CREDIT COMPANY
ACQUISITION ACQUISITION ACQUISITIONS ACQUISITION FACILITY CONSOLIDATED
----------- ----------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents...... 53 64 6,381 (6,498)(b) 6,499
Accounts
receivable, net.. 368 144 7 2,295 8,664
Prepaid
expenses......... 250 29 10 2,893
Property and
equipment, net... 12,086 9,282 3,832 24,091 79,993 (b) 342,159
Franchise costs
and intangible
assets, net...... 13,809 21,520 695 149,277 11,125 (b) 546,085
Deferred
financing costs
and other, net... 12 980 4,000 (b) 15,509
(992)(c)
(6,656)(d)
Deposits......... (121,616)(b) 143
------ ------ ------ ------- -------- -------
Total assets.... 26,566 31,039 10,937 176,643 (40,644) 921,952
====== ====== ====== ======= ======== =======
Accounts payable
and accrued
liabilities...... 1,155 174 437 1,499 500 (b) 18,695
Subscriber
prepayments and
deposits......... 259 1,364 3,552
Accrued interest
payable.......... 22 (22)(c) 5,692
Deferred income
taxes............ 10,009 62,636 (72,645)(c)
Debt............. 3,731 30,735 205,809 (b) 754,405
(34,466)(c)
Partners'
capital.......... 25,411 20,856 6,488 80,409 (133,164)(c) 139,608
(6,656)(d)
------ ------ ------ ------- -------- -------
Total
liabilities and
partners'
capital......... 26,566 31,039 10,937 176,643 (40,644) 921,952
====== ====== ====== ======= ======== =======
</TABLE>
30
<PAGE>
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
(a)Represents the effect of the Offering, assuming that the net proceeds (after
$6.0 million of direct costs) of $144.0 million are utilized to repay $30.5
million of existing reducing revolving credit facility indebtedness under the
Senior Credit Facility, with the remaining placed in escrow.
(b)Represents adjustments to the historical balance sheets of the Acquisition
Systems to reflect the purchase of the Acquisition Systems, including (i) fair
value adjustments recorded in connection with purchase accounting, (ii) incre-
mental indebtedness incurred to acquire the Acquisition Systems, (iii) addition
of $4.0 million of deferred financing costs incurred in connection with the New
Credit Facility, (iv) recordation of an estimated $2.0 million of transaction
costs, and (v) accrual for $0.5 million of certain identifiable restructuring
costs the Company expects to incur within one year of the respective closing
dates.
The combined purchase price allocation for the Acquisition Systems, based on
estimates, is as follows:
<TABLE>
<CAPTION>
-----------------------------------
PURCHASE
HISTORICAL PRICE PRELIMINARY
TOTAL ACQUISITION SYSTEMS BALANCE ADJUSTMENTS ALLOCATION
------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Property and equipment................ $ 49,291 $ 79,993 $129,284
Intangible assets:....................
Franchise costs..................... 22,215 154,688 176,903
Other intangible assets............. 163,086 (143,563) 19,523
-------- -------- --------
Total intangible assets........... 185,301 11,125 196,426
-------- -------- --------
Aggregate purchase price, including
transaction and restructuring costs.. $325,710
========
</TABLE>
(c)Represents the reversal of the historical equity accounts of the Acquisition
Systems, and the elimination of debt balances, accrued interest, certain de-
ferred financing costs and deferred income taxes which are not assumed under
the acquisition agreements.
(d)A non-recurring charge of $6.7 million of deferred financing costs related
to the Senior Credit Facility has been recognized in connection with the New
Credit Facility, which will replace the Senior Credit Facility in its entirety.
Such adjustment has been reflected as a direct charge to equity.
31
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(FOR THE SIX MONTHS ENDED JUNE 30, 1997)
(In $ thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
EXISTING SYSTEMS
-----------------------------------------------------------------------------
PRO FORMA SUBTOTAL
ADJUSTMENTS FOR COMPANY PRO
EXISTING PRO FORMA FORMA
FVOP AND EXISTING SYSTEMS AND ADJUSTMENTS OFFERING AND
SUBSIDIARY SYSTEMS SENIOR FOR THE EXISTING
ACTUAL ACQUISITIONS(A) CREDIT FACILITY OFFERING SYSTEMS
---------- --------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
Revenue.......... 65,636 4,911 70,547
Expenses
System
operations...... 34,462 2,610 (346)(e) 36,726
Corporate
administrative
expense......... 2,049 313 (313)(f) 2,049
Depreciation and
amortization.... 29,191 1,306 551 (g) 31,048
------- ------- ------ ------- --------
Operating income
(loss)........... (66) 682 108 724
Interest expense,
net.............. (21,302) (783) 438 (h) (8,034)(j) (29,681)
Other income
(expense)........ (47) 1 (46)
------- ------- ------ ------- --------
Net income (loss)
before income
taxes............ (21,415) (100) 546 (8,034) (29,003)
Provision for
income taxes.....
------- ------- ------ ------- --------
Net income
(loss)........... (21,415) (100) 546 (8,034) (29,003)
======= ======= ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
ACQUISITION SYSTEMS
----------------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
BLUE RIDGE FOR THE
TCI NEW AND COX ACQUISITION
CABLEVISION ENGLAND PHOENIX--MI CENTRAL OHIO SYSTEMS AND PRO FORMA
SYSTEMS SYSTEMS SYSTEMS SYSTEMS NEW CREDIT COMPANY
ACQUISITION ACQUISITION ACQUISITIONS ACQUISITION FACILITY CONSOLIDATED
----------- ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
Revenue.......... 9,262 4,278 1,927 16,743 (287)(k) 102,470
Expenses
System
operations...... 5,161 2,156 919 7,369 4 (l) 52,335
Corporate
administrative
expense......... 684 124 44 405 (565)(m) 2,741
Depreciation and
amortization.... 1,534 934 466 4,510 7,427 (n) 45,919
------- ----- ------ ------- ------- ---------
Operating income
(loss)........... 1,883 1,064 498 4,459 (7,153) 1,475
Interest expense,
net.............. (176) (146) (970) (7,170)(o) (38,143)
Other income
(expense)........ (14) (34) (25) (12) (131)
------- ----- ------ ------- ------- ---------
Net income (loss)
before income
taxes............ 1,693 1,030 327 3,477 (14,323) (36,799)
Provision for
income taxes..... (388) (1,425) 1,813 (p)
------- ----- ------ ------- ------- ---------
Net income
(loss)........... 1,693 642 327 2,052 (12,510) (36,799)
======= ===== ====== ======= ======= =========
</TABLE>
32
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(FOR THE YEAR ENDED DECEMBER 31, 1996)
(In $ thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
EXISTING SYSTEMS
--------------------------------------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS FOR
EFFECT OF EXISTING PRO FORMA
FVOP AND ACE TRIAX OTHER SALE OF THE SYSTEMS AND ADJUSTMENTS
SUBSIDIARY SYSTEMS SYSTEMS SYSTEMS DISPOSITION SENIOR FOR THE
ACTUAL ACQUISITION(B) ACQUISITION(B) ACQUISITIONS(C) SYSTEMS(D) CREDIT FACILITY OFFERING
---------- -------------- -------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
Revenues......... 76,464 22,911 14,521 25,527 (2,162)
Expenses
System
operations...... 39,181 12,377 6,846 13,004 (1,159) (1,473)(e)
Corporate
administrative
expense......... 2,930 886 948 1,518 (96) (2,514)(f)
Depreciation and
amortization.... 35,336 8,266 5,506 6,348 (557) 6,262 (g)
------- --------- --------- --------- -------- -------- --------
Operating income
(loss)........... (983) 1,382 1,221 4,657 (350) (2,275)
Interest expense,
net.............. (22,422) (19,202) (2,222) (3,695) 5,492 (h) (16,995)(j)
Other income
(expense)........ (396) (913) (244) 21 903 (i)
------- --------- --------- --------- -------- -------- --------
Net income (loss)
before income
taxes............ (23,801) (18,733) (1,245) 983 (350) 4,120 (16,995)
Provision for
income taxes.....
------- --------- --------- --------- -------- -------- --------
Net income
(loss)........... (23,801) (18,733) (1,245) 983 (350) 4,120 (16,995)
======= ========= ========= ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
ACQUISITION SYSTEMS
------------ --------------------------------------------------------------------------------
PRO FORMA
SUBTOTAL ADJUSTMENTS
COMPANY PRO BLUE RIDGE FOR THE
FORMA TCI NEW AND COX ACQUISITION
OFFERING AND CABLEVISION ENGLAND PHOENIX--MI CENTRAL OHIO SYSTEMS AND PRO FORMA
EXISTING SYSTEMS SYSTEMS SYSTEMS SYSTEMS NEW CREDIT COMPANY
SYSTEMS ACQUISITION ACQUISITION ACQUISITION ACQUISITION FACILITY CONSOLIDATED
------------ ----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
Revenues......... 137,261 17,584 8,440 3,793 31,749 (755)(k) 198,072
Expenses
System
operations...... 68,776 9,987 4,747 1,632 13,955 (249) (l) 98,848
Corporate
administrative
expense......... 3,672 1,270 430 86 1,320 (1,480)(m) 5,298
Depreciation and
amortization.... 61,161 3,057 1,852 921 8,818 15,094 (n) 90,903
--------- ------- ------- -------- ------- ------- ---------
Operating income
(loss)........... 3,652 3,270 1,411 1,154 7,656 (14,120) 3,023
Interest expense,
net.............. (59,044) (272) (321) (2,346) (13,615)(o) (75,598)
Other income
(expense)........ (629) (27) (2) (1) 5 (654)
--------- ------- ------- -------- ------- ------- ---------
Net income (loss)
before income
taxes............ (56,021) 2,971 1,409 832 5,315 (27,735) (73,229)
Provision for
income taxes..... (595) (2,176) 2,771 (p)
--------- ------- ------- -------- ------- ------- ---------
Net income
(loss)........... (56,021) 2,971 814 832 3,139 (24,964) (73,229)
========= ======= ======= ======== ======= ======= =========
</TABLE>
<PAGE>
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(a)Includes the historical results of operations of the Bluegrass Systems,
Milestone Systems, Clear B&G Systems, Triax I Systems and Front Row Systems
("Existing Systems Acquisitions"). Historical results are presented for the
systems purchased from January 1, 1997 to the respective dates of acquisition.
(b)Includes the historical results of operations of the ACE Systems and Triax
Systems. Historical results are presented for the period from January 1, 1996
to the respective dates of acquisition.
(c)Includes the historical results of operations of the C4 Systems, Cox Sys-
tems, Americable Systems, Grassroots Systems, Penn/Ohio Systems, Deep Creek
Systems, Bluegrass Systems, Clear B&G Systems, Milestone Systems, Triax I Sys-
tems, and Phoenix Front Row Systems ("Other Systems Acquisitions"). Historical
results are presented for the systems purchased from January 1, 1996 to Decem-
ber 31, 1996, or if earlier, the respective dates of acquisition.
(d)Represents the operations of the Chatsworth, Georgia system and the
Woodstock and New Market, Virginia systems (the "Disposition Systems").
(e)Represents the anticipated decrease in programming costs for the Existing
Systems of $19 and the anticipated increase in programming costs of $175 for
June 30, 1997 and December 31, 1996, respectively, based on the Company's esti-
mates of its programming costs and the estimated cost savings of $327 and
$1,648 for June 30, 1997 and December 31, 1996, respectively, resulting from
the elimination of duplicate functions and personnel attributable to the Exist-
ing Systems.
(f)Represents the elimination of management fees and allocated overhead costs
of $313 and $3,256 for June 30, 1997 and December 31, 1996, respectively, and
the inclusion of the Company's estimated incremental overhead cost of $742 for
December 31, 1996, attributable to the Existing Systems.
(g)Represents the additional depreciation and amortization expense arising from
the acquisitions of the Existing Systems as if such acquisitions had occurred
on January 1, 1996. Pro forma depreciation and amortization is calculated on a
straight-line basis over periods that are consistent with the Company's stated
accounting policy. The cost basis of the purchased assets utilized in these
calculations is based on preliminary asset allocations between property and
equipment and intangible assets and are subject to final allocation adjust-
ments.
(h)Represents the net adjustment to (i) record interest expense on the incre-
mental indebtedness arising from the purchase of the Existing Systems and to
(ii) reverse the historical interest expense of the Existing Systems. Adjust-
ments to interest expense are calculated as if the incremental indebtedness had
been outstanding since January 1, 1996 with interest accruing at rates as fol-
lows: 8.50% and 8.51% weighted average interest rate on borrowings under the
Senior Credit Facility at June 30, 1997 and December 31, 1996, respectively,
11.0% for $200,000 of FVOP Notes, and 11.5% for the UVC Note of $8,600 and
$8,100 at June 30, 1997 and December 31, 1996, respectively.
(i)Represents the elimination of the minority interest in loss of the C4 Sys-
tems prior to acquisition and the reversal of expenses incurred in connection
with override and forbearance agreements with the lenders of ACE existing prior
to acquisition.
(j)Adjustment to record a net increase to interest expense calculated as if
$150,000 indebtedness incurred from the Offering had been outstanding during
the entire period and $30,500 of the net proceeds from the Offering had been
applied to repay existing indebtedness under the Senior Credit Facility with
$113,500 placed in escrow. Interest expense on the Offering debt is calculated
using an interest rate of 11.875% per annum. Interest on remaining debt is cal-
culated as follows: 8.55% weighted average interest rate on borrowings under
the Senior Credit Facility at June 30, 1997 and December 31, 1996, 11.0% on
$200,000 of FVOP Notes, and 11.5% on the UVC Note of $8,600 and $8,100 at June
30, 1997 and December 31, 1996, respectively. A 1/8% change in the interest
rate would result in a $94 and $188 change to the Company's pro forma net loss
for the six months ended June 30, 1997 and for the year ended December 31,
1996, respectively.
(k)Represents the elimination of Primestar revenues for the TCI New England
Systems.
(l)Represents the anticipated increase in programming costs for the Acquisition
Systems of $424 and $804 for June 30, 1997 and December 31, 1996, respectively,
based on the Company's current negotiated programming contracts, offset par-
tially by the estimated cost savings of $216 and $380 for June 30, 1997 and De-
cember 31, 1996, respectively, resulting from the elimination of duplicative
functions and personnel attributable to the Acquisition Systems and partially
by the cost savings of $204 and $673 for June 30, 1997 and December 31, 1996,
respectively, resulting from the elimination of Primestar functions provided in
the TCI New England Systems.
(m)Represents the elimination of management fees and allocated overhead costs
of $1,257 and $3,106 for June 30, 1997 and December 31, 1996, respectively, and
the inclusion of the Company's estimated incremental overhead cost of $692 and
$1,626 for June 30, 1997 and December 31, 1996, attributable to the Acquisition
Systems.
(n)Represents the additional depreciation and amortization expense arising from
the purchase of the Acquisition Systems as if such acquisitions had occurred on
January 1, 1996. Pro forma depreciation and amortization is calculated on a
straight-line basis over periods that are consistent with the Company's stated
accounting policy. The cost basis of the purchased assets utilized in these
calculations is based on preliminary asset allocations between property and
equipment and intangible assets and are subject to final allocation adjust-
ments.
(o)Represents the net adjustment to (i) record interest expense on the incre-
mental indebtedness needed to purchase the Acquisition Systems and to (ii) re-
verse the historical interest expense of the Acquisition Systems. Adjustments
to interest expense are calculated as if the incremental indebtedness had been
outstanding since January 1, 1996 with interest accruing at rates as follows:
8.36% weighted average interest rate on borrowings under the Senior Credit Fa-
cility at June 30, 1997 and December 31, 1996, 11.0% for $200,000 of FVOP
Notes, and 11.5% for the UVC Note of $8,600 and $8,100 at June 30, 1997 and De-
cember 31, 1996, respectively. A 1/8% change in the assumed interest rate would
result in a $129 and $252 change to the Company's pro forma net loss for the
six months ended June 30, 1997 and for the year ended December 31, 1996, re-
spectively.
(p)Represents adjustments to reverse the provision of income taxes. FVOP is
structured as a partnership, and accordingly, is not subject to income taxes.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company commenced operations on November 9, 1995 with the acquisition of
its first cable television systems. See "Business--Development of the Systems--
The Existing Systems" for a description of the Existing Systems. The Company
has operated the Existing Systems for a limited period of time and had no oper-
ations prior to November 9, 1995. All acquisitions have been accounted for un-
der the purchase method of accounting and, therefore, the Company's historical
results of operations include the results of operations for each acquired sys-
tem subsequent to its respective acquisition date.
The Company has recently entered into definitive agreements or has substan-
tially completed negotiations to acquire certain cable television system assets
of Cablevision, TCI, Cox, Blue Ridge, and Phoenix for aggregate consideration
of approximately $323.2 million (subject to adjustment). See "Business--Devel-
opment of the Systems--The Acquisition Systems" for a description of the Acqui-
sition Systems. If consummated, the purchase of the Acquisition Systems will
result in a substantial increase in the number of subscribers and the revenues
and expenses of the Company. As a result of the Company's limited operating
history and the expected effect of the purchase of the Acquisition Systems, the
Company believes that its results of operations for the periods presented are
not indicative of the Company's results of operations in the future.
The Company's objective is to increase its subscriber base and operating cash
flow through selective acquisitions of cable television systems that can be in-
tegrated with the Company's Existing Systems and to enhance enterprise value
through operating improvements and revenue growth. The Company continues the
process of acquiring cable systems, and integrating, rebuilding and upgrading
the new systems with its current systems. The Company also continues to invest
significant capital for technical enhancement, including the headend equipment
needed to launch additional channels contemporaneously with service rate in-
creases which the Company expects to implement over the course of 1997. The
Company has initiated the process of significant cable system rebuild and up-
grade activity primarily in its New England and Ohio operating clusters, and is
at varying stages of completion on eight separate rebuild and upgrade projects
in systems serving, in the aggregate, approximately 37,500 basic subscribers.
In addition, the Company will install headend equipment for the HITS digital
television system in four of its Existing Systems and is currently beta-testing
the HITS system in anticipation of its plan to launch the service commercially
in early fall of 1997.
35
<PAGE>
RESULTS OF OPERATIONS
Actual
Three months ended June 30, 1997 compared with the three months ended March 31,
1997
The following table sets forth, for the three-month periods ended June 30, 1997
and March 31, 1997, certain statements of operations and other data of the Com-
pany. As a result of the Company's limited operating history, the Company be-
lieves that its results of operations for the periods presented in this table
are not indicative of the Company's future results.
<TABLE>
<CAPTION>
--------------------------------
THREE MONTHS THREE MONTHS
ENDED JUNE 30, ENDED MARCH 31,
1997 1997
--------------- ---------------
% OF % OF
AMOUNT REVENUE AMOUNT REVENUE
------- ------- ------- -------
In thousands (unaudited)
<S> <C> <C> <C> <C>
Revenue.................................. $34,081 100.0% $31,555 100.0%
Expenses
Operating expenses..................... 17,679 51.8 16,783 53.2
Corporate expenses..................... 1,048 3.1 1,001 3.2
------- ----- ------- -----
EBITDA(1)................................ $15,354 45.1% $13,771 43.6%
======= ===== ======= =====
Basic subscribers........................ 390,350 362,350
Premium units............................ 164,525 149,500
</TABLE>
- ---------------
(1)EBITDA represents operating income (loss) before depreciation and amortiza-
tion. The Company believes that EBITDA is a meaningful measure of performance
because it is commonly used in the cable television industry to analyze and
compare cable television companies on the basis of operating performance, lev-
erage and liquidity. In addition, the Senior Credit Facility, the Indenture and
the FVOP Notes Indenture contain certain covenants, compliance with which is
measured by computations substantially similar to those used in determining
EBITDA. See "Description of Other Indebtedness" and "Description of the Notes."
However, EBITDA is not intended to be a performance measure that should be re-
garded as an alternative either to operating income or net income as an indica-
tor of operating performance or to cash flows as a measure of liquidity, as de-
termined in accordance with generally accepted accounting principles.
The three-month period ended June 30, 1997 is the only period in which the Com-
pany operated all of the Existing Systems, although certain systems (the Triax
I Systems and the Front Row Systems) were purchased during the period and are
reflected only for that portion of the period that such systems were owned by
the Company. The three-month period ended March 31, 1997 represents the inte-
gration of all of the Existing Systems (except for the Triax I and Front Row
Systems), although certain systems (the Bluegrass Systems, the Milestone Sys-
tems and the Clear/B&G Systems) were purchased during the period and are re-
flected only for that portion of the period that such systems were owned by the
Company.
Revenue increased 8.0%, or approximately $2.5 million, to approximately $34.1
million for the three months ended June 30, 1997 from approximately $31.6 mil-
lion for the three months ended March 31, 1997. Operating and corporate ex-
penses increased approximately 5.3% and 4.7%, respectively, for the three
months ended June 30, 1997 from the three months ended March 31, 1997. The num-
ber of basic subscribers increased approximately 7.7% from 362,350 at March 31,
1997 to 390,350 as of June 30, 1997, while the number of premium units in-
creased approximately 10.0% from 149,500 to 164,525 over the three-month peri-
od.
Significant growth over the first quarter of 1997 in revenue, operating and
corporate expenses, basic subscribers and premium units is primarily attribut-
able to the Company's acquisitions of cable systems during March and May of
1997. The Company's primary focus over the twelve-month period ended June 30,
1997 has been to achieve critical mass through acquisitions, to establish its
core geography and to begin the consolidation of operations. In addition, the
Company has aggresively launched and promoted new service offerings in the ma-
jority of its systems, enabling the Company to increase service rates and pene-
tration levels.
In an effort to maximize revenue from existing subscribers, the Company also
has established and commenced operations at a centralized, in-house
telemarketing center equipped with state-of-the art predictive dialing and com-
munications equipment. The Company's efforts are focused on telemarketing pre-
mium services to its subscribers in its New England and Ohio operating clus-
ters. Beginning in April 1997, telemarketers have contacted the Company's sub-
scribers, marketing
36
<PAGE>
FrontierVision's "Ultimate TV" package, a premium service package consisting of
at least three premium channels. This has resulted in an increase in the number
of pay units purchased of those subscribers by approximately 17.4% over a
three-month period. Based on its initial success, the Company intends to con-
tinue to aggressively market selected premium service packages through its in-
ternal telemarketing resources.
As its operations base has developed, the Company has increased its focus on
the integration of business operations to achieve efficiencies, the significant
investment in technical plant and the promotion of new and existing services to
enhance revenues. In the second quarter of 1997, the Company has continued to
progress in certain phases of these objectives, and the impact of certain of
these efforts has resulted in the increase in EBITDA margin during the second
quarter of 1997. Operating and corporate expenses were reduced to 54.9% of rev-
enue in the three months ended June 30, 1997 from 56.4% in the three months
ended March 31, 1997. The Company's EBITDA margin increased to 45.1% for the
three months ended June 30, 1997 from 43.6% for the three months ended March
31, 1997.
Six months ended June 30, 1997 compared with six months ended June 30, 1996
The following table set forth, for the six-month periods ended June 30, 1997
and June 30, 1996, certain statements of operations and other data of the Com-
pany. As a result of the Company's limited operating history, the Company be-
lieves that its results of operations for the periods presented in this table
are not indicative of the Company's future results.
<TABLE>
<CAPTION>
----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1996
---------------- ----------------
% OF % OF
AMOUNT REVENUE AMOUNT REVENUE
-------- ------- -------- -------
In thousands (unaudited)
<S> <C> <C> <C> <C>
Revenue................................ $ 65,636 100.0% $ 27,539 100.0%
Expenses
Operating expenses................... 34,462 52.5 13,668 49.6
Corporate expenses................... 2,049 3.1 1,265 4.6
-------- ----- -------- -----
EBITDA................................. $ 29,125 44.4% $ 12,606 45.8%
======== ===== ======== =====
Basic subscribers...................... 390,350 217,900
Premium units.......................... 164,525 91,300
</TABLE>
Revenue increased 138.3%, or approximately $38.1 million, to approximately
$65.6 million for the six months ended June 30, 1997 from approximately $27.5
million for the six months ended June 30, 1996. Operating and corporate ex-
penses increased approximately 152.1% and 62.0%, respectively, for the six
months ended June 30, 1997 from the six months ended June 30, 1996. As a per-
centage of revenue, operating and corporate expenses increased to 55.6% of rev-
enue for the six months ended June 30, 1997 from 54.2% of revenue for the six
months ended June 30, 1996. The number of basic subscribers increased approxi-
mately 79.1% from 217,900 at June 30, 1996 to 390,350 as of June 30, 1997,
while the number of premium units increased approximately 80.2% from 91,300 to
164,525 over the twelve-month period.
37
<PAGE>
Twelve months ended December 31, 1996 compared with the period from April 17,
1995 (inception) to December 31, 1995
The following table sets forth, for the twelve-month period ended December 31,
1996 and the period from April 17, 1995 (inception) to December 31, 1995, cer-
tain statements of operations and other data of the Company. As a result of the
Company's limited operating history, the Company believes that its results of
operations for the periods presented in this table are not indicative of the
Company's future operations.
<TABLE>
<CAPTION>
--------------------------------
TWELVE MONTHS PERIOD FROM
ENDED APRIL 17, 1995
DECEMBER 31, TO DECEMBER
1996 31, 1995
---------------- --------------
% OF % OF
AMOUNT REVENUE AMOUNT REVENUE
-------- ------- ------ -------
In thousands
<S> <C> <C> <C> <C>
Revenue........................ $ 76,464 100.0% $4,369 100.0%
Expenses
Operating expenses........... 39,181 51.2 2,311 52.9
Corporate expenses........... 2,930 3.8 127 2.9
Pre-acquisition expenses..... 940 21.5
-------- ----- ------ -----
EBITDA......................... $ 34,353 44.9% $ 991 22.7%
======== ===== ====== =====
Basic subscribers.............. 356,400 92,736
Premium units.................. 152,100 35,677
</TABLE>
Revenue increased to $76.5 million in the twelve months ended December 31, 1996
from $4.4 million in the period ended December 31, 1995. This increase was at-
tributable in part to having a full year of operations from the UVC Systems and
the Longfellow Systems (both acquired in November 1995). Revenue for the twelve
months ended December 31, 1996 also reflect operations for the following sys-
tems from the date of their respective acquisitions: the C4 Systems on February
1, 1996; the Americable Systems on March 29, 1996; the Cox Systems on April 9,
1996; the Grassroots Systems on August 29, 1996; the Triax Systems on October
7, 1996; the ACE Systems on October 9, 1996; the Penn/Ohio Systems on October
31, 1996; and the Deep Creek Systems on December 23, 1996.
Operating and corporate expenses were reduced to 55.0% of revenue in the twelve
months ended December 31, 1996 from 55.8% of revenues in the period ended De-
cember 31, 1995 due primarily to cost-cutting measures implemented by the Com-
pany. These efforts included the establishment of centralized regional service
centers in Rockland, Maine, Greeneville, Tennessee, Richmond, Kentucky and
Chillicothe, Ohio and the elimination of certain customer service offices.
Other cost reductions have been realized through the elimination of duplicative
expenses, such as customer billing, accounting, accounts payable and payroll
administration.
As a result of such cost efficiencies and the aforementioned acquisitions,
EBITDA increased to 44.9% of revenues in the twelve months ended December 31,
1996 from 22.7% of revenues in the period ended December 31, 1995.
Combined historical Acquired Predecessor Systems
The summary combined selected historical financial data and results of opera-
tions discussed below represent the combined historical financial data of cer-
tain of the Existing Systems. Combined financial data and results of operations
do not include results of operations of the systems purchased from UVC and
Longfellow during the period in 1995 when such systems were owned by the Compa-
ny. Combined historical financial data and results of operations are presented
as of and for the years ended December 31, 1995, 1994 and 1993 for certain of
the Existing Systems, which represented approximately 85% of the Existing Sys-
tems in terms of number of basic subscribers, as of June 30, 1997 and include
only the systems purchased from UVC, C4, Cox, ACE and Triax (collectively the
"Acquired Predecessor Systems").
38
<PAGE>
The summary unaudited combined selected historical financial data and results
of operations discussed below are derived from the audited and unaudited his-
torical financial statements of the Existing Systems and should be read in con-
junction with the audited financial statements and related notes thereto of the
Acquired Predecessor Systems and "Management's Discussion and Analysis of Fi-
nancial Condition and Results of Operations" included elsewhere in this Pro-
spectus. The combined selected financial data set forth below represent the
combined results of operations for the systems for periods during which the
systems were not owned by the Company and, accordingly, do not reflect any pur-
chase accounting adjustments or any changes in the operation or management of
the systems that the Company has made since the date of acquisition or that it
intends to make in the future. Accordingly, the Company does not believe that
such operating results are indicative of future operating results of the Compa-
ny.
<TABLE>
<CAPTION>
----------------------------------
ACQUIRED PREDECESSOR SYSTEMS
YEAR ENDED DECEMBER 31
----------------------------------
1995(1)(2) 1994(3)(4) 1993(3)(4)
---------- ---------- ----------
In thousands
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................. $109,765 $105,368 $ 96,171
Expenses
Operating expenses.................... 62,098 58,643 52,702
Depreciation and amortization......... 42,354 46,345 41,863
-------- -------- --------
Operating income........................ 5,313 380 1,606
Interest expense........................ (37,898) (34,506) (31,230)
Other expense........................... (4,409) (2,570) (3,450)
-------- -------- --------
Net loss................................ $(36,994) $(36,696) $(33,074)
======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Total assets............................ $288,253 $228,820 $255,108
Total debt.............................. 285,144 263,660 255,319
</TABLE>
- ---------------
(1)Includes the combined results of operations of the Existing Systems pur-
chased from UVC, C4, Cox, ACE and Triax for the year ended December 31, 1995
(except for UVC, which is for the period ended November 8, 1995). As the re-
sults of operations of systems purchased from UVC are included in the Company's
historical results of operations subsequent to the date of the Company's acqui-
sition thereof (November 9, 1995), the amounts do not include $4.2 million in
revenues, $2.4 million in operating expenses and $2.2 million in depreciation
and amortization (computed after the application of purchase accounting adjust-
ments) attributable to such systems.
(2)Includes combined balance sheet data for systems purchased from UVC as of
November 9, 1995, the date of the Company's acquisition thereof, and combined
balance sheet data for systems purchased from C4, Cox, ACE and Triax as of De-
cember 31, 1995, because such acquisitions occurred after that date.
(3)Includes the combined results of operations of systems purchased from UVC,
C4, Cox, ACE and Triax for the years ended December 31, 1994 and 1993.
(4)Includes combined balance sheet data for systems purchased from UVC, C4,
Cox, ACE and Triax as of December 31, 1994 and 1993.
Year ended December 31, 1995 compared to the year ended December 31, 1994
Revenue increased to $109.8 million (excluding $4.2 million attributable to the
operations of the UVC Systems for the period after acquisition by the Company)
in the year ended December 31, 1995 from $105.4 million in the year ended De-
cember 31, 1994 due to increases in service rates, internal subscriber growth
and the acquisition of approximately 9,000 subscribers in the Triax Systems
during the first quarter of 1995. For the UVC Systems, the Cox Systems and the
C4 Systems during this period, basic subscribers increased by approximately
2.9%, primarily in the Cox Systems and the C4 Systems, which grew by 1,800 and
1,200 subscribers, respectively. Over this period, the number of basic sub-
scribers and premium units increased by approximately 7.1% and 13.1%, respec-
tively, for the ACE Systems and the Triax Systems. Basic penetration improved
to 71.1% at year-end 1995 from 69.7% at year-end 1994, and premium penetration
over the period declined to 42.1% at year-end 1995 from 45.9% at year-end 1994
for the UVC Systems, the Cox Systems and the C4 Systems. For the Triax Systems
and the ACE Systems, basic penetration improved to approximately 73.2% at year-
end 1995 from approximately 71.9% at year-end 1994, and premium penetration in-
creased to 44.9% at year-end 1995 from 42.5% at year-end 1994. Operating ex-
penses grew at rates generally approximating revenue growth, increasing to
$62.1 million (excluding $2.4 million attributable to the operations of the UVC
Systems for the period after acquisition by the Company) in the year ended De-
cember 31, 1995 from $58.6 million in the year ended December 31, 1994. EBITDA
39
<PAGE>
increased to $47.7 million in 1995 excluding $1.8 million attributable to the
operations of the UVC Systems for the period after acquisition by the Company)
from $46.7 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business generally requires substantial capital for the
construction, expansion and maintenance of the delivery system. In addition,
the Company has pursued, and intends to pursue in the future, a business strat-
egy which includes selective acquisitions. The Company has financed these ex-
penditures to date through a combination of cash from operations, indebtedness
and equity capital. The Company intends to continue to finance such expendi-
tures in the future through these same sources.
The Company has entered into a $265.0 million Amended and Restated Credit
Agreement (the "Senior Credit Facility") with The Chase Manhattan Bank, as Ad-
ministrative Agent, J.P. Morgan Securities Inc., as Syndication Agent, CIBC
Inc., as Managing Agent, and the other lenders signatory thereto. The Senior
Credit Facility includes a $75.0 million, 8.25-year reducing revolving credit
facility (the "Revolving Credit Facility"), a $100.0 million, 8.25-year term
loan (the "Facility A Term Loan") and a $90.0 million, 9.25-year term loan (the
"Facility B Term Loan"). At June 30, 1997, the Company had $30.5 million out-
standing under the Revolving Credit Facility, $100.0 million outstanding under
the Facility A Term Loan and $90.0 million outstanding under the Facility B
Term Loan. The weighted average interest rates at June 30, 1997 on the out-
standing borrowings under the Revolving Credit Facility were approximately
8.19%, and under the Facility A Term Loan and the Facility B Term Loan were ap-
proximately 8.19% and 8.94%, respectively. The Company has entered into inter-
est rate swap agreements to hedge the underlying LIBOR rate exposure for $170.0
million of borrowings through November 1999 and October 2000. For the three-
month period ended June 30, 1997, the Company had recognized an increase to in-
terest expense of approximately $63,000 as a result of these interest rate swap
agreements.
In general, the Senior Credit Facility requires the Company to use the proceeds
from any equity or subordinated debt issuance or any cable system disposition
to reduce indebtedness for borrowings under the Senior Credit Facility and to
reduce permanently commitments thereunder, subject to certain exceptions per-
mitting the Company to use such proceeds to fund certain permitted acquisi-
tions, provided that the Company is otherwise in compliance with the terms of
the Senior Credit Facility. The lenders under the Senior Credit Facility have
agreed that the contribution of the net proceeds of this Offering by Holdings
to FVOP will not result in a permanent reduction of the commitments under the
Senior Credit Facility.
The Senior Credit Facility is secured by a pledge of all limited and general
partnership interests in the Company and in any subsidiaries of the Company and
a first priority lien on all the tangible and intangible assets of the Company
and each of its subsidiaries. In addition, in the event of the occurrence and
continuance of an event of default under the Senior Credit Facility, the Admin-
istrative Agent is entitled to replace the general partner of the Company with
its designee.
On September 15, 1997, FVOP received a commitment from its principal lenders
under the Senior Credit Facility to enter into the New Credit Facility, which
will refinance and replace the Senior Credit Facility. The commitment will pro-
vide that the lenders will extend up to $650.0 million aggregate principal
amount of revolving credit and term loan financing to FVOP. Under the commit-
ment letter for the New Credit Facility, The Chase Manhattan Bank and Morgan
Guaranty Trust Company of New York have committed, subject to various terms and
conditions, to provide $390.0 million and $260.0 million, respectively, in se-
nior bank financing to FVOP. It is expected that these initial lenders will ar-
range, directly or through their affiliates, for a syndicate of other banks
that will participate as lenders under the New Credit Facility. The Chase Man-
hattan Bank will serve as Administrative Agent, Morgan Guaranty Trust Company
of New York will serve as Syndication Agent, and Chase Securities Inc. and J.P.
Morgan Securities Inc. will serve as Co-Arrangers of the New Credit Facility.
The New Credit Facility will consist of a $200.0 million, 8-year revolving
credit facility (the "New Revolving Credit Facility"), a $250.0 million, 8-year
term loan (the "Tranche A Term Loan Facility") and a $200.0 million, 8.5-year
term loan (the "Tranche B Term Loan Facility"). The Tranche A Term Loan Facil-
ity and the Tranche B Term Loan Facility must be fully drawn as a condition to
the availability of borrowings under the New Revolving Credit Facility. The
proceeds from the New Credit Facility will be used, in part, to finance the ac-
quisition of the Cox Central Ohio Systems, as well as to refinance and replace
the Senior Credit Facility and for other general corporate purposes. In addi-
tion, the commitment letter for the New Credit Facility contemplates that the
lenders may make available, in their sole discretion, following a request by
FVOP, up to an additional $250.0 million term loan (the "Incremental Term Loan
Facility") to fund future
40
<PAGE>
acquisitions. No lender will be required to have committed to fund the Incre-
mental Term Loan Facility at the closing of the New Credit Facility. If the
lenders determine to fund the Incremental Term Loan Facility, the final matu-
rity of such facility will be the same as the maturity of the Tranche B Term
Loan Facility.
In general, the New Credit Facility will require FVOP to make mandatory prepay-
ments of amounts outstanding under the New Credit Facility, beginning in 2002,
based on a percentage of available excess cash flow. In addition, the New
Credit Facility will require FVOP to use the proceeds from any cable system
disposition (subject to certain qualifications) to reduce indebtedness for
borrowings under the New Credit Facility. The New Credit Facility will provide
that FVOP may engage in cable system dispositions of up to $150.0 million in
the aggregate without the need to permanently reduce the commitments under the
New Credit Facility if the net proceeds of such dispositions are either applied
to temporarily reduce the New Revolving Credit Facility or held in a special
account pending permitted reinvestment in subsequent acquisitions of cable sys-
tems. The New Credit Facility will also permit FVOP to make acquisitions of up
to $150.0 million in the aggregate (as such amount may be increased by the pro-
ceeds of dispositions being held for reinvestment). The New Credit Facility
will also contain customary financial and other covenants, which are expected
to include limitations on the ability of Holdings and its subsidiaries to incur
additional indebtedness. It is also expected that the New Credit Facility will
permit FVOP to make distributions to Holdings in order to make regularly sched-
uled interest payments (commencing March 15, 2002) and the payment of principal
at the stated maturity date of the Notes unless a default or an event of de-
fault has occurred under the New Credit Facility.
Holdings, as the general partner of FVOP, will guaranty the indebtedness under
the New Credit Facility on a limited recourse basis. The New Credit Facility
also will be secured by a pledge of all limited and general partnership inter-
ests in FVOP and a first priority lien on all the assets of FVOP and its
subsidiaries. The Company expects FVOP to enter into the New Credit Facility in
the fourth quarter of 1997. See "Description of Other Indebtedness."
On October 7, 1996, FVOP issued $200.0 million aggregate principal amount of
11% Senior Subordinated Notes due 2006 (the "FVOP Notes"). The FVOP Notes ma-
ture on October 15, 2006 and bear interest at 11%, with interest payments due
semiannually commencing on April 15, 1997. The Company paid its first interest
payment of $11.5 million on April 15, 1997. The FVOP Notes are general
unsecured obligations of the Company and rank subordinate in right of payment
to all existing and any future senior indebtedness. See "Description of Other
Indebtedness." In anticipation of the issuance of the FVOP Notes, the Company
entered into deferred interest rate setting agreements to reduce the interest
rate exposure related to the FVOP Notes. The financial statement effect of
these agreements will be to increase the effective interest rate which the Com-
pany incurs over the life of the FVOP Notes.
In addition, in connection with the acquisition of the ACE Systems and the
Triax Systems, FrontierVision Partners, L.P. ("FVP"), the Company's sole gen-
eral partner, received additional funding commitments of approximately $76.0
million. As of June 30, 1997, all of such funding commitments had been invested
in FVP and FVP had contributed substantially all of such investments to the
Company as equity. During the six-month period ended June 30, 1997, the Company
received approximately $37.7 million of equity contributions from its partners.
Such equity contributions and senior debt, along with cash flow generated from
operations, has been sufficient to finance capital improvement projects as well
as acquisitions. The Company has adequately serviced its debt in accordance
with the provisions of the Senior Credit Facility from EBITDA of approximately
$29.1 million generated by the Company for the six-month period ended June 30,
1997.
In connection with the acquisition of the UVC Systems, the Company issued a
subordinated note to UVC in the aggregate principal amount of $7.2 million. Un-
der the terms of the UVC Note, the Company may repay the UVC Note at any time.
See "Description of Other Indebtedness."
Cash Flows From Operating Activities
Cash flows from operating activities for the six months ended June 30, 1997
were $9.1 million compared to $7.2 million for the six months ended June 30,
1996. The increase was primarily a result of cable television system operations
acquired during 1996 and 1997.
Cash flows from operating activities for the year ended December 31, 1996 were
$18.9 million compared to $1.9 million for the period from inception (April 17,
1995) through December 31, 1995. The increase was the result of cable televi-
sion system operations acquired during 1996 as the UVC Systems and the
Longfellow Systems were acquired during the fourth quarter of 1995.
41
<PAGE>
Cash Flows From Investing Activities
Investing cash flows were primarily used to fund capital expenditures and ac-
quire cable television systems. Capital expenditures for the six-month period
ended June 30, 1997 were approximately $9.9 million compared to approximately
$3.4 million for the six-month period ended June 30, 1996. Capital expendi-
tures primarily consisted of expenditures for the construction and expansion
of the delivery system, and additional costs were incurred related to the ex-
pansion of customer service facilities. In addition, the Company capitalized
approximately $0.4 million attributable to the cost of obtaining certain fran-
chise, leasehold and other long-term agreements. The Company invested approxi-
mately $55.5 million in acquisitions during the six months ended June 30, 1997
compared with approximately $178.8 million for the same period in 1996.
The Company had capital expenditures of $9.3 million during the twelve months
ended December 31, 1996 compared to $0.6 million for the period from inception
(April 17, 1995) through December 31, 1995. The 1996 expenditures primarily
consisted of expenditures for the construction and expansion of the delivery
system and additional costs were incurred related to the expansion of customer
service facilities. In addition, for the year ended December 31, 1996, the
Company capitalized approximately $2.0 million attributable to the cost of ob-
taining certain franchise, leasehold and other long-term agreements. The Com-
pany invested approximately $421.5 million in acquisitions during the twelve
months ended December 31, 1996 compared with approximately $121.3 million for
the period from inception (April 17, 1995) through December 31, 1995. The Com-
pany also disposed of cable television systems for net proceeds of $15.1 mil-
lion in the twelve months ended December 31, 1996.
The Company expects to spend approximately $93.0 million over the next two
years for capital expenditures with respect to the Existing Systems and the
Acquisition Systems, consisting primarily of (i) installation of fiber optic
cable and microwave links which will allow for the anticipated reduction in
the number of headends, (ii) analog and digital converter boxes which will al-
low the Company to more effectively market premium and pay-per-view services
and (iii) the continued deployment of coaxial cable to build-out the Existing
Systems.
Cash Flows From Financing Activities
Acquisitions during the first half of 1997 were financed primarily with equity
contributions from the Company's partners; acquisitions during the first half
of 1996 were financed primarily with borrowings under the Senior Credit Facil-
ity and, to a lesser extent, with equity contributions from the Company's
partners.
As of June 30, 1997, FVP had received a total of $199.4 million of equity com-
mitments from its partners and all such equity commitments had been invested
in FVP and FVP had contributed substantially all such equity investments to
the Company.
Acquisitions during the twelve months ended December 31, 1996 were financed
with equity contributions from the Company's partners, borrowings under the
Senior Credit Facility, and issuance of $200.0 million aggregate principal
amount of FVOP Notes; acquisitions for the period from inception (April 17,
1995) were financed with equity contributions from the Company's partners and
borrowings under the Senior Credit Facility. During the year ended December
31, 1996, the Company received approximately $107.4 million of equity contri-
butions from its partners as compared to $49.1 million for the period from in-
ception (April 17, 1995) through December 31, 1995.
Holdings is a holding company which has no significant assets other than its
direct and indirect equity interests in FVOP. Holdings Capital, a wholly-owned
subsidiary of Holdings, was formed solely for the purpose of serving as a co-
issuer of the Notes and has no operations or assets from which it will be able
to repay the Notes. Accordingly, the Issuers must rely entirely upon distribu-
tions from FVOP to generate the funds necessary to meet their obligations, in-
cluding the payment of Accreted Value or principal and interest of the Notes.
The Senior Credit Facility prohibits the distribution of funds to Holdings by
FVOP. In addition, the FVOP Notes Indenture contains, and the New Credit Fa-
cility will contain, significant restrictions on the ability of FVOP to dis-
tribute funds to Holdings. See "Description of Other Indebtedness." There can
be no assurance that the Senior Credit Facility, the FVOP Notes Indenture, the
New Credit Facility or any agreement governing indebtedness that refinances
such indebtedness or other indebtedness of FVOP will permit FVOP to distribute
funds to Holdings in amounts sufficient to pay the Accreted Value or principal
or interest on the Notes when the same become due (whether at maturity, upon
acceleration or otherwise).
The only significant assets of Holdings are the partnership interests in FVOP
owned by Holdings. All of such interests in FVOP are pledged by Holdings as
collateral under the Senior Credit Facility and will remain so pledged under
the New Credit Facility. Therefore, if Holdings were unable to pay the Ac-
creted Value or principal or interest on the Notes when
42
<PAGE>
due (whether at maturity, upon acceleration or otherwise), the ability of the
holders of the Notes to proceed against the partnership interests of FVOP to
satisfy such amounts would be subject to the ability of such holders to obtain
a judgment against Holdings and the prior satisfaction in full of all amounts
owing under the Senior Credit Facility or the New Credit Facility, as appropri-
ate. Any action to proceed against the FVOP partnership interests by or on be-
half of the holders of Notes would constitute an event of default under the Se-
nior Credit Facility or the New Credit Facility, as the case may be, entitling
the lenders thereunder to declare all amounts owing to be immediately due and
payable, which event would in turn constitute an event of default under the
FVOP Notes Indenture, entitling the holders thereof to declare the principal
and accrued interest of the FVOP Notes to be immediately due and payable. In
addition, as a secured creditor, the lenders under the Senior Credit Facility
or the New Credit Facility, as the case may be, would control the disposition
and sale of the FVOP partnership interests after an event of default under the
Senior Credit Facility or the New Credit Facility, as the case may be, and
would not be legally required to take into account the interests of unsecured
creditors of Holdings, such as the holders of the Notes, with respect to any
such disposition or sale. There can be no assurance that the assets of Hold-
ings, after the satisfaction of claims of its secured creditors, would be suf-
ficient to satisfy any amounts owing with respect to the Notes.
43
<PAGE>
BUSINESS
THE COMPANY
The Company owns, operates and develops cable television systems in small and
medium-sized suburban and exurban communities in geographically concentrated
operating clusters. The Company has established three primary operating clus-
ters--New England, Ohio and Kentucky--with a fourth, smaller group of cable
television systems in the Southeast. Since closing its first acquisition in No-
vember 1995, the Company has completed 15 acquisitions and has substantially
achieved its initial acquisition objective of acquiring at least 500,000 sub-
scribers in operating clusters serving 100,000 or more subscribers. In meeting
its growth objective, the Company has taken advantage of a market opportunity
to acquire cable properties in small to medium-sized communities at histori-
cally attractive values. FrontierVision is currently one of the 25 largest MSOs
in the United States; the Existing Systems passed approximately 559,300 homes
in 12 states and served approximately 390,350 basic subscribers as of June 30,
1997.
Recently, the Company has begun to exploit a new market opportunity to acquire
larger cable systems which are contiguous or in close proximity to the Existing
Systems. The Company expects this strategy will enable it to further consoli-
date its market areas, increase subscriber density within its operating clus-
ters and achieve economies of scale and operating efficiencies. Pursuant to
this strategy, the Company has entered into agreements or has substantially
completed negotiations to acquire, for an aggregate purchase price of approxi-
mately $323.2 million (subject to adjustment), the Acquisition Systems which
passed approximately 250,800 homes and served approximately 175,150 basic sub-
scribers as of June 30, 1997. The Acquisition Systems primarily consist of cer-
tain significant cable television systems to be acquired from affiliates of
Cablevision, TCI and Cox. As of June 30, 1997, the Cablevision systems served
approximately 53,400 subscribers in Maine, the TCI systems served approximately
14,900 subscribers in New Hampshire and 7,200 subscribers in Vermont and the
Cox systems served approximately 87,550 subscribers in Ohio.
The Company is currently the second largest MSO in Kentucky, and, after giving
pro forma effect to the purchase of the Acquisition Systems, as of June 30,
1997, the Company would be the largest MSO in Maine and one of the top five
MSOs in Ohio. In the Southeast, the Company has accumulated attractive systems
which it expects either to consolidate with subsequent system acquisitions,
trade for systems within the Company's primary operating regions or divest at
favorable prices. As of June 30, 1997, after giving pro forma effect to Acqui-
sitions, the Company's cable television systems passed approximately 810,100
homes and served approximately 565,500 basic subscribers, representing a basic
penetration level of 69.8%. On such a pro forma basis, for the six months ended
June 30, 1997 and for the year ended December 31, 1996, the Company had reve-
nues of approximately $102.5 million and $198.1 million, respectively, and
EBITDA of approximately $47.4 million and $93.9 million, respectively.
Through continued acquisitions and internal growth, the Company seeks to own
and operate cable systems serving at least 750,000 subscribers in geographi-
cally concentrated clusters, each of which serves at least 150,000 subscribers
or more. By continuing to focus on increasing subscriber density within its op-
erating regions through selective acquisitions, integrating and streamlining
business operations, and making significant investment and improvements in
technical plant, the Company believes it can further enhance the operational
and financial performance of its cable systems as well as effectively position
the properties for the development of existing and new cable and broadband
telecommunications services.
ACQUISITION OPPORTUNITY
The Company was organized in 1995 to exploit acquisition opportunities in the
cable television marketplace created by the confluence of several economic,
regulatory, competitive and technical forces. The cable television industry has
experienced rapid and continuing consolidation over the last several years for
various reasons. For example, operators have been faced with the need for in-
creased levels of capital expenditures to expand channel capacity and have re-
cently begun to face the threat of competition from new market entrants, in-
cluding DBS services and telephone company video programming services.
Many smaller MSOs, particularly those that were acquisitive during the late
1980's and purchased systems at prices significantly higher than those paid by
the Company, either are seeking liquidity for their investors or are con-
strained from accessing additional capital to upgrade or rebuild aging plant to
remain competitive with other video programming providers. This has resulted in
both a large inventory of cable systems for sale in small to medium-sized mar-
kets, and a relatively small pool of capable buyers.
44
<PAGE>
As a result of this supply and demand anomaly, the Company initially sought to
selectively acquire small and medium- sized cable television properties,
thereby establishing core geographic clusters and subscriber mass. The aggre-
gate purchase price paid (net of aggregate disposition proceeds of approxi-
mately $16.0 million) by the Company for the Existing Systems was approximately
$601.8 million, representing an average of 8.55 times the Acquisition Cash Flow
(as defined) of the Existing Systems and approximately $1,550 per subscriber.
In reaction to the same market forces, larger MSOs recently have embarked on
their own program of divesting or trading less strategic systems to redirect
their resources to major urban and suburban markets. These "non-core" cable
systems are near many of the Company's Existing Systems and are becoming avail-
able to be acquired by the Company. The Acquisition Systems are representative
of this market opportunity and generally serve larger communities with high
subscriber density and technical plant and system specifications superior to
those of the Existing Systems. The aggregate purchase price to be paid by the
Company for the Acquisition Systems is $323.2 million, representing an average
of 9.42 times the Acquisition Cash Flow of the Acquisition Systems and $1,845
per Acquisition System subscriber.
The Company believes that acquisition opportunities will continue to exist
among the small and large MSO segments. Based on its well-defined geographical
focus and strong market presence, the Company believes it is well-positioned to
continue to acquire cable properties at attractive values.
BUSINESS STRATEGY
The Company's objective is to increase its subscriber base and operating cash
flow through selective acquisitions of cable television systems that can be in-
tegrated with the Company's existing systems and to enhance enterprise value
through operating improvements and revenue growth. To achieve its objective,
the Company pursues the following business strategies:
TARGET CLUSTERS IN SMALL AND MEDIUM-SIZED MARKETS. The Company has acquired
contiguous clusters of cable television systems serving small and medium-sized
suburban and exurban markets which are generally within 50 to 100 miles of
larger urban and suburban communities. The Company believes that such markets
have many of the beneficial attributes of larger urban and suburban markets,
including moderate to high household growth, economic stability, attractive
subscriber demographics and favorable potential for additional clustering.
Moreover, in such markets, the Company believes that (i) it will face less di-
rect competition given the lower population densities and higher costs per sub-
scriber of installing cable service; (ii) it will maintain higher subscriber
penetration levels and lower customer turnover based on fewer competing enter-
tainment alternatives; and (iii) its overhead and operating costs will gener-
ally be lower than similar costs incurred in larger markets.
GROW THROUGH STRATEGIC AND OPPORTUNISTIC ACQUISITIONS. In seeking to become the
consolidator of cable television systems within its targeted geographic areas,
the Company has systematically implemented a focused acquisition and consolida-
tion strategy within its three primary operating clusters of New England, Ohio
and Kentucky and its systems group in the Southeast. Recently, the Company has
significantly increased the size and scale of its operating clusters by enter-
ing into agreements to acquire larger cable systems deemed "non-core" by larger
MSOs. The Company will also continue to pursue "fill-in" acquisitions of
smaller systems in its operating clusters. The Company believes that such ac-
quisition targets will have diminished strategic value to other prospective
buyers given the Company's geographic prominence in these regions. Consequent-
ly, the Company believes these acquisition targets can be purchased at favora-
ble prices.
IMPLEMENT OPERATING EFFICIENCIES AND INCREASE OPERATING CASH FLOW THROUGH RE-
GIONAL CONSOLIDATION. Upon acquiring a system, FrontierVision implements exten-
sive management, operational and technical changes designed to improve operat-
ing efficiencies and increase operating cash flow. By centralizing and upgrad-
ing customer support functions, the Company has begun to reduce administrative
costs and better manage and train employees, while providing a higher level of
customer service than was previously provided by smaller, dispersed offices.
Within the Existing Systems and Acquisition Systems, the Company plans to con-
solidate up to 58 customer service and sales offices into five regional service
centers and 17 local payment offices. The Company also seeks to reduce techni-
cal operating costs and capital expenditures by consolidating headend facili-
ties. In the Existing Systems and the Acquisition Systems, the Company plans to
eliminate over 40% of the 249 headends. By serving more subscribers from a sin-
gle distribution point, FrontierVision has begun to decrease ongoing technical
maintenance expenses, improve system reliability and enhance cost-efficiencies
in adding new channels and services.
PROMOTE AND EXPAND SERVICE OFFERINGS. Because many of the Company's customers
received limited service offerings prior to acquisition, the Company believes
that a significant opportunity exists to increase service revenue by increas-
45
<PAGE>
ing the programming and pricing options available to its customers. Towards
this end, the Company has created new basic and premium packages and launched
several lower priced premium channels such as Disney, Starz! and Encore. The
Company aggressively promotes and expands services to add and retain customers
and increase revenue per customer. The Company employs a coordinated array of
marketing techniques, including direct door-to-door sales, telemarketing, di-
rect mail, print and broadcast advertising, flyers and billing inserts and
cross-channel promotion. In April 1997, the Company established a centralized,
in-house telemarketing center initially focusing on telemarketing premium serv-
ice packages to its customers in Ohio and Maine. The Company is also actively
engaged in sales audit programs targeted at its markets with low cable penetra-
tion. As systems are consolidated and technically enhanced, the Company will
also continue to expand addressability, which is currently only available in
systems serving 36.9% of the Company's subscribers, and seek to increase reve-
nues derived from pay-per-view movies and events, as well as new pay services
such as interactive video games. In addition, with the expanded advertising
market delivery afforded by larger, contiguous system clusters, the Company
plans to intensify local spot advertising sales efforts, which generated only
$0.64 per subscriber per month in the second quarter of 1997.
STRATEGICALLY UPGRADE SYSTEMS. The Company will selectively upgrade its cable
systems to increase channel capacities, enhance signal quality and improve
technical reliability. The Company believes that such technical upgrades will
not only enhance the potential for increasing revenues, but also will improve
customer and community relations and further solidify the Company's incumbent
position as the preeminent local provider of video services. Over the next five
years, the Company currently intends to establish a technical platform of 400
MHz to 550 MHz (54 to 78 analog channels) in most of its systems and 750 MHz
(110 analog channels) in its larger markets. Subsequent to this upgrade plan,
approximately two-thirds of the Company's subscribers will be served by systems
with 550 MHz to 750 MHz plant. Over the same period, the Company plans to in-
vest substantial amounts in addressable converters. Given the scope of its en-
gineering activities, the Company is in the process of hiring in-house con-
struction and technical management personnel to improve efficiencies and expe-
dite the completion of engineering projects. The Company continually monitors
and evaluates new technological developments to anticipate the introduction of
new services and program delivery capabilities, such as the HITS digital pro-
gramming system and cable Internet access. As a result, the Company may deter-
mine to reallocate the investment of its capital in order to deploy such tech-
nology and to make optimal use of its assets.
POSITION THE SYSTEMS FOR BROADBAND SERVICES. By implementing a hybrid fiber
optic/coaxial cable design ("HFC") across the majority of its cable plant, the
Company will effectively position itself for the introduction of new broadband
video, voice and data services. Given its fiber-rich local infrastructure and
the expanded bandwidth provided by coaxial cable, the Company believes it will
enjoy distinct advantages over competitive service providers, which include
higher speed, increased capacity, greater selectivity and better technical re-
liability. The Company's full service broadband HFC networks will enable it to
offer a wide range of new services that include video applications such as dig-
ital programming, regional advertising insertion and interactive video games,
as well as telecommunications and data services such as cable Internet access,
virtual LAN applications, high speed point-to-point data transmission and com-
petitive telephone access. Given its fiber-rich local infrastructure and the
expanded bandwidth provided by coaxial cable, the Company believes it will en-
joy distinct advantages over competitive service providers that include higher
speed, increased capacity, greater selectivity and better technical reliabili-
ty. In addition, the Company is initiating limited beta tests of digital pro-
gramming systems and cable modems to assess the viability of a more widespread
roll-out.
FOCUS ON THE CUSTOMER. FrontierVision continually seeks to provide superior
customer service and improve programming and service choices for its subscrib-
ers. By centralizing customer service at the regional level, all functions that
directly impact subscribers, including sales and marketing, customer service
and administration and technical support, are implemented as close to the cus-
tomer as possible. In addition, as a result of its consolidation efforts, the
Company has been able to enhance its customer service by increasing hours of
operation for its customer service functions, better coordinating technical
service and installation calls, speeding responsiveness to customer inquiries
and standardizing maintenance procedures. While centralizing and improving cus-
tomer service, the Company has opened local payment and technical offices to
maintain its local presence and visibility within its communities. In addition,
as part of the Company's plans to upgrade its acquired cable systems,
FrontierVision regularly evaluates the programming packages, pricing options
and add-on services available to its customers.
46
<PAGE>
DEVELOPMENT OF THE SYSTEMS
The Existing Systems. The Company commenced operations in November 1995 with
the acquisition of its first cable television systems. The following table sum-
marizes the acquisitions of the Existing Systems:
<TABLE>
<CAPTION>
----------------------------------------------------------
BASIC PURCHASE
PURCHASE PRICE(1) SUBSCRIBERS PRICE PER
PREDECESSOR OWNER DATE ACQUIRED (IN MILLIONS) ACQUIRED(2) SUBSCRIBER
- ----------------- ----------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C>
United Video
Cablevision, Inc. (the
"UVC Systems")......... November 9, 1995 $120.8 87,400 $1,382
Longfellow Cable
Company, Inc. (the
"Longfellow Systems").. November 21, 1995 6.1 5,100 1,196
C4 Media Cable
Southeast, Limited
Partnership (the
"C4 Systems").......... February 1, 1996 47.6 40,400 1,178
Americable International
Maine, Inc. (the
"Americable Systems").. March 29, 1996 4.8 3,350 1,433
Cox Communications (the
"Cox Systems")......... April 9, 1996 136.0 77,200 1,762
Phoenix Grassroots Cable
Systems, LLC (the
"Grassroots Systems").. August 29, 1996 9.3 7,400 1,257
Triax Southeast
Associates, L.P. (the
"Triax Systems")....... October 7, 1996 84.7 53,200 1,592
American Cable
Entertainment of
Kentucky-Indiana, Inc.
(the "ACE Systems").... October 9, 1996 146.0 83,250 1,754
SRW, Inc.'s Penn/Ohio
Cablevision, L.P. (the
"Penn/Ohio Systems")... October 31, 1996 3.8 3,225 1,178
SRW, Inc.'s Deep Creek
Cable TV, L.P. (the
"Deep Creek System")... December 23, 1996 3.0 2,175 1,379
Bluegrass Cable
Partners, L.P. (the
"Bluegrass Systems")... March 20, 1997 9.9 7,225 1,370
Clear Cable T.V., Inc.
and B&G Cable T.V.
Systems, Inc. (the
"Clear/B&G Systems")... March 31, 1997 1.7 1,450 1,172
Milestone Communications
of New York, L.P. (the
"Milestone Systems")... March 31, 1997 2.8 2,125 1,318
Triax Associates I, L.P.
(the "Triax I
Systems").............. May 30, 1997 34.5 20,700 1,667
Phoenix Front Row
Cablevision (the "Front
Row Systems").......... May 30, 1997 6.8 5,250 1,295
------ ------- ------
Total................... $617.8 399,450 $1,547
====== ======= ======
</TABLE>
- ---------------
(1) Represents the contract purchase price excluding working capital purchase
adjustments and transaction costs.
(2) Includes 10,600 subscribers to systems that were sold by the Company in
1996.
The Acquisition Systems. The Company has entered into agreements or has sub-
stantially completed negotiations to acquire the Acquisition Systems for an ag-
gregate purchase price of approximately $323.2 million (subject to adjustment).
As of June 30, 1997, the Acquisition Systems passed approximately 250,800 homes
and served approximately 175,150 basic subscribers and 102,225 premium units,
representing basic penetration of 69.8% and premium penetration of 58.4%. As
described below, the substantial majority of the Acquisition Systems are in
close proximity to the Existing Systems, consistent with the Company's strategy
of clustering its cable television systems to achieve operating efficiencies.
The Company's purchase of the Acquisition Systems is subject to, among other
things, the satisfaction of customary closing conditions and the receipt of
certain third-party or governmental approvals, including the consent of fran-
chising authorities. In the case of the acquisition of the Cox Central Ohio
Systems, the transaction is also subject to the execution of a definitive asset
purchase agreement. Although there can be no assurances that such closing con-
ditions will be satisfied or that any of these transactions will be consummat-
ed, it is anticipated that each of these transactions will be completed during
the fourth quarter of 1997. See "Risk Factors--Risks Relating to Acquisition
Strategy."
Cablevision Systems. On May 8, 1997, the Company entered into an agreement with
A-R Cable Services ME, Inc., an affiliate of Cablevision, to purchase substan-
tially all of the assets comprising the four Cablevision Systems located in and
around Bangor and Lewiston, Maine for a purchase price of approximately $78.2
million. The Company intends to operate
47
<PAGE>
all of the Cablevision Systems as part of its New England cluster. As of June
30, 1997, the Cablevision Systems passed approximately 89,400 homes and served
approximately 53,400 basic subscribers who purchased approximately 31,950 pre-
mium service units, representing basic penetration of 59.7% and premium pene-
tration of 59.8%. At June 30, 1997, the average monthly revenue per subscriber
was $29.47. The aggregate purchase price of $78.2 million represents a multiple
of 9.2 times Acquisition Cash Flow and $1,464 per subscriber. The Cablevision
Systems serve primarily the cities of Bangor and Lewiston, Maine and outlying
communities from four headend facilities. Bangor and Lewiston, respectively,
are the second and third largest cities in Maine and those systems are contigu-
ous to certain of the Existing Systems which served approximately 19,000 basic
subscribers as of June 30, 1997. Up to eighteen headend facilities serving the
Existing Systems are expected to be interconnected as a part of the Company's
overall upgrade plan, resulting in approximately 70,000 subscribers being
served from two headend facilities.
TCI New England Systems. On May 12, 1997, the Company entered into an agreement
with TCI Cablevision of Vermont, Inc. and Westmarc Development Joint Venture to
purchase substantially all of the assets comprising five TCI New England Sys-
tems located in Vermont and New Hampshire for a purchase price of $34.5 mil-
lion. The Company intends to operate the TCI New England Systems as part of its
New England cluster. As of June 30, 1997, the TCI New England Systems passed
approximately 18,100 homes and served approximately 14,900 basic subscribers
and 5,425 premium units in New Hampshire and passed approximately 10,350 homes
and served 7,200 basic subscribers and 2,825 premium units in Vermont. In the
aggregate, the TCI New England Systems achieved basic penetration of approxi-
mately 77.7% and premium penetration of approximately 37.3%, and generated av-
erage monthly revenue per subscriber of $33.07 at June 30, 1997. The aggregate
purchase price of $34.5 million represents a multiple of 8.4 times Acquisition
Cash Flow and $1,560 per subscriber. The New Hampshire systems are contiguous
to two Existing Systems, and headends for these systems are expected to be
eliminated as part of the Company's upgrade plans. This will result in a single
headend facility in Lebanon, New Hampshire serving over 12,000 subscribers. The
New Hampshire systems are located within 60 miles of Concord, the state capital
and the Vermont systems are located north and northeast of Burlington, the
state's largest city. The Lebanon system will become the Company's largest sys-
tem in New Hampshire, while the Vermont TCI New England Systems will establish
the Company's presence in Vermont.
Cox Central Ohio Systems. On July 1, 1997, the Company entered into a letter of
intent and subsequently has substantially completed negotiations with Cox to
acquire the assets of the Cox Central Ohio Systems for aggregate consideration
of approximately $193.0 million. The Company intends to operate the Cox Central
Ohio Systems as part of its Ohio cluster. As of June 30, 1997, the Cox Central
Ohio Systems passed approximately 116,450 homes and served approximately 87,550
basic subscribers and 58,550 premium units, representing basic penetration of
75.2% and premium penetration of 66.9%. At June 30, 1997, the average monthly
revenue per basic subscriber was $32.89. The aggregate purchase price repre-
sents a multiple of 9.9 times Acquisition Cash Flow and an average of $2,200
per subscriber. The communities served by the Cox Central Ohio Systems are gen-
erally self-contained communities located north and east of Columbus, Ohio. Up
to nine Existing System headends in Ohio, currently serving approximately 8,000
subscribers, are expected to be eliminated as part of the Company's upgrade
plans, with such subscribers to be served from headend facilities of the Cox
Central Ohio Systems. The acquisition of the Cox Central Ohio Systems will sig-
nificantly expand the Company's presence in Ohio and increase the average sys-
tem size in the Company's Ohio cluster.
Phoenix-Michigan System. On August 29, 1997, the Company purchased from Phoenix
substantially all of the assets of the Phoenix-Michigan System for aggregate
consideration of $13.5 million. The Company intends to operate the Phoenix-
Michigan System as part of its Ohio cluster. As of June 30, 1997, the Phoenix-
Michigan System passed approximately 10,500 homes and served approximately
7,600 basic subscribers and 2,500 pay units, representing basic penetration of
72.4% and premium penetration of 33.0%. Average monthly revenue per subscriber
was $31.03 at June 30, 1997. The $13.5 million purchase price represents a mul-
tiple of 8.0 times Acquisition Cash Flow and an average purchase price of
$1,776 per subscriber. The Phoenix-Michigan subscribers are served from a sin-
gle headend facility located just north of Toledo, Ohio from a technical plat-
form of 450 MHz plant. The service area is adjacent to certain of the Existing
Systems in predominantly middle-class communities of southeastern Michigan.
Blue Ridge Systems. On September 3, 1997, the Company purchased from Blue Ridge
to purchase substantially all the assets of the Blue Ridge Systems for a pur-
chase price of approximately $4.0 million. The Company intends to operate the
Blue Ridge Systems as part of its Southeast region. As of June 30, 1997, the
Blue Ridge Systems passed approximately 6,000 homes and served approximately
4,500 basic subscribers and 925 pay units, representing basic penetration of
75.0% and premium penetration of 20.6%. Average monthly revenue per subscriber
was $21.63 at June 30, 1997. The aggregate purchase price represents a multiple
of 6.8 times Acquisition Cash Flow and $900 per subscriber.
48
<PAGE>
Potential Acquisitions. The Company intends to continue to pursue, on an oppor-
tunistic basis, additional strategic acquisitions of significant size, joint
venture arrangements and smaller "fill-in" acquisitions within its existing op-
erating clusters to further enhance the operational and financial performance
of its geographic clusters and to obtain subscriber densities sufficient to po-
sition the systems for broadband services. Towards this end, the Company cur-
rently has entered into four additional letters of intent to acquire, for ag-
gregate consideration of approximately $65.9 million, contiguous cable systems
or cable systems in close proximity to the Existing Systems and the Acquisition
Systems, and the Company intends to continue the process of regional consolida-
tion. In the aggregate, these systems served approximately 37,900 basic sub-
scribers as of June 30, 1997. Of the total subscribers, approximately 34,000
would be added to the Company's Ohio cluster, 2,400 to the Company's Kentucky
cluster, and 1,500 to the Company's Southeast region. These systems possess
technical profiles generally consistent with the profiles for the Company's Ex-
isting Systems. There can be no assurance that any or all of these additional
acquisitions will be consummated or that the Company can successfully integrate
any acquired business with its existing operations.
SYSTEM DESCRIPTIONS
The Company's cable television systems consist of three primary clusters--New
England, Ohio and Kentucky--with a fourth, smaller group of systems in the
Southeast. The following chart provides certain pro forma operating and techni-
cal profile statistics as of June 30, 1997 for the Acquisition Systems and for
the Existing Systems. The following discussion of the number of subscribers in
each of the clusters gives effect to the Acquisitions.
COMBINED EXISTING SYSTEMS AND ACQUISITION SYSTEMS
<TABLE>
<CAPTION>
-------------------------------------------------------
COMBINED
ACQUISITION
NEW ENGLAND OHIO KENTUCKY SOUTHEAST AND EXISTING
CLUSTER CLUSTER CLUSTER SYSTEMS SYSTEMS
----------- ------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Homes passed............ 213,525 328,050 167,800 100,725 810,100
Basic subscribers....... 143,850 235,375 124,925 61,350 565,500
Basic penetration....... 67.4% 71.8% 74.5% 60.9% 69.8%
Premium units........... 64,325 127,750 47,600 27,075 266,750
Premium penetration..... 44.7% 54.3% 38.1% 44.1% 47.2%
Average monthly revenue
per basic subscriber... $30.46 $31.95 $32.41 $27.14 $31.15
Number of headends...... 78 82 40 49 249
Percentage of
subscribers with at
least 54-channel
capacity............... 34.7% 75.7% 56.7% 26.4% 55.7%
</TABLE>
- ---------------
(1) Average monthly revenue per basic subscriber equals revenue for the month
ended June 30, 1997 divided by the number of basic subscribers as of the end of
such period.
New England Cluster. The systems in the New England cluster passed approxi-
mately 213,525 homes and served approximately 143,850 basic subscribers and
64,325 premium units as of June 30, 1997. The New England cluster is comprised
primarily of systems located in communities in southern, middle and coastal
Maine, central New Hampshire and northern Vermont. Of the Maine systems' ap-
proximately 116,800 subscribers, approximately 70,000 subscribers are located
in Bangor and Lewiston and contiguous communities, and the remaining Maine sub-
scribers are located within 60 miles of Portland in predominantly blue-collar,
middle-income bedroom communities. In addition, the Company serves resort com-
munities in Maine's Carrabassett Valley that include Sugarloaf/USA and Sunday
River. Most of the approximately 19,900 subscribers in New Hampshire are lo-
cated in Lebanon and surrounding communities or within commuting distance of
Laconia, Plymouth and Littleton. The 1996 median household income and projected
household growth rates (from 1996 to 2001) in the areas served by the New En-
gland Systems exceed U.S. averages for counties with less than 100,000 house-
holds ("Comparable Counties"), according to Equifax National Decision Systems,
1996.
After giving pro forma effect to the Acquisitions, approximately 34.7% of the
Company's subscribers in the New England cluster are offered at least 54 chan-
nels. The Company plans to utilize excess channel capacity by introducing new
basic and premium services, increasing penetration of addressable converters,
available to only 55.9% of the pro forma New England cluster subscribers as of
June 30, 1997, and aggressively pursuing spot advertising revenue, which ac-
counted for only $0.10 per subscriber per month during the second quarter of
1997. The pro forma New England cluster's basic penetration rate is 15.5% below
the Maine state average penetration rate of 79.8% according to Warren Publish-
ing, Inc.'s Television and Cable Factbook, 1997.
49
<PAGE>
Ohio Cluster. The systems in the Ohio cluster passed approximately 328,050
homes and served approximately 235,375 basic subscribers and 127,750 premium
units as of June 30, 1997. The majority of the subscribers in the Ohio cluster
are located within 60 miles of either Columbus or Toledo, Ohio. In addition to
those subscribers located in exurban Columbus and Toledo, certain of the
Company's subscribers residing along the Ohio River in Ohio, Kentucky and West
Virginia are served from a single regional office located in Chillicothe, Ohio.
The 1996 median household income in the Ohio cluster exceeds U.S. averages for
Comparable Counties, according to Equifax National Decision Systems, 1996, al-
though household growth rates in the areas served by the Ohio Systems are pro-
jected to lag that of Comparable Counties over the next five years.
After giving pro forma effect to the Acquisitions, approximately 75.7% of the
Company's subscribers in the Ohio cluster are offered at least 54 channels, in-
cluding a fiber-to-the-feeder 550 MHz design in Ashland, Kentucky and Newark,
Ohio. Although the Ohio cluster's pro forma basic penetration rate at June 30,
1997 was above the 1996 Ohio state average of 65.6%, its pay penetration rate
was approximately 13.7% below the Ohio state average pay penetration rate of
63.0% according to Warren Publishing, Inc.'s Television and Cable Factbook,
1997.
As part of its technical improvement program, the Company plans to increase the
deployment of addressable converters, which were available to only 44.5% of the
pro forma Ohio cluster subscribers as of June 30, 1997, and to more aggres-
sively market pay-per-view and other interactive services such as video games.
In addition, the Company plans to leverage its existing centralized advertising
facilities and personnel to increase advertising revenue in all of the Ohio
cluster, which accounted for only $0.81 per subscriber per month during the
second quarter of 1997.
Kentucky Cluster. The systems in the Kentucky cluster passed approximately
167,800 homes and served approximately 124,925 basic subscribers and 47,600
premium units as of June 30, 1997. The majority of the subscribers in the Ken-
tucky cluster are serviced from a regional customer service center in Richmond,
Kentucky and reside in outlying communities of Lexington, Kentucky and Cincin-
nati, Ohio. The 1996 median household income and the projected growth rates
(from 1996 to 2001) in the areas served by the Kentucky Systems exceed U.S. av-
erages for Comparable Counties, according to Equifax National Decision Systems,
1996.
After giving pro forma effect to the Acquisitions, approximately 56.7% of the
Company's subscribers in the Kentucky cluster are offered at least 54 channels,
including fiber-to-the-feeder 550 MHz design systems in Nicholasville, Kentucky
and Delhi, Ohio and 750 MHz design systems in Madison, Indiana and Winchester,
Kentucky. The Company continues to expend capital to complete a fiber ring sur-
rounding Lexington, Kentucky. When complete, this fiber loop will serve approx-
imately 60,000 subscribers from a single headend facility, interconnecting ap-
proximately fifteen existing headend facilities and passing nine colleges and
universities. The Kentucky cluster will then be effectively positioned to offer
broadband telecommunications and data services such as high speed Internet ac-
cess, distance learning and point-to-point telephony. The Company plans to uti-
lize excess channel capacity to introduce new basic and premium services to the
Kentucky cluster. While the Kentucky cluster's basic penetration rate at June
30, 1997 was marginally less than the Kentucky state average of 76.9%, its pay
penetration rate was approximately 21.6% below the Kentucky state average pay
penetration rate of 48.6% according to Warren Publishing, Inc.'s Television and
Cable Factbook, 1997.
As part of its technical improvement program, the Company also plans to in-
crease the deployment of addressable converters, which were available to only
53.2% of the pro forma Kentucky cluster subscribers as of June 30, 1997, and to
more aggressively market pay-per-view and other interactive services. Addition-
ally, the Company plans to leverage its existing centralized advertising facil-
ities and advertising sales personnel to increase advertising revenue in all of
the Kentucky cluster, which accounted for only $1.00 per subscriber per month
during the second quarter of 1997.
Southeast Systems. The Company plans either to consolidate further the systems
in its Southeast region through acquisitions, to trade certain of the systems
for properties within its New England, Ohio and Kentucky clusters or to sell
the systems outright. As such, the Company's operating and capital expenditure
plans for the Southeast systems will be limited to maintenance and discretion-
ary projects that will increase the value of the systems to a potential buyer
or trading partner. The Southeast systems passed approximately 100,725 homes
and served approximately 61,350 basic subscribers and 27,075 premium units as
of June 30, 1997. The Southeast systems are comprised of groups of systems lo-
cated in the following states: (i) Tennessee, which served approximately 19,400
basic subscribers; (ii) North Carolina, which served approximately 15,100 basic
subscribers; (iii) Virginia, which served approximately 19,600 basic subscrib-
ers; and (iv) Maryland/Pennsylvania, which served approximately 7,250 basic
subscribers at June 30, 1997. The Tennessee systems are located primarily in
Greeneville, Tennessee and surrounding communities, the North Carolina systems
are located near
50
<PAGE>
Rocky Mount, North Carolina and the Virginia systems are located in north cen-
tral Virginia between Charlottesville and Winchester and in Eastern Virginia
near Richmond. The Maryland/Pennsylvania systems are located along the Mary-
land and Pennsylvania border, approximately 120 miles west of Washington, D.C.
The 1996 median household income and actual and projected growth rate in the
number of households (from 1990 to 2001) in the areas served by the Southeast
Systems exceed U.S. averages for Comparable Counties, according to Equifax Na-
tional Decision Systems, 1996.
Approximately 26.4% of the current plant design for the pro forma Southeast
systems is at least 54 channels. The Company will continue to evaluate capital
expenditures to rebuild and upgrade plant based on the sales or trading status
of the Southeast systems.
TECHNOLOGICAL DEVELOPMENTS
As part of its commitment to customer service, the Company maintains high
technical performance standards in all of its cable systems, and systems are
selectively upgraded and maintained to maximize channel capacity and to im-
prove picture quality and reliability of the delivery of additional program-
ming and new services. Before committing the capital to upgrade or rebuild a
system, management carefully assesses (i) subscribers' demand for more chan-
nels, (ii) requirements in connection with franchise renewals, (iii) competing
technologies that are currently available, (iv) subscriber demand for other
cable and broadband telecommunications services, (v) the extent to which sys-
tem improvements will increase the attractiveness of the property to a future
buyer and (vi) the cost effectiveness of any such capital outlay.
The following tables set forth certain information regarding the channel ca-
pacities and miles of plant and the average number of subscribers per headend
for the Existing Systems and the Acquisition Systems as of June 30, 1997.
<TABLE>
<CAPTION>
-------------------------------------------------------
<220 MHZ: 221-399 MHZ: 400-549 MHZ: 550-750 MHZ:
UP TO 32 33 TO 53 54 TO 77 78 TO 110
CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
--------- ------------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Existing Systems:
Miles of plant........ 195 9,252 5,632 1,601 16,680
% miles of plant..... 1.2% 55.5% 33.8% 9.6% 100.0%
% of basic
subscribers.......... 1.6% 45.9% 35.4% 17.1% 100.0%
Acquisition Systems:
Miles of plant........ 146 1,654 1,590 593 3,983
% miles of plant..... 3.7% 41.5% 39.9% 14.9% 100.0%
% of basic
subscribers.......... 2.8% 34.4% 46.5% 16.3% 100.0%
Total:
Miles of plant........ 341 10,906 7,222 2,194 20,663
% miles of plant..... 1.6% 52.8% 35.0% 10.6% 100.0%
% of basic
subscribers.......... 1.9% 42.4% 38.8% 16.9% 100.0%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------
NUMBER OF SUBSCRIBERS PER HEADEND
---------------------------------------------
1,001- 5,001- 10,001-
<1,000 5,000 10,000 25,000 >25,001 TOTAL
------ ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Existing Systems:
# of subscribers............. 57,845 155,555 82,630 68,900 25,420 390,350
% of subscribers............. 14.8% 39.9% 21.2% 17.7% 6.4% 100.0%
Acquisition Systems:
# of subscribers............. 1,900 20,880 24,040 72,360 55,970 175,150
% of subscribers............. 1.1% 11.9% 13.7% 41.3% 32.0% 100.0%
Total:
% of subscribers............. 10.6% 31.2% 18.9% 25.0% 14.3% 100.0%
</TABLE>
51
<PAGE>
After giving pro forma effect to the Acquisitions, the Company's systems had
an average capacity of approximately 55 channels and delivered an average of
44 channels of programming to its subscribers as of June 30, 1997. Approxi-
mately 58.2% of the Company's subscribers were served by systems with more
than 5,000 subscribers and 39.3% were served by systems serving more than
10,000 subscribers. Approximately 36.9% of the Company's subscribers currently
have access to addressable technology. Addressable technology enables the Com-
pany, from the office or headend, to change the premium channels being deliv-
ered to each subscriber or to activate pay-per-view services. These service
level changes can be effectuated without the delay or expense associated with
dispatching a technician to the subscriber's home. Addressable technology also
reduces premium service theft and allows the Company automatically to discon-
nect delinquent accounts electronically from the customer service center.
The use of fiber optic technology in concert with coaxial cable has signifi-
cantly enhanced cable system performance. Fiber optic strands are capable of
carrying hundreds of video, data and voice channels over extended distances
without the extensive signal amplification typically required for coaxial ca-
ble. To date, the Company has used fiber to interconnect headends, to elimi-
nate headends by installing fiber backbones and to reduce amplifier cascades,
thereby improving both picture quality, system reliability and operational ef-
ficiencies.
Recently, digital set-top boxes and high speed cable modems have become com-
mercially viable. These developments will increase services available to cable
subscribers and may allow the introduction of alternative communications de-
livery systems for data and voice. The Company is in the process of installing
headend equipment for the HITS digital television system in four of its exist-
ing systems, one system in each of its operating clusters. The Company is cur-
rently beta-testing digital programming systems in anticipation of launching
approximately 70 channels of digital programming services. The Company will
monitor customer demand and profitability of such digital services to assess
the viability of a more widespread roll-out. The Company has also entered into
a strategic joint venture with an independent Internet access service provider
("ISP") in central Maine to provide commercial and residential Internet access
and data networking services to area businesses. The Company is pursuing simi-
lar arrangements with ISPs in its other operating regions.
THE CABLE TELEVISION INDUSTRY
A cable television system receives television, radio and data signals that are
transmitted to the system's headend site by means of off-air antennas, micro-
wave relay systems and satellite earth stations. These signals are then modu-
lated, amplified and distributed, primarily through coaxial, and in some in-
stances, fiber optic cable, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and
other information services for distribution through the system. Cable televi-
sion systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified term of years, generally for extended periods of up to 15 years.
The cable television industry developed in the United States in the late
1940's and early 1950's in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air tele-
vision reception was inadequate due to factors such as topography and remote-
ness from television broadcast towers. In the late 1960's, cable television
systems also developed in small and medium-sized cities and suburban areas
that had a limited availability of clear off-air television station signals.
All of these markets are regarded within the cable industry as "classic" cable
television station markets. In more recent years, cable television systems
have been constructed in large urban cities and nearby suburban areas, where
good off-air reception from multiple television stations usually is already
available, in order to receive the numerous, satellite-delivered channels car-
ried by cable television systems which are not otherwise available via broad-
cast television reception.
Cable television systems offer customers various levels (or "tiers") of cable
services consisting of (i) off-air television signals of local network, inde-
pendent and educational stations, (ii) a limited number of television signals
from so-called "superstations" originating from distant cities (such as WTBS
and WGN), (iii) various satellite-delivered, non-broadcast channels (such as
Cable News Network ("CNN"), MTV: Music Television, the USA Network ("USA"),
Entertainment and Sports Programming Network ("ESPN") and Turner Network Tele-
vision ("TNT")), (iv) certain programming originated locally by the cable
television system (such as public, governmental and educational access pro-
grams) and (v) informational displays featuring news, weather, stock market
and financial reports and public service announcements. For an extra monthly
charge, cable television systems also offer premium television services to
their customers. These services (such as Home Box Office ("HBO"), Showtime and
regional sports networks) are satellite-delivered channels consisting princi-
pally of feature films, live sports events, concerts and other special enter-
tainment features, usually presented without commercial interruption.
52
<PAGE>
A customer generally pays an initial installation charge and fixed monthly fees
for basic and premium television services and for other services (such as the
rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenue for cable television operators. In ad-
dition to customer revenue from these services, cable television operators gen-
erate revenue from additional fees paid by customers for pay-per-view program-
ming of movies and special events and from the sale of available advertising
spots on advertiser-supported programming. Cable television operators fre-
quently also offer to their customers home shopping services, which pay the
systems a share of revenue from sales of products in the systems' service
areas. See "--Programming, Services and Rates."
PROGRAMMING, SERVICES AND RATES
The Company has various contracts to obtain basic and premium programming for
its systems from program suppliers whose compensation is typically based on a
fixed fee per customer. The Company's programming contracts are generally for a
fixed period of time and are subject to negotiated renewal. Some program sup-
pliers provide volume discount pricing structures or offer marketing support to
the Company. In particular, the Company has negotiated programming agreements
with premium service suppliers that offer cost incentives to the Company under
which premium service unit prices decline as certain premium service growth
thresholds are met. The Company's successful marketing of multiple premium
service packages emphasizing customer value has enabled the Company to take ad-
vantage of such cost incentives. In addition, the Company is a member of a pro-
gramming consortium consisting of small to medium-sized MSOs serving, in the
aggregate, over three million cable subscribers. The consortium was formed to
help create efficiencies in the areas of securing and administering programming
contracts, as well as to establish more favorable programming rates and con-
tract terms for small to medium-sized operators. The Company intends to negoti-
ate programming contract renewals both directly and through the consortium to
obtain the best available contract terms. The Company also has various
retransmission consent arrangements with commercial broadcast stations. Some of
these consents require direct payment of nominal fees for carriage. In some
other instances no payment is required; however, the Company has entered into
agreements with certain stations to carry satellite-delivered cable programming
which is affiliated with the network carried by such stations. A substantial
portion of these retransmission consent agreements were required to be renewed
before December 1996, at which time the Company renewed or renegotiated such
agreements through December 1999 under substantially the same terms. See "Leg-
islation and Regulation."
Although services vary from system to system due to differences in channel ca-
pacity, viewer interests and community demographics, the majority of the
Company's systems offer a "basic service tier," consisting of local television
channels (network and independent stations) available over-the-air and local
public, governmental, home-shopping and leased access channels. The majority of
the Company's systems offer, for a monthly fee, an expanded basic tier of
"superstations" originating from distant cities (such as WTBS and WGN), various
satellite-delivered, non-broadcast channels (such as CNN, MTV, USA, ESPN and
TNT) and certain programming originated locally by the cable system (such as
public, governmental and educational access programs) providing information
with respect to news, time, weather and the stock market. In addition to these
services, the Company's systems typically provide one or more premium services
purchased from independent suppliers and combined in different formats to ap-
peal to the various segments of the viewing audience, such as HBO, Cinemax,
Showtime, The Movie Channel, Starz! and The Disney Channel. These services are
satellite-delivered channels consisting principally of feature films, original
programming, live sports events, concerts and other special entertainment fea-
tures, usually presented without commercial interruption. Such premium program-
ming services are offered by the Company's systems both on an a la carte basis
and as part of premium service packages designed to enhance customer value and
to enable the Company's systems to take advantage of programming agreements of-
fering cost incentives based on premium unit growth. Subscribers may subscribe
for one or more premium units. Additionally, the Company plans to upgrade cer-
tain of its systems with fiber optic cable, which will allow the Company to ex-
pand its ability to use "tiered" packaging strategies for marketing premium
services and promoting niche programming services. The Company believes that
this ability will increase basic and premium penetration as well as revenue per
subscriber.
Rates to subscribers vary from market to market and in accordance with the type
of service selected. As of June 30, 1997, the average monthly rate for the Ex-
isting Systems was $24.04 for the basic and expanded basic service tiers. These
rates reflect reductions effected in response to the 1992 Cable Act's re-regu-
lation of cable television industry rates, and in particular, the FCC's rate
regulations implementing the 1992 Cable Act, which became effective in 1993. A
one-time installation fee, which may be waived in part during certain promo-
tional periods, is charged to new subscribers. Management believes that the
Company's rate practices are generally consistent with the current practices in
the industry. See "Legislation and Regulation."
53
<PAGE>
MARKETING, CUSTOMER SERVICE AND COMMUNITY RELATIONS
The Company aggressively markets and promotes its cable television services
with the objective of adding and retaining customers and increasing subscriber
revenue. The Company actively markets its basic and premium program packages
through a number of coordinated marketing techniques, which include (i) direct
consumer sales and subscriber audit programs, (ii) direct mail for basic and
upgrade acquisition campaigns, (iii) monthly subscriber statement inserts, (iv)
local newspaper and broadcast/radio advertising where population densities are
sufficient to provide a reasonable cost per sale and (vi) cross-channel promo-
tion of new services and pay-per-view. Towards this end, the Company has estab-
lished a single centralized telemarketing center to provide the outbound
telemarketing support for all operating regions. The facility is currently
staffed by ten telemarketers, and the facility has the capacity to support up
to 50 such personnel. Using a predictive dialing system platform, the operation
will focus on (i) basic and pay unit acquisition, (ii) delinquent account col-
lection activities, (iii) customer satisfaction surveys and (iv) targeted mar-
keting campaigns.
The Company is dedicated to providing superior customer service. To meet this
objective, the Company provides its customers with a full line-up of program-
ming, a wide variety of programming options and packages, timely and reliable
service and improved technical quality. The Company's employees receive ongoing
training in customer service, sales and subscriber retention and technical sup-
port. In general, following a new installation, a customer service representa-
tive will follow up by telephone contact with the subscriber to assess the
quality of installation and the service the subscriber is receiving and to en-
sure overall subscriber satisfaction. Customer service representatives and
technicians are also trained to market upgrades or cross-sell services at the
point of sale of service. As part of its consolidation efforts, the Company has
established centralized customer service facilities, increased hours of opera-
tion, and installed state-of-the-art telephone, information and billing systems
to improve responsiveness to customer needs. In addition, the Company has re-
tained local payment and technical offices to maintain its local presence and
visibility within its communities.
Recognizing that strong governmental, franchise and public relations are cru-
cial to the overall success of the Company, the Company aggressively maintains
and improves the working relationships with all governmental entities within
the franchise areas. Regional management meets regularly with local officials
for the purposes of keeping them advised on the Company's activities within the
communities, to receive information and feedback on the Company's standing with
officials and customers alike and to ensure that the Company can maximize its
growth potential in areas where new housing development is occurring or where
significant technical plant improvement is underway. The regional management is
also responsible for franchise renewal negotiations as well as the maintenance
of Company visibility through involvement in various community and civic orga-
nizations and charities. In addition, the Company recently hired experienced
community relations personnel in its New England, Ohio and Kentucky clusters to
enhance local visibility and long-term relationships.
FRANCHISES
Cable television systems are generally constructed and operated under non-ex-
clusive franchises granted by local governmental authorities. These franchises
typically contain many conditions, such as time limitations on commencement and
completion of construction; conditions of service, including number of chan-
nels, types of programming and the provision of free service to schools and
certain other public institutions; and the maintenance of insurance and indem-
nity bonds. The provisions of local franchises are subject to federal regula-
tion under the Communications Act. See "Legislation and Regulation."
As of June 30, 1997, the Company held 571 franchises. These franchises, most of
which are non-exclusive, provide for the payment of fees to the issuing author-
ity. In all of the Existing Systems, such franchise fees are passed through di-
rectly to the customers. The Cable Acts prohibit franchising authorities from
imposing franchise fees in excess of 5% of gross revenue and also permit the
cable system operator to seek renegotiation and modification of franchise re-
quirements if warranted by changed circumstances. See "Legislation and Regula-
tion."
54
<PAGE>
Approximately 98.0% of the Existing System's basic subscribers are in service
areas that require a franchise. The table below groups the franchises of the
Existing Systems by date of expiration and presents the approximate number and
percentage of basic subscribers for each group of franchises as of June 30,
1997.
<TABLE>
<CAPTION>
--------------------------------------------------
PERCENTAGE OF PERCENTAGE OF
YEAR OF FRANCHISE NUMBER OF TOTAL NUMBER OF FRANCHISED
EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
----------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
1997 through 2001....... 217 38% 146,058 38%
2002 and thereafter..... 354 62% 235,581 62%
--- ---- ------- ----
Total................. 571 100% 381,639 100%
</TABLE>
The Cable Acts provide, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if re-
newal is denied and the franchising authority acquires ownership of the system
or effects a transfer of the system to another person, the operator generally
is entitled to the "fair market value" for the system covered by such fran-
chise. In addition, the Cable Acts established comprehensive renewal procedures
which require that an incumbent franchisee's renewal application be assessed on
its own merits and not as part of a comparative process with competing applica-
tions. See "Legislation and Regulation."
The Company believes that it generally has very good relationships with its
franchising communities. The Company has never had a franchise revoked or
failed to have a franchise renewed. In addition, all of the franchises of the
Company eligible for renewal have been renewed or extended at or prior to their
stated expirations, and no franchise community has refused to consent to a
franchise transfer to the Company.
COMPETITION
Cable television systems face competition from alternative methods of receiving
and distributing television signals and from other sources of news, information
and entertainment such as off-air television broadcast programming, newspapers,
movie theaters, live sporting events, interactive 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 customers, a
greater variety of programming and other communications services than those
which are available off-air or through other alternative delivery sources and
upon superior technical performance and customer service.
Cable television systems generally operate pursuant to franchises granted on a
nonexclusive basis. The 1992 Cable Act prohibits franchising authorities from
unreasonably denying requests for additional franchises and permits franchising
authorities to operate cable television systems. See "Legislation and Regula-
tion." It is possible that a franchising authority might grant a second fran-
chise to another company containing terms and conditions more favorable than
those afforded the Company. Well-financed businesses from outside the cable in-
dustry (such as the public utilities that own the poles to which cable is at-
tached) may become competitors for franchises or providers of competing servic-
es. See "Legislation and Regulation." Competition from other video service
providers exists in areas served by the Company. In a limited number of the
Company's franchise areas, the Company faces direct competition from another
franchised cable television system.
The availability of reasonably-priced home satellite dish earth stations
("HSDs") enables individual households to receive many of the satellite-deliv-
ered program services formerly available only to cable subscribers. The 1992
Cable Act contains provisions, which the FCC 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 lo-
cal restrictions on the use of HSDs and roof-top antennae to receive satellite
programming and over-the-air broadcasting services. See "Legislation and Regu-
lation."
Cable operators also face competition from private satellite master antenna
television ("SMATV") systems that serve condominiums, apartment and office com-
plexes and private residential developments. The 1996 Telecom Act broadens the
definition of SMATV systems not subject to regulation as a franchised cable
television system. SMATV systems offer both improved reception of local televi-
sion stations and many of the same satellite-delivered program services offered
by franchised cable television systems. SMATV operators often enter into exclu-
sive agreements with building owners or homeowners' associations, although some
states have enacted laws that authorize franchised cable operators access to
such private complexes. These laws have been challenged in the courts with va-
rying results. In addition, some companies are developing and/or offering to
these private residential and commercial developments packages of telephony,
data and video
55
<PAGE>
services. The ability of the Company to compete for customers in residential
and commercial developments served by SMATV operators is uncertain.
The FCC and the Congress have adopted policies providing a more favorable oper-
ating environment for new and existing technologies that provide, or have the
potential to provide, substantial competition to cable television 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 DBS dishes through conven-
tional, medium and high-powered satellites. DBS systems are increasing channel
capacity and are providing movies, broadcast stations, and other program serv-
ices comparable to those of cable television systems. Currently, Primestar
Partners (a consortium comprised of cable operators and a satellite company),
DirecTV (which includes AT&T Corp. as an investor), and EchoStar Communications
Corp. ("EchoStar") are providing nation-wide DBS services, with each company
offering in excess of 100 channels of video programming to subscribers. There
are other companies that are currently providing or are planning to provide do-
mestic DBS services. American Sky Broadcasting ("ASkyB"), a joint venture be-
tween MCI Communications Corp. ("MCI") and The News Corporation Limited ("News
Corp."), is currently developing high-power DBS services. 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 (subject to various governmental approvals) 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
United States. The Primestar partners recently announced an agreement to con-
solidate their DBS assets into a new publicly traded company. DBS providers
provide significant competition to cable service providers, including the Com-
pany.
Digital satellite service ("DSS") offered by DBS systems currently has certain
advantages over cable systems with respect to programming and digital quality,
as well as disadvantages that include high upfront costs and a lack of local
programming, service and equipment distribution. While DSS presents a competi-
tive threat, the Company currently has excess channel capacity available in
most of its systems, as well as strong local customer service and technical
support, which will enhance its ability to compete. By selectively increasing
channel capacities of systems to between 54 and 100 channels and introducing
new premium channels, pay-per-view and other services, the Company will seek to
maintain programming parity with DSS and magnify competitive service price
points. Based on internal tracking of subscriber disconnects, the Company be-
lieves it lost less than 1,000 subscribers to DBS during the first six months
of 1997. On an annualized basis, this represents less than 0.5% of the sub-
scribers of the Existing Systems as of June 30, 1997. The Company will continue
to monitor closely the activity level and the product and service needs of its
customer base to counter potential erosion of its market position or unit
growth to DSS.
Cable television systems also compete with wireless program distribution serv-
ices such as MMDS, which uses low power microwave frequencies to transmit video
programming over the air to customers. Additionally, the FCC recently adopted
new regulations allocating frequencies in the 28 GHz band for a new multichan-
nel wireless video service similar to MMDS. Wireless distribution services gen-
erally provide many of the programming services provided by cable systems, and
digital compression technology is likely to increase significantly the channel
capacity of their systems. Because MMDS service requires unobstructed "line of
sight" transmission paths, the ability of MMDS systems to compete may be ham-
pered in some areas by physical terrain and large buildings. In the majority of
the Company's franchise service areas, prohibitive topography and limited "line
of sight" access have limited, and are likely to continue to limit, competition
from MMDS systems. The Company is not aware of any significant MMDS operation
currently within its cable franchise service areas.
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. See "Legislation and Regulation." Various LECs currently are
providing video programming 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 television systems could be placed at a competitive disadvantage if the
delivery of video programming 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 im-
posed upon cable television systems under such franchises. Issues of cross-sub-
sidization by LECs of video and telephony services also pose strategic disad-
vantages for cable operators seeking to compete with LECs that 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. The
Company believes, however, that the small to medium-sized markets in which it
provides or expects to provide cable services are unlikely to support competi-
tion in the provision of video and telecommunications broadband services given
the lower population densities and high costs per subscriber of
56
<PAGE>
installing plant. The 1996 Telecom Act's provision promoting facilities-based
broadband competition is primarily targeted at larger markets, and its prohibi-
tion on buy-outs and joint ventures between incumbent cable operators and LECs
exempts small operators and carriers meeting certain criteria. See "Legislation
and Regulation." The Company believes that significant growth opportunities ex-
ist for the Company by establishing cooperative rather than competitive rela-
tionships with LECs within its service areas, to the extent permitted by law.
Other new technologies, including Internet-based services, may become competi-
tive with services that cable television 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 incum-
bent 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 sta-
tions to transmit textual and graphic information useful both to consumers and
businesses. The FCC also permits commercial and noncommercial FM stations to
use their subcarrier frequencies to provide nonbroadcast 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 educa-
tional programming along with informational and data services. LECs and other
common carriers provide facilities for the transmission and distribution to
homes and businesses of video services, including interactive computer-based
services like the Internet, data and other nonvideo services. The FCC has con-
ducted spectrum auctions for licenses to provide 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 environments are constantly occurring. Thus, it
is not possible to predict the effect that ongoing or future developments might
have on the cable industry or on the operations of the Company.
EMPLOYEES
At June 30, 1997, without giving effect to the Acquisitions, the Company had
approximately 593 equivalent full-time employees, eight of whom belonged to a
collective bargaining unit. The Company considers its relations with its em-
ployees to be good.
PROPERTIES
The Company's principal physical assets consist of cable television operating
plant and equipment, including signal receiving, encoding and decoding devices,
headends and distribution systems and customer house drop equipment for each of
its cable television systems. The signal receiving apparatus typically includes
a tower, antenna, ancillary electronic equipment and earth stations for recep-
tion of satellite signals. Headends, consisting of associated electronic equip-
ment necessary for the reception, amplification and modulation of signals, are
located near the receiving devices. The Company's distribution system consists
primarily of coaxial and fiber optic cables and related electronic equipment.
Customer devices consist of decoding converters, which expand channel capacity
to permit reception of more than twelve channels of programming. Some of the
Existing Systems utilize converters that can be addressed by sending coded sig-
nals from the headend over the cable network. See "--Technological Develop-
ments."
The Company owns or leases parcels of real property for signal reception sites
(antenna towers and headends), microwave facilities and business offices, and
owns most of its service vehicles. The Company believes that its properties,
both owned and leased, are in good condition and are suitable and adequate for
the Company's business operations.
The Company's cables generally are attached to utility poles under pole rental
agreements with local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. The physical components of
the Company's systems require maintenance and periodic upgrading to keep pace
with technological advances.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a party
or to which any of its properties are subject.
57
<PAGE>
LEGISLATION AND REGULATION
The cable television industry currently is regulated by the FCC and certain
state and local governments. In addition, legislative and regulatory proposals
under consideration by the Congress and federal agencies may materially affect
the cable television industry.
The Cable Acts and the 1996 Telecom Act amended the Communications Act and es-
tablished a national policy to guide the development and regulation of cable
television systems. Principal responsibility for implementing the policies of
the Cable Acts and the 1996 Telecom Act is allocated between the FCC and state
or local franchising authorities. The FCC and state regulatory agencies are
required to conduct numerous rulemaking and regulatory proceedings to imple-
ment the 1996 Telecom Act and such proceedings may materially affect the cable
television industry. The following is a summary of federal laws and regula-
tions materially affecting the growth and operation of the cable television
industry and a description of certain state and local laws.
THE COMMUNICATIONS ACT AND FCC REGULATIONS
The Telecommunications Act of 1996. The 1996 Telecom Act, which became effec-
tive in February 1996, is the most comprehensive reform of the nation's tele-
communications laws since the Communications Act. Although the long term goal
of the 1996 Telecom Act is to promote competition and decrease regulation of
various communications industries, in the short term, the law delegates to the
FCC (and in some cases to the states) broad new rulemaking authority. The 1996
Telecom Act deregulates cable programming service tier ("CPST") rates for most
MSOs (including the Company) after March 31, 1999, except that such rates are
immediately deregulated for certain small operators. Deregulation will occur
sooner for systems in markets where comparable video programming services,
other than DBS, are offered by local telephone companies, or their affiliates,
or by third parties using the local telephone company's 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 sub-
scribers 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 customers to file rate com-
plaints 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 after the date of enactment of the 1996 Telecom Act. The
1996 Telecom Act also modifies the existing statutory provisions governing ca-
ble system technical standards, equipment compatibility, customer notice re-
quirements and program access, permits certain operators to include losses in-
curred prior to September 1992 in setting regulated rates and repeals the
three-year anti-trafficking prohibition adopted in the 1992 Cable Act. The
1996 Telecom Act prohibits certain local restrictions that impair a viewer's
ability to receive video programming services using HSDs and over-the-air an-
tennae, and the FCC adopted regulations implementing this provision that pre-
empt certain local restrictions on satellite and over-the-air antenna recep-
tion 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 us-
er.
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 serv-
ice 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 on a non-
discriminatory basis. Under certain limited circumstances, cable operators
also may elect to offer services through open video systems. The 1996 Telecom
Act also prohibits a local telephone company 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
LECs to provide nondiscriminatory access and interconnection to potential com-
petitors, such as cable operators, wireless telecommunications providers and
long distance companies. The 1996 Telecom Act also permits interstate utility
companies to enter the telecommunications market for the first time.
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 spe-
cial three-judge federal district courts have issued preliminary injunctions
enjoining the enforcement of these provisions as unconstitutional to the ex-
tent they regulated the transmission of indecent material. The United States
Supreme Court recently
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affirmed the lower court's decision. The 1996 Telecom Act also requires the FCC
to prescribe guidelines for a ratings system for violent and indecent video
programming (unless video programming distributors adopt voluntary guidelines)
and requires all new television sets to contain a so-called "V-chip" capable of
blocking all programs with a given rating. In accordance with the 1996 Telecom
Act, the television industry recently adopted a voluntary ratings system for
violent and indecent video programming which the FCC is currently reviewing.
The new law also substantially relaxes current broadcast ownership rules by
eliminating, among other things, the statutory broadcast/cable television
cross-ownership restriction that had been codified by the 1984 Cable Act and by
directing the FCC to eliminate its network/cable cross-ownership regulation and
review the need for its rule prohibiting broadcast/cable cross-ownership.
Rate Regulation. The 1992 Cable Act authorized rate regulation for certain ca-
ble communications services and equipment in communities that are not subject
to "effective competition" as defined by federal law. Under the 1992 Cable Act,
virtually all cable television systems were subject to rate regulation for ba-
sic cable service and equipment by local officials under the oversight of the
FCC, which prescribed detailed guidelines for such rate regulation. The 1992
Cable Act also required the FCC to resolve complaints about rates for nonbasic
cable programming services (other than programming offered on a per channel or
per program basis) and to reduce any such rates found to be unreasonable. The
1992 Cable Act limited the ability of cable television systems to raise rates
for basic and certain cable programming services (collectively, the "Regulated
Services") and eliminated the 5% annual basic service rate increase permitted
by the 1984 Cable Act without local approval. Cable services offered on a per
channel (a la carte) or per program (pay-per-view) basis are not subject to
rate regulation by either local franchising authorities or the FCC.
The 1996 Telecom Act deregulates rates for CPSTs after March 31, 1999 for most
MSOs (including the Company) and, for certain small cable operators, immedi-
ately eliminates rate regulation of CPSTs and, in certain circumstances, basic
services and equipment. The deregulation of a smaller cable operator's rates
only applies in franchise areas in which the small cable operator serves 50,000
or fewer subscribers. To qualify for the "small cable operator" rate deregula-
tion under the 1996 Telecom Act, the operator (and its affiliates) must serve
in the aggregate less than one percent (currently estimated by the FCC to be
approximately 617,000 subscribers) of all U.S. cable television subscribers and
may not be affiliated with an entity or group of entities that in the aggregate
has annual gross revenue exceeding $250 million. The FCC has adopted interim
rules in which it has defined "affiliate" as any entity that has a 20% or
greater equity interest in the small cable operator (active or passive) or that
holds de jure or de facto control over the small cable operator. The FCC is
currently conducting a rulemaking to implement the 1996 Telecom Act's "small
cable operator" rate deregulation, including adoption of permanent affiliation
standards.
The FCC's regulations, which became effective in September 1993, govern rates
that may be charged to subscribers for Regulated Services. The FCC uses a
benchmark methodology as the principal method of regulating rates for Regulated
Services. Cable operators may also justify rates using a cost-of-service meth-
odology. As of September 1, 1993, cable operators subject to rate regulation
whose then current rates were above FCC benchmark levels were required, absent
a successful cost-of-service showing, to reduce those rates to the benchmark
level or by up to 10% of the rates in effect on September 30, 1992, whichever
reduction was less, adjusted for equipment costs and inflation and programming
modifications occurring subsequent to September 30, 1992. Effective May 15,
1994, the FCC modified its benchmark methodology to require reductions of up to
17% of the rates for Regulated Services in effect on September 30, 1992, ad-
justed for inflation, channel modifications, equipment costs and increases in
certain operating costs. The FCC's modified benchmark regulations were designed
to cause an additional 7% reduction in the rates for Regulated Services on top
of any rate reductions implemented under the FCC's initial benchmark regula-
tions. The FCC has also adopted comprehensive and restrictive regulations al-
lowing 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.
In November 1994, the FCC adopted regulations permitting cable operators to
create new programming packages, called new product tiers ("NPTs"), that are
not subject to rate regulation if certain conditions are met. The FCC also re-
vised its previously adopted policy and concluded that packages of a la carte
services are subject to rate regulation by the FCC as CPSTs. Because of the un-
certainty created by the FCC's prior a la carte package guidelines, the FCC al-
lows cable operators, under certain circumstances, to treat previously offered
a la carte packages as NPTs.
In addition to rate deregulation for certain small cable operators under the
1996 Telecom Act, the FCC adopted regulations in June 1995 ("Small System Regu-
lations") pursuant to the 1992 Cable Act that were designed to reduce the sub-
stantive
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and procedural burdens of rate regulation on "small cable systems." For pur-
poses of these FCC regulations, a "small cable system" is a system serving
15,000 or fewer subscribers that is owned by or affiliated with a cable company
which serves, in the aggregate, 400,000 or fewer subscribers. Under the FCC's
Small System Regulations, qualifying systems may justify their regulated serv-
ice and equipment rates using a simplified cost-of-service formula. The regula-
tory benefits accruing to qualified small cable systems under certain circum-
stances remain effective even if such systems are later acquired by a larger
cable operator that serves in excess of 400,000 subscribers. Various franchis-
ing authorities and municipal groups have requested the FCC to reconsider its
Small System Regulations. The FCC recently determined that the 1996 Telecom Act
does not require modification of its Small System Regulations. The Company be-
lieves that many of the Existing Systems currently satisfy the eligibility cri-
teria under the FCC's Small System Regulations and would therefore be eligible
to use the FCC's simplified cost-of-service methodology to justify basic serv-
ice, CPST and equipment rates if regulated by a franchising authority or the
FCC. Once the Company serves in the aggregate more than 400,000 subscribers,
most of the systems acquired from larger MSOs, such as TCI, Cox and Cablevi-
sion, generally will not be eligible for rate regulatory treatment as "small
cable systems"; however, certain systems acquired from qualified "small cable
operators" will be "grandfathered" under the FCC's Small System Regulations and
will continue to be eligible to justify regulated rates using the FCC's simpli-
fied cost-of-service formula.
Franchising authorities are empowered to regulate the rates charged for addi-
tional outlets and for the installation, lease and sale of equipment used by
customers to receive the basic 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. The FCC recently revised its regulations to permit operators to com-
pute regulated equipment rates by aggregating costs of broad categories of
equipment at the franchise, system, regional or company level.
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 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 tan-
gible assets used to provide Regulated Services. The FCC's cost-of-service reg-
ulations 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 rulemaking in which it proposes to use an operator's actual debt cost
and capital structure to determine an operator's cost of capital or rate of re-
turn.
"Anti-Buy Through" Provisions. The 1992 Cable Act also requires cable systems
to permit customers 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 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 capacity to offer programming in the manner required by the stat-
ute is available until a system obtains such capability, but not later than De-
cember 2002. The FCC may waive such time periods, if deemed necessary. Most of
the Company's cable systems do not have the technological capability to offer
programming in the manner required by the statute and currently are exempt from
complying with the requirement. The Company cannot predict the extent to which
this provision of the 1992 Cable Act and the corresponding FCC rules may cause
customers to discontinue optional nonbasic service tiers in favor of the less
expensive basic cable service.
Must Carry/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 noncommercial
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 re-
quired 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 sta-
tions carried by such systems after October 1993. In March 1997, the U.S. Su-
preme Court affirmed a three-judge district court decision upholding the con-
stitutional validity of the 1992 Cable Act's mandatory signal carriage require-
ments. The FCC will conduct a rulemaking in the future to consider the require-
ments, if any, for mandatory carriage of DTV signals. The Company cannot pre-
dict the ultimate outcome of such a rulemaking or the impact of new carriage
requirements of the Company or its business.
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As a result of the mandatory carriage rules, some of the Company's systems have
been required to carry television broadcast stations that otherwise would not
have been carried and have caused displacement of possibly more attractive pro-
gramming. The retransmission consent rules have resulted in the deletion of
certain local and distant televisions broadcast stations which various Company
systems were carrying. To the extent retransmission consent fees must be paid
for the continued carriage of certain television stations, the Company's cost
of doing business will increase with no assurance that such fees can be recov-
ered through rate increases.
Designated Channels. The Communications Act permits franchising authorities to
require cable operators to set aside certain channels for public, educational
and governmental access programming. Federal law 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 com-
pete with services offered by the cable operator. In August 1996, a federal ap-
pellate court generally upheld the constitutionality of these designated chan-
nel provisions, but indicated that in certain situations the requirement to
provide such channels might be found unconstitutional. 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 con-
ditions for commercial use of such channels; and (iii) the procedures for the
expedited resolution of disputes concerning rates or commercial use of the des-
ignated 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 au-
thorities (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 juris-
dictions. The 1992 Cable Act encourages competition with existing cable systems
by (i) allowing municipalities to operate their own cable systems without fran-
chises, (ii) preventing franchising authorities from granting exclusive fran-
chises or unreasonably refusing to award additional franchises covering an ex-
isting cable system's service area, and (iii) prohibiting (with limited excep-
tions) the common ownership of cable systems and co-located MMDS or SMATV sys-
tems. 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 cable operator faces "effective competition" as defined by fed-
eral law. The 1996 Telecom Act also permits local telephone companies to pro-
vide video programming services as traditional cable operators with local fran-
chises.
The Cable Acts also provide that in granting or renewing franchises, local au-
thorities may establish requirements for cable-related facilities and equip-
ment, but not for video programming or information services other than in broad
categories. The Cable Acts limit franchise fees to 5% of cable system revenue
derived from the provision of cable services and permit cable operators to ob-
tain modification of franchise requirements by the franchising authority or ju-
dicial action if warranted by changed circumstances. The Company's franchises
typically provide for payment of fees to franchising authorities in the range
of 3% to 5% of "revenue" (as defined by each franchise agreement). Recently, a
federal appellate court held that a cable operator's gross revenue includes all
revenue received from subscribers, without deduction, and overturned an FCC or-
der which had held that a cable operator's gross revenue does not include money
collected from subscribers that is allocated to pay local franchise fees. The
1996 Telecom Act generally prohibits franchising authorities from (i) imposing
requirements in the cable franchising process that require, prohibit or re-
strict the provision of telecommunications services by an operator, (ii) impos-
ing franchise fees on revenue derived by the operator from providing telecommu-
nications 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 makes sev-
eral changes to the renewal process which could make it easier for a franchis-
ing 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 author-
ity 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
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its franchises and has provided quality levels of service, and it 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 cer-
tain substantive franchise requirements (i.e., access channels, universal serv-
ice and other technical requirements). These decisions have been somewhat in-
consistent 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.
Ownership Limitations. Pursuant to the 1992 Cable Act, the FCC adopted rules
prescribing national customer limits and limits on the number of channels that
can be occupied on a cable system by a video programmer in which the cable op-
erator has an attributable interest. The FCC's horizontal ownership limits have
been stayed because a federal district court found the statutory limitation to
be unconstitutional. An appeal of that decision is pending and has been consol-
idated with an appeal of the FCC's regulations which implemented the national
customer and channel limitation provisions of the 1992 Cable Act. The 1996
Telecom Act eliminates the statutory prohibition on the common ownership, oper-
ation or control of a cable system and a television broadcast station in the
same service area and directs the FCC to eliminate its regulatory restrictions
on cross-ownership of cable systems and national broadcasting networks and to
review its broadcast-cable ownership restrictions to determine if they are nec-
essary in the public interest. Pursuant to the mandate of the 1996 Telecom Act,
the FCC eliminated its regulatory restriction on cross-ownership of cable sys-
tems and national broadcasting networks.
Telephone Company Ownership of Cable Systems. The 1996 Telecom Act makes far-
reaching changes in the regulation of telephone companies that provide video
programming services. The new law eliminates federal legal barriers to competi-
tion in the local telephone and cable communications businesses, preempts legal
barriers to competition that previously existed in state and local laws and
regulation and sets basic standards for relationships between telecommunica-
tions providers. The 1996 Telecom Act generally limits acquisitions and prohib-
its certain joint ventures between LECs and cable operators in the same market.
There are some statutory exceptions to the buy-out and joint venture prohibi-
tions, including exceptions for certain small cable systems (as defined by fed-
eral law) and for cable systems or telephone facilities serving certain rural
areas, and the FCC is authorized to grant waivers of the prohibitions under
certain circumstances. 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 appealed these regula-
tions. The U.S. Court of Appeals for the Eighth Circuit, where the appeals were
consolidated, recently vacated key portions of the FCC's regulations, including
the FCC's pricing and nondiscrimination rules. The ultimate outcome of these
FCC rulemakings and the ultimate impact of the 1996 Telecom Act or any final
regulations adopted pursuant to the new law on the Company or its business can-
not 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 through the use of a formula that it has
devised. 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 nonvideo 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 at-
tachment 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 telecom-
munications 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 in-
crease the fees paid by cable operators to utilities for pole attachments and
conduit space. Additionally, the FCC recently initiated a separate rulemaking
wherein, within two years of enactment of the 1996 Telecom Act, it will 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 enact-
ment of the 1996 Telecom Act, and any increase in attachment rates resulting
from the FCC's new regulations will be phased in equal annual increments over a
period of five years beginning on the effective date of the new FCC regula-
tions. The ultimate outcome of these rulemakings and the
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ultimate impact of any revised FCC rate formula or of any new pole attachment
rate regulations on the Company or its business cannot be determined at this
time.
Other Statutory Provisions. The 1992 Cable Act, the 1996 Telecom Act and FCC
regulations preclude a satellite video programmer affiliated with a cable com-
pany, or with a common carrier providing video programming directly to custom-
ers, from favoring an affiliated company over competitors and require such a
programmer to sell its programming to other multichannel video distributors.
These provisions limit the ability of cable program suppliers affiliated with
cable companies or with common carriers providing satellite-delivered video
programming directly to customers 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, al-
ternatively, to carry such programming only at "safe harbor" time periods cur-
rently 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 statu-
tory 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 en-
forcement of this law. The FCC's regulations implementing this statutory provi-
sion became effective in May 1997. The Communications Act also includes provi-
sions, among others, concerning horizontal and vertical ownership of cable sys-
tems, customer service, customer privacy, marketing practices, equal employment
opportunity, technical standards, and consumer equipment compatibility.
Other FCC Regulations. The FCC has numerous rulemaking 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 rulemaking proceedings. In addition to the FCC regula-
tions noted above, there are other FCC regulations covering such areas as equal
employment opportunity, syndicated program exclusivity, network program
nonduplication, registration of cable systems, maintenance of various records
and public inspection files, microwave frequency usage, lockbox availability,
origination cablecasting and sponsorship identification, antenna structure no-
tification, marking and lighting, carriage of local sports broadcast program-
ming, application of rules governing political broadcasts, limitations on ad-
vertising contained in nonbroadcast children's programming, consumer protection
and customer service, ownership of home wiring, indecent programming, program-
mer access to cable systems, programming agreements, technical standards, con-
sumer 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 op-
erate certain transmission facilities often used in connection with cable
operations.
The 1992 Cable Act, the 1996 Telecom Act and the FCC's rules implementing these
statutory provisions generally have increased the administrative and opera-
tional expenses of cable systems and have resulted in additional regulatory
oversight by the FCC and local franchise authorities. The Company will continue
to develop strategies to minimize the adverse impact that the FCC's regulations
and the other provisions of the 1992 Cable Act and the 1996 Telecom Act have on
the Company's business. However, no assurances can be given that the Company
will be able to develop and successfully implement such strategies to minimize
the adverse impact of the FCC's rate regulations, the 1992 Cable Act or the
1996 Telecom Act on the Company's business.
COPYRIGHT
Cable 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 revenue 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
broadcast signal carriage cannot be predicted at this time. The Copyright Of-
fice recently issued a report to Congress reviewing the various copyright li-
censing regimes governing the retransmission of broadcast signals by multichan-
nel video providers. The Copyright Office recommended that Congress make major
revisions of both the cable television and satellite compulsory licenses to
make them as simple as possible to administer, to provide copyright owners with
full compensation for the use of their works, and to treat every multichannel
video delivery system the same, except to the extent that technological differ-
ences or differences in the regulatory burdens placed upon the delivery system
justify different copyright treatment. The possible simplification, modifica-
tion or elimination of the compulsory copyright license is the subject of con-
tinuing 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 customers. The Com-
pany cannot predict the outcome of this legislative activity.
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Cable operators distribute programming and advertising that use music con-
trolled 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 estab-
lished a special rate court for BMI. BMI and certain cable industry represent-
atives recently concluded negotiations for a standard licensing agreement cov-
ering the usage 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. ASCAP and cable industry repre-
sentatives have met to discuss the development of a standard licensing agree-
ment covering ASCAP 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 re-
quired to pay for past and future use of ASCAP-controlled music, it does not
believe such license fees will be material to the Company's operations.
STATE AND LOCAL REGULATION
Cable systems are subject to state and local regulation, typically imposed
through the franchising process, because they use local streets and rights-of-
way. Regulatory responsibility for essentially local aspects of the cable
business such as franchisee selection, billing practices, system design and
construction, and safety and consumer protection remains with either state or
local officials and, in some jurisdictions, with both.
Cable systems generally are operated pursuant to nonexclusive franchises, per-
mits 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 juris-
diction. Each franchise generally contains provisions governing payment of
franchise fees, franchise term, system construction and maintenance obliga-
tions, system channel capacity, design and technical performance, customer
service standards, franchise renewal, sale or transfer of the franchise, ter-
ritory 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 systems to the jurisdiction of centralized state gov-
ernmental agencies, some of which impose regulation of a character similar to
that of a public utility. Attempts in other states to regulate cable systems
are continuing and can be expected to increase. To date, no state in which the
Company currently operates has enacted such state level regulation; however,
upon completion of the acquisition of the TCI New England Systems, the Company
will be subject to the jurisdiction of the Vermont Public Service Board. The
Company cannot predict whether any of the states in which it currently oper-
ates will engage in such regulation in the future. State and local franchising
jurisdiction is not unlimited, however, and must be exercised consistently
with federal law. The 1992 Cable Act immunizes franchising authorities from
monetary damage awards arising from regulation of cable 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 juris-
dictions, state and local franchise requirements, are currently the subject of
judicial proceedings, legislative hearings and administrative and legislative
proposals which could change, in varying degrees, the manner in which cable
systems operate. Neither the outcome of these proceedings nor the impact on
the cable communications industry or the Company can be predicted at this
time.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF FRONTIERVISION INC.
Holdings' sole general partner is FVP. FVP's sole general partner is FVP GP,
L.P. ("FVP GP"). FVP GP's sole general partner is FrontierVision Inc. Informa-
tion with respect to the directors and executive officers of FrontierVision
Inc. and FrontierVision Holdings Capital Corporation, respectively, is set
forth below:
FRONTIERVISION INC.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James C. Vaughn 51 President, Chief Executive Officer and Director
John S. Koo 36 Senior Vice President, Chief Financial Officer, Secretary and Director
William J. Mahon, Jr. 56 Vice President of Operations
David M. Heyrend 47 Vice President of Engineering
William P. Brovsky 41 Vice President of Marketing and Sales
James W. McHose 33 Vice President and Treasurer
Richard G. Halle 33 Vice President of Business Development
Todd E. Padgett 31 Vice President of Finance
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James C. Vaughn 51 President, Chief Executive Officer and Director
John S. Koo 36 Senior Vice President, Chief Financial Officer, Secretary and Director
James W. McHose 33 Vice President and Treasurer
</TABLE>
JAMES C. VAUGHN, President, Chief Executive Officer and a Director of
FrontierVision Inc. and Holdings Capital and a founder of the Company, is a ca-
ble television system operator and manager with over 30 years of experience in
the cable television industry. From 1987 to 1995, he served as Senior Vice
President of Operations for Triax Communications Corp., a top 40 MSO, where he
was responsible for managing all aspects of small and medium-sized cable tele-
vision systems. These systems grew from serving 57,000 subscribers to over
376,000 subscribers during Mr. Vaughn's tenure. Prior to joining Triax Communi-
cations, Mr. Vaughn served as Director of Operations for Tele-Communications,
Inc. from 1986 to 1987, with responsibility for managing the development of
Chicago-area cable television systems. From 1985 to 1986, Mr. Vaughn was Divi-
sion Manager for Harte-Hanks Communications. From 1983 to 1985, Mr. Vaughn
served as Vice President of Operations for Bycom, Inc. From 1979 to 1983, Mr.
Vaughn served as Director of Engineering for the Development Division of Cox
Cable Communications Corp. From 1970 to 1979, Mr. Vaughn served as Senior Staff
Engineer for Viacom, Inc.'s cable division, and a Director of Engineering for
Showtime, a division of Viacom International, Inc.
JOHN S. KOO, Senior Vice President, Chief Financial Officer, Secretary and a
Director of FrontierVision Inc. and Holdings Capital and a founder of the Com-
pany, has over eleven years of banking experience in the telecommunications in-
dustry. From 1990 to 1995, Mr. Koo served as a Vice President at Canadian Impe-
rial Bank of Commerce ("CIBC"), where he co-founded CIBC's Mezzanine Finance
Group, targeted at emerging media and telecommunications businesses. From 1986
to 1990, Mr. Koo was a Vice President at Bank of New England specializing in
media finance. From 1984 to 1986, he was a management consultant to the finan-
cial services industry.
WILLIAM J. MAHON, JR., Vice President of Operations of FrontierVision Inc.
since December 1995, has over fifteen years of cable television operations man-
agement experience. Prior to joining the Company, Mr. Mahon served as Vice
President of Operations for UVC, a top 50 MSO, from 1990 to 1995, where he was
responsible for the day-to-day operations of approximately 130 cable systems
located in twelve states. From 1983 to 1989, Mr. Mahon served as President and
General Manager of Heritage Cable Vision, a 90,000 subscriber MSO. Mr. Mahon is
a member of the Society of Cable Engineers and serves on the Board of Directors
of the New England Cable Television Association.
DAVID M. HEYREND, Vice President of Engineering of FrontierVision Inc., has 23
years of cable television engineering management and operations experience.
Prior to joining the Company in 1996, Mr. Heyrend served from 1988 to 1995 as
Director of Engineering for UVC, where he developed technical standards, em-
ployee development programs and oversaw
65
<PAGE>
plant construction projects. From 1985 to 1988, as Director of Programs for
Tele-Engineering Corporation, he developed and managed broadband LAN projects
for clients such as Allen Bradley, Ford Motor Company and TRW. Mr. Heyrend
also worked for several years with Daniels & Associates in system technical
operations and engineering management.
WILLIAM P. BROVSKY, Vice President of Marketing and Sales of FrontierVision
Inc., has fourteen years of cable television experience and is responsible for
programming and contract negotiations in addition to overseeing the sales and
marketing activities of the Company's operating divisions. Before joining the
Company in 1996, Mr. Brovsky managed day-to-day sales and marketing operations
from 1989 to 1996 for Time Warner Cable of Cincinnati, serving almost 200,000
subscribers. He also served as Project Manager, supervising all aspects of
system upgrades to fiber optics. From 1982 to 1989, Mr. Brovsky served as Gen-
eral Sales Manager for American Television and Communications, where he was
responsible for sales, marketing and telemarketing operations for Denver and
its suburban markets.
JAMES W. MCHOSE, Vice President and Treasurer of FrontierVision Inc. and Hold-
ings Capital, has over ten years of accounting and tax experience, including
six years providing tax, accounting and consulting services to companies en-
gaged in the cable television industry. Prior to joining the Company in 1996,
Mr. McHose was a Senior Manager in the Information, Communications, and Enter-
tainment practice of KPMG Peat Marwick, LLP, where he specialized in taxation
of companies in the cable television industry. In this capacity, Mr. McHose
served MSOs with over 14 million subscribers in the aggregate. Mr. McHose is a
member of the Cable Television Tax Professional's Institute and is a Certified
Public Accountant.
RICHARD G. HALLE, Vice President of Business Development of FrontierVision
Inc. since February 1997, is responsible for the evaluation and development of
new businesses including cable modems and Internet access, digital programming
delivery, distance learning and alternative telephone access. Prior to joining
the Company, from 1995 to 1996 Mr. Halle served as the Vice President of Oper-
ations and then as the Vice President of Development at Fanch Communications,
a top 20 MSO, where he was initially responsible for the management of an op-
erating region of 100,000 subscribers and subsequently responsible for the
planning and deployment of all advanced services including digital television,
dial-up Internet access and high speed cable modems. Prior to that, he spent
nine years in the banking industry, specializing in media and telecommunica-
tions finance.
TODD E. PADGETT, Vice President of Finance of FrontierVision Inc. since Janu-
ary 1997 and Director of Finance of FrontierVision Inc. since July 1995, has
over six years of project management and corporate finance experience. From
1990 to 1995, Mr. Padgett served as Project Manager for Natural Gas Pipeline
Company of America, a subsidiary of MidCon Corp., which is a division of Occi-
dental Petroleum Corporation, where he specialized in developing, evaluating,
negotiating and financing natural gas pipeline and international power pro-
jects. Mr. Padgett is a Certified Public Accountant and has an MBA from the
University of Chicago.
ADVISORY COMMITTEE
The partnership agreement of FVP provides for the establishment of an Advisory
Committee to consult with and advise FVP GP, the general partner of FVP, with
respect to FVP's business and overall strategy. The Advisory Committee has
broad authority to review and approve or disapprove matters relating to all
material aspects of FVP's business. The approval of seventy-five percent (75%)
of the members of the Advisory Committee that are entitled to vote on the mat-
ter is required in order for the Company to effect any cable television system
acquisition. The Advisory Committee consists of four representatives of the
Attributable Class A Limited Partners of FVP and one representative of FVP GP.
Subject to certain conditions, each of the four Attributable Class A Limited
Partners of FVP listed in "Principal Security Holders" is entitled to desig-
nate (directly or indirectly) one of the four Attributable Class A Limited
Partner representatives on the Advisory Committee. The designees of J.P. Mor-
gan Investment Corporation, 1818 II Cable Corp. (whose designee is selected by
two affiliated individuals specified in the FVP Partnership Agreement), Olym-
pus Cable Corp. and First Union Capital Partners Inc. are John W. Watkins,
Richard H. Witmer, Jr., James A. Conroy and L. Watts Hamrick, III, respective-
ly. FVP GP's designee is Mr. Vaughn.
66
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to FrontierVision Inc.'s
Chief Executive Officer and to each of its other most highly compensated offi-
cers receiving compensation in excess of $100,000 for services rendered during
the fiscal years ended December 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------------------------
ANNUAL COMPENSATION
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
- --------------------------- ---- -------- -------- ----------------
<S> <C> <C> <C> <C>
James C. Vaughn 1996 $283,986 $120,000(2) $7,882
President and Chief Executive Offi-
cer 1995 169,695 110,000(3)
John S. Koo 1996 170,192 111,618(2) 4,760
Senior Vice President, Chief Finan-
cial Officer and Secretary 1995 93,416 90,000(3)
</TABLE>
- ---------------
(1) Consists of FVP's contributions to the 401(k) Plan.
(2) Bonus paid for the employment year ended April 16, 1997. Mr. Vaughn and Mr.
Koo deferred $45,000 and $110,000, respectively, of the bonus to the De-
ferred Compensation Plan described below.
(3) Bonus paid for the employment year ended April 16, 1996. Mr. Vaughn and Mr.
Koo deferred $35,000 and $50,000, respectively, of the bonus to the De-
ferred Compensation Plan described below.
DEFERRED COMPENSATION PLAN
FVP established the FrontierVision Partners, L.P. Executive Deferred Compensa-
tion Plan (the "Deferred Compensation Plan") effective January 1, 1996 to allow
key employees the opportunity to defer the payment of compensation to a later
date and to participate in any appreciation of FVP's business. The Deferred
Compensation Plan is administered by FVP's Advisory Committee. Participation in
the Deferred Compensation Plan is limited to James C. Vaughn, John S. Koo and
other key executives of FVP or its affiliates approved by the Compensation Com-
mittee of the Advisory Committee (the "Compensation Committee").
Under the Deferred Compensation Plan, eligible participants may elect to defer
the payment of a portion of their compensation each year up to an amount deter-
mined by the Compensation Committee. Any amount deferred is credited to a book-
keeping account, which is credited with interest at the rate of 12% per annum.
Each participant's account also has a phantom equity component through which
the account will be credited with earnings in excess of 12% per annum to the
extent the Net Equity Value of FVP appreciates in excess of 12% per annum dur-
ing the term of the deferral. Net Equity Value of FVP is determined by multi-
plying each cable television system's EBITDA for the most recent fiscal quarter
by the weighted average multiple of EBITDA paid by FVP to acquire each cable
television system; provided that if substantially all of the assets or partner-
ship interests of FVP are sold, Net Equity Value shall be based upon such ac-
tual sale price adjusted to reflect any prior distributions to the partners and
any payments during the term of the deferral to the holders of certain subordi-
nated notes issued to the limited partners of FVP. Accounts shall be paid fol-
lowing (i) the sale of all of FVP's partnership interests or upon liquidation
of FVP, other than sales or liquidations which are part of a reorganization, or
(ii) the death or disability of the participant prior to termination of employ-
ment with FVP. The Compensation Committee may agree to pay the account in the
event the participant incurs a severe financial hardship or if the participant
agrees to an earlier payment. There are 12 employees currently participating in
the Deferred Compensation Plan, including Messrs. Vaughn and Koo.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
A Compensation Committee of the Advisory Committee of FVP, consisting of
Messrs. Watkins and Witmer, as representative of J.P. Morgan Investment Corpo-
ration and 1818 II Cable Corp., respectively, sets the compensation of the ex-
ecutive officers of the Company. See "Certain Relationships and Related Trans-
actions."
EMPLOYMENT AGREEMENT
In connection with the formation of the Company, James. C. Vaughn entered into
an employment agreement with FVP, dated as of April 17, 1995 (the "Employment
Agreement"). The Employment Agreement expired by its terms as of April 17,
1997.
67
<PAGE>
The Employment Agreement provided that Mr. Vaughn would be employed as Presi-
dent and Chief Executive Officer of FVP. The Employment Agreement established a
base salary to be paid to Mr. Vaughn each year, subject to annual adjustment to
reflect increases in the Consumer Price Index for All Urban Consumers, as pub-
lished by the Bureau of Labor Statistics of the United States Department of La-
bor (or, in the event of the discontinuance thereof, another appropriate index
selected by FVP, with the approval of the Advisory Committee). In addition, Mr.
Vaughn was entitled to annual bonuses of up to $75,000, subject to the attain-
ment of certain performance objectives set forth in the Employment Agreement.
Mr. Vaughn agreed not to compete with FVP for the term of his employment with
FVP and for an additional period of two years thereafter and to keep certain
information in connection with FVP confidential.
68
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Holdings' sole general partner (owning 99.9% of the partnership interests
therein) is FVP. Holdings' sole limited partner (owning 0.1% of the partnership
interests therein) is FrontierVision Holdings, LLC, which is a wholly owned
subsidiary of FVP. FVP's sole general partner (owning 1% of the partnership in-
terests therein) is FVP GP. FVP's limited partners (owning 99% of the partner-
ship interests therein) consist of J.P. Morgan Investment Corporation, an af-
filiate of J.P. Morgan Securities Inc., First Union Capital Partners, Inc., an
affiliate of First Union Capital Markets Corp., and various institutional in-
vestors and accredited investors. FVP GP's sole general partner (owning 1% of
the partnership interests therein) is FrontierVision Inc., which is owned by
James C. Vaughn and John S. Koo. See "Principal Security Holders."
As of June 30, 1997, J.P. Morgan Investment Corporation and First Union Capital
Partners, Inc. had committed approximately $45.5 million and $30.0 million, re-
spectively, to FVP, all of which has been contributed to FVP. As of June 30,
1997, FrontierVision Inc. had committed and contributed approximately $20,343
to FVP, representing contributions of approximately $13,563 and $6,780 by James
C. Vaughn and John S. Koo, respectively, who are directors of FrontierVision
Inc. Such capital commitments were contributed as equity to FVOP in connection
with the closing of acquisitions by FVOP, for escrow deposits for acquisitions
by FVOP under contract and for FVOP working capital requirements.
J.P. Morgan Investment Corporation and First Union Capital Partners, Inc. are
"Special Class A" limited partners of FVP. Upon the termination of FVP and in
connection with distributions to its partners in respect of their partnership
interests, J.P. Morgan Investment Corporation, First Union Capital Partners,
Inc. and FVP GP will be entitled to receive "carried interest" distributions or
will be allocated a portion of 15% of any remaining capital to be distributed
by FVP after certain other distributions are made. J.P. Morgan Securities Inc.
acted as placement agent for the initial offering of limited partnership inter-
ests of FVP (other than with respect to the investment made by J.P. Morgan In-
vestment Corporation) and the placement of debt securities of FVP and in con-
nection with those activities received customary fees and reimbursement of ex-
penses.
Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securi-
ties Inc., The Chase Manhattan Bank, an affiliate of Chase Securities Inc., and
CIBC Inc., an affiliate of CIBC Wood Gundy Securities Corp., are agents and
lenders under the Senior Credit Facility and have received customary fees for
acting in such capacities. Such entities will also be lenders to FVOP under the
New Credit Facility. In addition, J.P. Morgan Securities Inc., Chase Securities
Inc., CIBC Wood Gundy Securities Corp. and First Union Capital Markets Corp.
(collectively, the "FVOP Underwriters") received compensation in the aggregate
of approximately $6.0 million in connection with the issuance of the FVOP
Notes. There are no other arrangements between the FVOP Underwriters and their
affiliates and the Company or any of its affiliates pursuant to which the FVOP
Underwriters or their affiliates will receive any additional compensation from
the Company or any of its affiliates, except in connection with this offering
of the Notes and the New Credit Facility. See "Plan of Distribution."
69
<PAGE>
PRINCIPAL SECURITY HOLDERS
The following table sets forth, as of June 30, 1997, (i) the percentage of the
total partnership interests of FVP beneficially owned by the directors and ex-
ecutive officers of FrontierVision Inc. and each person who is known to Hold-
ings to own beneficially more than 5.0% of any class of FVP's partnership in-
terests and (ii) the percentage of the equity securities of FrontierVision
Inc., FVP GP, FVP and Holdings owned by each director or executive officer of
FrontierVision Inc. named in the Summary Compensation Table and by all execu-
tive officers of FrontierVision, Inc. as a group. Holdings was formed as a Del-
aware limited partnership in August 1997. FVP will contribute its 99.9% general
partner interest in FVOP to Holdings in connection with the Formation Transac-
tion. FrontierVision Partners Holding Company, Inc. will contribute its 100%
interest in FVOP Inc. to Holdings, with the result that FVOP will be wholly
owned, directly or indirectly, by Holdings. Holdings Capital was incorporated
in August 1997. It has nominal assets and does not conduct any operations. For
a more detailed discussion of the ownership of the Company, see "Certain Rela-
tionships and Related Transactions" and "Prospectus Summary--Ownership Struc-
ture."
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS TYPE OF INTEREST % OF CLASS
- ------------------------------------- ---------------- ----------
<S> <C> <C>
FrontierVision Partners, General Partner Interest in Holdings (2) 99.90%
L.P. ("FVP")(1)
1777 South Harrison Street,
Suite P-200
Denver, Colorado 80210
FVP GP, L.P. (3) General Partner Interest in FVP 1.00%
1777 South Harrison Street,
Suite P-200
Denver, Colorado 80210
J.P. Morgan Investment Cor- Limited Partnership Interest in FVP 22.83%
poration
101 California Street, (Attributable Class A Limited Partner)
Suite 3800
San Francisco, CA 94111 Limited Partnership Interest in FVP GP 7.18%
1818 II Cable Corp. Limited Partnership Interest in FVP 23.63%
c/o Brown Brothers Harriman (Attributable Class A Limited Partner)
& Co.
59 Wall Street Limited Partnership Interest in FVP GP 7.18%
New York, NY 10005
Olympus Cable Corp. Limited Partnership Interest in FVP 14.77%
Metro Center--One Station (Attributable Class A Limited Partner)
Place
Stamford, CT 06920 Limited Partnership Interest in FVP GP 7.18%
First Union Capital Part- Limited Partnership Interest in FVP 15.05%
ners, Inc.
One First Union Center, 5th (Attributable Class A Limited Partner)
Floor
Charlotte, NC 28288 Limited Partnership Interest in FVP GP 4.31%
James C. Vaughn Stockholder of FrontierVision Inc. 66.67%
1777 South Harrison Street, Limited Partnership Interest in FVP GP 48.78%
Suite P-200
Denver, Colorado 80210
John S. Koo Stockholder of FrontierVision Inc. 33.33%
1777 South Harrison Street, Limited Partnership Interest in FVP GP 24.39%
Suite P-200
Denver, Colorado 80210
All other executive offi- 0.00%
cers and directors as a
group
</TABLE>
- ---------------
(1)FVP's limited partners (owning 99% of the partnership interests therein) are
various institutional investors and accredited investors.
(2)Holdings' sole limited partner (owning 0.1% of the partnership interests
therein) is FrontierVision Holdings, LLC.
(3)FVP GP's sole general partner (owning 1% of the partnership interests
therein) is FrontierVision Inc., which is owned by James C. Vaughn and John S.
Koo. FVP GP's limited partners (owning 99% of the partnership interests
therein) consist of various institutional investors, James C. Vaughn and John
S. Koo.
70
<PAGE>
THE PARTNERSHIP AGREEMENTS
The following is a summary of certain material terms of the Agreement of Lim-
ited Partnership of Holdings (the "Holdings Partnership Agreement"), the
Agreement of Limited Partnership of FVOP, as amended (the "FVOP Partnership
Agreement"), the First Amended and Restated Agreement of Limited Partnership
of FVP, as amended (the "FVP Partnership Agreement"), and the First Amended
and Restated Agreement of Limited Partnership of FVP GP, as amended (the "FVP
GP Partnership Agreement" and together with the Holdings Partnership Agree-
ment, the FVOP Partnership Agreement and FVP Partnership Agreement, the "Part-
nership Agreements"). The statements under this caption are summaries and do
not purport to be complete, and where reference is made to particular provi-
sions of the Partnership Agreements, such provisions, including the defini-
tions of certain terms, are incorporated by reference as a part of such summa-
ries or terms, which are qualified in their entirety by such reference. Com-
plete copies of the form of Partnership Agreements will be made available to
prospective investors upon request. All capitalized terms not otherwise de-
fined herein shall have the meanings ascribed to them in the respective Part-
nership Agreement.
HOLDINGS PARTNERSHIP AGREEMENT
Organization and Duration. Holdings was formed on August 29, 1997 as a Dela-
ware limited partnership to acquire, own and operate cable systems and to en-
gage in all activities necessary, desirable or incidental for such purpose.
Unless otherwise terminated in accordance with the terms of the Holdings Part-
nership Agreement, Holdings may exist until June 30, 2008.
Control of Operations. The Holdings Partnership Agreement provides that its
General Partner shall have the right and power to manage and control the busi-
ness and affairs of Holdings.
Capital Contributions. Under the Holdings Partnership Agreement, the partners
of Holdings have made certain capital contributions to Holdings. Each partner
of Holdings may, but is not required to, make additional capital contributions
to Holdings. The Holdings Partnership Agreement provides that, upon the admis-
sion of any additional limited partners or substituted limited partners to
Holdings, Holdings' Limited Partner shall withdraw from Holdings and shall be
entitled to receive the return of its capital contribution, without interest
or deduction.
Withdrawal or Removal of Partners. In general, no right is given to any part-
ner of Holdings to withdraw from Holdings. The General Partner of Holdings may
admit (i) additional limited partners, (ii) an assignee of the Limited Part-
ner's partnership interest in Holdings as a substituted limited partner of
Holdings and (iii) one or more additional general partners to Holdings.
Assignment of Partnership Interests. Under the Holdings Partnership Agreement,
the Limited Partner may assign all or any part of its partnership interest in
Holdings only with the consent of the General Partner. The Limited Partner has
no right to grant an assignee of its partnership interest in Holdings the
right to become a Substituted Limited Partner of Holdings. Following the ad-
mission of a new General Partner to Holdings, neither the General Partner nor
the Limited Partner may transfer its partnership interest in Holdings without
the prior written consent of the new General Partner.
FVOP PARTNERSHIP AGREEMENT
Organization and Duration. FVOP was formed on July 14, 1995 as a Delaware lim-
ited partnership to acquire, own and operate cable systems and to engage in
all activities necessary, desirable or incidental for such purpose. Unless
otherwise terminated in accordance with the terms of the FVOP Partnership
Agreement, FVOP may exist until June 30, 2008.
Control of Operations. The FVOP Partnership Agreement provides that its Gen-
eral Partner shall have the right and power to manage and control the business
and affairs of FVOP. Upon the occurrence and continuance of any Event of De-
fault under and as defined in the Senior Credit Facility, The Chase Manhattan
Bank (the "Administrative Agent") shall be entitled to be substituted (or to
have a designee of its choice substituted) as a new General Partner of FVOP.
Capital Contributions. Under the FVOP Partnership Agreement, the partners of
FVOP have made certain capital contributions to FVOP. Each partner of FVOP
may, but is not required to, make additional capital contributions to FVOP.
The FVOP Partnership Agreement provides that, upon the admission of any addi-
tional Limited Partners or Substituted Limited Partners to FVOP, FVOP's Lim-
ited Partner shall withdraw from FVOP and shall be entitled to receive the re-
turn of its capital contribution, without interest or deduction.
71
<PAGE>
Withdrawal or Removal of Partners. In general, no right is given to any partner
of FVOP to withdraw from FVOP. The General Partner of FVOP may admit (i) addi-
tional Limited Partners, (ii) an assignee of the Limited Partner's partnership
interest in FVOP as a Substituted Limited Partner of FVOP and (iii) one or more
additional general partners to FVOP. In addition, upon the occurrence and con-
tinuance of any Event of Default under and as defined in the Senior Credit Fa-
cility, the Administrative Agent shall be entitled to be substituted (or to
have a designee of its choice substituted) as a new General Partner.
Assignment of Partnership Interests. Under the FVOP Partnership Agreement, the
Limited Partner may assign all or any part of its partnership interest in FVOP
only with the consent of the General Partner of FVOP. The Limited Partner has
no right to grant an assignee of its partnership interest in FVOP the right to
become a Substituted Limited Partner of FVOP. Following the admission of a new
General Partner to FVOP, neither the General Partner of FVOP nor the Limited
Partner may transfer its partnership interest in FVOP without the prior written
consent of the new General Partner of FVOP.
FVP PARTNERSHIP AGREEMENT
Organization and Duration. FVP was formed on April 17, 1995 as a Delaware lim-
ited partnership to (i) acquire, invest in, own, finance, operate, improve,
develop, maintain, promote, sell, dispose of and otherwise exploit cable tele-
vision systems and properties and interests therein, (ii) conduct related busi-
ness activities, including telephony and other communications businesses and
activities that are related to FVP's cable television businesses and activi-
ties, directly or indirectly through other entities, alone or with others, and
(iii) do any and all acts necessary, desirable or incidental to the accomplish-
ment of such purpose. Unless otherwise terminated in accordance with the terms
of the FVP Partnership Agreement, FVP may exist until June 30, 2008.
Control of Operations. The FVP Partnership Agreement provides that its General
Partner has the right, power and discretion to operate, manage and control the
affairs and business of FVP and to make all decisions affecting FVP's affairs
and business, subject to the terms and provisions of the FVP Partnership Agree-
ment.
Advisory Committee. The FVP Partnership Agreement provides for the establish-
ment of an Advisory Committee to consult with and advise FVP GP with respect to
FVP's business and overall strategy. Under the FVP Partnership Agreement, the
Advisory Committee has broad authority to review and approve or disapprove mat-
ters relating to all material aspects of FVP's business. The failure of the
General Partner to follow any such direction of the Advisory Committee in con-
nection with such determinations shall constitute a material breach of the FVP
Partnership Agreement whereby FVP GP may be removed from FVP. As provided in
the FVP Partnership Agreement, the approval of seventy-five percent (75%) of
the members of the Advisory Committee that are entitled to vote on the matter
is required in order for FVOP to effect any cable television system acquisi-
tion. The Advisory Committee consists of four representatives of the Attribut-
able Class A Limited Partners of FVP and one representative of FVP GP. Subject
to certain conditions, each of the four Attributable Class A Limited Partners
of FVP listed in "Principal Security Holders" is entitled to designate (di-
rectly or indirectly) one of the four Attributable Class A Limited Partner rep-
resentatives on the Advisory Committee.
Voting Rights. Except as to matters for which consent or approval is expressly
required under the FVP Partnership Agreement, the Limited Partners of FVP have
no right to vote on any partnership matters.
Amendments and Modifications. In general, the FVP Partnership Agreement is sub-
ject to modification or amendment only with the written consent of the General
Partner of FVP and a majority in Interest of the Class A and Class B Limited
Partners of FVP.
Capitalization and Certain Distributions. In connection with its initial forma-
tion, FVP issued to its Limited Partners units consisting of limited partner-
ship interests in FVP, 12% Senior Subordinated Notes due 2008 and 14% Junior
Subordinated Notes due 2008. Pursuant to such transaction, and under the FVP
Partnership Agreement, each General Partner and Limited Partner of FVP has made
certain capital contributions and loans to FVP. The General Partner of FVP is
required under the FVP Partnership Agreement to make such Capital Commitments
to FVP as are necessary to maintain at all times a Capital Commitment equal to
not less than one percent (1%) of the total Capital Commitments of all Part-
ners. The Limited Partners of FVP are not required to make additional capital
contributions to FVP in excess of their respective Capital Commitments. Except
for provisions allowing for the return of capital to Partners upon dissolution
of FVP, the FVP Partnership Agreement provides that no Partner of FVP shall
have the right to withdraw or demand return of its capital contribution.
72
<PAGE>
FVP GP PARTNERSHIP AGREEMENT
Organization and Duration. FVP GP was formed on April 17, 1995 as a Delaware
limited partnership to (i) serve as general partner of FVP and (ii) do all
other lawful things necessary, desirable or incidental to the accomplishment of
such purposes. Unless otherwise terminated in accordance with the terms of the
FVP GP Partnership Agreement, FVP GP shall exist until the partners of FVP GP
may unanimously elect to carry on the business of FVP GP.
Control of Operations. The FVP GP Partnership Agreement provides that its Gen-
eral Partner has the right, power and discretion to operate, manage and control
the affairs and business of FVP GP and to make all decisions affecting FVP GP's
affairs and business, subject to certain customary exceptions specified in the
FVP GP Partnership Agreement.
Voting Rights. Except as to matters for which consent or approval is expressly
required under the FVP GP Partnership Agreement, the Limited Partners of FVP GP
have no right to vote on any partnership matters.
Amendments and Modifications. In general, the FVP GP Partnership Agreement is
subject to modification or amendment only with the written consent of the Gen-
eral Partner of FVP GP and a majority in Interest of the Class X and Class Z
Limited Partners of FVP GP and a majority in Interest of the Class Y Limited
Partners.
Capital Contributions. Under the FVP GP Partnership Agreement, the Partners of
FVP GP have made certain capital contributions to FVP GP. The General Partner
is required under the FVP GP Partnership Agreement to make such Capital Commit-
ments to FVP GP as are necessary to maintain at all times a Capital Commitment
equal to not less than one percent (1%) of the total Capital Commitments of all
Partners. The Limited Partners of FVP GP are not required to make additional
capital contributions to FVP GP. Except for provisions allowing for the return
of capital to Partners of FVP GP upon dissolution of FVP GP, the FVP GP Part-
nership Agreement provides that no Partner of FVP GP shall have the right to
withdraw or demand return of its capital contribution.
73
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
THE FVOP NOTES
The FVOP Notes are joint and several obligations of FVOP and Capital (collec-
tively the "FVOP Note Issuers"). The FVOP Notes are general unsecured senior
subordinated obligations of the FVOP Note Issuers, are limited to $200 million
aggregate principal amount and rank subordinate in right of payment to all ex-
isting and future Senior Indebtedness of FVOP. The FVOP Notes rank pari passu
in right of payment with all other senior subordinated indebtedness of the FVOP
Note Issuers. Capital has nominal assets and does not conduct any operations.
The FVOP Notes mature on October 15, 2006 and bear interest at 11% per annum
from the date of issuance or from the most recent interest payment date to
which interest has been paid or provided for. Interest is payable semiannually
on April 15 and October 15 of each year.
The FVOP Notes are not redeemable prior to October 15, 2001, except as set
forth below. The FVOP Notes are subject to redemption, at the option of the
FVOP Note Issuers, in whole or in part, at any time on or after October 15,
2001 and prior to maturity, at the following redemption prices (expressed as
percentages of principal amount) plus accrued and unpaid interest to but ex-
cluding the date fixed for redemption, if redeemed during the 12-month period
beginning on October 15 of the years indicated:
<TABLE>
<CAPTION>
----------
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 105.50%
2002 103.67
2003 101.83
2004 and thereafter 100.00
</TABLE>
In addition, prior to October 15, 1999, the FVOP Note Issuers may redeem up to
35% of the principal amount of the FVOP Notes with the net cash proceeds re-
ceived by FVOP from one or more Public Equity Offerings or Strategic Equity In-
vestments, at a redemption price (expressed as a percentage of the principal
amount) of 111% of the principal amount thereof, plus accrued and unpaid inter-
est to the date fixed for redemption; provided, however, that at least 65% in
aggregate principal amount of the FVOP Notes originally issued remains out-
standing immediately after any such redemption (excluding any FVOP Notes owned
by the FVOP Note Issuers or any of their Affiliates).
Upon a Change of Control, the FVOP Note Issuers will be required to make an of-
fer to purchase all outstanding FVOP Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest to the purchase date.
The FVOP Notes Indenture contains the following covenants which limit the abil-
ity of FVOP and certain of its Subsidiaries to incur indebtedness or make dis-
tributions to Holdings. Capitalized terms used below and not otherwise de-
scribed herein have the respective meanings ascribed to such terms in the FVOP
Notes Indenture, a copy of which will be made available to prospective invest-
ors upon request.
Limitation on Indebtedness. The FVOP Notes Indenture provides that FVOP will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness) or issue any Disquali-
fied Equity Interests except for Permitted Indebtedness; provided, however,
that FVOP or any Restricted Subsidiary may Incur Indebtedness and FVOP or any
Restricted Subsidiary may issue Disqualified Equity Interests if, at the time
of and immediately after giving pro forma effect to such Incurrence of Indebt-
edness or issuance of Disqualified Equity Interests and the application of the
proceeds therefrom, the Debt to Operating Cash Flow Ratio would be less than or
equal to (i) 7.0 to 1.0 if the date of such Incurrence is on or before December
31, 1997 and (ii) 6.75 to 1.0 thereafter.
The foregoing limitations will not apply to the Incurrence of any of the fol-
lowing (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(a) Indebtedness under the FVOP Notes and the FVOP Notes Indenture;
(b) Indebtedness and Disqualified Equity Interests of FVOP and the Re-
stricted Subsidiaries outstanding on the Issue Date;
(c) Indebtedness under the Senior Credit Facility in an aggregate principal
amount at any one time outstanding not to exceed the sum of (a) $265.0
million, which amount shall be reduced by (x) any permanent reduction of
commit-
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<PAGE>
ments thereunder and (y) any other repayment accompanied by a permanent
reduction of commitments thereunder (other than in connection with any
refinancing thereof) plus (B) any amounts outstanding under the Senior
Credit Facility that utilizes subparagraph (i) below;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and held by FVOP
or any Wholly Owned Restricted Subsidiary and (y) Indebtedness of FVOP
owed to and held by any Wholly Owned Restricted Subsidiary which is
unsecured and subordinated in right of payment to the payment and per-
formance of the Issuers' obligations under any Senior Indebtedness, the
FVOP Notes Indenture and the FVOP Notes; provided, however, that an
Incurrence of Indebtedness that is not permitted by this clause (d)
shall be deemed to have occurred upon (i) any sale or other disposition
of any Indebtedness of FVOP or a Wholly Owned Restricted Subsidiary re-
ferred to in this clause (d) to a Person (other than FVOP or a Wholly
Owned Restricted Subsidiary), (ii) any sale or other disposition of Eq-
uity Interests of a Wholly Owned Restricted Subsidiary which holds In-
debtedness of the Company or another Wholly Owned Restricted Subsidiary
such that such Wholly Owned Restricted Subsidiary ceases to be a Wholly
Owned Restricted Subsidiary or (iii) designation of a Wholly Owned Re-
stricted Subsidiary which holds Indebtedness of FVOP as an Unrestricted
Subsidiary;
(e) guarantees by any Restricted Subsidiary of Indebtedness of FVOP;
(f) Interest Rate Protection Obligations of FVOP or any Restricted Subsidi-
ary relating to Indebtedness of FVOP or such Restricted Subsidiary, as
the case may be (which Indebtedness (i) bears interest at fluctuating
interest rates and (ii) is otherwise permitted to be Incurred under
this covenant); provided, however, that the notional principal amount
of such Interest Rate Protection Obligations does not exceed the prin-
cipal amount of the Indebtedness to which such Interest Rate Protection
Obligations relate;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of FVOP
or any Restricted Subsidiary which do not exceed $5.0 million in the
aggregate at any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests of FVOP or any Restricted
Subsidiary to the extent representing a replacement, renewal, refinanc-
ing or extension (collectively, a "refinancing") of outstanding Indebt-
edness or Disqualified Equity Interests of FVOP or any Restricted Sub-
sidiary Incurred in compliance with the Debt to Operating Cash Flow Ra-
tio of the first paragraph of this covenant or clause (a) or (b) of
this paragraph of this covenant; provided, however, that (i) Indebted-
ness or Disqualified Equity Interests of the Company may not be refi-
nanced under this clause (h) with Indebtedness or Disqualified Equity
Interests of any Restricted Subsidiary, (ii) any such refinancing shall
not exceed the sum of the principal amount (or, if such Indebtedness or
Disqualified Equity Interests provide for a lesser amount to be due and
payable upon a declaration of acceleration thereof at the time of such
refinancing, an amount no greater than such lesser amount) of the In-
debtedness or Disqualified Equity Interests being refinanced plus the
amount of accrued interest or dividends thereon and the amount of any
reasonably determined prepayment premium necessary to accomplish such
refinancing and such reasonable fees and expenses incurred in connec-
tion therewith, (iii) Indebtedness representing a refinancing of In-
debtedness other than Senior Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being refinanced, and (iv) Indebtedness
that is pari passu with the Notes may only be refinanced with Indebted-
ness that is made pari passu with or subordinate in right of payment to
the Notes and Subordinated Indebtedness or Disqualified Equity Inter-
ests may only be refinanced with Subordinated Indebtedness or Disquali-
fied Equity Interests; and
(i) in addition to the items referred to in clauses (a) through (h) above,
Indebtedness of FVOP (including any Indebtedness under the Senior
Credit Facility that utilizes this subparagraph (i)) having an aggre-
gate principal amount not to exceed $20.0 million at any time outstand-
ing.
Limitation on Restricted Payments. The FVOP Notes Indenture provides that FVOP
will not, and will not permit any Restricted Subsidiary to, directly or indi-
rectly,
(i) declare or pay any dividend or any other distribution on any Equity In-
terests of FVOP or any Restricted Subsidiary or make any payment or
distribution to the direct or indirect holders (in their capacities as
such) of Equity Interests of FVOP or any Restricted Subsidiary (other
than payments or distributions made to FVOP or a Wholly Owned Re-
stricted Subsidiary and dividends or distributions payable solely in
Qualified Equity Interests of the Company or in options, warrants or
other rights to purchase Qualified Equity Interests of FVOP);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of FVOP or any Restricted Subsidiary (other than any such
Equity Interests owned by FVOP or a Wholly Owned Restricted Subsidi-
ary);
75
<PAGE>
(iii) purchase, redeem, defease or retire for value more than one year
prior to the stated maturity thereof any Subordinated Indebtedness
(other than any Subordinated Indebtedness held by a Wholly Owned Re-
stricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments) in any Person
(other than in FVOP, a Wholly Owned Restricted Subsidiary or a Person
that becomes a Wholly Owned Restricted Subsidiary, or is merged with
or into or consolidated with FVOP or a Wholly Owned Restricted Subsid-
iary (provided FVOP or a Wholly Owned Restricted Subsidiary is the
survivor), as a result of or in connection with such Investment)
(such payments or any other actions (other than Permitted Investments) de-
scribed in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"), un-
less
(a) no Default or Event of Default shall have occurred and be continuing at
the time or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, FVOP would
be able to Incur $1.00 of Indebtedness (other than Permitted Indebted-
ness) under the Debt to Operating Cash Flow Ratio of the first para-
graph of "--Limitation on Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment, the aggre-
gate amount of all Restricted Payments declared or made on or after the
Issue Date does not exceed an amount equal to the sum of (1) the dif-
ference between (x) the Cumulative Available Cash Flow determined at
the time of such Restricted Payment and (y) 140% of cumulative Consoli-
dated Interest Expense of FVOP determined for the period commencing on
the Issue Date and ending on the last day of the latest fiscal quarter
for which consolidated financial statements of FVOP are available pre-
ceding the date of such Restricted Payment, plus (2) the aggregate net
proceeds (with the value of any non-cash proceeds to be the Fair Market
Value thereof as determined by an Independent Financial Advisor) re-
ceived by FVOP either (x) as capital contributions to FVOP after the
Issue Date or (y) from the issue and sale (other than to a Restricted
Subsidiary) of its Qualified Equity Interests after the Issue Date (ex-
cluding the net proceeds from any issuance and sale of Qualified Equity
Interests financed, directly or indirectly, using funds borrowed from
FVOP or any Restricted Subsidiary until and to the extent such borrow-
ing is repaid), plus (3) the principal amount (or accrued or accreted
amount, if less) of any Indebtedness of FVOP or any Restricted Subsidi-
ary Incurred after the Issue Date which has been converted into or ex-
changed for Qualified Equity Interests of FVOP, plus (4) in the case of
the disposition or repayment of any Investment constituting a Re-
stricted Payment made after the Issue Date, an amount (to the extent
not included in the computation of Cumulative Available Cash Flow)
equal to the lesser of: (i) the return of capital with respect to such
Investment and (ii) the amount of such Investment which was treated as
a Restricted Payment, in either case, less the cost of the disposition
of such Investment, plus (5) FVOP's proportionate interest in the
lesser of the Fair Market Value or the net worth of any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date not to exceed in any case the Designation Amount with
respect to such Restricted Subsidiary upon its Designation, minus (6)
the Designation Amount with respect to any Subsidiary of FVOP which has
been designated as an Unrestricted Subsidiary after the Issue Date.
The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of
the FVOP Indenture, (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the retirement of any Equity Interests of FVOP in
exchange for, or out of the net cash proceeds of the substantially concurrent
issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity
Interests of FVOP; provided, however, that any such net cash proceeds and the
value of any Equity Interests issued in exchange for such retired Equity In-
terests are excluded from clause (c)(2) of the preceding paragraph (and were
not included therein at any time), (iii) so long as no Default or Event of De-
fault shall have occurred and be continuing, the purchase, redemption, retire-
ment or other acquisition of Subordinated Indebtedness made in exchange for,
or out of the net cash proceeds of, a substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of (x) Qualified Equity Interests of
FVOP; provided, however, that any such net cash proceeds and the value of any
Equity Interests issued in exchange for Subordinated Indebtedness are excluded
from clauses (c)(2) and (c)(3) of the preceding paragraph (and were not in-
cluded therein at any time) or (y) other Subordinated Indebtedness having no
stated maturity for the payment of principal thereof prior to the final stated
maturity of the FVOP Notes, (iv) the payment of any dividend or distribution
on Equity Interests of FVOP or any Restricted Subsidiary to the extent neces-
sary to permit the direct or indirect beneficial owners of such Equity Inter-
ests to pay federal and state income tax liabilities arising from income of
FVOP or such Restricted Subsidiary and attributable to them solely as a result
of FVOP or such Restricted Subsidiary (and any intermediate entity through
which such holder owns such Equity Interests) being a partnership or similar
pass-through entity for federal income tax purposes, (v) so long as no
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<PAGE>
Default or Event of Default has occurred and is continuing, any Investment made
out of the net cash proceeds of the substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of Qualified Equity Interests of FVOP;
provided, however, that any such net cash proceeds are excluded from clause
(c)(2) of the preceding paragraph (and were not included therein at any time)
or (vi) the purchase, redemption or other acquisition, cancellation or retire-
ment for value of Equity Interests, or options, warrants, equity appreciation
rights or other rights to purchase or acquire Equity Interests, of FVOP or any
Restricted Subsidiary, or similar securities, held by officers or employees or
former officers or employees of FVOP or any Restricted Subsidiary (or their es-
tates or beneficiaries under their estates), upon death, disability, retirement
or termination of employment not to exceed $1.0 million in any calendar year.
The Indenture governing the terms of the FVOP Notes contains certain other cov-
enants that, among other things, limit the ability of each FVOP Note Issuer and
certain of its Subsidiaries to create certain Liens, enter into certain trans-
actions with Affiliates, permit dividend or other payment restrictions to apply
to certain Subsidiaries or consummate certain merger, consolidation or similar
transactions. In addition, in certain circumstances, the FVOP Note Issuers are
required to offer to purchase the FVOP Notes at 100% of the principal amount
thereof with the net proceeds of certain asset sales. These covenants are sub-
ject to a number of significant exceptions and qualifications.
THE SENIOR CREDIT FACILITY
On April 9, 1996, FVOP entered into the $265.0 million Amended and Restated
Credit Agreement with The Chase Manhattan Bank, as Administrative Agent, J.P.
Morgan Securities Inc., as Syndication Agent, CIBC Inc., as Managing Agent, and
the other lenders signatory thereto. FVOP used these proceeds to refinance an
existing $130.0 million senior credit facility, to finance the purchase of the
Cox systems and for general business purposes. As of June 30, 1997, borrowings
under the Senior Credit Facility totaled approximately $220.5 million.
The Senior Credit Facility includes a $75.0 million, 8.25-year reducing Revolv-
ing Credit Facility, a $100.0 million, 8.25-year Facility A Term Loan and a
$90.0 million, 9.25-year Facility B Term Loan. FVOP had outstanding borrowings
of $30.5 million as of June 30, 1997 under the Revolving Credit Facility bear-
ing interest at varying rates, based upon different borrowing options and fi-
nancial ratios, and maturing on June 30, 2004. The weighted average interest
rate at June 30, 1997 on the outstanding borrowings under the Revolving Credit
Facility was approximately 8.19%. FVOP has outstanding borrowings of $100.0
million under the Facility A Term Loan bearing interest at varying rates, based
upon different borrowing options and financial ratios, and maturing on June 30,
2004. The weighted average interest rate at June 30, 1997 on the outstanding
borrowings under the Facility A Term Loan was approximately 8.19%. FVOP has
outstanding borrowings of $90.0 million under the Facility B Term Loan bearing
interest at varying rates, based upon different borrowing options and financial
ratios, and maturing on June 30, 2005. The weighted average interest rate at
June 30, 1997 on the outstanding borrowings under the Facility B Term Loan was
approximately 8.94%. FVOP has entered into interest rate protection agreements
to hedge its underlying Treasury rate exposure for $170 million of borrowings
through November 1999.
In general, the Senior Credit Facility requires FVOP to use the proceeds from
any equity or debt issuance or any cable system disposition to reduce indebted-
ness for borrowings under the Senior Credit Facility and to reduce permanently
commitments thereunder unless FVOP either uses such proceeds to close a permit-
ted acquisition of cable systems or, if such closing does not occur within five
days of the closing of such equity or debt issuance or system disposition,
holds such proceeds in a special account pending a permitted reinvestment in a
subsequent acquisition of cable systems approved by the Senior Credit Facility
lenders within 180 days of such closing. However, in the event of a continuing
event of default under the Senior Credit Facility, the lenders thereunder are
not required to release such proceeds from such account for use for reinvest-
ment in subsequent acquisitions. The purchase of the Acquisition Systems from
Cablevision, TCI and Blue Ridge are permitted acquisitions under the Senior
Credit Facility, subject to customary deliveries by FVOP to the lenders there-
under. The purchase of the Cox Central Ohio Systems is expected to be financed
with borrowings under the New Credit Facility. In addition, the lenders under
the Senior Credit Facility have agreed that the contribution of the net pro-
ceeds of the Offering by Holdings to FVOP will not result in a permanent reduc-
tion of the commitments under the Senior Credit Facility.
The Senior Credit Facility is secured by a pledge of all limited and general
partnership interests in FVOP and in any subsidiaries of FVOP and a first pri-
ority lien on all the tangible and intangible assets of FVOP and each of its
subsidiaries. In addition, in the event of the occurrence and continuance of an
event of default under the Senior Credit Facility, the Administrative Agent is
entitled to replace the general partner of FVOP with its designee. See "The
Partnership Agreements--FVOP Partnership Agreement." Among other events, an
event of default under the Senior Credit Facility will occur
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<PAGE>
if either James C. Vaughn or John S. Koo for any reason cease to be actively
involved in the day-to-day management of the Company and are not replaced with
persons acceptable to the lenders thereunder.
THE NEW CREDIT FACILITY
On September 15, 1997, FVOP received a commitment from its principal lenders
under the Senior Credit Facility to enter into the New Credit Facility, under
which such lenders will extend up to $650.0 million aggregate principal amount
of revolving credit and term loan financing to FVOP. Under the commitment let-
ter for the New Credit Facility, The Chase Manhattan Bank and Morgan Guaranty
Trust Company of New York have committed, subject to various terms and condi-
tions, to provide $390.0 million and $260.0 million, respectively, in senior
bank financing to FVOP. It is expected that these initial lenders will arrange,
directly or through their affiliates, for a syndicate of other banks that will
participate as lenders under the New Credit Facility. The Chase Manhattan Bank
will serve as Administrative Agent, Morgan Guaranty Trust Company of New York
will serve as Syndication Agent, and Chase Securities Inc. and J.P. Morgan Se-
curities Inc. will serve as Co-Arrangers of the New Credit Facility.
The New Credit Facility will consist of a $200.0 million, 8-year New Revolving
Credit Facility, a $250.0 million, 8-year Tranche A Term Loan Facility and a
$200.0 million, 8.5-year Tranche B Term Loan Facility. The Tranche A Term Loan
Facility and the Tranche B Term Loan Facility must be fully drawn as a condi-
tion to the availability of borrowings under the New Revolving Credit Facility.
The proceeds from the New Credit Facility will be used, in part, to finance the
acquisition of the Cox Central Ohio Systems, as well as to refinance and re-
place the Senior Credit Facility and for other general corporate purposes. In
addition, the commitment letter for the New Credit Facility contemplates that
the lenders may make available, in their sole discretion, following a request
by FVOP, up to a $250.0 million Incremental Term Loan Facility to fund future
acquisitions. No lender will be required to have committed to fund the Incre-
mental Term Loan Facility at the closing of the New Credit Facility. If the
lenders determine to fund the Incremental Term Loan Facility, the final matu-
rity of such facility will be the same as the maturity of the Tranche B Term
Loan Facility.
In general, the New Credit Facility will require FVOP to make mandatory prepay-
ments of amounts outstanding under the New Credit Facility, beginning in 2002,
based on a percentage of available excess cash flow. In addition, the New
Credit Facility will require FVOP to use the proceeds from any cable system
disposition (subject to certain qualifications) to reduce indebtedness for
borrowings under the New Credit Facility. The New Credit Facility will provide
that FVOP may engage in cable system dispositions of up to $150.0 million in
the aggregate without the need to permanently reduce the commitments under the
New Credit Facility if the net proceeds of such dispositions are either applied
to temporarily reduce the New Revolving Credit Facility or held in a special
account pending permitted reinvestment in subsequent acquisitions of cable sys-
tems. The New Credit Facility will also permit FVOP to make acquisitions of up
to $150.0 million in the aggregate (as such amount may be increased by the pro-
ceeds of dispositions being held for reinvestment). The New Credit Facility
will also contain customary financial and other covenants, which are expected
to include limitations on the ability of Holdings and its subsidiaries to incur
additional indebtedness. It is also expected that the New Credit Facility will
permit FVOP to make distributions to Holdings in order to make regularly sched-
uled interest payments (commencing March 15, 2002) and the payment of principal
at the stated maturity date of the Notes unless a default or an event of de-
fault has occurred under the New Credit Facility.
Holdings, as the general partner of FVOP, will guaranty the indebtedness under
the New Credit Facility on a limited recourse basis. The New Credit Facility
also will be secured by a pledge of all limited and general partnership inter-
ests in FVOP and a first priority lien on all the assets of FVOP and its
subsidiaries.
The Company expects FVOP to enter into the New Credit Facility in the fourth
quarter of 1997. The proceeds from the New Credit Facility will be used, in
part, to finance the acquisition of the Cox Central Ohio Systems, as well as to
refinance and replace the Senior Credit Facility. The New Credit Facility is
subject to numerous conditions, including the execution and delivery of defini-
tive documentation by no later than December 12, 1997. There can be no assur-
ance that consummation of the New Credit Facility will occur.
THE UVC NOTE
In connection with the Company's acquisition of systems from UVC, FVOP issued a
subordinated promissory note to UVC in November 1995 in the original principal
amount of $7.2 million. The UVC Note bears interest at 9% for the first three
years. At the end of each subsequent year, the annual interest rate increases
2% per year. Under the terms of the UVC Note, FVOP may issue additional subor-
dinated promissory notes rather than making cash interest payments. In this
event,
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<PAGE>
the subordinated note bears interest equal to the annual interest of the origi-
nal promissory note plus 2.5% for the first three years and 3% for each subse-
quent year. In addition, if FVOP's leverage ratio exceeds certain amounts, the
interest rate increases by 2%. Under its terms, FVOP can prepay the UVC Note at
any time.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Issuers on September 19, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Old Notes with (i) qualified institutional buyers in
reliance on Rule 144A under the Securities Act and (ii) qualified buyers out-
side the United States in reliance upon Regulation S under the Securities Act.
As a condition of the Purchase Agreement, the Issuers entered into the Regis-
tration Rights Agreement with the Initial Purchasers pursuant to which the Is-
suers have agreed, for the benefit of the holders of the Old Notes, at the Is-
suers' cost, to file a registration statement for the Exchange Offer (the "Ex-
change Offer Registration Statement") (of which this Prospectus is a part)
within 60 days after the date of the original issue of the Old Notes with the
Commission with respect to the Exchange Offer for the Exchange Notes. Upon the
Exchange Offer Registration Statement being declared effective, the Issuers
will offer the Exchange Notes in exchange for surrender of the Old Notes. For
each Old Note surrendered to the Issuers pursuant to the Exchange Offer, the
holder of such Old Note will receive an Exchange Note having an original Prin-
cipal Amount at Maturity equal to that of the surrendered Old Note.
Based upon interpretations by the staff of the Commission set forth in certain
no-action letters to third parties, the Issuers believe that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes will in general
be freely tradeable after the Exchange Offer without compliance with the regis-
tration and prospectus delivery requirements of the Securities Act. However,
any purchaser of Old Notes who is an "affiliate" of the Issuers (within the
meaning of Rule 405 under the Securities Act), who does not acquire the Ex-
change Notes in the ordinary course of business or who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
could not rely on the position of the staff of the Commission enunciated in the
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 any resale transaction. Failure to comply with such re-
quirements in such instance may result in such holder incurring liability under
the Securities Act for which the holder is not indemnified by the Issuers.
As contemplated by these no-action letters and the Registration Rights Agree-
ment, each holder accepting the Exchange Offer is required to represent to the
Issuers in the Letter of Transmittal that (i) the Exchange Notes are to be ac-
quired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person is not engaging in the distribution of the Ex-
change Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the Ex-
change Notes, (iv) neither the holder nor any such other person is an "affili-
ate" of the Issuers within the meaning of Rule 405 under the Securities Act,
and (v) the holder or any such other person acknowledges that if such holder or
any other person participates in the Exchange Offer for the purpose of distrib-
uting the Exchange Notes it must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of
the Exchange Notes and cannot rely on those no-action letters. As indicated
above, each Participating Broker-Dealer that receives an Exchange Note for its
own account in exchange for Old Notes must acknowledge that it (i) acquired the
Old Notes for its own account as a result of market-making activities or other
trading activities, (ii) has not entered into any arrangement or understanding
with the Issuers or any "affiliate" of the Issuers (within the meaning of Rule
405 under the Securities Act) to distribute the Exchange Notes to be received
in the Exchange Offer and (iii) will deliver a prospectus meeting the require-
ments of the Securities Act in connection with any resale of such Exchange
Notes. For a description of the procedures for resales by Participating Broker-
Dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of the
staff of the Commission do not permit the Issuers to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is commenced and not con-
summated within 210 days of the date of the original issuance of the Old Notes,
the Issuers will (i) file the Shelf Registration Statement covering resales of
the Old Notes; (ii) use their reasonable best efforts to cause the Shelf Regis-
tration Statement to be declared effective under the Securities Act on or prior
to the 120th day after the filing thereof with the Commission and (iii) use
their reasonable best efforts to keep effective the Shelf Registration State-
ment until the earlier of (i) two years after the date of the original issuance
of the Old Notes or (ii) such time as all of the applicable Old Notes have been
sold thereunder. The Issuers will, in the event of the filing of the Shelf Reg-
istration Statement, provide to each applicable holder of the Old Notes copies
of the prospectus which is a part of the Shelf Registration Statement, notify
each such holder when the Shelf Registration Statement has become effective and
take certain other actions as are required to permit unrestricted resale of the
Old Notes. A holder of the Old Notes that sells such Old Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a sell-
ing security holder in the related prospectus and to deliver a
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<PAGE>
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are applica-
ble to such a holder (including certain indemnification obligations). In addi-
tion, each holder of the Old Notes will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide com-
ments on the Shelf Registration Statement within the time periods set forth in
the Registration Rights Agreement in order to have their Old Notes included in
the Shelf Registration Statement and to benefit from the provisions set forth
in the following paragraph.
The Registration Rights Agreement provides that the Issuers will file an Ex-
change Offer Registration Statement with the Commission on or prior to 60 days
after the date of the original issuance of the Old Notes (the "Issue Date"). In
the event that (i) the Exchange Offer Registration Statement is not filed with
the Commission on or prior to the 60th day following this Issue Date, (ii) the
Exchange Offer Registration Statement is not declared effective by the Commis-
sion on or prior to the 180th day following the Issue Date, (iii) the Exchange
Offer is not consummated on or prior to the 210th day following the Issue Date
or (iv) a Shelf Registration Statement with respect to resale of the Old Notes
(if required) is not declared effective within the period specified in the Reg-
istration Rights Agreement (each such event referred to in clauses (i) through
(iv) above a "Registration Default"), the sole remedy available to holders of
the Old Notes will be the immediate assessment of cash interest on the Old
Notes (whether or not cash interest is then payable on the Old Notes under the
Indenture) ("Additional Interest") as follows: the per annum interest rate on
the Old Notes will increase by 25 basis points and the per annum interest rate
will increase by an additional 25 basis for each subsequent 90-day period dur-
ing which the Registration Default remains uncured, up to a maximum amount of
additional interest of 100 basis points per annum. All Additional Interest will
be payable to holders of the Old Notes in cash on each March 15 and September
15, commencing with the first such date occurring after any such Additional In-
terest commences to accrue, until such Registration Default is cured. After the
date on which such Registration Default is cured, the interest rate on the Old
Notes will revert to 11 7/8% per annum.
Holders of Old Notes will be required to make certain representations to the
Issuers (as described in the Registration Rights Agreement) in order to partic-
ipate in the Exchange Offer and will be required to deliver information to be
used in connection with the Shelf Registration Statement, if required, and to
provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its en-
tirety by, all the provisions of the Registration Rights Agreement, a copy of
which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes who
were eligible to participate in the Exchange Offer but who did not tender their
Old Notes will not have any further registration rights and such Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal, the Issuers will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuers will issue $1,000 original Principal Amount at
Maturity of Exchange Notes in exchange for each $1,000 original Principal
Amount at Maturity of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange Of-
fer. However, Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms of
the Old Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement, including the provisions pro-
viding for an increase in the interest rate on the Old Notes in certain circum-
stances relating to the timing of the Exchange Offer, all of which rights will
terminate when the Exchange Offer is terminated. The Exchange Notes will evi-
dence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
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As of the date of this Prospectus, $237,650,000 aggregate original Principal
Amount at Maturity of Old Notes were outstanding. The Issuers have fixed the
close of business on October , 1997 as the record date for the Exchange Offer
for purposes of determining the persons to whom this Prospectus and the Letter
of Transmittal will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under the
Delaware General Corporation Law or the Indenture in connection with the Ex-
change Offer. The Issuers intend to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and regula-
tions of the Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Old Notes when,
as and if the Issuers have given oral or written notice thereof to the Ex-
change Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant
to the Exchange Offer. The Issuers will pay all charges and expenses, other
than transfer taxes in certain circumstances, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on Octo-
ber , 1997, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the regis-
tered holders an announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date.
The Issuers reserve the right, in their sole discretion, (i) to delay ac-
cepting any Old Notes, to extend the Exchange Offer or to terminate the Ex-
change Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal or transmit an Agent's Message in
connection with a book-entry transfer, and mail or otherwise deliver such Let-
ter of Transmittal or such facsimile, or Agent's Message, together with the
Old Notes and any other required documents, to the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent prior
to the Expiration Date along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes into the Exchange Agent's account at The Depository Trust Company
("DTC" or 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 guaran-
teed delivery procedures described below. To be tendered effectively, the Old
Notes, or Book-Entry Confirmation, as the case may be, the Letter of Transmit-
tal and other required documents must be received by the Exchange Agent at the
address set forth below under "--Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO THE BOOK ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURE DOES NOT CONSTITUTE DELIV-
ERY TO THE EXCHANGE AGENT.
DTC has authorized DTC participants that hold Old Notes on behalf of benefi-
cial owners of Old Notes through DTC to tender their Old Notes as if they were
holders. To effect a tender of Old Notes, DTC participants should either (i)
complete
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and sign the Letter of Transmittal (or a manually signed facsimile thereof),
have the signature thereon guaranteed if required by the instructions to the
Letter of Transmittal, and mail or deliver the Letter of Transmittal (or such
manually signed facsimile) to the Exchange Agent pursuant to the procedure set
forth in "Procedures for Tendering" or (ii) transmit their acceptance to DTC
through the DTC Automated Tender Offer Program ("ATOP") for which the transac-
tion will be eligible and follow the procedure for book-entry transfer set
forth in "--Book-Entry Transfer."
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Issuers the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will consti-
tute agreement between such holder and the Issuers in accordance with the terms
and subject to the conditions set forth herein and in the Letter of Transmittal
or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL OR AGENT'S MES-
SAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION
AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY
WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EX-
PIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COM-
PANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to ten-
der should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instructions to Regis-
tered Holder and/or Book-Entry Transfer Facility Participant from Beneficial
Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. 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 guarantee must be by a member firm of the Medallion System (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or ac-
companied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the Is-
suers of their authority to so act must be submitted with the Letter of Trans-
mittal.
All questions as to the validity, form, eligibility (including time of re-
ceipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuers' accept-
ance of which would, in the opinion of counsel for the Issuers, be unlawful.
The Issuers also reserve the right in their sole discretion to waive any de-
fects, irregularities or conditions of tender as to particular Old Notes. The
Issuers' interpretation of the terms and conditions of the Exchange Offer (in-
cluding the instructions in the Letter of Transmittal) will be final and bind-
ing on all parties. Unless waived, any defects or irregularities in connection
with tenders of Old Notes must be cured within such time as the Issuers shall
determine. Although the Issuers intend to notify holders of defects or irregu-
larities with respect to tenders of Old Notes, neither the Issuers, the Ex-
change Agent nor any other person shall incur any liability for failure to give
such notification. Tenders of Old Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Old Note accepted for exchange, the holder of such Old Note will re-
ceive an Exchange Note having a Principal Amount at Maturity equal to that of
the surrendered Old Note. For purposes of the Exchange Offer, the Issuers shall
be deemed to have accepted properly tendered Old Notes for exchange when, as
and if the Issuers have given oral or written notice thereof to the Exchange
Agent.
In all cases, the issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely re-
ceipt 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, a properly completed and duly executed Letter
of Transmittal or Agent's Message and all other required documents. If any ten-
dered Old Notes are not accepted for any reason set forth in the terms and con-
ditions of the Exchange Offer, 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 transfer 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 Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish a new account or utilize an existing account
with respect to the Old Notes at DTC promptly after the date of this Prospec-
tus, and any financial institution that is a participant in DTC and whose name
appears on a security position listing as the owner of Old Notes may make a
book-entry tender of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although tender of Old Notes may be effected through book-
entry transfer into the Exchange Agent's account at DTC, the Letter of Trans-
mittal (or a manually signed facsimile thereof), properly completed and validly
executed, with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must, in any
case, be received by the Exchange Agent at its address set forth below under
the caption "Exchange Agent" on or prior to the Expiration Date, or the guaran-
teed delivery procedures described below must be complied with. The confirma-
tion of book-entry transfer of Old Notes into the Exchange Agent's account at
DTC as described above is referred to herein as a "Book-Entry Confirmation."
Delivery of documents to DTC in accordance with DTC's procedures does not con-
stitute delivery to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC to, and received
by, the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from the participant in
DTC tendering the Old Notes stating (i) the aggregate principal amount of Old
Notes which have been tendered by such participant, (ii) that such participant
has received and agrees to be bound by the terms of the Letter of Transmittal
and (iii) that the Issuers may enforce such agreement against the participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not im-
mediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through a firm which is a member of a registered na-
tional securities exchange or of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such El-
igible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate num-
ber(s) of such Old Notes and the principal amount of Old Notes ten-
dered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the Expi-
ration Date, the Letter of Transmittal (or facsimile thereof) (or in
the case of a book-entry transfer, an Agent's Message) together with
the certificate(s) representing the Old Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and any other documents required by
the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) the certificate(s) representing all tendered Old Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Fa-
cility), together with a
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Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and all other documents required
by the Letter of Transmittal are received by the Exchange Agent upon five
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date; other-
wise such tenders are irrevocable.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i) spec-
ify the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the cer-
tificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the ac-
count at the Book-Entry Transfer Facility to be credited), (iii) be signed by
the holder in the same manner as the original signature on the Letter of Trans-
mittal by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers, whose de-
termination shall be final and binding on all parties. Any Old Notes so with-
drawn will be deemed not to have been validly tendered for purposes of the Ex-
change Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to such holder as soon as practicable after with-
drawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures de-
scribed above under "--Procedures for Tendering" at any time prior to the Expi-
ration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not be
required to accept for exchange, or exchange Exchange Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the ac-
ceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or any mate-
rial adverse development has occurred in any existing action or pro-
ceeding with respect to the Issuers or any of their subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Issuers, might materially impair the ability of the Is-
suers to proceed with the Exchange Offer or materially impair the con-
templated benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the Is-
suers shall, in their sole discretion, deem necessary for the consumma-
tion of the Exchange Offer as contemplated hereby.
If the Issuers determine in their sole discretion that any of the conditions
are not satisfied, the Issuers may (i) refuse to accept any Old Notes and re-
turn all tendered Old Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Old Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Old Notes
(see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
EXCHANGE AGENT
U.S. Bank National Association d/b/a Colorado National Bank has been appointed
as Exchange Agent for the Exchange Offer. Questions and requests for assis-
tance, requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed
to the Exchange Agent addressed as follows:
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By Mail: Overnight Courier:
Colorado National Bank Colorado National Bank
950 17th Street, Suite 650 950 17th Street, Suite 650
Denver, Colorado 80202 Denver, Colorado 80202
Attention: Gretchen L. Middents Attention: Gretchen L. Middents
By Hand: Facsimile Transmission:
Colorado National Bank (303) 585-6865
950 17th Street, Suite 650
Denver, Colorado 80202 Confirm by Telephone:
Attention: Gretchen L. Middents (303) 585-4596
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telecopy, telephone or in person by officers and regular em-
ployees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the Ex-
change Offer and will not make any payments to brokers, dealers, or others so-
liciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reim-
burse it for its reasonable out-of pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuers. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Issuers' accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Issuers. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the Ex-
change Offer will remain restricted securities. Accordingly, such Old Notes may
be resold only (i) to the Issuers (upon redemption thereof or otherwise), (ii)
so long as the Old Notes are eligible for resale pursuant to Rule 144A, to a
person inside the United States whom the seller reasonably believes is a quali-
fied institutional buyer within the meaning of Rule 144A under the Securities
Act in a transaction meeting the requirements of Rule 144A, in accordance with
Rule 144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Issuers), (iii) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act, or (iv) pursuant to an effective registration statement un-
der the Securities Act, in each case in accordance with any applicable securi-
ties laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based upon interpretations by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Issuers believe that a holder or other person who receives Ex-
change Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Issuers within the meaning of Rule
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405 under the Securities Act) who receives Exchange Notes in exchange for Old
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating Broker-
Dealer that receives Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such Participating Broker-Dealer
as a result of market-making activities or other trading activities, must ac-
knowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights Agree-
ment, each holder accepting the Exchange Offer is required to represent to the
Issuers in the Letter of Transmittal that (i) the Exchange Notes are to be ac-
quired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person is not engaging in the distribution of the Ex-
change Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the Ex-
change Notes, (iv) neither the holder nor any such other person is an "affili-
ate" of the Issuers within the meaning of Rule 405 under the Securities Act,
and (v) the holder or any such other person acknowledges that if such holder or
other person participates in the Exchange Offer for the purpose of distributing
the Exchange Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Ex-
change Notes and cannot rely on those no-action letters. As indicated above,
each Participating Broker-Dealer that receives Exchange Notes for its own ac-
count in exchange for Old Notes must acknowledge that it (i) acquired the Old
Notes for its own account as a result of market-making activities or other
trading activities, (ii) has not entered into any arrangement or understanding
with the Issuers or any "affiliate" of the Issuers (within the meaning of Rule
405 under the Securities Act) to distribute the Exchange Notes to be received
in the Exchange Offer and (iii) will deliver a prospectus meeting the require-
ments of the Securities Act in connection with any resale of such Exchange
Notes. For a description of the procedures for resales by Participating Broker-
Dealers, see "Plan of Distribution."
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DESCRIPTION OF THE NOTES
As used below in this "Description of the Notes" section, the "Company" means
FrontierVision Holdings, L.P., but not any of its subsidiaries, unless other-
wise specified. The Exchange Notes, like the Old Notes, are to be issued under
an Indenture, to be dated as of September 19, 1997 (the "Indenture"), among the
Issuers and U.S. Bank National Association d/b/a Colorado National Bank, as
Trustee (the "Trustee"). The Indenture is subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements under this caption relating
to the Notes, the Indenture and the Registration Rights Agreement are summaries
and do not purport to be complete, and where reference is made to particular
provisions of the Indenture or the Registration Rights Agreement, such provi-
sions, including the definitions of certain terms, are incorporated by refer-
ence as a part of such summaries or terms, which are qualified in their en-
tirety by such reference.
The form and terms of the Exchange Notes are the same as the form and terms of
the Old Notes (which they replace) except that (i) the issuance of the Exchange
Notes have been registered under the Securities Act and, therefore, the Ex-
change Notes will not bear legends restricting the transfer thereof, and (ii)
the holders of Exchange Notes will not be entitled to certain rights under the
Registration Rights Agreement, including the provisions providing for an in-
crease in the interest rate on the Old Notes in certain circumstances relating
to the timing of the Exchange Offer, which rights will terminate when the Ex-
change Offer is consummated. A copy of the Indenture has been filed as an ex-
hibit to the Exchange Offer Registration Statement of which this Prospectus
forms a part. Certain definitions of terms used in the following summary are
set forth under "--Certain Definitions" below. The Old Notes and the Exchange
Notes are sometimes referred to herein collectively as the "Notes."
The Notes are joint and several obligations of the Company and Holdings Capi-
tal. The Notes will be general unsecured obligations of the Issuers, will be
limited to $237,650,000 aggregate original Principal Amount at Maturity, de-
signed to result in gross proceeds to the Company of approximately $150 mil-
lion. Holdings Capital has nominal assets and does not conduct any operations.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on September 15, 2007. Cash interest will not be required
to accrue or be payable on the Notes prior to September 15, 2001; provided that
on any Interest Payment Date prior to September 15, 2001, the Company may elect
to begin accruing cash interest on the Notes, with notice of such election to
the Trustee and the holders of the Notes (the "Cash Interest Election"). Cash
interest will accrue on the Notes at the rate of 11 7/8% per annum (except as
set forth under "--Registration Rights") from the earlier of the Interest Pay-
ment Date on which the Cash Interest Election is made or September 15, 2001 and
will be payable semiannually on March 15 and September 15, commencing on the
earlier of the Interest Payment Date following the Cash Interest Election or
March 15, 2002, to the Person in whose name a Note is registered at the close
of business on the preceding March 1 or September 1 (each, a "Record Date"), as
the case may be. Cash interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
earlier of the Interest Payment Date on which the Cash Interest Election is
made or September 15, 2001. Cash interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months. Holders must surrender the
Notes to the paying agent for the Notes to collect principal payments. The Is-
suers will pay principal and cash interest by check and may mail interest
checks to a holder's registered address.
The Notes will be issued only in fully registered form, without coupons, in de-
nominations of $1,000 Principal Amount at Maturity and any integral multiple
thereof. No service charge will be made for any registration of transfer or ex-
change of Notes, but the Issuers may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Initially, the Trustee will act as paying agent and registrar for the Notes.
The Notes may be presented for registration of transfer and exchange at the of-
fices of the registrar for the Notes.
Notes that remain outstanding after consummation of the Exchange Offer and Ex-
change Notes will be treated as a single class of securities under the Inden-
ture.
OPTIONAL REDEMPTION
The Notes are not redeemable prior to September 15, 2001, except as set forth
below. The Notes will be subject to redemption, at the option of the Issuers,
in whole or in part, at any time on or after September 15 , 2001 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
holder of Notes to be redeemed at his address appearing in the register for the
Notes, in amounts of $1,000 Principal Amount at Maturity or an integral multi-
ple of $1,000 Principal
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Amount at Maturity, at the following redemption prices (expressed as percent-
ages of Principal Amount at Maturity) plus accrued and unpaid interest, if any,
to but excluding the date fixed for redemption (subject to the right of holders
of record on the relevant Record Date to receive interest, if any, due on an
Interest Payment Date that is on or prior to the date fixed for redemption), if
redeemed during the 12-month period beginning on September 15 of the years in-
dicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 107.917%
2002 105.937
2003 103.958
2004 101.979
2005 and thereafter 100.000
</TABLE>
In addition, prior to September 15, 2000, the Issuers may redeem up to 35% of
the aggregate Principal Amount at Maturity of the Notes with the net cash pro-
ceeds received by the Company from one or more Public Equity Offerings or Stra-
tegic Equity Investments at a redemption price of 111.875% of the Accreted
Value thereof, plus accrued and unpaid interest, if any, to the date of redemp-
tion; provided, however, that at least 65% in aggregate Principal Amount at Ma-
turity of the Notes originally issued remains outstanding immediately after any
such redemption (excluding any Notes owned by the Issuers or any of their Af-
filiates). Notice of redemption pursuant to this paragraph must be mailed to
holders of Notes not later than 60 days following the consummation of such Pub-
lic Equity Offering or Strategic Equity Investment.
Selection of Notes for any partial redemption shall be made by the Trustee, in
accordance with the rules of any national securities exchange on which the
Notes may be listed or, if the Notes are not so listed, pro rata or by lot or
in such other manner as the Trustee shall deem appropriate and fair. Notes in
denominations larger than $1,000 Principal Amount at Maturity may be redeemed
in part but only if the unredeemed portion is an integral multiple of $1,000
Principal Amount at Maturity. Notice of redemption will be mailed before the
date fixed for redemption to each holder of Notes to be redeemed at his regis-
tered address. On and after the date fixed for redemption, interest will cease
to accrue on Notes or portions thereof called for redemption.
The Notes will not have the benefit of any sinking fund.
REGISTRATION RIGHTS
The Issuers have entered into a Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Issuers have agreed, for the benefit of the
holders of Old Notes, that they will, at their cost, file and use their best
efforts to cause to become effective a registration statement with respect to a
registered offer to exchange (the "Exchange Offer") the Old Notes for the Ex-
change Notes. Upon such registration statement's being declared effective, the
Issuers shall offer the Exchange Notes in return for surrender of the Old
Notes. The Exchange Offer shall remain open for not less than 30 days after the
date notice of the Exchange Offer is mailed to holders of Notes. For each Old
Note surrendered to the Issuers under the Exchange Offer, the holder thereof
will receive an Exchange Note of equal Accreted Value and Principal Amount at
Maturity. In the event that applicable interpretations of the staff of the Com-
mission do not permit the Issuers to effect the Exchange Offer or do not permit
any holder of Old Notes to participate in the Exchange Offer, the Issuers will,
at their cost, file and use their best efforts to cause to become effective a
shelf registration statement with respect to resales of the Old Notes and to
keep such registration statement effective until two years after the Issue
Date. The Issuers shall, in the event of such a shelf registration, provide to
each holder of Old Notes copies of the prospectus, notify each holder of Old
Notes when a registration statement for the Old Notes has become effective and
take certain other actions as are required to permit resales of the Old Notes.
In the event that (i) the registration statement relating to the Exchange Offer
is not filed with the Commission on or prior to the 60th day following the Is-
sue Date, (ii) such registration statement is not declared effective by the
Commission on or prior to the 180th day following the Issue Date, (iii) the Ex-
change Offer is not consummated on or prior to the 210th day following the Is-
sue Date or (iv) a registration statement with respect to resale of the Old
Notes (if required) is not declared effective within the period specified in
the Registration Rights Agreement (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then the Company will pay additional
interest (in addition to the interest otherwise due on the Old Notes), payable
in cash, whether or not cash interest is then accruing on the Old Notes, to
each holder of Old Notes during the first 90-day period immediately following
the occurrence of each such Registration Default in an amount equal to 25 basis
points per annum. The amount of interest will increase by an additional 25 ba-
sis points per annum for each subsequent 90-day period until such Registration
Default is cured, up to a maximum amount of additional interest of 100 basis
points per annum. Additional interest will cease accruing on the Old Notes when
all Registration Defaults have been cured.
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COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Indenture will provide that the Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness) or issue any Disquali-
fied Equity Interests except for Permitted Indebtedness; provided, however,
that the Company or any Restricted Subsidiary may Incur Indebtedness and the
Company or any Restricted Subsidiary may issue Disqualified Equity Interests
if, at the time of and immediately after giving pro forma effect to such
Incurrence of Indebtedness or issuance of Disqualified Equity Interests and the
application of the proceeds therefrom, the Debt to Operating Cash Flow Ratio
would be less than or equal to (i) 8.0 to 1.0 if the date of such Incurrence is
on or before December 31, 1998 and (ii) 7.5 to 1.0 thereafter.
The foregoing limitations will not apply to the Incurrence of any of the fol-
lowing (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(a) Indebtedness under the Notes and the Indenture;
(b) Indebtedness and Disqualified Equity Interests of the Company and the
Restricted Subsidiaries outstanding on the Issue Date (including In-
debtedness under the FVOP Indenture and the UVC Note);
(c) Indebtedness of the Company and the Restricted Subsidiaries under the
Senior Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the sum of (a) $650.0 million, which amount
shall be reduced by (x) any permanent reduction of commitments thereun-
der and (y) any other repayment accompanied by a permanent reduction of
commitments thereunder (other than, in the case of either clause (x) or
(y), in connection with any refinancing thereof) plus (B) any amounts
outstanding under the Senior Credit Facility that utilizes subparagraph
(i) below;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Wholly Owned Restricted Subsidiary and (y) Indebtedness
of the Company owed to and held by any Wholly Owned Restricted Subsidi-
ary which is unsecured and subordinated in right of payment to the pay-
ment and performance of the Issuers' obligations under the Indenture
and the Notes; provided, however, that an Incurrence of Indebtedness
that is not permitted by this clause (d) shall be deemed to have oc-
curred upon (i) any sale or other disposition of any Indebtedness of
the Company or a Wholly Owned Restricted Subsidiary referred to in this
clause (d) to a Person (other than the Company or a Wholly Owned Re-
stricted Subsidiary), (ii) any sale or other disposition of Equity In-
terests of a Wholly Owned Restricted Subsidiary which holds Indebted-
ness of the Company or another Wholly Owned Restricted Subsidiary such
that such Wholly Owned Restricted Subsidiary ceases to be a Wholly
Owned Restricted Subsidiary or (iii) designation of a Wholly Owned Re-
stricted Subsidiary which holds Indebtedness of the Company as an Unre-
stricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Indebtedness of the Company;
(f) Interest Rate Protection Obligations of the Company or any Restricted
Subsidiary relating to Indebtedness of the Company or such Restricted
Subsidiary, as the case may be (which Indebtedness (i) bears interest
at fluctuating interest rates and (ii) is otherwise permitted to be In-
curred under this covenant); provided, however, that the notional prin-
cipal amount of such Interest Rate Protection Obligations does not ex-
ceed the principal amount of the Indebtedness to which such Interest
Rate Protection Obligations relate;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of the
Company or any Restricted Subsidiary which do not exceed $10.0 million
in the aggregate at any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests of the Company or any Re-
stricted Subsidiary to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness or Disqualified Equity Interests of the Company or any Re-
stricted Subsidiary Incurred in compliance with the Debt to Operating
Cash Flow Ratio of the first paragraph of this covenant or clause (a)
or (b) of this paragraph of this covenant; provided, however, that (i)
Indebtedness or Disqualified Equity Interests of the Company may not be
refinanced under this clause (h) with Indebtedness or Disqualified Eq-
uity Interests of any Restricted Subsidiary, (ii) any such refinancing
shall not exceed the sum of the principal amount (or, if such Indebted-
ness or Disqualified Equity Interests provide for a lesser amount to be
due and payable upon a declaration of acceleration thereof at the time
of such refinancing, an amount no greater than such lesser amount) of
the Indebtedness or Disqualified Equity Interests being refinanced plus
the amount of accrued interest or dividends thereon and the amount of
any reasonably determined prepayment premium necessary to accomplish
such refinancing and such reasonable fees and expenses incurred in con-
nection therewith, (iii) Indebtedness representing a refinancing of In-
debtedness of the Company shall have a Weighted Average Life to Matu-
rity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced and
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(iv) Subordinated Indebtedness of the Company or Disqualified Equity In-
terests of the Company may only be refinanced with Subordinated Indebted-
ness of the Company or Disqualified Equity Interests of the Company; and
(i) in addition to the items referred to in clauses (a) through (h) above,
Indebtedness of the Company (including any Indebtedness under the Se-
nior Credit Facility that utilizes this subparagraph (i)) having an ag-
gregate principal amount not to exceed $25.0 million at any time out-
standing.
Limitation on Restricted Payments. The Indenture will provide that the Company
will not, and will not permit any Restricted Subsidiary to, directly or indi-
rectly,
(i) declare or pay any dividend or any other distribution on any Equity In-
terests of the Company or any Restricted Subsidiary or make any payment
or distribution to the direct or indirect holders (in their capacities
as such) of Equity Interests of the Company or any Restricted Subsidi-
ary (other than payments or distributions made to the Company or a
Wholly Owned Restricted Subsidiary and dividends or distributions pay-
able solely in Qualified Equity Interests of the Company or in options,
warrants or other rights to purchase Qualified Equity Interests of the
Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Restricted Subsidiary (other than any
such Equity Interests owned by the Company or a Wholly Owned Re-
stricted Subsidiary);
(iii) purchase, redeem, defease or retire for value more than one year
prior to the stated maturity thereof any Subordinated Indebtedness of
the Company (other than any such Subordinated Indebtedness held by a
Wholly Owned Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments) in any Person
(other than in the Company, a Wholly Owned Restricted Subsidiary or a
Person that becomes a Wholly Owned Restricted Subsidiary, or is merged
with or into or consolidated with the Company or a Wholly Owned Re-
stricted Subsidiary (provided the Company or a Wholly Owned Restricted
Subsidiary is the survivor), as a result of or in connection with such
Investment)
(such payments or any other actions (other than Permitted Investments) de-
scribed in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"), un-
less
(a) no Default or Event of Default shall have occurred and be continuing at
the time or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the Company
would be able to Incur $1.00 of Indebtedness (other than Permitted In-
debtedness) under the Debt to Operating Cash Flow Ratio of the first
paragraph of "--Limitation on Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment, the aggre-
gate amount of all Restricted Payments declared or made on or after the
Issue Date does not exceed an amount equal to the sum of (1) the dif-
ference between (x) the Cumulative Available Cash Flow determined at
the time of such Restricted Payment and (y) 140% of cumulative Consoli-
dated Interest Expense of the Company determined for the period com-
mencing on the Issue Date and ending on the last day of the latest fis-
cal quarter for which consolidated financial statements of the Company
are available preceding the date of such Restricted Payment, plus (2)
the aggregate net proceeds (with the value of any non-cash proceeds to
be the Fair Market Value thereof as determined by an Independent Finan-
cial Advisor) received by the Company either (x) as capital contribu-
tions to the Company after the Issue Date or (y) from the issue and
sale (other than to a Restricted Subsidiary) of its Qualified Equity
Interests after the Issue Date (excluding the net proceeds from any is-
suance and sale of Qualified Equity Interests financed, directly or in-
directly, using funds borrowed from the Company or any Restricted Sub-
sidiary until and to the extent such borrowing is repaid), plus (3) the
principal amount (or accrued or accreted amount, if less) of any In-
debtedness of the Company or any Restricted Subsidiary Incurred after
the Issue Date which has been converted into or exchanged for Qualified
Equity Interests of the Company, plus (4) in the case of the disposi-
tion or repayment of any Investment constituting a Restricted Payment
made after the Issue Date, an amount (to the extent not included in the
computation of Cumulative Available Cash Flow) equal to the lesser of:
(i) the return of capital with respect to such Investment and (ii) the
amount of such Investment which was treated as a Restricted Payment, in
either case, less the cost of the disposition of such Investment, plus
(5) the Company's proportionate interest in the lesser of the Fair Mar-
ket Value or the net worth of any Unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the Issue Date in accor-
dance with "--Designation of Unrestricted Subsidiaries" below not to
exceed in any case the Designation Amount with respect to such Re-
stricted Subsidiary upon its Designation, minus (6) the Designation
Amount with respect to any Subsidiary of the Company which has been
designated as an Unrestricted Subsidiary after the Issue Date in accor-
dance with "--Designation of Unrestricted Subsidiaries" below.
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The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of
the Indenture, (ii) so long as no Default or Event of Default shall have oc-
curred and be continuing, the retirement of any Equity Interests of the Com-
pany in exchange for, or out of the net cash proceeds of the substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of, Quali-
fied Equity Interests of the Company; provided, however, that any such net
cash proceeds and the value of any Equity Interests issued in exchange for
such retired Equity Interests are excluded from clause (c)(2) of the preceding
paragraph (and were not included therein at any time), (iii) so long as no De-
fault or Event of Default shall have occurred and be continuing, the purchase,
redemption, retirement or other acquisition of Subordinated Indebtedness of
the Company made in exchange for, or out of the net cash proceeds of, a sub-
stantially concurrent issue and sale (other than to a Restricted Subsidiary)
of (x) Qualified Equity Interests of the Company; provided, however, that any
such net cash proceeds and the value of any Equity Interests issued in ex-
change for Subordinated Indebtedness of the Company are excluded from clauses
(c)(2) and (c)(3) of the preceding paragraph (and were not included therein at
any time) or (y) other Subordinated Indebtedness of the Company having no
stated maturity for the payment of principal thereof prior to the final stated
maturity of the Notes, (iv) the payment of any dividend or distribution on Eq-
uity Interests of the Company or any Restricted Subsidiary to the extent nec-
essary to permit the direct or indirect beneficial owners of such Equity In-
terests to pay federal and state income tax liabilities arising from income of
the Company or such Restricted Subsidiary and attributable to them solely as a
result of the Company or such Restricted Subsidiary (and any intermediate en-
tity through which such holder owns such Equity Interests) being a partnership
or similar pass-through entity for federal income tax purposes, (v) so long as
no Default or Event of Default has occurred and is continuing, any Investment
made out of the net cash proceeds of the substantially concurrent issue and
sale (other than to a Restricted Subsidiary) of Qualified Equity Interests of
the Company; provided, however, that any such net cash proceeds are excluded
from clause (c)(2) of the preceding paragraph (and were not included therein
at any time), (vi) the purchase, redemption or other acquisition, cancellation
or retirement for value of Equity Interests, or options, warrants, equity ap-
preciation rights or other rights to purchase or acquire Equity Interests, of
the Company or any Restricted Subsidiary, or similar securities, held by offi-
cers or employees or former officers or employees of the Company or any Re-
stricted Subsidiary (or their estates or beneficiaries under their estates),
upon death, disability, retirement or termination of employment not to exceed
$2.0 million in any calendar year; (vii) the payment of any dividend or dis-
tribution on Equity Interests of a Restricted Subsidiary out of such Re-
stricted Subsidiary's net income from the Issue Date to Persons other than the
Company or a Restricted Subsidiary; provided that such dividend or distribu-
tion is paid pro rata to all holders of such Equity Interests; (viii) Invest-
ments in Persons (including, without limitation, Restricted Subsidiaries which
are not Wholly Owned Restricted Subsidiaries and Unrestricted Subsidiaries)
engaged in a Related Business, not to exceed $30.0 million at any one time
outstanding; and (ix) Permitted Strategic Investments.
In determining the amount of Restricted Payments permissible under this cove-
nant, amounts expended pursuant to clauses (i), (vi) and (ix) of the immedi-
ately preceding paragraph shall be included as Restricted Payments and amounts
expended pursuant to clauses (ii) through (v) and (vii) and (viii) shall be
excluded. The amount of any non-cash Restricted Payment shall be deemed to be
equal to the Fair Market Value thereof at the date of the making of such Re-
stricted Payment.
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. The In-
denture will provide that in the event that any Restricted Subsidiary (other
than a Subsidiary Guarantor), directly or indirectly, guarantees any Indebted-
ness of the Company other than the Notes (the "Other Indebtedness") the Com-
pany shall cause such Restricted Subsidiary to concurrently guarantee (a "Sub-
sidiary Guarantee") the Company's obligations under the Indenture and the
Notes to the same extent that such Restricted Subsidiary guaranteed the
Company's obligations under the Other Indebtedness (including waiver of subro-
gation, if any); provided, however, that if such Other Indebtedness is (i) not
Subordinated Indebtedness of the Company, the Subsidiary Guarantee shall be
pari passu in right of payment with the guarantee of the Other Indebtedness or
(ii) Subordinated Indebtedness of the Company, the Subsidiary Guarantee shall
be senior in right of payment to the guarantee of the Other Indebtedness; pro-
vided, further, however, that each Subsidiary issuing a Subsidiary Guarantee
will be automatically and unconditionally released and discharged from its ob-
ligations under such Subsidiary Guarantee upon the release or discharge of the
guarantee of the Other Indebtedness that resulted in the creation of such Sub-
sidiary Guarantee, except a discharge or release by, or as a result of, any
payment under the guarantee of such Other Indebtedness by such Subsidiary
Guarantor. The Company shall cause each Restricted Subsidiary issuing a Sub-
sidiary Guarantee to (i) execute and deliver to the Trustee a supplemental in-
denture in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Company's ob-
ligations under the Notes and the Indenture on the terms set forth in the In-
denture, (ii) deliver to the Trustee an opinion of counsel that such supple-
mental indenture has been duly authorized, executed and delivered by such Re-
stricted Subsidiary and constitutes a legal, valid, binding and
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enforceable obligation of such Restricted Subsidiary (which opinion may be sub-
ject to customary assumptions and qualifications) and (iii) execute and deliver
to the Initial Purchasers a counterpart to the Registration Rights Agreement as
a Subsidiary Guarantor thereunder. Thereafter, such Restricted Subsidiary shall
(unless released in accordance with the terms of the Indenture) be a Subsidiary
Guarantor for all purposes of the Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or oth-
erwise cause or suffer to exist or become effective any encumbrance or restric-
tion on the ability of any Restricted Subsidiary to (a) pay dividends or make
any other distributions to the Company or any other Restricted Subsidiary on
its Equity Interests or with respect to any other interest or participation in,
or measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, the Company or any other Restricted Sub-
sidiary or (c) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary (any such encumbrance or restriction in the forego-
ing clauses (a), (b) and (c), a "Payment Restriction"), except for (i) any such
encumbrance or restriction existing on the Issue Date, including, without limi-
tation, pursuant to the Senior Credit Facility or the FVOP Indenture, in each
case as in effect on the Issue Date, and any amendments, restatements, renew-
als, replacements or refinancings (collectively, a "refinancing") thereof; pro-
vided, however, that such refinancings are either (x) no more restrictive in
the aggregate with respect to such encumbrances or restrictions than those con-
tained in the FVOP Indenture as in effect on the Issue Date or (y) do not pro-
hibit the payment of dividends or distributions to the Company in an amount
sufficient to pay cash interest on the Notes (assuming no Cash Interest Elec-
tion) as required under the Indenture or to pay the Principal Amount at Matu-
rity of the Notes at their Stated Maturity unless an event has occurred which
permits (or with the giving of notice or the lapse of time or both would per-
mit) the acceleration of the maturity of such Indebtedness, (ii) any such en-
cumbrance or restriction existing under or by reason of applicable law, (iii)
any such encumbrance or restriction existing under or by reason of any instru-
ment governing Indebtedness or Equity Interests of an Acquired Person acquired
by the Company or any Restricted Subsidiary as in effect at the time of such
acquisition (except to the extent such Indebtedness was Incurred by such Ac-
quired Person in connection with, as a result of or in contemplation of such
acquisition); provided, however, that such encumbrances and restrictions are
not applicable to the Company or any Restricted Subsidiary, or the properties
or assets of the Company or any Restricted Subsidiary, other than the Acquired
Person, (iv) any such encumbrance or restriction existing under or by reason of
customary non-assignment provisions in leases or cable television franchises
entered into in the ordinary course of business and consistent with past prac-
tices, (v) any such encumbrance or restriction existing under or by reason of
any agreement governing Purchase Money Indebtedness for property acquired in
the ordinary course of business that only imposes encumbrances and restrictions
on the property so acquired, (vi) any such encumbrance or restriction existing
under or by reason of any agreement for the sale or disposition of the Equity
Interests or assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (vi) are only applicable
to such Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with "--Disposition of Proceeds of Asset
Sales" below to the extent applicable thereto, (vii) any such encumbrance or
restriction existing under or by reason of any agreement governing refinancing
Indebtedness permitted under clause (h) of "--Limitation on Indebtedness"
above; provided, however, that the encumbrances and restrictions contained in
the agreements governing such Indebtedness are no more restrictive in the ag-
gregate than those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing, (viii) any such encumbrance
or restriction existing under or by reason of the Indenture or (ix) any such
encumbrance or restriction existing under any other agreement, instrument or
document hereafter in effect; provided, however, that the terms and conditions
of any such encumbrance or restriction are either (a) not more restrictive than
those contained in the FVOP Indenture as in effect on the Issue Date or (b) in
the case of any such agreement, instrument or document governing Indebtedness,
do not prohibit the payment of dividends or distributions to the Company in an
amount sufficient to pay cash interest on the Notes (assuming no Cash Interest
Election) as required under the Indenture or to pay the Principal Amount at Ma-
turity of the Notes at their Stated Maturity unless an event has occurred which
permits (or with the giving of notice or the lapse of time or both would per-
mit) the acceleration of the maturity of such Indebtedness.
Limitation on Liens. The Indenture will provide that the Company will not, di-
rectly or indirectly, Incur any Liens of any kind against or upon any of its
properties or assets now owned or hereafter acquired, or any proceeds therefrom
or any income or profits therefrom, to secure any Indebtedness unless contempo-
raneously therewith effective provision is made to secure the Notes equally and
ratably with such Indebtedness with a Lien on the same properties and assets
securing such Indebtedness for so long as such Indebtedness is secured by such
Lien, except for (i) Liens on Equity Interests of Subsidiaries of the Company
(and their successors) securing obligations under the Senior Credit Facility,
(ii) Liens on Equity Interests of Unrestricted Subsidiaries and (iii) Permitted
Liens.
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Disposition of Proceeds of Asset Sales. The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Asset Sale, unless (a) the Company or such Restricted Sub-
sidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the assets sold or otherwise
disposed of and (b) either (i) at least 75% of such consideration consists of
cash or Cash Equivalents or (ii) at least 75% of such consideration consists of
(x) properties and capital assets (including franchises and licenses required
to own or operate such properties) to be used in the same lines of business be-
ing conducted by the Company or any Restricted Subsidiary at such time or (y)
Equity Interests in one or more Persons which thereby become Wholly Owned Re-
stricted Subsidiaries whose assets consist primarily of such properties and
capital assets. The amount of any (i) liabilities of the Company or any Re-
stricted Subsidiary that are actually assumed by the transferee in such Asset
Sale and from which the Company and the Restricted Subsidiaries are fully re-
leased shall be deemed to be cash for purposes of determining the percentage of
cash consideration received by the Company or the Restricted Subsidiaries and
(ii) notes or other similar obligations received by the Company or the Re-
stricted Subsidiaries from such transferee that are immediately converted (or
are converted within thirty days of the related Asset Sale) by the Company or
the Restricted Subsidiaries into cash shall be deemed to be cash, in an amount
equal to the net cash proceeds realized upon such conversion, for purposes of
determining the percentage of cash consideration received by the Company or the
Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to
repay (x) Indebtedness of the Company secured by a Lien on the property or as-
sets subject to such Asset Sale or (y) Indebtedness of any Restricted Subsidi-
ary and, in each case, permanently reduce any related commitment; provided,
however, that if Indebtedness under the revolving credit portion of the Senior
Credit Facility is repaid, the Company need not reduce the commitments for such
revolving credit portion, or (ii) commit in writing to acquire, construct or
improve properties and capital assets (including franchises and licenses re-
quired to own or operate any such assets or properties) to be used in the same
line of business being conducted by the Company or any Restricted Subsidiary at
such time and so apply such Net Cash Proceeds within 365 days of the receipt
thereof.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are not so
applied within 365 days of such Asset Sale (such Net Cash Proceeds, the
"Unutilized Net Cash Proceeds"), the Company shall, within 30 days of such
365th day, make an Offer to Purchase from all holders of Notes. Notes with an
aggregate Accreted Value as of such Purchase Date equal to such Unutilized Net
Cash Proceeds, at a purchase price in cash equal to 100% of such Accreted Value
thereof, plus accrued and unpaid interest to the Purchase Date; provided, how-
ever, that the Offer to Purchase may be deferred until there are aggregate
Unutilized Net Cash Proceeds equal to or in excess of $5.0 million, at which
time the entire amount of such Unutilized Net Cash Proceeds, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph. In the event that any other Indebtedness of the Company which ranks
pari passu with the Notes requires the repayment or prepayment thereof, or an
offer to purchase to be made to repurchase such Indebtedness, upon the consum-
mation of any Asset Sale, the Company may apply the Unutilized Net Cash Pro-
ceeds otherwise required to be applied to an Offer to Purchase to repay, prepay
or offer to purchase such other Indebtedness and to an Offer to Purchase pro
rata based upon (i) the aggregate Accreted Value of the Notes then outstanding
on the applicable Purchase Date and (ii) the aggregate principal amount (or ac-
creted amount, if less) of such other Indebtedness then outstanding on such
Purchase Date. The Offer to Purchase shall remain open for a period of 20 Busi-
ness Days or such longer period as may be required by law. To the extent the
aggregate Accreted Value of Notes tendered pursuant to the Offer to Purchase
exceeds the Unutilized Net Cash Proceeds, Notes shall be purchased among hold-
ers on a proportionate basis (based on the relative aggregate Accreted Value of
Notes validly tendered for purchase by holders thereof). To the extent the
Unutilized Net Cash Proceeds exceed the aggregate Accreted Value of Notes ten-
dered by the holders of the Notes pursuant to the Offer to Purchase, the Com-
pany may retain and utilize any portion of the Unutilized Net Cash Proceeds not
applied to repurchase the Notes for any purpose consistent with the other terms
of the Indenture.
In the event that the Company makes an Offer to Purchase the Notes, the Company
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act and any violation of the provisions of the Indenture relating to such Offer
to Purchase occurring as a result of such compliance shall not be deemed an
Event of Default or an event that with the passing of time or giving of notice,
or both, would constitute an Event of Default.
Limitation on Transactions with Affiliates and Related Persons. The Indenture
will provide that the Company will not, and will not permit, cause or suffer
any Restricted Subsidiary to, directly or indirectly, conduct any business or
enter into any transaction (or series of related transactions) with or for the
benefit of any of their respective Affiliates or any beneficial holder of 10%
or more of the Equity Interests of the Company or any officer, director or em-
ployee of the Company or any Restricted Subsidiary (each an "Affiliate Transac-
tion"), unless (a) such Affiliate Transaction is on terms which are no less
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favorable to the Company or such Restricted Subsidiary, as the case may be,
than would be available in a comparable transaction with an unaffiliated third
party, (b) if such Affiliate Transaction (or series of related Affiliate Trans-
actions) involves aggregate payments or other consideration having a Fair Mar-
ket Value in excess of $5.0 million, a majority of the disinterested members of
the Board of Directors of the Company shall have approved such transaction and
determined that such transaction complies with the foregoing provisions and (c)
if such Affiliate Transaction (or series of related Affiliate Transactions) in-
volves aggregate payments or other consideration having a Fair Market Value of
$25.0 million or more, the Company has obtained a written opinion from an Inde-
pendent Financial Advisor stating that the consideration to be paid or re-
ceived, as the case may be, by the Company or the Restricted Subsidiary pursu-
ant to such Affiliate Transaction is fair to the Company or the Restricted Sub-
sidiary, as the case may be, from a financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and the Wholly
Owned Restricted Subsidiaries, (ii) customary directors' fees, indemnification
and similar arrangements, consulting fees, employee salaries, bonuses, or em-
ployment agreements, compensation or employee benefit arrangements, and incen-
tive arrangements with any officer, director or employee of the Company entered
into in the ordinary course of business (including customary benefits thereun-
der) and payments under any indemnification arrangements permitted by applica-
ble law, (iii) the Agreement of Limited Partnership of the Company or the
Agreement of Limited Partnership of FVOP, in each case, as in effect on the Is-
sue Date, including any amendments or extensions thereof that do not otherwise
violate any other covenant set forth in the Indenture, and any transactions un-
dertaken pursuant to any other contractual obligations in existence on the Is-
sue Date (as in effect on the Issue Date), (iv) the issue and sale by the Com-
pany to its partners or stockholders of Qualified Equity Interests, (v) any Re-
stricted Payments made in compliance with "--Limitation on Restricted Payments"
above (including without limitation the making of any payments or distributions
permitted to be made in accordance with clauses (i) through (ix) of the penul-
timate paragraph of "--Limitation on Restricted Payments"), (vi) loans and ad-
vances to officers, directors and employees of the Company and the Restricted
Subsidiaries for travel, entertainment, moving and other relocation expenses,
in each case made in the ordinary course of business and consistent with past
business practices, (vii) customary commercial banking, investment banking, un-
derwriting, placement agent or financial advisory fees paid in connection with
services rendered to the Company and its Subsidiaries in the ordinary course,
(viii) the Incurrence of intercompany Indebtedness permitted pursuant to clause
(d) under the definition of "Permitted Indebtedness" set forth under "--Limita-
tion on Indebtedness," (ix) the pledge of Equity Interests of Unrestricted Sub-
sidiaries to support the Indebtedness thereof and (x) the Senior Credit Facili-
ty.
Designation of Unrestricted Subsidiaries. The Indenture will provide that the
Company may designate any Subsidiary of the Company as an "Unrestricted Subsid-
iary" under the Indenture (a "Designation") only if:
(a) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such Designation;
(b) at the time of and after giving effect to such Designation, the Company
could incur $1.00 of additional Indebtedness under the Debt to Operat-
ing Cash Flow Ratio of the first paragraph of "--Limitation on Indebt-
edness" above; and
(c) the Company would be permitted to make an Investment (other than a Per-
mitted Investment) at the time of Designation (assuming the effective-
ness of such Designation) pursuant to the first paragraph of "--Limita-
tion on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Company's proportionate interest in the Fair Mar-
ket Value of such Subsidiary on such date; provided, however, that the
condition set forth in this clause (c) shall not be applicable to the
designation of a Subsidiary as an Unrestricted Subsidiary which is made
as part of an Investment or Permitted Strategic Investment made in ac-
cordance with clause (viii) or (ix) of the penultimate paragraph of "--
Limitation on Restricted Payments."
Neither the Company nor any Restricted Subsidiary shall at any time (x) provide
credit support for, subject any of its property or assets (other than the Eq-
uity Interests of any Unrestricted Subsidiary) to the satisfaction of, or guar-
antee, any Indebtedness of any Unrestricted Subsidiary (including any undertak-
ing, agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary, except, in the case of clause (x)
or (y), to the extent otherwise permitted under the terms of the Indenture, in-
cluding, without limitation, pursuant to "--Limitation on Restricted Payments"
and "--Limitation on Indebtedness" above.
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The Company may revoke any Designation of a Subsidiary as an Unrestricted Sub-
sidiary (a "Revocation") if:
(a) no Default or Event of Default shall have occurred and be continuing at
the time of and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if Incurred at such time,
have been permitted to be Incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by resolutions of the Board
of Directors of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
Limitation on Conduct of Business of Holdings Capital. The Indenture will pro-
vide that Holdings Capital will not own any operating assets or other proper-
ties or conduct any business other than to serve as an Issuer and an obligor on
the Notes and as a guarantor of obligations under the Senior Credit Facility.
CHANGE OF CONTROL
The Indenture will provide that within 35 days following the date of consumma-
tion of a transaction resulting in a Change of Control, the Company will com-
mence an Offer to Purchase all outstanding Notes at a purchase price in cash
equal to 101% of the Accreted Value of the Notes on such Purchase Date, plus
accrued and unpaid interest, if any, to such Purchase Date. Each holder shall
be entitled to tender all or any portion of the Notes owned by such holder pur-
suant to the Offer to Purchase, subject to the requirement that any portion of
a Note tendered must be in an integral multiple of $1,000 Principal Amount at
Maturity.
In the event that the Company makes an Offer to Purchase the Notes, the Company
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act, and any violation of the provisions of the Indenture relating to such Of-
fer to Purchase occurring as a result of such compliance shall not be deemed an
Event of Default or an event that with the passing of time or giving of notice,
or both, would constitute an Event of Default.
With respect to the sale of assets referred to in the definition of "Change of
Control," the phrase "all or substantially all" of the assets of the Company or
the General Partner will likely be interpreted under applicable state law and
will be dependent upon particular facts and circumstances. As a result, there
may be a degree of uncertainty in ascertaining whether a sale or transfer of
"all or substantially all" of the assets of the Company or the General Partner
has occurred. In addition, no assurances can be given that the Company will be
able to acquire Notes tendered upon the occurrence of a Change of Control. The
ability of the Company to pay cash to the holders of Notes upon a Change of
Control may be limited by its then existing financial resources. The Senior
Credit Facility and the FVOP Indenture contain, and the New Credit Facility
will contain, certain covenants which will have the effect of limiting or pro-
hibiting, or requiring waiver or consent of the lenders thereunder prior to,
the repurchase of the Notes upon a Change of Control, and future debt agree-
ments of the Company or the Restricted Subsidiaries may provide the same. See
"Risk Factors--Ability to Purchase Notes Upon a Change of Control." None of the
provisions relating to a repurchase upon a Change of Control are waivable by
the Board of Directors of FV Inc. or the Trustee.
The foregoing provisions will not prevent the Company from entering into a
transaction of the type described under the definition of "Change of Control"
with management or their affiliates. In addition, such provisions may not nec-
essarily afford the holders of the Notes protection in the event of a highly
leveraged transaction, including a reorganization, restructuring, merger or
similar transaction, involving the Company that may adversely affect the hold-
ers of the Notes because such transactions may not involve a shift in voting
power or beneficial ownership or, even if they do, may not involve a shift of
the magnitude required under the definition of "Change of Control" to trigger
the provisions.
PROVISION OF FINANCIAL INFORMATION
The Indenture will provide that whether or not the Issuers are subject to Sec-
tion 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
the Issuers shall file with the Commission the annual reports, quarterly re-
ports and other documents which the Issuers would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Issuers were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Issuers would have been required so to file such documents
if the Issuers were so required. The Issuers shall also in any event (a) within
15 days of each Required Filing
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Date (whether or not permitted or required to file with the Commission) (i)
transmit by mail to all holders of Notes, as their names and addresses appear
in the Note register, without cost to such holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other documents
which the Issuers are required to file with the Commission pursuant to the
preceding sentence or, if such filing is not so permitted, information and
data of a similar nature, and (b) if, notwithstanding the preceding sentence,
filing such documents by the Issuers with the Commission is not permitted un-
der the Exchange Act, promptly upon written request supply copies of such doc-
uments to any prospective holder of Notes. The Issuers shall not be obligated
to file any such reports with the Commission if the Commission does not permit
such filings for all companies similarly situated other than due to any action
or inaction by the Issuers. Notwithstanding the foregoing provisions, this
covenant shall be deemed to have been satisfied during the period prior to the
effectiveness of a registration statement with respect to the Notes or the Ex-
change Notes if the Issuers cause such annual reports, quarterly reports and
other documents to be filed with the Commission by FVOP if such filings con-
tain substantially the same information that would be required if such docu-
ments were filed by the Issuers.
MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that an Issuer will not consolidate with or merge
with or into (whether or not such Issuer is the Surviving Person) any other
entity and the Issuers will not and will not permit any of their respective
Restricted Subsidiaries to sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of such Issuer's properties and assets
(determined, in the case of the Company, on a consolidated basis for the Com-
pany and the Restricted Subsidiaries) to any entity in a single transaction or
series of related transactions, unless: (a) either (i) such Issuer shall be
the Surviving Person or (ii) the Surviving Person (if other than such Issuer)
shall be, in the case of Holdings Capital, a corporation or, in any other
case, a corporation, partnership, limited liability company, limited liability
limited partnership or trust organized and validly existing under the laws of
the United States of America or any State thereof or the District of Columbia,
and shall, in any such case, expressly assume by a supplemental indenture the
due and punctual payment of the principal of, premium, if any, and interest on
all the Notes and the performance and observance of every covenant of the In-
denture to be performed or observed on the part of the applicable Issuer; (b)
immediately thereafter, no Default or Event of Default shall have occurred and
be continuing; (c) immediately after giving effect to any such transaction in-
volving the Incurrence by the Company or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in con-
nection with or as a result of such transaction as having been Incurred at the
time of such transaction), the Surviving Person could Incur, on a pro forma
basis after giving effect to such transaction as if it had occurred at the be-
ginning of the latest fiscal quarter for which consolidated financial state-
ments of the Company are available, at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the Debt to Operating Cash Flow Ra-
tio of the first paragraph of "--Limitation on Indebtedness" above; and (d)
immediately thereafter the Surviving Person shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of such Issuer imme-
diately prior to such transaction.
The Indenture will provide that, subject to the requirements of the immedi-
ately preceding paragraph, in the event of a sale of all or substantially all
of the assets of any Subsidiary Guarantor or all of the Equity Interests of
any Subsidiary Guarantor, by way of merger, consolidation or otherwise, then
the Surviving Person of any such merger or consolidation, or such Subsidiary
Guarantor, if all of its Equity Interests are sold, shall be released and re-
lieved of any and all obligations under the Subsidiary Guarantee of such Sub-
sidiary Guarantor if (i) the Person or entity surviving such merger or consol-
idation or acquiring the Equity Interests of such Subsidiary Guarantor is not
a Restricted Subsidiary, and (ii) the Net Cash Proceeds from such sale are
used after such sale in a manner that complies with the provisions of "--Dis-
position of Proceeds of Asset Sales" above. Except as provided in the preced-
ing sentence, the Indenture will provide that no Subsidiary Guarantor shall
consolidate with or merge with or into another Person, whether or not such
Person is affiliated with such Subsidiary Guarantor and whether or not such
Subsidiary Guarantor is the Surviving Person, unless (i) the Surviving Person
is a corporation, partnership, limited liability company, limited liability
limited partnership or trust organized or existing under the laws of the
United States, any State thereof or the District of Columbia, (ii) the Surviv-
ing Person (if other than such Subsidiary Guarantor) assumes all the Obliga-
tions of such Subsidiary Guarantor under the Notes and the Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee,
(iii) at the time of and immediately after such Disposition, no Default or
Event of Default shall have occurred and be continuing, and (iv) the Surviving
Person will have Consolidated Net Worth (immediately after giving pro forma
effect to the Disposition) equal to or greater than the Consolidated Net Worth
of such Subsidiary Guarantor immediately preceding the transaction; provided,
however, that clause (iv) of this paragraph shall not be a condition to a
merger or consolidation of a Subsidiary Guarantor if such merger or consolida-
tion only involves the Company and/or one or more Wholly Owned Restricted Sub-
sidiaries.
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In the event of any transaction (other than a lease) described in and complying
with the conditions listed in the immediately preceding paragraphs in which an
Issuer or any Subsidiary Guarantor is not the Surviving Person and the Surviv-
ing Person is to assume all the obligations of such Issuer or any such Subsidi-
ary Guarantor under the Notes and the Indenture pursuant to a supplemental in-
denture, such Surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of, such Issuer or such Subsidiary Guaran-
tor, as the case may be, and such Issuer or such Subsidiary Guarantor, as the
case may be, shall be discharged from its Obligations under the Indenture, the
Notes or its Subsidiary Guarantee, as the case may be.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(a) failure to pay interest on any Note when due and payable, continued for
30 days;
(b) failure to pay the Accreted Value or principal of (or premium, if any,
on) any Note when due and payable at maturity, upon redemption or oth-
erwise;
(c) failure to perform or comply with any of the provisions described under
"--Merger, Sale of Assets, etc.," "--Change of Control" and "--Cove-
nants--Disposition of Proceeds of Asset Sales" above;
(d) failure to observe or perform any other covenant, warranty or agreement
of the Issuers or any Subsidiary Guarantor under the Indenture or the
Notes continued for 30 days after written notice to the Issuers by the
Trustee or holders of at least 25% in aggregate principal amount at ma-
turity of outstanding Notes;
(e) default under the terms of one or more instruments evidencing or secur-
ing Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10 million or more individually or in
the aggregate that has resulted in the acceleration of the payment of
such Indebtedness or failure to pay principal when due at the stated
maturity of any such Indebtedness;
(f) the rendering of a final judgment or judgments (not subject to appeal)
against the Company or any Restricted Subsidiary in an amount of $10
million or more (net of any amounts covered by reputable and credit-
worthy insurance companies) which remains undischarged or unstayed for
a period of 60 days after the date on which the right to appeal has ex-
pired;
(g) any holder or holders of at least $10 million in aggregate principal
amount of Indebtedness of the Company or any Restricted Subsidiary, af-
ter a default under such Indebtedness, shall notify the Trustee of the
intended sale or disposition of any assets of the Company or any Re-
stricted Subsidiary with an aggregate Fair Market Value (as determined
in good faith by the Board of Directors of the Company) of at least $2
million that have been pledged to or for the benefit of such holder or
holders to secure such Indebtedness or shall commence proceedings, or
take any action (including by way of setoff), to retain in satisfaction
of such Indebtedness or to collect on, seize, dispose of or apply in
satisfaction of such Indebtedness such assets of the Company or any Re-
stricted Subsidiary (including funds on deposit or held pursuant to
lock-box and other similar arrangements) which continues for five Busi-
ness Days after notice has been given to the Company and the represen-
tative of such Indebtedness;
(h) certain events of bankruptcy, insolvency or reorganization affecting
either of the Issuers or any Significant Restricted Subsidiary; and
(i) other than as provided in or pursuant to any Subsidiary Guarantee or
the Indenture, such Subsidiary Guarantee ceases to be in full force and
effect or is declared null and void and unenforceable or found to be
invalid or any Subsidiary Guarantor denies its liability under its Sub-
sidiary Guarantee (other than by reason of a release of such Subsidiary
Guarantor from its Subsidiary Guarantee in accordance with the terms of
the Indenture and such Subsidiary Guarantee).
Subject to the provisions of the Indenture relating to the duties of the Trust-
ee, in case an Event of Default (as defined) shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers un-
der the Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a major-
ity in aggregate Principal Amount at Maturity of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceed-
ing for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee.
If an Event of Default (other than an Event of Default with respect to either
of the Issuers described in clause (h) above) shall occur and be continuing,
the Trustee or the holders of at least 25% in aggregate Principal Amount at Ma-
turity of the
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outstanding Notes by notice in writing to the Issuers (and to the Trustee if
given by the holders) may declare the Accreted Value of all the outstanding
Notes, together with all accrued and unpaid interest, if any, thereon as of
such date of declaration to be immediately due and payable (provided that
Notes whose Accreted Value remains unpaid after such date of declaration shall
continue to accrete pursuant to the definition of "Accreted Value" and accrue
interest as provided in the Notes). Upon any such declaration, such Accreted
Value and accrued and unpaid interest, if any, shall become immediately due
and payable. If an Event of Default specified in clause (h) above with respect
to either of the Issuers occurs, the Accreted Value on all of the outstanding
Notes, together with all accrued and unpaid interest, if any, thereon will
ipso facto become immediately due and payable without any declaration or other
act on the part of the Trustee or any holder (provided that Notes whose Ac-
creted Value remains unpaid after the date of such Event of Default shall con-
tinue to accrete pursuant to the definition of "Accreted Value" and accrue in-
terest as provided in the Notes).
After such acceleration, but before a judgment or decree based on acceleration
has been obtained, the holders of not less than a majority in aggregate Prin-
cipal Amount at Maturity of then outstanding Notes may, under certain circum-
stances, rescind and annul such acceleration if all Events of Default, other
than the non-payment of accelerated Accreted Value or principal and interest,
as the case may be, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "--Modification and Waiver" be-
low.
The Indenture provides that the Trustee shall, within 30 days after the occur-
rence of any Default or Event of Default with respect to the Notes, give the
holders thereof notice of all uncured Defaults or Events of Default known to
it; provided, however, that, except in the case of an Event of Default or a
Default in payment with respect to the Notes or a Default or Event of Default
in complying with "Merger, Sale of Assets, etc." above, the Trustee shall be
protected in withholding such notice if and so long as the Board of Directors
or responsible officers of the Trustee in good faith determine that the with-
holding of such notice is in the interest of the holders of the Notes.
No holder of any Note will have any right to institute any proceeding with re-
spect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate Principal Amount
at Maturity of the outstanding Notes shall have made written request, and of-
fered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee, and the Trustee shall not have received from the holders of a major-
ity in aggregate Principal Amount at Maturity of the outstanding Notes a di-
rection inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holder of a Note for enforcement of payment of Accreted Value
of, the principal of and premium, if any, or interest on such Note on or after
the respective due dates expressed in such Note and the Indenture.
The Issuers will be required to furnish to the Trustee annually a statement as
to the performance by them of certain of their obligations under the Indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND PARTNERS
The Indenture will provide that no director, officer, employee, incorporator
or limited or general partner of the Issuers or any of their Subsidiaries
shall have any liability for any obligation of the Issuers or any of their
Subsidiaries under the Indenture or the Notes or for any claim based on, in
respect of, or by reason of, any such obligation or the creation of any such
obligation. Each holder by accepting a Note waives and releases such Persons
from all such liability and such waiver and release is part of the considera-
tion for the issuance of the Notes.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Issuers may terminate their and any Subsidiary Guarantor's substantive ob-
ligations in respect of the Notes by delivering all outstanding Notes to the
Trustee for cancellation and paying all sums payable by them on account of Ac-
creted Value of or principal of, premium, if any, and interest on all Notes or
otherwise. In addition to the foregoing, the Issuers may, provided that no De-
fault or Event of Default has occurred and is continuing or would arise there-
from (or, with respect to a Default or Event of Default specified in clause
(h) of "--Events of Default" above, any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day)), terminate their and
any Subsidiary Guarantor's substantive obligations in respect of the Notes
(except for their obligations to pay the principal of (and premium, if any)
and the interest on the Notes and the Subsidiary Guarantors' guarantee there-
of) by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or United States Government Obligations sufficient
(without reinvestment) to pay all remaining Indebtedness on the Notes to their
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maturity, (ii) delivering to the Trustee either an Opinion of Counsel or a rul-
ing directed to the Trustee from the Internal Revenue Service to the effect
that the holders of the Notes will not recognize income, gain or loss for fed-
eral income tax purposes solely as a result of such deposit and termination of
obligations, (iii) delivering to the Trustee an Opinion of Counsel to the ef-
fect that the Issuers' exercise of their option under this paragraph will not
result in either of the Issuers, the Trustee or the trust created by the Is-
suers' deposit of funds pursuant to this provision becoming or being deemed to
be an "investment company" under the Investment Company Act of 1940, as amend-
ed, and (iv) complying with certain other requirements set forth in the Inden-
ture. In addition, the Issuers may, provided that no Default or Event of De-
fault has occurred and is continuing or would arise therefrom (or, with respect
to a Default or Event of Default specified in clause (h) of "--Events of De-
fault" above, any time on or prior to the 91st calendar day after the date of
such deposit (it being understood that this condition shall not be deemed sat-
isfied until after such 91st day)), terminate all of their and any Subsidiary
Guarantor's substantive obligations in respect of the Notes (including their
obligations to pay the principal of (and premium, if any) and interest on the
Notes and the Subsidiary Guarantors' guarantee thereof) by (i) depositing with
the Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all re-
maining Indebtedness on the Notes to their maturity, (ii) delivering to the
Trustee either a ruling directed to the Trustee from the Internal Revenue Serv-
ice to the effect that the holders of the Notes will not recognize income, gain
or loss for federal income tax purposes solely as a result of such deposit and
termination of obligations or an Opinion of Counsel based upon such a ruling
addressed to the Trustee or a change in the applicable federal tax law since
the date of the Indenture to such effect, (iii) delivering to the Trustee an
Opinion of Counsel to the effect that the Issuers' exercise of their option un-
der this paragraph will not result in either of the Issuers, the Trustee or the
trust created by the Issuers' deposit of funds pursuant to this provision be-
coming or being deemed to be an "investment company" under the Investment Com-
pany Act of 1940, as amended, and (iv) complying with certain other require-
ments set forth in the Indenture.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
The Issuers and each Subsidiary Guarantor (if any), when authorized by a reso-
lution of their respective Boards of Directors, and the Trustee may amend or
supplement the Indenture or the Notes without notice to or consent of any hold-
er: (i) to cure any ambiguity, defect or inconsistency; provided, however, that
such amendment or supplement does not materially and adversely affect the
rights of any holder; (ii) to effect the assumption by a successor Person of
all obligations of the Issuers under the Notes and the Indenture in connection
with any transaction complying with "--Merger, Sale of Assets, etc." above;
(iii) to provide for uncertificated Notes in addition to or in place of certif-
icated Notes; (iv) to comply with any requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust Inden-
ture Act; (v) to make any change that would provide any additional benefit or
rights to the holders; (vi) to make any other change that does not materially
and adversely affect the rights of any holder under the Indenture; (vii) to ev-
idence the succession of another Person to any Subsidiary Guarantor and the as-
sumption by any such successor of the covenants of such Subsidiary Guarantor in
the Indenture and in the Subsidiary Guarantee; (viii) to add to the covenants
of the Issuers or the Subsidiary Guarantors for the benefit of the holders, or
to surrender any right or power conferred upon the Issuers or any Subsidiary
Guarantor under the Indenture; (ix) to secure the Notes pursuant to the re-
quirements of "--Covenants--Limitation on Liens" above or otherwise; or (x) to
reflect the release of a Subsidiary Guarantor from its obligations with respect
to its Subsidiary Guarantee in accordance with the provisions of the Indenture
and to add a Subsidiary Guarantor pursuant to the requirements of the Inden-
ture; provided, however, that the Issuers have delivered to the Trustee an
Opinion of Counsel stating that such amendment or supplement complies with the
provisions of the Indenture.
Modifications and amendments of the Indenture and the Notes may be made by the
Issuers and each Subsidiary Guarantor (if any) when authorized by a resolution
of their respective Boards of Directors and the Trustee with the consent of the
holders of a majority in aggregate Principal Amount at Maturity of the out-
standing Notes; provided, however, that no such modification or amendment may,
without the consent of the holder of each Note affected thereby, (a) change the
definition of "Accreted Value" or change the definition of Principal Amount at
Maturity or change the Stated Maturity of the principal of or any installment
of interest on any Note or alter the optional redemption or repurchase provi-
sions of any Note or the Indenture in a manner adverse to the holders of the
Notes, (b) reduce the Accreted Value or the Principal Amount at Maturity (or
the premium) of any Note, (c) reduce the rate of or extend the time for payment
of interest on any Note, (d) change the place or currency of payment of Ac-
creted Value or principal of (or premium) or interest on any Note, (e) modify
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any provisions of the Indenture relating to the waiver of past defaults (other
than to add sections of the Indenture subject thereto) or the right of the
holders to institute suit for the enforcement of any payment on or with respect
to any Note or the modification and amendment of the Indenture and the Notes
(other than to add sections of the Indenture or the Notes which may not be
amended, supplemented or waived without the consent of each holder affected),
(f) reduce the percentage of the Principal Amount at Maturity of outstanding
Notes necessary for amendment to or waiver of compliance with any provision of
the Indenture or the Notes or for waiver of any Default, (g) waive a default in
the payment of the Accreted Value of, principal of, interest on, or a redemp-
tion payment with respect to, any Note (except a rescission of acceleration of
the Notes by the holders as provided in the Indenture and a waiver of the pay-
ment default that resulted from such acceleration), (h) modify the ranking or
priority of the Notes or the Subsidiary Guarantee of any Subsidiary Guarantor
in any manner adverse to the holders, (i) release any Subsidiary Guarantor from
any of its obligations under its Subsidiary Guarantee or the Indenture other-
wise than in accordance with the Indenture, or (j) modify the provisions relat-
ing to any Offer to Purchase required under the covenants described under "--
Covenants--Disposition of Proceeds of Asset Sales" or "--Change of Control"
above in a manner materially adverse to the holders.
The holders of a majority in aggregate Principal Amount at Maturity of the out-
standing Notes, on behalf of all holders of Notes, may waive compliance by the
Issuers with certain restrictive provisions of the Indenture. Subject to cer-
tain rights of the Trustee, as provided in the Indenture, the holders of a ma-
jority in aggregate Principal Amount at Maturity of the outstanding Notes, on
behalf of all holders of Notes, may waive any past default under the Indenture,
except a default in the payment of the Accreted Value of, principal of, premium
or interest on or a default arising from failure to purchase any Note tendered
pursuant to an Offer to Purchase, or a default in respect of a provision that
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Note affected.
THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will perform only such duties as are specifically set forth in the In-
denture. During the existence of a Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree of
care and skill in their 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 Trust Indenture Act incorporated by reference therein contain
limitations on the rights of the Trustee, should it become a creditor of either
of the Issuers, any Subsidiary Guarantor or any other obligor upon the Notes,
to obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claim as security or otherwise. The
Trustee is permitted to engage in other transactions with the Issuers or an Af-
filiate of either of the Issuers; provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. The Trustee is also the
trustee under the FVOP Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the Inden-
ture. Reference is made to the Indenture for the full definition of all such
terms, as well as any other terms used herein for which no definition is pro-
vided.
"Accreted Value" as of any date (the "Specified Date") means, with respect to
each $1,000 original principal amount at maturity of Notes:
(i) if the Specified Date is one of the following dates (each a "Semi-An-
nual Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-
ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------- --------------
<S> <C>
Issue Date $ 631.18
March 15, 1998 668.66
September 15, 1998 708.36
March 15, 1999 750.42
September 15, 1999 794.97
March 15, 2000 842.17
September 15, 2000 892.18
March 15, 2001 945.15
September, 2001 1,000.00
</TABLE>
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<PAGE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accrual Date im-
mediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the immediately following Semi-
Annual Accrual Date less the Accreted Value for the immediately pre-
ceding Semi-Annual Accrual Date and (y) a fraction, the numerator of
which is the number of days actually elapsed from the immediately pre-
ceding Semi-Annual Accrual Date to the Specified Date and the denomi-
nator of which is 180; and
(iii) if the Specified Date is after September 15, 2001, $1,000;
provided, however, that if the Company makes the Cash Interest Election, the
Accreted Value shall be, and remain through the Stated Maturity of the Notes,
the Accreted Value as of the Semi-Annual Accrual Date on which the Cash Inter-
est Election is made.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connec-
tion with an Asset Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other Person
which merges with or into or becomes a Subsidiary of such specified Person.
"Advisory Committee" means the Advisory Committee of the General Partner estab-
lished pursuant to the provisions of Article VI of the First Amended and Re-
stated Agreement of Limited Partnership of the General Partner, as amended to
the date of issuance of the Notes.
"Affiliate" means, with respect to any specified Person, any other Person di-
rectly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of transfers
of cash or other property to others or payments for property or services for
the account or use of others, or otherwise) by the Company or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Equity Inter-
ests of any other Person by the Company or any Restricted Subsidiary, in either
case pursuant to which such Person shall become a Restricted Subsidiary or
shall be consolidated or merged with or into the Company or any Restricted Sub-
sidiary, or (ii) any acquisition by the Company or any Restricted Subsidiary of
the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary, (ii) any material license, franchise or other autho-
rization of the Company or any Restricted Subsidiary, (iii) any assets of the
Company or any Restricted Subsidiary which constitute substantially all of an
operating unit or line of business of the Company or any Restricted Subsidiary
or (iv) any other property or asset of the Company or any Restricted Subsidiary
outside of the ordinary course of business. For the purposes of this defini-
tion, the term "Asset Sale" shall not include (i) any transaction consummated
in compliance with "--Merger, Sale of Assets, etc." above and the creation of
any Lien not prohibited by the provisions described under "--Covenants--Limita-
tion on Liens" above, (ii) sales of property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be, and
(iii) any transaction consummated in compliance with "--Covenants--Limitation
on Restricted Payments" above. In addition, solely for purposes of "--Cove-
nants--Disposition of Proceeds of Asset Sales" above, any sale, conveyance,
transfer, lease or other disposition of any property or asset, whether in one
transaction or a series of related transactions, involving assets with a Fair
Market Value not in excess of $1.0 million individually or $2.0 million in any
fiscal year shall be deemed not to be an Asset Sale.
"Board of Directors" means (i) in the case of a Person that is a partnership,
the board of directors of such Person's corporate general partner (or if such
general partner is itself a partnership, the board of directors of such general
partner's corporate general partner), (ii) in the case of a Person that is a
corporation, the board of directors of such Person and (iii) in the case of any
other Person, the board of directors, management committee or similar governing
body or any authorized
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committee thereof responsible for the management of the business and affairs of
such Person. By way of illustration, as of the date of the Indenture, any ref-
erence herein to the Board of Directors of any of the Company, the General
Partner or FVP GP means the board of directors of FV Inc.
"Capitalized Lease Obligation" means, with respect to any Person for any peri-
od, an obligation of such Person to pay rent or other amounts under a lease
that is required to be capitalized for financial reporting purposes in accor-
dance with GAAP; and the amount of such obligation shall be the capitalized
amount shown on the balance sheet of such Person as determined in accordance
with GAAP.
"Cash Equivalents" means (i) any security maturing not more than six months af-
ter the date of acquisition issued by the United States of America or an in-
strumentality or agency thereof and guaranteed fully as to principal, premium,
if any, and interest by the United States of America, (ii) any certificate of
deposit, time deposit, money market account or bankers' acceptance maturing not
more than six months after the date of acquisition issued by any commercial
banking institution that is a member of the Federal Reserve System and that has
combined capital and surplus and undivided profits of not less than $500.0 mil-
lion whose debt has a rating, at the time as of which any investment therein is
made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency, or "a-1" (or higher) according to Standard & Poor's
Rating Services, a division of The McGraw-Hill Companies, Inc., or any succes-
sor rating agency and (iii) commercial paper maturing not more than three
months after the date of acquisition issued by any corporation (other than an
Affiliate of the Company) organized and existing under the laws of the United
States of America with a rating, at the time as of which any investment therein
is made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or
any successor rating agency, or "A-1" (or higher) according to Standard &
Poor's Rating Services, a division of The McGraw-Hill Companies, Inc., or any
successor rating agency.
"Change of Control" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than the Permitted Holders, is or becomes the "benefi-
cial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of 50%
or more of the total voting power of the outstanding Voting Equity Interests of
the Company, the General Partner, FVP GP or FV Inc., as the case may be; (b)
the Company, the General Partner, FVP GP or FV Inc., as the case may be, con-
solidates with, or merges with or into, another Person or sells, assigns, con-
veys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any Person, or any Person consolidates with, or merges with or
into, the Company, the General Partner, FVP GP or FV Inc., as the case may be,
in any such event pursuant to a transaction in which the outstanding Voting Eq-
uity Interests of the Company, the General Partner, FVP GP or FV Inc., as the
case may be, are converted into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting Equity
Interests of the Company, the General Partner, FVP GP or FV Inc., as the case
may be, are converted into or exchanged for Voting Equity Interests (other than
Disqualified Equity Interests) of the surviving or transferee Person and, imme-
diately after such transaction, the Permitted Holders or the holders of the
Voting Equity Interests of the Company, the General Partner, FVP GP or FV Inc.,
as the case may be, immediately prior thereto own, directly or indirectly, more
than 50% of the total voting power of the outstanding Voting Equity Interests
of the surviving or transferee Person; (c) during any consecutive two-year pe-
riod, individuals who at the beginning of such period constituted the Board of
Directors of the Company, the General Partner, FVP GP or FV Inc., as the case
may be (together with any new directors whose election to such Board of Direc-
tors was approved by the Permitted Holders or by a vote of at least a majority
of the directors then still in office who were either directors at the begin-
ning of such period or whose election or nomination for election was previously
so approved), cease for any reason (other than by action of the Permitted Hold-
ers) to constitute a majority of the Board of Directors of the Company, the
General Partner, FVP GP or FV Inc., as the case may be, then in office in any
such case in connection with any actual or threatened solicitation to which
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act applies or
other actual or threatened solicitation of proxies or consents; (d) any Person
or Persons other than Permitted Holders are or become entitled to appoint or
designate more than 25% of the members of the Advisory Committee; or (e) the
admission of any Person as a general partner of the Company, the General Part-
ner or FVP GP, as the case may be, after which the General Partner, FVP GP or
FV Inc., as the case may be, does not have the sole power to take all of the
actions it is entitled or required to take under the limited partnership agree-
ment of the Company, the General Partner or FVP GP, as the case may be, as in
effect on the Issue Date; provided, however, that a Change of Control will be
deemed not to have occurred in any of the foregoing circumstances (i) with re-
spect to FV Inc. (either in its own capacity or in its capacity as a direct or
indirect corporate general partner of any other Person), (ii) with respect to
or as a result of the conversion of the general partnership interest of FVP GP
in the General Partner into a limited partnership interest, or (iii) with re-
spect to the
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events in clause (e), if the change, event or condition giving rise thereto has
been approved by the Permitted Holders holding a majority in interest of the
total outstanding Equity Interests of the General Partner held by the Permitted
Holders.
"Consolidated Income Tax Expense" means, with respect to the Company for any
period, the provision for federal, state, local and foreign income taxes pay-
able by the Company and the Restricted Subsidiaries for such period as deter-
mined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any pe-
riod, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any amortiza-
tion of debt discount, (b) the net cost under Interest Rate Protection Obliga-
tions (including any amortization of discounts), (c) the interest portion of
any deferred payment obligation, (d) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance fi-
nancing and (e) all capitalized interest and all accrued interest, (ii) the in-
terest component of Capitalized Lease Obligations paid, accrued and/or sched-
uled to be paid or accrued by the Company and the Restricted Subsidiaries dur-
ing such period as determined on a consolidated basis in accordance with GAAP
and (iii) dividends and distributions in respect of Disqualified Equity Inter-
ests actually paid in cash by the Company during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income of
the Company and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (i) all ex-
traordinary gains or losses and all gains and losses from the sale or other
disposition of assets out of the ordinary course of business (net of taxes,
fees and expenses relating to the transaction giving rise thereto) for such pe-
riod, (ii) that portion of such net income derived from or in respect of in-
vestments in Persons other than Restricted Subsidiaries, except to the extent
actually received in cash by the Company or any Restricted Subsidiary, (iii)
the portion of such net income (or loss) allocable to minority interests in un-
consolidated Persons for such period, except to the extent actually received in
cash by the Company or any Restricted Subsidiary (subject, in the case of any
Restricted Subsidiary, to the provisions of the immediately following sentence
of this definition) and (iv) net income (or loss) of any other Person combined
with the Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination. In calculating
Consolidated Net Income as a component of Consolidated Operating Cash Flow (x)
for purposes of calculating the Debt to Operating Cash Flow Ratio in connection
with determining whether an Incurrence of Indebtedness by the Company (but not
the Restricted Subsidiaries) is permitted under the Debt to Operating Cash Flow
Ratio of the first paragraph of "Covenants--Limitation on Indebtedness" and (y)
for purposes of calculating (I) Cumulative Available Cash Flow pursuant to
clause (c)(1) of "Covenants--Limitation on Restricted Payments" and (II) the
Debt to Operating Cash Flow Ratio pursuant to clause (b) under "Covenants--Lim-
itation on Restricted Payments" in connection with determining whether a Re-
stricted Payment by the Company pursuant to clauses (i), (ii) or (iii) under
"Covenants--Limitation on Restricted Payments" is permitted under such cove-
nant, the net income of any Restricted Subsidiary shall be excluded to the ex-
tent that the declaration of dividends or similar distributions by that Re-
stricted Subsidiary of that income is not at the time (regardless of any waiv-
er) permitted, directly or indirectly, by reason of any Payment Restriction;
provided, however, that that net income shall not be so excluded in determining
whether the Company could incur $1.00 of Indebtedness under the Debt to Operat-
ing Cash Flow Ratio of the first paragraph under "Covenants--Limitation on In-
debtedness" (a) (or in calculating Cumulative Available Cash Flow) for purposes
of determining whether any Restricted Payment other than those referred to in
clause (y) of this sentence is permitted under "Covenants--Limitation on Re-
stricted Payments," (B) for purposes of determining whether a Designation is
permitted pursuant to clause (b) under "Covenants--Designation of Unrestricted
Subsidiaries" and (C) for purposes of determining compliance with clause (c)
under "Merger, Sale of Assets, etc." (unless the applicable transaction in-
volves the Incurrence by the Company of additional Indebtedness).
"Consolidated Net Worth" with respect to any Person means the equity of the
holders of Qualified Equity Interests of such Person and its Restricted Subsid-
iaries, as reflected in a balance sheet of such Person determined on a consoli-
dated basis and in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any period, Consoli-
dated Net Income for such period increased (without duplication) by the sum of
(i) Consolidated Income Tax Expense accrued according to GAAP for such period
to the extent deducted in determining Consolidated Net Income for such period,
(ii) Consolidated Interest Expense (other than dividends on Preferred Equity
Interests) for such period to the extent deducted in determining Consolidated
Net Income for such period, and (iii) depreciation, amortization and any other
non-cash items for such period to the extent deducted in
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determining Consolidated Net Income for such period (other than any non-cash
item which requires the accrual of, or a reserve for, cash charges for any fu-
ture period) of the Company and the Restricted Subsidiaries, including, without
limitation, amortization of capitalized debt issuance costs for such period,
all of the foregoing determined on a consolidated basis in accordance with GAAP
minus non-cash items to the extent they increase Consolidated Net Income (in-
cluding the partial or entire reversal of reserves taken in prior periods) for
such period.
"Cumulative Available Cash Flow" means, as at any date of determination, the
positive cumulative Consolidated Operating Cash Flow realized during the period
commencing on the Issue Date and ending on the last day of the most recent fis-
cal quarter immediately preceding the date of determination for which consoli-
dated financial information of the Company is available or, if such cumulative
Consolidated Operating Cash Flow for such period is negative, the negative
amount by which cumulative Consolidated Operating Cash Flow is less than zero.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Total Consoli-
dated Indebtedness as of the date of calculation (the "Determination Date") to
(ii) four times the Consolidated Operating Cash Flow for the latest fiscal
quarter for which financial information is available immediately preceding such
Determination Date (the "Measurement Period"). For purposes of calculating Con-
solidated Operating Cash Flow for the Measurement Period immediately prior to
the relevant Determination Date, (I) any Person that is a Restricted Subsidiary
on the Determination Date (or would become a Restricted Subsidiary on such De-
termination Date in connection with the transaction that requires the determi-
nation of such Consolidated Operating Cash Flow) will be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period, (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such Consolidated Oper-
ating Cash Flow) will be deemed not to have been a Restricted Subsidiary at any
time during such Measurement Period, and (III) if the Company or any Restricted
Subsidiary shall have in any manner (x) acquired (including through an Asset
Acquisition or the commencement of activities constituting such operating busi-
ness) or (y) disposed of (including by way of an Asset Sale or the termination
or discontinuance of activities constituting such operating business) any oper-
ating business during such Measurement Period or after the end of such period
and on or prior to such Determination Date, such calculation will be made on a
pro forma basis in accordance with GAAP as if, in the case of an Asset Acquisi-
tion or the commencement of activities constituting such operating business,
all such transactions had been consummated on the first day of such Measurement
Period and, in the case of an Asset Sale or termination or discontinuance of
activities constituting such operating business, all such transactions had been
consummated prior to the first day of such Measurement Period.
"Default" means any event that is or with the passing of time or giving of no-
tice or both would be an Event of Default.
"Designation" has the meaning set forth under "--Covenants--Designation of Un-
restricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "--Covenants--Designation
of Unrestricted Subsidiaries" above.
"Disposition" means, with respect to any Person, any merger, consolidation or
other business combination involving such Person (whether or not such Person is
the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund ob-
ligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Notes or the date on which no Notes remain out-
standing.
"Equity Interest" in any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or inter-
ests in (however designated) corporate stock or other equity participations,
including partnership interests, whether general or limited, in such Person,
including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission thereunder.
"Fair Market Value" means, with respect to any asset, the price (after taking
into account any liabilities relating to such assets) which could be negotiated
in an arm's-length free market transaction, for cash, between a willing seller
and a
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willing and able buyer, neither of which is under pressure or compulsion to
complete the transaction; provided, however, that the Fair Market Value of any
such asset or assets shall be determined by the Board of Directors of the Com-
pany, acting in good faith, and shall be evidenced by resolutions of the Board
of Directors of the Company delivered to the Trustee.
"FV Inc." means FrontierVision Inc., a Delaware corporation.
"FVOP" means FrontierVision Operating Partners, L.P., a Delaware limited part-
nership.
"FVOP Indenture" means the Indenture dated as of October 7, 1996 among FVOP,
FrontierVision Capital Corporation and Colorado National Bank, as trustee.
"FVP GP" means FVP GP, L.P., a Delaware limited partnership.
"GAAP" means, at any date of determination, generally accepted accounting prin-
ciples in effect in the United States which are applicable at the date of de-
termination and which are consistently applied for all applicable periods.
"General Partner" means FrontierVision Partners, L.P., a Delaware limited part-
nership.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part or all of such obli-
gation and (ii) an agreement, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to maintain or preserve any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"Incur" means, with respect to any Indebtedness or other obligation of any Per-
son, to create, issue, incur (including by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such Per-
son (and "Incurrence", "Incurred" and "Incurring" shall have meanings correla-
tive to the foregoing). Indebtedness of any Person or any of its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary (or is merged
into or consolidates with the Company or any Restricted Subsidiary), whether or
not such Indebtedness was incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into or consoli-
dated with the Company or any Restricted Subsidiary), shall be deemed Incurred
at the time any such Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other simi-
lar instruments, including obligations Incurred in connection with the acquisi-
tion of property, assets or businesses, (iii) every reimbursement obligation of
such Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable incurred in the ordinary course of busi-
ness and payable in accordance with industry practices, or other accrued lia-
bilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capitalized Lease Obliga-
tion of such Person, (vi) every net obligation under interest rate swap or sim-
ilar agreements or foreign currency hedge, exchange or similar agreements of
such Person, (vii) every obligation of the type referred to in clauses (i)
through (vi) of another Person and all dividends of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or lia-
ble for, directly or indirectly, as obligor, guarantor or otherwise, and (viii)
any and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i) through (vii) above. Indebtedness (i) shall never be
calculated taking into account any cash and cash equivalents held by such Per-
son, (ii) shall not include obligations of any Person (x) arising from the hon-
oring by a bank or other financial institution of a check, draft or similar in-
strument inadvertently drawn against insufficient funds in the ordinary course
of business, provided that such obligations are extinguished within two Busi-
ness Days of their incurrence unless covered by an overdraft line, (y) result-
ing from the endorsement of negotiable instruments for collection in the ordi-
nary course of business and consistent with past business practices and (z) un-
der stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents, (iii) which provides that an amount
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less than the principal amount thereof shall be due upon any declaration of ac-
celeration thereof shall be deemed to be Incurred or outstanding in an amount
equal to the accreted value thereof at the date of determination, (iv) shall
include the liquidation preference and any mandatory redemption payment obliga-
tions in respect of any Disqualified Equity Interests of the Company or any Re-
stricted Subsidiary and (v) shall not include obligations under performance
bonds, performance guarantees, surety bonds and appeal bonds, letters of credit
or similar obligations, incurred in the ordinary course of business, including
in connection with the requirements of cable television franchising authori-
ties, and otherwise consistent with industry practice.
"Independent Financial Advisor" means a nationally recognized investment bank-
ing firm (i) which does not, and whose directors, officers and employees or Af-
filiates do not, have a direct or indirect financial interest in the Company
and (ii) which, in the judgment of the Board of Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Interest Payment Date" means each of March 15 and September 15.
"Interest Rate Protection Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other agree-
ments or arrangements designed to protect such Person against fluctuations in
interest rates.
"Investment" means, with respect to any Person, any advance, loan, account re-
ceivable (other than an account receivable arising in the ordinary course of
business) or other extension of credit (including, without limitation, by means
of any guarantee) or any capital contribution to (by means of transfers of
property to others, payments for property or services for the account or use of
others, or otherwise), or any purchase or ownership of any stocks, bonds,
notes, debentures or other securities of, any other Person.
"Issue Date" means the date of original issuance of the Notes under the Inden-
ture.
"Lien" means any lien, mortgage, charge, security interest, hypothecation, as-
signment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the na-
ture thereof, and any agreement to give any security interest).
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash
Equivalents received by the Company or any Restricted Subsidiary in respect of
any Asset Sale, including all cash or Cash Equivalents received upon any sale,
liquidation or other exchange of proceeds of Asset Sales received in a form
other than cash or Cash Equivalents, net of (i) the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and invest-
ment banking fees, and sales commissions) and any relocation expenses Incurred
as a result thereof, (ii) taxes paid or payable as a result thereof (after tak-
ing into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to the repayment of Indebt-
edness secured by a Lien on the asset or assets that were the subject of such
Asset Sale, (iv) amounts deemed, in good faith, appropriate by the Board of Di-
rectors of FV Inc. to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been re-
leased or are not otherwise required to be retained as a reserve) and (v) with
respect to Asset Sales by Restricted Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such Restricted
Subsidiaries.
"Offer to Purchase" means a written offer (the "Offer") sent by or on behalf of
the Company by first class mail, postage prepaid, to each holder at his address
appearing in the register for the Notes on the date of the Offer offering to
purchase up to the Accreted Value of Notes specified in such Offer at the pur-
chase price specified in such Offer (as determined pursuant to the Indenture).
Unless otherwise required by applicable law, the Offer shall specify an expira-
tion date (the "Expiration Date") of the Offer to Purchase, which shall be not
less than 20 Business Days nor more than 60 days after the date of such Offer
and a settlement date (the "Purchase Date") for purchase of Notes to occur no
later than five Business Days after the Expiration Date. The Company shall no-
tify the Trustee at least 15 Business Days (or such shorter period as is ac-
ceptable to the Trustee) prior to the mailing of the Offer of the Company's ob-
ligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the ex-
pense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such holders to tender Notes pursuant to the
Offer to Purchase. The Offer shall also state:
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(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate Principal Amount at Maturity of the outstanding Notes of-
fered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than all of the Notes, the manner by which such
amount has been determined pursuant to the Section of the Indenture re-
quiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 aggregate
Principal Amount at Maturity of Notes accepted for payment (as speci-
fied pursuant to the Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Notes registered
in the name of such holder and that any portion of a Note tendered in a
denomination of less than $1,000 Principal Amount at Maturity must be
tendered in whole;
(6) the place or places where Notes are to be surrendered for tender pursu-
ant to the Offer to Purchase;
(7) that Notes not tendered or tendered but not purchased by the Company
pursuant to the Offer to Purchase will continue to accrete Accreted
Value as provided in the Indenture;
(8) that interest on any Note not tendered or tendered but not purchased by
the Company pursuant to the Offer to Purchase will continue to accrue
as provided the Indenture;
(9) that on the Purchase Date the Purchase Price will become due and pay-
able upon each Note being accepted for payment pursuant to the Offer to
Purchase and that the Accreted Value thereof will cease to increase on
and that interest thereon shall cease to accrue on and after the Pur-
chase Date;
(10) that each holder electing to tender all or any portion of a Note pur-
suant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the holder thereof or his attorney duly au-
thorized in writing);
(11) that holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than
the close of business on the fifth Business Day next preceding the Ex-
piration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount at maturity
of the Note the holder tendered, the certificate number of the Note
the holder tendered and a statement that such holder is withdrawing
all or a portion of his tender;
(12) that if Notes with an aggregate Accreted Value less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase all such Notes and
(b) if Notes with an aggregate Accreted Value in excess of the Pur-
chase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Notes with an aggregate Accreted
Value equal to the Purchase Amount on a pro rata basis (with such ad-
justments as may be deemed appropriate so that no Notes in denomina-
tions of less than $1,000 Principal Amount at Maturity are purchased
in part); and
(13) that in the case of any holder whose Note is purchased only in part,
the Company shall execute and the Trustee shall authenticate and de-
liver to the holder of such Note without service charge a new Note or
Notes, of any authorized denomination as requested by such holder, in
an Aggregate Principal Amount at Maturity equal to and in exchange for
the unpurchased portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"Payment Restriction" has the meaning set forth under "Covenants--Limitation on
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries."
"Permitted Holders" means any of (a) the General Partner, FVP GP or FV Inc. for
so long as a majority of the voting power of the Voting Equity Interests of
such Person is beneficially owned by any of the Persons listed in the other
clauses of this definition, (b) James C. Vaughn, the President and Chief Execu-
tive Officer of FV Inc. on the Issue Date, (c) John S. Koo, the Senior Vice
President and Chief Financial Officer of FV Inc. on the Issue Date, (d) any of
J. P. Morgan Investment Corporation, a Delaware corporation, Olympus Cable
Corp., a Delaware corporation, First Union Capital Partners, Inc., a Virginia
corporation, and 1818 II Cable Corp., a Delaware corporation, (e) any Person
controlling, controlled by or under common control with any other Person de-
scribed in clauses (a)-(d) of this definition and (f) (i) the spouse or chil-
dren of any
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Person named in clause (b) or (c) of this definition and any trust for the
benefit of any such Persons or their respective spouses or children; provided,
however, that with respect to any such trust, such Persons have the sole right
to direct and control any such trust and any Voting Equity Interest owned by
such trust, and (ii) any such Person's estate, executor, administrator and
heirs.
"Permitted Investments" means (a) Cash Equivalents, (b) Investments in prepaid
expenses, negotiable instruments held for collection and lease, utility and
workers' compensation, performance and other similar deposits, (c) loans and
advances to employees made in the ordinary course of business not to exceed $1
million in the aggregate at any one time outstanding, (d) Interest Rate Pro-
tection Obligations, (e) bonds, notes, debentures or other securities received
as a result of Asset Sales permitted under "--Covenants--Disposition of Pro-
ceeds of Asset Sales" above not to exceed 25% of the total consideration for
such Asset Sales, (f) transactions with officers, directors and employees of
the Company, the General Partner, FVP GP, FV Inc. or any Restricted Subsidiary
entered into in the ordinary course of business (including compensation or em-
ployee benefit arrangements with any such director or employee) and consistent
with past business practices, (g) Investments existing as of the Issue Date
and any amendment, extension, renewal or modification thereof to the extent
that any such amendment, extension, renewal or modification does not require
the Company or any Restricted Subsidiary to make any additional cash or non-
cash payments or provide additional services in connection therewith, (h) any
Investment for which the sole consideration provided is Qualified Equity In-
terests of the Company and (i) any Investment consisting of a guarantee per-
mitted under clause (e) of "--Covenants--Limitation on Indebtedness" above.
"Permitted Liens" means (a) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company; provided, howev-
er, that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not secure any property or assets of the Com-
pany or any Restricted Subsidiary other than the property or assets subject to
the Liens prior to such merger or consolidation, (b) Liens imposed by law such
as carriers', warehousemen's and mechanics' Liens and other similar Liens
arising in the ordinary course of business which secure payment of obligations
not more than sixty (60) days past due or which are being contested in good
faith and by appropriate proceedings, (c) Liens existing on the Issue Date,
(d) Liens securing the Notes, (e) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently con-
cluded; provided, however, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor, (f)
easements, reservation of rights-of-way, restrictions and other similar ease-
ments, licenses, restrictions on the use of properties, or minor imperfections
of title that in the aggregate are not material in amount and do not in any
case materially detract from the properties subject thereto or interfere with
the ordinary conduct of the business of the Company and the Restricted Subsid-
iaries, (g) Liens resulting from the deposit of cash or securities in connec-
tion with contracts, tenders or expropriation proceedings, or to secure work-
ers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise ar-
rangements entered into in the ordinary course of business, (h) Liens securing
Indebtedness consisting of Capitalized Lease Obligations of the Company, Pur-
chase Money Indebtedness of the Company, mortgage financings of the Company,
industrial revenue bonds of the Company or other monetary obligations of the
Company, in each case Incurred solely for the purpose of financing all or any
part of the purchase price or cost of construction or installation of assets
used in the business of the Company, or repairs, additions or improvements to
such assets, provided, however, that (I) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of
any such assets or repair, addition or improvement thereto (plus an amount
equal to the reasonable fees and expenses in connection with the Incurrence of
such Indebtedness), (II) such Liens do not extend to any other assets of the
Company or the Restricted Subsidiaries (and, in the case of repairs, additions
or improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
Incurrence of such Indebtedness is permitted by "--Covenants--Limitation on
Indebtedness" above and (IV) such Liens attach within 90 days of such pur-
chase, construction, installation, repair, addition or improvement, (i) Liens
to secure any refinancings, renewals, extensions, modifications or replace-
ments (collectively, "refinancing") (or successive refinancings), in whole or
in part, of any Indebtedness secured by Liens referred to in the clauses above
so long as such Lien does not extend to any other property (other than im-
provements thereto), and (j) Liens securing letters of credit entered into in
the ordinary course of business and consistent with past business practice.
"Permitted Strategic Investment" means an Investment in a Person (including,
without limitation, a Restricted Subsidiary which is not a Wholly Owned Re-
stricted Subsidiary or an Unrestricted Subsidiary) engaged in a Related Busi-
ness if, at the time of and immediately after giving pro forma effect to such
Investment (and any related transaction or series of transactions), the Debt
to Operating Cash Flow Ratio would be less than or equal to (i) 7.0 to 1.0, if
the date of such Investment is on or before December 31, 1998, and (ii) 6.5 to
1.0 thereafter.
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"Person" means any individual, corporation, partnership, joint venture, associ-
ation, joint-stock company, limited liability company, limited liability lim-
ited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any volun-
tary or involuntary liquidation or dissolution of such Person, over Equity In-
terests of any other class in such Person.
"Principal Amount at Maturity" means, with respect to each $1,000 original
principal amount at maturity of the Notes, (i) $1,000, if no Cash Interest
Election is made by the Company, or (ii) if the Cash Interest Election is made,
the Accreted Value of such Notes as of the Interest Payment Date on which the
Cash Interest Election is made.
"Public Equity Offering" means, with respect to any Person, a public offering
by such Person of some or all of its Qualified Equity Interests, the net pro-
ceeds of which (after deducting any underwriting discounts and commissions) ex-
ceed $25.0 million.
"Purchase Date" has the meaning set forth in the definition of "Offer to Pur-
chase".
"Purchase Money Indebtedness" means Indebtedness of the Company or any Re-
stricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not ex-
ceed the lesser of the Fair Market Value of such property or such purchase
price or cost.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Related Business" means a cable or broadcast television, telecommunications,
Internet or data transmission business or a business reasonably related
thereto.
"Restricted Subsidiary" means any Subsidiary of the Company that has not been
designated by the Board of Directors of the Company by a resolution of the
Board of Directors of the Company delivered to the Trustee as an Unrestricted
Subsidiary pursuant to "--Covenants--Designation of Unrestricted Subsidiaries"
above. Any such designation may be revoked by a resolution of the Board of Di-
rectors of the Company delivered to the Trustee, subject to the provisions of
such covenant.
"Senior Credit Facility" means the Amended and Restated Credit Agreement, dated
as of April 9, 1996, among FVOP, the lenders named therein, The Chase Manhattan
Bank, as Administrative Agent, J.P. Morgan Securities Inc., as Syndication
Agent, and CIBC Inc., as Managing Agent, including any deferrals, renewals, ex-
tensions, restatements, replacements, refinancings or refundings thereof or
amendments, modifications or supplements thereto, and any agreement providing
therefor, whether by or with the same or any other lender, creditor, group or
groups of lenders or group or groups of creditors, and including related notes,
guarantee and security agreements and other instruments and agreements executed
in connection therewith.
"Significant Restricted Subsidiary" means, at any date of determination, (a)
any Restricted Subsidiary that, together with its Subsidiaries that constitute
Restricted Subsidiaries, (i) for the most recent fiscal year of the Company ac-
counted for more than 10.0% of the consolidated revenues of the Company and the
Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned more
than 10.0% of the consolidated assets of the Company and the Restricted Subsid-
iaries, all as set forth on the consolidated financial statements of the Com-
pany and the Restricted Subsidiaries for such year prepared in conformity with
GAAP, and (b) any Restricted Subsidiary which, when aggregated with all other
Restricted Subsidiaries that are not otherwise Significant Restricted Subsidi-
aries and as to which any event described in clause (h) of "--Events of De-
fault" above has occurred, would constitute a Significant Restricted Subsidiary
under clause (a) of this definition.
"Stated Maturity," when used with respect to any Note or any installment of in-
terest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Strategic Equity Investment" means the issuance and sale of Qualified Equity
Interests of the Company for net proceeds to the Company of at least $25.0 mil-
lion to a Person engaged primarily in the cable television, wireless cable
television, telephone or interactive television business.
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"Subordinated Indebtedness" means any Indebtedness of the Company which is ex-
pressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person or (ii) any other Person of which at
least a majority of Voting Equity Interests are at the time, directly or indi-
rectly, owned by such first named Person.
"Subsidiary Guarantee" means any guarantee of the Issuers' obligations under
the Indenture and the Notes issued after the Issue Date pursuant to "--Cove-
nants--Limitation on Guarantees of Indebtedness by Restricted Subsidiaries"
above.
"Subsidiary Guarantor" means any Subsidiary of the Company that guarantees the
Issuers' obligations under the Indenture and the Notes issued after the Issue
Date pursuant to "--Covenants--Limitation on Guarantees of Indebtedness by Re-
stricted Subsidiaries" above.
"Surviving Person" means, with respect to any Person involved in or that makes
any Disposition, the Person formed by or surviving such Disposition or the Per-
son to which such Disposition is made.
"Total Consolidated Indebtedness" means, as at any date of determination, an
amount equal to the aggregate amount of all Indebtedness and Disqualified Eq-
uity Interests of the Company and the Restricted Subsidiaries outstanding as of
such date of determination.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to the provisions of "--Covenants--Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Directors of the Company delivered to the Trustee, subject to the pro-
visions of such covenant.
"Voting Equity Interests" means Equity Interests in a corporation or other Per-
son with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such corpo-
ration or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required scheduled payment of principal,
including payment of final maturity, in respect thereof by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding aggregate
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of the
outstanding Voting Equity Interests (other than directors' qualifying shares)
of which are owned, directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered form
without interest coupons.
Notes sold in offshore transactions in reliance on Regulation S under the Secu-
rities Act will initially be represented by a single, temporary global Note in
definitive, fully registered form without interest coupons (the "Temporary Reg-
ulation S Global Note") and will be deposited with the Trustee as custodian for
The Depositary Trust Company, as depositary (the "Depositary"), and registered
in the name of a nominee of the Depositary for the accounts of Euroclear and
Cedel. The Temporary Regulation S Global Note will be exchangeable for a sin-
gle, permanent global note (the "Permanent Regulation S Global Note", and, to-
gether with the Temporary Regulation S Global Note, the "Regulation S Global
Note") on or after the 40th day after the later of the commencement of the Of-
fering and the Issue Date. Prior to such date, beneficial interests in the Tem-
porary Regulation S Global Note may be only held through Euroclear or Cedel,
and any resale or other transfer of such interests to U.S. persons shall not be
permitted during such period unless such resale or transfer is made pursuant to
Rule 144A or Regulation S and in accordance with the certification requirements
described below.
Notes sold in reliance on Rule 144A will be represented by a single, permanent
global Note in definitive, fully registered form without interest coupons (the
"Restricted Global Note") and will be deposited with the Trustee as custodian
for and registered in the name of a nominee of the Depositary. The Restricted
Global Note and the Temporary Regulation S Global
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Note (and any Notes issued in exchange therefor) will be subject to certain re-
strictions on transfer set forth therein and will bear the legend regarding
such restrictions set forth under "Notice to Investors."
Prior to the 40th day after the later of the commencement of the Offering and
the Issue Date, a beneficial interest in the Temporary Regulation S Global Note
may be transferred to a person who takes delivery in the form of an interest in
the Restricted Global Note only upon receipt by the Trustee of a written certi-
fication from the transferor to the effect that such transfer is being made to
a person whom the transferor reasonably believes is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the require-
ments of Rule 144A. Beneficial interests in the Restricted Global Note may be
transferred to a person who takes delivery in the form of an interest in the
Regulation S Global Note whether before, on or after such 40th day, only upon
receipt by the Trustee of a written certification to the effect that such
transfer is being made in accordance with Regulation S. Any beneficial interest
in the Global Notes (as defined) that is transferred to a person who takes de-
livery in the form of an interest in the other Global Note will, upon transfer,
cease to be an interest in such Global Note and become an interest in the other
Global Note and, accordingly, will thereafter be subject to all transfer re-
strictions, if any, and other procedures applicable to beneficial interests in
such other Global Note for as long as it remains such an interest.
THE GLOBAL NOTES
Upon the issuance of the Regulation S Global Note and the Restricted Global
Note (each a "Global Note" and together the "Global Notes"), the Depositary or
its custodian will credit on its internal system the respective principal
amount at maturity of the individual beneficial interests represented by such
Global Note to the accounts of persons who have accounts with the Depositary.
Such accounts initially will be designated by or on behalf of the Initial Pur-
chasers. Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with the Depositary ("participants") or persons who
hold interests through participants. Ownership of beneficial interests in a
Global Note will be shown on, and the transfer of that ownership will be ef-
fected only through, records maintained by the Depositary or its nominee (with
respect to interests of participants) and the records of participants (with re-
spect to interests of persons other than participants). Qualified institutional
buyers may hold their interests in a Global Note directly through the Deposita-
ry, if they are participants in such system, or indirectly through organiza-
tions which are participants in such system.
Investors may hold their interests in the Regulation S Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or indi-
rectly through organizations that are participants in such system. Beginning 40
days after the later of the commencement of the Offering and the Issue Date
(but not earlier), investors may also hold such interests through organizations
other than Cedel or Euroclear that are participants in the Depositary's system.
Cedel and Euroclear will hold interests in the Regulation S Global Note on be-
half of their participants through the Depositary.
So long as the Depositary, or its nominee, is the registered holder of a Global
Note, the Depositary or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with the procedures provided for under "Notice to Investors," as well as the
Depositary's applicable procedures and, if applicable, those of Euroclear and
Cedel.
Payments of the Accreted Value of, the principal of, and interest on, the
Global Notes will be made to the Depositary or its nominee, as the case may be,
as the registered owner thereof. None of the Issuers, the Trustee or any Paying
Agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Notes or for maintaining, supervising or reviewing any records re-
lating to such beneficial ownership interests.
The Issuers expect that the Depositary or its nominee, upon receipt of any pay-
ment of Accreted Value, principal or interest in respect of a Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount at maturity of such
Global Note as shown on the records of the Depositary or its nominee. The Is-
suers also expect that payments by participants to owners of beneficial inter-
ests in such Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with securi-
ties held for the accounts of customers registered in the name of nominees for
such customers. Such payments will be the responsibility of such participants.
Transfers between participants in the Depositary will be effected in the ordi-
nary way in accordance with the Depositary's rules and will be settled in same-
day funds.
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The Depositary has advised the Issuers that it will take any action permitted
to be taken by a holder of Notes (including the presentation of Notes for ex-
change as described below) only at the direction of one or more participants to
whose accounts an interest in the Global Notes is credited and only in respect
of such portion of the aggregate principal amount at maturity of Notes as to
which such participant or participants has or have given such direction.
The Depositary has advised the Issuers as follows: the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of New York Banking Law, 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 pro-
visions of Section 17A of the Exchange Act. The Depositary was created to hold
securities for its 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 phys-
ical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other or-
ganizations. Indirect access to the Depositary system is available to others
such as banks, brokers, dealers and trust companies that clear through or main-
tain a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although the Depositary, Euroclear and Cedel have agreed to the foregoing pro-
cedures in order to facilitate transfers of interests in the Global Notes among
participants of the Depositary, Euroclear and Cedel, they are under no obliga-
tion to perform or continue to perform such procedures, and such procedures may
be discontinued at any time. Neither the Issuers nor the Trustee will have any
responsibility for the performance by the Depositary, Euroclear or Cedel or
their respective participants or indirect participants of their respective ob-
ligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
If the Depositary is at any time unwilling or unable to continue as a deposi-
tary for the Global Notes and a successor depositary is not appointed by the
Issuers within 90 days, the Issuers will issue certificated notes in exchange
for the Global Notes which will bear the legend referred to under the heading
"Notice to Investors."
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion is a summary of material United States federal income
tax consequences of the purchase, ownership and disposition of the Notes, but
does not purport to be a complete analysis of all potential tax effects. This
summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed regulations thereunder, published rulings and
court decisions, all as in effect and existing on the date hereof and all of
which are subject to change at any time, which change may be retroactive. Un-
less otherwise specifically noted, this summary applies only to those persons
who are the initial holders of Notes, who acquired the Notes for cash and who
hold Notes as capital assets ("Holders") and does not address the tax conse-
quences to taxpayers who are subject to special rules (such as financial insti-
tutions, tax-exempt organizations, insurance companies, S corporations, regu-
lated investment companies, real estate investment trusts, broker-dealers, tax-
payers subject to the alternative minimum tax, persons that will hold Notes as
part of a position in a "straddle" or as part of a "hedging" or "conversion"
transaction, foreign corporations, foreign partnerships, foreign trusts, for-
eign estates and persons who are not citizens or residents of the United
States) or aspects of federal income taxation that may be relevant to a pro-
spective investor based upon such investor's particular tax situation. Accord-
ingly, Holders of Notes should consult their own tax advisors with respect to
the particular consequences to them of the purchase, ownership and disposition
of the Notes, including the applicability of any state, local or foreign tax
laws to which they may be subject, as well as with respect to the possible ef-
fects of changes in federal and other tax laws.
The following discussion is based on the position that, for federal income tax
purposes, Holdings will be deemed to be the sole issuer of the Notes, insofar
as Holdings Capital will have nominal assets and no business operations.
EFFECT OF EXCHANGE OF OLD NOTES FOR EXCHANGE NOTES
The Issuers believe that the exchange of Old Notes for Exchange Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because the Exchange Notes will not be considered to differ mate-
rially in kind or extent from the Old Notes. Rather, the Exchange Notes re-
ceived by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, there will be no federal income tax conse-
quences to holders exchanging Old Notes for Exchange Notes pursuant to the Ex-
change Offer.
ORIGINAL ISSUE DISCOUNT; SPECIAL INTEREST
Because the Notes are being issued at a discount from their "stated redemption
price at maturity," the Notes will have original issue discount ("OID") for
federal income tax purposes. For federal income tax purposes, OID on a Note
will be the excess of the stated redemption price at maturity of the Note over
its "issue price." The issue price of the Notes will be the first price at
which a substantial amount of the Notes is sold to the public (excluding sales
to bond houses, brokers, or similar persons or organizations acting in the ca-
pacity of underwriters or wholesalers). For purposes of this discussion, it is
assumed that all initial Holders will purchase their Notes at the issue price.
The stated redemption price at maturity of a Note will be the sum of all pay-
ments to be made on such Note, including all stated interest payments, other
than payments of "qualified stated interest." Qualified stated interest is
stated interest that is unconditionally payable at least annually at a single
fixed rate that appropriately takes into account the length of the interval be-
tween payments. Because there will be no required payment of interest on the
Notes until March 15, 2002, none of the interest payments on the Notes, under
the stated payment schedule, will constitute qualified stated interest. It is
anticipated that the stated redemption price at maturity of the Notes will ex-
ceed their issue price by more than a de minimis amount. Therefore, each Note
will bear OID in an amount equal to the excess of (i) the sum of its principal
amount and all stated interest payments over (ii) its issue price.
A Holder will be required to include OID in income periodically over the term
of a Note before receipt of the cash or other payment attributable to such in-
come, regardless of the Holder's method of tax accounting. The amount of OID
required to be included in a Holder's gross income for any taxable year is the
sum of the "daily portions" of OID with respect to the Note for each day during
the taxable year or portion of a taxable year during which such Holder holds
the Note. The daily portion is determined by allocating to each day of any "ac-
crual period" within a taxable year a pro rata portion of an amount equal to
the "adjusted issue price" of the Note at the beginning of the accrual period
multiplied by the "yield to maturity" of the Note. For purposes of computing
OID, the Company will use six-month accrual periods that end on the days in the
calendar year corresponding to the maturity date of the Notes and the date six
months prior to such maturity date, with the exception of an initial short ac-
crual period. The adjusted issue price of a Note at the beginning of any
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accrual period is the issue price of the Note increased by the amount of OID
previously includible in the gross income of the Holder, and decreased by any
payments (excluding Special Interest) previously made on the Note. The yield to
maturity is the discount rate that, when used in computing the present value of
all payments of principal and interest to be made on the Note, produces an
amount equal to the issue price of the Note. The Issuers are obligated to pay
additional interest ("Special Interest") to the Holder under certain circum-
stances described above. Any such payments should be treated for tax purposes
as interest, taxable to Holders as such payments become fixed and payable. No
amount of Special Interest is being included in computing the yield to maturity
of the Notes because it is currently believed that the Issuers will take all
steps necessary to avoid incurring the obligation to pay Special Interest. A
Holder's tax basis in a Note will be increased by the amount of any OID includ-
ible in the Holder's income under the rules discussed above and decreased by
the amount of any payment (including payments of stated interest but excluding
payments of Special Interest) with respect to the Note.
In the event the Issuers make the Cash Interest Election, the payments of in-
terest made pursuant to the Cash Interest Election should be treated first, as
payments of accrued OID, and second, as payments of principal. The IRS may take
the position, however, that the interest paid pursuant to the Cash Interest
Election should be treated as a "pro rata prepayment" of a portion of the Note.
A pro rata prepayment would be treated as a payment in retirement of a portion
of the Note, which may result in gain or loss to the Holder, as described in
the section entitled "Sale, Exchange, or Redemption of Senior Discount Notes."
ACQUISITION OR BOND PREMIUM AND MARKET DISCOUNT
A Holder who purchases a Note subsequent to its original issuance for an amount
that is greater than its adjusted issue price as of the purchase date will be
considered to have purchased such Note at an "acquisition premium." The amount
of OID that such Holder must include in its gross income with respect to such
Note for any taxable year is generally reduced by the portion of such acquisi-
tion premium properly allocable to such year.
A U.S. Holder who purchases a Note at a cost in excess of its principal amount
will be considered to have purchased the Note at a premium, and may make an
election, applicable to all Notes held by such holder, to amortize such premi-
um, using a constant yield method, over the remaining term of the Note (or, if
a smaller amortization allowance would result, by computing such allowance with
reference to the amount payable on an earlier call date, and by amortizing such
allowance over the shorter period to such call date).
If a Holder purchases, subsequent to its original issuance, a Note for an
amount that is less than its "revised issue price" as of the purchase date, the
amount of the difference generally will be treated as "market discount," unless
such difference is less than a specified de minimis amount. The Code provides
that the revised issue price of a Note equals its issue price plus the amount
of OID includable in the income of all holders for periods prior to the pur-
chase date (disregarding any deduction for acquisition premium) reduced by the
amount of all prior cash payments on the Note. Subject to a de minimis excep-
tion, a Holder will be required to treat any gain recognized on the sale, ex-
change, redemption, retirement or other disposition of the Note as ordinary in-
come to the extent of the accrued market discount that has not previously been
included in income. In addition, the Holder may be required to defer, until the
maturity date of the Note or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the Note, unless the Holder
elects to accrue market discount on a constant interest method. A Holder of a
Note may elect to include market discount in income currently as it accrues
(under either the ratable or constant interest method). This election to in-
clude currently, once made, applies to all market discount obligations acquired
in or after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. If the Holder of Notes makes such an
election, the foregoing rules with respect to the recognition of ordinary in-
come on sales and other dispositions of such instruments, and with respect to
the deferral of interest deductions on debt incurred or maintained to purchase
or carry such debt instruments, would not apply.
EFFECT OF MANDATORY AND OPTIONAL REDEMPTION ON OID
The Issuers may redeem the Notes, in whole or in part, at any time on or after
September 15, 2001, at redemption prices specified elsewhere herein plus ac-
crued interest to the date of redemption. The Treasury Regulations contain
rules for determining the "maturity date" and the stated redemption price at
maturity of an instrument that may be redeemed prior
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to its stated maturity date at the option of the issuer. Under the OID rules,
solely for purposes of the accrual of OID, it is assumed that the issuer will
exercise any option to redeem a debt instrument if such exercise will lower the
yield-to-maturity of the debt instrument. The Issuers believe that it would not
be presumed to exercise their right to redeem the Notes prior to their stated
maturity under these rules.
In the event of certain Public Equity Offerings or Strategic Equity Investments
(as defined in the Indenture) prior to September 15, 2000, the Issuers at their
option may redeem up to 35% of the aggregate principal amount at maturity of
the Notes then outstanding at redemption prices specified elsewhere herein;
provided that at least 65% in aggregate principal amount at maturity of the
Notes originally issued remains outstanding immediately after such redemption.
See "Description of the Notes--Optional Redemption." The Treasury Regulations
contain rules for determining the "maturity date" and the stated redemption
price at maturity of an instrument that may be redeemed prior to its stated ma-
turity date upon the occurrence of one or more contingencies. Under such Trea-
sury Regulations, if the timing and amounts of the payments that comprise each
payment schedule are known as of the issue date, the "maturity date" and stated
redemption price at maturity of such an instrument are determined by assuming
that payments will be made according to the instrument's stated payment sched-
ule, unless based upon all the facts and circumstances as of the issue date, it
is more likely than not that the instrument's stated payment schedule will not
occur. The Issuers believe that under these regulations, the "maturity date"
and stated redemption price at maturity of the Notes would be determined on the
basis of the stated maturity and stated payment schedule, because such stated
maturity and stated payment schedule are more likely than not to occur based on
the facts and circumstances known as of the issue date.
If, notwithstanding the foregoing, it is presumed that the Issuers will exer-
cise their option to redeem, then the maturity date of the Notes for the pur-
pose of calculating yield to maturity would be the exercise date of such op-
tional redemption right and the stated redemption price at maturity for each
Note would equal the amount payable upon such redemption. If, subsequently, the
optional redemption right is not exercised, then, for purposes of the OID
rules, the Issuers would be treated as having issued on the presumed exercise
date of the optional redemption right a new debt instrument in exchange for the
existing instrument. The new debt instrument deemed issued would have an issue
price equal to the call price. As a result, another OID computation would have
to be made with respect to the constructively issued new debt instrument.
In the event of a Change of Control, as defined in the Indenture, the Issuers
will be required to offer to redeem all of the Notes at redemption prices spec-
ified elsewhere herein. See "Description of the Notes--Change of Control." Such
redemption rights should not affect, and will be treated by the Issuers as not
affecting, the determination of the yield or maturity of the Notes. Holders
should consult their own tax advisors regarding the treatment of payments upon
such a redemption.
SALE, EXCHANGE OR REDEMPTION OF SENIOR DISCOUNT NOTES
Generally, a sale, exchange or redemption of Notes will result in taxable gain
or loss equal to the difference between the amount of cash or other property
received and the Holder's adjusted tax basis in the Note. A Holder's adjusted
tax basis for determining gain or loss on the sale or other disposition of a
Note will initially equal the cost of the Note to such Holder and will be in-
creased by any amounts included in income as OID, and decreased by the amount
of any cash payments received by such Holder (excluding Special Interest) re-
gardless of whether such payments are denominated as principal or interest.
Gain or loss upon a sale, exchange, or redemption of a Note will be capital
gain or loss if the Note is held as a capital asset.
An individual will be taxed on his or her net capital gain at a maximum rate of
(i) 28%, for property held for 18 months or less but more than one year, (ii)
20%, for property held for more than 18 months and (iii) 18%, for property (X)
acquired after December 31, 2000 and (Y) held for more than five years. Special
rules (and generally lower maximum rates) apply for individuals in lower tax
brackets.
Neither an exchange of the Notes for Exchange Notes of the Issuers with terms
identical to those of the Notes nor the filing of a registration statement with
respect to the resale of the Notes should be a taxable event to the Holders of
the Notes, and Holders should not recognize any taxable gain or loss or any in-
terest income as a result of such an exchange or such a filing.
ELECTION TO TREAT ALL INTEREST AS OID
A Holder of a Note may elect, subject to certain limitations, to include all
interest that accrues on the Note in gross income on a constant-yield basis.
For purposes of this election, interest includes stated interest, OID, market
discount, de minimis market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium.
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In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the Holder's ba-
sis in the Note immediately after its acquisition, the issue date of the Note
will be the date of its acquisition by the Holder, and no payments on the Notes
will be treated as payments of qualified stated interest. The election will
generally apply only to the Note with respect to which it is made and may not
be revoked without consent of the Internal Revenue Service.
If the election to apply the constant-yield method to all interest on a Note is
made with respect to a Note on which there is market discount, the electing
Holder will be treated as having made the election described above under Acqui-
sition and Market Discount to include market discount in income currently over
the life of all debt instruments held or thereafter acquired by such Holder.
FOREIGN HOLDERS
The following is a general discussion of certain United States federal income
tax consequences of the ownership and sale or other disposition of the Notes by
a Holder that, for United States federal income tax purposes, is not a "United
States person" (a "Foreign Person"). For purposes of this discussion, a "United
States person" means a citizen or resident (as determined for United States
federal income tax purposes) of the United States; a corporation, partnership
or other entity created or organized in the United States or under the laws of
the United States or of any political subdivision thereof; an estate the income
of which is includible in gross income for U.S. federal income tax purposes,
regardless of its source; or a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States fiduciaries have the authority to control all sub-
stantial decisions of the trust. Resident alien individuals will be subject to
United States federal income tax with respect to the Notes as if they were
United States citizens.
If the income or gain on the Notes is "effectively connected with the conduct
of a trade or business within the United States" by the Foreign Person holding
the Note, such income or gain will be subject to tax essentially in the same
manner as if the Notes were held by a United States person, as discussed above,
and in the case of a Foreign Person that is a foreign corporation, may also be
subject to the branch profits tax.
If the income on the Notes is not "effectively connected," then under the
"portfolio interest" exception to the general rules for the withholding of tax
on interest and original issue discount paid to a Foreign Person, a Foreign
Person will not be subject to United States tax (or to withholding) on interest
or OID on a Note, provided that (i) the Foreign Person does not actually or
constructively own 10% or more of a capital or profits interest in Holdings
within the meaning of Section 871(h)(3) of the Code, and (ii) the Issuers,
their paying agent or the person who would otherwise be required to withhold
tax receives either (a) a statement (an "Owner's Statement") on the Internal
Revenue Service's Form W-8 signed under penalties of perjury by the beneficial
owner of the Note in which the owner certifies that the owner is not a United
States person and which provides the owner's name and address, or (B) a state-
ment signed under penalties of perjury by a financial institution holding the
Note on behalf of the beneficial owners, together with a copy of each benefi-
cial owner's Owner's Statement. Regulations proposed in April 1996, but which
have not yet gone into effect, would retain these procedures for certifying
that a Holder is a Foreign Person and would add several alternative certifica-
tion procedures. A Foreign Person who does not qualify for the "portfolio in-
terest" exception would be subject to United States withholding tax at a flat
rate of 30% (or a lower applicable treaty rate upon delivery of requisite cer-
tification of eligibility) on interest payments and payments (including pro-
ceeds from a sale, exchange or retirement) attributable to OID (and Special In-
terest) on the Notes.
If the gain on the Notes is not "effectively connected" with the conduct of a
United States trade or business, then gain recognized by a Foreign Person upon
the redemption, sale or exchange of a Note (including any gain representing ac-
crued market discount) will not be subject to United States tax unless the For-
eign Person is an individual present in the United States for 183 days or more
during the taxable year in which the Note is redeemed, sold or exchanged, and
certain other requirements are met, in which case the Foreign Person will be
subject to United States tax at a flat rate of 30% (unless exempt by applicable
treaty upon delivery of requisite certification of eligibility). Foreign Per-
sons who are individuals may also be subject to tax pursuant to provisions of
United States federal income tax law applicable to certain United States expa-
triates.
BACKUP WITHHOLDING
A Holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to payments received with respect to the Notes. This
withholding applies if the Holder (i) fails to furnish his or her social secu-
rity or
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other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN,
(iii) is notified by the Internal Revenue Service that he or she has failed to
report properly payments of interest and dividends and the Internal Revenue
Service has notified the Issuers that he or she is subject to backup withhold-
ing, or (iv) fails, under certain circumstances, to provide a certified state-
ment, signed under penalty of perjury, that the TIN provided is his or her cor-
rect number and that he or she is not subject to backup withholding. Any amount
withheld from a payment to a Holder under the backup withholding rules is al-
lowable as a credit against such Holder's U.S. federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service. Certain Holders (including, among others, corporations and foreign in-
dividuals who comply with certain certification requirements described above
under "Foreign Holders") are not subject to backup withholding. Holders should
consult their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own ac-
count pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This Prospec-
tus, as it may be amended or supplemented from time to time, may be used by any
Participating Broker-Dealer subject to the prospectus delivery requirements of
the Securities Act (other than an Excluded Participating Broker Dealer). The
Issuers have agreed that for a period of up to 180 days after the Expiration
Date, they will use their reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement this Prospectus in
order to permit this Prospectus to be lawfully delivered by all persons subject
to the prospectus delivery requirements of the Securities Act (provided that,
as set forth in the Letter of Transmittal, such persons shall have expressed
that they may be subject to such requirements and have undertaken to use their
reasonable best efforts to notify Holdings when they are no longer subject to
such requirements). In addition, until , 1997 (90 days after the commence-
ment of the Exchange Offer), all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange Notes
by Participating Broker-Dealers. Exchange Notes received by Participating Bro-
ker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Notes or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of commis-
sions or concessions from any such Participating Broker-Dealer and/or the pur-
chasers of any such Exchange Notes. Any Participating Broker-Dealer that re-
sells the Exchange Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a distribu-
tion of such Exchange Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of up to 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or supple-
ment to this Prospectus to any Participating Broker-Dealer that has provided
the Issuers, pursuant to the Letter of Transmittal, with notice of its status
as a Participating Broker-Dealer.
Certain of the Initial Purchasers and their affiliates have provided financial
advisory and investment banking and commercial banking services to the Issuers
and their affiliates in the past, for which they received customary fees, and
may do so in the future. In addition, affiliates of each of the Initial Pur-
chasers serve as lenders and agents under the Senior Credit Facility and have
received customary fees for acting in such capacities. Each of such affiliates
will receive its proportionate share of any repayment by FVOP of amounts out-
standing under the Senior Credit Facility from the proceeds of the Offering.
See "Use of Proceeds". Certain of such affiliates will extend commitments to
FVOP with respect to the New Credit Facility for which they will receive com-
pensation. See "Description of Other Indebtedness--The New Credit Facility".
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LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Issuers by Dow,
Lohnes & Albertson, PLLC, Washington, D.C.
EXPERTS
The financial statements of FrontierVision Holdings, L.P. and subsidiary as of
September 18, 1997, FrontierVision Holdings Capital Corporation as of September
18, 1997, FrontierVision Operating Partners, L.P. and Subsidiary as of Decem-
ber 31, 1996 and 1995 and for the year ended December 31, 1996 and the period
from inception through December 31, 1995, FrontierVision Partners, L.P. and
Subsidiaries as of December 31, 1996 and 1995, A-R Cable Services--ME, Inc. (a
wholly-owned subsidiary of A-R Cable Services, Inc.) as of December 31, 1996
and 1995 and the years then ended and the New Hampshire/Vermont Systems (Se-
lected Assets Acquired from TCI Communications, Inc.) as of December 31, 1996
and 1995 have been included herein in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and audit-
ing.
The financial statements for United Video Cablevision, Inc. included elsewhere
in this Prospectus have been audited by Piaker & Lyons, P.C., independent pub-
lic accountants, as indicated in their report with respect thereto. The finan-
cial statements referred to above are included in the Prospectus in reliance
upon the authority of said firm as experts in giving said reports.
The combined financial statements of Ashland and Defiance Clusters as of Decem-
ber 31, 1995 and 1994 and for the one-month period ended January 31, 1995 and
the eleven-month period ended December 31, 1995 and the years ended December
31, 1994 and 1993 and of the Cox Central Ohio Cluster as of December 31, 1996
and for the year then ended included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports appear-
ing herein, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements for C4 Media Cable Southeast, Limited
Partnership included elsewhere in this Prospectus have been audited by Wil-
liams, Rogers, Lewis & Co., P.C., independent public accountants, as indicated
in their report with respect thereto. The consolidated financial statements re-
ferred to above are included in the Prospectus in reliance upon the authority
of said firm as experts in giving said reports.
The financial statements of American Cable Entertainment of Kentucky-Indiana,
Inc. as of December 31, 1995 and 1994 and for the years ended December 31, 1995
and 1994 included in this Prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein (which
report expresses an unqualified opinion and includes an explanatory paragraph
relating to the ability of American Cable Entertainment of Kentucky-Indiana,
Inc. to continue as a going concern), and have been so included in reliance
upon the report of such firm given upon their authority as experts in account-
ing and auditing.
The financial statements of Triax Southeast Associates, L.P., included else-
where in this Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report appearing herein and elsewhere in
the Registration Statement and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
120
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement (of which
this Prospectus is a part and which term shall encompass any amendments there-
to) on Form S-4, pursuant to the Securities Act with respect to the Exchange
Offer. As permitted by the rules and regulations of the Commission, this Pro-
spectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information about
the Issuers and the Exchange Offer, reference is hereby made to the Registra-
tion Statement and to such exhibits and schedules. Statements contained herein
concerning the provisions of any documents filed as an exhibit to the Registra-
tion Statement or otherwise filed with the Commission are not necessarily com-
plete, 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.
In addition, the Issuers will be subject to the informational requirements of
the Exchange Act, and, in accordance therewith, will file reports and other in-
formation with the Commission. In addition, under the Indenture governing the
Notes, the Issuers will be required to furnish to the Trustee and to registered
holders of the Notes audited annual consolidated financial statements, unau-
dited quarterly consolidated financial reports and certain other reports. The
Registration Statement, the exhibits and schedules forming a part thereof and
the reports and other information filed by the Issuers with the Commission pur-
suant to the informational requirements of the Exchange Act may be inspected
without charge and copied upon payment of certain fees at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Of-
fices of the Commission: New York Regional Office, Seven World Trade Center,
13th Floor, New York, New York 10048, and Chicago Regional Office, Northwestern
Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Com-
mission also maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports and other information regarding regis-
trants that file electronically with the Commission.
FVOP is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Northwest Atrium, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at 450 Fifth Street, N.W., Wash-
ington, D.C. 20549. Such material may also be accessed electronically by means
of the Commission's World Wide Web site (http://www.sec.gov).
121
<PAGE>
GLOSSARY
THE FOLLOWING IS A DESCRIPTION OF CERTAIN TERMS USED IN THIS PROSPECTUS.
ACQUISITION CASH FLOW--Forecasted net income of an acquired system, for a pe-
riod believed to be appropriate based on the facts and circumstances of a spe-
cific acquisition, calculated as of the date of acquisition of such system, be-
fore interest, taxes, depreciation, amortization and corporate administrative
expenses. The Company believes that Acquisition Cash Flow is a measure commonly
used in the cable television industry to analyze and compare the purchase price
of cable television systems. However, Acquisition Cash Flow is not intended to
be an indicator of actual operating performance and is not determined in accor-
dance with generally accepted accounting principles.
A LA CARTE--The purchase of programming services on a per-channel or per-pro-
gram basis.
ADDRESSABILITY--"Addressable" technology permits the cable operator to activate
remotely the cable television services to be delivered to subscribers who are
equipped with addressable converters. With addressable technology, a cable op-
erator can add to or reduce services provided to a subscriber from the headend
site without dispatching a service technician to the subscriber's home.
BASIC PENETRATION--Basic subscribers as a percentage of the total number of
homes passed in the system.
BASIC SERVICE--A package of over-the-air broadcast stations, local access chan-
nels and certain satellite-delivered cable television services (other than pre-
mium services).
BASIC SUBSCRIBER--A subscriber to a cable or other television distribution sys-
tem who receives the basic level of cable television service and who is usually
charged a flat monthly rate for a number of channels. A home with one or more
television sets connected to a cable system is counted as one basic subscriber.
CABLE PLANT--A network of coaxial and/or fiber optic cables that transmit mul-
tiple channels carrying video-programming, sound and data between a central fa-
cility and an individual customer's television set. Networks may allow one-way
(from a headend to a residence and/or business) or two-way (from a headend to a
residence and/or business with a data return path to the headend) transmission.
CHANNEL CAPACITY--The number of video programming channels that can be carried
over a communications system.
CLUSTERING--A general term used to describe the strategy of operating cable
television systems in a specific geographic region, thus allowing for the
achievement of economies of scale and operating efficiencies in such areas as
system management, marketing and technical functions.
COAXIAL PLANT--Cable consisting of a central conductor surrounded by and insu-
lated from another conductor. It is the standard material used in traditional
cable systems. Signals are transmitted through it at different frequencies,
giving greater channel capacity than is possible with twisted pair copper wire,
but less than is possible with optical fiber.
COMPETITIVE ACCESS PROVIDER (CAP)--A company that provides its customers with
an alternative to the local telephone company for local transport of private
line, special access services and switched access services. CAPs are also re-
ferred to in the industry as alternative access vendors, alternative local
telecommunications service providers (ALTS) and metropolitan area network prov-
iders (MANs).
COST-OF-SERVICE--A general term used to refer to the regulation of prices
charged to a customer. Existing prices are set and price increases are regu-
lated by allowing a company to earn a reasonable rate of return, as determined
by the regulatory authority.
DENSITY--A general term used to describe the number of homes passed per mile of
cable plant.
DIGITAL COMPRESSION--The conversion of the standard analog video signal into
digital signal, and the compression of that signal so as to facilitate multiple
channel transmission through a single channel's bandwidth.
DIGITAL PROGRAMMING SYSTEM--A programming distribution system under which mul-
tiple channels of programming are digitally transmitted via satellite to a ca-
ble television system's headend and then retransmitted, using the cable sys-
tem's
122
<PAGE>
existing distribution platform, to subscribers equipped with special digital
converters. One such example is the Headend-in-the-Sky digital programming sys-
tem ("HITS"). The use of the HITS system enables a cable operator to transmit
from 6 to 14 digital channels using the same bandwidth as used by a single ana-
log channel and, thus, has the potential to dramatically expand a system's
channel capacity.
DIRECT BROADCAST SATELLITE (DBS)--A service by which packages of satellite-de-
livered television programming are transmitted directly into individual homes,
each serviced by a single satellite dish.
EXPANDED BASIC SERVICE--A package of satellite-delivered cable programming
services available only for additional subscription over and above the basic
level of television service.
FCC--Federal Communications Commission.
FIBER OPTICS--Technology that involves sending laser light pulses across glass
strands to transmit digital information; fiber is virtually immune to electri-
cal interference and most environmental factors that affect copper wiring and
satellite transmissions. Use of fiber optic technology reduces noise on the ca-
ble system, improves signal quality and increases system channel capacity and
reliability.
FIBER OPTIC BACKBONE CABLE--The principal fiber optic trunk lines for a cable
system which is using a hybrid fiber-coaxial architecture to deliver signals to
customers.
FIBER OPTIC TRUNK LINES--Cables made of glass fibers through which signals are
transmitted as pulses of light to the distribution portion of the cable televi-
sion system which in turn goes to the customer's home. Capacity for a very
large number of channels can be more easily provided.
FIBER-TO-THE-FEEDER--Network topology/architecture using a combination of fiber
optic cable and coaxial cable transmission lines to deliver signals to custom-
ers. Initially signals are transmitted from the headend on fiber optic trunk
lines into neighborhood nodes (an individual point of origination and termina-
tion or intersection on the network, usually where electronics are housed) and
then from the nodes to the end user on a combination of coaxial cable
distribution/feeder and drop lines. The coaxial feeder and drop lines typically
represent the operator's "last mile" of plant to the end user.
HEADEND--A collection of hardware, typically including satellite receivers,
modulators, amplifiers and video cassette playback machines, within which sig-
nals are processed and then combined for distribution within the cable network.
HOMES PASSED--Homes that can be connected to a cable distribution system with-
out further extension of the distribution network.
HFC--Hybrid fiber optic/coaxial cable design, used in a cable television sys-
tem's distribution plant.
INTERNET--The large, worldwide network of thousands of smaller, interconnected
computer networks. Originally developed for use by the military and for aca-
demic research purposes, the Internet is now accessible by millions of consum-
ers through online services.
LAN--LOCAL AREA NETWORK--A communications network that serves users within a
confined geographical area, consisting of servers, workstations, a network op-
erating system and a communications link.
MICROWAVE LINKS--The transmission of voice, video or data using microwave radio
frequencies, generally above 1 GHz, from one location to another.
MMDS--Multichannel Multipoint Distribution Service. A one-way radio transmis-
sion of programming over microwave frequencies from a fixed station transmit-
ting to multiple receiving facilities located at fixed points.
MSO--A term used to describe cable television companies that are "multiple sys-
tem operators."
NEW PRODUCT TIERS--A general term used to describe unregulated cable television
services.
OVER-THE-AIR BROADCAST STATIONS--A general term used to describe signals trans-
mitted by local television broadcast stations, including network affiliates or
independent television stations, that can be received directly through the air
by the use of a standard rooftop receiving antenna.
123
<PAGE>
PAY-PER-VIEW--Payment made for individual movies, programs or events as opposed
to a monthly subscription for a whole channel or group of channels.
PCS--Personal Communications Services, or PCS, is the name given to a new gen-
eration of cellular-like telecommunications services which are expected to pro-
vide customers new choices in wireless mobile telecommunications using digital
technology for voice and data service compared to traditional analog technolo-
gy.
PREMIUM PENETRATION--Premium service units as a percentage of the total number
of basic service subscribers. A customer may purchase more than one premium
service, each of which is counted as a separate premium service unit. This ra-
tio may be greater than 100% if the average customer subscribes to more than
one premium service unit.
PREMIUM SERVICE--An individual cable programming service available only for ad-
ditional subscription over and above the basic or expanded basic levels of ca-
ble television service.
PREMIUM UNITS--The number of subscriptions to premium services which are paid
for on an individual basis.
REBUILD--The replacement or upgrade of an existing cable system, usually under-
taken to improve either its technological performance or to expand the system's
channel or bandwidth capacity in order to provide more services.
SMATV--Satellite Master Antenna Television System. A video programming delivery
system to multiple dwelling units utilizing satellite transmissions.
TELEPHONY--The provision of telephone service.
TIERS--Varying levels of cable services consisting of differing combinations of
several over-the-air broadcast and satellite-delivered cable television pro-
gramming services.
124
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion [ALTERNATE PAGE]
Dated September 26, 1997
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
[LOGO APPEARS HERE]
$237,650,000
11 7/8% Senior Discount Notes due 2007
ISSUE PRICE: 63.118%
This Prospectus relates to offers and sales by J.P. Morgan Securities Inc. of
11 7/8% Senior Discount Notes due 2007 (the "Exchange Notes") which have been
issued by FrontierVision Holdings, L.P., a Delaware limited partnership ("Hold-
ings" or the "Company"), and FrontierVision Holdings Capital Corporation, a
Delaware corporation ("Holdings Capital") which is a wholly owned subsidiary of
Holdings. The Exchange Notes are the joint and several obligations of Holdings
and Holdings Capital (collectively, the "Issuers"). The Exchange Notes were is-
sued in a publicly registered exchange offer in exchange for 11 7/8% Senior
Discount Notes due 2007 with terms substantially identical to the Exchange
Notes (the "Old Notes," and collectively with the Exchange Notes, the "Notes").
The Notes mature on September 15, 2007, unless previously redeemed. The Notes
were issued and sold at a price of $631.18 per $1,000 original Principal Amount
at Maturity (as defined), representing a yield to maturity of 11 7/8% (computed
on a semiannual bond-equivalent basis). Unless the Issuers have previously made
the Cash Interest Election (as defined), the Notes will not accrue cash inter-
est until September 15, 2001. Cash interest on the Notes will accrue at a rate
of 11 7/8% per annum and will be payable on a semiannual basis on each March 15
and September 15, commencing on the earlier of the Interest Payment Date (as
defined) following the Cash Interest Election or March 15, 2002. The Notes are
not redeemable prior to September 15, 2001, except as set forth below. The
Notes will be redeemable at the option of the Issuers, in whole or in part, at
any time on or after September 15, 2001, at the redemption prices set forth
herein, together with accrued and unpaid interest to the redemption date. In
addition, prior to September 15, 2000, the Issuers may redeem up to 35% of the
Principal Amount at Maturity of the Notes with the net cash proceeds received
from one or more Public Equity Offerings or Strategic Equity Investments (as
such terms are defined) at a redemption price of 111.875% of the Accreted Value
thereof, plus accrued and unpaid interest, if any, to the redemption date; pro-
vided, however, that at least 65% in aggregate Principal Amount at Maturity of
the Notes originally issued remains outstanding immediately after any such re-
demption.
Upon a Change of Control (as defined), the Issuers will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount there-
of, together with accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Issuers and will rank
parri passu in right of payment to all existing and future unsecured indebted-
ness of the Issuers. The Notes will rank pari passu in right of payment with
any other senior subordinated indebtedness of the Issuers. At June 30, 1997, as
adjusted to give effect to the Offering and the Acquisitions (as defined), such
subsidiaries had approximately $604.4 million of indebtedness (including $395.8
million of indebtedness under the New Credit Facility (as defined), which will
be secured by substantially all of the assets of Holdings).
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
J.P. Morgan Securities Inc. acquired the Exchange Notes as a result of market-
making activities or other trading activities. This Prospectus has been pre-
pared for and is to be used by J.P. Morgan Securities Inc. in connection with
offers and sales of the Exchange Notes related to market-making transactions in
the over-the-counter market at negotiated prices related to prevailing market
prices at the time of sale. J.P. Morgan Securities Inc. may act as principal or
agent in such transactions. See "Plan of Distribution."
J.P. MORGAN & CO.
, 1997
<PAGE>
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
J.P. Morgan Securities Inc. acquired the Exchange Notes as a result of market-
making activities or other trading activities. This Prospectus is to be used by
J.P. Morgan Securities Inc. in connection with offers and sales of the Exchange
Notes in market-making transactions in the over-the-counter market at negoti-
ated prices related to prevailing market prices at the time of sale. J.P. Mor-
gan Securities Inc. may act as principal or agent in such transactions and has
no obligation to make a market in the Exchange Notes and may discontinue its
market-making activities at any time without notice, at its sole discretion.
The Issuers have agreed to indemnify J.P. Morgan Securities Inc. against cer-
tain liabilities, including liabilities under the Securities Act, or to con-
tribute to payments that J.P. Morgan Securities Inc. may be required to make in
respect thereof.
An affiliate of J.P. Morgan Securities Inc. beneficially owns approximately
22.83% of the partnership interests of the Company. See "Certain Relationships
and Related Transactions--Ownership of Equity Interests in FVP GP, FVP and
Holdings," "Principal Security Holders" and "The Partnership Agreement."
A-2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion [ALTERNATE PAGE]
Dated September 26, 1997
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
LOGO
$237,650,000
11 7/8% Senior Discount Notes due 2007
ISSUE PRICE: 63.118%
This Prospectus relates to offers and sales by First Union Capital Markets
Corp. of 11 7/8% Senior Discount Notes due 2007 (the "Exchange Notes") which
have been issued by FrontierVision Holdings, L.P., a Delaware limited partner-
ship ("Holdings" or the "Company"), and FrontierVision Holdings Capital Corpo-
ration, a Delaware corporation ("Holdings Capital") which is a wholly owned
subsidiary of Holdings. The Exchange Notes are the joint and several obliga-
tions of Holdings and Holdings Capital (collectively, the "Issuers"). The Ex-
change Notes were issued in a publicly registered exchange offer in exchange
for 11 7/8% Senior Discount Notes due 2007 with terms substantially identical
to the Exchange Notes (the "Old Notes," and collectively with the Exchange
Notes, the "Notes").
The Notes mature on September 15, 2007, unless previously redeemed. The Notes
were issued and sold at a price of $631.18 per $1,000 original Principal Amount
at Maturity (as defined), representing a yield to maturity of 11 7/8% (computed
on a semiannual bond-equivalent basis). Unless the Issuers have previously made
the Cash Interest Election (as defined), the Notes will not accrue cash inter-
est until September 15, 2001. Cash interest on the Notes will accrue at a rate
of 11 7/8% per annum and will be payable on a semiannual basis on each March 15
and September 15, commencing on the earlier of the Interest Payment Date (as
defined) following the Cash Interest Election or March 15, 2002. The Notes are
not redeemable prior to September 15, 2001, except as set forth below. The
Notes will be redeemable at the option of the Issuers, in whole or in part, at
any time on or after September 15, 2001, at the redemption prices set forth
herein, together with accrued and unpaid interest to the redemption date. In
addition, prior to September 15, 2000, the Issuers may redeem up to 35% of the
Principal Amount at Maturity of the Notes with the net cash proceeds received
from one or more Public Equity Offerings or Strategic Equity Investments (as
such terms are defined) at a redemption price of 111.875% of the Accreted Value
thereof, plus accrued and unpaid interest, if any, to the redemption date; pro-
vided, however, that at least 65% in aggregate Principal Amount at Maturity of
the Notes originally issued remains outstanding immediately after any such re-
demption.
Upon a Change of Control (as defined), the Issuers will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount there-
of, together with accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Issuers and will rank
parri passu in right of payment to all existing and future unsecured indebted-
ness of the Issuers. The Notes will rank pari passu in right of payment with
any other senior subordinated indebtedness of the Issuers. At June 30, 1997, as
adjusted to give effect to the Offering and the Acquisitions (as defined), such
subsidiaries had approximately $604.4 million of indebtedness (including $395.8
million of indebtedness under the New Credit Facility (as defined), which will
be secured by substantially all of the assets of Holdings).
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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 AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
First Union Capital Markets Corp. acquired the Exchange Notes as a result of
market-making activities or other trading activities. This Prospectus has been
prepared for and is to be used by First Union Capital Markets Corp. in connec-
tion with offers and sales of the Exchange Notes related to market-making
transactions in the over-the-counter market at negotiated prices related to
prevailing market prices at the time of sale. First Union Capital Markets Corp.
may act as principal or agent in such transactions. See "Plan of Distribution."
FIRST UNION CAPITAL MARKETS CORP.
, 1997
<PAGE>
PLAN OF DISTRIBUTION
First Union Capital Markets Corp. acquired the Exchange Notes as a result of
market-making activities or other trading activities. This Prospectus is to be
used by First Union Capital Markets Corp. in connection with offers and sales
of the Exchange Notes in market-making transactions in the over-the-counter
market at negotiated prices related to prevailing market prices at the time of
sale. First Union Capital Markets Corp. may act as principal or agent in such
transactions and has no obligation to make a market in the Exchange Notes and
may discontinue its market-making activities at any time without notice, at its
sole discretion. The Issuers have agreed to indemnify First Union Capital Mar-
kets Corp. against certain liabilities, including liabilities under the Securi-
ties Act, or to contribute to payments that First Union Capital Markets Corp.
may be required to make in respect thereof.
An affiliate of First Union Capital Markets Corp. beneficially owns approxi-
mately 15.05% of the partnership interests of the Company. See "Certain Rela-
tionships and Related Transactions--Ownership of Equity Interests in FVP GP,
FVP and Holdings," "Principal Security Holders" and "The Partnership Agree-
ment."
A-4
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARY
Report of Independent Public Accountants F-3
Consolidated Balance Sheet as of September 18, 1997 F-4
Note to the Consolidated Balance Sheet F-5
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
Report of Independent Public Accountants F-6
Balance Sheet as of September 18, 1997 F-7
Note to the Balance Sheet F-8
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December
31, 1996 F-9
Unaudited Consolidated Statements of Operations for the three months
ended June 30, 1997, the three months ended June 30, 1996, the six
months ended June 30, 1997 and the six months ended June 30, 1996 F-10
Unaudited Consolidated Statements of Partners' Capital for the six months
ended June 30, 1997 and for the year ended December 31, 1996 F-11
Unaudited Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and for the six months ended June 30, 1996 F-12
Notes to Unaudited Consolidated Financial Statements F-13
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
Independent Auditors' Report F-19
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-20
Consolidated Statements of Operations for the year ended December 31,
1996 and for the period from inception (April 17, 1995) through December
31, 1995 F-21
Consolidated Statements of Partners' Capital for the year ended December
31, 1996 and for the period from inception (April 17, 1995) through
December 31, 1995 F-22
Consolidated Statements of Cash Flows for the year ended December 31,
1996 and for the period from inception (April 17, 1995) through December
31, 1995 F-23
Notes to Consolidated Financial Statements F-24
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
Independent Auditors' Report F-32
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-33
Notes to Consolidated Balance Sheets F-34
UNITED VIDEO CABLEVISION, INC. (SELECTED ASSETS ACQUIRED BY FVOP)
Independent Auditors' Report F-43
Divisional Balance Sheets as of November 8, 1995 and December 31, 1994 F-44
Statements of Divisional Operations for the period from January 1, 1995
through November 8, 1995 and for the years ended December 31, 1994 and
1993 F-45
Statements of Divisional Equity for the period from January 1, 1995
through November 8, 1995 and for the years ended December 31, 1994 and
1993 F-46
Statements of Divisional Cash Flows for the period from January 1, 1995
through November 8, 1995 and for the years ended December 31, 1994 and
1993 F-47
Notes to Divisional Financial Statements F-48
ASHLAND AND DEFIANCE CLUSTERS (SELECTED ASSETS ACQUIRED FROM COX
COMMUNICATIONS, INC. BY FVOP)
Independent Auditors' Report F-50
Combined Statements of Net Assets as of December 31, 1995 and 1994 F-51
Combined Statements of Operations for the eleven-month period ended
December 31, 1995, for the one-month period ended January 31, 1995 and
for the years ended December 31, 1994 and 1993 F-52
Combined Statements of Changes in Net Assets for the eleven-month period
ended December 31, 1995, for the one-month period ended January 31, 1995
and for the years ended December 31, 1994 and 1993 F-53
Combined Statements of Cash Flows for the eleven-month period ended
December 31, 1995, for the one-month period ended January 31, 1995 and
for the years ended December 31, 1994 and 1993 F-54
Notes to Combined Financial Statements F-55
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
Independent Auditors' Report F-62
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-63
Consolidated Statements of Loss for the years ended December 31, 1995
and 1994 F-64
Consolidated Statements of Partners' Deficit for the years ended
December 31, 1995 and 1994 F-65
Consolidated Statements of Cash Flows for the years ended December 31,
1995 and 1994 F-66
Notes to Consolidated Financial Statements F-67
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
Independent Auditors' Report F-71
Balance Sheets as of September 30, 1996 (unaudited) and December 31,
1995 and 1994 F-72
Statements of Operations for the nine-month period ended September 30,
1996 (unaudited) and for the years ended December 31, 1995, 1994 and
1993 F-73
Statements of Shareholders' Deficiency for the nine-month period ended
September 30, 1996 (unaudited) and for the years ended December 31,
1995, 1994 and 1993 F-74
Statements of Cash Flows for the nine-month period ended September 30,
1996 (unaudited) and for the years ended December 31, 1995, 1994 and
1993 F-75
Notes to Financial Statements F-76
TRIAX SOUTHEAST ASSOCIATES, L.P.
Report of Independent Public Accountants F-83
Balance Sheets as of September 30, 1996 (unaudited) and December 31,
1995 and 1994 F-84
Statements of Operations for the nine-month period ended September 30,
1996 (unaudited) and for the years ended December 31, 1995, 1994 and
1993 F-85
Statements of Partners' Capital for the nine-month period ended
September 30, 1996 (unaudited) and for the years ended December 31,
1995, 1994 and 1993 F-86
Statements of Cash Flows for the nine-month period ended September 30,
1996 (unaudited) and for the years ended December 31, 1995, 1994 and
1993 F-87
Notes to Financial Statements F-88
A-R CABLE SERVICES--ME, INC.
Independent Auditors' Report F-94
Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and
1995 F-95
Statements of Income for the six-month periods ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited) and for the years ended
December 31, 1996 and 1995 F-96
Statements of Cash Flows for the six-month periods ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited) and for the years ended
December 31, 1996 and 1995 F-97
Notes to Financial Statements F-98
NEW HAMPSHIRE/VERMONT SYSTEMS (SELECTED ASSETS ACQUIRED FROM TCI
COMMUNICATIONS, INC.)
Independent Auditors' Report F-102
Combined Balance Sheets as of June 30, 1997 (unaudited) and December 31,
1996 and 1995 F-103
Combined Statements of Operations and Retained Earnings for the six-
month periods ended June 30, 1997 and June 30, 1996 (unaudited) and for
the years ended December 31, 1996 and 1995 F-104
Combined Statements of Cash Flows for the six-month period ended June
30, 1997 and June 30, 1996 (unaudited) and for the years ended December
31, 1996 and 1995 F-105
Notes to Combined Financial Statements F-106
COX CENTRAL OHIO CLUSTER
Independent Auditors' Report F-110
Combined Statements of Net Assets as of June 30, 1997 (unaudited) and
December 31, 1996 F-111
Combined Statements of Income for the six-month periods ended June 30,
1997 (unaudited) and June 30, 1996 (unaudited) and for the year ended
December 31, 1996 F-112
Combined Statements of Changes in Net Assets the six-month period ended
June 30, 1997 (unaudited) and for the year ended December 31, 1996 F-113
Combined Statements of Cash Flows for the six-month periods ended June
30, 1997 (unaudited) and June 30, 1996 (unaudited) and for the year
ended December 31, 1996 F-114
Notes to Combined Financial Statements F-115
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of FrontierVision Holdings, L.P.:
We have audited the accompanying consolidated balance sheet of FrontierVision
Holdings, L.P. and subsidiary as of September 18, 1997. This consolidated
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this consolidated financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit of a balance sheet includes examining, on a
test basis, evidence supporting the amounts and disclosures in that balance
sheet. An audit of a balance sheet also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of FrontierVision
Holdings, L.P. and subsidiary as of September 18, 1997 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
September 24, 1997
F-3
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 18, 1997
<TABLE>
<S> <C>
Asset--Cash $100.00
=======
Partners' capital--
FrontierVision Partners, L.P. $ 99.90
FrontierVision Holdings, LLC .10
-------
Total partners' capital $100.00
=======
</TABLE>
See note to the balance sheet.
F-4
<PAGE>
FRONTIERVISION HOLDINGS, L.P. AND SUBSIDIARY
NOTE TO THE CONSOLIDATED BALANCE SHEET
SEPTEMBER 18, 1997
FrontierVision Holdings, L.P. ("Holdings"), a Delaware limited partnership, is
indirectly wholly-owned by FrontierVision Partners, L.P., and was organized on
September 3, 1997 ("inception") for the purpose of acting as co-issuer with
its wholly-owned subsidiary FrontierVision Holdings Capital Corporation of
$237,650,000 aggregate principal amount at maturity of 11 7/8% Senior Discount
Notes (the "Notes") due 2007. Holdings acquired all of the outstanding
partnership interests of FrontierVision Operating Partners, L.P. ("FVOP")
prior to the issuance of the Notes on September 19, 1997 ("Formation
Transaction") and therefore, at that time, FVOP and FrontierVision Capital
Corporation became wholly-owned, consolidated subsidiaries of Holdings.
Subsequent to the Formation Transaction, Holdings contributed approximately
$142,000,000 of net proceeds of the Notes to FVOP as a contribution. Holdings
had no operations from inception through September 18, 1997.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of FrontierVision Holdings Capital Corporation:
We have audited the accompanying balance sheet of FrontierVision Holdings
Capital Corporation as of September 18, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit of a balance sheet includes examining, on a
test basis, evidence supporting the amounts and disclosures in that balance
sheet. An audit of a balance sheet also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of FrontierVision Holdings Capital
Corporation as of September 18, 1997 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
September 24, 1997
F-6
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
BALANCE SHEET
SEPTEMBER 18, 1997
<TABLE>
<S> <C>
Asset--Cash $100.00
=======
Equity--
Common stock, par value $0.01; 1,000 shares authorized, 100 shares
issued and outstanding $ 1.00
Additional paid-in capital 99.00
-------
$100.00
=======
</TABLE>
See note to the balance sheet.
F-7
<PAGE>
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
NOTE TO THE BALANCE SHEET
SEPTEMBER 18, 1997
FrontierVision Holdings Capital Corporation ("Capital"), a Delaware
corporation, is a wholly-owned subsidiary of FrontierVision Holdings, L.P.,
and was organized on August 22, 1997 ("inception") for the purpose of acting
as co-issuer with FrontierVision Holdings, L.P. of $237,650,000 face value
senior discount notes. Capital had no operations from inception through
September 18, 1997.
F-8
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
------------------------
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 6,499 $ 3,639
Accounts receivable, net of allowance for doubtful
accounts of $205 and $322 5,164 4,544
Other receivables 686 846
Prepaid expenses and other 2,604 2,231
Investment in cable television systems, net:
Property and equipment 212,875 199,461
Franchise cost and other intangible assets 349,659 324,905
-------- --------
Total investment in cable television systems, net 562,534 524,366
-------- --------
Deferred financing costs, net 12,165 13,042
Earnest money deposits 8,259 500
-------- --------
Total assets $597,911 $549,168
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,558 $ 1,994
Accrued liabilities 12,372 10,825
Subscriber prepayments and deposits 1,929 1,862
Accrued interest payable 5,692 6,290
Debt 429,096 398,194
-------- --------
Total liabilities 451,647 419,165
-------- --------
Partners' capital:
FrontierVision Partners, L.P. 146,118 129,874
FrontierVision Operating Partners, Inc. 146 129
-------- --------
Total partners' capital 146,264 130,003
Commitments
-------- --------
Total liabilities and partners' capital $597,911 $549,168
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 34,081 $17,759 $ 65,636 $27,539
Expenses:
Operating expenses 17,679 8,980 34,462 13,668
Corporate administra-
tive expenses 1,048 695 2,049 1,265
Depreciation and amor-
tization 15,132 10,119 29,191 13,595
-------- ------- -------- -------
Total expenses 33,859 19,794 65,702 28,528
-------- ------- -------- -------
Operating income/(loss) 222 (2,035) (66) (989)
Interest expense, net (10,824) (4,831) (21,302) (7,304)
Other income/(expense) 5 -- (47) --
-------- ------- -------- -------
Net loss $(10,597) $(6,866) $(21,415) $(8,293)
======== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------
FrontierVision
FrontierVision Operating
Partners, L.P. Partners, Inc.
(General (Limited
Partner) Partner) Total
-------------- -------------- --------
<S> <C> <C> <C>
Balance, December 31, 1995 $ 46,361 $ 46 $ 46,407
Capital contributions 107,289 108 107,397
Net loss (23,776) (25) (23,801)
-------- ---- --------
Balance, December 31, 1996 129,874 129 130,003
Capital contributions (Unaudited) 37,638 38 37,676
Net loss (Unaudited) (21,394) (21) (21,415)
-------- ---- --------
Balance, June 30, 1997 (Unaudited) $146,118 $146 $146,264
======== ==== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
-------------------------
For the Six For the Six
Months Ended Months Ended
June 30, June 30,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(21,415) $ (8,293)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 29,191 13,595
Amortization of deferred debt issuance costs 1,020 --
Interest expense deferred and included in long-
term debt 472 --
Changes in operating assets and liabilities, net
of effect of acquisitions:
Accounts receivable (462) (988)
Prepaid expenses and other (352) (536)
Accounts payable and accrued liabilities 1,310 1,322
Subscriber prepayments and deposits (66) (129)
Accrued interest payable (598) 2,195
-------- ---------
Total adjustments 30,515 15,459
-------- ---------
Net cash flows from operating activities 9,100 7,166
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,881) (3,369)
Pending acquisition costs (132) (89)
Cash paid for franchise costs (437) --
Earnest money deposits (8,259) (3,000)
Cash paid in acquisitions of cable television
systems (55,494) (178,791)
-------- ---------
Net cash flows from investing activities (74,203) (185,249)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings 41,500 124,100
Debt payments (11,000) --
Principal payments on capital lease obligations (70) (13)
Increase in deferred financing fees (143) (3,112)
Partner capital contributions 37,676 55,867
-------- ---------
Net cash flows from financing activities 67,963 176,842
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,860 (1,241)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,639 2,650
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,499 $ 1,409
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 20,448 $ 4,902
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands)
(1) STATEMENT OF ACCOUNTING PRESENTATIONS AND OTHER INFORMATION
FrontierVision Operating Partners, L.P. (the "Company") is a Delaware limited
partnership formed on July 14, 1995 for the purpose of acquiring and operating
cable television systems. As of June 30, 1997, the Company owned and operated
cable television systems in three primary operating clusters--New England,
Ohio and Kentucky--with a fourth, smaller group of cable television systems in
the Southeast. The Company was initially capitalized in November 1995 with
approximately $38 from its sole limited partner, FrontierVision Operating
Partners, Inc. ("FVOP Inc."), a Delaware corporation, and approximately
$38,300 from its sole general partner, FrontierVision Partners, L.P. ("FVP"),
a Delaware limited partnership. FVOP Inc. is a wholly owned subsidiary of FVP.
During the period from January 1, 1997 to June 30, 1997, the Company received
additional capital contributions of approximately $37,676 from its partners.
FVP allocates certain administrative expenses to FVOP, which are included as
capital contributions from its partners. Such expense allocations were
approximately $255 for the six months ended June 30, 1997.
FrontierVision Capital Corporation ("Capital"), a Delaware corporation, is a
wholly owned subsidiary of the Company, and was organized on July 26, 1996 for
the sole purpose of acting as co-issuer with the Company of $200 million
aggregate principal amount of 11% Senior Subordinated Notes due 2006 (the
"Notes"). Capital has nominal assets and does not have any material
operations.
Reference to Annual Report
These interim financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all the disclosures
required by generally accepted accounting principles. The accompanying
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 for additional
disclosures, including a summary of the Company's accounting policies.
The following notes, insofar as they are applicable to the six months ended
June 30, 1997, are not audited. In management's opinion, all adjustments
considered necessary for a fair presentation of such financial statements are
included and all such adjustments are of a normal and recurring nature. The
results for the six-month period ended June 30, 1997 are not necessarily
indicative of the results for the entire 1997 fiscal year.
Reclassifications
Certain 1996 amounts have been reclassified for comparative purposes.
(2) ACQUISITIONS
The Company has completed several acquisitions since its inception through
June 30, 1997. All of the acquisitions have been accounted for using the
purchase method of accounting, and, accordingly, the purchase price has been
allocated to the assets acquired and liabilities assumed based upon fair
values at the respective dates of acquisition. The following table lists the
acquisitions and the purchase price allocation for each.
F-13
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(Amounts in thousands)
(2) ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
-------------------------------------------------------------
Primary Location
Predecessor Owner of Systems Date Acquired Acquisition Cost(a)
----------------- ----------------------- ----------------- -------------------
<S> <C> <C> <C>
United Video
Cablevision, Inc.
("UVC") Maine and Ohio November 9, 1995 $121,800
Longfellow Cable
Company, Inc.
("Longfellow") Maine November 21, 1995 $ 6,100
C4 Media Cable
Southeast, Limited
Partnership ("C4") Virginia and Tennessee February 1, 1996 $ 47,600
Americable International
Maine, Inc.
("Americable") Maine March 29, 1996 $ 4,800
Cox Communications, Inc.
("Cox") Ohio April 9, 1996 $135,900
Phoenix Grassroots Cable
Systems, LLC
("Grassroots") Maine and New Hampshire August 29, 1996 $ 9,700
Triax Southeast
Associates, L.P.
("Triax") Kentucky and Ohio October 7, 1996 $ 86,000
American Cable
Entertainment of
Kentucky-Indiana, Inc.
("ACE") Kentucky and Indiana October 9, 1996 $147,500
SRW, Inc.'s Penn/Ohio
Cablevision, L.P.
("Penn/Ohio") Pennsylvania and Ohio October 31, 1996 $ 3,800
SRW, Inc.'s Deep Creek
Cable TV, L.P.
("Deep Creek") Maryland December 23, 1996 $ 3,000
Bluegrass Cable
Partners, L.P.
("Bluegrass") Kentucky March 20, 1997 $ 10,300
Clear Cable T.V., Inc.
and B&G Cable T.V.
Systems, Inc.
("Clear/B&G") Kentucky March 31, 1997 $ 1,900*
Milestone Communications
of New York, L.P.
("Milestone") Ohio March 31, 1997 $ 3,000
Triax Associates I, L.P.
("Triax I") Ohio May 30, 1997 $ 34,700*
Phoenix Front Row
Cablevision ("Front
Row") Ohio May 30, 1997 $ 6,800*
</TABLE>
- ---------
(a) Acquisition cost represents the purchase price allocation between tangible
and intangible assets including certain purchase accounting adjustments as
of June 30, 1997.
* Subject to adjustment.
The combined purchase price of these acquisitions which were consummated
during the periods presented has been allocated to the acquired assets and
liabilities as follows:
<TABLE>
<CAPTION>
---------------------------------
Acquisitions Acquisitions
for the Six for the Six
Months Ended Months Ended
June 30, 1997(a) June 30, 1996(a)
---------------- ----------------
<S> <C> <C>
Property and equipment $17,980 $ 68,845
Franchise cost and other
intangible assets 38,928 121,242
------- --------
Subtotal 56,908 190,087
------- --------
Net working capital defi-
cit (914) (1,794)
Less--Earnest money de-
posits applied (500) (9,502)
------- --------
Total cash paid for ac-
quisitions $55,494 $178,791
======= ========
</TABLE>
- ---------
(a) The combined purchase price includes certain purchase price adjustments
for acquisitions consummated prior to the respective periods.
The Company has reported the operating results of its acquired cable systems
from the dates of their respective acquisition. Unaudited pro forma summarized
operating results of the Company for the six months ended June 30, 1996,
assuming the C4, Cox, Triax and ACE acquisitions (the "Acquisitions") had been
consummated on January 1, 1996, are as follows:
<TABLE>
<CAPTION>
---------------------------------
Six Months Ended June 30, 1996
---------------------------------
Historical Pro Forma
Results Acquisitions Results
---------- ------------ ---------
<S> <C> <C> <C>
Revenue $ 27,539 $ 32,484 $ 60,023
Operating, selling, general and adminis-
trative expenses (14,933) (18,236) (33,169)
Depreciation and amortization (13,595) (16,580) (30,175)
-------- -------- --------
Operating income (loss) (989) (2,332) (3,321)
Interest and other expenses (7,304) (14,040) (21,344)
-------- -------- --------
Net loss $ (8,293) $(16,372) $(24,665)
======== ======== ========
</TABLE>
F-14
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(Amounts in thousands)
(2) ACQUISITIONS (CONTINUED)
The pro forma financial information presented above has been prepared for
comparative purposes only and does not purport to be indicative of the
operating results which actually would have resulted had the Acquisitions been
consummated on the dates indicated. Furthermore, the above pro forma financial
information does not include the effect of certain acquisitions and
dispositions of cable systems because these transactions were not material on
an individual or aggregate basis.
On May 8, 1997, the Company entered into an asset purchase agreement with A-R
Cable Services--ME, Inc., a wholly-owned subsidiary of Cablevision Systems,
Inc., to acquire certain cable television assets in Maine, for a cash purchase
price of approximately $78,160. As of June 30, 1997, the Company had advanced
$7,816 as an earnest money deposit related to this transaction.
On May 12, 1997, the Company entered into an asset purchase agreement with TCI
Cablevision of Vermont, Inc., and Westmarc Development Joint Venture to
acquire certain cable television assets, in New Hampshire and Vermont, for a
cash purchase price of $34,500.
On June 9, 1997, the Company entered into an asset purchase agreement with
SRW, Inc.'s Blue Ridge Cable Systems, L.P. to acquire certain cable television
assets, in Tennessee and North Carolina, for a cash purchase price of $4,050.
As of June 30, 1997, the Company had advanced $100 as an earnest money related
to this transaction.
On June 10, 1997, the Company entered into an asset purchase agreement with
affiliates of Phoenix Cable ("Phoenix") to acquire certain cable television
assets, in Maine, for a cash purchase price of $13,500. As of June 30, 1997,
the Company had advanced $200 as an earnest money related to this transaction.
As of June 30, 1997, the Company had advanced $30 and $113 to Bluegrass and
Phoenix, respectively, in the form of letters of credit in connection with the
transfer of certain franchises in favor of the Company.
(3) DEBT
The Company's debt was comprised of the following:
<TABLE>
<CAPTION>
---------------------
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Bank Credit Facility(a)--
Revolving credit loan, due June 30, 2004, interest
based on various floating rate options (8.19%
average at June 30, 1997), payable monthly $ 30,500 $ --
Term loans, due June 30, 2004, interest based on
various floating rate options (8.55% and 8.60%
weighted average at June 30, 1997 and December
31, 1996, respectively), payable monthly 190,000 190,000
11% Senior Subordinated Notes due 2006(b) 200,000 200,000
Subordinated promissory note to UVC, due December
31, 2004, with interest as described below(c) 8,596 8,124
Capital lease obligations, monthly payments of $3,
including average interest at 9.1%, due November
1998 and May 1999 -- 70
-------- --------
Total debt $429,096 $398,194
======== ========
</TABLE>
- ---------
(a) Bank Credit Facility
The Company has an Amended and Restated Credit Facility (the "Senior Credit
Facility") which includes a $75.0 million revolving credit facility
("Revolving Credit Facility"), a $100.0 million term loan ("Facility A Term
Loan") and a $90.0 million term loan ("Facility B Term Loan"). The Facility
A Term Loan and the Revolving Credit
F-15
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(Amounts in thousands)
(3) DEBT (CONTINUED)
Facility both mature on June 30, 2004. Escalating principal payments are
due quarterly beginning September 30, 1998 under the Facility A Term Loan,
with quarterly principal reductions of the Revolving Credit Facility also
beginning September 30, 1998. The Facility B Term Loan matures June 30,
2005 with 91% of the principal being repaid in the last four quarters of
the term of the facility.
Under the terms of the Senior Credit Facility, with certain exceptions, the
Company has a mandatory prepayment obligation upon any sale of new
partnership interests and the sale of any of its operating systems.
Further, beginning with the year ending December 31, 1998, the Company is
required to make prepayments equal to 50% of its excess cash flow, as
defined in the Senior Credit Facility. The Company also pays commitment
fees of 1/2% per annum, on the average unborrowed portion of the total
amount available for borrowings under the Senior Credit Facility.
The Senior Credit Facility also requires the Company to maintain compliance
with various financial covenants including, but not limited to, covenants
relating to total indebtedness, debt ratios, interest coverage ratio, fixed
charges ratio, and capital expenditures. In addition, the Senior Credit
Facility has restrictions on certain partnership distributions by the
Company. As of June 30, 1997, the Company was in compliance with the
financial covenants of the Senior Credit Facility.
All partnership interests in the Company and all assets of the Company and
its subsidiary are pledged as collateral for the Senior Credit Facility.
In order to convert certain of the interest payable at variable rates under
the Senior Credit Facility to interest at fixed rates, the Company has
entered into interest rate swap agreements for notional amounts totaling
$170,000, and maturing between November 15, 1999 and October 7, 2000.
According to these agreements, the Company pays or receives the difference
between (1) an average fixed rate of 5.932% and (2) various available
floating rate options applied to the same $170,000 notional amount every
three months during the term of the interest rate swap agreement. For the
six-month period ended June 30, 1997, the Company had recognized an
increase in interest expense of approximately $232 as a result of these
interest rate swap agreements.
(b) Senior Subordinated Notes
On October 7, 1996, the Company issued, pursuant to a public offering (the
"Offering"), $200,000 aggregate principal amount of the Notes. Net proceeds
from the Offering of $192,500, after costs of approximately $7,500, were
available to the Company on October 7, 1996.
In connection with the anticipated issuance of the Notes in connection with
the Offering, the Company entered into deferred interest rate setting
agreements to reduce the Company's interest rate exposure in anticipation
of issuing the Notes. The cost of such agreements, amounting to $1,390,
will be recognized as a component of interest expense over the term of the
Notes.
The Notes are unsecured subordinated obligations of the Company (co-issued
by Capital) that mature on October 15, 2006. Interest accrues at 11% per
annum beginning from the date of issuance, and is payable each April 15 and
October 15, commencing April 15, 1997.
The Indenture for the Notes (the "Indenture") has certain restrictions on
incurrence of indebtedness, distributions, mergers, asset sales and changes
in control of the Company.
(c) Subordinated Promissory Note to UVC
The subordinated promissory issued by the Company note to UVC, dated
November 9, 1995 (the "UVC Note"), bears interest at 9% for the first three
years. At the end of each subsequent year, the annual interest rate
increases 2% per year. Under the terms of the UVC Note, the Company may
issue additional subordinated promissory notes rather than making cash
interest payments. In this event, the UVC Note bears interest equal to the
annual interest of
F-16
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(Amounts in thousands)
(3) DEBT (CONTINUED)
the original promissory note plus 2.5% for the first three years and 3% for
each of the subsequent years. Further, in the event the Company's leverage
ratio exceeds certain specified amounts, the interest rate also increases
by 2%. Under the terms of the UVC Note, the Company can prepay the balance
at any time.
The debt of the Company matures as follows:
<TABLE>
<CAPTION>
Year Ended
December
31--
----------
<S> <C>
1997 $ --
1998 4,590
1999 11,790
2000 17,010
2001 22,230
Thereafter 373,476
--------
$429,096
========
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES
The Company has annual commitments under lease agreements for office space,
equipment, pole rental and land upon which certain of its towers and antennae
are constructed. Rent expense for the six month periods ended June 30, 1997
and 1996 was $1,907 and $925, respectively.
Estimated future noncancelable lease payments under such lease obligations
subsequent to June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended
December
31--
----------
<S> <C>
1997 $ 257
1998 377
1999 237
2000 150
2001 121
Thereafter 202
------
$1,344
======
</TABLE>
In October 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services which allowed cable operators to justify
regulated rates in excess of the FCC benchmarks through cost of service
showings at both the franchising authority level for basic service and at the
FCC level in response to complaints on rates for cable programming services.
The FCC 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 the 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 FCC has
also adopted regulations that permit qualifying small cable operators to
justify their regulated service and equipment rates using a simplified cost-
of-service formula. For a more detailed discussion of these matters, see
"Legislation and Regulation" and Note 7 to the Company's consolidated
financial statements in its Form 10-K for the fiscal year ended December 31,
1996.
As a result of such actions, the Company's basic and tier service rates and
its equipment and installation charges (the "Regulated Services") are subject
to the jurisdiction of local franchising authorities and the FCC. The Company
believes that it has complied in all material respects with the rate
regulation provisions of the federal law. However, the Company's
F-17
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(Amounts in thousands)
(4) COMMITMENTS AND CONTINGENCIES (CONTINUED)
rates for Regulated Services are subject to review by the FCC, if a complaint
has been filed, or by the appropriate franchise authority if it is certified
by the FCC to regulate basic rates. If, as a result of the review process, a
system cannot substantiate its rates, it could be required to retroactively
reduce its rates to the appropriate benchmark and refund the excess portion of
rates received. Any refunds of the excess portion of tier service rates would
be retroactive to the date of complaint. Any refunds of the excess portion of
all other Regulated Service rates would be retroactive to one year prior to
the implementation of the rate reductions.
The Company's agreements with franchise authorities require the payment of
annual fees which approximate 5% of system franchise revenue. Such franchises
are generally nonexclusive and are granted by local governmental authorities
for a specified term of years, generally for extended periods of up to fifteen
years.
(5) SUBSEQUENT EVENTS
As of August 14, 1997, the Company had entered into additional letters of
intent to acquire certain cable television systems, primarily located in Ohio
and Kentucky, in four separate transactions, for aggregate consideration of
approximately $244,700.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
FrontierVision Operating Partners,
L.P.:
We have audited the accompanying consolidated balance sheets of FrontierVision
Operating Partners, L.P. and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of operations, cash flows and partners'
capital for the year ended December 31, 1996 and the period from inception
(April 17, 1995--see Note 1) through December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
FrontierVision Operating Partners, L. P. and subsidiary as of December 31,
1996 and 1995, and the results of their operations and their cash flows for
the year ended December 31, 1996 and the period from inception (April 17,
1995--see Note 1) through December 31, 1995 in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
March 12, 1997
F-19
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,639 $ 2,650
Accounts receivable, net of allowance for doubt-
ful accounts of $322 and $40 4,544 358
Other receivables 846 1,667
Prepaid expenses and other 2,231 201
Investment in cable television systems, net:
Property and equipment 199,461 42,917
Franchise cost and other intangible assets 324,905 83,364
-------- --------
Total investment in cable television systems,
net 524,366 126,281
Deferred financing costs, net 13,042 2,853
Earnest money deposits 500 9,502
-------- --------
Total assets $549,168 $143,512
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,994 $ 1,606
Accrued liabilities 10,825 1,558
Subscriber prepayments and deposits 1,862 362
Accrued interest payable 6,290 420
Debt 398,194 93,159
-------- --------
Total liabilities 419,165 97,105
-------- --------
Partners' capital:
FrontierVision Partners, L.P. 129,874 46,361
FrontierVision Operating Partners, Inc. 129 46
-------- --------
Total partners' capital 130,003 46,407
Commitments
-------- --------
Total liabilities and partners' capital $549,168 $143,512
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------
For the Period From
Inception (April
For the Year Ended 17, 1995--
December 31, see Note 1) through
1996 December 31, 1995
------------------ -------------------
<S> <C> <C>
Revenue $ 76,464 $ 4,369
Expenses:
Operating expenses 39,181 2,311
Corporate administrative expenses 2,930 127
Depreciation and amortization 35,336 2,308
Pre-acquisition expenses -- 940
-------- -------
Total expenses 77,447 5,686
-------- -------
Operating loss (983) (1,317)
Interest expense, net (22,422) (1,386)
Other expense (396) --
-------- -------
Net loss $(23,801) $(2,703)
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------------------
FrontierVision
FrontierVision Operating
Partners, L.P. Partners, Inc.
(General Partner) (Limited Partner) Total
----------------- ----------------- --------
<S> <C> <C> <C>
Balance, at inception
(April 17, 1995--see Note 1) $ -- $-- $ --
Capital contributions 49,061 49 49,110
Net loss (2,700) (3) (2,703)
-------- ---- --------
Balance, December 31, 1995 46,361 46 46,407
Capital contributions 107,289 108 107,397
Net loss (23,776) (25) (23,801)
-------- ---- --------
Balance, December 31, 1996 $129,874 $129 $130,003
======== ==== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
--------------------------------
For the Period from
For the Year Inception (April
Ended 17, 1995--
December 31, see Note 1) through
1996 December 31, 1995
------------ -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (23,801) $ (2,703)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 35,336 2,308
Net loss on disposal of assets 388 --
Amortization of deferred debt issuance costs 999 69
Interest expense deferred and included in
long-term debt 924 --
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable (1,946) (261)
Receivable from seller 1,377 --
Prepaid expenses and other (1,266) 75
Accounts payable and accrued liabilities 3,423 1,637
Subscriber prepayments and deposits (2,393) 362
Accrued interest payable 5,870 420
--------- ---------
Total adjustments 42,712 4,610
--------- ---------
Net cash flows from operating activities 18,911 1,907
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,304) (573)
Cash paid for franchise costs (2,009) --
Earnest money deposits (500) (9,502)
Proceeds from disposition of cable television
systems 15,065 --
Cash paid in acquisitions of cable television
systems (421,467) (121,270)
--------- ---------
Net cash flows from investing activities (418,215) (131,345)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings 137,700 85,900
Payments on debt borrowings (33,600) --
Proceeds of issuance of Senior Subordinated
Notes 200,000 --
Principal payments on capital lease obliga-
tions (16) --
Increase in deferred financing fees (5,163) (2,922)
Offering costs related to Senior Subordinated
Notes (6,025) --
Partner capital contributions 107,397 49,110
--------- ---------
Net cash flows from financing activities 400,293 132,088
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 989 2,650
CASH AND CASH EQUIVALENTS, AT BEGINNING OF
PERIOD 2,650 --
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,639 $ 2,650
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 15,195 $ 957
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
(1) THE COMPANY
Organization and Capitalization
FrontierVision Operating Partners, L.P. (the "Company") is a Delaware limited
Partnership formed on July 14, 1995 for the purpose of acquiring and operating
cable television systems. As of December 31, 1996, the Company owned and
operated cable television systems in three primary operating clusters--Ohio,
Kentucky and New England--with a fourth, smaller group of cable television
systems in the Southeast. The Company was initially capitalized in November
1995 with approximately $38 from its sole limited partner, FrontierVision
Operating Partners, Inc. ("FVOP Inc."), a Delaware corporation, and
approximately $38,300 from its sole general partner, FrontierVision Partners,
L.P. ("FVP"), a Delaware limited partnership. FVOP Inc. is a wholly owned
subsidiary of FVP. During the period from January 1, 1996 to December 31,
1996, the Company received additional capital contributions of approximately
$107,397 from its partners. FVP allocates certain administrative expenses to
FVOP which are included as capital contributions from its partners. Such
expense allocations were approximately $735 and $1,228 for the periods ended
December 31, 1996 and 1995, respectively.
FrontierVision Capital Corporation ("Capital"), a Delaware corporation, is a
wholly owned subsidiary of the Company, and was organized on July 26, 1996 for
the sole purpose of acting as co-issuer with the Company of $200 million
aggregate principal amount of the 11% Senior Subordinated Notes due 2006 (the
"Notes"). Capital has nominal assets and does not have any material
operations.
Allocation of Profits, Losses and Distributions
Generally, the Company's partnership agreement provides that profits, losses
and distributions will be allocated to the general partner and the limited
partner pro rata based on capital contributions.
Pre-Acquisition Expenses
The Company had no substantive operations of its own until the date of the
acquisitions described in Note 3. However, FVP, which was formed on April 17,
1995, incurred certain general and administrative costs deemed attributable to
FVOP prior to the Company's legal formation. Such expenditures have been
reflected in the accompanying financial statements as pre-acquisition expenses
as if the Company had incurred those costs directly. In addition, the
accompanying balance sheet as of December 31, 1995 and 1996 reflects earnest
money deposits paid by FVP on behalf of the Company related to planned
acquisitions (see Note 3). All such amounts have been reflected as capital
contributions in the accompanying financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
Cash and Cash Equivalents
For purposes of the financial statements, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
Property and Equipment
Property and equipment are stated at cost and include the following:
distribution facilities, support equipment and leasehold improvements.
Replacements, renewals and improvements are capitalized and costs for repairs
and maintenance
F-24
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are charged to expense when incurred. The Company capitalized direct labor and
overhead related to installation activities of approximately $1,577 and $39
for the periods ended December 31, 1996 and 1995. Depreciation is computed on
a straight-line basis using an estimated useful life of 8 years.
Franchise Costs, Covenants not to Compete, Subscriber Lists and Goodwill
Franchise costs, covenants not to compete, subscriber lists and goodwill
result from the application of the purchase method of accounting to business
combinations. Such amounts are amortized on a straight-line basis over the
following periods: 15 years for franchise costs (which reflects the Company's
ability to renew existing franchise agreements), 5 years for covenants not to
compete, 7 years for subscriber lists and 15 years for goodwill.
Deferred Financing Costs
Deferred financing costs are being amortized using the straight-line method
over the life of the loans. Accumulated amortization at December 31, 1996 and
1995 is $1,068 and $69, respectively.
Revenue Recognition
Revenue is recognized in the period in which the related services are provided
to the subscribers.
Income Taxes
No provision has been made for federal, state or local income taxes related to
the Company because they are the responsibility of the individual partners.
The principal difference between results reported for financial reporting
purposes and for income tax purposes results from differences in depreciable
lives and amortization methods utilized for tangible and intangible assets.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which is required to be adopted by affected companies for fiscal years
beginning after December 15, 1995. SFAS 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by the Company be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
adopted the principles of this statement on January 1, 1996. The provisions of
SFAS 121 did not have an effect on the Company's reported results of
operations or financial condition through December 31, 1996.
Reclassification
Certain amounts have been reclassified for comparability with the 1996
presentation.
F-25
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(3) INVESTMENT IN CABLE TELEVISION SYSTEMS
The Company's investment in cable television systems is comprised of the
following:
<TABLE>
<CAPTION>
-------------------------
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Property and equipment $217,148 $ 43,906
Less--accumulated depre-
ciation (17,687) (989)
-------- --------
Property and equipment,
net 199,461 42,917
-------- --------
Franchise costs 258,453 50,834
Covenants not to compete 14,934 --
Subscriber lists 41,777 29,707
Goodwill 28,845 4,140
-------- --------
344,009 84,681
Less--accumulated amorti-
zation (19,104) (1,317)
-------- --------
Franchise costs and
other intangible as-
sets, net 324,905 83,364
-------- --------
Total investment in cable
television systems, net $524,366 $126,281
======== ========
</TABLE>
(4) ACQUISITIONS AND DISPOSITIONS
Acquisitions
The Company has completed several acquisitions from its inception through
December 1996. All of the acquisitions have been accounted for using the
purchase method of accounting, and, accordingly, the purchase price has been
allocated to the assets acquired and liabilities assumed based upon fair
values at the respective dates of acquisition. The following table lists the
acquisitions and the purchase price allocation for each.
<TABLE>
-------------------------------------------------------------
<CAPTION>
Primary Location
Predecessor Owner of Systems Date Acquired Acquisition Cost(a)
----------------- ----------------------- ----------------- -------------------
<S> <C> <C> <C>
United Video
Cablevision, Inc.
("UVC") Maine and Ohio November 9, 1995 $121,800
Longfellow Cable
Company, Inc.
("Longfellow") Maine November 21, 1995 $ 6,100
C4 Media Cable
Southeast, Limited
Partnership ("C4") Virginia and Tennessee February 1, 1996 $ 47,600
Americable International
Maine, Inc.
("Americable") Maine March 29, 1996 $ 4,800
Cox Communications, Inc.
("Cox") Ohio April 9, 1996 $135,900
Phoenix Grassroots Cable
Systems, LLC
("Grassroots") Maine and New Hampshire August 29, 1996 $ 9,700
Triax Southeast
Associates, L.P.
("Triax") Kentucky and Ohio October 7, 1996 $ 85,900
American Cable
Entertainment of
Kentucky-Indiana, Inc.
("ACE") Kentucky and Indiana October 9, 1996 $147,400
SRW, Inc.'s Penn/Ohio
Cablevision, L.P.
("Penn/Ohio") Pennsylvania and Ohio October 31, 1996 $ 3,800
SRW, Inc.'s Deep Creek
Cable TV, L.P.
("Deep Creek") Maryland December 23, 1996 $ 3,000
</TABLE>
- ---------
(a) Acquisition cost represents the purchase price allocation between tangible
and intangible assets including certain purchase accounting adjustments as
of December 31, 1996.
As of December 31, 1995, the Company had advanced $2,502 and $7,000 to C4 and
Cox, respectively, as earnest money deposits related to the respective
transactions.
F-26
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(4) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The combined purchase price of these acquisitions has been allocated to the
acquired assets and liabilities as follows:
<TABLE>
<CAPTION>
----------------------------
1996 1995
Acquisitions(a) Acquisitions
--------------- ------------
<S> <C> <C>
Property, plant and equipment $169,240 $ 43,333
Franchise costs and other intangible assets 268,836 84,595
-------- --------
Subtotal 438,076 127,928
-------- --------
Net working capital (deficit) (7,107) 542
Less--Earnest money deposits applied (9,502) --
Less--Subordinated promissory note to seller -- (7,200)
-------- --------
Total cash paid for acquisitions $421,467 $121,270
======== ========
</TABLE>
- ---------
(a) The combined purchase price includes certain purchase price adjustments
for acquisitions consummated prior to the respective periods.
The Company has reported the operating results of its acquired cable systems
and disposed cable systems from the date of their respective acquisition and
has reported the operating results of its disposed cable systems up to the
respective disposal date. Unaudited pro forma summarized operating results of
the Company, assuming the UVC, C4, Cox, Triax and ACE acquisitions had been
consummated on January 1, 1995, are as follows:
<TABLE>
<CAPTION>
------------------------------------
Twelve Months Ended December 31,
1996
------------------------------------
Historical Pro Forma
Results Acquisitions(a) Results
---------- --------------- ---------
<S> <C> <C> <C>
Revenue $ 76,464 $ 44,627 $121,091
Operating, selling, general and ad-
ministrative expenses (42,111) (23,412) (65,523)
Depreciation and amortization (35,336) (22,207) (57,543)
-------- -------- --------
Operating income (loss) (983) (992) (1,975)
Interest and other expenses (22,818) (20,769) (43,587)
-------- -------- --------
Net loss $(23,801) $(21,761) $(45,562)
======== ======== ========
<CAPTION>
------------------------------------
Twelve Months Ended December 31,
1995
------------------------------------
Historical Pro Forma
Results Acquisitions(a) Results
---------- --------------- ---------
<S> <C> <C> <C>
Revenue $ 4,369 $106,204 $110,573
Operating, selling, general and ad-
ministrative expenses (2,438) (60,100) (62,538)
Depreciation and amortization (2,308) (55,213) (57,521)
Pre-acquisition expenses (940) -- (940)
-------- -------- --------
Operating income (loss) (1,317) (9,109) (10,426)
Interest and other expenses (1,386) (39,001) (40,387)
-------- -------- --------
Net loss $ (2,703) $(48,110) $(50,813)
======== ======== ========
</TABLE>
- ---------
(a) Represents acquistions consummated on or before December 31, 1996 (UVC,
C4, Cox, Triax and ACE).
The pro forma financial information presented above is not necessarily
indicative of the operating results that would have occurred had the UVC, C4,
Cox, Triax and ACE acquisitions actually been consummated on January 1, 1995.
Furthermore, the above pro forma financial information does not include the
effect of certain acquisitions or dispositions of cable systems because these
transactions were not material on an individual or aggregated basis.
F-27
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(4) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
Dispositions
The Company has completed two dispositions from its inception through December
1996.
On July 24, 1996, the Company sold certain cable television system assets
located primarily in Chatsworth, Georgia to an affiliate of Helicon Partners
for an aggregate sales price of approximately $7,900.
On September 30, 1996, the Company sold certain cable television system assets
located in Virginia to Shenandoah Cable Television Company, an affiliate of
Shenandoah Telephone Company, for an aggregate sales price of approximately
$7,100.
(5) DEBT
The Company's debt was comprised of the following:
<TABLE>
<CAPTION>
-------------------------
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Bank Credit Facility(a)--
Revolving credit loan, due June 30, 2004,
interest based on various floating rate
options (8.69% weighted average on $50,000
and 8.50% weighted average on $5,900 at
December 31, 1995), payable monthly $ -- $55,900
Term loans, due June 30, 2004, interest based
on various floating rate options (8.6% and
8.69% weighted average at December 31, 1996
and 1995, respectively), payable monthly 190,000 30,000
11% Senior Subordinated Notes due 2006(b) 200,000 --
Subordinated promissory notes to UVC, due
December 31, 2004, with interest as described
below(c) 8,124 7,200
Capital lease obligations, monthly payments of
$3, including average interest at 9.1%, due
November 1998 and May 1999 70 59
-------- -------
Total debt $398,194 $93,159
======== =======
</TABLE>
(a) Bank Credit Facility
As of December 31, 1995, the Company had entered into a credit agreement
(the "Senior Credit Facility") with a maximum availability of $130,000 of
which $30,000 was available in term loans and $100,000 was available as a
revolving line of credit. The Company had drawn $30,000 in term loans and
$55,900 under the revolver as of December 31, 1995. On April 9, 1996, the
Company entered into an Amended and Restated Credit Facility increasing the
available Senior Debt by $135,000, for a total availability of $265,000.
Under the Amended and Restated Credit Facility, the Company has $100,000
available under the Facility A Term Loan, $75,000 available under the
Revolving Credit Loan and $90,000 available under the Facility B Term Loan.
The Facility A Term Loan and the Revolving Credit Loan both mature on June
30, 2004. Escalating principal payments are due quarterly beginning
September 30, 1998 under the Facility A Term Loan with quarterly principal
reductions of the Revolving Credit Loan also beginning September 30, 1998.
The Facility B Term Loan matures June 30, 2005 with 91% of the principal
being repaid in the last four quarters of the term of the facility. On
September 30, 1996, the Company amended the Amended and Restated Credit
Facility primarily to allow for the issuance of the 11% Senior Subordinated
Notes (the "Notes").
Under the terms of the Amended and Restated Credit Facility, with certain
exceptions, the Company has a mandatory prepayment obligation upon any sale
of new partnership interests and the sale of any of its operating systems.
Further, beginning with the year ended December 31, 1998, the Company is
required to make prepayments equal to 50% of its excess cash flow, as
defined in the credit agreement. The Company also pays commitment fees of
1/2% per annum, on the average unborrowed portion of the total amount
available for borrowings under the bank credit facility.
F-28
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(5) DEBT (CONTINUED)
The Amended and Restated Credit Facility also requires the Company to
maintain compliance with various financial covenants including, but not
limited to, covenants relating to total indebtedness, debt ratios, interest
coverage ratio, fixed charges ratio, and capital expenditures. In addition,
the Senior Credit Facility has restrictions on certain Partnership
distributions. As of December 31, 1996, the Company was in compliance with
the financial covenants of the Amended and Restated Credit Facility.
All partnership interests in the Company and all assets of the Company and
its subsidiary are pledged as collateral for the Senior Credit Facility.
In order to convert certain of the interests payable at variable rates
under the Amended and Restated Credit Facility to interest at fixed rates,
the Company has entered into interest rate swap agreements for notional
amounts totaling $170,000, and maturing between November 15, 1999 and
October 7, 2000. According to these agreements, the Company pays or
receives the difference between (1) an average fixed rate of 5.932% and (2)
various available floating rate options applied to the same $170,000
notional amount every three months during the term of the agreement.
Through the year ended December 31, 1996, the Company had recognized an
increase in interest expense of approximately $195 as a result of these
interest rate swap agreements.
(b) Senior Subordinated Notes
On October 7, 1996, the Company issued, pursuant to a public offering (the
"Offering"), $200,000 aggregate principal amount of the Notes. Net proceeds
from the Offering of $192,500, after costs of approximately $7,500, were
available to the Company on October 7, 1996.
In connection with the anticipated issuance of the Notes, the Partnership
entered into deferred interest rate setting agreements to reduce the
Partnership's interest rate exposure in anticipation of issuing the Notes.
The cost of such agreements, amounting to $1,390, will be recognized as a
component of interest expense over the term of the Notes.
The Notes are unsecured subordinated obligations of the Company (co-issued
by FrontierVision Capital Corporation) that mature on October 15, 2006.
Interest accrues at 11% per annum beginning from the date of issuance, and
is payable each April 15 and October 15, commencing April 15, 1997.
The Indenture for the Notes (the "Indenture") also requires the Company to
maintain compliance with covenants relating to total indebtedness. In
addition, the Indenture has certain restrictions on distributions, mergers,
asset sales and changes in control of the Company. As of December 31, 1996,
the Company was in compliance with the financial covenants of the
Indenture.
(c) Subordinated Promissory Note to UVC
The subordinated promissory note to UVC (the "UVC Note") bears interest at
9% for the first three years. At the end of each subsequent year, the
annual interest rate increases 2% per year. Under the terms of the UVC
Note, the Company may issue additional subordinated promissory notes rather
than making cash interest payments. In this event, the UVC Note bears
interest equal to the annual interest of the original promissory note plus
2.5% for the first three years and 3% for each of the subsequent years.
Further, in the event the Company's leverage ratio exceeds certain
specified amounts, the interest rate also increases by 2%. Under the terms
of the UVC Note, the Company can prepay the balance at any time.
F-29
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(5) DEBT (CONTINUED)
The debt of the Company matures as follows:
<TABLE>
<CAPTION>
Year ended
December
31--
----------
<S> <C>
1997 $ 33
1998 3,709
1999 9,353
2000 13,350
2001 17,350
Thereafter 354,399
--------
$398,194
========
</TABLE>
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying financial statements
because they accrue directly to the partners. Taxable losses reported to the
partners are different from those reported in the accompanying statements of
operations due primarily to differences in depreciation and amortization
methods and estimated useful lives under regulations prescribed by the
Internal Revenue Service.
A reconciliation between the net loss reported for financial reporting
purposes and the net loss reported for federal income tax purposes is as
follows:
<TABLE>
<CAPTION>
-----------------
1996 1995
-------- -------
<S> <C> <C>
Net loss for financial reporting purposes $(23,801) $(2,703)
Excess depreciation and amortization recorded for income
tax purposes (15,647) (192)
Other temporary differences 326 186
-------- -------
Net loss for federal income tax purposes $(39,122) $(2,709)
======== =======
</TABLE>
(7) FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximate their fair value
due to the nature and length of maturity of the investments.
The estimated fair value of the Company's debt instruments is based on the
borrowing rates that approximate existing rates at December 31, 1996;
therefore, there is no material difference in the fair market value and the
carrying value of such debt instruments.
(8) COMMITMENTS AND CONTINGENCIES
The Company has annual commitments under lease agreements for office space,
equipment, pole rental and land upon which certain of its towers and antennae
are constructed. Rent expense for the year ended December 31, 1996 and for the
period from inception (April 17, 1995) to December 31, 1995 was $2,365 and
$194, respectively.
Estimated future noncancelable lease payments under such lease obligations
subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year ended
December
31--
----------
<S> <C>
1997 $ 480
1998 344
1999 260
2000 170
2001 131
Thereafter 288
------
$1,673
======
</TABLE>
F-30
<PAGE>
FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in Thousands)
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services which allowed cable operators to justify
regulated rates in excess of the FCC benchmarks through cost of service
showings at both the franchising authority level for basic service and to the
FCC in response to complaints on rates for cable programming services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided
cable operators with the ability to offer new product tiers priced as
operators elect, provided certain limited conditions are met, permit cable
operators to add new channels at reasonable prices to existing cable
programming service tiers, and created an additional option pursuant to which
small cable operators may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish monthly rates no higher than $1.24 per subscriber per channel, the
rates are deemed to be reasonable.
As a result of such actions, The Company's basic and tier service rates and
its equipment and installation charges (the "Regulated Services") are subject
to the jurisdiction of local franchising authorities and the FCC. The Company
believes that it has complied in all material respects with the provisions of
the 1992 Cable Act. However, the Company's rates for Regulated Services are
subject to review by the FCC, if a complaint has been filed, or if the
appropriate franchise authority has certified the system. If, as a result of
the review process, a system cannot substantiate its rates, it could be
required to retroactively reduce its rates to the appropriate benchmark and
refund the excess portion of rates received. Any refunds of the excess portion
of tier service rates would be retroactive to the date of complaint. Any
refunds of the excess portion of all other Regulated Service rates would be
retroactive to one year prior to the implementation of the rate reductions.
The Company's agreements with franchise authorities require the payment of
annual fees which approximate 5% of system franchise revenue. Such franchises
are generally nonexclusive and are granted by local governmental authorities
for a specified term of years, generally for extended period of up to fifteen
years.
(9) SUBSEQUENT EVENTS (UNAUDITED)
On March 11, 1997, FVP called an additional $15,000 of the equity offering
commitment. As of March 26, 1997, substantially all of this capital call had
been received by FVP.
On December 18, 1996, the Company entered into an asset purchase agreement
with Bluegrass Cable Partners, Limited Partnership, to acquire certain cable
television assets, primarily in Northern Kentucky, for a cash purchase price
of $9,900. As of December 31, 1996, the Company had advanced $500 as an
earnest money deposit related to this transaction. On March 20, 1997, the
acquisition was consummated.
Subsequent to December 31, 1996, the Company entered into letters of intent or
asset purchase agreements to acquire certain cable television systems,
primarily located in Ohio and Kentucky, in seven separate transactions, for
aggregate consideration of approximately $54.8 million. The transactions are
expected to close by the third quarter of 1997.
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of FrontierVision
Partners, L.P.:
We have audited the accompanying consolidated balance sheets of FrontierVision
Partners, L.P. and subsidiaries as of December 31, 1996 and 1995. These
consolidated balance sheets are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
balance sheets based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated balance sheets referred to above present
fairly, in all material respects, the financial position of FrontierVision
Partners, L.P. and subsidiaries as of December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
March 19, 1997
F-32
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,560 $ 5,906
Accounts receivable, net of allowance for doubt-
ful accounts of $322 and $40 4,544 358
Other receivables 846 1,667
Prepaid expenses and other 2,231 201
Investment in cable television systems, net:
Property and equipment 199,461 42,917
Franchise costs 248,055 50,270
Covenant not to compete 12,650 --
Subscriber lists 36,321 29,000
Goodwill 27,879 4,094
-------- --------
Total investment in cable television systems,
net 524,366 126,281
-------- --------
Deferred financing costs, net 15,391 3,787
Organization costs, net 479 604
Earnest money deposits 500 9,502
-------- --------
Total assets $555,917 $148,306
======== ========
LIABILITIES
Accounts payable $ 2,096 $ 1,606
Accrued liabilities 10,969 1,563
Subscriber prepayments and deposits 1,862 362
Accrued interest payable 6,290 420
Senior Notes due to partners 105,632 4,972
Junior Notes due to partners 48,908 33,330
Other debt 398,194 93,159
-------- --------
Total liabilities 573,951 135,412
-------- --------
Partners' capital
General partner (182) 128
Limited partners--
Special Class A (13,063) 9,361
Class A (4,789) 3,405
-------- --------
Total partners' capital (18,034) 12,894
Commitments
-------- --------
Total liabilities and partners' capital $555,917 $148,306
======== ========
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(1) THE PARTNERSHIP
Organization and Capitalization:
FrontierVision Partners, L.P. ("FVP" or the "Partnership") is a Delaware
limited partnership formed April 17, 1995, for the purpose of acquiring and
operating cable television systems. The Partnership was capitalized in August
1995 with approximately $16,600 of limited partner contributions, and
approximately $168 from its sole general partner, FVP GP, L.P., a Delaware
partnership. FVP's limited partners include individuals, corporations and
partnerships. FVP allocates certain administrative expenses to FrontierVision
Operating Partners, L.P. ("FVOP") which are included as capital contributions
to FVOP from its partners. Such expense allocations were approximately $735
and $1,228 for the periods ended December 31, 1996 and 1995, respectively.
FVP's partners have committed to provide debt and equity capital commitments
totaling approximately $199,400 through two limited partnership and note
purchase agreements. As of December 31, 1996, FVP had received approximately
$163,400 of these commitments. Of the total capital contributed to FVP by
December 31, 1996, approximately $22,200 is in the form of general and limited
partner capital contributions, approximately $43,200 in the form of 14% junior
subordinated notes (the "Junior Notes") and approximately $98,000 in the form
of 12% senior subordinated notes (the "Senior Notes"). On March 11, 1997, FVP
called an additional $15,000 in capital contributions from its partners,
approximately $2,040 in the form of general and limited partner capital
contributions, approximately $3,960 in the form of Junior Notes and
approximately $9,000 in the form of Senior Notes. Substantially all of the
$15.0 million had been collected as of March 26, 1997.
Under the terms of the FVP partnership agreement and the limited and
partnership interest note purchase agreement of $123,500, the Partnership
agreed to issue partnership interests, Senior Notes and Junior Notes to a
limited partner, in an amount equal to 3% of total limited partner debt and
equity commitments (less that limited partner's debt and equity commitments)
as a syndication fee. As of December 31, 1996, the Partnership has credited
the capital account of the limited partner with $428 related to limited
partner capital contributions received, and issued Senior Notes and Junior
Notes totaling $2,604 related to this arrangement. The amount issued related
to the Senior Notes and the Junior Notes is reflected as a deferred financing
cost in the accompanying consolidated financial statements and the amount
issued related to limited partnership interests is reflected as a partners'
capital syndication fee.
Allocation of Profits, Losses and Distributions:
The Partnership may issue Class A, Special Class A, Class B, Special Class B
and Class C limited partnership interests. As of December 31, 1996, the
Partnership had only issued Class A, Special Class A and Class C limited
partnership interests.
Net losses are allocated to the partners in proportion to their capital
commitments until the limited partners have been allocated amounts equal to
their capital contributions, except no losses shall be allocated to any
limited partner which would cause the limited partner's capital account to
become negative by an amount greater than the limited partner's share of the
Partnership's "minimum gain" (the excess of the Partnership's nonrecourse debt
over its adjusted basis in the assets encumbered by nonrecourse debt).
Thereafter, losses are allocated to the general partner.
Profits are allocated first to the general and limited partners to the extent
of their negative capital accounts; then to the general and limited partners
to the extent of their capital contributions; then to the general and limited
partners until the Class A and Class B limited partners receive a 12%
preferred return on their capital contributions; thereafter, 85% to the Class
A and Class B limited partners and the general partner in proportion to their
capital contributions, 7% to the general partner and Class C limited partners
(the "General Partner Special Allocation"), and 8% to the Special Class A and
Special Class B limited partners.
Distributions are made first, 99% to the Class A and Class B limited partners
and 1% to the general partner until the Class A and Class B limited partners
have received a return of their contributed capital; second, 99% to the Class
A and Class B limited partners and 1% to the general partner until the Class A
and Class B limited partners receive a 12%
F-34
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(1) THE PARTNERSHIP (CONTINUED)
preferred annual rate of return on their capital contributions; thereafter,
85% to the Class A and Class B limited partners and the general partner in
proportion to their capital contributions, 7% to the general partner and Class
C limited partners (the "general partner special allocation") and 8% to the
Special Class A and Special Class B limited partners. Under the terms of the
FVP partnership agreement, the general partner may issue Class C limited
partnership interests to employees of the Partnership which entitle the holder
to receive distributions from the Partnership. However, in no event shall the
Class C limited partners be entitled to receive more than 1% of the aggregate
distributions made. The percentage of the aggregate distributions made to the
Class C limited partners shall result in a reduction to the General Partner's
Special Allocation percentage. As of December 31, 1996, the Partnership had
received total commitments of approximately $32,900 and $166,500 from its
Class A limited partners and from its Special Class A limited partners,
respectively.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Partnership
and its direct and indirect wholly owned subsidiaries, FrontierVision
Operating Partners, L.P. ("FVOP") and FrontierVision Operating Partners, Inc.
("FVOP Inc.") and FrontierVision Capital Corporation ("FCC"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
FVOP Inc. holds a 0.01% limited partnership interest in FVOP as its only
asset. FVOP owns and operates cable television properties, primarily in Maine
and Ohio. FCC is a wholly owned subsidiary of FVOP.
Basis of Presentation:
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.
Cash and Cash Equivalents:
For purposes of the financial statements, the Partnership considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
Property and Equipment:
Property and equipment are stated at cost and include the following:
distribution facilities, support equipment and leasehold improvements.
Replacements, renewals and improvements are capitalized and costs for repairs
and maintenance are charged to expense when incurred. The Partnership
capitalized a portion of salaries related to installation activities of
approximately $1,577 and $39 for the periods ended December 31, 1996 and 1995,
respectively. Depreciation and amortization are computed using the straight-
line method over the following estimated useful lives:
<TABLE>
<CAPTION>
---------------------------------
December 31, December 31,
1996 1995 Life
------------ ------------ -------
<S> <C> <C> <C>
Property and equipment $217,148 $43,906 8 years
Less--Accumulated depreciation (17,687) (989)
-------- -------
$199,461 $42,917
======== =======
</TABLE>
F-35
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Franchise Costs, Covenants not to Compete, Subscriber Lists and Goodwill
Franchise costs, covenants not to compete, subscriber lists and goodwill
result from the application of the purchase method of accounting to business
combinations. Amounts are being amortized using the straight-line method over
the following periods, which for franchise costs consider the Partnership's
ability to renew existing franchise agreements:
<TABLE>
<CAPTION>
-----------------------------------
December 31, December 31,
1996 1995 Life
------------ ------------ ---------
<S> <C> <C> <C>
Franchise costs $258,453 $50,834 15 years
Less--Accumulated amortization (10,398) (564)
-------- -------
$248,055 $50,270
======== =======
Covenant not to compete $ 14,934 $ -- 5 years
Less--Accumulated amortization (2,284) --
-------- -------
$ 12,650 $ --
======== =======
Subscriber lists $ 41,777 $29,707 7 years
Less--Accumulated amortization (5,456) (707)
-------- -------
$ 36,321 $29,000
======== =======
Goodwill $ 28,845 $ 4,140 15 years
Less--Accumulated amortization (966) (46)
-------- -------
$ 27,879 $ 4,094
======== =======
Deferred Financing Costs and Organization Costs:
Deferred financing costs are being amortized using the straight-line method
over the life of the loans. Organization costs are being amortized using the
straight-line method over 5 years:
<CAPTION>
-----------------------------------
December 31, December 31,
1996 1995 Life
------------ ------------ ---------
<S> <C> <C> <C>
Deferred financing costs $ 16,714 $ 3,874 1-9 years
Less--Accumulated amortization (1,323) (87)
-------- -------
$ 15,391 $ 3,787
======== =======
Organization costs $ 625 $ 625 5 years
Less--Accumulated amortization (146) (21)
-------- -------
$ 479 $ 604
======== =======
</TABLE>
Income Taxes
No provision has been made for federal, state or local income taxes related to
the Partnership because they are the responsibility of the individual
partners. The principal difference between results reported for financial
reporting purposes and for income tax purposes results from differences in
depreciable lives and amortization methods utilized for tangible and
intangible assets.
F-36
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which is required to be adopted by affected companies for fiscal years
beginning after December 15, 1995. SFAS 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by the Partnership be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Partnership
adopted the principles of this statement on January 1, 1996. The provisions of
SFAS 121 did not have an effect on the Partnership's results of operations or
financial condition through December 31, 1996.
(3) ACQUISITIONS AND DISPOSITIONS
Acquisitions
The Partnership has completed several acquisitions from its inception through
December 1996. All of the acquisitions have been accounted for using the
purchase method of accounting, and, accordingly, the purchase price has been
allocated to the assets purchased and liabilities assumed based upon fair
values at the respective dates of acquisition.
On November 9, 1995, the Partnership purchased certain cable television system
assets, primarily in Maine and Ohio, from United Video Cablevision, Inc.
("UVC") for a purchase price of approximately $121,800, excluding working
capital.
On November 21, 1995, the Partnership acquired certain cable television assets
located in Maine from Longfellow Cable Company, Inc. and two of its affiliates
for a purchase price of approximately $6,100, excluding working capital.
On February 1, 1996, the Partnership acquired certain cable television assets,
primarily in Virginia and Tennessee, from C4 Media Cable Southeast L.P.
("C4"), for a purchase price of approximately $47,600 (subject to adjustment),
excluding working capital. As of December 31, 1995, the Partnership had
advanced $2,502 as an earnest money deposit related to this transaction.
On April 9, 1996, the Partnership acquired certain cable television system
assets, primarily in Ohio, from affiliates of Cox Communications, Inc. ("Cox")
for a purchase price of approximately $135,900, excluding working capital. As
of December 31, 1995, the Partnership had advanced $7,000 as an earnest money
deposit related to this transaction.
On October 7, 1996, the Partnership acquired certain cable television assets,
primarily in Kentucky and Ohio, from Triax Southeast Associates, L.P.
("Triax"), for purchase price of approximately $85,900 (subject to
adjustment), excluding working capital.
On October 9, 1996, the Partnership acquired certain cable television assets,
primarily in Kentucky and Indiana, from American Cable Entertainment of
Kentucky-Indiana, Inc. ("ACE") for a purchase price of approximately $147,400,
excluding working capital.
During 1996, in addition to the transactions mentioned above, the Partnership
acquired certain cable television assets, located in Maine, New Hampshire,
Ohio, Pennsylvania, and Maryland for a purchase price of approximately
$21,300, excluding working capital.
F-37
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(3) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The combined purchase price of these acquisitions have been allocated to the
acquired assets and liabilities as follows:
<TABLE>
<CAPTION>
-------------------------
1996 1995
Acquisitions Acquisitions
------------ ------------
<S> <C> <C>
Property, plant and equipment $169,240 $ 43,333
Franchise costs 215,329 50,748
Subscriber lists 12,070 29,707
Covenant not to compete 16,041 --
Goodwill 25,396 4,140
-------- --------
Subtotal 438,076 127,928
-------- --------
Net working capital (deficit) (7,107) 542
Less--Earnest money deposits applied (9,502) --
Less--Subordinated promissory note to seller -- (7,200)
-------- --------
Total cash paid for acquisitions $421,467 $121,270
======== ========
</TABLE>
The Partnership has reported the operating results of its acquired cable
systems and disposed cable systems from the date of their respective
acquisition and has reported the operating results of its disposed cable
systems up to the respective disposal date. Unaudited pro forma summarized
operating results of the Partnership, assuming the UVC, C4, Cox, Triax and ACE
acquisitions had been consummated on January 1, 1995, are as follows:
<TABLE>
<CAPTION>
-------------------------------------
Twelve Months Ended December 31, 1996
-------------------------------------
Historical Pro Forma
Results Acquisitions (a) Results
---------- ---------------- ---------
<S> <C> <C> <C>
Revenues $ 76,464 $ 44,627 $121,091
Operating, selling, general and
administrative expenses (42,111) (23,412) (65,523)
Depreciation and amortization (35,461) (22,207) (57,668)
-------- -------- --------
Operating income (loss) (1,108) (992) (2,100)
Interest and other expenses (35,260) (20,769) (56,029)
-------- -------- --------
Net loss $(36,368) $(21,761) $(58,129)
======== ======== ========
<CAPTION>
-------------------------------------
Twelve Months Ended December 31, 1995
-------------------------------------
Historical Pro Forma
Results Acquisitions (a) Results
---------- ---------------- ---------
<S> <C> <C> <C>
Revenues $ 4,369 $106,204 $110,573
Operating, selling, general and
administrative expenses (2,443) (60,100) (62,543)
Depreciation and amortization (2,329) (55,213) (57,542)
Pre-acquisition expenses (940) -- (940)
-------- -------- --------
Operating income (loss) (1,343) (9,109) (10,452)
Interest and other expenses (2,112) (39,001) (41,113)
-------- -------- --------
Net loss $ (3,455) $(48,110) $(51,565)
======== ======== ========
</TABLE>
- ---------
(a) Represents acquisitions consummated on or before December 31, 1996 (UVC,
C4, Cox, Triax and ACE).
The pro forma financial information presented above is not necessarily
indicative of the operating results that would have occurred had the UVC, C4,
Cox, Triax and ACE acquisitions actually been consummated on January 1, 1995.
Furthermore, the above pro forma financial information does not include the
effect of certain acquisitions or dispositions of cable systems because these
transactions were not material on an individual or aggregated basis.
F-38
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(3) ACQUISITIONS AND DISPOSITIONS (CONTINUED)
Dispositions
The Partnership has completed two dispositions from its inception through
December 1996.
On July 24, 1996, the Partnership sold certain cable television system assets,
located primarily in Chatsworth, Georgia, to an affiliate of Helicon Partners
for an aggregate sales price of approximately $7,900.
On September 30, 1996, the Partnership sold certain cable television system
assets located in Virginia to Shenandoah Cable Television Company, an
affiliate of Shenandoah Telephone Company, for an aggregate sales price of
approximately $7,100.
(4) DEBT
The Partnership's debt was comprised of the following:
<TABLE>
<CAPTION>
-------------------------
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Bank Credit Facility (a)--
Revolving credit loan, due June 30, 2004,
interest based on various floating rate
options (8.69% weighted average on $50,000
and 8.50% weighted average on $5,900 at
December 31, 1995), payable monthly $ -- $ 55,900
Term loans, due June 30, 2004, interest based
on various floating rate options (8.6% and
8.69% weighted averages at December 31, 1996
and 1995, respectively), payable monthly 190,000 30,000
11% Senior Subordinated Notes due 2006 (b) 200,000 --
12% Senior Notes, due June 30, 2004 and 2007 (c) 105,632 4,972
14% Junior Notes, due June 30, 2004 and 2007(c) 48,908 33,330
Subordinated promissory notes to UVC, due
December 31, 2004, with interest as described
below (d) 8,124 7,200
Capital lease obligations, monthly payments of
$3, including interest at 9.1%, due November
1998 and May 1999 70 59
-------- --------
Total debt $552,734 $131,461
======== ========
</TABLE>
(a)Bank Credit Facility
As of December 31, 1995, the Partnership had entered into a credit
agreement (the "Senior Credit Facility") with a maximum availability of
$130,000 of which $30,000 was available in term loans and $100,000 was
available as a revolving line of credit. The Partnership had drawn $30,000
in term loans and $55,900 under the revolver as of December 31, 1995. On
April 9, 1996, the Partnership entered into an Amended and Restated Credit
Facility increasing the available Senior Debt by $135,000, for a total
availability of $265,000. Under the Amended and Restated Credit Facility,
the Partnership has $100,000 available under the Facility A Term Loan,
$75,000 available under the Revolving Credit Loan and $90,000 available
under the Facility B Term Loan. The Facility A Term Loan and the Revolving
Credit Loan both mature on June 30, 2004. Escalating principal payments are
due quarterly beginning September 30, 1998 under the Facility A Term Loan
with quarterly principal reductions of the Revolving Credit Loan also
beginning September 30, 1998. The Facility B Term Loan matures June 30,
2005 with 91% of the principal being repaid in the last four quarters of
the term of the facility. On September 30, 1996, the Partnership amended
the Amended and Restated Credit Facility primarily to allow for the
issuance of the 11% Senior Subordinated Notes (the "Notes").
F-39
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(4) DEBT (CONTINUED)
Under the terms of the Amended and Restated Credit Facility, the
Partnership has a mandatory prepayment obligation upon any sale of new
partnership interests and the sale of any of its operating systems.
Further, beginning with the year ended December 31, 1998, the Partnership
is required to make prepayments equal to 50% of its excess cash flow, as
defined in the credit agreement. The Partnership also pays commitment fees
of 1/2% per annum, on the average unborrowed portion of the total amount
available for borrowings under the bank credit facility.
The Amended and Restated Credit Facility also requires the Partnership to
maintain compliance with various financial covenants including, but not
limited to, covenants relating to total indebtedness, debt ratios, interest
coverage ratio, fixed charges ratio, and capital expenditures. In addition,
the Senior Credit Facility has restrictions on certain Partnership
distributions. As of December 31, 1996, the Partnership was in compliance
with the financial covenants of the Amended and Restated Credit Facility.
All partnership interests in the Company and all assets of the Company and
its subsidiary are pledged as collateral for the Senior Credit Facility.
In order to convert certain of the interests payable at variable rates
under the Amended and Restated Credit Facility to interest at fixed rates,
the Partnership has entered into interest rate swap agreements for notional
amounts totaling $170,000, and maturing between November 15, 1999 and
October 7, 2000. According to these agreements, the Partnership pays or
receives the difference between (1) an average fixed rate of 5.932% and (2)
various available floating rate options applied to the same $170,000
notional amount every three months during the term of the agreement.
Through the year ended December 31, 1996, the Partnership had recognized an
increase in interest expense of approximately $195 as a result of these
interest rate swap agreements.
(b) Senior Subordinated Notes
On October 7, 1996, the Partnership issued, pursuant to a public offering
(the "Offering"), $200,000 aggregate principal amount of 11% Senior
Subordinated Notes due 2006 (the "Notes"). Net proceeds from the Offering
of $192,500, after costs of approximately $7,500, were available to the
Partnership on October 7, 1996.
In connection with the anticipated issuance of the Notes, the Partnership
entered into deferred interest rate setting agreements to reduce the
Partnership's interest rate exposure in anticipation of issuing the Notes.
The cost of such agreements, amounting to $1,390, will be recognized as a
component of interest expense over the term of the Notes.
The Notes are unsecured subordinated obligations of the Partnership (co-
issued by FrontierVision Capital Corporation) that mature on October 15,
2006. Interest accrues at 11% per annum beginning from the date of
issuance, and is payable each April 15 and October 15, commencing April 15,
1997.
The Indenture for the Notes (the "Indenture") also requires the Partnership
to maintain compliance with covenants relating to total indebtedness. In
addition, the Indenture has certain restrictions on distributions, mergers,
asset sales and changes in control of the Company. As of December 31, 1996,
the Partnership was in compliance with the financial covenants of the
Indenture.
(c) Senior and Junior Notes
The Senior Notes bear interest at a rate of 12% per annum, compounded
annually, and are payable June 30, 2004 and 2007. The Junior Notes bear
interest at a rate of 14% per annum, compounded annually, and are payable
June 30, 2004 and 2007. Under the terms of the Senior Notes and the Junior
Notes, no cash interest payments are required.
F-40
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(4) DEBT (CONTINUED)
(d)Subordinated Promissory Note to UVC
The subordinated promissory note to UVC bears interest at 9% for the first
three years. At the end of each subsequent year, the annual interest rate
increases 2% per year. Under the terms of the subordinated promissory note,
the Partnership may issue additional subordinated promissory notes rather
than making cash interest payments. In this event, the subordinated
promissory note bears interest equal to the annual interest of the original
promissory note plus 2.5% for the first three years and 3% for each of the
subsequent years. Further, in the event the Partnership's leverage ratio
exceeds certain specified amounts, the interest rate also increases by 2%.
Under the terms of the subordinated promissory note, the Partnership can
prepay the balance at any time.
The debt of the Partnership matures as follows:
<TABLE>
<CAPTION>
Year ended December 31--
------------------------
<S> <C>
1997 $ 33
1998 3,709
1999 9,353
2000 13,350
2001 17,350
Thereafter 508,939
--------
$552,734
========
</TABLE>
(5) FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximate their fair value
due to the nature and length of maturity of the investments.
The estimated fair value of the Partnership's debt instruments is based on the
borrowing rates that approximate existing rates at December 31, 1996;
therefore, there is no material difference in the fair market value and the
carrying value of such debt instruments.
(6) COMMITMENTS AND CONTINGENCIES
The Partnership has annual commitments under lease agreements for office
space, equipment, pole rental and land upon which certain of its towers and
antennae are constructed. Rent expense for the year ended December 31, 1996
and for the period from inception (April 17, 1995) to December 31, 1995 was
$2,365 and $194, respectively.
Estimated future noncancelable lease payments under such lease obligations
subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year ended December 31--
------------------------
<S> <C>
1997 $ 480
1998 344
1999 260
2000 170
2001 131
Thereafter 288
------
$1,673
======
</TABLE>
F-41
<PAGE>
FRONTIERVISION PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in Thousands)
(6) COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services, which allowed cable operators to justify
regulated rates in excess of the FCC benchmarks through cost of service
showings at both the franchising authority level for basic service and to the
FCC in response to complaints on rates for cable programming services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided
cable operators with the ability to offer new product tiers priced as
operators elect, provided certain limited conditions are met, permit cable
operators to add new channels at reasonable prices to existing cable
programming service tiers, and created an additional option pursuant to which
small cable operators may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish monthly rates per subscriber no higher than $1.24 per channel, the
rates are deemed to be reasonable.
As a result of such actions, the Partnership's basic and tier service rates
and its equipment and installation charges (the "Regulated Services") are
subject to the jurisdiction of local franchising authorities and the FCC. The
Partnership believes that it has complied in all material respects with the
provisions of the 1992 Cable Act. However, the Partnership's rates for
Regulated Services are subject to review by the FCC, if a complaint has been
filed, or if the appropriate franchise authority has certified the system. If,
as a result of the review process, a system cannot substantiate its rates, it
could be required to retroactively reduce its rates to the appropriate
benchmark and refund the excess portion of rates received. Any refunds of the
excess portion of tier service rates would be retroactive to the date of
complaint. Any refunds of the excess portion of all other Regulated Services
rates would be retroactive to one year prior to the implementation of the rate
reductions.
The Partnership's agreements with franchise authorities require the payment of
annual fees which approximate 5% of system franchise revenue. Such franchises
are generally nonexclusive and are granted by local governmental authorities
for a specified term of years, generally for extended period of up to fifteen
years.
(7) SUBSEQUENT EVENTS (UNAUDITED)
On December 18, 1996, the Partnership entered into an asset purchase agreement
with Bluegrass Cable Partners, Limited Partnership, to acquire certain cable
television assets, primarily in Northern Kentucky for a cash purchase price of
$9,900. As of December 31, 1996, the Partnership had advanced $500 as an
earnest money deposit related to this transaction. The Partnership consummated
the purchase of the systems on March 20, 1997.
Subsequent to December 31, 1996, the Partnership entered into letters of
intent or asset purchase agreements to acquire certain cable television
systems, located primarily in Ohio and Kentucky, in seven separate
transactions, for aggregate consideration of approximately $54.8 million. The
transactions are expected to close by the third quarter of 1997.
F-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of
United Video Cablevision, Inc.:
We have audited the accompanying divisional balance sheet of United Video
Cablevision, Inc.--Maine and Ohio Divisions as of November 8, 1995 and
December 31, 1994, and the related statements of divisional operations, cash
flows and equity for the period of January 1, 1995 through November 8, 1995,
and for the years ended December 31, 1994 and 1993. These financial statements
are the responsibility of the Divisions' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from 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 our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the divisional financial position of United Video
Cablevision, Inc.--Maine and Ohio Divisions as of November 8, 1995 and
December 31, 1994, and the results of its divisional operations and its cash
flows for the period ending November 8, 1995, and the years ending December
31, 1994 and 1993 in conformity with generally accepted accounting principles.
Piaker & Lyons, P.C.
Vestal, NY
May 7, 1996
F-43
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
DIVISIONAL BALANCE SHEETS
<TABLE>
<CAPTION>
--------------------------
November 8, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 75,100 $ 35,461
------------ ------------
Accounts Receivable(1)
Accounts Receivable, Trade 143,673 206,576
Accounts Receivable, Other 25,980 31,034
Less: Allowance for Doubtful Accounts (53,994) (34,928)
------------ ------------
Net Accounts Receivable 115,659 202,682
------------ ------------
Prepaid Expenses 165,080 108,045
------------ ------------
Total Current Assets 355,839 346,188
------------ ------------
Property, Plant and Equipment--At Cost
Land 61,556 61,223
Buildings and Improvements 1,586,150 1,570,888
Vehicles 2,608,730 2,628,936
Cable Television Distribution Systems 85,010,454 83,296,885
Office Furniture, Tools and Equipment 1,386,288 1,363,828
Less: Accumulated Depreciation(1) (68,243,467) (59,163,656)
------------ ------------
Net Property, Plant and Equipment 22,409,711 29,758,104
------------ ------------
Intangible Assets
Franchise Rights 1,994,336 1,984,349
Non Compete Agreements 71,753 71,753
Other Intangible Assets 1,943,836 1,943,836
Less: Accumulated Amortization(1) (2,930,019) (2,550,708)
------------ ------------
Net Intangible Assets 1,079,906 1,449,230
------------ ------------
Total Assets $ 23,845,456 $ 31,553,522
============ ============
LIABILITIES AND DIVISIONAL EQUITY
Liabilities
Accounts Payable $ -- $ 684,264
Subscriber Deposits and Unearned Income 341,263 401,606
Accrued Franchise Fees 424,312 469,578
Accrued Programming Fees 686,599 513,151
Other Accrued Expenses 1,596,134 1,154,024
------------ ------------
Total Current Liabilities 3,048,308 3,222,623
Divisional Equity 20,797,148 28,330,899
------------ ------------
Total Liabilities and Divisional Equity $ 23,845,456 $ 31,553,522
============ ============
</TABLE>
See the accompanying notes to divisional financial statements.
F-44
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL OPERATIONS
<TABLE>
<CAPTION>
---------------------------------------
Period from
January 1,
1995 For the For the
through Year Ended Year Ended
November 8, December 31, December 31,
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Revenues(1) $25,417,064 $27,964,550 $27,917,090
----------- ----------- -----------
Operating Expenses
Programming 5,350,664 5,717,160 5,361,127
Plant and Operation 3,741,207 4,185,894 3,902,847
General and Administrative 3,754,474 4,415,919 4,628,442
Marketing and Advertising 276,712 248,572 409,890
Corporate Overhead(3) 1,270,072 1,327,127 1,470,702
Depreciation and Amortization(1) 9,625,116 11,225,978 9,960,536
----------- ----------- -----------
Total Expenses 24,018,245 27,120,650 25,733,544
----------- ----------- -----------
Operating Income 1,398,819 843,900 2,183,546
----------- ----------- -----------
Other (Income) Expense
Interest Expense(1) 4,086,738 4,892,250 4,960,032
Gain on Sale of Fixed Assets (25,034) (33,835) (33,810)
----------- ----------- -----------
Total Other (Income) Expense 4,061,704 4,858,415 4,926,222
----------- ----------- -----------
Net Loss $(2,662,885) $(4,014,515) $(2,742,676)
=========== =========== ===========
</TABLE>
See the accompanying notes to divisional financial statements.
F-45
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL EQUITY
<TABLE>
<CAPTION>
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, $28,330,899 $32,700,089 $37,526,944
Net Loss (2,662,885) (4,014,515) (2,742,676)
Payments to Corporate Division, Net (4,870,866) (354,675) (2,084,179)
----------- ----------- -----------
Balance, November 8, 1995 $20,797,148
===========
Balance, December 31, $28,330,899 $32,700,089
=========== ===========
</TABLE>
See the accompanying notes to divisional financial statements.
F-46
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
STATEMENTS OF DIVISIONAL CASH FLOWS
<TABLE>
<CAPTION>
---------------------------------------
Period from
January 1,
1995 For the For the
through Year Ended Year Ended
November 8, December 31, December 31,
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents
Operating Activities
Net Loss $(2,662,885) $(4,014,515) $(2,742,676)
----------- ----------- -----------
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operations:
Depreciation 9,245,805 10,771,263 9,497,062
Amortization of Intangibles 379,311 454,715 463,474
Allowance for Doubtful Accounts 19,066 6,124 (3,077)
Gain on Sale of Assets (25,034) (33,835) (33,810)
Changes in Operating Assets and
Liabilities, Net of Effects from
Acquisition of Corporate Entities:
Accounts Receivable and Other
Receivables 67,957 (132,182) 122,248
Prepaid Expenses (57,035) 13,897 (158,603)
Accounts Payable and Accrued
Expenses (113,972) (846,244) (52,046)
Subscriber Deposits and Unearned
Income (60,343) (45,895) (72,253)
----------- ----------- -----------
Total Adjustments 9,455,755 10,187,843 9,762,995
----------- ----------- -----------
Net Cash Provided by Operating
Activities 6,792,870 6,173,328 7,020,319
----------- ----------- -----------
Investing Activities
Purchase of Property, Plant and
Equipment (2,037,144) (5,712,592) (5,024,998)
Acquisition of Intangible Assets (9,987) (216,154) (1,928)
Proceeds from Sale of Assets 164,766 41,789 37,660
----------- ----------- -----------
Net Cash Used in Investing Activities (1,882,365) (5,886,957) (4,989,266)
----------- ----------- -----------
Financing Activities
Payments to Corporate Division, Net (4,870,866) (354,675) (2,084,179)
----------- ----------- -----------
Net Increase (Decrease) in Cash
Equivalents 39,639 (68,304) (53,126)
Cash and Cash Equivalents at
Beginning of Period 35,461 103,765 156,891
----------- ----------- -----------
Cash and Cash Equivalents at End of
Period $ 75,100 $ 35,461 $ 103,765
=========== =========== ===========
Supplemental Disclosures of Cash Flow
Information:
Interest Paid $ 4,086,738 $ 4,892,250 $ 4,960,032
Income Taxes Paid -- -- --
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, the Divisions consider all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
See the accompanying notes to divisional financial statements.
F-47
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
NOTES TO DIVISIONAL FINANCIAL STATEMENTS
NOVEMBER 8, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
The accompanying divisional financial statements include the Maine and Ohio
Divisions of United Video Cablevision, Inc. (the "Divisions"). The Divisions
are engaged in providing cable television programming services to subscribers
in their franchised areas. The Corporate division allocates debt to the
operating divisions based upon the respective acquisition and construction
costs relative to the debt incurred. Accordingly, interest has been allocated
to the operating divisions by the Corporate division in the same manner. For
the purpose of the divisional financial statements, debt has been reflected as
division equity in the accompanying financial statements under the terms of
the agreement with FrontierVision Operating Partners, L.P., as no such debt
will be assumed.
Concentrations of Credit Risk
The Divisions' trade receivables are comprised of amounts due from subscribers
in varying regions throughout the states. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Divisions' customer base and geographic dispersion.
Revenue Recognition
The Divisions recognize service revenues on the accrual basis in the month in
which the service is to be provided. Payments received in advance are included
in deferred revenue until the month they become due at which time they are
recognized as income.
Capitalization and Depreciation
In accordance with Statement No. #51 of the Financial Accounting Standards
Board, the Divisions have adopted the policy of capitalizing certain expenses
applicable to the construction and operating of a cable television system
during the period while the cable television system is partially under
construction and partially in service. For the period ended November 8, 1995,
the total capitalized costs amounted to $314,347. During 1994 and 1993, the
total capitalized costs amounted to $244,276 and $300,429, respectively.
The Divisions, for financial reporting purposes, provide depreciation on the
straight-line method, which is considered adequate for the recovery of the
cost of the properties over their estimated useful lives. For income tax
purposes, however, the Divisions utilize both accelerated methods and the
accelerated cost recovery system. For the period ended November 8, 1995, the
provision for depreciation in the accompanying statements of operations
amounted to $9,245,805. For the years ended December 31, 1994 and 1993, the
provision amounted to $10,771,263 and $9,497,062, respectively.
Depreciation lives for financial statement purposes are as follows:
<TABLE>
<S> <C>
Headend Equipment
Tower 12 Years
Antennae 7 Years
Other Headend Equipment 8 Years
Trunk and Distribution Equipment
Traps, Descramblers, Converters, Decoders 5 Years
Other Trunk and Distribution Equipment 8 Years
Test Equipment 5 Years
Local Origination Equipment 8 Years
Vehicles 3 Years
Furniture and Fixtures 10 Years
Leasehold Improvements 8 Years
Computer and EDP Equipment 5 Years
</TABLE>
F-48
<PAGE>
UNITED VIDEO CABLEVISION, INC.
MAINE AND OHIO DIVISIONS
NOTES TO DIVISIONAL FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Amortization
The Divisions are amortizing various intangible assets acquired and incurred
on a straight-line basis, generally from 5 to 40 years. For the period ended
November 8, 1995, the provision for amortization in the accompanying
statements of operations amounted to $379,311. For the years ended December
31, 1994 and 1993, the provision amounted to $454,715 and $463,474,
respectively.
Income Taxes
The Divisions are a part of United Video Cablevision, Inc. which has elected
to be taxed as a small business corporation under "Sub-Chapter S" of the
Internal Revenue Code effective January 1, 1987, wherein the stockholders of
United Video Cablevision, Inc. are taxed on any earnings or losses of the
Company.
Bad Debts
The Divisions have adopted the reserve method for recognizing bad debts for
financial statement purposes and continue to utilize the direct write-off
method for tax purposes.
Use of Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses.
(2) COMMITMENTS
The Divisions were committed to annual pole rentals of approximately $823,000
at November 8, 1995 and $830,000 and $832,000 at December 31, 1994 and 1993,
respectively, to various utilities. These agreements are subject to
termination rights by both parties.
The Divisions lease in various systems the land upon which their towers and
antennae are constructed. The annual rental payments under these leases
amounted to approximately $37,000 at November 8, 1995, approximately $37,000
at December 31, 1994 and approximately $46,000 at December 31, 1993.
(3) MANAGEMENT AGREEMENT WITH RELATED PARTY
The Divisions are being provided with certain management and technical
services by a related party by means of a management agreement. For the period
ended November 8, 1995, the allocated billings amounted to $1,270,072, and for
the years ended December 31, 1994 and 1993, billings amounted to $1,327,127
and $1,470,702, respectively.
(4) SALE OF DIVISIONS
On November 9, 1995, United Video Cablevision, Inc. consummated an agreement
by which it sold substantially all of the net assets and associated current
liabilities in its Maine and Ohio franchise areas (the Divisions) for
approximately $120,500,000. Upon the completion of the transaction, United
Video Cablevision, Inc. realized a gain of approximately $100,000,000.
F-49
<PAGE>
INDEPENDENT AUDITORS' REPORT
Cox Communications, Inc.:
We have audited the accompanying combined statements of net assets of the
combined operations of Cox Communications, Inc.'s ("CCI") cable television
systems serving 57 communities in Ashland, Kentucky and Defiance, Ohio
(collectively referred to as the "Ashland and Defiance Clusters" or
"Successor") whose assets and certain liabilities were acquired by
FrontierVision Operating Partners, L.P. on April 9, 1996, as of December 31,
1994 ("Predecessor") and 1995 ("Successor"), and the related combined
statements of operations, changes in net assets, and cash flows for the years
ended December 31, 1993 and 1994 (Predecessor), for the one-month period ended
January 31, 1995 (Predecessor), and for the eleven-month period ended December
31, 1995 (Successor). These financial statements are the responsibility of the
Ashland and Defiance Clusters' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Ashland and
Defiance Clusters at December 31, 1994 (Predecessor) and 1995 (Successor), and
the combined results of its operations and its cash flows for years ended
December 31, 1993 and 1994 (Predecessor), for the one-month period ended
January 31, 1995 (Predecessor), and for the eleven-month period ended December
31, 1995 (Successor), in conformity with generally accepted accounting
principles.
As discussed in Note 1, effective February 1, 1995, CCI acquired the Ashland
and Defiance Clusters in connection with the acquisition of Times Mirror Cable
Television, Inc.
Deloitte & Touche LLP
Atlanta, Georgia
April 10, 1996
F-50
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF NET ASSETS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------
Successor Predecessor
------------ ------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 188
Accounts Receivable--Less allowance for doubtful
accounts of $43 and $37 $ 1,784 1,563
Amounts Due From Affiliate 5,848
Intercompany Income Taxes Receivable 1,182
Net Plant and Equipment 25,621 18,096
Intangible Assets 110,796 51,210
Other Assets 1,149 580
-------- -------
$146,380 $71,637
======== =======
LIABILITIES AND NET ASSETS
Accounts Payable $ 580 $ 692
Accrued Expenses 966 915
Intercompany Income Taxes Payable 2,160
Deferred Income 1,355 1,142
Deferred Income Taxes 7,644 3,147
Other Liabilities 146 99
Amounts Due to Affiliate 52,317
-------- -------
Total liabilities 10,691 60,472
Net Assets 135,689 11,165
-------- -------
$146,380 $71,637
======== =======
</TABLE>
See notes to combined financial statements.
F-51
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------------------------
Successor Predecessor
------------- ----------------------------
Eleven Months One Month Year Ended
Ended Ended December 31,
December 31, January 31, ----------------
1995 1995 1994 1993
------------- ----------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $24,628 $2,096 $25,235 $24,679
COSTS AND EXPENSES
OPERATING 8,035 689 7,188 6,773
Selling, general, and
administrative 4,919 503 5,507 5,398
Depreciation 5,480 214 3,293 3,413
Amortization 2,727 128 1,830 2,129
------- ------ ------- -------
Total costs and expenses 21,161 1,534 17,818 17,713
------- ------ ------- -------
OPERATING INCOME 3,467 562 7,417 6,966
INTEREST INCOME--NET 79 434 133
OTHER--NET (29) (3) (4)
------- ------ ------- -------
INCOME BEFORE INCOME TAXES 3,438 641 7,848 7,095
INCOME TAXES 3,749 248 3,982 3,559
------- ------ ------- -------
NET INCOME (LOSS) $ (311) $ 393 $ 3,866 $ 3,536
======= ====== ======= =======
</TABLE>
See notes to combined financial statements.
F-52
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
(In Thousands)
<TABLE>
<S> <C>
PREDECESSOR
- -----------
BALANCE, JANUARY 1, 1993 $ 11,303
Net income for the year ended December 31, 1993 3,536
Dividends to Affiliate (1,570)
--------
BALANCE, DECEMBER 31, 1993 13,269
Net income for the year ended December 31, 1994 3,866
Dividends to Affiliate (5,970)
--------
BALANCE, DECEMBER 31, 1994 11,165
Net income for the one month ended January 31, 1995 393
--------
BALANCE, JANUARY 31, 1995 $ 11,558
========
SUCCESSOR
- ---------
FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED FROM TIMES
MIRROR CABLE TELEVISION, INC. ON FEBRUARY 1, 1995 $136,000
Net loss for the eleven months ended December 31, 1995 (311)
--------
BALANCE, DECEMBER 31, 1995 $135,689
========
</TABLE>
See notes to combined financial statements.
F-53
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
------------------------------------------
Successor Predecessor
------------- ----------------------------
Eleven Months One Month Year Ended
Ended Ended December 31,
December 31, January 31, ----------------
1995 1995 1994 1993
------------- ----------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (311) $ 393 $ 3,866 $ 3,536
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,207 342 5,123 5,542
Deferred income taxes (142) (70) 298 293
(Increase) decrease in accounts
receivable (287) 66 114 (45)
Increase (decrease) in accounts
payable and accrued expenses 467 (360) (214) (92)
Income taxes payable (1,182) 31 1,914 (906)
Other, net 274 45 162 (61)
------- ----- ------- -------
Net cash provided by operating
activities 7,026 447 11,263 8,267
INVESTING ACTIVITIES:
Capital expenditures (1,362) (65) (3,795) (6,075)
Advances to Affiliate (5,848)
------- ----- ------- -------
Net cash used in investing
activities (7,210) (65) (3,795) (6,075)
FINANCING ACTIVITIES:
Net change in amounts due to
Affiliate (386) (1,466) (580)
Dividends paid (5,970) (1,570)
------- ----- ------- -------
Net cash used in financing
activities (386) (7,436) (2,150)
------- ----- ------- -------
NET INCREASE (DECREASE) IN CASH (184) (4) 32 42
CASH AT BEGINNING OF PERIOD 184 188 156 114
------- ----- ------- -------
CASH AT END OF PERIOD $ 184 $ 188 $ 156
------- ----- ------- -------
CASH PAID DURING THE PERIOD FOR:
Interest $ -- $ 79 $ 434 $ 133
======= ===== ======= =======
</TABLE>
See notes to combined financial statements.
F-54
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1994,
ONE MONTH ENDED JANUARY 31, 1995, AND
ELEVEN MONTHS ENDED DECEMBER 31, 1995
(1) ORGANIZATION AND BASIS OF PRESENTATION
These combined financial statements represent the combined operations of Cox
Communications, Inc.'s ("CCI") cable television systems serving 57 communities
in Ashland, Kentucky and Defiance, Ohio (collectively referred to as the
"Ashland and Defiance Clusters") whose assets and certain liabilities were
acquired by FrontierVision Operating Partners, L.P. on April 9, 1996. These
cable television systems were acquired by CCI, a majority owned subsidiary of
Cox Enterprises, Inc. ("CEI"), from The Times Mirror Company ("Times Mirror")
in connection with CCI's acquisition of Times Mirror Cable Television, Inc.
("TMCT") on February 1, 1995. The operations of the Ashland and Defiance
Clusters prior to February 1, 1995 are referred to as "Predecessor" and as
"Successor" after February 1, 1995.
All significant intercompany accounts and transactions have been eliminated in
combination. The acquisition of the Ashland and Defiance Clusters was
accounted for by the purchase method of accounting, whereby the allocable
share of the TMCT purchase price was pushed down to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition as
follows (thousands of dollars):
<TABLE>
<S> <C>
Net working capital $ (2,836)
Plant and equipment 30,022
Deferred taxes related to plant and equipment write-up (4,709)
Intangible Assets 113,523
--------
$136,000
========
</TABLE>
The historical combined financial statements do not necessarily reflect the
results of operations or financial position that would have existed had the
Ashland and Defiance Clusters been an independent company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Ashland and Defiance Clusters bill their customers in advance; however,
revenue is recognized as cable television services are provided. Receivables
are generally collected within 30 days. Credit risk is managed by
disconnecting services to customers who are delinquent generally greater than
60 days. Other revenues are recognized as services are provided. Revenues
obtained from the connection of customers to the cable television systems are
less than related direct selling costs; therefore, such revenues are
recognized as received.
Plant and Equipment
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of 5 to 20 years for buildings and building
improvements, 5 to 12 years for cable television systems, and 3 to 10 years
for other plant and equipment.
The costs of initial cable television connections are capitalized as cable
plant at standard rates for the Ashland and Defiance Clusters' labor and at
actual costs for materials and outside labor. Expenditures for maintenance and
repairs are charged to operating expense as incurred. At the time of
retirements, sales or other dispositions of property, the original cost and
related accumulated depreciation are written off.
Intangible Assets
Intangible assets consist primarily of goodwill and franchise costs recorded
in business combinations which is amortized on a straight-line basis over 40
years. The Ashland and Defiance Clusters assess on an on-going basis the
recoverability of intangible assets based on estimates of future undiscounted
cash flows for the applicable business acquired compared to net book value.
F-55
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Through January 31, 1995, the accounts of the Ashland and Defiance Clusters
were included in the consolidated federal income tax returns and certain state
income tax returns of Times Mirror. Beginning on February 1, 1995, the
accounts of the Ashland and Defiance Clusters were included in the
consolidated federal income tax returns and certain state income tax returns
of CEI. Current federal and state income tax expenses and benefits are
allocated on a separate return basis to the Ashland and Defiance Clusters
based on the current year tax effects of the inclusion of their income,
expenses, and credits in the consolidated income tax returns of Times Mirror,
CEI, or based on separate state income tax returns.
Deferred income taxes arise from temporary differences between income taxes
and financial reporting and principally relate to depreciation and
amortization.
Fees and Taxes
The Ashland and Defiance Clusters incur various fees and taxes in connection
with the operation of their cable television systems, including franchise fees
paid to various franchise authorities, copyright fees paid to the U.S.
Copyright Tribunal, and business and franchise taxes paid to the States of
Ohio and Kentucky. A portion of these fees and taxes are passed through to the
Ashland and Defiance Clusters' subscribers. Amounts collected from subscribers
are recorded as a reduction of operating expenses.
Pension and Postretirement Benefits
CCI generally provides defined pension benefits to all employees based on
years of service and compensation during those years. CEI provides certain
health care and life insurance benefits to substantially all retirees and
employees. For employees and retirees of the Ashland and Defiance Clusters,
these benefits are provided through the CCI plans. Expense related to these
plans is allocated to the Ashland and Defiance Clusters through the
intercompany account. The amount of the allocations is generally based on
actuarial determinations of the effects of the Ashland and Defiance Clusters
employees' participation in the plans.
Times Mirror Cable generally provides defined pension benefits to all
employees based on years of service and the employee's compensation during the
last five years of employment. Prior to December 31, 1992, these benefits were
primarily provided under the Times Mirror Cable Television, Inc. Pension Plan
(the "Times Mirror Cable Plan") in conjunction with the Times Mirror Employee
Stock Ownership Plan. On December 31, 1992, the Times Mirror Cable Plan was
merged with the Times Mirror Pension Plan.
Net periodic pension expense for 1993 and 1994 was estimated by an actuary
under the assumption that the Times Mirror Cable Plan continued to be a stand-
alone plan. This expense was allocated to the Ashland and Defiance Clusters
based on its salary expense as a percentage of total TMCT salary expense.
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.
Recently Issued Accounting Pronouncements
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed of," was issued. This Statement
requires that long-lived assets and certain intangibles be reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, with any impairment losses being
reported in the period in which the recognition criteria are first applied
based on the fair value of the asset. Long-lived assets and certain
intangibles to be disposed of are required to be reported at the lower
F-56
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of carrying amount or fair value less cost to sell. CCI, including the Ashland
and Defiance Clusters, adopted SFAS No. 121 in the first quarter of 1996. The
effect on the combined financial statements upon adoption of SFAS No. 121 was
not significant.
(3) CASH MANAGEMENT SYSTEM
The Ashland and Defiance Clusters participate in CEI's cash management system,
whereby the bank sends daily notification of checks presented for payment. CEI
transfers funds from other sources to cover the checks presented for payment.
Prior to February 1, 1995, the Ashland and Defiance Clusters participated in a
similar cash management system with Times Mirror.
(4) PLANT AND EQUIPMENT
Plant and equipment is summarized as follows (Thousands of Dollars):
<TABLE>
<CAPTION>
-------------------------
Successor Predecessor
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Land $ 5 $ 10
Buildings and building improvements 207 646
Transmission and distribution plant 30,235 34,543
Miscellaneous equipment 343 472
Construction in progress 3 59
------- --------
Plant and equipment, at cost 30,793 35,730
Less accumulated depreciation (5,172) (17,634)
------- --------
Net plant and equipment $25,621 $ 18,096
======= ========
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets are summarized as follows (Thousands of Dollars):
<TABLE>
<CAPTION>
-------------------------
Successor Predecessor
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Goodwill $113,523 $60,907
Other 134
-------- -------
Total 113,523 61,041
Less accumulated amortization (2,727) (9,831)
-------- -------
Net intangible assets $110,796 $51,210
======== =======
</TABLE>
F-57
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(6) INCOME TAXES
Income tax expense (benefit) is summarized as follows (Thousands of Dollars):
<TABLE>
<CAPTION>
---------------------------------------
Successor Predecessor
------------- -------------------------
Eleven Months One Month Year Ended
Ended Ended December 31,
December 31, January 31, -------------
1995 1995 1994 1993
------------- ----------- ------ ------
<S> <C> <C> <C> <C>
Current:
Federal $3,054 $248 $2,866 $2,614
State 837 70 818 652
------ ---- ------ ------
Total current 3,891 318 3,684 3,266
Deferred:
Federal (113) (68) 183 250
State (29) (2) 115 43
------ ---- ------ ------
Total deferred (142) (70) 298 293
------ ---- ------ ------
Total income taxes $3,749 $248 $3,982 $3,559
====== ==== ====== ======
</TABLE>
The tax effects of significant temporary differences which comprise the net
deferred tax liabilities are as follows (Thousands of Dollars):
<TABLE>
<CAPTION>
--------------
December 31,
--------------
1995 1994
------ ------
<S> <C> <C>
Plant and equipment $7,942 $3,408
Other (298) (261)
------ ------
Net deferred tax liability $7,644 $3,147
====== ======
</TABLE>
Income tax expense computed using the United States federal statutory rates is
reconciled to the reported income tax provisions as follows:
<TABLE>
<CAPTION>
----------------------------------------
Successor Predecessor
------------- --------------------------
Eleven Months One Month Year Ended
Ended Ended December 31,
December 31, January 31, --------------
1995 1995 1994 1993
------------- ----------- ------ ------
<S> <C> <C> <C> <C>
Federal statutory income tax rate 35% 35% 35% 35%
Computed tax expense at federal
statutory rates on income before
income taxes $1,203 $224 $2,747 $2,483
State income taxes (net of federal
tax benefit) 534 33 560 424
Acquisition adjustments 2,033 44 543 541
1% increase in enacted tax rate 76
Other, net (21) (53) 132 35
------ ---- ------ ------
Income tax provision $3,749 $248 $3,982 $3,559
====== ==== ====== ======
</TABLE>
F-58
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(7) RETIREMENT PLANS
As a result of the acquisition of TMCT by CCI, effective January 1, 1996, CEI
established the Cox Communications, Inc. Pension Plan (the "CCI Plan"), a
noncontributory defined benefit plan for substantially all of CCI's employees
including Ashland and Defiance Clusters' employees. The Ashland and Defiance
Clusters employees will become participants in the CCI Plan retroactive to the
Merger date of February 1, 1995. The CCI Plan will be established with a
transfer of plan assets from CEI and Times Mirror. The CCI Plan assets are
expected to have an estimated fair value equal to or greater than the
projected benefit obligation attributable to substantially all of the Ashland
and Defiance Clusters employees. Prior to February 1, 1995, substantially all
of the Ashland and Defiance Clusters' employees participated in a similar
defined benefit plan provided by TMCT. Several of the Ashland and Defiance
Clusters' employees were covered under a separate defined benefit plan funded
by the Communication Workers of America.
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
----------------
December 31,
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 7.50%
Rate of increase in compensation levels 5.00 6.00 6.25
Expected long-term rate of return on assets 9.00 9.50 9.75
</TABLE>
Total pension expense allocated to the Ashland and Defiance Clusters was
$53,000, $44,000, $0, and $64,000 for the years ended December 31, 1993 and
1994, for the one-month period ended January 31, 1995, and the eleven-month
period ended December 31, 1995, respectively.
Beginning February 1, 1995, CEI provides certain health care and life
insurance benefits to substantially all retirees of CEI and its subsidiaries,
Postretirement expense allocated to the Ashland and Defiance Clusters by CEI
was $14,000 for the eleven months ended December 31, 1995.
The funded status of the portion of the postretirement plan covering the
employees of the Ashland and Defiance Clusters is not determinable. The
accumulated postretirement benefit obligation for the postretirement plan of
CEI substantially exceeded the fair value of assets held in the plan at
December 31, 1995.
Beginning February 1, 1995, substantially all of the Ashland and Defiance
Clusters employees were eligible to participate in the savings and investment
plan of CEI. Under the terms of the plan, the Ashland and Defiance Clusters
match 50% of employee contributions up to a maximum of 6% of the employee's
base salary. Prior to February 1, 1995, the Ashland and Defiance Clusters
employees were eligible to participate in a similar savings and investment
plan with Times Mirror. The Ashland and Defiance Clusters' expense under the
plan was $39,000, $43,000, $3,000, and $44,000 for the years ended December
31, 1993 and 1994, for the one-month period ended January 31, 1995, and the
eleven-month period ended December 31, 1996, respectively.
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Ashland and Defiance Clusters borrow funds for working capital and other
needs from CEI. Certain management services are provided to the Ashland and
Defiance Clusters by CCI and CEI. Such services include legal, corporate
secretarial, tax, treasury, internal audit, risk management, benefits
administration, and other support services. Prior to February 1, 1995, the
Ashland and Defiance Clusters had similar arrangements with Times Mirror. The
Ashland and Defiance Clusters were allocated expenses for the years ended
December 31, 1993 and 1994, for the one-month period ended January 31, 1995,
and the eleven-month period ended December 31, 1995 of approximately
$1,040,000, $1,298,000, $117,000, and $1,513,000, respectively, related to
these services. Such expenses are estimated by management and are generally
allocated based on the number of customers served. Management believes that
these allocations were made, on a reasonable basis. However, the allocations
are not necessarily indicative of the level of expenses that might have been
incurred had the Ashland and Defiance Clusters contracted directly with third
parties. Management has not made a study or any attempt to obtain quotes from
third-parties to determine what the cost of
F-59
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(8) TRANSACTIONS WITH AFFILIATED COMPANIES (CONTINUED)
obtaining such services from third parties would have been. The fees and
expenses to be paid by the Ashland and Defiance Clusters are subject to
change.
The amounts due from affiliate represent the net of various transactions,
including those described above. Prior to February 1, 1995, amounts due
from/to Times Mirror bore interest at Times Mirror's estimated ten-year
financing rate and ranged between 6% and 8% between 1993 and 1994. Interest
income for 1993 and 1994 was $133,000 and $434,000, respectively. Effective
February 1, 1995, advances to affiliate are noninterest-bearing.
In accordance with the requirements of SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," the Ashland and Defiance Clusters have
estimated the fair value of its intercompany advances. Given the short-term
nature of these advances, the carrying amounts reported in the balance sheets
approximate fair value.
(9) COMMITMENTS AND CONTINGENCIES
The Ashland and Defiance Clusters lease office facilities and various items of
equipment under noncancelable operating leases. Rental expense under operating
leases amounted to $119,000 and $122,000 for the years ended December 31, 1993
and 1994 and $163,000 for the eleven-month period ended December 31, 1995.
Future minimum lease payments as of December 31, 1995 for all noncancelable
operating leases are as follows (Thousands of Dollars),
<TABLE>
<S> <C>
1996 $126
1997 103
1998 59
1999 50
2000 42
Thereafter 4
----
Total $383
====
</TABLE>
At December 31, 1995, the Ashland and Defiance Clusters had outstanding
purchase commitments totaling approximately $2,000.
The Ashland and Defiance Clusters are a party to various legal proceedings
that are ordinary and incidental to its business. Management does not expect
that any legal proceedings currently pending will have a material adverse
impact on the Ashland and Defiance Clusters' combined financial position or
combined results of operations.
(10) RATE REGULATION AND OTHER DEVELOPMENTS
In 1993 and 1994, the FCC adopted rate regulations required by the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), which utilized a benchmark price cap system, or alternatively a cost-
of-service regime, for establishing the reasonableness of existing basic and
cable programming service rates. The regulations resulted in, among other
things, an overall reduction of up to 17% in basic rates and other charges in
effect on September 30, 1992, before inflationary and other allowable
adjustments, if those rates exceeded the revised per-channel benchmarks
established by the FCC and could not otherwise be justified under a cost-of-
service showing.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to increase
rates for programming annually on the basis of projected increases in external
costs rather than on the basis of cost increases incurred in the preceding
quarter.
Many franchising authorities have become certified by the FCC to regulate
rates charged by the Ashland and Defiance Clusters for basic cable service and
associated basic cable service equipment. Some local franchising authority
decisions have been rendered that were adverse to the Ashland and Defiance
Clusters. In addition, a number of such franchising authorities and customers
of the Ashland and Defiance Clusters filed complaints with the FCC regarding
the rates charged for cable programming services.
F-60
<PAGE>
ASHLAND AND DEFIANCE CLUSTERS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(10) RATE REGULATION AND OTHER DEVELOPMENTS (CONTINUED)
In September 1995, CCI and the Cable Services Bureau of the FCC reached a
settlement in the form of a resolution of all outstanding rate complaints
covering the CCI, the Ashland and Defiance Clusters, and the former Times
Mirror cable television systems. In December 1995, the FCC approved the
Resolution which, among other things, provided for refunds ($115,000 to the
Ashland and Defiance Clusters' customers) in January 1996, and the removal of
additional outlet charges for regulated services from all of the Times Mirror
cable television systems, which accounts for a majority of the refund amounts.
The resolution also finds that the Ashland and Defiance Clusters' cable
programming services tier rates as of June 30, 1995 are not unreasonable. At
December 31, 1995, refunds under the resolution were fully provided for in the
Ashland and Defiance Clusters' financial statements.
On February 1, 1996, Congress passed the Telecommunications Competition and
Deregulation Act of 1996 ("the 1996 Act") which was signed into law by the
President on February 8, 1996, The 1996 Act is intended to promote substantial
competition in the delivery of video and other services by local telephone
companies (also known as local exchange carriers or "LECs") and other service
providers, and permits cable television operators to provide telephone
services.
Among other provisions, the 1996 Act deregulates the Cable Programming
Services ("CPS") tier of large cable television operators on March 31, 1999
and upon enactment, the CPS rates of small cable television operators where a
small cable operator serves 50,000 or fewer subscribers, revises the
procedures for filing a CPS complaint, and adds a new effective competition
test.
The 1996 Act establishes local exchange competition as a national policy by
preempting laws that prohibit competition in the telephone local exchange and
by establishing uniform requirements and standards for entry, competitive
carrier interconnection, and unbundling of LEC monopoly services. Both the FCC
and state commissions have substantial new responsibilities to promote the
1996 Act's competition policy. Depending on the degree and form of regulatory
flexibility afforded the LECs as part of the 1996 Act's implementation, the
Ashland and Defiance Clusters' ability to offer competitive telephony services
may be adversely affected.
The 1996 Act repeals the cable television/telephone cross-ownership ban and
allows LECs and other common carriers, as well as cable systems providing
local exchange service, to provide video programming services as either cable
operators or as open video system ("OVS") operators within their service areas
upon certification from the FCC and pursuant to regulations which the FCC is
required to adopt. The 1996 Act exempts OVS operators from many of the
regulatory obligations that currently apply to cable operators such as rate
regulation and franchise fees, although other requirements are still
applicable. OVS operators, although not subject to franchise fees as defined
by the 1992 Cable Act may be subject to fees charged by local franchising
authorities or other governmental entities in lieu of franchise fees.
F-61
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
C4 Media Cable Southeast, Limited Partnership
Lockney, Texas 79241
We have audited the consolidated balance sheets of C4 Media Cable Southeast,
Limited Partnership and its subsidiary (the Partnership) as of December 31,
1995, and 1994, and the related consolidated statements of loss, partners'
deficit, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated 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 report.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of C4 Media
Cable Southeast Limited Partnership and its subsidiary as of December 31, 1995
and 1994, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 7
to the consolidated financial statements, the Partnership sold substantially
all assets on February 1, 1996. The sales price was not sufficient to satisfy
the liabilities of the Partnership. The remaining unpaid principal and
interest on Senior and Junior loans have been due and payable since September
30, 1990. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 7. The historical consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Williams, Rogers, Lewis & Co., P.C.
Plainview, Texas
March 11, 1996
F-62
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 203,955 $ 204,255
Accounts Receivable, Net 168,823 141,025
Prepaid Expense and Other 211,289 201,952
------------ ------------
Total Current Assets 584,067 547,232
------------ ------------
Property, Plant and Equipment
Plant and Equipment 41,057,969 39,251,506
Less: Accumulated Depreciation (20,386,652) (16,172,050)
------------ ------------
Net Property, Plant and Equipment 20,671,317 23,079,456
------------ ------------
Other Assets
Deposits and Other 17,314 17,899
Franchises, Net 2,967,669 4,031,170
Acquisition Costs, Net 874,863 1,148,913
Covenant Not to Compete -0- -0-
------------ ------------
Total Other Assets 3,859,846 5,197,982
------------ ------------
Total Assets $ 25,115,230 $ 28,824,670
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities
Accounts Payable $ 735,138 $ 691,305
Other Current Liabilities 393,423 568,455
Accrued Interest Payable 30,022,386 24,315,384
Notes Payable 60,165,844 60,165,844
------------ ------------
Total Current Liabilities 91,316,791 85,740,988
------------ ------------
Minority Interest (371,926) (268,729)
------------ ------------
Partners' Deficit
General Partners (65,829,635) (56,647,589)
------------ ------------
Total Liabilities and Partners' Deficit $ 25,115,230 $ 28,824,670
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-63
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF LOSS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
------------------------
1995 1994
----------- -----------
<S> <C> <C>
REVENUE
Cable Service $11,755,860 $11,231,123
----------- -----------
EXPENSE
Programming Costs 3,003,682 2,602,692
Salaries 1,124,203 1,046,895
Other Operating Expenses 2,607,023 2,642,777
Management Fees 545,641 561,114
Depreciation 4,214,602 4,113,809
Amortization 1,337,551 1,575,551
Interest 8,208,401 7,447,251
----------- -----------
21,041,103 19,990,089
----------- -----------
Loss Before Minority Interest (9,285,243) (8,758,966)
Minority Interest in Loss of Subsidiary 103,197 116,472
----------- -----------
NET LOSS $(9,182,046) $(8,642,494)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-64
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
----------------------------------------------
Class A
General General Limited
Partners Partners Partners Total
--------- ------------ -------- ------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $(539,910) $(47,465,185) $-0- $(48,005,095)
Loss, 1994 (86,425) (8,556,069) -0- (8,642,494)
--------- ------------ ---- ------------
BALANCE, DECEMBER 31, 1994 (626,335) (56,021,254) -0- (56,647,589)
Loss, 1995 (91,820) (9,090,226) -0- (9,182,046)
--------- ------------ ---- ------------
BALANCE, DECEMBER 31, 1995 $(718,155) $(65,111,480) $-0- $(65,829,635)
========= ============ ==== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-65
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $(9,182,046) $(8,642,494)
Adjustments to reconcile net loss to net cash:
Minority interest in loss of subsidiary (103,197) (116,472)
Depreciation 4,214,602 4,113,809
Amortization 1,337,551 1,575,551
Changes in Assets and Liabilities:
Accounts receivable (27,798) 2,330
Prepaid expenses and other (8,752) (7,701)
Accounts payable 43,833 20,388
Other liabilities (175,032) 51,392
Accrued interest 5,707,002 3,928,106
----------- -----------
Net cash provided by operating activities 1,806,163 924,909
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of plant, equipment and other assets (1,806,463) (854,999)
----------- -----------
Net cash used in investing activities (1,806,463) (854,999)
----------- -----------
Net Increase (Decrease) in Cash (300) 69,910
Cash, Beginning of Year 204,255 134,345
----------- -----------
Cash, End of Year $ 203,955 $ 204,255
=========== ===========
Supplemental Disclosure for Statements of Cash
Flows:
Cash Paid for Interest 2,470,936 3,519,145
Non-Cash Investing Activities:
Deposit added to cost of plant and equipment -0- 39,622
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-66
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Entities:
C4 Media Cable Southeast, Limited Partnership and its subsidiary (the
"Partnership") is a Delaware limited partnership organized to own and operate
cable television systems in various communities throughout Virginia,
Tennessee, and Georgia. The Partnership provides basic and pay cable
television service to approximately 40,500 subscribers in these states.
General partners are C4 Media Cable, Inc. and C4 Media Cable Employees
Investment Corporation. C4 Media Cable, Inc. also participates as a limited
partner. Under a letter agreement dated May 9, 1992, Philips Credit
Corporation ("Philips") has exercised its rights under certain pledge
agreements to exercise voting control over all partnership interests.
Accordingly, effective October 30, 1992, C4 Media Cable, Inc. was replaced by
Southeast Cable, Inc., a corporate affiliate of Philips, as the managing
general partner. The managing general partner utilized Doucette Management
Company ("DMC") as the business manager for the Partnership until December 30,
1993 at which time the management agreement was assigned to Cablevision of
Texas III, LP ("CAB III"). See note 4.
Principles of Consolidation:
The consolidated financial statements include the accounts of C4 Media Cable
Southeast, Limited Partnership and County Cable Company, Limited Partnership
of which the Partnership is an 80% owner and general partner. All significant
intercompany transactions have been eliminated.
Revenue Recognition:
The Partnership recognizes cable service revenue on the accrual basis in the
month the cable service is provided. Payments received in advance are included
in deferred revenue until the month the service is provided at which time they
are recognized as income.
Property, Plant, Equipment and Depreciation:
Property, plant and equipment used in the business are stated at cost and
depreciated over estimated useful lives generally on the straight line method
for financial statement purposes. Expenditures which significantly increase
asset values or extend useful lives are capitalized, limited by projected
recoverability of such current year expenditures in the ordinary course of
business from expected future revenue.
The useful lives of property, plant and equipment for purposes of computing
depreciation range from 3 to 10 years.
Franchises:
The company has been granted rights to operate within the locations wherein it
has cable television systems. Such franchises grant certain operating rights
and impose certain costs and restrictions. The Partnership pays its franchise
fees annually on most of its locations based upon either gross or basic
service revenues. Franchise fee expense for the years ended December 31, 1995
and 1994 was $327,088 and $303,375, respectively.
Such franchises have varying lives and are renewable at the discretion of the
franchise's governing boards. For financial statement purposes, franchise
costs acquired in connection with the purchase of cable systems are being
amortized over the remaining average lives of the related cable television
franchises at the date of acquisition, which approximates 7 to 13 years.
Franchise amortization expense for the years ended December 31, 1995 and 1994
was $1,063,501 in each year.
Acquisition Costs:
Acquisition costs are those costs incurred related to the acquisition of new
systems. For financial statement purposes, such costs are amortized by using
the straight-line method over 10 years. Amortization expense for acquisition
costs for the years ended December 31, 1995 and 1994 was $274,050, and
$274,050, respectively.
F-67
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Covenants Not to Compete:
The portion of the purchase price of systems allocated to non-competition
agreements with former owners is capitalized and amortized by using the
straight-line method over the life of the agreements. Amortization expense for
non-competition agreements for the year ended December 31, 1994 was $238,000.
Income Taxes:
The partnership does not pay federal income tax, but is a pass through entity
so that partners are taxed on their share of partnership earnings. Partnership
net income or loss is allocated to each partner under a formula established in
the partnership agreement.
Cash Equivalents:
For cash flow purposes, cash equivalents are cash and cash items with a
maturity of less than 90 days.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
(2) ACCOUNTS RECEIVABLE, NET
Following is a summary of accounts receivable at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
------------------
1995 1994
-------- --------
<S> <C> <C>
Trade Accounts $175,671 $146,239
Other 281 642
Related Parties (4) -0- 194,873
Less: Allowance for Doubtful Accounts (4) (7,129) (200,729)
-------- --------
$168,823 $141,025
======== ========
</TABLE>
(3) NOTES PAYABLE
Following is a summary of notes payable at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
-----------------------
1995 1994
----------- -----------
<S> <C> <C>
Senior loan payable to Philips, due September 30,
1990, interest due at prime +2.25%, secured by
substantially all assets of the partnership and the
pledge of partnership interests. In addition, the
loan is collateralized by the pledge of all stock
held in C4 Media Cable, Inc. and C4 Media Cable,
Employees Investment Corporation by the President and
Chairman of C4 Media Cable, Inc. $44,185,831 $44,185,831
Junior Loan payable to Philips, due September 30, 1990
interest due at 20%, secured by substantially all
assets of the partnership and the pledge of
partnership interests. In addition, the loan is
collateralized by the pledge of all stock held in C4
Media Cable, Inc. and C4 Media Cable Employees
Investment Corporation by the President and Chairman
of C4 Media Cable, Inc. 15,980,013 15,980,013
----------- -----------
Total $60,165,844 $60,165,844
=========== ===========
</TABLE>
F-68
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) NOTES PAYABLE (CONTINUED)
The Philips notes contain performance covenants concerning homes passed,
subscriber levels, miles of plant, etc., some of which the Partnership had
violated as of December 31, 1995 and 1994. Philips has not waived compliance
with these provisions.
All notes payable and accrued interest to Philips were due September 30, 1990.
Philips has not extended the due date of the notes and has the right to demand
payment at any time. A significant amount of accrued interest and principle
was paid when substantially all operating assets of the Partnership were sold
February 1, 1996. See note 7.
(4) RELATED PARTY TRANSACTIONS
Effective October 30, 1992, C4 Media Cable, Inc. was replaced by Southeast
Cable, Inc., a corporate affiliate of Philips, as the managing general
partner. Effective May 10, 1992 under the provisions of an agreement with
Philips, the Partnership terminated its management agreement with C4 Media
Cable, Inc. and entered into a management agreement with DMC for a term
extending to December 30, 1993. At December 30, 1993 the management agreement
was assigned to CAB III. The agreement provides for fixed fees and the
reimbursement of direct expenses incurred on behalf of the Partnership as
defined in the agreement. Management fees paid under these agreements for the
years ended December 31, 1995 and 1994 were $545,641 and $550,214,
respectively. Other fees and expense reimbursements paid under the agreements
for the years ended December 31, 1995 and 1994 were $120,000 and are included
in Other Operating Expenses.
Other related parties include Caribbean Cable TV ("CCTV") and MCT Cablevision
("MCT"). Related party lending was done without independent business judgment,
terms, collateral or a method of settlement. Due to the manner in which this
lending was done and questions surrounding the collectability of these
accounts, all the related party receivables were reserved in the allowance for
doubtful accounts prior to 1994 and were written off in 1995. See note 2.
Related party receivables at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
--------
1994
--------
<S> <C>
CCTV $ 23,965
MCT 35,968
C4 Media Cable, Inc. 134,940
--------
$194,873
========
</TABLE>
The Partnership purchased leasehold improvements from J-D Partnership, Ltd.
("J-D") for the Lockney, Texas office of $5,366 on April 24, 1995. J-D is a
limited partnership 99% owned by James and Denise Doucette (Doucette).
Doucette is also the managing general partner and owns 62% of CAB III, as well
as being the sole stockholder of DMC, an S-Corporation. The Partnership paid a
management fee to Doucette of $10,900 for the year ended December 31, 1994.
(5) COMMITMENTS
The Company has certain obligations under pole rental agreements, tower site
leases, etc. for assets utilized in the operation of the systems. These are
mostly short term agreements. Expenses charged to operations for the periods
ended December 31, 1995 and 1994 were $536,368 and $518,837, respectively, and
are included in Other Operating Expenses.
(6) CONTINGENCIES
The Company is to a significant degree self-insured for risks consisting
primarily of physical loss to property and plant. The headend equipment is
insured, but the plant itself is not and represents a potential exposure for
the Company. Management is of the opinion that the various systems' distance
from each other make the likelihood of a complete loss to the plant unlikely.
F-69
<PAGE>
C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) SUBSEQUENT EVENT AND CONSIDERATION OF ABILITY TO CONTINUED AS A GOING
CONCERN
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business.
On February 1, 1996 substantially all assets of the Partnership were sold to
FrontierVision Operating Partners, L.P. The agreement had a stated sales price
of $48,000,000 and a net payment amount of $46,237,708 after escrow holdback
of $1,375,200 and other adjustments. At the date of the auditors' report the
Partnership was still liable for the remaining balance of the note payable to
Philips with no significant assets to satisfy that liability, and the escrow
items remain open.
An unaudited pro forma consolidated balance sheet is presented below giving
effect to the sale as if it had occurred December 31, 1995 including escrowed
items. The pro forma information is presented for the purpose of additional
analysis and is not a required part of the basic consolidated financial
statements.
<TABLE>
<CAPTION>
------------
Pro Forma
Unaudited
1995
------------
<S> <C>
Current Assets $ 685,773
Other Assets 1,392,514
------------
Total Assets $ 2,078,287
============
Current Liabilities $ 45,303,939
Partners' Deficit (43,225,652)
------------
Total Liabilities and Partners' Deficit $ 2,078,287
============
</TABLE>
The Partnership has been unable to pay all of its principle and interest as
required under its loan agreements since the loans matured September 30, 1990.
These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The historical consolidated financial statements
do not include any adjustments that might result from this sale of assets or
this uncertainty. Management has not fully evaluated the options for the
Partnership subsequent to the sale.
F-70
<PAGE>
INDEPENDENT AUDITORS' REPORT
American Cable Entertainment of Kentucky-Indiana, Inc.
We have audited the accompanying balance sheets of American Cable
Entertainment of Kentucky-Indiana, Inc. (the "Company") as of December 31,
1995 and 1994 and the related statements of operations, shareholders'
deficiency and cash flows for each of the three years in the period ended
December 31, 1995. 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
from 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 financial statements present fairly, in all material
respects, the financial position of American Cable Entertainment of Kentucky-
Indiana, Inc. as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
American Cable Entertainment of Kentucky-Indiana, Inc. will continue as a
going concern. As discussed in Note 1 to the financial statements, the Company
is unable to meet its scheduled debt maturity repayments which raises
substantial doubt about the Company's ability to continue as a going concern.
Consequently, the Company has entered into an agreement to sell substantially
all of its assets, has entered into agreements with its creditors who have
consented, under certain circumstances, to forbear taking any action against
the Company pending the sale of the Company's assets and has filed a
prepackaged bankruptcy under Chapter 11 of the Federal Bankruptcy Code.
Management's plans in regard to these matters are described further in Note 1.
The accompanying financial statements do not purport to reflect or provide for
the consequences of the sale of the Company or the filing of the prepackaged
bankruptcy. In particular, such financial statements do not purport to show
the realizable value of assets or liabilities on a liquidation basis nor do
they include any adjustments that might result from the outcome of these
uncertainties.
The accompanying balance sheet as of September 30, 1996, and the statements of
operations, cash flows and shareholders' deficiency for the nine-month period
ended September 30, 1996 were not audited by us and, accordingly, we do not
express an opinion on them. As described in Note 10, these unaudited financial
statements have not been prepared in accordance with Statement of Position 90-
7 "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code," which is required under generally accepted accounting principles for
entities that have filed petitions with the Bankruptcy Court and expect to
reorganize as going concerns under Chapter 11. Pre-petition liabilities
subject to compromise by the Bankruptcy Court as of the bankruptcy filing date
have not been segregated on the September 30, 1996 balance sheet or reported
based on the expected amount of the allowed claims. Expenses directly related
to the reorganization of the Company since the filing of the prepackaged
bankruptcy have not been separately disclosed and interest on the Company's
Step Coupon Senior Subordinated Notes and Junior Subordinated Debentures
continued to be accrued during the bankruptcy period although such interest
was not probable of being paid in the future.
DELOITTE & TOUCHE LLP
Stamford, CT
March 15, 1996 (Except for Note 1, as to
which the date is August 1, 1996.)
F-71
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
-----------------------------------------
September 30, December 31, December 31,
1996 1995 1994
------------- ------------ ------------
Unaudited
<S> <C> <C> <C>
ASSETS
Investment in Cable Television
Systems:
Land and land improvements $ 247,561 $ 247,561 $ 247,561
Vehicles 1,811,308 1,702,997 1,507,850
Buildings and improvements 1,007,624 998,414 967,794
Office furniture and equipment 812,985 802,377 733,465
CATV distribution systems and
related equipment 55,094,378 51,757,161 49,161,506
------------ ------------ ------------
Total Fixed Assets 58,973,856 55,508,510 52,618,176
Less accumulated depreciation 32,840,157 28,897,790 23,683,730
------------ ------------ ------------
Total Fixed Assets--net 26,133,699 26,610,720 28,934,446
Franchise costs--net 278,753 2,785,425 5,964,805
Subscriber lists--net 154,331 1,543,307 3,531,021
Covenant not to compete--net 8,068 80,682 242,045
------------ ------------ ------------
Investment in cable television
systems--net 26,574,851 31,020,134 38,672,317
Goodwill--net 3,499,898 3,579,784 3,686,299
Deferred Charges--net 134,767 371,691 963,949
Cash and Cash Equivalents 907,718 3,704,823 3,427,849
Accounts Receivable--less allowance
for doubtful accounts of $313,661
in 1996, $240,212 in 1995 and
$195,736 in 1994 859,836 304,734 276,709
Prepaid and Other 387,763 197,802 194,514
------------ ------------ ------------
Total Assets $ 32,364,833 $ 39,178,968 $ 47,221,637
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
DEFICIENCY
Liabilities:
Notes and loans payable $187,404,112 $182,430,902 $167,707,411
Accrued interest--Senior debt 0 1,314,032 329,004
Accrued interest--Senior/Junior
Subordinated Debentures 10,537,714 3,068,862 4,345,047
Accounts payable and accrued
expenses 5,019,665 4,244,348 3,973,224
Unearned income 146,702 124,109 124,344
Converter deposits 126,852 134,366 136,588
------------ ------------ ------------
Total Liabilities 203,235,045 191,316,619 176,615,618
------------ ------------ ------------
Commitments (See Note 7)
Shareholders' Deficiency:
Capital stock--all series 10,000 10,000 26
Additional paid-in capital 1,490,000 1,490,000 1,499,974
Deficit (172,370,212) (153,637,651) (130,893,981)
------------ ------------ ------------
Total shareholders' deficiency (170,870,212) (152,137,651) (129,393,981)
------------ ------------ ------------
Total Liabilities and Shareholders'
Deficiency $ 32,364,833 $ 39,178,968 $ 47,221,637
============ ============ ============
</TABLE>
See notes to financial statements.
F-72
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-------------------------------------------------------
For the
Nine Months For the Year For the Year For the Year
Ended Ended Ended Ended
September 30, December 31, December 31, December 31,
1996 1995 1994 1993
------------- ------------ ------------ ------------
Unaudited
<S> <C> <C> <C> <C>
Revenue $ 22,911,386 $ 28,088,127 $ 25,879,525 $ 24,976,818
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Operating expenses 8,681,583 10,880,854 9,388,813 8,699,878
Selling, general and
administrative expenses 3,884,865 4,948,493 4,912,150 4,743,783
Management fees 696,942 842,644 819,095 749,305
Depreciation and
amortization 8,265,739 11,284,315 18,054,371 18,231,734
Expenses incurred in
connection with
override and
forbearance agreements 912,865 557,664 0 0
------------ ------------ ------------ ------------
Total costs and expenses 22,441,994 28,513,970 33,174,429 32,424,700
------------ ------------ ------------ ------------
Operating income (loss) 469,392 (425,843) (7,294,904) (7,447,882)
Interest expense--net 19,201,953 22,366,189 20,241,202 18,410,503
Net gain on sale of
cable television system
and marketable
securities 0 48,362 1,266,020 0
------------ ------------ ------------ ------------
Net Loss $(18,732,561) $(22,743,670) $(26,270,086) $(25,858,385)
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-73
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
FOR THE NINE MONTHS ENDED SEPTEMBER, 1996 (UNAUDITED)
AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Common Stock
--------------------------------------
Number of
Shares Additional Total
Issued and Par Paid-in Shareholders'
Outstanding Value Capital Deficit Deficiency
------------- ------------- ---------- ------------- -------------
Class Class
------------- -------------
A D A D
----- ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1993 255 $ 26 $1,499,974 $ (78,765,510) $ (77,265,510)
Net Loss (25,858,385) (25,858,385)
----- ------ ---- ------- ---------- ------------- -------------
Balance at December 31,
1993 255 26 1,499,974 (104,623,895) (103,123,895)
Net Loss (26,270,086) (26,270,086)
----- ------ ---- ------- ---------- ------------- -------------
Balance at December 31,
1994 255 26 1,499,974 (130,893,981) (129,393,981)
Net Loss (22,743,670) (22,743,670)
Recapitalization of
Common Stock (254) 99,999 (26) $10,000 (9,974)
----- ------ ---- ------- ---------- ------------- -------------
Balance at December 31,
1995 1 99,999 0 10,000 1,490,000 (153,637,651) (152,137,651)
Net Loss Unaudited (18,732,561) (18,732,561)
----- ------ ---- ------- ---------- ------------- -------------
Balance at September 30,
1996 Unaudited 1 99,999 $ 0 $10,000 $1,490,000 $(172,370,212) $(170,870,212)
===== ====== ==== ======= ========== ============= =============
</TABLE>
See notes to financial statements
F-74
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------
For the For the For the
Nine Months Year Year For the year
Ended Ended Ended Ended
September 30, December 31, December 31, December 31,
1996 1995 1994 1993
------------- ------------ ------------ ------------
Unaudited
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $(18,732,561) $(22,743,670) $(26,270,086) $(25,858,385)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation 3,980,667 5,257,085 6,397,956 5,452,940
Amortization 4,285,072 6,027,230 11,656,415 12,778,794
Accretion of discount
on step coupon senior
subordinated notes 8,583,143 10,171,124 9,519,095 8,189,478
Accretion of discount
on junior
subordinated
debentures 4,429,619 5,416,469 4,820,269 4,231,918
Net gain on sale of
cable television
system, marketable
securities, and other
assets 0 (48,362) (1,266,020)
Change in assets and
liabilities:
Decrease (increase)
in accounts
receivable (555,102) (28,025) (94,868) 23,917
Decrease (increase)
in prepaid and
other assets (189,961) (3,288) 51,799 (59,414)
(Decrease) increase
in accounts payable
and accrued
expenses 775,317 271,124 (414,333) 169,808
(Decrease) increase
in accrued
interest-senior
debt (1,314,032) 985,028 129,505
Increase (decrease)
in converter
deposits (7,514) (2,222) (237) (9,384)
Increase (decrease)
in unearned income 22,593 (235) (91,827) 9,518
------------ ------------ ------------ ------------
Net cash provided by
operating activities 1,277,241 5,302,258 4,437,668 4,929,190
------------ ------------ ------------ ------------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Additions to reception
and distribution
facilities and
equipment (3,471,098) (2,933,359) (3,605,498) (5,083,401)
Net proceeds from sale
of assets 0 48,362 1,523,137
------------ ------------ ------------ ------------
Net cash used in
investing activities (3,471,098) (2,884,997) (2,082,361) (5,083,401)
------------ ------------ ------------ ------------
CASH FLOWS USED IN
FINANCING ACTIVITIES:
Payments on senior
bank loan (229,016) (1,262,542) (309,165)
Payments on senior
revolving credit
facility (55,862) (131,616) (3,668)
Payments on senior
secured notes (315,121) (742,447) (20,712)
Increase in deferred
Charges 0 (186,563) (598)
(Decrease) increase in
obligations under
capital lease (3,249) (3,682) 7,281
------------ ------------ ------------ ------------
Net cash used in
financing activities (603,248) (2,140,287) (512,827) (598)
------------ ------------ ------------ ------------
Net (decrease) increase
in cash and cash
equivalents (2,797,105) 276,974 1,842,480 (154,809)
Cash and cash
equivalents at
beginning of period 3,704,823 3,427,849 1,585,369 1,740,178
------------ ------------ ------------ ------------
Cash and cash
equivalents at end of
period $ 907,718 $ 3,704,823 $ 3,427,849 $ 1,585,369
============ ============ ============ ============
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for interest $ 6,002,809 $ 6,900,613 $ 5,952,791 $ 6,038,557
============ ============ ============ ============
Cash paid for
restructuring costs 912,865 0 0 0
============ ============ ============ ============
</TABLE>
See notes to financial statements
F-75
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS
Unaudited as to September 30, 1996
(1) DEBT MATURITIES AND THE SALE OF THE COMPANY
During the fourth quarter of 1995 the Company's senior debt obligations
matured without being paid. In addition, the Company failed to make the full
payment of interest on the Step Coupon Senior Subordinated Notes which became
due in 1995.
Prompted by these payment defaults, effective December 31, 1995, the Company,
its shareholders, and Kentucky-Indiana Management Company, Inc. ("KYMC"),
which acts as manager for the Company, entered into two agreements: a
"Forbearance Agreement" with its senior lenders; and an "Override Agreement"
with the holders of its Senior Subordinated and Junior Subordinated Notes.
Under the terms of the Forbearance Agreement the senior lenders have agreed to
forebear in the exercise of their rights and remedies with respect to the
payment default described above as well as defaults with respect to certain
specified financial covenants, through September 30, 1996 which allows the
Company time to sell its assets in an orderly manner. It contains certain
financial covenants as well as procedures that the Company and KYMC have
agreed to follow during the sales process. Subsequent to September 30, 1996,
certain financial covenants, which the Company is currently in default upon,
revert back to the terms in the original agreements.
The Override Agreement requires that the Company undertake to sell
substantially all of its assets, and to enter into a contract for sale and to
consummate that sale in accordance with an agreed upon time schedule. It also
contains certain financial covenants and procedures to be followed.
Effective July 15, 1996, the Company entered into an asset purchase agreement
with FrontierVision Operating Partners, L.P. ("FrontierVision") for the sale
of substantially all of the assets of the Company for $146 million, subject to
certain purchase price adjustments. Due to the expected shortfall of payments
to existing creditors from the sale proceeds, the Company filed a prepackaged
bankruptcy under Chapter 11 of the Federal Bankruptcy code with the Federal
Bankruptcy court on August 1, 1996. Management anticipates the sale to
FrontierVision to be consummated in the fourth quarter of 1996, subject to the
required regulatory approvals and the approval of the bankruptcy court.
As a result of the matters discussed above, Management does not believe that
it is practical to estimate the fair value of the Company's debt facilities.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Accordingly, the financial statements do not
reflect adjustments or provide for the potential consequences of the sale of
the Company's assets. In particular, the financial statements do not purport
to show the realizable value of assets on a liquidation basis or their
availability to satisfy liabilities.
The accompanying balance sheet as of September 30, 1996, the statements of
operations, and cash flows for the nine months ended September 30, 1996 and
the statement of shareholders' deficiency for the nine months ended September
30, 1996 are unaudited but, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) which are
necessary to present fairly the results for these interim periods in
accordance with Generally Accepted Accounting Principles, except as disclosed
in Note 10. The interim financial information as of and for the years ended
September 30, 1996 included within the notes to the financial statements is
also unaudited.
Formation of Company
On November 7, 1989 cable systems were purchased from Centel Cable Television
Company to form Simmons Cable TV of Kentucky-Indiana, Inc. (the "Company").
The Company owns and operates cable systems in Kentucky and Indiana. On April
12, 1994 the Company changed its name to American Cable Entertainment of
Kentucky-Indiana, Inc.
F-76
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates.
Investment in Cable Television Systems
Reception and distribution facilities and equipment additions are stated at
cost. Depreciation is provided using the straight-line method over the useful
lives of the assets (four to ten years for CATV distribution facilities and
related equipment, vehicles, building improvements and office furniture and
equipment; forty years for buildings). Included in depreciation expense for
the year ended December 31, 1994 were write-offs related to a rebuilt cable
system of $942,850.
Franchise acquisition costs are amortized over the average remaining term of
the franchises as of November 7, 1989 of seven years using the straight-line
method, Accumulated amortization of franchise costs at September 30, 1996 and
at December 31, 1995 and 1994 aggregated $21,976,905, $19,470,233 and
$16,290,853, respectively.
Covenants not to compete are amortized over the life of the agreements (five
years). Accumulated amortization of such covenants at September 30, 1996 and
at December 31, 1995, and 1994 aggregated $798,749, $726,315 and $564,772,
respectively.
Subscriber lists are amortized over seven years. Accumulated amortization of
subscriber lists at September 30, 1996, December 31, 1995 and 1994 aggregated
$13,759,669, $12,370,693 and $10,382,979, respectively.
Deferred charges consist of $882,408 of organizational costs and $3,616,230 of
loan acquisition costs at September 30, 1996. The loan acquisition costs are
amortized over the average life of the related debt, and organizational costs
are amortized over five years. Accumulated amortization at September 30, 1996
and at December 31, 1995 and 1994 was $4,363,871, $4,126,947 and $3,534,689,
respectively.
Goodwill is amortized over forty years. Accumulated amortization of goodwill
at September 30, 1996, December 31, 1995 and 1994 aggregated $760,711,
$680,825 and $574,310, respectively.
Valuation of Intangible Assets
The Company, on an annual basis, undertakes a review and valuation of the net
carrying value, recoverability and write-off of all categories of its
intangible assets. The Company in its valuation considers current market
values of its properties, competition, prevailing economic conditions,
government policy including taxation, and the Company's and the industry's
historical and current growth patterns, as well as the recoverability of the
cost of its intangible assets based on a comparison of estimated undiscounted
operating cash flows.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and liquid investments with a
maturity of three months or less from the date of purchase.
Income Taxes
The Company has elected to be taxed as an S Corporation under the Internal
Revenue Code and, accordingly, pays no federal income taxes. The income or
loss of the Company for its tax year is passed through to its shareholder(s)
and reported in the income tax returns of the shareholder(s).
F-77
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Subscription Revenues
Subscription revenues received in advance of services rendered are deferred
and recorded in income in the period in which the related services are
provided.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
or credit risk consist principally of trade receivables. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base.
Disclosure of Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate or short-term maturity of
these financial instruments. Management does not believe it is practicable to
estimate the fair value of the Company's debt facilities. (See Note 4).
(3) DISPOSITIONS
On June 30, 1994 the Company sold its cable television system serving Jackson
County, Kentucky. The carrying value of the assets sold at the date of sale,
net of accumulated depreciation and amortization was as follows:
<TABLE>
<S> <C>
Reception and distribution facilities and equipment $69,527
Franchise cost 55,714
Goodwill and other intangible assets 50,300
</TABLE>
The net loss on this transaction was $157,630, recognized in 1994. Additional
proceeds of $48,362 were received in 1995 and recorded as a gain.
On October 17, 1994, the Company tendered all of its holding in QVC, Inc.,
which resulted in a gain of $1,423,650.
These transactions are reflected in the statements of operations for the years
ended December 31, 1995 and 1994.
(4) NOTES AND LOANS PAYABLE
Notes and loans payable at September 30, 1996 and at December 31, 1995 and
1994 are comprised of the following:
<TABLE>
<CAPTION>
---------------------------------------
September 30, December 31, December 31,
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Senior Debt
Bank Credit Agreement (a) $ 23,199,277 $ 23,428,293 $ 24,690,835
Revolving Credit Facility (b) 5,658,854 5,714,716 5,846,332
Senior Secured Notes (c) 31,921,720 32,236,841 32,979,288
Step Coupon Senior Subordinated
Notes (d) 83,593,122 78,016,664 66,137,000
Junior Subordinated
Debentures (e) 43,030,789 43,030,789 38,046,675
Capitalized lease obligation 350 3,599 7,281
------------ ------------ ------------
$187,404,112 $182,430,902 $167,707,411
============ ============ ============
</TABLE>
F-78
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(4) NOTES AND LOANS PAYABLE (CONTINUED)
(a) The Company has a credit agreement with Crestar Bank providing for
total borrowings of $25,000,000. This agreement provided for interest up to
1.5 percentage points over the bank's prime rate (or from 1.0 to 2.5
percentage points over LIBOR). Interest only was payable quarterly in
arrears on the last day of March, June, September and December, and at the
end of any LIBOR borrowing period. The total commitment terminated at its
maturity date of October 31, 1995. Upon the payment default at maturity,
the default rate of prime plus 4% was charged. Upon the effective date of
the Override Agreement, interest is payable monthly at the rate of 11.75%
per annum.
(b) The Company has a revolving credit facility with Sanwa Business Credit
Corporation which originally provided for borrowings of up to $15,000,000.
The total commitment was reduced to $7,000,000 in early 1994, and in
December 1994, the balance of the unused commitment was terminated. The
agreement provided for interest of up to 1.5 points over the Sanwa's prime
rate (or from 1.0 to 2.5 percentage points over LIBOR). Interest was
payable quarterly in arrears on the last day of March, June, September and
December, and at the end of any LIBOR borrowing period. The total
commitment terminated at its maturity date of October 31, 1995. Upon the
payment default at maturity, the default rate of prime plus 4% was charged.
Upon the effective date of the Override Agreement, interest is payable
monthly at the rate of 11.75% per annum.
(c) Senior Secured Notes were issued on November 7, 1989 bearing interest
at 10.125% and matured November 7, 1995. The interest rate increased to
10.225% effective January 1, 1991. Interest only was payable quarterly in
arrears on the last day of March, June, September and December. Upon the
payment default at maturity, interest was charged at 12.25%. Upon the
effective date of the Override Agreement, interest is payable monthly at
the rate of 11.75% per annum.
(d) Step Coupon Senior Subordinated Notes due April 30, 1996 were issued on
November 7, 1989 in the principal amount of $66,137,000 with a stated
interest rate of 15.7472%. Interest accreted and compounded semi- annually
through October 31, 1994. Although interest payments of $5,125,618 were
payable semi-annually beginning April 30, 1995 until maturity, only
$1,300,000 of interest has been paid. These notes were issued with warrants
to purchase up to 150 shares of Class C Non-voting Common Stock for an
aggregate exercise price of $330,000. As a result of the recapitalization
(See Note 5), the number of shares the warrant holders were entitled to
purchase was increased to 58,531 shares of the Class C stock. There are
certain restrictions as to when the warrants may be exercised, and they
expire on November 7, 2001. Total proceeds from the issuance of these
warrants amounted to $200,000. Accreted interest was $17,456,122,
$11,879,664 and $1,708,540 at September 30, 1996, December 31, 1995 and
December 31, 1994, respectively.
(e) Junior Subordinated Debentures due October 31, 1997, were issued on
November 7, 1989 for $20,800,000, bearing interest at 13.1%. Interest is
deferred and compounds annually on September 30 of each year and is payable
on the maturity date. On the maturity date, the Company shall pay as
additional interest on the Notes, an amount equal to the greater of 4% of
net operating income of the Company from November 7, 1989 through and
including the maturity date, or 15% of the fair market value of the
Company, but in no event shall the amount exceed $2,153,000. Accreted and
accrued interest was $29,729,270, $25,299,651 and $19,883,183 at September
30, 1996, December 31, 1995 and December 31, 1994, respectively. These
notes were issued with warrants to purchase up to 595 shares of common
stock and up to 1,000 shares of 6% non-cumulative preferred stock. These
warrants are exercisable in whole or in part through November 7, 1999 for
an aggregate exercise price of $2,000,000. Upon exercise, the warrants can
be converted into either Class A Voting Stock or Class B Non-Voting Stock
at the option of the warrant holder. Shares will be issued in the ratio of
.595 shares of common stock to each share of preferred stock. As a result
of the recapitalization (See Note 5), the number of shares the warrant
holders were entitled to purchase was increased to 233,359 shares of common
stock, in the ratio of 233.359 shares of common stock to each share of
preferred stock. Total proceeds from the issuance of these warrants
amounted to $1,200,000.
The Senior Subordinated and Junior Subordinated Notes will continue to earn
interest at the rate of 15.5% and 13.1%, respectively, although, unless any of
certain specified defaults occur, net proceeds of a sale will be distributed
as provided for in the Override Agreement. The Company leased equipment under
a lease agreement which is classified as a capital lease. The lease term is 3
years and expires in December, 1996.
F-79
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(4) NOTES AND LOANS PAYABLE (CONTINUED)
In 1989 the Company entered into an interest cap agreement and an interest
floor agreement covering $25,000,000 of borrowings which expired November 1,
1994. Under the cap agreement, Fleet Bank, (as successor to Bank of New
England), made payments to the Company on a quarterly basis in an amount equal
to $25,000,000 multiplied by the excess of the then current three month LIBOR
rate over 9%. Under the floor agreement, the Company made payments to Crestar
Bank on a quarterly basis in an amount equal to $25,000,000 multiplied by the
difference between the then current three month LIBOR rate and 8%, to the
extent that the three month LIBOR rate is less than 8%. Approximately $793,000
was charged to interest expense and paid in 1994 relating to the floor
agreement.
The Senior Debt and Senior Subordinated Notes are secured by substantially all
the assets of the Company. The Company's debt agreements contain certain
restrictive covenants requiring the maintenance of minimum subscriber levels
and certain financial ratios. The Company has not been in compliance with
certain covenants in its debt agreements, including the timely payment of
principal and interest. (See Note 1).
Debt Maturities
All of the Company's debt is due upon the consummation of the sale of the
Company in accordance with the Forbearance and Override Agreements. (see Note
1).
(5) CAPITAL STOCK
The Company's Board of Directors adopted a resolution on December 31, 1995
which, among other things, established a new class of common stock (Class D),
and authorized the exchange of the outstanding Class A shares for one share of
Class A and 99,999 shares of Class D. Additional shares of Class B and Class C
stock were authorized as well. The Company's Certificate of Incorporation was
amended on February 29, 1996 to reflect these changes.
Capital stock of the Company at December 31, 1994 and prior to the December
31, 1995 resolution noted above, consisted of the following:
<TABLE>
<CAPTION>
----------------------
Number of Shares
----------------------
Issued and
Authorized Outstanding
---------- -----------
<S> <C> <C>
Common Stock
Class A--$.10 par value 850 255
Class B--$.10 par value 595
Class C--$.10 par value 150
6% Non-cumulative Preferred Stock $1,000 par value 1,000
</TABLE>
Capital stock of the Company after the recapitalization consists of the
following at September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
----------------------
Number of Shares
----------------------
Issued and
Authorized Outstanding
---------- -----------
<S> <C> <C>
Common Stock
Class A--$.10 par value 233,360 1
Class B--$.10 par value 231,940
Class C--$.10 par value 58,531
Class D--$.10 par value 99,999 99,999
6% Non-cumulative Preferred Stock $1,000 par value 1,000
</TABLE>
F-80
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(5) CAPITAL STOCK (CONTINUED)
The Class A common stock is voting. The Class B, Class C and Class D shares
are non-voting. Class B shares are convertible into Class A shares at a rate
of one for one. See Note 4 for disclosure of warrants for unissued capital
stock at September 30, 1996, December 31, 1995 and 1994.
(6) TRANSACTIONS WITH RELATED PARTIES
KYMC acts as manager for the Company. In accordance with the management
agreement, KYMC is paid a management fee equal to 3% of total revenue (as
defined in the management agreement) plus out-of-pocket expenses not to exceed
1% of total revenue. The management fee for the nine months ended September
30, 1996 and the years ended December 31, 1995, 1994 and 1993 was $696,942,
$842,644, $819,095 and $749,305 respectively.
Included in accounts payable and accrued expenses at December 31, 1994 is a
payable in the amount of $151,190 to Scott Cable Communications, Inc.
("Scott"), an affiliated Company, for certain administrative costs paid by
Scott on behalf of the Company.
(7) COMMITMENTS
The Company rents pole space, office space and equipment under operating
leases. Future minimum payments, by year and in the aggregate, under
noncancelable operating leases with terms of one year or more are as follows:
<TABLE>
<S> <C>
1996 $132,081
1997 104,417
1998 59,412
1999 56,006
2000 45,182
Thereafter 53,675
--------
Total $450,773
========
</TABLE>
Rent expense for the nine months ended September 30, 1996 and the years ended
December 31, 1995, 1994 and 1993 was $165,497, $202,652, $204,164 and $207,901
respectively.
(8) 401K RETIREMENT/SAVINGS PLAN
The Company's employees are covered by a 401(k) retirement/savings plan
covering all employees who meet service requirements. Total plan expenses for
the nine months ended September 30, 1996 and the years ended December 31,
1995, 1994 and 1993 was $5,049, $7,660, $5,769 and $7,099, respectively.
(9) REGULATORY MATTERS
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") which regulates the cable
television industry. Pursuant to the 1992 Cable Act, the Federal
Communications Commission (the "FCC") has issued numerous regulations which
include provisions regarding rates and other matters. As a result of these
rules, the Company was required to reduce many of its basic service rates
effective September 1, 1993, and again on August 1, 1994.
On June 5, 1995, the FCC extended regulatory relief to small cable operators.
All of the Company's cable systems qualified for this regulatory relief, which
allows for greater flexibility in establishing rates (including increases). On
February 8, 1996, Congress enacted the 1996 Telecommunications Act which,
among other things, immediately deregulated all levels of service except
broadcast basic service for small cable operators for which all of the
Company's cable systems qualified.
F-81
<PAGE>
AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited as to September 30, 1996
(10) SALE OF THE COMPANY'S CABLE TELEVISION SYSTEMS AND EMERGENCE FROM
BANKRUPTCY (CONTINUED)
As described in Note 1, the Company filed a prepackaged bankruptcy under
Chapter 11 of the Federal Bankruptcy Code on August 1, 1996. The prepackaged
bankruptcy, which was agreed to by the Company, the Company's Step Coupon
Senior Subordinated Noteholders and the Company's Junior Subordinated
Noteholders, called for, among other things: the sale of the Company's cable
television systems to FrontierVision; the payment in full of the Senior
Debtholders from the proceeds of the sale; the payment in full of trade
creditors in the ordinary course of business; and the allocation of the
remaining sale proceeds among the Step Coupon Senior Subordinated Noteholders,
the Junior Subordinated Noteholders and KYMC.
On October 9, 1996, the Company consummated the sale of its cable television
systems to FrontierVision for $146 million, subject to certain purchase price
adjustments and effectively emerged from the prepackaged bankruptcy. Senior
Debtholders and trade creditors were paid in full as a result of the
prepackaged bankruptcy. Step Coupon Senior Subordinated Noteholders, Junior
Subordinated Noteholders and KYMC, with aggregate debt of $137,161,625, at
September 30, 1996 were paid $78,343,097, as a result of the prepackaged
bankruptcy. During the nine months ended September 30, 1996, the Company
incurred expenses totaling $912,865 in connection with the Forbearance
Agreement, the Override Agreement and in connection with the reorganization of
the Company under Chapter 11.
Under Generally Accepted Accounting Principles, entities in reorganization
under the bankruptcy code are required to comply with the provisions of
Statement of Position 90-7 "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"), which requires, among other things: a
segregation of liabilities subject to compromise by the Bankruptcy Court as of
the bankruptcy filing date; the reporting of prepetition liabilities on the
basis of the expected amount of the allowed claims; and separate disclosure of
expenses directly related to the reorganization of the Company. Given the sale
of the Company's cable television systems and the Company's emergence from
bankruptcy on October 9, 1996, the Company's unaudited financial statements as
of and for the nine months ended September 30, 1996 have not been prepared in
accordance with SOP 90-7. These unaudited interim financial statements have
been prepared in accordance with the basis of presentation indicated in
Note 2.
F-82
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Triax Southeast Associates, L.P.:
We have audited the accompanying balance sheets of Triax Southeast Associates,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' capital and cash flows for the
years ended December 31, 1995, 1994 and 1993. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triax Southeast Associates,
L.P. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years ended December 31, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Denver, Colorado,
February 27, 1996.
F-83
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
--------------------------------------
December 31,
September 30, ------------------------
1996 1995 1994
------------- ----------- -----------
Unaudited
<S> <C> <C> <C>
ASSETS
Cash $ 852,907 $ 3,380,723 $ 699,077
Receivables, net of allowance of
$7,747, $29,985 and $52,302 at
September 30, 1996 and December
31, 1995 and 1994, respectively 703,356 600,866 542,832
Prepaid expenses 100,628 167,908 174,821
Inventory -- 346,274 444,624
Property, plant and equipment, net 35,966,591 38,761,227 36,496,820
Purchased intangibles, net 8,292,119 9,542,002 10,105,115
Other assets, net 959,186 933,591 1,118,718
----------- ----------- -----------
Total Assets $46,874,787 $53,732,591 $49,582,007
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accrued interest expense $ 24,924 $ 258,223 $ 168,559
Accounts payable and other accrued
expenses 1,611,149 1,710,636 1,962,757
Subscriber prepayments and deposits 58,724 71,105 42,470
Payable to affiliates 274,686 239,021 227,355
Debt 37,242,965 42,546,539 35,787,218
----------- ----------- -----------
Total liabilities 39,212,448 44,825,524 38,188,359
Partners' capital:
General partner (63,376) (50,929) (26,063)
Limited partners 7,725,715 8,957,996 11,419,711
----------- ----------- -----------
Total liabilities and partners'
capital $46,874,787 $53,732,591 $49,582,007
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-84
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
---------------------------------------------------
Nine Months
Ended December 31,
September 30, ------------------------------------
1996 1995 1994 1993
------------- ----------- ----------- ----------
Unaudited
<S> <C> <C> <C> <C>
REVENUES $14,520,733 $17,780,041 $15,057,652 $7,810,891
----------- ----------- ----------- ----------
Expenses:
Programming 2,892,862 3,400,604 2,661,058 1,128,730
Operating, selling,
general and
administrative 3,953,135 5,104,803 4,489,003 2,268,325
Overhead expenses paid
to affiliate 221,847 211,993 176,705 74,393
Management fees paid to
affiliate 726,036 888,996 752,882 390,545
Depreciation and
amortization 5,505,387 7,344,035 6,252,573 3,307,310
----------- ----------- ----------- ----------
13,299,267 16,950,431 14,332,221 7,169,303
Operating income 1,221,466 829,610 725,431 641,588
Other expenses 244,180 -- -- --
Interest expense, net 2,222,014 3,316,191 2,359,980 1,056,256
----------- ----------- ----------- ----------
Net loss $(1,244,728) $(2,486,581) $(1,634,549) $ (414,668)
=========== =========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-85
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
----------------------------------
General Limited
Partner Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
Balances, December 31, 1992 $ (5,571) $ 6,448,436 $ 6,442,865
Contributions -- 7,000,000 7,000,000
Net loss (4,147) (410,521) (414,668)
-------- ----------- -----------
Balances, December 31, 1993 (9,718) 13,037,915 13,028,197
Net loss (16,345) (1,618,204) (1,634,549)
-------- ----------- -----------
Balances, December 31, 1994 (26,063) 11,419,711 11,393,648
Net loss (24,866) (2,461,715) (2,486,581)
-------- ----------- -----------
Balances, December 31, 1995 (50,929) 8,957,996 8,907,067
Net loss unaudited (12,447) (1,232,281) (1,244,728)
-------- ----------- -----------
Balances, September 30, 1996 unaudited $(63,376) $ 7,725,715 $ 7,662,339
======== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-86
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------
Nine
Months
Ended Years Ended December 31,
September 30, --------------------------------------
1996 1995 1994 1993
------------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(1,244,728) $(2,486,581) $(1,634,549) $ (414,668)
Adjustments to reconcile
net loss to net cash
flows from operating
activities:
Depreciation and
amortization 5,505,387 7,344,035 6,252,573 3,307,310
Write-off of assets 9,111
(Increase) decrease in
receivables, net (102,490) (58,034) 6,042 (345,197)
(Increase) decrease in
prepaid expenses 67,280 6,913 (128,309) (20,657)
(Decrease) increase in
accrued interest
expense (233,299) 89,664 26,923 (45,894)
(Decrease) increase in
accounts payable and
other accrued expenses (99,487) (252,121) 803,714 274,125
(Decrease) increase in
subscriber prepayments
and deposits (12,381) 28,635 (3,886) 17,495
(Decrease) increase in
payable to affiliates 35,665 11,666 72,286 30,849
----------- ----------- ----------- ------------
Net cash flows from
operating activities 3,925,058 4,684,177 5,394,794 2,803,363
----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of
properties, including
purchased intangibles (184,000) (6,065,116) (74,203) (25,342,487)
Purchase of property,
plant and equipment (1,420,160) (2,369,183) (3,643,894) (1,269,346)
Proceeds from sale of
property, plant and
equipment 108,043 -- -- --
(Increase) decrease in
inventory 346,274 98,350 263,815 (610,502)
Increase in franchise
costs and other assets (183,457) (10,387) (121,663) --
----------- ----------- ----------- ------------
Net cash flows from
investing activities (1,333,300) (8,346,336) (3,575,945) (27,222,335)
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings -- 9,400,000 1,000,000 19,400,000
Repayment of borrowings (5,020,000) (2,880,000) (2,500,000) (1,400,000)
Partners' contributions -- -- -- 7,000,000
Cash paid for loan costs -- (66,520) (117,107) (340,789)
Repayment of capital
lease obligations (99,574) (109,675) (60,007) (24,725)
----------- ----------- ----------- ------------
Net cash flows from
financing activities (5,119,574) 6,343,805 (1,677,114) 24,634,486
----------- ----------- ----------- ------------
Net increase in cash (2,527,816) 2,681,646 141,735 215,514
Cash, beginning of period 3,380,723 699,077 557,342 341,828
----------- ----------- ----------- ------------
Cash, end of period $ 852,907 $ 3,380,723 $ 699,077 $ 557,342
=========== =========== =========== ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest $ 2,549,048 $ 3,268,546 $ 2,333,057 $ 1,102,150
=========== =========== =========== ============
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Acquisitions with capital
leases $ -- $ 164,996 $ 233,047 $ 66,236
=========== =========== =========== ============
Note issued for
acquisition of
properties $ -- $ 184,000 $ -- $ --
=========== =========== =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-87
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
(1) THE PARTNERSHIP
Organization and Capitalization
Triax Southeast Associates, L.P. (the "Partnership") is a Delaware limited
partnership formed on January 23, 1992 for the purpose of acquiring,
constructing, owning, and operating cable television systems, located
primarily in Kentucky, North Carolina, West Virginia and Ohio. The Partnership
was capitalized and commenced operations on July 28, 1992, with $7,000,000 of
limited partner contributions and a $70,000 demand non-interest bearing note
from its general partner, Triax Southeast General Partner, L.P. ("Southeast,
G.P."). Triax Investors Southeast, L.P. ("Investors"), a limited partnership
in which Triax Southeast Associates, Inc. ("Southeast Inc."), a Delaware
corporation, is the general partner, contributed $1,000,000 to the
Partnership.
Southeast Inc. is a wholly owned subsidiary of Triax Communications
Corporation ("TCC"), a Delaware corporation. Southeast Inc. contributed
capital of $1,000,000 and a $59,500 demand non-interest bearing note to
Investors for a general partnership interest. In addition, Southeast Inc.
contributed a $700 demand non-interest bearing note to Southeast, G.P. for a
general partnership interest. Investors contributed a $59,500 demand non-
interest bearing note for a limited partner interest in Southeast, G.P.
On December 15, 1993, the Partnership Agreement was amended to reflect
additional capital contributions of $7,000,000 by certain limited partners.
Southeast Inc. contributed $1,250,000 to Investors, which in turn contributed
an additional $1,250,000 to the Partnership.
The Partnership Agreement, as amended, provides that at any time after April
30, 1997, upon notice from a majority of the limited partners that they desire
to cause a sale of the Partnership's assets and business (or all of the
interests in the Partnership), TCC may purchase all of the Partnership's
assets and business (or all of the interests in the Partnership), subject to
the approval of the majority of limited partners. In addition, after July 31,
1998, each limited partner who has made capital contributions in excess of
$1,000,000 may cause the sale of the Partnership's assets and business and
liquidation of the Partnership. The above dates may be extended to 1998 or
1999 to coincide with the revised termination date of one of the limited
partner's partnership agreement, if and when the limited partner extends the
termination date.
Allocation of Profits, Losses and Distributions
Profits
The Partnership Agreement, as amended, provides that profits will be allocated
as follows: (i) 1% to the general partner and 99% to the limited partners
until profits allocated to them equal losses previously allocated; (ii) to the
limited partners until the limited partners have been allocated profits equal
to a 12% per annum cumulative preferred return on their capital contributions
plus the amount of losses previously allocated; then, (iii) 20% to the general
partner and 80% to the limited partners.
Losses
The Partnership Agreement, as amended, provides that losses will be allocated
1% to the general partner and 99% to the limited partners, except no losses
shall be allocated to any limited partner which would cause the limited
partner's capital account to become negative by an amount greater than the
limited partner's share of the Partnership's "minimum gain" (the excess of the
Partnership's nonrecourse debt over its adjusted basis in the assets
encumbered by nonrecourse debt), as defined, plus any amount of Partnership
debt assumed by the limited partner or any amount the limited partner is
obligated to contribute to the Partnership; then 100% to the general partner.
Distributions
The Partnership Agreement, as amended, provides that Distributable Cash, as
defined, will be distributed as follows: (i) to the partners in proportion to
their Capital Contribution Accounts, as defined, until the balances are
reduced to zero; (ii) to the limited partners until the limited partners have
received a 12% per annum cumulative preferred return on their capital
contributions and then, (iii) 20% to the general partner and 80% to the
limited partners.
F-88
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
Interim Financial Statements
The financial statements and related footnote disclosures as of September 30,
1996 and for the nine months ended September 30, 1996 are unaudited. In
management's opinion, the unaudited financial statements as of September 30,
1996 and for the nine months ended September 30, 1996 include all adjustments
necessary for a fair presentation. Such adjustments were of a normal recurring
nature.
Revenue Recognition
Revenues are recognized in the period the related services are provided to the
subscribers.
Income Taxes
No provision has been made for federal, state or local income taxes because
they are the responsibility of the individual partners. The principal
difference between net income or loss for income tax and financial reporting
purposes results from the use of accelerated depreciation for tax purposes.
Inventory
Inventory is carried at historical cost, which approximates market value, and
consists primarily of installation materials and addressable trap changers.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are charged
directly to expense when incurred. The Partnership capitalized a portion of
technician and installer salaries to property, plant, and equipment which
amounted to approximately $299,692 for the nine months ended September 30,
1996 and $283,000 and $422,000 for the years ended December 31, 1995 and 1994,
respectively. Depreciation and amortization are computed using the
straightline method over the following estimated useful lives:
<TABLE>
<S> <C> <C> <C> <C>
----------------------------------------------------
<CAPTION>
September 30, December 31,
1996 -------------------------
Unaudited 1995 1994 Life
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Property, plant and
equipment $ 52,400,285 $ 51,188,466 $43,704,363 5-10 years
Less: Accumulated
depreciation (16,433,694) (12,427,239) (7,207,543)
------------ ------------ -----------
$ 35,966,591 $ 38,761,227 $36,496,820
============ ============ ===========
</TABLE>
F-89
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Purchased Intangibles
Purchased intangibles are being amortized using the straight-line method over
the following estimated useful lives:
<TABLE>
<CAPTION>
------------------------------------------------
September 30, December 31,
1996 ------------------------
Unaudited 1995 1994 Life
------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Franchise costs $13,026,848 $13,026,720 $11,832,807 10 years
Noncompete agreements 850,000 850,000 1,700,000 3 years
----------- ----------- ----------- --------
13,876,848 13,876,720 13,532,807
Less: Accumulated
amortization (5,584,729) (4,334,718) (3,427,692)
----------- ----------- -----------
$ 8,292,119 $ 9,542,002 $10,105,115
=========== =========== ===========
</TABLE>
During 1995, the Partnership wrote-off approximately $1,000,000 of noncompete
agreements, and the associated accumulated amortization, as the noncompete
agreements had expired.
Impairment of Long-Lived Assets
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of" ("SFAS 121"). SFAS 121
requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS 121 is required to be adopted by the Company in fiscal
1996. Management believes the adoption of SFAS 121 will not have a material
impact on the financial statements.
Other Assets
Other assets are being amortized using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
----------------------------------------------
September 30, December 31,
1996 ----------------------
Unaudited 1995 1994 Life
------------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Loan costs $1,111,608 $1,111,608 $1,084,999 5 years
Organization costs 441,435 441,435 441,435 5 years
Other 187,204 3,875 -- 10 years
---------- ---------- ----------
1,740,247 1,556,918 1,526,434
Less: Accumulated
amortization (781,061) (623,327) (407,716)
---------- ---------- ----------
$ 959,186 $ 933,591 $1,118,718
========== ========== ==========
</TABLE>
(3) ACQUISITIONS
On February 28, 1995, the Partnership acquired certain cable television
systems and related assets of Rodgers Cable TV, Inc. ("Rodgers"). The purchase
price of approximately $5,700,000, including closing costs, was accounted for
by the purchase method of accounting and allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $4,580,000
Franchise costs 1,019,400
Non-compete 100,600
----------
Total cash paid $5,700,000
==========
</TABLE>
F-90
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) ACQUISITIONS (CONTINUED)
On March 31, 1995, the Partnership acquired cable television systems and
related assets of Green Tree Cable T.V., Inc. The purchase price of
approximately $570,000, including closing costs, was accounted for by the
purchase method of accounting and allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $4,580,000
Franchise costs 1,019,400
Non-compete 100,600
----------
Total cash paid $5,700,000
==========
</TABLE>
On December 15, 1993, the Partnership acquired cable television systems and
related assets of C4 Media Cable South, L.P. for approximately $17 million,
and on December 21, 1993, acquired additional cable television system assets
and related liabilities of Charter Cable, Inc. for approximately $6.5 million.
Acquisition-related fees totaled approximately $700,000. The acquisitions were
financed by additional limited partners' contributions of $7 million, the
drawdown by the Partnership of $17.6 million under its amended Revolving
Credit and Term Loan and available cash of $750,000. The acquisitions were
accounted for by the purchase method of accounting and allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment $20,144,000
Franchise costs 2,756,000
Non-compete 600,000
-----------
Total cash paid $23,500,000
===========
</TABLE>
(4) DEBT
Debt consisted of the following at September 30, 1996, and December 31, 1995
and 1994, respectively.
<TABLE>
<CAPTION>
-------------------------------------
December 31,
September 30, -----------------------
1996 1995 1994
------------- ----------- -----------
Unaudited
<S> <C> <C> <C>
Revolving Credit and Term Loan,
interest payable quarterly based on
varying interest rate options $37,000,000 $42,020,000 $35,500,000
Note Payable to seller -- 184,000 --
Vehicle leases 242,965 342,539 287,218
----------- ----------- -----------
$37,242,965 $42,546,539 $35,787,218
=========== =========== ===========
</TABLE>
The Revolving Credit and Term Loan Agreement, as amended through February 28,
1995 (the "Revolver"), is collateralized by all property, plant and equipment,
inventory and accounts receivable of the Partnership and all rights under
present and future permits, licenses and franchises. On September 30, 1995,
the outstanding principal was converted into a term loan with quarterly
payments from December 31, 1995 through June 30, 2002. Commencing in 1996,
within 120 days after the close of the fiscal year, the Partnership must make
a mandatory prepayment in an amount equal to 50% of the excess cash flow, as
defined, for the prior year. A commitment fee of 1/2% per annum is charged on
the daily unused portion of the commitment amount.
The Partnership entered into LIBOR interest rate agreements with the banks
related to the Revolver. The Partnership fixed the interest rate on $40
million at 7.21% for the period from June 4, 1996 to August 5, 1996. The
remaining outstanding balance bears interest at prime plus 1%.
On July 1, 1994 the Partnership paid $135,000 for an interest rate cap of 7%
on the LIBOR rate on $18 million effective July 1, 1994 through July 1, 1996,
and on March 27, 1995, paid $62,000 for an interest rate cap of 7.5% on the
LIBOR rate on $10 million effective March 27, 1995 through March 27, 1997.
F-91
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) DEBT (CONTINUED)
The loan agreement contains certain covenants, the more significant of which
include leverage and interest coverage ratios and limitations on capital
expenditures.
Debt maturities required as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
-----------
Year Amount
---- -----------
<S> <C>
1996 $ 3,174,759
1997 4,731,241
1998 5,578,235
1999 6,842,304
2000 7,920,000
Thereafter 14,300,000
-----------
$42,546,539
===========
</TABLE>
(5) RELATED PARTY TRANSACTIONS
TCC provides management services to the Partnership for a fee equal to 5% of
gross revenues, as defined. The Partnership incurred management fees totaling
$726,036 for the nine months ended September 30, 1996, and $888,996, $752,882
and $390,545 in 1995, 1994 and 1993, respectively.
TCC also allocates certain overhead expenses to the Partnership, based on
proportionate subscriber revenues, which primarily relate to employment costs,
which expenses are limited to 1.25% of gross revenues. These overhead expenses
amounted to $168,609 for the nine months ended September 30, 1996, and
$211,993, $176,705 and $74,393 in 1995, 1994 and in 1993, respectively.
TCC was paid acquisition fees of $235,000 in 1993 related to the acquisition
of certain assets. Such fees are included in purchased intangibles in the
accompanying balance sheets. TCC may be paid a disposition fee of 1% of the
sales price of the Partnership after certain approvals of the limited
partners, and after certain other conditions are met.
The Partnership purchases programming from TCC at TCC's cost, which includes
volume discounts TCC might earn.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximates fair value
because of the nature of the investments and the length of maturity of the
investments.
The estimated fair value of the Partnership's debt instruments are based on
borrowing rates that would be equal to existing rates; therefore, there is no
material difference in the fair market value and the current value.
(7) REGULATORY MATTERS
In October 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services (other than programming offered on a per-
channel or per-program basis). The FCC implemented regulation which allowed
cable operators to justify regulated rates in excess of the FCC benchmarks
through cost of service showings at both the franchising authority level for
basic service and to the FCC in response to complaints on rates for cable
programming services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
F-92
<PAGE>
TRIAX SOUTHEAST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) REGULATORY MATTERS (CONTINUED)
On November 10, 1994, the FCC adopted "going forward" rules that provided
cable operators with the ability to offer new product tiers priced as
operators elect, provided certain limited conditions are met, permit cable
operators to add new channels at reasonable prices to existing cable
programming service tiers, and created an additional option pursuant to which
small cable operators may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 was enacted which, among
other things, deregulated cable rates for small systems on their programming
tiers.
To date, the FCC's regulations have not had a material adverse effect on the
Partnership due to the lack of certifications by the local franchising
authorities.
F-93
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
FrontierVision Operating Partners, L.P.:
We have audited the accompanying balance sheets of A-R Cable Services--ME,
Inc., (a wholly-owned subsidiary of A-R Cable Services, Inc.) as of December
31, 1996 and 1995, and the related statements of income and cash flows for the
years then ended. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of A-R Cable Services--ME, Inc.
at December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Jericho, New York
July 7, 1997
F-94
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------------------
June 30, December 31, December 31,
1997 1996 1995
----------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 53 $ 54 $ 72
Accounts receivable--subscribers (less
allowance for doubtful accounts of
$38, $45 and $28) 368 435 328
Accounts receivable--parent and affili-
ates, net 42,640 41,204 37,474
Prepaid expenses and other assets 250 235 267
Property, plant and equipment--net 12,086 11,793 11,438
Excess cost over fair value of net
assets acquired, net of accumulated
amortization of $12,583, $11,923 and
$10,603 13,809 14,469 15,789
------- ------- -------
Total assets $69,206 $68,190 $65,368
======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable 531 559 530
Accrued liabilities 624 1,273 1,444
Capital lease obligations -- -- 7
------- ------- -------
Total liabilities 1,155 1,832 1,981
------- ------- -------
Commitments
Stockholder's equity:
Common stock: $10 par value, 150,000
shares authorized, 54,499 shares is-
sued and outstanding 545 545 545
Additional paid-in capital 67,407 67,407 67,407
Accumulated deficit 99 (1,594) (4,565)
------- ------- -------
Total stockholder's equity 68,051 66,358 63,387
------- ------- -------
Total liabilities and stockholder's eq-
uity $69,206 $68,190 $65,368
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-95
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------
Six Months Six Months Year Year
Ended Ended Ended Ended
June 30, June 30, December 31, December 31,
1997 1996 1996 1995
----------- ----------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $9,262 $8,684 $17,584 $16,823
Operating expenses:
Technical expenses 3,639 3,471 7,209 6,360
Selling, general and
administrative expenses 2,206 2,033 4,048 3,808
Depreciation and
amortization 1,534 1,502 3,057 6,489
------ ------ ------- -------
Operating income 1,883 1,678 3,270 166
Other expense:
Interest expense (176) (128) (272) (190)
Miscellaneous, net (14) (20) (27) (12)
------ ------ ------- -------
Net income (loss) before
income tax benefit 1,693 1,530 2,971 (36)
Income tax benefit -- -- -- 1,046
------ ------ ------- -------
Net income $1,693 $1,530 $ 2,971 $ 1,010
====== ====== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-96
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------
Six Months Six Months Year Year
Ended Ended Ended Ended
June 30, June 30, December 31, December 31,
1997 1996 1996 1995
----------- ----------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 1,693 $ 1,530 $ 2,971 $ 1,010
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Income tax benefit -- -- -- (1,046)
Loss on sale of equipment 6 -- 3 11
Depreciation and
amortization 1,534 1,502 3,057 6,489
Changes in assets and
liabilities:
Accounts receivable--
subscribers, net 67 44 (107) (117)
Accounts receivable--
parent and affiliates (1,436) (1,959) (3,730) (3,561)
Prepaid expenses and
other assets (15) 80 32 (63)
Accounts payable--trade (28) 85 29 72
Accrued expenses (649) (136) (171) (711)
------- ------- ------- -------
Net cash provided by
operating activities 1,172 1,146 2,084 2,084
------- ------- ------- -------
Cash flows from investing
activities:
Proceeds from sale of
equipment 9 -- 8 13
Capital expenditures (1,182) (1,193) (2,103) (2,050)
------- ------- ------- -------
Net cash used in
investing activities (1,173) (1,193) (2,095) (2,037)
------- ------- ------- -------
Cash flows from financing
activities:
Principal payments under
capital lease obligations -- (7) (7) (17)
------- ------- ------- -------
Net cash used in
financing activities -- (7) (7) (17)
------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents (1) (54) (18) 30
Cash and cash equivalents at
beginning of year 54 72 72 42
------- ------- ------- -------
Cash and cash equivalents at
end of year $ 53 $ 18 $ 54 $ 72
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-97
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
(1) THE COMPANY AND RELATED MATTERS
A-R Cable Services--ME, Inc. (the "Company"), a wholly-owned subsidiary of A-R
Cable Services, Inc. ("A-R Cable"), owns and operates cable television systems
in Maine (the "Maine Systems"). The Company's revenues are derived principally
from the provision of cable television services, which include recurring
monthly fees paid by subscribers. A-R Cable is a wholly-owned subsidiary of
Cablevision Systems Corporation ("CSC").
The Company entered into an agreement as of May 8, 1997 with FrontierVision
Operating Partners, L.P. ("FrontierVision") pursuant to which FrontierVision
agreed to purchase the Maine Systems for approximately $78,000 in cash.
Certain assets and liabilities, principally accounts receivable--parent and
affiliates (net) will not be purchased by FrontierVision. The cash proceeds of
the transaction with FrontierVision and the net assets not purchased by
FrontierVision will be dividended to A-R Cable following the transaction.
A-R Cable operates other cable television systems in addition to the Maine
Systems of the Company. The accompanying financial statements contain the
assets, liabilities, revenues and expenses of the Company, for all periods
presented, as if the Company had operated as a separate entity. An allocation
of the cost of corporate administrative and financial services provided by CSC
to A-R Cable and ultimately the Company is included in selling, general and
administrative expenses. These expenses are generally allocated based on
employee headcount for payroll related expenses, and for other expenses, on
relative number of subscribers. Management believes that the allocated
expenses are reasonable; however, such allocated expenses may not necessarily
be indicative of what such expenses would have been had the Company actually
operated as an unaffiliated entity.
(2) SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenues as cable television services are provided to
subscribers.
Long-Lived Assets
Property, plant and equipment, including construction materials, are recorded
at cost, which includes all direct costs and certain indirect costs associated
with the construction of cable television transmission and distribution
systems and the costs of new subscriber installations. Property, plant and
equipment are being depreciated over their estimated useful lives using the
straight-line method for financial reporting purposes. Leasehold improvements
are amortized over the shorter of their useful lives or the terms of the
related leases.
The costs assigned to subscriber lists were amortized on the straight-line
basis over varying periods during which subscribers were expected to remain
connected to the system. The costs assigned to franchises were amortized on
the straight-line basis over the average remaining term of the franchises.
Subscriber lists and franchises became fully amortized during 1995. Excess
costs over fair value of net assets acquired are being amortized over 20 years
on the straight-line basis.
The Company implemented the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective January 1, 1996. The Company
reviews its long-lived assets (property, plant and equipment, and related
intangible assets that arose from business combinations accounted for under
the purchase method) for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the
expected cash flows, undiscounted and without interest, is less than the
carrying amount of the asset, an impairment loss is recognized as the amount
by which the carrying amount of the asset exceeds its fair value. The adoption
of Statement No. 121 had no impact on the Company's financial position or
results of operations.
F-98
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands)
(2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
A-R Cable files a separate federal income tax return on behalf of itself and
its consolidated subsidiaries, including the Company. Due to significant
losses incurred by A-R Cable, A-R Cable has provided a valuation allowance for
the entire amount of its net deferred tax assets since realization of these
assets was not assured. The Company has similarly provided a valuation
allowance for the entire amount of its net deferred tax assets as it has not
received the benefits of any prior losses reported on A-R Cable's consolidated
returns.
Cash Flows
For purposes of the statements of cash flows, the Company considers all short
term investments with a maturity at date of purchase of three months or less
to be cash equivalents.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent 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.
Interim Financial Information
The accompanying interim combined financial statements as of June 30, 1997 and
for the six-month periods ending on June 30, 1997 and 1996 are unaudited but,
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for fair presentation of the results for such
periods. The results of any interim period are not necessarily indicative of
results for the full year.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and 1995 consist of the
following items which are depreciated over the estimated useful lives shown
below:
<TABLE>
<CAPTION>
-------------------------------
Estimated
1996 1995 Useful Lives
------- ------- -------------
<S> <C> <C> <C>
Cable television transmission and distribution
systems:
Converters $ 3,070 $ 2,774 5 years
Headends 2,522 2,473 7 years
Distribution systems 16,410 15,080 15 years
Program, service and test equipment 1,063 975 5-7 years
Microwave equipment 322 322 7-9 years
Construction in progress (including material
and supplies) 77 111
------- -------
23,464 21,735
Buildings 320 300 25 years
Leasehold improvements 409 343 Term of Lease
Furniture and fixtures 258 230 7 years
Vehicles 1,710 1,526 4 years
------- -------
26,161 24,134
Less accumulated depreciation and amortization (14,368) (12,696)
------- -------
$11,793 $11,438
======= =======
</TABLE>
F-99
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands)
(4) OPERATING LEASES
The Company leases certain office, production, satellite transponder, and
transmission facilities under terms of operating leases expiring at various
dates. Rent expense for the years ended December 31, 1996 and 1995 amounted to
approximately $207 and $210 respectively.
In addition, the Company rents space on utility poles for use in its
operations. The Company's pole rental agreements are for varying terms, and
management anticipates renewals as they expire. Pole rental expense for the
years ended December 31, 1996 and 1995 was approximately $444 and $479,
respectively.
The minimum future annual rental payments for all operating leases, including
pole rentals from January 1, 1997 through December 31, 2001, at rates
presently in force are approximately: 1997, $631; 1998, $528; 1999, $493;
2000, $493; and 2001, $493.
(5) RELATED PARTY TRANSACTIONS
CSC has an interest in several companies engaged in providing cable television
programming services to the cable television industry including the Company.
During the years ended December 31, 1996 and 1995, the Company was charged
approximately $373 and $390, respectively, by these companies primarily for
programming services. At December 31, 1996 and 1995, the Company owed
approximately $96 and $86, respectively, to these companies for such
programming services which amounts are included in accounts receivable--parent
and affiliates, net in the accompanying balance sheets.
A-R Cable has an agreement with CSC whereby CSC provides management services
in exchange for a management fee of 3- 1/2% of gross receipts, as defined. The
agreement can be renewed indefinitely at the option of CSC. Interest accrues
on unpaid management fees at 10% per annum. During the years ended December
31, 1996 and 1995, the fees allocated to the Company amounted to approximately
$618 and $592, respectively. Interest expense in the accompanying statements
of income represents interest on unpaid management fees.
The Company is allocated a share of certain selling, general and
administrative expenses of CSC. For the years ended December 31, 1996 and
1995, these expenses totalled approximately $652 and $675, respectively.
(6) INCOME TAXES
A-R Cable's tax returns for the years 1984 through 1989 have been examined by
the Internal Revenue Service and certain issues related to the amortization of
intangible assets are being appealed by A-R Cable. Management believes that
any settlement arising out of this examination will not have a material
adverse effect on the financial position of the Company.
The sale to FrontierVision described in note 1 is a net asset purchase.
Accordingly, net operating losses available at December 31, 1996 will be
retained by the Company.
In connection with the acquisition of A-R Cable by CSC in January 1988, the
Company recorded certain fair value adjustments net of their tax effects. In
accordance with SFAS 109, these assets have been adjusted to their remaining
pre- tax amounts at January 1, 1993, the date SFAS 109 was adopted.
Amortization of these amounts in 1995 resulted in the recognition of income
tax benefits of $1,046. These amounts were fully amortized in 1995.
(7) BENEFIT PLAN
CSC maintains a pension and Section 401(k) savings plan (collectively, the
"Plan") pursuant to which the Company contributes 1- 1/2% of eligible
employees' annual compensation, as defined, to the defined contribution
portion of the Plan and an equivalent amount to the Section 401(k) portion of
the Plan. The Company also makes matching contributions for employee voluntary
contributions to the Section 401(k) portion of the Plan. For the years ended
December 31, 1996 and 1995, the cost associated with this Plan was
approximately $66 and $58, respectively. The Company does not provide any
postretirement or postemployment benefits for any of its employees.
F-100
<PAGE>
A-R CABLE SERVICES--ME, INC.
(A WHOLLY-OWNED SUBSIDIARY OF A-R CABLE SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Dollars in thousands)
(8) COMMITMENTS
CSC and its cable television affiliates (including the Company) have an
affiliation agreement with a program supplier whereby CSC and its cable
television affiliates are obligated to make Base Rate Annual Payments, as
defined and subject to certain adjustments pursuant to the agreement, through
2004. The Company is contingently liable for its proportionate share of Base
Rate Annual Payments, based on subscriber usage, of approximately $1,434 in
1997; $1,484 in 1998; $1,535 in 1999; and for the years 2000 through 2004, such
payments would increase by percentage increases in the Consumer Price Index, or
five percent, whichever is less, over the prior year's Base Annual Payment.
F-101
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TCI Communications, Inc.:
We have audited the accompanying combined balance sheets of the New
Hampshire/Vermont Systems (as defined inNote 1 to the combined financial
statements) as of December 31, 1996 and 1995, and the related combined
statements of operations and retained earnings and cash flows for the years
then ended. These combined financial statements are the responsibility of the
New Hampshire/Vermont Systems management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the New
Hampshire/Vermont Systems as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
July 11, 1997
F-102
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
COMBINED BALANCE SHEETS
amounts in thousands
<TABLE>
<CAPTION>
----------------------------
December 31,
June 30, ----------------
1997 1996 1995
----------- ------- -------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash $ 64 $ 136 $ --
Trade and other receivables, net 144 172 168
Prepaid expenses and other assets 29 13 14
Property and equipment, at cost:
Land 29 29 29
Cable distribution systems 14,715 14,618 14,377
Support equipment and buildings 1,273 1,301 960
------- ------- -------
16,017 15,948 15,366
Less accumulated depreciation (6,735) (6,168) (5,158)
------- ------- -------
9,282 9,780 10,208
------- ------- -------
Franchise costs 27,266 27,266 27,266
Less accumulated amortization (5,746) (5,399) (4,705)
------- ------- -------
21,520 21,867 22,561
------- ------- -------
$31,039 $31,968 $32,951
======= ======= =======
LIABILITIES AND PARENT'S INVESTMENT
Cash overdraft $ -- $ -- $ 45
Accounts payable and accrued liabilities 174 251 297
Deferred income taxes (note 3) 10,009 9,919 9,374
------- ------- -------
Total liabilities 10,183 10,170 9,716
------- ------- -------
Parent's investment:
Due to TCI Communications, Inc. ("TCIC") 2,870 4,454 6,705
Retained earnings 17,986 17,344 16,530
------- ------- -------
Total parent's investment 20,856 21,798 23,235
------- ------- -------
Commitments (note 4) $31,039 $31,968 $32,951
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-103
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
amounts in thousands
<TABLE>
<CAPTION>
---------------------------------
Six months ended Years ended
June 30, December 31,
------------------ --------------
1997 1996 1996 1995
-------- -------- ------ ------
(unaudited)
<S> <C> <C> <C> <C>
Revenue $ 4,278 4,015 8,440 8,732
Operating costs and expenses:
Operating (note 2) 1,638 1,739 3,545 3,396
Selling, general and
administrative (note 2) 642 709 1,632 1,272
Depreciation 587 574 1,158 1,142
Amortization 347 347 694 674
-------- ------- ------ ------
3,214 3,369 7,029 6,484
-------- ------- ------ ------
Operating income 1,064 646 1,411 2,248
Other, net (34) (3) (2) --
-------- ------- ------ ------
Earnings before income taxes 1,030 643 1,409 2,248
Income tax expense (note 3) (388) (272) (595) (958)
-------- ------- ------ ------
Net earnings 642 371 814 1,290
Retained earnings:
Beginning of period 17,344 16,530 16,530 15,240
-------- ------- ------ ------
End of period $ 17,986 16,901 17,344 16,530
======== ======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-104
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
COMBINED STATEMENTS OF CASH FLOWS
amounts in thousands
<TABLE>
<CAPTION>
---------------------------------
Six months
ended Years ended
June 30, December 31,
--------------- ----------------
1997 1996 1996 1995
------- ------ ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 642 $ 371 $ 814 $ 1,290
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 934 921 1,852 1,816
Deferred income tax expense 90 231 545 1,064
Changes in operating assets and
liabilities:
Receivables 28 53 (4) (128)
Prepaid expenses and other assets (16) (14) 1 (10)
Accounts payable and accrued
liabilities (77) (150) (46) 96
------- ------ ------- -------
Net cash provided by operating
activities 1,601 1,412 3,162 4,128
------- ------ ------- -------
Net cash used in investing activities--
capital expended for property and equipment (89) (362) (730) (542)
------- ------ ------- -------
Cash flows from financing activities:
Change in cash overdraft -- (45) (45) 45
Change in amounts due to TCIC (1,584) (464) (2,251) (3,711)
------- ------ ------- -------
Net cash used in financing activities (1,584) (509) (2,296) (3,666)
------- ------ ------- -------
Net increase (decrease) in cash (72) 541 136 (80)
Cash at beginning of period 136 -- -- 80
------- ------ ------- -------
Cash at end of period $ 64 $ 541 $ 136 $ --
======= ====== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-105
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The combined financial statements include the accounts of the cable television
systems, indirectly wholly-owned by TCIC through its subsidiaries Westmarc
Communications, Inc. ("Westmarc") and TCI East, Inc., in and around Lebanon,
New Hampshire; Newport, New Hampshire; Morrisville, Vermont and St. Albans,
Vermont. Such systems are collectively referred to herein as the "New
Hampshire/Vermont Systems." TCIC is a subsidiary of Tele-Communications, Inc.
("TCI"). The New Hampshire/Vermont Systems are principally engaged in the
development and operation of cable television systems.
These combined financial statements include an allocation of certain purchase
accounting adjustments, including the related deferred tax effects, from
TCIC's original acquisition of Westmarc. This allocation and the related
franchise cost amortization is based on the number of subscribers in these
cable television systems relative to the total number of subscribers in all of
Westmarc's cable television systems. In addition, certain operating costs that
are recorded at the corporate level are charged to the New Hampshire/Vermont
Systems based on its number of subscribers (see note 2). Although such
allocations are not necessarily indicative of the costs that would have been
incurred by the New Hampshire/Vermont Systems on a stand alone basis,
management believes that the resulting allocated amounts are reasonable. All
significant inter-entity accounts and transactions have been eliminated in
combination.
It is contemplated that during 1997, TCIC will sell the New Hampshire/Vermont
Systems. See note 5.
Receivables
Receivables are reflected net of an allowance for doubtful accounts. Such
allowance at December 31, 1996 and 1995 was not material.
Long-Lived Assets
(a)Property and Equipment
Property and equipment is stated at cost, including acquisition costs
allocated to tangible assets of the cable television system acquired.
Construction costs, including interest during construction and applicable
overhead, are capitalized. Interest capitalized during the years ended
December 31, 1996 and 1995 was not material.
Depreciation is calculated on a straight-line basis over the estimated
remaining useful lives, which are 3 to 15 years for cable distribution
systems and 3 to 40 years for support equipment and buildings.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales or
other dispositions of property, the original cost and cost of removal of
such property are charged to accumulated depreciation, and salvage, if any,
is credited thereto. Gains or losses are only recognized in connection with
the sales of systems in their entirety.
(b)Franchise Costs
Franchise costs include the difference between the cost of acquiring cable
television systems and amounts allocated to the tangible assets. Such
amounts are amortized on a straight-line basis over 40 years. Costs
incurred by the New Hampshire/Vermont Systems in negotiating and renewing
franchise agreements are amortized on a straight-line basis over the life
of the franchise, generally 10 to 20 years. The periods used for
amortization consider the Company's ability to renew existing franchise
agreements.
In March of 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of ("Statement No.
121"), effective for fiscal years beginning after December 15, 1995. Statement
No. 121 requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
future
F-106
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
cash flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement No. 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. The New Hampshire/Vermont
Systems adopted Statement No. 121 effective January 1, 1996. Such adoption did
not have an effect on the financial position or results of operations of the
New Hampshire/Vermont Systems.
Pursuant to Statement No. 121, the New Hampshire/Vermont Systems periodically
review the carrying amounts of its long-lived assets, including franchise
costs, to determine whether current events or circumstances warrant
adjustments to such carrying amounts. The New Hampshire/Vermont Systems
consider historical and expected future net operating losses to be its primary
indicators of potential impairment. Assets are grouped and evaluated for
impairment at the lowest level for which there are identifiable cash flows
that are largely independent of the cash flows of other groups of assets
("Assets"). The New Hampshire/Vermont Systems deem Assets to be impaired if
the New Hampshire/Vermont Systems are unable to recover the carrying value of
such Assets over their expected remaining useful life through a forecast of
undiscounted future operating cash flows directly related to the Assets. If
Assets are deemed to be impaired, the loss is measured as the amount by which
the carrying amount of the Assets exceeds their fair value. The New
Hampshire/Vermont Systems generally measure fair value by considering sales
prices for similar assets or by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future
cash flows. Accordingly, actual results could vary significantly from such
estimates.
Combined Statements of Cash Flows
Transactions effected through the intercompany account with TCIC have been
considered constructive cash receipts and payments for purposes of the
combined statements of cash flows.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Interim Financial Information
The accompanying interim combined financial statements as of June 30, 1997 and
for the six-month periods ending on June 30, 1997 and 1996 are unaudited but,
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for fair presentation of the results for such
periods. The results of any interim period are not necessarily indicative of
results for the full year.
(2) TRANSACTIONS WITH AFFILIATES
The amounts due to TCIC consist of various non-interest bearing intercompany
advances and expense allocations. There is no agreement that requires such
advances and expense allocations to be repaid.
The New Hampshire/Vermont Systems purchase, at TCICs cost, certain pay
television and other programming through a subsidiary of TCIC. Charges for
such programming are included in operating expenses in the accompanying
combined statements of operations.
Certain subsidiaries of TCIC provide administrative services to the New
Hampshire/Vermont Systems and have assumed managerial responsibility of the
New Hampshire/Vermont Systems' cable television operations and construction.
As compensation for these services, the New Hampshire/Vermont Systems pay a
monthly fee to such subsidiaries based on the number of the New
Hampshire/Vermont Systems' subscribers. Charges for such administrative
services are included in selling, general, and administrative expenses in the
accompanying combined statements of operations.
F-107
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) TRANSACTIONS WITH AFFILIATES (CONTINUED)
The intercompany advances and expense allocation activity in amounts due to
TCIC consist of the following:
<TABLE>
<CAPTION>
-------------------------------
June 30, December 31,
--------------- --------------
1997 1996 1996 1995
------- ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C>
amounts in thousands
Beginning of period $ 4,454 6,705 6,705 10,416
Programming charges 872 854 1,691 1,355
Administrative services 124 133 430 331
Tax allocations 298 41 50 (106)
Cash repayments (2,878) (1,492) (4,422) (5,291)
------- ------ ------ ------
End of period $ 2,870 6,241 4,454 6,705
======= ====== ====== ======
</TABLE>
(3) INCOME TAXES
The New Hampshire/Vermont Systems are included in the consolidated federal
income tax return of TCI. Income tax expense for the New Hampshire/Vermont
Systems is based on those items in the consolidated calculation applicable to
the New Hampshire/Vermont Systems as if filed as a separate return.
Intercompany tax allocation represents an apportionment of tax expense or
benefit (other than deferred taxes) among subsidiaries of TCI in relation to
their respective amounts of taxable earnings or losses. The payable or
receivable arising from the intercompany tax allocation is recorded as an
increase or decrease in amounts due from TCIC.
Income tax benefit (expense) for the years ended December 31, 1996 and 1995
consists of:
<TABLE>
<CAPTION>
-----------------------
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
amounts in thousands
Year ended December 31, 1996:
Intercompany allocation $(50) $ -- $ (50)
Federal -- (440) (440)
State and local -- (105) (105)
---- ------- -----
$(50) $ (545) $(595)
==== ======= =====
Year ended December 31, 1995:
Intercompany allocation $106 $ -- $ 106
Federal -- (851) (851)
State and local -- (213) (213)
---- ------- -----
$106 $(1,064) $(958)
==== ======= =====
</TABLE>
F-108
<PAGE>
NEW HAMPSHIRE/VERMONT SYSTEMS
(INDIRECTLY WHOLLY-OWNED BY TCI COMMUNICATIONS, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(3) INCOME TAXES (CONTINUED)
Income tax expense attributable to net earnings differs from the amount
computed by applying the federal income tax rate of 35% as a result of the
following:
<TABLE>
<CAPTION>
--------------
Years ended
December 31,
--------------
1996 1995
------ ------
<S> <C> <C>
amounts in thousands
Computed "expected" tax expense $ (493) $ (787)
Amortization not deductible for tax purposes (29) (29)
State and local income taxes, net of federal income tax
benefit (68) (138)
Other (5) (4)
------ ------
$ (595) $ (958)
====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities at December 31, 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
-------------
December 31,
-------------
1996 1995
------ ------
amounts in thousands
<S> <C> <C>
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation $2,850 $2,544
Franchise costs, principally due to differences in
amortization 7,069 6,830
------ ------
Deferred tax liability $9,919 $9,374
====== ======
</TABLE>
(4) COMMITMENTS
The New Hampshire/Vermont Systems have entered into pole rental agreements and
use certain equipment under lease arrangements. Rental expense under such
arrangements amounted to $183,000 and $174,000 for 1996 and 1995,
respectively. It is expected that in the normal course of business, expiring
leases will be renewed or replaced. Accordingly, it is anticipated that annual
commitments after 1996 will not decrease.
(5) SUBSEQUENT EVENT
On May 12, 1997, TCIC entered into an agreement to sell the New
Hampshire/Vermont Systems to a third party for $34,500,000 subject to certain
adjustments. Consummation is subject to regulatory approvals. There is no
assurance that such transaction will be consummated.
F-109
<PAGE>
The Board of Directors and Shareholders
Cox Communications, Inc.
We have audited the accompanying combined statements of net assets of Cox
Communications, Inc.'s ("CCI") Central Ohio Cluster as of December 31, 1996,
and the related combined statements of income, changes in net assets, and cash
flows for the year then ended. These financial statements are the
responsibility of CCI's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Cox
Communications, Inc.'s Central Ohio Cluster at December 31, 1996, and the
combined results of its operations and its cash flows for the year then ended,
in conformity with generally accepted accounting principles.
As discussed in Note 1, CCI entered into a letter of intent to sell the assets
and certain liabilities of the Central Ohio Cluster.
DELOITTE & TOUCHE LLP
August 29, 1997
Atlanta, Georgia
F-110
<PAGE>
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF NET ASSETS
<TABLE>
<CAPTION>
------------------------
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
ASSETS
Cash $ -- $ 239
Accounts receivable, less allowance for doubtful
accounts of $79 and $66 2,295 2,310
Net plant and equipment 24,091 24,512
Intangible assets 149,277 151,263
Other assets 980 1,448
-------- --------
Total assets $176,643 $179,772
======== ========
LIABILITIES AND NET ASSETS
Accounts payable and accrued expenses $ 1,070 $ 1,245
Deferred income 1,364 1,430
Deferred income taxes 62,636 63,442
Other liabilities 429 191
Amounts due to affiliates 30,735 35,107
-------- --------
Total liabilities 96,234 101,415
Net assets 80,409 78,357
-------- --------
Total liabilities and net assets $176,643 $179,772
======== ========
</TABLE>
See notes to combined financial statements.
F-111
<PAGE>
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
----------------------------------------------
Six Months Ended Six Months Ended Year Ended
June 30, June 30, December 31,
1997 1996 1996
---------------- ---------------- ------------
(Unaudited) (Unaudited)
(Thousands of Dollars)
<S> <C> <C> <C>
REVENUES $16,743 $15,495 $31,749
COSTS AND EXPENSES:
Operating 5,549 5,054 10,132
Selling, general and
administrative 2,225 2,367 5,143
Depreciation 2,524 2,378 4,846
Amortization 1,986 1,986 3,972
------- ------- -------
OPERATING INCOME 4,459 3,710 7,656
Interest expense with affiliates (970) (1,322) (2,346)
Other, net (12) 4 5
------- ------- -------
INCOME BEFORE INCOME TAXES 3,477 2,392 5,315
Income taxes 1,425 979 2,176
------- ------- -------
NET INCOME $ 2,052 $ 1,413 $ 3,139
======= ======= =======
</TABLE>
See notes to combined financial statements.
F-112
<PAGE>
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
----------------------
(Thousands of Dollars)
----------------------
<S> <C>
BALANCE AT DECEMBER 31, 1995 $75,218
Net income 3,139
-------
BALANCE AT DECEMBER 31, 1996 $78,357
Net income (Unaudited) 2,052
-------
BALANCE AT JUNE 30, 1997 (Unaudited) $80,409
=======
</TABLE>
See notes to combined financial statements.
F-113
<PAGE>
CENTRAL OHIO CLUSTER
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------
Six Months Ended Six Months Ended Year Ended
June 30, June 30, December 31,
1997 1996 1996
---------------- ---------------- ------------
(Unaudited) (Unaudited)
(Thousands of Dollars)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 2,052 $1,413 $ 3,139
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 2,524 2,378 4,846
Amortization 1,986 1,986 3,972
Deferred income taxes (806) (867) (1,849)
(Increase) decrease in accounts
receivable 15 273 (120)
Decrease in other assets 468 946 206
Increase (decrease) in accounts
payable and accrued expenses (358) 256 803
Other, net 238 (6) (42)
------- ------ -------
Net cash provided by operating
activities 6,119 6,379 10,955
------- ------ -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (2,103) (2,059) (2,939)
------- ------ -------
Net cash used in investing
activities (2,103) (2,059) (2,939)
------- ------ -------
CASH FLOWS FROM FINANCING
ACTIVITIES
Decrease in amounts due to
Affiliates (4,372) (3,692) (7,777)
Increase in bank overdrafts 117 -- --
------- ------ -------
Net cash used in financing
activities (4,255) (3,692) (7,777)
------- ------ -------
Net increase (decrease) in cash (239) 628 239
Cash at beginning of period 239 -- --
------- ------ -------
Cash at end of period $ -- $ 628 $ 239
======= ====== =======
Cash paid during the period for:
Interest $ 10 $ 7 $ 14
Income taxes 788 856 905
</TABLE>
See notes to combined financial statements.
F-114
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997
and 1996 is unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements represent the combined operations of Cox
Communications, Inc.'s ("CCI") cable television systems serving eight
communities in Central Ohio (collectively referred to as the "Central Ohio
Cluster"). These cable television systems were acquired by CCI, an indirect
75.3% owned subsidiary of Cox Enterprises, Inc. ("CEI"), from the Times Mirror
Company ("Times Mirror") in connection with CCI's acquisition of Times Mirror
Cable Television, Inc. ("TMCT") on February 1, 1995. On July 1, 1997, CCI
entered into a letter of intent to sell the assets and certain liabilities of
the Central Ohio Cluster to FrontierVision Operating Partners, L.P. No losses
are expected upon completion of the sale. The historical combined financial
statements do not necessarily reflect the results of operations or financial
position that would have existed had the Central Ohio Cluster been an
independent company. All significant intercompany accounts and transactions
have been eliminated in the combined financial statements of the Central Ohio
Cluster.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Central Ohio Cluster bills its customers in advance; however, revenue is
recognized as cable television services are provided. Receivables are
generally collected within 30 days. Credit risk is managed by disconnecting
services to customers who are delinquent generally for more than 75 days.
Other revenues are recognized as services are provided. Revenues obtained from
the connection of customers to the cable television systems are less than
related direct selling cost; therefore, such revenues are recognized as
services are provided.
Plant and Equipment
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of five to 20 years for building and
building improvements, five to 12 years for cable television systems and three
to 10 years for other plant and equipment.
The costs of initial cable television connections are capitalized as cable
plant at standard rates for the Central Ohio Cluster's labor and at actual
cost for materials and outside labor. Expenditures for maintenance and repairs
are charged to operating expense as incurred. At the time of retirement, sale
or other disposition of property, the original cost and related accumulated
depreciation are written off.
Intangible Assets
Intangible assets consist of goodwill and cable television franchise rights
recorded in connection with the acquisition of the Central Ohio Cluster from
TMCT and are amortized on a straight-line basis over 40 years. The Central
Ohio Cluster assesses on an ongoing basis the recoverability of intangible
assets based on estimates of future undiscounted cash flows for the applicable
business acquired compared to net book value. The Central Ohio Cluster also
evaluates the amortization period of intangible assets to determine whether
events or circumstances warrant revised estimates of useful lives.
Impairment of Long-Lived Assets
Effective January 1, 1996, the Central Ohio Cluster adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires that long-lived assets and certain intangibles be
reviewed for impairment when events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable, with any impairment
losses being reported in the period in which the recognition criteria are
first applied based on the fair value of the asset. Long-lived assets and
certain intangibles to be disposed of are required to be reported at the lower
of carrying amounts or fair value less cost to sell.
F-115
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997
and 1996 is unaudited)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The accounts of the Central Ohio Cluster are included in the consolidated
federal income tax return and certain state income tax returns of CEI. Current
federal and state income tax expenses and benefits have been allocated on a
separate return basis to the Central Ohio Cluster based on the current year
tax effects of the inclusion of its income, expenses and credits in the
consolidated income tax returns of CEI or based on separate state income tax
returns.
Deferred income tax assets and liabilities arise from temporary differences in
the financial reporting and income tax bases of assets and liabilities. These
differences primarily result from property and intangible assets.
Fees and Taxes
The Central Ohio Cluster incurs various fees and taxes in connection with the
operations of its cable television systems, including franchise fees paid to
various franchise authorities, copyright fees paid to the U.S. Copyright
Tribunal and business and franchise taxes paid to the State of Ohio. A portion
of these fees and taxes are passed through to the Central Ohio Cluster's
subscribers. Amounts collected from subscribers are recorded as a reduction of
operating expenses.
Pension, Postretirement and Postemployment Benefits
CCI generally provides defined pension benefits to substantially all employees
based on years of service and compensation during those years. CCI also
provides certain health care and life insurance benefits to substantially all
retirees and employees through certain CEI plans. Expense related to the CCI
and CEI plans is allocated to the Central Ohio Cluster through the
intercompany account. The amount of the allocations is generally based on
actuarial determinations of the effects of the Central Ohio Cluster employees'
participation in the plans.
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.
Unaudited Interim Financial Statements
The unaudited combined financial statements as of June 30, 1997 and for the
six months ended June 30, 1997 and 1996, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position and results of operations
for these periods. Operating results for six months ended June 30, 1997 and
1996 are not necessarily indicative of the results that may be expected for
the entire year.
(3) CASH MANAGEMENT SYSTEM
The Central Ohio Cluster participates in CEI's cash management system, whereby
the bank sends daily notification of checks presented for payment. CEI
transfers funds from other sources to cover the checks presented for payment.
A book overdraft of $117,000 existed on June 30, 1997 as a result of checks
outstanding. This book overdraft was classified as accounts payable and
accrued expenses in the accompanying combined statement of net assets and is
considered a financing activity in the accompanying combined statement of cash
flows.
F-116
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997 and
1996 is unaudited)
(4) PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
----------------------
June 30, December 31,
1997 1996
-------- ------------
(Thousands of Dollars)
<S> <C> <C>
Land $ 311 $ 311
Buildings and building improvements 982 1,033
Transmission and distribution plant 41,874 41,329
Miscellaneous equipment 1,835 1,478
Construction in progress 1,250 825
-------- --------
Plant and equipment, at cost 46,252 44,976
Less accumulated depreciation (22,161) (20,464)
-------- --------
Net plant and equipment $ 24,091 $ 24,512
======== ========
</TABLE>
(5) INTANGIBLE ASSETS
<TABLE>
<CAPTION>
----------------------
June 30, December 31,
1997 1996
-------- ------------
(Thousands of Dollars)
<S> <C> <C>
Goodwill $158,876 $158,876
Less accumulated amortization (9,599) (7,613)
-------- --------
Net intangible assets $149,277 $151,263
======== ========
</TABLE>
(6) INCOME TAXES
Current and deferred income tax expenses (benefits) are as follows:
<TABLE>
<CAPTION>
-----------------------------
Six months ended Year ended
June 30, December 31,
1997 1996
---------------- ------------
(Thousands of Dollars)
<S> <C> <C>
Current:
Federal $1,905 $3,289
State 326 736
------ ------
Total current $2,231 $4,025
------ ------
Deferred:
Federal (729) (1,385)
State (77) (464)
------ ------
Total deferred (806) (1,849)
------ ------
Net income tax expense $1,425 $2,176
====== ======
</TABLE>
F-117
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997
and 1996 is unaudited)
(6) INCOME TAXES (CONTINUED)
Income tax expense differs from the amount computed by applying the U.S.
statutory federal income tax rate (35%) to income before income taxes as a
result of the following items:
<TABLE>
<CAPTION>
-----------------------------
Six months ended Year ended
June 30, December 31,
1997 1996
---------------- ------------
(Thousands of Dollars)
<S> <C> <C>
Computed tax expense at federal statutory
rates on income before income taxes $1,217 $1,860
State income taxes, net of federal tax
benefit 162 177
Other, net 46 139
------ ------
Net income tax expense $1,425 $2,176
====== ======
</TABLE>
Significant components of the net deferred tax liability consist of the
following:
<TABLE>
<CAPTION>
----------------------
June 30, December 31,
1997 1996
-------- ------------
(Thousands of Dollars)
<S> <C> <C>
Plant and equipment $ (5,660) $ (5,787)
Franchise rights (57,926) (58,638)
Other 950 983
-------- --------
Net deferred tax liability $(62,636) $(63,442)
======== ========
</TABLE>
(7) RETIREMENT PLANS
Qualified Pension Plan
Effective January 1, 1996, CCI established the Cox Communications, Inc.
Pension Plan (the "CCI Plan"), a qualified noncontributory defined benefit
pension plan for substantially all of CCI's employees including the Central
Ohio Cluster's employees. Plan assets consist primarily of common stock,
investment-grade corporate bonds, cash and cash equivalents and U.S.
government obligations. The CCI Plan calls for benefits to be paid to eligible
employees at retirement based primarily upon years of service with CCI and
compensation rates near retirement. The funded status of the portion of the
CCI Plan covering the employees of the Central Ohio Cluster is not
determinable. The fair value of the CCI Plan assets was greater than the
projected benefit obligation as of December 31, 1996.
Total pension expense attributable to the Central Ohio Cluster employees'
participation in the CCI Plan was $74,000 for the six-month period ended June
30, 1997 and $158,000 for the year ended December 31, 1996.
The assumptions used in the actuarial computations at December 31, 1996 were:
<TABLE>
<S> <C>
Discount rate 7.75%
Rate of increase in compensation levels 5.50%
Expected long-term rate of return on plan assets 9.00%
</TABLE>
Other Retirement Plans
CEI provides certain health care and life insurance benefits to substantially
all retirees of CEI and its subsidiaries. Postretirement expense allocated to
the Central Ohio Cluster by CEI was $8,000 for the six-month period ended June
30, 1997 and $15,000 for the year ended December 31, 1996. CEI has been
contributing additional amounts to the Cox Pension Plan Trust to fund health
care benefits pursuant to Section 401(h) of the Internal Revenue Code. CEI is
funding benefits to the extent contributions are tax deductible. In general,
retiree health benefits are paid as covered expenses are incurred. The funded
status of the postretirement plan covering the employees of the Central Ohio
Cluster is not
F-118
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997
and 1996 is unaudited)
(7) RETIREMENT PLANS (CONTINUED)
determinable. The accumulated postretirement benefit obligation for the
postretirement plan of CEI substantially exceeded the fair value of assets
held in the Cox Pension Plan Trust at December 31, 1996.
In addition, substantially all of the Central Ohio Cluster's employees are
eligible to participate in the savings and investment plan of CEI. Under the
terms of the plan, the Central Ohio Cluster matches 50% of employee
contributions up to a maximum of 6% of the employee's base salary. The Central
Ohio Cluster's expense under the plan was $39,000 for the six-month period
ended June 30, 1997 and $83,000 for the year ended December 31, 1996.
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Central Ohio Cluster borrows funds for working capital and other needs
from CCI. Certain management services are provided to the Central Ohio Cluster
by CCI and CEI. Such services include legal, corporate secretarial, tax,
treasury, internal audit, risk management, benefits administration and other
support services. The Central Ohio Cluster was allocated expenses for the six
months ended June 30, 1997 and for the year ended December 31, 1996 of
approximately $405,000 and $1,320,000, respectively, related to these
services. Allocated expenses are based on management's estimate of expenses
related to the services provided to the Central Ohio Cluster in relation to
those provided to other divisions of CCI and CEI. Management believes that
these allocations were made on a reasonable basis. However, the allocations
are not necessarily indicative of the level of expenses that might have been
incurred had the Central Ohio Cluster contracted directly with third parties.
Management has not made a study or any attempt to obtain quotes from third
parties to determine what the cost of obtaining such services from third
parties would have been. The fees and expenses to be paid by the Central Ohio
Cluster are subject to change. The amounts due to affiliates are generally due
on demand and represent the net of various transactions, including those
described above. At June 30, 1997 and December 31, 1996, outstanding amounts
due to affiliates bear interest at fifty basis points above CCI's commercial
paper borrowings. This rate as of June 30, 1997 and December 31, 1996 was
6.38% and 6.6%, respectively.
In accordance with the requirements of SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," the Central Ohio Cluster has estimated the
fair value of its intercompany advances and notes payable. Given the short-
term nature of these advances, the carrying amounts reported in the statements
of net assets approximate fair value.
(9) COMMITMENTS AND CONTINGENCIES
The Central Ohio Cluster leases office facilities and various items of
equipment under noncancellable operating leases. Rental expense under
operating leases amounted to $179,000 for the six-month period ended June 30,
1997 and $331,000 for the year ended December 31, 1996. Future minimum lease
payments as of June 30, 1997 for all noncancellable operating leases are as
follows:
<TABLE>
<S> <C>
1997 $ 60
1998 31
1999 31
2000 31
2001 22
----
Total $175
====
</TABLE>
The FCC has adopted rate regulations required by the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). Beginning in
September 1995, the FCC authorized a method of implementing rate adjustments
which allows cable operators to increase rates for programming annually on the
basis of proposed increases in external costs rather than on the basis of cost
increases incurred in the preceding quarter. Local franchising authorities
have the ability to obtain certification from the FCC to regulate rates
charged by the Central Ohio Cluster for basic cable services and associated
basic cable services equipment. In addition, the rates charged by the Central
Ohio Cluster for cable programming services ("CPS") can be regulated by the
FCC should cable customers of the Central Ohio Cluster file rate complaints
with the FCC. To date, the local franchising authorities for the Central Ohio
Cluster have not become certified by the FCC to regulate rates for basic cable
service and associated basic cable services equipment and no complaints have
been filed by customers with the FCC regarding rates charged for CPS. Though
rates
F-119
<PAGE>
CENTRAL OHIO CLUSTER
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Information as of June 30, 1997 and for the Six Months Ended June 30, 1997
and 1996 is unaudited)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
for basic and CPS are presently not regulated, management of the Central Ohio
cluster believes the rates charged for basic and CPS comply in all material
respects with the 1992 Cable Act and that should such rates become regulated
in the future the impact on the combined financial position and combined
results of operation of the Central Ohio Cluster would not be material.
On February 1, 1996, Congress passed the Telecommunications Competition and
Deregulation Act of 1996 (the "1996 Act"), which was signed into law by the
President on February 8, 1996. Among other provisions, the 1996 Act
deregulates the CPS tier of large cable television operators on March 31, 1999
and upon enactment, the CPS rates of small cable television operators, where a
small cable operator serves 50,000 or fewer subscribers, revises the
procedures for filing a CPS complaint and adds a new effective competition
test.
F-120
<PAGE>
[LOGO]
FRONTIERVISION HOLDINGS, L.P.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.6 of the First Amended and Restated Agreement of Limited Partner-
ship of FVP, dated as of August 11, 1995 (the "FVP Partnership Agreement"),
provides that in the absence of fraud, breach of fiduciary duty, willful mis-
conduct or gross negligence, FVP GP, its partners, their respective officers,
directors, employees, agents or stockholders (including when any of the fore-
going is serving at the request of FVP GP on behalf of FVP as a partner, offi-
cer, director, employee or agent of any other Person) (as such term is defined
in the FVP Partnership Agreement) (in each case, the "Indemnitee") shall not
be liable to any other partner of FVP or FVP (i) for any mistake in judgment,
(ii) for any action taken or omitted to be taken in good faith and in a manner
reasonably believed by such Person to be in the best interests of FVP and to
be within the scope of its authority under the FVP Partnership Agreement, or
(iii) for any loss due to the mistake, action, inaction, negligence, dishones-
ty, fraud or bad faith or any broker or other agent, provided that such broker
or other agent shall have been selected and supervised by FVP GP or other In-
demnitee with reasonable care. In addition, Indemnitees will be indemnified
and held harmless by FVP against losses, damages and expenses for which such
Person has not otherwise been reimbursed actually and pending or completed ac-
tion, suit or proceeding (other than any action by or in the name of FVP), by
reason of any action taken or omitted to be taken in connection with or aris-
ing out of such Person's activities on behalf of FVP or in furtherance of FVP,
if such actions were taken or omitted to be taken in good faith and in a man-
ner reasonably believed by such Person to be in the best interests of FVP and
within the scope of the FVP Partnership Agreement, provided, that any Person
entitled to indemnification shall obtain the written consent of FVP GP (which
consent will not be given without the approval of the Advisory Committee)
prior to entering into any compromise or settlement which would result in an
obligation of FVP to indemnify such Person.
Section 5.6 of the First Amended and Restated Agreement of Limited Partner-
ship of FVP GP, dated as of August 11, 1995 (the "FVP GP Partnership Agree-
ment"), provides that in the absence of fraud, breach of fiduciary duty, will-
ful misconduct or gross negligence, Frontier Vision Inc., its officers, direc-
tors, employees, agents or stockholders (including when any of the foregoing
is serving at the request of FrontierVision Inc. on behalf of FVP GP or FVP as
a partner, officer, director, employee or agent of any other Person) (as such
term is defined in the FVP GP Partnership Agreement) (in each case, the "In-
demnitee") shall not be liable to any other partner of FVP GP or FVP GP (i)
for any mistake in judgment, (ii) for any action taken or omitted to be taken
in good faith an din a manner reasonably believed by such Person to be in the
best interests of FVP GP and to be within the scope of its authority under the
FVP GP Partnership Agreement, or (iii) for any loss due to the mistake, ac-
tion, inaction, negligence dishonesty, fraud or bad faith of any broker or
other agent, provided that such broker or other agent shall have been selected
and supervised by FrontierVision Inc. or other Indemnitee with reasonable
care. In addition, Indemnitees will be indemnified and held harmless by FVP GP
against losses, damages and expenses for which such person has not otherwise
been reimbursed actually and reasonably incurred by such Person who was or is
a party or is threatened to be made a party to any threatened, pending or com-
pleted action, suit or proceeding (other than any action by or in the name of
FVP GP), by reason of any action taken or omitted to be taken in connection
with or arising out of such Person's activities on behalf of FVP GP or in fur-
therance of FVP GP, if such actions were taken or omitted to be taken in good
faith and in a manner reasonably believed by such person to be in the best in-
terests of FVP GP and within the scope of the FVP GP Partnership Agreement,
provided, that any Person entitled to indemnification shall obtain the written
consent of FrontierVision Inc. (which consent will not be given without the
consent of a majority in interests of the Class X Limited Partners (as such
term is defined in the FVP GP Partnership Agreement)) prior to entering into
any compromise or settlement which would result in an obligation of FVP GP to
indemnify such person.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation (in its original certificate of in-
corporation or amendment thereto) may eliminate or limit the personal liabil-
ity of a director (or certain persons who, pursuant to the provisions of the
certificate of incorporation, exercise of perform duties conferred or imposed
upon directors by the DGCL) to the corporation or its stockholders for mone-
tary damages for breach of fiduciary duty as a director, provided that such
provisions shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the corporation or its stock-
holders, (ii) for acts or omissions not in good faith or which involve inten-
tional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (providing for liability of directors for unlawful payment of divi-
dends or unlawful stock purchases or redemptions) or (iv) for any transaction
from which the director derived an improper personal benefit. Article Tenth of
FrontierVision Inc.'s Certificate of Incorporation and Article Eleventh of
Holdings Capital's Certificate of Incorporation each limit the liability of
directors thereof to the extent permitted by Section 102(b)(7) of the DGCL.
II-1
<PAGE>
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attor-
ney's fees), judgments, fines and amounts paid in settlement actually and rea-
sonably incurred by them in connection with any action, suit or proceeding
brought by third parties to which they may be made parties by reason of their
being or having been directors, officers, employees or agents and shall so in-
demnify such persons if they acted in good faith and in a manner they reasona-
bly 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 reasonable
cause to believe their conduct was unlawful.
ITEM 21 EXHIBITS AND FINANCIAL DATA SCHEDULES.
<TABLE>
<S> <C>
3.1 Amended and Restated Agreement of Limited Partnership of FVOP.
3.2 Certificate of Limited Partnership of FVOP. (1)
3.3 First Amended and Restated Agreement of Limited Partnership of FVP. (1)
3.4 Amendment No. 1 to the First Amended and Restated Agreement of Limited
Partnership of FVP.
3.5 Amendment No. 2 to the First Amended and Restated Agreement of Limited
Partnership of FVP.
3.6 Amendment No. 3 to the First Amended and Restated Agreement of Limited
Partnership of FVP.
3.7 Amendment No. 4 to the First Amended and Restated Agreement of Limited
Partnership of FVP.
3.8 Amendment No. 5 to the First Amended and Restated Agreement of Limited
Partnership of FVP.
3.9 Certificate of Limited Partnership of FVP. (1)
3.10 First Amended and Restated Agreement of Limited Partnership of FVP GP.
(1)
3.11 Amendment No. 1 to the First Amended and Restated Agreement of Limited
Partnership of FVP GP.
3.12 Amendment No. 2 to the First Amended and Restated Agreement of Limited
Partnership of FVP GP.
3.13 Certificate of Limited Partnership of FVP GP. (1)
3.14 Certificate of Incorporation of FrontierVision Inc. (1)
3.15 Bylaws of FrontierVision, Inc. (1)
3.16 Agreement of Limited Partnership of Holdings.
3.17 Certificate of Limited Partnership of Holdings.
3.18 Certificate of Incorporation of FrontierVision Holdings Capital
Corporation.
3.19 Bylaws of FrontierVision Holdings Capital Corporation.
4.1 Indenture dated as of October 7, 1996, among FrontierVision Operating
Partners, L.P., FrontierVision Capital Corporation and Colorado National
Bank, as Trustee. (2)
4.2 Indenture dated as of September 19, 1997, among FrontierVision Holdings,
L.P., FrontierVision Holdings Capital Corporation and U.S. Bank National
Association d/b/a Colorado National Bank, as Trustee.
4.3 Purchase Agreement, dated as of September 16, 1997, by and among
FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as Initial
Purchasers.
4.4 Registration Rights Agreement, dated as of September 19, 1997, by and
among FrontierVision Holdings, L.P., FrontierVision Holdings Capital
Corporation, and J.P. Morgan Securities Inc., Chase Securities Inc.,
CIBC Wood Gundy Corp. and First Union Capital Markets Corp., as Initial
Purchasers.
5.1 Opinion of Dow, Lohnes & Albertson, PLLC.
10.1 Senior Credit Facility. (1)
10.2 Employment Agreement of James C. Vaughn. (1)
10.3 Asset Purchase Agreement dated July 20, 1995 between United Video
Cablevision, Inc. and FrontierVision Operating Partners, L.P. (1)
10.4 Asset Acquisition Agreement (July 27, 1995 Auction Sale) dated as of
July 27, 1995 among Stephen S. Gray in his capacity as Receiver of
Longfellow Cable Company, Inc., Carrabassett Electronics and
Carrabassett Cable Company, Inc. and FrontierVision Operating Partners,
L.P. (1)
10.5 Asset Purchase Agreement dated October 27, 1995 among C4 Media Cable
Southeast, Limited Partnership, County Cable Company, L.P. and
FrontierVision Operating Partners, L.P. (1)
10.6 Asset Purchase Agreement dated November 17, 1995 among Cox
Communications Ohio, Inc., Times Mirror Cable Television of Defiance,
Inc., Chillicothe Cablevision, Inc., Cox Communications Eastern
Kentucky, Inc. and FrontierVision Operating Partners, L.P. (1)
10.7 Asset Purchase Agreement dated February 27, 1996 between Americable
International Maine, Inc. and FrontierVision Operating Partners, L.P.
(1)
10.8 Asset Purchase Agreement dated May 16, 1996 among Triax Southeast
Associates, L.P., Triax Southeast General Partner, L.P. and
FrontierVision Operating Partners, L.P. (1)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.9 Asset Purchase and Sale Agreement dated June 21, 1996 between HPI
Acquisition Co. LLC (assignee of Helicon Partners I, LP) and
FrontierVision Operating Partners, L.P. (1)
10.10 Asset Purchase Agreement dated July 15, 1996 between American Cable
Entertainment of Kentucky-Indiana, Inc. and FrontierVision Operating
Partners, L.P. (1)
10.11 Asset Purchase Agreement dated as of July 30, 1996 between Shenandoah
Cable Television Company and FrontierVision Operating Partners, L.P. (1)
10.12 Purchase Agreement dated as of August 6, 1996 between Penn/Ohio
Cablevision, L.P. and FrontierVision Operating Partners, L.P. (1)
10.13 Asset Purchase Agreement dated July 19, 1996 between Phoenix Grassroots
Cable Systems, L.L.C. and FrontierVision Operating Partners, L.P. (1)
10.14 Amendment No. 1 to Senior Credit Facility. (1)
10.15 Consent and Amendment No. 2 to Senior Credit Facility. (2)
10.16 Asset Purchase Agreement dated May 8, 1997 between A-R Cable Services--
ME, Inc. and FrontierVision Operating Partners, L.P.
10.17 Asset Purchase Agreement dated as of May 12, 1997 between TCI
Cablevision of Vermont, Inc., Westmarc Development Joint Venture and
FrontierVision Operating Partners, L.P.
10.18 New Credit Facility
12.2 Statement of Computation of Ratios.
23.18 Consent of KPMG Peat Marwick LLP (FrontierVision Holdings, L.P.).
23.19 Consent of KPMG Peat Marwick LLP (FrontierVision Holdings Capital
Corporation).
23.20 Consent of KPMG Peat Marwick LLP (FrontierVision Operating Partners,
L.P.).
23.21 Consent of KPMG Peat Marwick LLP (FrontierVision Partners, L.P.).
23.22 Consent of Piaker & Lyons, P.C. (United Video Cablevision, Inc.).
23.23 Consent of Williams, Rogers, Lewis & Co., P.C. (C4 Media Cable
Southeast, Limited Partnership).
23.24 Consent of Arthur Andersen LLP (Triax Southeast Associates, L.P.).
23.25 Consent of Deloitte & Touche LLP (American Cable Entertainment of
Kentucky-Indiana, Inc.).
23.26 Consent of Deloitte & Touche LLP (Ashland and Defiance Clusters).
23.27 Consent of KPMG Peat Marwick LLP (A-R Cable Services-ME, Inc.).
23.28 Consent of KPMG Peat Marwick LLP (New Hampshire/Vermont Systems).
23.29 Consent of Deloitte & Touche LLP (Cox Central Ohio Cluster).
25.1 Statement of Eligibility and Qualification on Form T-1 of Trustee.
27.5 Financial Data Schedule as of September 18, 1997.
99.1 Letter of Transmittal.
</TABLE>
- -------
(1) Incorporated by reference to the exhibits to FVOP's and Capital's
Registration Statement on Form S-1, Registration No. 333-9535.
(2) Incorporated by reference to the exhibits to FVOP's and Capital's
Quarterly Report on Form 10-Q, File No. 333-9535 for the quarter ended
September 30, 1996.
ITEM 22 UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, FVP,
FVP GP, FrontierVision Inc. and Capital pursuant to the provisions described
under Item 14 above or otherwise, the Registrants have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore,
unenforeceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrants will, unless in the opinion of their counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisidiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
II-3
<PAGE>
(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.
(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 which remain unsold at the termination of the
offering.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
FRONTIERVISION HOLDINGS, L.P. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON
SEPTEMBER 26, 1997.
Frontiervision Holdings, L.P.
By: FrontierVision Partners, L.P., its
general partner,
By: FVP GP, L.P., its general partner
By: FrontierVision Inc., its general
partner
By: /s/ James C. Vaughn
-------------------------------------
James C. Vaughn
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANTS AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ James C. Vaughn President, Chief September 26, 1997
- ----------------------------------- Executive
JAMES C. VAUGHN Officer, and
Director of
FrontierVision
Inc. (Principal
Executive
Officer)
/s/ John S. Koo Senior Vice September 26, 1997
- ----------------------------------- President, Chief
JOHN S. KOO Financial
Officer,
Secretary and
Director of
FrontierVision
Inc. (Principal
Financial
Officer)
/s/ James W. McHose Vice President and September 26, 1997
- ----------------------------------- Treasurer of
JAMES W. MCHOSE FrontierVision
Inc. (Principal
Accounting
Officer)
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
FRONTIERVISION HOLDINGS CAPITAL CORPORATION HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, ON SEPTEMBER 26, 1997.
Frontiervision Holdings Capital
Corporation
/s/ James C. Vaughn
By: ----------------------------------
James C. Vaughn
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANTS AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ James C. Vaughn President and September 26, 1997
- ----------------------------------- Director
JAMES C. VAUGHN (Principal
Executive
Officer)
/s/ John S. Koo Senior Vice September 26, 1997
- ----------------------------------- President, Chief
JOHN S. KOO Financial
Officer,
Secretary and
Director
(Principal
Financial
Officer)
/s/ James W. McHose Vice President and September 26, 1997
- ----------------------------------- Treasurer
JAMES W. MCHOSE (Principal
Accounting
Officer)
II-6
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
FRONTIERVISION OPERATING PARTNERS, L.P.
This Amended and Restated Agreement of Limited Partnership of
FrontierVision Operating Partners, L.P. (the "Partnership") is entered into by
and between FrontierVision Partners, L.P., a Delaware limited partnership, as
withdrawing general partner (the "Withdrawing General Partner"); FrontierVision
Holdings, L.P., a Delaware limited partnership (the "General Partner"); and
FrontierVision Operating Partners, Inc., a Delaware corporation (the "Limited
Partner").
WHEREAS, by Agreement of Limited Partnership dated as of July 14, 1995
(the "Agreement"), the General Partner and the Class B Limited Partner formed
the Partnership as a limited partnership pursuant to and in accordance with the
Delaware Revised Uniform Limited Partnership Act (6 Del. C. (S)(S)17-101, et
------ --
seq.) (the "Act"); and
- ---
WHEREAS, the Agreement was amended by Amendment No. 1 dated as of July
15, 1995, Amendment No. 2 dated as of November 8, 1995, Amendment No. 3 dated as
of April 9, 1996, and Amendment No. 4 dated as of September 27, 1996; and
WHEREAS, the parties now wish to substitute the General Partner for the
Withdrawing General Partner, continue the Partnership, extend the term of the
Partnership and otherwise amend and restate the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein made and intending to be legally bound (i) the Withdrawing General
Partner hereby assigns to the General Partner all of the Withdrawing General
Partner's rights as a partner of the Partnership and hereby withdraws as a
partner of the Partnership, (ii) the General Partner hereby assumes all
obligations of the Withdrawing General Partner as a partner of the Partnership,
(iii) the parties hereby admit the General Partner to the Partnership as a
general partner, consent to the withdrawal of the Withdrawing General Partner
and agree to continue the Partnership, and (iv) the parties hereby amend and
restate the Agreement to read in its entirety as follows:
1. Name. The name of the limited partnership heretofore formed and
----
hereby continued is FrontierVision Operating Partners, L.P. (the "Partnership").
2. Purpose. The Partnership is organized for the object and purpose of,
-------
and the nature of the business to be conducted and promoted by the Partnership
is, acquiring, investing in, disposing of, operating, managing and financing
cable television and communications systems and engaging in any and all
activities necessary, desirable or incidental to the foregoing.
<PAGE>
3. Registered Office. The registered office of the Partnership in the
-----------------
State of Delaware is c/o The Prentice-Hall Corporation System, Inc., 1013 Centre
Road, New Castle County, Wilmington, Delaware 19805-1297.
4. Registered Agent. The name and address of the registered agent of
----------------
the Partnership for service of process on the Partnership in the State of
Delaware is The Prentice-Hall Corporation System, Inc., 1013 Centre Road, New
Castle County, Wilmington, Delaware 19805-1297.
5. Partners. The names and mailing addresses of the General Partner
--------
and the Limited Partner are as follows:
General Partner
---------------
FrontierVision Holdings, L.P.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
Limited Partner
---------------
FrontierVision Operating Partners, Inc.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
6. Powers. The powers of the General Partner include all powers,
------
statutory and otherwise, possessed by general partners under the laws of the
State of Delaware.
7. Term. The Partnership shall dissolve, and its affairs shall be
----
wound up either (i) on June 30, 2008 or (ii) at such earlier time as (a) all of
the partners of the Partnership approve in writing, (b) the Partnership sells or
otherwise disposes of its interest in all or substantially all of its property,
(c) an event of withdrawal of the General Partner has occurred under the Act or
(d) an entry of a decree of judicial dissolution has occurred under (S)(S)17-802
of the Act.
8. Capital Contributions. The partners of the Partnership have
---------------------
previously made certain capital contributions to the Partnership as reflected in
the books and records of the Partnership. Capital contributions heretofore made
by the Withdrawing General Partner shall be deemed to have been made by the
General Partner.
9. Additional Contributions. Each partner of the Partnership may, but
------------------------
is not required to, make additional capital contributions to the Partnership.
10. Allocation of Profits and Losses. The Partnership's profits and
--------------------------------
losses shall be allocated in proportion to the capital contributions of the
partners of the Partnership.
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<PAGE>
11. Distributions. At the time determined by the General Partner, but
-------------
at least once during each fiscal year of the Partnership, the General Partner
shall, to the extent not prohibited by any financing arrangements to which the
Partnership is then subject, cause the Partnership to distribute any cash held
by it which is not reasonably necessary for the operation of the Partnership.
Cash available for distribution shall be distributed to the partners of the
Partnership in the same proportion as their then capital account balance.
12. Assignments. The Limited Partner may assign all or any part of its
-----------
partnership interest in the Partnership only with the consent of the General
Partner. The Limited Partner has no right to grant an assignee of its
partnership interest in the Partnership the right to become a substituted
limited partner of the Partnership.
13. Withdrawal. Except as provided in the following Section 14, no
----------
right is given to any partner of the Partnership to withdraw from the
Partnership.
14. Additional Partners.
-------------------
(a) Without the approval of the Limited Partner, the General
Partner may admit additional limited partners to the Partnership. The General
Partner may admit an assignee of the Limited Partner's partnership interest in
the Partnership as a substituted limited partner of the Partnership. The General
Partner may admit one or more additional general partners, without the consent
of the Limited Partner. Upon the admission of any additional limited partners or
substituted limited partners to the Partnership, the Limited Partner shall
withdraw from the Partnership and shall be entitled to receive forthwith the
return of his capital contribution, without interest or deduction.
(b) After the admission of any additional limited partners,
substituted limited partners or additional general partners pursuant to this
Section 14, the Partnership shall continue as a limited partnership under the
Act.
(c) The admission of additional limited partners, substituted
limited partners or additional general partners to the Partnership pursuant to
this Section 14 shall be accomplished by the amendment of this Agreement of
Limited Partnership and, if required by the Act, the filing of an appropriate
amendment of the Partnership's Certificate of Limited Partnership in the office
of the Secretary of State of the State of Delaware.
15. Lender Rights. Notwithstanding any other provision contained in
-------------
this Agreement to the contrary (but subject to clause (c) below):
(a) Each partner hereby (i) acknowledges the collateral assignment
by the General Partner and the Limited Partner of their partnership interests in
the Partnership pursuant to that certain Partner Pledge Agreement dated as of
November 9, 1995 (as modified and supplemented and in effect from time to time,
the "Partner Pledge Agreement"), which Partner Pledge Agreement was originally
------------------------
between The Chase Manhattan Bank (National Association), as Administrative Agent
and the Limited Partner and the Withdrawing General Partner, the General
-3-
<PAGE>
Partner having subsequently become a party thereto in connection with its
admission to the Partnership, (ii) in connection with the exercise by the
Administrative Agent of any of its rights and remedies under the Partner Pledge
Agreement, consents to the assignment of the partnership interests subject to
the Partner Pledge Agreement to any other person (and to the substitution of
such other person as a general or limited partner, as the case may be, holding
the partnership interest so assigned), and (iii) agrees that no such assignment
(and substitution) shall effect a termination or dissolution of the Partnership
(so long as all partnership interests are not assigned to the same person).
(b) Without limiting the generality of the foregoing, each partner
hereby agrees that upon the occurrence and continuance of any Event of Default
under and as defined in the Credit Agreement referred to in the Partner Pledge
Agreement:
(i) the Administrative Agent shall be entitled to be
admitted (or to have a designee of its choice admitted) as a new
general partner of the Partnership (such new general partner being
hereinafter referred to as the "New General Partner") and, each
-------------------
partner hereby consents to such admission and agrees to execute and
deliver such instruments, if any, as shall be necessary to effect
the foregoing;
(ii) in connection with the admission of the New General
Partner to the Partnership, no capital contribution by the New
General Partner shall be required;
(iii) as provided in the Partner Pledge Agreement, the New
General Partner shall not have any liability with respect to the
obligations of the Partnership under the Credit Agreement;
(iv) on and after the admission of the New General Partner to
the Partnership, the allocation of profit and loss of the
Partnership and any distributions of any cash held by the
Partnership shall be made as if the General Partner, the New
General Partner and the Limited Partner had contributed 99.89%,
0.01% and 0.1%, respectively, of the total capital contributions of
all of the Partners to the Partnership;
(v) On and after the admission of the New General Partner to
the Partnership, the New General Partner shall have all powers,
statutory and otherwise, possessed by general partners under the
laws of the State of Delaware and shall have the sole authority to
manage the business and affairs of the Partnership (and,
notwithstanding any other provision contained herein or in any such
laws, the General Partner shall have no further powers or
privileges with respect to the management of the Partnership);
(vi) if requested by the Administrative Agent following the
admission of the New General Partner to the Partnership, the
partnership interest in the Partnership held by the General Partner
shall be converted into a limited
-4-
<PAGE>
partnership interest (provided that, as contemplated by the Partner
Pledge Agreement, the General Partner shall remain obligated in
respect of its guarantee in the Partner Pledge Agreement) and in
that connection, the New General Partner may make such additional
capital contributions, and alter the allocation of partnership
profits and losses among the partners, in such manner as it shall
determine to be appropriate to preserve the status of the
Partnership as a partnership for federal income tax purposes; and
(vii) following the admission of the New General Partner to
the Partnership (and without limiting similar restrictions
contained in the Partner Pledge Agreement), neither the General
Partner nor any Limited Partner may transfer either of their
partnership interests in the Partnership without the prior written
consent of the New General Partner.
(c) Any substitution of a person for the General Partner pursuant
to clause (a) above, and any addition of a New General Partner pursuant to
clause (b) above, shall be subject to compliance with the applicable provisions
of Section 6.12 of the Partner Pledge Agreement with respect to obtaining
necessary regulatory approvals prior to taking any action that would effect a
change of control of the Partnership.
16. Governing Law. This Agreement shall be governed by, and construed
-------------
under, the laws of the State of Delaware, all rights and remedies being governed
by said laws.
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have
duly executed this Amended and Restated Agreement of Limited Partnership as of
the 19th day of September, 1997.
GENERAL PARTNER:
---------------
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P., its sole
general partner
By: FVP GP, L.P., its sole general partner
By: FrontierVision Inc., its sole general
partner
By: /s/ James C. Vaughn
--------------------------
James C. Vaughn
President
LIMITED PARTNER:
---------------
FRONTIERVISION OPERATING PARTNERS, INC.
By: /s/ James C. Vaughn
--------------------------
James C. Vaughn
President
WITHDRAWING GENERAL PARTNER:
---------------------------
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general partner
By: FrontierVision Inc., its sole general
partner
By: /s/ James C. Vaughn
--------------------------
James C. Vaughn
President
-6-
<PAGE>
EXHIBIT 3.4
AMENDMENT NO. 1
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS, L.P.
DATED AS OF AUGUST 11, 1995
------------------------------------------------------------------
This Amendment No. 1 to the First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P., dated as of August 11,
1995 (the "Agreement"), is dated as of October 31, 1995.
The Agreement is hereby amended as follows:
1. A new paragraph 3.11 is hereby added, to read in its entirety as
set forth on Exhibit A hereto.
2. Schedule A to the Agreement is hereby amended to read in its
entirety as set forth in the Schedule A attached hereto.
Except as expressly amended hereby, the Agreement is and shall remain,
in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the 31st day of October, 1995.
GENERAL PARTNER:
---------------
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
------------------------------------
James C. Vaughn,
President
LIMITED PARTNERS.
----------------
All Limited Partners by the General
Partner pursuant to the Power of
Attorney granted by paragraph 12.1
of the Agreement.
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
------------------------------------
James C. Vaughn,
President
<PAGE>
EXHIBIT A
---------
3.11 FOREIGN INVESTORS; FOREIGN-OWNED SPECIAL PURPOSE CORPORATIONS.
-------------------------------------------------------------
Several investors in the Partnership are foreign-owned special purpose
corporations (each a "FOSPC"), each of which is wholly-owned by a foreign
corporation (each such corpo ration a "Foreign Investor"). After any
indebtedness of the Partnership and its Operating Entities for borrowed money,
other than the Junior Subordinated Notes, has been repaid, and immediately prior
to any subsequent sale to a buyer of all or substantially all of the
Partnership's assets, each Foreign Investor may wish to have its indirect
interest in the assets of the Partnership distributed to its FOSPC. The Foreign
Investor may wish then to sell the stock of its FOSPC to the buyer at the same
time that the Partnership sells its direct interest in the assets of the
Partnership to that buyer. In addition, in the event that the Partnership is
reorganized as a corporation (for example, in contemplation of an initial public
offering), the Foreign Investor may wish to exchange the stock of its FOSPC for
stock in such corporation or to merge its FOSPC into such corpo ration. The
Partnership and the General Partner have agreed to assist the Foreign Investors
in achieving their objectives, but in any event (i) only if pursuant to
paragraph 3.10 a Fund Investor similarly elects to sell its stock in a SPC to a
buyer or to combine its SPC with a corporation resulting from a reorganization
of the Partnership, as applicable, and (ii) only to the extent practicable and
not adverse in any material respect to the other Partners and the Partnership
(as determined by the Advisory Committee in its sole discretion, which
determination shall be final and binding). To that end, the General Partner,
the Partnership and the FOSPCs have agreed as provided below in this paragraph
3.11.
3.11.1 Each FOSPC shall be a single-purpose corpora tion, whose sole
purpose and business shall be to make an invest ment in the Partnership.
3.11.2 After all indebtedness of the Partnership and its Operating
Entities for borrowed money, other than the Junior Subordinated Notes, has been
repaid, if the General Partner, with the approval of the Advisory Committee,
determines to sell all or substantially all of the assets of the Partnership,
and if a SPC has similarly so requested pursuant to paragraph 3.10.5, then upon
the request of a FOSPC, the Partnership shall use commer cially reasonable
efforts to arrange for the sale to be accom plished as follows (it being
understood that the actions des cribed in this paragraph 3.11.2 shall not be
taken unless (i) an SPC of a Fund Investor has similarly requested that such
action be taken pursuant to paragraph 3.10.5 and (ii) the buyer, in its sole
discretion, has agreed to buy and the Foreign Investor has agreed to sell the
stock of the FOSPC):
<PAGE>
(a) The Partnership first shall distribute (a "FOSPC Distribution") to
the FOSPC an interest in the assets of the Partnership having a fair market
value (as determined by the General Partner in its sole discretion, which
determination shall be conclusive) equal to the amount of cash and/or the fair
market value of securities that would have been paid to the FOSPC in respect of
its Junior Subordinated Notes and/or would have been distributed to the FOSPC in
respect of its Limited Partnership Interest if the assets of the Partnership had
been directly sold to the buyer, and the Partnership had used the net proceeds
of such sale to repay the Junior Subordinated Notes and to make distributions to
its Partners. Each such FOSPC Distribution shall be treated for all purposes of
this Agreement and the Purchase Agreement (x) first, as a repayment of the
principal of, and accrued interest on, the Junior Subordinated Notes held by the
FOSPC and (y) to the extent of the excess of the fair market value of the FOSPC
Distribution over the principal of, and accrued interest on, such Junior
Subordinated Notes, as a cash distribution pursuant to paragraph 4.2.1.
(b) The buyer shall then purchase from the Partnership its interest in
the assets, and from the Foreign Investor the stock of its FOSPC. The net
proceeds of such sale received by the Partnership shall be used exclusively to
repay the Junior Subordinated Notes of, and thereafter to make distributions to,
the Partners other than the FOSPCs (and the SPCs of the Fund Investors that have
similarly so elected pursuant to paragraph 3.10.5), and the FOSPCs (and any SPCs
of the Fund Investors that have similarly so elected pursuant to paragraph
3.10.5) shall not share in such proceeds.
Each FOSPC recognizes that the amount the Foreign Investor will receive for the
stock of such FOSPC will be less than the amount such FOSPC would receive for a
direct interest in the Partner ship. The FOSPCs acknowledge and agree that
their stockholders will bear the entire difference between (x) the amount a
buyer is willing to pay for the assets of the Partnership as compared to (y) the
amount a buyer is willing to pay for the Partnership's interest in such assets,
together with the stock of the FOSPCs.
3.11.3 Each FOSPC acknowledges that although the Partnership and the
General Partner have agreed to use commer cially reasonable efforts to arrange
for sales as described in this paragraph 3.11, they will not be required to do
so if the Advisory Committee, in its sole discretion, determines that such a
sale is not practicable or would adversely affect in any material respect the
other Limited Partners. The determination of the Advisory Committee shall be
final and binding. In such event, the Partnership may sell the assets of the
Partnership without making a FOSPC Distribution.
3.11.4 In the event that the Partnership is reorgan ized as a
corporation (for example, in contemplation of an
2
<PAGE>
initial public offering), and if a Fund Investor similarly has so requested
pursuant to paragraph 3.10.8, then at the request of a Foreign Investor, the
Partnership and the General Partner will use commercially reasonable efforts to
permit the Foreign Investor to exchange its stock in its FOSPC for stock of such
corporation or to merge its FOSPC into such corporation, unless the Advisory
Committee, in its sole discretion, determines that such an exchange or merger is
not practicable or is adverse in any material respect to the other Partners or
the Partnership. The determination of the Advisory Committee shall be final and
binding. The amount of stock in the new corporation that a Foreign Investor
receives in respect of its stock in a FOSPC will be determined by the General
Partner, with the approval of the Advisory Committee, in its and their sole
discretion, based upon the valuation used in determining the amount of stock in
the new corporation that each Fund Investor that has similarly so elected
pursuant to paragraph 3.10.8 receives in respect of its stock in a SPC. The
determination of the General Partner, with the approval of the Advisory
Committee, shall be final and binding. Each FOSPC recognizes that the amount of
stock in the new corporation that its Foreign Investor will receive for the
stock of a FOSPC will be less than the amount of stock in the new corporation
that the FOSPC would have received in respect of the FOSPC's interest in the
Partnership. The FOSPCs acknowledge and agree that they will bear the entire
difference between (x) the value of the new corporation if the FOSPCs themselves
receive stock in such corporation (rather than stock of the FOSPCs being
exchanged for stock of the new corporation, or the FOSPCs being merged into the
new corporation, as applicable), as compared to (y) the value of the new
corporation if stock of the FOSPCs is exchanged for stock in such corporation or
if the FOSPCs are merged into such corporation, as applicable.
3
<PAGE>
SCHEDULE A
----------
AS OF OCTOBER 31, 1995
----------------------
<TABLE>
<CAPTION>
CLASS OF INTEREST
[INDICATING WHETHER
SPECIAL AND, IF SO,
NAME AND ADDRESS PERCENTAGE OF
OF PARTNER SPECIAL ALLOCATION] CAPITAL COMMITMENT
- ---------------- ------------------- ------------------
<S> <C> <C>
GENERAL PARTNER:
- ---------------
FVP GP, L.P. General Partnership $ 167,762
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
LIMITED PARTNERS:
- ----------------
J.P. Morgan Investment Special Class A - Attributable $3,400,000
Corporation [2% of Special Allocation]
101 California Street
Suite 3800
San Francisco, CA 94111
1818 II Cable Corp. Special Class A - Attributable $3,351,814
c/o Brown Brothers [2% of Special Allocation]
Harriman & Co.
59 Wall Street
New York, NY 10005
Olympus Cable Corp. Special Class A - Attributable $3,351,814
c/o Olympus Growth Fund [2% of Special Allocation]
II, L.P.
Metro Center
One Station Place
Stamford, CT 06920
First Union Capital Special Class A - Attributable $2,040,000
Partners, Inc. [1.2% of Special Allocation]
One First Union Center
18th Floor
Charlotte, NC 28288
Eos Partners SBIC, L.P. Class A - Non-Attributable $ 394,400
520 Madison Avenue
New York, NY 10022
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Tahosa Investors Special Class A - $204,000
c/o Samuel J. Recht Non-Attributable
Quarles & Brady [0.08571% of Special
411 East Wisconsin Avenue Allocation]
Milwaukee, WI 53202-4497/1/
Kensington Investment Special Class A - $136,000
Associates Non-Attributable
575 Madison Avenue [0.05714% of Special
Suite 1006 Allocation]
New York, NY 10022/1/
Pegasus Partners Special Class A - $204,000
c/o Arnold D. Friedman Non-Attributable
27 Hidden Valley Drive [0.08571% of Special
Suffern, NY 10901/1/ Allocation]
Prosperity Associates Special Class A - $ 34,000
c/o Philippe L. Sommer Non-Attributable
1165 Park Avenue [0.01429% of Special
Apartment 15C Allocation]
New York, NY 10128/1/
SBF Investments Ltd. Special Class A - $136,000
c/o Dennis Good Non-Attributable
7800 Stemmons Freeway [0.05714% of Special
10th Floor Allocation]
Dallas, TX 75247/1/
L. Philips Runyon III Special Class A - $136,000
Runyon & Howard, P.A. Non-Attributable
69 Main Street [0.05714% of Special
Peterborough, NH 03458/1/ Allocation]
Roth Trading Company Special Class A - $ 68,000
101 Park Avenue Non-Attributable
Suite 1800 [0.02857% of Special
New York, NY 10178/1/ Allocation]
Washington Partners Special Class A - $ 34,000
39 Plumb Hill Road Non-Attributable
Washington, CN 06793/1/ [0.01429% of Special
Allocation]
</TABLE>
--------------------------
/1/ With copies to:
R.E. Loewenberg
Capital Management Corporation
450 Park Avenue
New York, New York 10022
A-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Duff Ackerman Goodrich - Special Class A - Attributable $ 58,384
FrontierVision, L.P. [0.4% of Special Allocation]
c/o John M. Duff, Jr.
Two Embarcadero Center
Suite 2930
San Francisco, CA 94111
Richard King Mellon Class A - Non-Attributable $544,000
Foundation
c/o Arthur Miltenberger
Richard K. Mellon & Sons
P.O. Box RKM
Ligonier, PA 15658
Mellon Family Investment Class A - Non-Attributable $136,000
Co., IV
c/o Arthur Miltenberger
Richard K. Mellon & Sons
P.O. Box RKM
Ligonier, PA 15658
J. Cashew Corporation Class A - Non-Attributable $ 54,400
c/o George Dirkes, Esq.
Bancroft & McAlister
601 Montgomery Street
Suite 900
San Francisco, CA 94111
Bertelsen Family Trust Class A - Non-Attributable $ 34,000
Thomas E. Bertelsen, Jr.
201 California Street
2nd Floor
San Francisco, CA 94111
John C. Unkovic, Esq. Class A - Non-Attributable $ 34,000
Reed Smith Shaw & McClay
P.O. Box 2009
Pittsburgh, PA 15230
Roger S. Ahlbrandt Class A - Non-Attributable $ 13,600
Dean, School of Business
Administration
Portland State University
P.O. Box 751
Portland, OR 97207-0751
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Dr. Anne McBride Curtis Class A - Non-Attributable $13,600
28 Loyal Lodge
Guilford, CT 06437
Bruce D. Evans, Esq. Class A - Non-Attributable $13,600
Reed Smith Shaw & McClay
P.O. Box 2009
Pittsburgh, PA 15219
Frances C. Hardie Class A - Non-Attributable $10,200
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
Hardie Brothers Class A - Non-Attributable $13,600
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
James H. Hardie Class A - Non-Attributable $ 3,400
c/o James H. Hardie, Esq.
P.O. Box 2009
Pittsburgh, PA 15219
John D. Margolis Trust Class A - Non-Attributable $13,600
(dated 9/16/92)
John D. Margolis
900 Greenwood Street
Evanston, IL 60201
Grover Sams Class A - Non-Attributable $13,600
505 Cypress Pt. Drive
#293
Mountain View, CA 94043
Augustus O. Schroeder Class A - Non-Attributable $13,600
764 Fairview Road
Pittsburgh, PA 15238
Justin J. Stevenson, Class A - Non-Attributable $13,600
III, Esq.
Shearman & Sterling
153 East 53rd Street
New York, NY 10022
John W. Weiser, Esq. Class A - Non-Attributable $13,600
Bechtel Group Inc.
50 Beale Street
San Francisco, CA 94105
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Mallard Investments Class A - Non-Attributable $ 68,000
Limited Partnership
c/o Tim Wulinger
20 Basswood Lane
Moreland Hills, Ohio 44022
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
I, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000
II, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
III, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000
IV, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000
V, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000
VI, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $272,000
VII, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $272,000
VIII, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
IX, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
X, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $102,000
XI, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
XII, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $102,000
XIII, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000
XIV, Inc./2/ Non-Disclosure
</TABLE>
------------------
/2/ c/o J.P. Morgan Delaware, 902 N. Market Street, 9th Floor,
Wilmington, Delaware 19801, Attn: H. Christian Raymond.
A-5
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
FV Holdings Delaware Class A - Non-Attributable; $68,000
XV, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $68,000
XVI, Inc./2/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $68,000
XVII, Inc./2/ Non-Disclosure
Olympus Executive Class A - Attributable $47,600
Fund, L.P.
c/o Olympus Partners
Metro Center,
One Station Place
Stamford, CT 06902
Attn: James A. Conroy
Leslie Abbey Class A - Non-Attributable $34,000
212 East 39th Street
New York, NY 10016
Jonathan Abbey Class A - Non-Attributable $34,000
212 East 39th Street
New York, NY 10016
Michael Rothbard Class A - Non-Attributable $34,000
111 West 67th Street
Apartment #43-E
New York, NY 10023
</TABLE>
A-6
<PAGE>
EXHIBIT 3.5
Amendment No. 2
to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
dated as of August 11, 1995
----------------------------------------------------
This Amendment No. 2 to the First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P., dated as of August 11,
1995, as amended by Amendment No. 1 dated as of October 31, 1995 (the
"Agreement"), is dated as of the date set forth below:
Section 2.5 of the Agreement is hereby amended to read in its entirety
as follows:
"2.5 Term. The term of the Partnership commenced on April
----
17, 1995, and shall continue in full force and effect until December
31, 2005, which period (i) may be extended by the General Partner to a
date not later than June 30, 2007 if the General Partner determines
that such extension is in the best interest of the Partnership and the
Advisory Committee approves such extension and (ii) shall be extended
by the General Partner to whatever date (but not later than June 30,
2007) the Advisory Committee requests, in each case not later than
thirty (30) days prior to the last day of the term, as then extended,
or until dissolution prior thereto pursuant to the provisions hereof."
Except as expressly amended hereby, the Agreement is, and shall
remain, in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
in multiple counterparts as of the _____ day of March, 1996.
GENERAL PARTNER.
---------------
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
------------------------------------
James C. Vaughn,
President
LIMITED PARTNERS.
----------------
All Limited Partners (other than those whose
signatures appear on the signature pages hereof)
by the General Partner pursuant to the Power of
Attorney granted by paragraph 12.1 of the
Agreement.
FVP GP, L.P.
By: FrontierVision Inc.,
its general partner
By: /s/ James C. Vaughn
------------------------------------
James C. Vaughn,
President
<PAGE>
EXHIBIT 3.6
EXHIBIT A
---------
AMENDMENT NO. 3
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS, L.P.
DATED AS OF AUGUST 11, 1995, AS AMENDED
-----------------------------------------------------
This Amendment No. 3 to the First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P., dated as of August 11,
1995, as amended (the "Agreement"), is dated as of September 27, 1996.
The Agreement is hereby amended as follows:
1. A new paragraph 3.12 is hereby added, to read in its entirety as
set forth on Exhibit A hereto.
2. Schedule A to the Agreement is hereby amended to read in its
entirety as set forth in the Schedule A attached hereto.
Except as expressly amended hereby, the Agreement is, and shall
remain, in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 3
as of the 27th day of September, 1996.
GENERAL PARTNER: LIMITED PARTNERS:
- ---------------- ---------------
FVP GP, L.P. All Limited Partners by the
General Partner pursuant to the
By: FrontierVision Inc., Power of Attorney granted by
its general partner paragraph 12.1 of the Agreement.
FVP GP, L.P.
By: /s/ James C. Vaughn By: FrontierVision Inc.,
--------------------- its general partner
James C. Vaughn,
President
By: /s/ James C. Vaughn
-----------------------
James C. Vaughn,
President
<PAGE>
Exhibit A
---------
To Amendment No. 3 to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
----------------------------------------------------
3.12. August 1996 Offering. Pursuant to a Limited Partnership
--------------------
Interest and Notes Purchase Agreement made as of the 15th day of August, 1996,
by and among the Partnership, the General Partner and the Persons set forth on
Schedule 1 thereto (the "New Purchase Agreement"), the Partnership offered (the
"August 1996 Offering") to each of its Partners as of July 31, 1996 the
opportunity to acquire up to $10,336,000 of Class A (or, at the election of the
Partner, Class B) Limited Partnership Interests (the "New Limited Partnership
Interests"), $20,064,000 of 14% junior subordinated notes of the Partnership
(the "New Junior Subordinated Notes") and $45,600,000 of 12% senior subordinated
notes of the Partnership (the "New Senior Subordinated Notes").
3.12.1. From and after the closing of the August 1996 Offering, (i)
all references in this Agreement to "Purchase Agreement" shall mean both (x) the
Limited Partnership Interest and Notes Purchase Agreement dated as of July 28,
1995, by and between the Partnership, the General Partner and the Partners set
forth on Schedule 1 thereto (the "Existing Purchase Agreement") and (y) the New
Purchase Agreement, except that references to Sections 1.6 and 1.10 of the
Purchase Agreement and Exhibit G to the Purchase Agreement shall mean
exclusively Sections 1.6 and 1.10 of the Existing Purchase Agreement and Exhibit
G to the Existing Purchase Agreement and the reference in clause (i) of
paragraph 8.2.1 to the "Purchase Agreement" shall mean the Existing Purchase
Agreement and/or the New Purchase Agreement, as applicable; (ii) all references
in this Agreement to "Senior Subordinated Notes" shall mean both the senior
subordinated notes issued pursuant to the Existing Purchase Agreement and the
New Senior Subordinated Notes issued pursuant to the New Purchase Agreement;
(iii) all references in this Agreement to "Junior Subordinated Notes" shall mean
both the junior subordinated notes issued pursuant to the Existing Purchase
Agreement and the New Junior Subordinated Notes issued pursuant to the New
Purchase Agreement; (iv) all references in this Agreement to "Notes" shall mean
both the Notes issued pursuant to the Existing Purchase Agreement and the New
Senior Subordinated Notes and New Junior Subordinated Notes issued pursuant to
the New Purchase Agreement; (v) all references in this Agreement to "Loan" or
"Loans" shall mean both the loans made pursuant to the Purchase Agreement and
the loans (the "New Loans") made pursuant to the New Purchase Agreement; (vi)
all references in this Agreement to the "Loan Amount" of a Partner shall mean
both the aggregate amount such Partner is required to loan to the Partnership
pursuant to the
<PAGE>
Existing Purchase Agreement and the aggregate amount (the "New Loan Amount")
such Partner is required to loan to the Partnership pursuant to the New Purchase
Agreement; (vii) the fourth sentence of paragraph 3.2.4 shall be amended by
adding the parenthetical clause "(other than any such constituent Person that
holds an "attributable" interest (as defined in paragraph 14.3.1) in the
Partnership by reason of such Person's relationship to an Attributable Limited
Partner)" at the end thereof; (viii) the last sentence of paragraph 8.1.2 shall
be amended by adding the clause "and to reflect any differences in the
outstanding principal amount of, and accrued interest on, the Notes" immediately
after the words "paragraph 4.2.1(c)" and within the parentheses and (ix)
paragraph 14.3.1(b) shall be amended by deleting the number "(i)" and deleting
the clause "or (ii) a national television network (such as ABC, CBS or NBC)".
The increase in a Partner's Capital Commitment (or, in the case of a person that
was not theretofore a Partner, such Partner's entire Capital Commitment) that
results from its purchase of New Limited Partnership Interests pursuant to the
New Purchase Agreement is sometimes hereinafter referred to as such Partner's
"New Capital Commitment," and the Capital Contributions made by a Partner with
respect to its New Capital Commitment are sometimes hereinafter referred to as
such Partner's "New Capital Contributions."
3.12.2(a) No later than six months after the closing of the August
1996 Offering, the General Partner, together with the Advisory Committee, will
make an assessment of whether the Partners' uncalled New Capital Commitments and
New Loan Amounts exceed the projected requirements of the Partnership (which
requirements are expected to include approximately $20 million for fill-in
acquisitions not yet identified by the Partnership). If the General Partner,
with the approval of the Advisory Committee, determines that the uncalled New
Capital Commitments and New Loan Amounts of the Partners exceed the projected
requirements of the Partnership, then the General Partner, with the approval of
the Advisory Committee, may (but in no event shall be required to) reduce the
amount of the Partners' New Capital Commitments and New Loan Amounts.
(b) Any reduction of the New Capital Commitments and New Loan Amounts
pursuant to this paragraph 3.12.2 shall be made by the General Partner, with the
approval of the Advisory Committee, in a manner such that, to the extent
practicable, (i) the amount of each Partner's New Capital Commitment and New
Loan Amount, as so reduced, bears the same ratio to the aggregate amount of the
New Capital Commitments and New Loan Amounts of all Partners, as so reduced, as
(ii) the amount of such Partner's Capital Commitment and Loan Amount prior to
the August 1996 Offering bears to the aggregate amount of the Capital
Commitments and Loan Amounts of all Partners prior to the August 1996 Offering.
(For purposes of the calculation in the immediately preceding sentence, the
General Partner may, in its discretion,
<PAGE>
attribute to a Partner all or part of the Capital Commitment and Loan Amount of
a Person that is an Affiliate or "associate" (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended) of such Partner.)
Any such reduction shall be made in a manner such that, to the extent
practicable, the amount of the New Capital Commitments, the New Loan Amounts
under the New Senior Subordinated Notes and the New Loan Amounts under the New
Junior Subordinated Notes are reduced proportionately. Any determination
pursuant to this paragraph 3.12.2 made by the General Partner and approved by
the Advisory Committee shall be final and binding on all Partners.
(c) Each Partner hereby authorizes the General Partner to amend
Schedule A hereto to reflect any reduction in the New Capital Commitments
pursuant to this paragraph 3.12.2, without any further Consent or other action
by such Partner. The General Partner shall give a Partner notice after the
General Partner effects any such reduction in such Partner's New Capital
Commitment.
(d) If the New Capital Commitments are reduced pursuant to this
paragraph 3.12.2 then, notwithstanding the last sentence of paragraph 3.3.1(a),
any subsequent New Capital Contributions required to be made by the Partners
pursuant to paragraph 3.3.1(a) may be requested by the General Partner, and if
so requested shall be made by the Partners, in such proportions as may be
required so that, to the maximum extent practicable, after giving effect to such
New Capital Contributions, the proportion that each Partner's aggregate New
Capital Contributions bears to the amount of such Partner's New Capital
Commitment is the same for all Partners.
3.12.3 JPMIC shall not have any Deemed Capital Contribution in
respect of the New Capital Contributions.
3.12.4 The Partnership shall "book-up" the Capital Account of each
Partner as of the close of business on the day preceding the closing of the
August 1996 Offering so that the balance of the Capital Account of each Partner
as of that date shall equal the amount of such Partner's Capital Contributions
plus the amount such Partner has loaned to the Partnership under its Junior
Subordinated Notes as of that date. From and after the closing of the August
1996 Offering, the word "Contributions" in clause (c)(ii) of paragraph 4.4.4 of
the Agreement shall be replaced with the word "Commitments."
<PAGE>
Schedule A
----------
To Amendment No. 3 to the
First Amended and Restated Amendment of
Limited Partnership of FrontierVision Partners L.P.
---------------------------------------------------
[SUBJECT TO COMPLETION]
<PAGE>
SCHEDULE A
----------
TO AMENDMENT NO. 3 TO THE
FIRST AMENDED AND RESTATED AMENDMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS L.P.
---------------------------------------------------
AS OF SEPTEMBER 27, 1996
------------------------
<TABLE>
<CAPTION>
CLASS OF INTEREST
[INDICATING WHETHER
SPECIAL AND, IF SO,
NAME AND ADDRESS PERCENTAGE OF
OF PARTNER SPECIAL ALLOCATION] CAPITAL COMMITMENT
- ---------------- --------------------- ------------------
<S> <C> <C>
GENERAL PARTNER:
- ---------------
FVP GP, L.P. General Partnership $ 167,762.00
1777 South Harrison Street
Suite P-200 General Partnership $ 103,360.00
Denver, Colorado 80210 ------------------- ----------------
Total $ 271,122.00
LIMITED PARTNERS:
- ----------------
J.P. Morgan Investment Special Class A - Attributable $ 3,252,786.00/1/
Corporation [1.914% of Special Allocation]/1/
101 California Street
Suite 3800 Class A - Attributable $ 2,935,600.21
San Francisco, CA 94111 ---------------------- ----------------
Total $ 6,188,386.21
Sixty Wall Street SBIC Special Class A-Non-Attributable $ 147,214.00/1/
Fund, L.P. [.086% of Special Allocation]/1/
60 Wall Street
New York, NY 10260 Class A - Attributable $ 148,013.46
---------------------- ----------------
Total $ 295,227.46
1818 II Cable Corp. Special Class A - Attributable $ 3,351,814.00
c/o Brown Brothers [2% of Special Allocation]
Harriman & Co.
59 Wall Street Class A - Attributable $ 3,055,719.51
New York, NY 10005 ---------------------- ----------------
Total $ 6,407,533.51
Olympus Cable Corp. Special Class A - Attributable $ 3,351,814.00
c/o Olympus Growth Fund [2% of Special Allocation]
II, L.P.
Metro Center Class A - Attributable $ 652,105.85
One Station Place ---------------------- ----------------
Stamford, CT 06920 Total $ 4,003,919.85
First Union Capital Special Class A - Attributable $ 2,040,000.00
Partners, Inc. [1.2% of Special Allocation]
One First Union Center
18th Floor Class A - Attributable $ 2,040,000.00
Charlotte, NC 28288 ---------------------- ----------------
Total $ 4,080,000.00
</TABLE>
- ----------------------------
/1/ Reflects transfer from JPMIC to Sixty Wall, effective September 27, 1996.
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Eos Partners SBIC, L.P. Class A - Non-Attributable $394,400.00
520 Madison Avenue
New York, NY 10022
Tahosa Investors Special Class A - $204,000.00
c/o Samuel J. Recht Non-Attributable
Quarles & Brady [0.08571% of Special
411 East Wisconsin Avenue Allocation]
Milwaukee, WI 53202-4497/2/ Class A-Non-Attributable $125,686.82
-------------------------- -----------
Total $329,686.82
Kensington Investment Special Class A - $136,000.00
Associates Non-Attributable
575 Madison Avenue [0.05714% of Special
Suite 1006 Allocation]
New York, NY 10022/2/ Class A-Non-Attributable $125,686.82
-------------------------- -----------
Total $329,686.82
Pegasus Partners Special Class A - $204,000.00
c/o Arnold D. Friedman Non-Attributable
27 Hidden Valley Drive [0.08571% of Special
Suffern, NY 10901/2/ Allocation]
Class A-Non-Attributable $125,686.82
-------------------------- -----------
Total $329,686.82
Prosperity Associates Special Class A - $ 34,000.00
c/o Philippe L. Sommer Non-Attributable
1165 Park Avenue [0.01429% of Special
Apartment 15C Allocation]
New York, NY 10128/2/ Class A-Non-Attributable $ 20,947.80
-------------------------- -----------
Total $ 54,947.80
SBF Investments Ltd. Special Class A - $136,000.00
c/o Dennis Good Non-Attributable
7800 Stemmons Freeway [0.05714% of Special
10th Floor Allocation]
Dallas, TX 75247/2/ Class A-Non-Attributable $ 83,791.22
-------------------------- -----------
Total $219,791.22
L. Phillips Runyon III Special Class A - $136,000.00
Runyon & Howard, P.A. Non-Attributable
69 Main Street [0.05714% of Special
Peterborough, NH 03458/2/ Allocation]
Class A-Non-Attributable $ 83,791.22
-------------------------- -----------
Total $219,791.22
</TABLE>
- ---------------------------
/2/ With copies to:
R.E. Loewenberg
Capital Management Corporation
450 Park Avenue
New York, New York 10022
A-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Roth Trading Company Special Class A - $ 68,000.00
101 Park Avenue Non-Attributable
Suite 1800 [0.02857% of Special
New York, NY 10178/2/ Allocation]
Class A-Non-Attributable $ 41,895.61
------------------------------ -----------
Total $109,895.61
Washington Partners Special Class A - $ 34,000.00
39 Plumb Hill Road Non-Attributable
Washington, CN 06793/2/ [0.01429% of Special
Allocation]
Class A-Non-Attributable $ 20,947.80
------------------------------ -----------
Total $ 54,947.80
Duff Ackerman Goodrich - Special Class A - Attributable $ 58,384.00
FrontierVision, L.P. [0.4% of Special Allocation]
c/o John M. Duff, Jr.
Two Embarcadero Center Class A - Attributable $ 35,970.98
Suite 2930 ------------------------------ -----------
San Francisco, CA 94111 Total $ 94,354.98
Richard King Mellon Class A - Non-Attributable $544,000.00
Foundation
c/o Arthur Miltenberger Class A - Non-Attributable $335,164.86
Richard K. Mellon & Sons ------------------------------ -----------
P.O. Box RKM Total $879,164.86
Ligonier, PA 15658
Mellon Family Investment Class A - Non-Attributable $136,000.00
Co., IV
c/o Arthur Miltenberger Class A - Non-Attributable $ 83,791.22
Richard K. Mellon & Sons ------------------------------ -----------
P.O. Box RKM Total $219,791.22
Ligonier, PA 15658
J. Cashew Corporation Class A - Non-Attributable $ 54,400.00
c/o George Dirkes, Esq.
Bancroft & McAlister Class A - Non-Attributable $ 33,516.49
601 Montgomery Street ------------------------------ -----------
Suite 900 Total $ 87,916.49
San Francisco, CA 94111
Bertelsen Family Trust Class A - Non-Attributable $ 34,000.00
Thomas E. Bertelsen, Jr.
201 California Street Class A - Non-Attributable $ 20,947.80
2nd Floor ------------------------------ -----------
San Francisco, CA 94111 Total $ 54,947.80
John C. Unkovic, Esq. Class A - Non-Attributable $ 34,000.00
Reed Smith Shaw & McClay
P.O. Box 2009 Class A - Non-Attributable $ 20,947.80
Pittsburgh, PA 15230 ------------------------------ -----------
Total $ 54,947.80
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ----------------- ----------------- ------------------
<S> <C> <C>
Roger S. Ahlbrandt Class A - Non-Attributable $ 13,600.00
Dean, School of Business
Administration
Portland State University
P.O. Box 751
Portland, OR 97207-0751
Dr. Anne McBride Curtis Class A - Non-Attributable $ 13,600.00
28 Loyal Lodge
Guilford, CT 06437 Class A - Non-Attributable $ 6,800.00
------------------------------ -----------
Total $ 20,400.00
Bruce D. Evans, Esq. Class A - Non-Attributable $ 13,600.00
Reed Smith Shaw & McClay
P.O. Box 2009 Class A - Non-Attributable $ 8,379.12
Pittsburgh, PA 15219 ------------------------------ -----------
Total $ 21,979.12
Frances C. Hardie Class A - Non-Attributable $ 10,200.00
c/o James H. Hardie, Esq.
P.O. Box 2009 Class A - Non-Attributable $ 6,284.34
Pittsburgh, PA 15219 ------------------------------ -----------
Total $ 16,484.34
Hardie Brothers Class A - Non-Attributable $ 13,600.00
c/o James H. Hardie, Esq.
P.O. Box 2009 Class A - Non-Attributable $ 8,379.12
Pittsburgh, PA 15219 ------------------------------ -----------
Total $ 21,979.12
James H. Hardie Class A - Non-Attributable $ 3,400.00
c/o James H. Hardie, Esq.
P.O. Box 2009 Class A - Non-Attributable $ 2,094.78
Pittsburgh, PA 15219 ------------------------------ -----------
Total $ 5,494.78
John D. Margolis Trust Class A - Non-Attributable $ 13,600.00
(dated 9/16/92)
John D. Margolis
900 Greenwood Street
Evanston, IL 60201
Grover Sams Class A - Non-Attributable $ 13,600.00
505 Cypress Pt. Drive
#293
Mountain View, CA 94043
Augustus O. Schroeder Class A - Non-Attributable $ 13,600.00
764 Fairview Road
Pittsburgh, PA 15238 Class A - Non-Attributable $ 8,379.12
------------------------------ -----------
Total $ 21,979.12
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
<S> <C> <C>
Justin J. Stevenson, Class A - Non-Attributable $ 13,600.00
III, Esq.
Shearman & Sterling
153 East 53rd Street
New York, NY 10022
John W. Weiser, Esq. Class A - Non-Attributable $ 13,600.00
Bechtel Group Inc.
50 Beale Street
San Francisco, CA 94105
Mallard Investments Class A - Non-Attributable $ 68,000.00
Limited Partnership
c/o Tim Wulinger Class A - Non-Attributable $ 68,000.00
20 Basswood Lane --------------------------- -----------
Moreland Hills, OH 44022 Total $136,000.00
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
I, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000.00
II, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
III, Inc./3/ Non-Disclosure
Class A - Non-Attributable;
Non-Disclosure $ 40,800.00
--------------------------- -----------
Total $108,800.00
FV Holdings Delaware Class A - Non-Attributable; $136,000.00
IV, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000.00
V, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $136,000.00
VI, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $272,000.00
VII, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $272,000.00
VIII, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
IX, Inc./3/ Non-Disclosure
</TABLE>
- -----------------------
/3/ c\o J.P. Morgan Delaware, 902 N. Market Street, 9th Floor, Wilmington,
Delaware 19801, Attn: H. Christian Raymond.
A-5
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- --------------------------- --------------------------- ------------------
<S> <C> <C>
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
X, Inc./3/ Non-Disclosure
Class A - Non-Attributable;
Non-Disclosure $ 41,895.61
--------------------------- -----------
Total $109,895.61
FV Holdings Delaware Class A - Non-Attributable; $102,000.00
XI, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
XII, Inc./3/ Non-Disclosure
Class A - Non-Attributable;
Non-Disclosure $ 41,895.61
--------------------------- -----------
Total $109,895.61
FV Holdings Delaware Class A - Non-Attributable; $102,000.00
XIII, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
XIV, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
XV, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
XVI, Inc./3/ Non-Disclosure
FV Holdings Delaware Class A - Non-Attributable; $ 68,000.00
XVII, Inc./3/ Non-Disclosure
Olympus Executive Class A - Attributable $ 47,600.00
Fund, L.P.
c/o Olympus Partners Class A - Attributable $ 9,520.00
Metro Center, --------------------------- -----------
One Station Place Total $ 57,120.00
Stamford, CT 06902
Attn: James A. Conroy
Leslie Abbey Class A - Non-Attributable $ 34,000.00
212 East 39th Street
New York, NY 10016
Jonathan Abbey Class A - Non-Attributable $ 34,000.00
212 East 39th Street
New York, NY 10016
Michael Rothbard Class A - Non-Attributable $ 34,000.00
111 West 67th Street
</TABLE>
A-6
<PAGE>
Exhibit 3.7
AMENDMENT NO. 4
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS, L.P.
DATED AS OF AUGUST 11, 1995, AS AMENDED
-----------------------------------------------------
This Amendment No. 4 to the First Amended and Restated Agreement of Limited
Partnership of FrontierVision Partners, L.P., dated as of August 11, 1995, as
amended (the "Agreement"), is dated as of December __, 1996.
Schedule A to the Agreement is hereby amended to read in its entirety as
set forth in the Schedule A attached hereto.
Except as expressly amended hereby, the Agreement is, and shall remain, in
full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 4 as
of the ____ day of December, 1996.
GENERAL PARTNER: LIMITED PARTNERS:
- --------------- ----------------
FVP GP, L.P. All Limited Partners by the
General Partner pursuant to
By: FrontierVision Inc., the Power of Attorney granted
its general partner by paragraph 12.1 of the
Agreement.
FVP GP, L.P.
By: /s/ James C. Vaughn
---------------------- By: FrontierVision Inc.,
James C. Vaughn, its general partner
President
By: /s/ James C. Vaughn
----------------------
James C. Vaughn,
President
<PAGE>
SCHEDULE A
----------
TO AMENDMENT NO. 4 TO THE
FIRST AMENDED AND RESTATED AMENDMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS L.P.
---------------------------------------------------
[SUBJECT TO COMPLETION]
<PAGE>
EXHIBIT 3.8
AMENDMENT NO. 5
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FRONTIERVISION PARTNERS, L.P.
DATED AS OF SEPTEMBER 11, 1995, AS AMENDED
------------------------------------------------------------
This Amendment No. 5 to the First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P., dated as of September 11,
1995, as amended (the "Agreement"), is dated as of September __, 1997.
The Agreement is hereby amended as follows:
1. Paragraph 2.5 of the Agreement is hereby amended and restated to
read in its entirety as set forth on Exhibit A hereto.
2. Paragraph 4.2.1(c) of the Agreement is hereby amended and
restated to read in its entirety as set forth on Exhibit B hereto.
3. Paragraph 4.2.2(a)(i) of the Agreement is hereby amended and
restated to read in its entirety as set forth on Exhibit C hereto.
Except as expressly amended hereby, the Agreement is, and shall
remain, in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
No. 5 as of the day of September, 1997.
----
GENERAL PARTNER: LIMITED PARTNERS:
- --------------- ----------------
FVP GP, L.P. All Limited Partners by the
General Partner pursuant to
By: FrontierVision Inc., the Power of Attorney granted
its general partner by paragraph 12.1 of the
Agreement.
FVP GP, L.P.
By: /s/ James. C. Vaughn
---------------------- By: FrontierVision Inc.,
James C. Vaughn, its general partner
President
By: /s/ James C. Vaughn
----------------------
James C. Vaughn,
President
<PAGE>
EXHIBIT A
---------
To Amendment No. 5 to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
----------------------------------------------------
2.5 Term. The term of the Partnership commenced on April 17, 1995,
----
and shall continue in full force and effect until December 31, 2006, which
period from time to time (i) may be extended by the General Partner to a date
not later than June 30, 2008 if the General Partner determines, in each
instance, that such extension is in the best interests of the Partnership and
the Advisory Committee approves such extension and (ii) shall be extended by the
General Partner to whatever date (but not later than June 30, 2008) the Advisory
Committee requests, in each case not later than thirty (30) days prior to the
last day of the term, as then extended, or until dissolution prior thereto
pursuant to the provisions hereof.
<PAGE>
EXHIBIT B
---------
To Amendment No. 5 to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
----------------------------------------------------
(c) Thereafter, (i) 85% (less the amount, not to exceed 2%, by which
the "Class C LP Special Allocation Percentage" as of the date of the
distribution exceeds 1%) to the Class A and Class B Limited Partners and the
General Partner, in proportion to their respective Capital Commitments; (ii) the
"GP Special Allocation Percentage" (as hereinafter defined) as of the date of
the distribution to the General Partner; (iii) 8% to the Special Class A and
Special Class B Limited Partners, in the proportions set forth in Schedule A
hereto; and (iv) the "Class C LP Special Allocation Percentage" as of the date
of the distribution to the Class C Limited Partners, to be shared by such Class
C Limited Partners in such proportions as the General Partner shall have
determined, and the Advisory Committee shall have approved.
<PAGE>
EXHIBIT C
---------
To Amendment No. 5 to the
First Amended and Restated Agreement of
Limited Partnership of FrontierVision Partners, L.P.
----------------------------------------------------
(i) The General Partner, with the approval of the Advisory Committee, from
time to time may issue Class C Limited Partnership Interests to employees of the
Partnership or of any Operating Entity or subsidiary of the Partnership, and
shall fix the right of each such Class C Limited Partnership Interest to receive
distributions pursuant to paragraph 4.2.1(c); provided, however, that in no
-------- -------
event shall all such Class C Limited Partnership Interests be entitled to
receive more than 3% of the aggregate distributions made pursuant to paragraph
4.2.1(c) (except by reason of any allocation to the Class C Limited Partnership
Interests of all or any part of any "GP Reduction Percentage" (as hereinafter
defined)). The Class C Limited Partnership Interests so issued shall be subject
to such conditions, restrictions and vesting schedules as shall be determined by
the General Partner and approved by the Advisory Committee. The first 1% of the
aggregate distributions made pursuant to paragraph 4.2.1(c) that is allocated to
the Class C Limited Partners pursuant to this paragraph 4.2.2(a)(i) shall result
in a corresponding reduction in the GP Special Allocation Percentage and the
next 2% shall result in a corresponding reduction in the percentage allocated to
the Class A and Class B Limited Partners and the General Partner pursuant to
clause (i) of paragraph 4.2.1(c). By way of illustration, and not of limitation,
if pursuant to this paragraph 4.2.2(a)(i) the Class C Limited Partnership
Interests are allocated 3% of the aggregate distributions made pursuant to
paragraph 4.2.1(c) (i.e., the maximum amount that may be allocated pursuant to
----
this paragraph 4.2.2(a) (i)), then the GP Special Allocation Percentage would be
reduced by 1%, and the resulting GP Special Allocation Percentage would be 6%,
and the percentage allocated to the Class A and Class B Limited Partners and the
General Partner pursuant to clause (i) of paragraph 4.2.1(c) would be reduced by
2%, and the resulting percentage would be 83%.
<PAGE>
EXHIBIT 3.11
AMENDMENT NO. 1
TO THE
FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF FVP GP, L.P.
DATED AS OF AUGUST 11, 1995
-----------------------------------------
This Amendment No. 1 to the First Amended and Restated Agreement of Limited
Partnership of FVP GP, L.P., dated as of August 11, 1995 (the "Agreement"), is
dated as of September __, 1996.
The Agreement is hereby amended as follows:
1. Paragraph 2.5 of the Agreement is hereby amended by replacing the
clause "June 30, 2002, which period shall be extended by the General Partner for
up to two additional one-year periods from such date" with the clause "December
31, 2005, which period shall be extended by the General Partner to a date not
later than June 30, 2007,".
2. Paragraph 3.11 of the Agreement is hereby amended and restated to read
in its entirety as set forth on Exhibit A hereto.
3. A new paragraph 3.12 is hereby added, to read in its entirety as set
forth on Exhibit B hereto.
4. Schedule A to the Agreement is hereby amended to read in its entirety
as set forth in the Schedule A attached hereto.
Except as expressly amended hereby, the Agreement is, and shall remain, in
full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the ____ day of September, 1996.
GENERAL PARTNER:
---------------
FRONTIERVISION INC.
By: /s/ James C. Vaughn
-----------------------------
Name: James C. Vaughn
Title: President
LIMITED PARTNERS:
----------------
J.P. MORGAN INVESTMENT CORPORATION
By: /s/ John W. Watkins
-----------------------------
Name: John W. Watkins
------------------------
Title: Vice President
-----------------------
1818 II CABLE CORP.
By: /s/ Richard H. Witmer, Jr.
-----------------------------
Name: Richard H. Witmer, Jr.
---------------------------
Title: Secretary
--------------------------
OLYMPUS CABLE CORP.
By: /s/ James A. Conroy
-----------------------------
Name: James A. Conroy
---------------------------
Title: President
--------------------------
FIRST UNION CAPITAL PARTNERS,
INC.
By: /s/ L. Watts Hamrick, III
-----------------------------
2
<PAGE>
Name: L. Watts Hamrick, III
___________________________
Title: Senior Vice President
__________________________
/s/ James C. Vaughn
____________________________________
JAMES C. VAUGHN
/s/ John S. Koo
____________________________________
JOHN S. KOO
Accepted and agreed to
as to paragraph 3.11(e):
/s/ James C. Vaughn
- ------------------------
James C. Vaughn
/s/ John S. Koo
- ------------------------
John S. Koo
3
<PAGE>
Exhibit A
---------
To Amendment No. 1 to the
First Amended and Restated Agreement of
Limited Partnership of FVP GP, L.P.
---------------------------------------
3.11 Deferral of Capital Commitment Payments; Loans.
----------------------------------------------
(a) Each Partner shall have an absolute and unconditional obligation
to make payments with respect to such Partner's Capital Commitment as provided
in paragraph 3.3.1. However, Mr. Vaughn has advised the Partnership that he
wishes to defer making payments with respect to his Capital Commitment in excess
of $149,957.55 until the earlier of (the "Final Payment Date") (i) June 30, 2007
and (ii) such time as the Partnership has been liquidated and any liquidation
proceeds have been distributed to the Partners. Mr. Vaughn shall have an
absolute obligation to pay his Capital Commitment obligation in excess of
$149,957.55 on the Final Payment Date (to the extent such payment has been
called by the Partnership and has not previously been made by Mr. Vaughn). Any
failure by Mr. Vaughn to make such payments at such time shall constitute a
material breach of, and default under, this Agreement. In addition, in the
event that at any time or from time to time after August 15, 1996 Mr. Vaughn
receives payments in respect of his interests as a limited partner of, or as a
participant in certain bonus pools relating to, various partnerships affiliated
with Triax Communications Corporation (each such event a "Vaughn Funding
Event"), he shall be required to make payments with respect to his Capital
Commitment (to the extent such payments have been called by the Partnership and
have not previously been made by Mr. Vaughn) to the extent of the net after tax
proceeds of such payments (each such payment a "Vaughn Funding Payment"),
calculated using the highest effective marginal combined federal and applicable
state and local income tax rate then in effect. Any failure by Mr. Vaughn to
make such payments at such time shall constitute a material breach of, and
default under, this Agreement. If Mr. Vaughn shall fail to make any payment
with respect to his Capital Commitment obligation prior to the Final Payment
Date (in which case, he shall be a "Non-Paying Partner"), he shall not be deemed
to have breached, or to be in default under, this Agreement provided that at the
time of such nonpayment (i) he otherwise is in compliance with the terms and
provisions of this Agreement and
<PAGE>
(ii) he has made (and thereafter shall continue to make) the Vaughn Funding
Payments upon the occurrence of the Vaughn Funding Events. Similarly, Mr. Koo
has advised the Partnership that he wishes to defer making payments with respect
to his Capital Commitment in excess of $80,914.86 until the Final Payment Date.
Mr. Koo shall have an absolute obligation to make all payments with respect to
his Capital Commitment (to the extent such payments have been called by the
Partnership and have not previously been made by Mr. Koo) no later than the
Final Payment Date. Any failure by Mr. Koo to make such payments at such time
shall constitute a material breach of, and default under, this Agreement. If Mr.
Koo shall fail to make any payment with respect to his Capital Commitment prior
to the Final Payment Date (in which case he shall be a "Non-Paying Partner"), he
shall not be deemed to have breached, or to be in default under, this Agreement
provided that on such date he otherwise is in compliance with the terms and
provisions of this Agreement. Upon any failure of a Non-Paying Partner to make a
required payment as aforesaid, the Class X and Class Z Limited Partners shall,
in proportion to their Capital Commitments, loan an aggregate amount equal to
such payment to the Partnership (that portion of such aggregate amount loaned by
each such Class X or Class Z Limited Partner, a "Special Loan", and each such
Class X and Class Z Limited Partner, a "Special Lending Partner").
(b) Each Special Loan shall mature on the Final Payment Date and shall
be evidenced by a promissory note (a "Special Note") of the Partnership payable
to the Lending Partner in the amount of the Special Loan. Interest on the
original principal amount of each Special Loan, at the rate of 12% per annum,
compounded annually (or, if less, the maximum rate permitted by applicable
provisions of law) shall be payable on the date such Special Loan is paid. Any
capital contributions made by the Non-Paying Partner for whose benefit the
Special Loan was made, any distributions that otherwise would have been made to
such Non-Paying Partner (except, in the case of distributions, for "Permitted
Distributions" (as defined in paragraph 3.11(f) below), which will continue to
be distributed to the Non-Paying Partner) and any Deferred Compensation Payments
(as hereinafter defined) that otherwise would have been paid by FrontierVision
to such Non-Paying Partner (except, in the case of Deferred Compensation
Payments, for amounts necessary to enable the Non-Paying Partner to pay taxes on
the related income, which will continue to be paid) will be applied to reduce
the Special Loans
2
<PAGE>
(including accrued interest) made with respect to such Non-Paying Partner and,
in the case of distributions and Deferred Compensation Payments, will be treated
as if they had been distributed or paid, as applicable, to such Non-Paying
Partner and then were contributed by such Non-Paying Partner to the Partnership
in respect of his Capital Commitment. To the extent (if any) of the amount of
the principal of, and accrued interest on, a Special Loan that is repaid by the
Partnership other than out of capital contributions made by, or distributions
that otherwise would have been made to, or Deferred Compensation Payments that
otherwise would have been paid by FrontierVision to, the Non-Paying Partner for
whose benefit the Special Loan was made (e.g., out of amounts that otherwise
----
would have been available to pay distributions to the Partners other than the
Non-Paying Partner) (the "Repayment Amount"), whether by reason of the maturity
of the Special Loan prior to sufficient available capital contributions by and
distributions to the Non-Paying Partner, its acceleration or otherwise, any
capital contributions thereafter made by, any distributions that thereafter
would have been made to, and any Deferred Compensation Payments that thereafter
would have been paid by FrontierVision to, the Non-Paying Partner for whose
benefit the Special Loan was made (except, in the case of distributions and
Deferred Compensation Payments, for amounts necessary to enable the Non-Paying
Partner to pay taxes on his allocable share of the related income, which will
continue to be distributed or paid, as applicable) will be distributed to the
other Partners in proportion to their Capital Commitments, until the other
Partners have so received an amount equal to the Repayment Amount and, in the
case of distributions and Deferred Compensation Payments, will be treated as if
such amounts had been distributed or paid, as applicable, to the Non-Paying
Partner and then were contributed by such Non-Paying Partner to the Partnership
in respect of his Capital Commitment. Each Special Loan shall be non-recourse to
any Partner of the Partnership, other than the Non-Paying Partner for whose
benefit the Special Loan was made. As used in this paragraph 3.11(b), "Deferred
Compensation Payments" means amounts payable to a Partner pursuant to the
FrontierVision Executive Deferred Compensation Plan, as amended from time to
time.
(c) When and as a Non-Paying Partner makes the payments in respect of
his Capital Commitment that he previously deferred, he shall make such payments
as a Capital Contribution to the Partnership and the proceeds thereof shall be
applied to
3
<PAGE>
the reduction of the Special Loan(s) made with respect to such Non-Paying
Partner.
(d) If any of the following events shall occur and be continuing for
any reason whatsoever (and whether it shall be voluntary or involuntary or occur
or be effected by operation of law or otherwise):
(i) the Partnership defaults in the payment when due of any
principal of or interest on any Special Loan or Special Note,
(ii) any event of default occurs (and is not waived) under the
Senior Subordinated Notes or Junior Subordinated Notes, or any other
indebtedness of the Partnership, FrontierVision or any Operating Entity for
borrowed money in an aggregate amount in excess of $5,000,000, and, as a
result of such event of default, such indebtedness becomes or is declared
due and payable prior to its stated maturity,
(iii) the Partnership, FrontierVision or any Operating Entity
shall (A) be generally not paying its debts as they become due, (B) file,
or consent by answer or otherwise to the filing against it of, a petition
for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, (C) make an assignment for the benefit
of its creditors, (D) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers of itself or of any
substantial part of its property, (E) be adjudicated insolvent or be
liquidated or (F) take partnership action for the purpose of any of the
foregoing, or
(iv) a court or governmental authority of competent jurisdiction
shall enter an order appointing, without consent by the Partnership,
FrontierVision or the Operating Entity, as applicable, a custodian,
receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, or if an order for
relief shall be entered in any case or proceeding for liquidation or
reorganization or otherwise to take advantage of any bankruptcy or
insolvency law of any
4
<PAGE>
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Partnership, FrontierVision or any Operating Entity, or if any petition for
any such relief shall be filed against the Partnership, FrontierVision or
any Operating Entity and such petition shall not be dismissed within 60
days,
then (x) upon the occurrence of any event of default described in clause (iii)
or (iv), the unpaid principal amount of and the accrued interest on the Special
Notes shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Partnership or (y) upon the occurrence of any
other event of default, the holder or holders of at least 51% of the unpaid
principal amount of the Special Notes at the time outstanding may, by written
notice to the Partnership, declare all of the Special Notes to be, and the same
shall forthwith become, due and payable, together with accrued interest thereon
which shall be deemed matured. Nevertheless, if at any time after acceleration
of the maturity of any Special Note or Notes, the Partnership shall pay all
arrears of interest and all payments on account of principal which shall have
become due otherwise than by acceleration (with interest on principal at the
rate specified in the Special Notes) and all events of default (other than non-
payment of principal of and accrued interest on Special Notes due and payable
solely by virtue of acceleration) shall be remedied or waived by the holder or
holders of at least 51% of the unpaid principal amount of the Special Notes at
the time outstanding by written notice to the Partnership, then the acceleration
and its consequences shall be rescinded and annulled; but such action shall not
affect any subsequent event of default or impair any right consequent thereon.
(e) During such time as any Special Loan is outstanding with respect
to Mr. Vaughn or Mr. Koo, he shall from time to time provide to each of the
Special Lending Partners, within 120 days after a written request therefor, his
personal financial statement as of the date specified in the request.
(f) For purposes of determining the "Permitted Distributions" to which
a Non-Paying Partner is entitled, the Limited Partnership Interest of a Non-
Paying Partner shall be treated as if divided into two Limited Partnership
Interests, one (the "Paid Partnership Interest") with a Capital Commitment equal
5
<PAGE>
to the Capital Contributions actually made by such Non-Paying Partner to the
Partnership (expressly excluding any distributions applied to reduce the Special
Loans and treated as contributions by the Non-Paying Partner) and the other (the
"Unpaid Partnership Interest") with a Capital Commitment equal to the amount by
which the Capital Commitment of the Non-Paying Partner exceeds the Capital
Contributions actually made by such Non-Paying Partner to the Partnership
(expressly excluding any distributions applied to reduce the Special Loans and
treated as contributions by the Non-Paying Partner). With respect to the Non-
Paying Partner's Paid Partnership Interest, "Permitted Distributions" shall mean
distributions of an amount equal to the greater of (i) the amount of
distributions that are payable in respect of the Paid Partnership Interest
pursuant to paragraph 4.2, but only if, and to the extent that, (A) no event of
default of a type described in paragraph 3.11(d) has occurred and (B) after
giving effect to such distributions, the fair market value of such Non-Paying
Partner's Limited Partnership Interest in the Partnership (as determined in good
faith by the General Partner with the Consent of the Special Lending Partners
whose Special Loans represent at least 51% of the principal amount of all
Special Loans made in respect of such Non-Paying Partner) exceeds 150% of the
sum of the then outstanding principal amount of, and accrued interest on, all
Special Loans made in respect of such Non-Paying Partner and all then existing
unused commitments of the Class X and Class Z Limited Partners to make Special
Loans in respect of such Non-Paying Partner; and (ii) the amount necessary to
enable the Non-Paying Partner to pay taxes on his allocable share of the taxable
income that relates to the distributions that, but for paragraph 3.11(b), would
have been payable to the Non-Paying Partner in respect of his Paid Partnership
Interest. With respect to the Non-Paying Partner's Unpaid Partnership Interest,
"Permitted Distributions" shall mean distributions of the amount necessary to
enable the Non-Paying Partner to pay taxes on his allocable share of the taxable
income that relates to the distributions that, but for paragraph 3.11(b), would
have been payable to the Non-Paying Partner in respect of his Unpaid Partnership
Interest.
6
<PAGE>
Exhibit B
---------
To Amendment No. 1 to the
First Amended and Restated Agreement of
Limited Partnership of FVP GP, L.P.
---------------------------------------
3.12. August 1996 Offering. Pursuant to a Limited Partnership
--------------------
Interest and Notes Purchase Agreement made as of the 15th day of August, 1996,
by and among FrontierVision, the Partnership, and the Persons set forth on
Schedule 1 thereto (the "New FrontierVision Purchase Agreement"), FrontierVision
offered (the "August 1996 Offering") to each of its partners as of July 31, 1996
the opportunity to acquire up to $10,336,000 of partnership interests (the "New
Partnership Interests"), $20,064,000 of 14% junior subordinated notes of
FrontierVision (the "New Junior Subordinated Notes") and $45,600,000 of 12%
senior subordinated notes of FrontierVision (the "New Senior Subordinated
Notes"). Pursuant to the New FrontierVision Purchase Agreement, the Partnership
has agreed to increase its capital commitment to FrontierVision by one percent
(1%) of the amount of New Partnership Interests, including those held by the
Partnership (the Partnership's "New FrontierVision Capital Commitment") and to
purchase New Junior Subordinated Notes and New Senior Subordinated Notes in an
amount equal to one percent (1%) of the aggregate amount of New Junior
Subordinated Notes and New Senior Subordinated Notes (including those held by
the Partnership). (The amount the Partnership is required to loan to
FrontierVision under the New FrontierVision Purchase Agreement is sometimes
referred to herein as the Partnership's "New FrontierVision Loan Amount.") To
enable the Partnership to make capital contributions to FrontierVision pursuant
to its New FrontierVision Capital Commitment and loans to FrontierVision under
its New FrontierVision Loan Amount, the Capital Commitments of the Class Y
Limited Partners and of the General Partner to the Partnership are being
increased effective upon the closing of the August 1996 Offering. Such increase
in the Capital Commitments of each of the Class Y Limited Partners and the
General Partner is sometimes hereinafter referred to as such Partner's "New
Capital Commitment."
3.12.1(a) Pursuant to paragraph 3.12.2 of the FrontierVision
Partnership Agreement (being adopted on the date hereof), no later than six
months after the closing of the August
<PAGE>
1996 Offering, the Partnership, with the approval of the FrontierVision Advisory
Committee, may (but in no event shall be required to) reduce the amount each of
the partners of FrontierVision is required to contribute and loan to
FrontierVision pursuant to the New Purchase Agreement. In the event the
Partnership's New FrontierVision Capital Commitment and New FrontierVision Loan
Amount are reduced pursuant to paragraph 3.12.2 of the FrontierVision
Partnership Agreement, the General Partner shall correspondingly reduce the New
Capital Commitments of the Class Y Limited Partners and the General Partner.
(b) Any reduction of the New Capital Commitments of the Class Y
Limited Partners and the General Partner pursuant to this paragraph 3.12.1 shall
be made by the General Partner, with the Consent of a majority in Interest of
the Class X Limited Partners, in a manner such that, to the extent practicable,
the General Partner's and each Class Y Partner's New Capital Commitment is
reduced proportionately.
(c) Each Partner hereby authorizes the General Partner to amend
Schedule A hereto to reflect any reduction in the New Capital Commitments of the
Class Y Limited Partners pursuant to this paragraph 3.12.1, without any further
Consent or other action by such Partner. The General Partner shall give a
Partner notice after the General Partner effects any such reduction in such
Partner's New Capital Commitment.
3.12.2 The Partnership shall "book-up" the Capital Account of each
Partner as of the close of business on the day preceding the closing of the
August 1996 Offering so that the balance of the Capital Account of each Partner
as of that date shall equal the amount of such Partner's Capital Commitment as
of that date. After such book-up, when calculating the Adjusted Capital Account
of a Partner, only the nonduplicative portion of such Partner's Capital
Commitment shall be credited (i.e., the portion of such Partner's Capital
----
Commitment not already reflected in such Partner's Capital Account).
2
<PAGE>
SCHEDULE A
----------
AS OF SEPTEMBER 27, 1996
------------------------
NAME AND ADDRESS
OF PARTNER CLASS OF INTEREST CAPITAL COMMITMENT
- ---------------- ----------------- ------------------
GENERAL PARTNER:
- ---------------
FrontierVision Inc. General Partnership $ 20,343
1777 South Harrison Street
Suite P 200
Denver, Colorado 80210
LIMITED PARTNERS:
- ----------------
CLASS X LIMITED PARTNERS:
- ------------------------
J.P. Morgan Investment Class X 173,753
Corporation
101 California Street
Suite 3800
San Francisco, CA 94111
1818 II Cable Corp. Class X 173,753
c/o Brown Brothers
Harriman & Co.
59 Wall Street
New York, New York 10005
Olympus Cable Corp. Class X 173,753
c/o Olympus Growth Fund II, L.P.
Metro Center
One Station Place
Stamford, Connecticut 06902
First Union Capital Class X 104,251
Partners, Inc. -------
One First Union Center
18th Floor
Charlotte, NC 28288
All Class X Limited Partners $ 625,510
<PAGE>
CLASS Y LIMITED PARTNERS:
- ------------------------
James C. Vaughn Class Y $1,067,981
2337 South Cook Street
Denver, Colorado 80210
John S. Koo Class Y $ 320,394
127 Albion Street ----------
Denver, Colorado 80220
2
<PAGE>
SCHEDULE A (CONT'D)
-------------------
All Class Y Limited Partners $1,388,375
All Limited Partners $2,013,885
----------
All Partners $2,034,228
==========
3
<PAGE>
EXHIBIT 3.12
Amendment No. 2
to the
First Amended and Restated Agreement of Limited Partnership of
FVP GP, L.P.
dated as of August 11, 1995, as amended
--------------------------------------------
This Amendment No. 2 to the First Amended and Restated Agreement of Limited
Partnership of FVP GP, L.P. dated as of August 11, 1995, as amended (the
"Agreement"), is dated as of the date set forth below.
The Agreement is hereby amended as follows:
1. Paragraph 2.5 of the Agreement is hereby amended and restated to read
in its entirety as follows:
2.5 Term. The term of the Partnership commenced on April 17,
----
1995, and shall continue in full force and effect until December 31,
2006, which period shall be extended by the General Partner to a date
not later than June 30, 2008 to the extent required so that the term
of the Partnership ends no earlier than the term of FrontierVision, or
until dissolution prior thereto pursuant to the provisions hereof.
Except as expressly amended hereby, the Agreement is, and shall remain, in
full force and effect.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2 as of
the ____ day of September, 1997.
GENERAL PARTNER:
---------------
FRONTIERVISION INC.
By: /s/ James C. Vaughn
----------------------------
Name: James C. Vaughn
Title: President
LIMITED PARTNERS:
----------------
All Limited Partners by the General
Partner pursuant to the Power of
Attorney granted by paragraph 12.1 of
the Agreement.
FRONTIERVISION INC.
By: /s/ James C. Vaughn
----------------------------
Name: James C. Vaughn
Title: President
2
<PAGE>
Exhibit 3.16
AGREEMENT OF LIMITED PARTNERSHIP
OF
FRONTIERVISION HOLDINGS, L.P.
This Agreement of Limited Partnership of FrontierVision Holdings, L.P.
is entered into by and between FrontierVision Partners, L.P., a Delaware limited
partnership (the "General Partner"), and FrontierVision Holdings, LLC, a
Delaware limited liability company, as limited partner (the "Limited Partner").
The General Partner and the Limited Partner hereby form a limited
partnership pursuant to and in accordance with the Delaware Revised Uniform
Limited Partnership Act (6 Del.C. (S)(S)17-101, et seq.) (the "Act"), and hereby
------ -- ---
agree as follows:
1. Name. The name of the limited partnership formed hereby is
----
FrontierVision Holdings, L.P. (the "Partnership").
2. Purpose. The Partnership is organized for the object and purpose of,
-------
and the nature of the business to be conducted and promoted by the Partnership
is, serving as the general partner of FrontierVision Operating Partners, L.P., a
Delaware limited partnership, and acquiring, investing in, disposing of,
operating, managing and financing, directly or indirectly, cable television and
communications systems and engaging in any and all activities necessary,
desirable or incidental to the foregoing, including, without limitation, the
issuance of such debt or equity securities as the Partnership may determine to
issue from time to time.
3. Registered Office. The registered office of the Partnership in the
-----------------
State of Delaware is c/o The Prentice-Hall Corporation System, Inc., 1013 Centre
Road, Wilmington, New Castle County, Delaware 19805.
<PAGE>
4. Registered Agent. The name and address of the registered agent of
----------------
the Partnership for service of process on the Partnership in the State of
Delaware is The Prentice-Hall Corporation System, Inc., 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805.
5. Partners. The names and mailing addresses of the General Partner and
--------
the Limited Partner are as follows:
General Partner
---------------
FrontierVision Partners, L.P.
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
Limited Partner
---------------
FrontierVision Holdings, LLC
1777 South Harrison Street, Suite P200
Denver, Colorado 80210
6. Powers. The powers of the General Partner include all powers,
------
statutory and otherwise, possessed by general partners under the laws of the
State of Delaware.
7. Term. The Partnership shall dissolve, and its affairs shall be wound
----
up either (i) on June 30, 2008 or (ii) at such earlier time as (a) all of the
partners of the Partnership approve in writing; (b) the Partnership sells or
otherwise disposes of its interest in all or substantially all of its property;
(c) an event of withdrawal of the General Partner has occurred under the Act; or
(d) an entry of a decree of judicial dissolution has occurred under (S)(S)17-802
of the Act.
8. Capital Contributions. The partners of the Partnership have
---------------------
contributed the following amounts, in cash, and no other property, to the
Partnership:
General Partner
---------------
FrontierVision Partners, L.P. $99.90
-2-
<PAGE>
Limited Partner
---------------
FrontierVision Holdings, LLC $ .10
9. Additional Contributions. Each partner of the Partnership may, but
------------------------
is not required to, make additional capital contributions to the Partnership.
10. Allocation of Profits and Losses. The Partnership's profits and
--------------------------------
losses shall be allocated in proportion to the capital contributions of the
partners of the Partnership.
11. Distributions. At the time determined by the General Partner, but
-------------
at least once during each fiscal year of the Partnership, the General Partner
shall, to the extent not prohibited by any financing arrangements to which the
Partnership is then subject, cause the Partnership to distribute any cash held
by it which is not reasonably necessary for the operation of the Partnership.
Cash available for distribution shall be distributed to the partners of the
Partnership in the same proportion as their then capital account balance.
12. Assignments. The Limited Partner may assign all or any part of its
-----------
partnership interest in the Partnership only with the consent of the General
Partner. The Limited Partner has no right to grant an assignee of its
partnership interest in the Partnership the right to become a substituted
limited partner of the Partnership.
13. Withdrawal. Except as provided in the following Section 14, no
----------
right is given to any partner of the Partnership to withdraw from the
Partnership.
14. Additional Partners.
-------------------
(a) Without the approval of the Limited Partner, the General
Partner may admit additional limited partners to the Partnership. The General
Partner may admit an assignee of the Limited Partner's partnership interest in
the Partnership as a substituted limited partner of the Partnership. The General
Partner may admit one or more additional general partners, without
-3-
<PAGE>
the consent of the Limited Partner. Upon the admission of any additional limited
partners or substituted limited partners to the Partnership, the Limited Partner
shall withdraw from the Partnership and shall be entitled to receive forthwith
the return of his capital contribution, without interest or deduction.
(b) After the admission of any additional limited partners,
substituted limited partners or additional general partners pursuant to this
Section 14, the Partnership shall continue as a limited partnership under the
Act.
(c) The admission of additional limited partners, substituted
limited partners or additional general partners to the Partnership pursuant to
this Section 14 shall be accomplished by the amendment of this Agreement of
Limited Partnership and, if required by the Act, the filing of an appropriate
amendment of the Partnership's Certificate of Limited Partnership in the office
of the Secretary of State of the State of Delaware.
15. Governing Law. This Agreement shall be governed by, and construed
-------------
under, the laws of the State of Delaware, all rights and remedies being governed
by said laws.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have
duly executed this Agreement of Limited Partnership as of the 29th day of
August, 1997.
GENERAL PARTNER:
---------------
FRONTIERVISION PARTNERS, L.P.
By: FVP GP, L.P., its sole general
partner
By: FrontierVision Inc., its sole
general partner
By: /s/ James C. Vaughn
-----------------------------
James C. Vaughn
President
LIMITED PARTNER:
---------------
FRONTIERVISION HOLDINGS, LLC
By: FrontierVision Partners, L.P., its
sole member
By: FVP GP, L.P., its sole general
partner
By: FrontierVision Inc., its sole
general partner
By: /s/ James C. Vaughn
-----------------------------
James C. Vaughn
President
-5-
<PAGE>
CERTIFICATE OF LIMITED PARTNERSHIP
OF
FRONTIERVISION HOLDINGS, L.P.
This Certificate of Limited Partnership of FrontierVision Holdings, L.P.
(the "Partnership"), dated as of August 28, 1997, is being duly executed and
filed by FrontierVision Partners, L.P., a Delaware limited partnership (the
"General Partner"), to form a limited partnership under the Delaware Revised
Uniform Limited Partnership Act (6 Del. C. (S)17-101, et seq.)
-- ---
1. NAME. The name of the limited partnership formed hereby is
FrontierVision Holdings, L.P.
2. REGISTERED OFFICE. The address of the registered office of the
Partnership in the State of Delaware is c/o Prentice-Hall Corporation System,
Inc., 1013 Centre Road, Wilmington, Delaware 19805.
3. REGISTERED AGENT. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware is Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, New Castle County,
Delaware 19805.
4. GENERAL PARTNER. The name and address of the sole general partner of
the Partnership is: FrontierVision Partners, L.P., 1777 Harrison
Street, Suite P-200, Denver, Colorado 80210.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first above written.
General Partner:
FRONTIERVISION PARTNERS, L.P.
By FVP GP, L.P., its sole
general partner
By FrontierVision Inc., its sole
general partner
By: /s/ James C. Vaughn
------------------------------
James C. Vaughn, President
<PAGE>
Exhibit 3.18
CERTIFICATE OF INCORPORATION
OF
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
-------------------------------------------
FIRST. The name of the Corporation is FrontierVision Holdings
-----
Capital Corporation.
SECOND. The registered office of the Corporation in the State of
------
Delaware is located at 1013 Centre Road, in the City of Wilmington, County of
New Castle. The registered agent in charge thereof is The Prentice-Hall
Corporation System, Inc.
THIRD. The nature of the business to be conducted and promoted by
-----
the Corporation and the purpose of the Corporation shall be to borrow money and
issue evidences of indebtedness as co-obligor with FrontierVision Holdings,
L.P., a limited partnership organized and operating under the laws of the State
of Delaware, and to take any and all other action necessary or appropriate in
connection therewith or incidental thereto and for no other purposes.
FOURTH. The amount of the total authorized capital stock of this
------
Corporation shall be One Thousand (1,000) shares of voting common stock, with a
par value of one cent ($.01) per share.
FIFTH. The name and mailing address of the sole incorporator is as
-----
follows:
Seth E. Bravin
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
SIXTH. The Corporation is to have perpetual existence.
-----
SEVENTH. The by-laws of the Corporation may be made, altered,
-------
amended, changed, added to or repealed by the board of directors without the
assent or vote of the stockholders.
<PAGE>
-2-
EIGHTH. Elections of directors need not be by written ballot unless
------
the by-laws of the Corporation shall so provide.
NINTH. Meetings of stockholders may be held within or without the
-----
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the Corporation.
TENTH. Whenever a compromise or arrangement is proposed between the
-----
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provision of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of creditors or class of creditors, and/or of the stockholders
or class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as such court directs. If a majority in number representing
three-fourths (3/4) in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ELEVENTH. A director shall not be personally liable to the Corporation
--------
or its stockholders for monetary damages for
<PAGE>
-3-
breach of fiduciary duties as a director, provided that the liability of a
director (i) for any breach of the director's loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
Title 8 of the Delaware Code or (iv) for any transaction from which the director
derived an improper personal benefit shall not be eliminated or limited hereby.
All references in this paragraph to a director shall also be deemed to refer to
such other person or persons, if any, who, pursuant to any provision of this
certificate of incorporation in accordance with subsection (a) of Section 141 of
Title 8 of the Delaware Code, exercise or perform any of the powers or duties
otherwise conferred or imposed upon the board of directors by Title 8 of the
Delaware Code.
TWELFTH. The Corporation reserves the right to amend, alter, change
-------
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
The undersigned, Seth E. Bravin, for the purpose of forming a
corporation pursuant to the General Corporation Law of the State of Delaware,
does hereby make, file and record this Certificate of Incorporation and does
hereby certify that the facts herein stated are true, and has accordingly
hereunto set his hand and seal.
/s/Seth E. Bravin
----------------------------
Seth E. Bravin, Incorporator
Dated: August 22, 1997
<PAGE>
Exhibit 3.19
BY-LAWS
OF
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
ARTICLE I
OFFICES
Section l. The registered office of FrontierVision Holdings Capital
Corporation (the "Corporation") shall be located in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The principal office of the Corporation shall be in the
City of Denver, County of Denver, State of Colorado. The Corporation may also
have offices at such other places both within and without the State of Delaware
and the United States as the Board of Directors may from time to time determine
or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders for the election
of directors shall be held at the principal office of the Corporation, at such
place and time as may be fixed from time to time by the Board of Directors, or
at such other place either within or without the State of Delaware or the United
States, as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting or in a duly executed waiver of the notice
thereof. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware or the United States, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual meetings of the stockholders shall be held on such
date not more than one hundred and eighty days (180) following the end of the
fiscal year, and at a time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting. At the annual meeting,
the stockholders shall elect by a plurality vote a Board of Directors and shall
transact such other business as may properly be brought before the meeting.
<PAGE>
-2-
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. Special meetings of the stockholders for any purpose or
purposes, unless otherwise provided by statute, the Certificate of Incorporation
or these By-laws, shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors or at the request in writing
of stockholders owning a majority of the capital stock of the Corporation issued
and outstanding and entitled to vote. Such requests shall state the purpose or
purposes of the proposed meeting.
Section 5. Written notice of a special meeting shall state the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called and 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.
Section 6. The holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 7. Unless otherwise required by law or the Certificate of
Incorporation, any question brought before any meeting of stockholders shall be
decided by the vote of the
<PAGE>
-3-
holders of a majority of the stockholders represented and entitled to vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy,
but no proxy shall be voted on or after three years from this date, unless such
proxy provides for a longer period.
Section 8. Unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
of the Corporation having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Such consent shall be filed
with the Secretary of the Corporation. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors that constitutes the Board of
Directors shall be at least one (1) and not more than five (5), the exact number
of which shall initially be fixed by the Incorporator and thereafter from time
to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at annual
meetings of stockholders, and each director so elected shall hold office until
the next annual meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any director may resign at any
time upon notice to the Corporation. Directors need not be shareholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office,
<PAGE>
-4-
though less than a quorum, or by a sole remaining director. The directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and qualified. If at the time of filling any vacancy
or any newly created directors the directors then in office shall constitute
less than a majority of the whole board (as constituted immediately prior to any
such increase), stockholders holding at least a majority of the outstanding
shares entitled to vote for directors shall have the right to order to vote to
fill any such vacancies or newly created directorships, or to replace any
directors chosen by the directors.
Section 3. The business of the Corporation shall be managed by its
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute, the Certificate of
Incorporation or these By-laws directed or required to be exercised or done by
the stockholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware or the United States. Regular meetings of the Board of Directors may
be held without notice at such place as may from time to time be determined by
the Board. Special meetings of the Board of Directors may be called by the
President or by any two directors. Notice thereafter shall be given by the
Secretary to each director either by mail on four day's notice or by telegram or
telephone on one day's notice.
Section 2. At all meetings of the Board, a majority of the entire
Board of Directors shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, unless otherwise
specifically provided by statute or the Certificate of Incorporation. If a
quorum is not present at any meeting of the Board of Directors, the directors
present thereat may adjourn the
<PAGE>
-5-
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum shall be present.
Section 3. Unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or the committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors.
Section 4. Unless otherwise provided by the Certificate of
Incorporation or these by-laws, members of the Board of Directors, or of any
committee designated by the Board, may participate in a meeting of the Board or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
ARTICLE V
COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each consisting of two or more
directors of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
<PAGE>
-6-
ARTICLE VI
COMPENSATION OF DIRECTORS
Section l. The directors may be paid their expenses, if any, of
attending meetings of the Board of Directors. Such payments may take the form of
a fixed sum for attendance at each meeting or a stated salary as a director.
Members of committees may be allowed like compensation for attending committee
meetings.
Section 2. No payment permitted under this Article VI shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 3. No contract or transaction between the Corporation and one
or more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose if (i) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or ratified
by the Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
<PAGE>
-7-
ARTICLE VII
OFFICERS
Section l. The officers of the Corporation shall be designated by the
Board of Directors by election and, unless otherwise required by the General
Corporation Law of the State of Delaware, may include a President, one or more
Vice Presidents, a Chief Financial Officer, a Secretary, a Treasurer, and one or
more Assistant Secretaries. The Board of Directors may also elect such other
officers and agents as it deems necessary, including Vice-Presidents and one or
more Assistant Secretaries and Assistant Treasurers. Any number of offices may
be held by the same person, unless otherwise provided by statute, the
Certificate of Incorporation or these By-laws. In its discretion, the Board of
Directors may choose not to fill any office for any period as it may deem
advisable, except that of any vacancy in the offices of the President and
Secretary shall be filled as expeditiously as possible.
Section 2. The officers of the Corporation shall be elected by the
Board of Directors at the Board's first meeting after each annual meeting of
stockholders.
Section 3. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors whenever in its judgment the best interests
of the Corporation will be served thereby. Any vacancy occurring in any office
of the Corporation shall be filled by the Board of Directors.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The President shall be the chief executive officer of the
Corporation. The President shall preside at all meetings of the stockholders,
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute under the seal of the
Corporation bonds, mortgages, contracts and other contracts requiring a seal,
<PAGE>
-8-
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof is expressly delegated by the
Board of Directors to some other officer or agent of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these by-laws or by the
Board of Directors.
Section 6. In the absence of the President or in the event of his
inability or refusal to act, the Vice-President (or in the event there are more
than one, the Vice-Presidents in the order designated, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice-President shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 7. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all of the proceedings
of the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for any committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board of Directors and
shall perform such other duties as may be prescribed by the Board of Directors
or the President, under whose supervision he shall be. The Secretary shall have
custody of the seal of the Corporation, and he, or an Assistant Secretary, shall
have the authority to affix the same to any instrument requiring it, and (when
so affixed) it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
Section 8. The Treasurer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable
<PAGE>
-9-
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
Section 9. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President, and the Board of Directors at
the Board's regular meetings or when the Board so requires, an account of all
his transactions as Treasurer and of the financial condition of the Corporation.
Section 10. If required by the Board of Directors, the Treasurer
shall give the Corporation a bond in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
ARTICLE VIII
NOTICE
Section 1. Whenever, under the provisions of law or of the
Certificate of Incorporation or of these by-laws, notice is required to be given
to any director or stockholder in writing, by mail, addressed to such director
or stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram or by telephone and shall be deemed to
be given at the time when such telegram is sent or such telephone notice is
actually given and received.
Section 2. Whenever any notice is required to be given under the
provisions of law or of the Certificate of Incorporation or by these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether
<PAGE>
-10-
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE IX
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman or Vice-Chairman of the Board of
Directors, or the President or a Vice-President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the
number of shares owned by the stockholder in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile if the certificate is manually signed on behalf of a transfer agent or
a registrar (other than the Corporation itself or an employee of the
Corporation). In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, the certificate may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. The Board of Directors may direct that a new certificate
or certificates be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates or his legal
representative to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Upon surrender to the Corporation or the
<PAGE>
-11-
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by the proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof, or entitled 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, the Board of Directors may fix, in advance,
a record date that shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. 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 date for
the adjourned meeting.
Section 6. The Corporation shall be entitled to recognize the
exclusive rights of a person registered on its books as the owner of shares to
receive dividends and to vote as such owner. The Corporation shall be entitled
to hold liable for calls and assessments a person registered on its books as the
owner of shares. The Corporation shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, regardless of whether the Corporation shall have express or other notice
thereof, unless otherwise provided by statute, the Certificate of Incorporation
or these By-laws.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
---------
Corporation, unless otherwise provided by statute, the Certificate of
Incorporation or these By-laws, may be
<PAGE>
-12-
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, property, or in shares of stock, unless
otherwise provided by statute, the Certificate of Incorporation or these By-
laws. Before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in their absolute discretion, may think proper as a
reserve or reserves for contingencies, equalizing dividends, repairing or
maintaining any property of the Corporation, or for such other purpose or
purposes as the Board of Directors shall think conducive to the interests of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
Section 2. Disbursements. All checks or demands for money and notes
-------------
of the Corporation shall be signed by such officer or officers or such other
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
designated by resolution of the Board of Directors.
Section 4. Corporate Seal. The Corporate seal shall have inscribed
--------------
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 5. Indemnification. The Corporation shall have the power to
---------------
indemnify its officers, directors, employees and agents of the Corporation, and
such other persons as designated by the Board of Directors, to the full extent
as permitted under Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time. To assure indemnification under this
provision of all such persons who are or were "fiduciaries" of an employee
benefit plan governed by the Act of Congress entitled "Employee Retirement
Income Security Act of 1974," as amended from time to time, said Section 145
shall, for the purposes hereof, be interpreted as follows: "other
<PAGE>
-13-
enterprise" shall be deemed to include an employee benefit plan; the Corporation
shall be deemed to have requested a person to serve an employee benefit plan
where the performance by such person of his duties to the Corporation also
imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan pursuant to said Act of Congress shall
be deemed "fines"; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
Section 6. Amendments. Unless such power is reserved to the
----------
stockholders by statute, the Certificate of Incorporation or these By-laws,
these By-laws may be altered, amended or repealed, in whole or in part, or new
By-laws adopted either by the stockholders or the Board of Directors (when such
power is conferred upon the Board of Directors by the Certificate of
Incorporation, and subject to repeal or change by action of the stockholders)
provided, however, that notice of such alteration, repeal, or adoption of new
by-laws be contained in the notice of such meeting of stockholders or Board of
Directors as the case may be. All such amendments must be approved by either
the holders of a majority of the capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
<PAGE>
Exhibit 4.2
================================================================================
INDENTURE
Dated as of September 19, 1997
Among
FRONTIERVISION HOLDINGS, L.P.
and
FRONTIERVISION HOLDINGS CAPITAL CORPORATION, as Issuers,
and
U.S. BANK NATIONAL ASSOCIATION
(d/b/a COLORADO NATIONAL BANK), as Trustee
-----------------
$237,650,000 Principal Amount at Maturity
11 7/8% Senior Discount Notes due 2007
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
- --------------------------- ---------
<S> <C>
(S) 310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(a)(5)............................................ N.A.
(b)............................................... 7.08; 7.10; 13.02
(c)............................................... N.A.
(S) 311(a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
(S) 312(a)............................................... 2.05
(b)............................................... 13.03
(c)............................................... 13.03
(S) 313(a)............................................... 7.06
(b)(1)............................................ N.A.
(b)(2)............................................ 7.06
(c)............................................... 7.06; 13.02
(d)............................................... 7.06
(S) 314(a)............................................... 4.11; 4.12; 13.02
(b)............................................... N.A.
(c)(1)............................................ 13.04
(c)(2)............................................ 13.04
(c)(3)............................................ N.A.
(d)............................................... N.A.
(e)............................................... 13.05
(f)............................................... N.A.
(S) 315(a)............................................... 7.01(b)
(b)............................................... 7.05; 13.02
(c)............................................... 7.01(a)
(d)............................................... 7.01(c)
(e)............................................... 6.11
(S) 316(a)(last sentence)................................ 2.09
(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.04
(a)(2)............................................ N.A.
(b)............................................... 6.07
(c)............................................... 10.04
(S) 317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.04
(S) 318(a)............................................... 13.01
</TABLE>
- --------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 25
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.......................................... 26
SECTION 1.04. Rules of Construction.................................... 27
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.......................................... 27
SECTION 2.02. Execution and Authentication............................. 29
SECTION 2.03. Registrar; Paying Agent; Depository...................... 30
SECTION 2.04. Paying Agent To Hold Money in Trust...................... 31
SECTION 2.05. Securityholder Lists..................................... 31
SECTION 2.06. Transfer and Exchange.................................... 31
SECTION 2.07. Replacement Securities................................... 42
SECTION 2.08. Outstanding Securities................................... 42
SECTION 2.09. Treasury Securities...................................... 42
SECTION 2.10. Temporary Securities..................................... 43
SECTION 2.11. Cancellation............................................. 43
SECTION 2.12. Defaulted Interest....................................... 43
SECTION 2.13. Payments of Interest..................................... 44
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................... 45
SECTION 3.02. Selection of Securities To Be Redeemed................... 45
SECTION 3.03. Notice of Redemption..................................... 45
SECTION 3.04. Effect of Notice of Redemption........................... 46
SECTION 3.05. Deposit of Redemption Price.............................. 46
SECTION 3.06. Securities Redeemed in Part.............................. 47
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.................................... 47
SECTION 4.02. Maintenance of Office or Agency.......................... 47
SECTION 4.03. Limitation on Transactions with
Affiliates and Related Persons......................... 48
SECTION 4.04. Limitation on Indebtedness............................... 49
</TABLE>
-i-
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 4.05. Disposition of Proceeds of Asset Sales................... 52
SECTION 4.06. Limitation on Restricted Payments........................ 55
SECTION 4.07. Corporate Existence...................................... 58
SECTION 4.08. Payment of Taxes and Other Claims........................ 59
SECTION 4.09. Notice of Defaults....................................... 59
SECTION 4.10. Maintenance of Properties................................ 59
SECTION 4.11. Compliance Certificate................................... 60
SECTION 4.12. Provision of Financial Information....................... 60
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.................. 61
SECTION 4.14. Change of Control........................................ 61
SECTION 4.15. [Intentionally Omitted].................................. 62
SECTION 4.16. Limitations on Dividends and Other Payment
Restrictions Affecting Restricted
Subsidiaries........................................... 62
SECTION 4.17. Designation of Unrestricted Subsidiaries................. 64
SECTION 4.18. Limitation on Liens...................................... 65
SECTION 4.19. Limitation on Guarantees of Indebtedness
by Restricted Subsidiaries............................. 65
SECTION 4.20. Limitation on Conduct of Business of
Capital................................................ 66
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Sale of Assets, etc.............................. 67
SECTION 5.02. Successor Corporation Substituted........................ 68
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................ 69
SECTION 6.02. Acceleration............................................. 71
SECTION 6.03. Other Remedies........................................... 72
SECTION 6.04. Waiver of Past Default................................... 73
SECTION 6.05. Control by Majority...................................... 73
SECTION 6.06. Limitation on Suits...................................... 74
SECTION 6.07. Rights of Holders To Receive Payment..................... 74
SECTION 6.08. Collection Suit by Trustee............................... 75
SECTION 6.09. Trustee May File Proofs of Claim......................... 75
SECTION 6.10. Priorities............................................... 75
SECTION 6.11. Undertaking for Costs.................................... 76
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................ 76
SECTION 7.02. Rights of Trustee........................................ 78
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 7.03. Individual Rights of Trustee............................. 79
SECTION 7.04. Trustee's Disclaimer..................................... 79
SECTION 7.05. Notice of Defaults....................................... 79
SECTION 7.06. Reports by Trustee to Holders............................ 79
SECTION 7.07. Compensation and Indemnity............................... 80
SECTION 7.08. Replacement of Trustee................................... 80
SECTION 7.09. Successor Trustee by Merger, etc......................... 82
SECTION 7.10. Eligibility; Disqualification............................ 82
SECTION 7.11. Preferential Collection of Claims Against
Company................................................ 83
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Issuers' Obligations...................... 83
SECTION 9.02. Application of Trust Money............................... 85
SECTION 9.03. Repayment to Issuers..................................... 85
SECTION 9.04. Reinstatement............................................ 86
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders............................... 86
SECTION 10.02. With Consent of Holders.................................. 87
SECTION 10.03. Compliance with Trust Indenture Act...................... 89
SECTION 10.04. Effect of Consents....................................... 89
SECTION 10.05. Notation on or Exchange of Securities.................... 90
SECTION 10.06. Trustee To Sign Amendments, etc.......................... 90
ARTICLE ELEVEN
SUBSIDIARY GUARANTEE
SECTION 11.01. Unconditional Guarantee.................................. 90
SECTION 11.02. Severability............................................. 91
SECTION 11.03. Release of a Guarantor................................... 92
SECTION 11.04. Limitation of Subsidiary Guarantor's
Liability.............................................. 93
SECTION 11.05. Contribution............................................. 93
SECTION 11.06. Execution of Subsidiary Guarantee........................ 93
SECTION 11.07. Additional Subsidiary Guarantors......................... 94
SECTION 11.08. Subordination of Subrogation and Other
Rights................................................. 94
</TABLE>
-iii-
<PAGE>
<TABLE>
Page
----
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
ARTICLE THIRTEEN
MISCELLANEOUS
<S> <C>
SECTION 13.01. Trust Indenture Act Controls............................. 95
SECTION 13.02. Notices.................................................. 95
SECTION 13.03. Communications by Holders with Other
Holders................................................ 97
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent.............................................. 97
SECTION 13.05. Statements Required in Certificate or
Opinion................................................ 97
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar................ 98
SECTION 13.07. Governing Law............................................ 98
SECTION 13.08. No Recourse Against Others............................... 98
SECTION 13.09. Successors............................................... 98
SECTION 13.10. Counterpart Originals.................................... 98
SECTION 13.11. Severability............................................. 99
SECTION 13.12. No Adverse Interpretation of Other
Agreements............................................. 99
SECTION 13.13. Legal Holidays........................................... 99
SIGNATURES . . . ....................................................... 100
EXHIBIT A - Form of Security............................................ A-1
EXHIBIT B - Form of Certificate of Transfer............................. B-1
EXHIBIT C - Form of Certificate of Exchange............................. C-1
- --------------------
</TABLE>
NOTE: This Table of Contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-iv-
<PAGE>
INDENTURE dated as of September 19, 1997, among FRONTIERVISION
HOLDINGS, L.P., a Delaware limited partnership (the "Company"), FRONTIERVISION
-------
HOLDINGS CAPITAL CORPORATION, a Delaware corporation ("Capital" and together
-------
with the Company, the "Issuers"), and U.S. BANK NATIONAL ASSOCIATION (d/b/a
-------
COLORADO NATIONAL BANK), as trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the 11 7/8% Senior
Discount Notes due 2007 of the Issuers:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Accreted Value" as of any date (the "Specified Date") means, with
-------------- --------------
respect to each $1,000 original principal amount at maturity of Securities:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
------------------------
<TABLE>
<CAPTION>
Semi-Annual Accreted
Accrual Date Value
------------ ---------
<S> <C>
Issue Date...................... $ 631.18
March 15, 1998.................. 668.66
September 15, 1998.............. 708.36
March 15, 1999.................. 750.42
September 15, 1999.............. 794.97
March 15, 2000.................. 842.17
September 15, 2000.............. 892.18
March 15, 2001.................. 945.15
September 15, 2001.............. $1,000.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (a) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (b) an amount equal to the
product of (x) the Accreted Value for the immediately following Semi-Annual
Accrual Date less the Accreted Value for the immediately preceding Semi-
Annual Accrual Date and (y) a fraction, the numerator of which is the
number of days actually elapsed
<PAGE>
-2-
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date and the denominator of which is 180; and
(iii) if the Specified Date is after September 15, 2001, $1,000;
provided, however, that if the Company makes the Cash Interest Election, the
- -------- -------
Accreted Value shall be, and remain through the Stated Maturity of the
Securities, the Accreted Value as of the Semi-Annual Accrual Date on which the
Cash Interest Election is made.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
---------------------
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any
---------------
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Additional Interest" shall mean the meaning set forth in the
-------------------
Registration Rights Agreement.
"Advisory Committee" means the Advisory Committee of the General
------------------
Partner established pursuant to the provisions of Article VI of the First
Amended and Restated Agreement of Limited Partnership of the General Partner, as
amended to the date of issuance of the Securities.
"Affiliate" means, with respect to any specified Person, any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar. See
-----
Section 2.03.
"Applicable Procedures" means, with respect to any transfer or
---------------------
exchange of interests in a Global Security, the rules and procedures of DTC,
Euroclear and Cedel that apply to such transfer or exchange.
<PAGE>
-3-
"Asset Acquisition" means (i) any capital contribution (by means of
-----------------
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of an operating unit or line of business of such Person or which is
otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
----------
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than the Company or a Wholly Owned Restricted Subsidiary, in
one transaction or a series of related transactions, of (i) any Equity Interest
of any Restricted Subsidiary, (ii) any material license, franchise or other
authorization of the Company or any Restricted Subsidiary, (iii) any assets of
the Company or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of the Company or any Restricted
Subsidiary or (iv) any other property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include (i) any transaction
consummated in compliance with Section 5.01 and the creation of any Lien not
prohibited by Section 4.18, (ii) sales of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Restricted Subsidiary, as the case may be,
and (iii) any transaction consummated in compliance with Section 4.06. In
addition, solely for purposes of Section 4.05, any sale, conveyance, transfer,
lease or other disposition of any property or asset, whether in one transaction
or a series of related transactions, involving assets with a Fair Market Value
not in excess of $1.0 million individually or $2.0 million in any fiscal year
shall be deemed not to be an Asset Sale.
"Board of Directors" means (i) in the case of a Person that is a
------------------
partnership, the board of directors of such Person's corporate general partner
(or if such general partner is itself a partnership, the board of directors of
such general partner's corporate general partner), (ii) in the case of a Person
that is a corporation, the board of directors of such Person and (iii) in
<PAGE>
-4-
the case of any other Person, the board of directors, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person. By way of illustration,
as of the date of this Indenture, any reference herein to the Board of Directors
of any of the Company, the General Partner or FVP GP means the board of
directors of FV Inc.
"Board Resolution" means, with respect to any Person, a duly adopted
----------------
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday that is not a day on which banking institutions in the City of New York
are authorized or obligated by law, resolution or executive order to close.
"Capitalized Lease Obligation" means, with respect to any Person for
----------------------------
any period, an obligation of such Person to pay rent or other amounts under a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of such obligation shall be the capitalized
amount shown on the balance sheet of such Person as determined in accordance
with GAAP.
"Cash Equivalents" means (i) any security, maturing not more than six
----------------
months after the date of acquisition, issued by the United States of America, or
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, time deposit, money market account or bankers'
acceptance maturing not more than six months after the date of acquisition
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500.0 million, whose debt has a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc., or any successor rating agency and (iii) commercial paper
maturing not more than three months after the date of acquisition issued by any
corporation (other than an Affiliate of the Company) organized and existing
under the laws of the United States of America with a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc., or any successor rating agency.
<PAGE>
-5-
"Cash Interest Election" means the election by the Issuers on any
----------------------
Semi-Annual Accrual Date (with written notice of such election to be given by
the Issuers to the Trustee and the Holders on such date) to begin accruing cash
interest on the Securities (which election shall be irrevocable) on such Semi-
Annual Accrual Date.
"Change of Control" means the occurrence of any of the following
-----------------
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total voting power of the outstanding Voting
Equity Interests of the Company, the General Partner, FVP GP or FV Inc., as the
case may be; (b) the Company, the General Partner, FVP GP or FV Inc., as the
case may be, consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, the General Partner, FVP GP or FV Inc., as
the case may be, in any such event pursuant to a transaction in which the
outstanding Voting Equity Interests of the Company, the General Partner, FVP GP
or FV Inc., as the case may be, are converted into or exchanged for cash,
securities or other property, other than any such transaction where the
outstanding Voting Equity Interests of the Company, the General Partner, FVP GP
or FV Inc., as the case may be, are converted into or exchanged for Voting
Equity Interests (other than Disqualified Equity Interests) of the surviving or
transferee Person and, immediately after such transaction, the Permitted Holders
or the holders of the Voting Equity Interests of the Company, the General
Partner, FVP GP or FV Inc., as the case may be, immediately prior thereto own,
directly or indirectly, more than 50% of the total voting power of the
outstanding Voting Equity Interests of the surviving or transferee Person; (c)
during any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company, the General Partner,
FVP GP or FV Inc., as the case may be (together with any new directors whose
election to such Board of Directors was approved by the Permitted Holders or by
a vote of at least a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved), cease for any reason (other than by
action of the Permitted Holders) to constitute a majority
<PAGE>
-6-
of the Board of Directors of the Company, the General Partner, FVP GP or FV
Inc., as the case may be, then in office in any such case in connection with any
actual or threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or threatened
solicitation of proxies or consents; (d) any Person or Persons, other than
Permitted Holders, is or becomes entitled to appoint or designate more than 25%
of the members of the Advisory Committee; or (e) the admission of any Person as
a general partner of the Company, the General Partner or FVP GP, as the case may
be, after which the General Partner, FVP GP or FV Inc., as the case may be, does
not have the sole power to take all of the actions it is entitled or required to
take under the limited partnership agreement of the Company, the General Partner
or FVP GP, as the case may be, as in effect on the Issue Date; provided,
--------
however, that a Change of Control will be deemed not to have occurred in any of
- -------
the foregoing circumstances (i) with respect to FV Inc. (either in its own
capacity or in its capacity as a direct or indirect corporate general partner of
any other Person), (ii) with respect to or as a result of the conversion of the
general partnership interest of FVP GP in the General Partner into a limited
partnership interest, or (iii) with respect to the events in clause (e) if the
change, event or condition giving rise thereto has been approved by the
Permitted Holders holding a majority in interest of the total outstanding Equity
Interests of the General Partner held by the Permitted Holders.
"Company" means the Person named as the "Company" in the first
-------
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Consolidated Income Tax Expense" means, with respect to the Company
-------------------------------
for any period, the provision for federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for
-----------------------------
any period, without duplication, the sum of (i) the interest expense of the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers'
<PAGE>
-7-
acceptance financing and (e) all capitalized interest and all accrued interest,
(ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP and (iii) dividends and distributions in respect of
Disqualified Equity Interests actually paid in cash by the Company during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net
-----------------------
income of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, adjusted, to the
extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses and all gains and losses from
the sale or other disposition of assets out of the ordinary course of business
(net of taxes, fees and expenses relating to the transaction giving rise
thereto) for such period, (ii) that portion of such net income derived from or
in respect of investments in Persons other than Restricted Subsidiaries, except
to the extent actually received in cash by the Company or any Restricted
Subsidiary, (iii) the portion of such net income (or loss) allocable to minority
interests in unconsolidated Persons for such period, except to the extent
actually received in cash by the Company or any Restricted Subsidiary (subject,
in the case of any Restricted Subsidiary, to the provisions of the immediately
following sentence of this definition), and (iv) net income (or loss) of any
other Person combined with the Company or any Restricted Subsidiary on a
"pooling of interests" basis attributable to any period prior to the date of
combination. In calculating Consolidated Net Income as a component of
Consolidated Operating Cash Flow (x) for purposes of calculating the Debt to
Operating Cash Flow Ratio in connection with determining whether an Incurrence
of Indebtedness by the Company (but not the Restricted Subsidiaries) is
permitted under the Debt to Operating Cash Flow Ratio of the first paragraph of
Section 4.04 and (y) for purposes of calculating (I) Cumulative Available Cash
Flow pursuant to clause (c)(1) of Section 4.06 and (II) the Debt to Operating
Cash Flow Ratio pursuant to clause (b) of Section 4.06 in connection with
determining whether a Restricted Payment by the Company pursuant to clause (i),
(ii) or (iii) of Section 4.06 is permitted under such covenant, the net income
of any Restricted Subsidiary shall be excluded to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time (regardless of any waiver) permitted, directly
or indirectly, by reason of any Payment Restriction; provided, however, that
-------- -------
net income
<PAGE>
-8-
shall not be so excluded in determining whether the Company could incur $1.00 of
Indebtedness under the Debt to Operating Cash Flow Ratio of the first paragraph
of Section 4.04 (A) (or in calculating Cumulative Available Cash Flow) for
purposes of determining whether any Restricted Payment other than those referred
to in clause (y) of this sentence is permitted under Section 4.06, (B) for
purposes of determining whether a Designation is permitted pursuant to clause
(b) of the first paragraph of Section 4.17 and (C) for purposes of determining
compliance with clause (a)(iii) of Section 5.01 (unless the applicable
transaction involves the Incurrence by the Company of additional Indebtedness).
"Consolidated Net Worth" with respect to any Person means the equity
----------------------
of the holders of Qualified Equity Interests of such Person and its Restricted
Subsidiaries, as reflected in a balance sheet of such Person determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Operating Cash Flow" means, with respect to any period,
--------------------------------
Consolidated Net Income for such period increased (without duplication) by the
sum of (i) Consolidated Income Tax Expense accrued according to GAAP for such
period to the extent deducted in determining Consolidated Net Income for such
period; (ii) Consolidated Interest Expense (other than dividends on Preferred
Equity Interests) for such period to the extent deducted in determining
Consolidated Net Income for such period; and (iii) depreciation, amortization
and any other non-cash items for such period to the extent deducted in
determining Consolidated Net Income for such period (other than any non-cash
item which requires the accrual of, or a reserve for, cash charges for any
future period) of the Company and the Restricted Subsidiaries, including,
without limitation, amortization of capitalized debt issuance costs for such
period, all of the foregoing determined on a consolidated basis in accordance
with GAAP minus non-cash items to the extent they increase Consolidated Net
Income (including the partial or entire reversal of reserves taken in prior
periods) for such period.
"Corporate Trust Office of the Trustee" shall be at the address of the
-------------------------------------
Trustee specified in Section 13.02 or such other address as the Trustee may give
notice to the Issuers.
"Cumulative Available Cash Flow" means, as at any date of
------------------------------
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consol-
<PAGE>
-9-
idated financial information of the Company is available or, if such cumulative
Consolidated Operating Cash Flow for such period is negative, the negative
amount by which cumulative Consolidated Operating Cash Flow is less than zero.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Total
---------------------------------
Consolidated Indebtedness as of the date of calculation (the "Determination
Date") to (ii) four times the Consolidated Operating Cash Flow for the latest
fiscal quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period"). For purposes of
------------------
calculating Consolidated Operating Cash Flow for the Measurement Period
immediately prior to the relevant Determination Date, (I) any Person that is a
Restricted Subsidiary on the Determination Date (or would become a Restricted
Subsidiary on such Determination Date in connection with the transaction that
requires the determination of such Consolidated Operating Cash Flow) will be
deemed to have been a Restricted Subsidiary at all times during such Measurement
Period, (II) any Person that is not a Restricted Subsidiary on such
Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Operating Cash Flow) will be deemed not to
have been a Restricted Subsidiary at any time during such Measurement Period,
and (III) if the Company or any Restricted Subsidiary shall have in any manner
(x) acquired (including through an Asset Acquisition or the commencement of
activities constituting such operating business) or (y) disposed of (including
by way of an Asset Sale or the termination or discontinuance of activities
constituting such operating business) any operating business during such
Measurement Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with GAAP as if, in the case of an Asset Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement Period
and, in the case of an Asset Sale or termination or discontinuance of activities
constituting such operating business, all such transactions had been consummated
prior to the first day of such Measurement Period.
"Default" means any event that is or with the passing of time or
-------
giving of notice or both would be an Event of Default.
"Depository" means, with respect to Securities issued in the form of
----------
one or more Global Securities, DTC or another Person designated as Depository by
the Issuers, which Person must
<PAGE>
-10-
be a clearing agency registered under Section 17A of the Exchange Act.
"Designation" has the meaning set forth in Section 4.17.
-----------
"Designation Amount" has the meaning set forth in Section 4.17.
------------------
"Disposition" means, with respect to any Person, any merger,
-----------
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by
----------------------------
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable, at the option of the holder
thereof, in whole or in part, or exchangeable into Indebtedness on or prior to
the earlier of the maturity date of the Securities or the date on which no
Securities remain outstanding.
"DTC" means The Depository Trust Company.
---
"Equity Interest" in any Person means any and all shares, interests,
---------------
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
---------
Office) as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Registration Statement" has the meaning set forth in the
-------------------------------
Registration Rights Agreement.
"Expiration Date" has the meaning set forth in the definition of
---------------
"Offer to Purchase" below.
<PAGE>
-11-
"Fair Market Value" means, with respect to any asset, the price (after
-----------------
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under pressure
or compulsion to complete the transaction; provided, however, that the Fair
-------- -------
Market Value of any such asset or assets shall be determined by the Board of
Directors of the Company, acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"FV Inc." means FrontierVision Inc., a Delaware corporation.
------
"FVOP" means FrontierVision Operating Partners, L.P., a Delaware
----
limited partnership.
"FVOP Indenture" means the Indenture dated as of October 7, 1996 among
--------------
FVOP, FrontierVision Capital Corporation and Colorado National Bank, as trustee.
"FVP GP" means FVP GP, L.P., a Delaware limited partnership.
------
"GAAP" means, at any date of determination, generally accepted
----
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"General Partner" means FrontierVision Partners, L.P., a Delaware
---------------
limited partnership.
"guarantee" means, as applied to any obligation, (i) a guarantee
---------
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
<PAGE>
-12-
"Holder" or "Securityholder" means the Person in whose name a Security
------ --------------
is registered on the books of the Registrar or any co-Registrar.
"Incur" means, with respect to any Indebtedness or other obligation of
-----
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
(or is merged into or consolidates with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary (or being
merged into or consolidated with the Company or any Restricted Subsidiary),
shall be deemed Incurred at the time any such Person becomes a Restricted
Subsidiary or merges into or consolidates with the Company or any Restricted
Subsidiary.
"Indebtedness" means (without duplication), with respect to any
------------
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable
incurred in the ordinary course of business and payable in accordance with
industry practices, or other accrued liabilities arising in the ordinary course
of business which are not overdue or which are being contested in good faith),
(v) every Capital Lease Obligation of such Person, (vi) every net obligation
under interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements of such Person, (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise, and (viii) any and all deferrals, renewals, extensions
and refundings of, or amendments,
<PAGE>
-13-
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i) through (vii) above. Indebtedness (i) shall never be
calculated taking into account any cash and cash equivalents held by such
Person, (ii) shall not include obligations of any Person (x) arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary
course of business, provided that such obligations are extinguished within two
Business Days of their incurrence unless covered by an overdraft line, (y)
resulting from the endorsement of negotiable instruments for collection in the
ordinary course of business and consistent with past business practices and (z)
under stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents, (iii) which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be
deemed to be incurred or outstanding in an amount equal to the accreted value
thereof at the date of determination, (iv) shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Equity Interests of the Company or any Restricted Subsidiary and
(v) shall not include obligations under performance bonds, performance
guarantees, surety bonds and appeal bonds, letters of credit or similar
obligations, incurred in the ordinary course of business, including in
connection with the requirements of cable television franchising authorities,
and otherwise consistent with industry practice.
"Indenture" means this Indenture as amended or supplemented from time
---------
to time.
"Independent Financial Advisor" means a nationally recognized
-----------------------------
investment banking firm (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest in
the Company and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for which it
is to be engaged.
"Initial Global Securities" means the Regulation S Global Security and
-------------------------
the 144A Global Security, each of which contains a Securities Act Legend.
"Initial Securities" means the Securities containing a Securities Act
------------------
Legend.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in
<PAGE>
-14-
Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities
Act.
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Securities.
"Interest Rate Protection Obligations" means, with respect to any
------------------------------------
Person, the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any advance, loan,
----------
account receivable (other than an account receivable arising in the ordinary
course of business), or other extension of credit (including, without
limitation, by means of any guarantee) or any capital contribution to (by means
of transfers of property to others, payments for property or services for the
account or use of others, or otherwise) or any purchase or ownership of any
stocks, bonds, notes, debentures or other securities of, any other Person.
"Issue Date" means the original issue date of the Securities,
----------
September 19, 1997.
"Issuer Request" or "Issuer Order" means a written request or order
-------------- ------------
signed in the name of each of the Issuers by its respective Chairman of the
Board of Directors, Vice Chairman of the Board of Directors, President or a Vice
President, and by its respective Treasurer, an Assistant Treasurer, Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Lien" means any lien, mortgage, charge, security interest,
----
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Maturity Date" means the date, which is set forth on the face of the
-------------
Securities, on which the Securities will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash
-----------------
or Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (i) the direct costs
<PAGE>
-15-
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, (ii) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), (iii) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale, (iv) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve) and (v) with
respect to Asset Sales by Restricted Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such Restricted
Subsidiaries.
"Offer" has the meaning set forth in the definition of "Offer to
-----
Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
----------------- -----
behalf of the Company by first class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the Accreted Value of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursu-
ant to this Indenture). Unless otherwise required by applicable law, the Offer
shall specify an expiration date (the "Expiration Date") of the Offer to
---------------
Purchase, which shall be not less than 20 Business Days nor more than 60 days
after the date of such Offer and a settlement date (the "Purchase Date") for
-------------
purchase of Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
all the information required by applicable law to be included therein. The
Offer shall contain all instructions and materials necessary to enable such
holders to tender Securities pursuant to the Offer to Purchase. The Offer
shall also state:
(1) the Section of this Indenture pursuant to which the Offer to Purchase
is being made;
<PAGE>
-16-
(2) the Expiration Date and the Purchase Date;
(3) the aggregate Principal Amount at Maturity of the outstanding
Securities offered to be purchased by the Company pursuant to the
Offer to Purchase (including, if less than all of the Securities, the
manner by which such amount has been determined pursuant to the
Section of this Indenture requiring the Offer to Purchase) (the
"Purchase Amount");
---------------
(4) the purchase price to be paid by the Company for each $1,000
aggregate Principal Amount at Maturity of Securities accepted for
payment (as specified pursuant to this Indenture) (the "Purchase
--------
Price");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a
Security tendered in a denomination of less than $1,000 Principal
Amount at Maturity must be tendered in whole;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that Securities not tendered or tendered but not purchased by the
Company pursuant to the Offer to Purchase will continue to accrete
Accreted Value as provided in this Indenture;
(8) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will
continue to accrue as provided in this Indenture;
(9) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accept ed for payment pursuant to the
Offer to Purchase and that the Accreted Value thereof will cease to
increase on and that interest thereon shall cease to accrue on and
after the Purchase Date;
(10) that each holder electing to tender all or any portion of a Security
pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied
by a written instrument of
<PAGE>
-17-
transfer in form satisfactory to the Company and the Trustee duly
executed by, the holder thereof or his attorney duly authorized in
writing);
(11) that holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile transmis-
sion or letter setting forth the name of the holder, the Principal
Amount at Maturity of the Security the holder tendered, the
certificate number of the Security the holder tendered and a statement
that such holder is withdrawing all or a portion of his tender;
(12) that (a) if Securities with an aggregate Accreted Value less than or
equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities with an aggregate Accreted Value in
excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase Securities with
an aggregate Accreted Value equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that no
Securities in denominations of less than $1,000 Principal Amount at
Maturity are purchased in part); and
(13) that in the case of any holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Security without service charge a new
Security or Securities, of any authorized denomination as requested by
such holder, in an aggregate Principal Amount at Maturity equal to and
in exchange for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"Officer" means, with respect to any Person, the Chairman of the Board
-------
of Directors, the President, any Vice President, the Chief Financial Officer,
the Treasurer, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers or
---------------------
by an Officer and an Assistant Treasurer or
<PAGE>
-18-
Assistant Secretary of each of FV Inc. and Capital complying with Sections 13.04
and 13.05; provided, however, that when the terms of this Indenture require the
-------- -------
delivery of an Officers' Certificate of the Company only, such Officers'
Certificate shall mean a certificate signed by two Officers or by an Officer and
an Assistant Treasurer or Assistant Secretary of FV Inc. complying with Sections
13.04 and 13.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuers or the Trustee.
"Participant" means any Person who has an account with DTC.
-----------
"Payment Restriction" has the meaning set forth in Section 4.16.
-------------------
"Permitted Holders" means any of (a) the General Partner, FVP GP or FV
-----------------
Inc. for so long as a majority of the voting power of the Voting Equity
Interests of such Person is beneficially owned by any of the Persons listed in
the other clauses of this definition, (b) James C. Vaughn, the President and
Chief Executive Officer of FV Inc. on the Issue Date, (c) John S. Koo, the
Senior Vice President and Chief Financial Officer of FV Inc. on the Issue Date,
(d) any of J.P. Morgan Investment Corporation, a Delaware corporation, Olympus
Cable, Inc., a Delaware corporation, First Union Capital Partners, Inc., a
Virginia corporation, and 1818 II Cable Corp., a Delaware corporation, (e) any
Person controlling, controlled by or under common control with any other Person
described in clauses (a)-(d) of this definition and (f) (i) the spouse or
children of any Person named in clause (b) or (c) of this definition and any
trust for the benefit of any such Persons or their respective spouses or
children; provided, however, that with respect to any such trust, such Persons
-------- -------
have the sole right to direct and control such trust and any Voting Equity
Interest owned by such trust, and (ii) any such Person's estate, executor,
administrator and heirs.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
---------------------
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed $1
million in the aggregate at any one time outstanding; (d) Interest Rate
Protection Obligations; (e) bonds, notes, debentures or other securities
received as a result of Asset Sales permitted
<PAGE>
-19-
under Section 4.05 not to exceed 25% of the total consideration for such Asset
Sales; (f) transactions with officers, directors and employees of the Company,
the General Partner, FVP GP, FV Inc. or any Restricted Subsidiary entered into
in ordinary course of business (including compensation or employee benefit
arrangements with any such director or employee) and consistent with past
business practices; (g) Investments existing as of the Issue Date and any
amendment, extension, renewal or modification thereof to the extent that any
such amendment, extension, renewal or modification does not require the Company
or any Restricted Subsidiary to make any additional cash or non-cash payments or
provide additional services in connection therewith; (h) any Investment for
which the sole consideration provided is Qualified Equity Interests of the
Company; and (i) any Investment consisting of a guarantee permitted under
clause (e) of Section 4.04.
"Permitted Liens" means (a) Liens on property of a Person existing at
---------------
the time such Person is merged into or consolidated with the Company; provided,
--------
however, that such Liens were in existence prior to the contemplation of such
- -------
merger or consolidation and do not secure any property or assets of the Company
or any Restricted Subsidiary other than the property or assets subject to the
Liens prior to such merger or consolidation; (b) Liens imposed by law such as
carriers', warehousemen's and mechanics' Liens and other similar Liens arising
in the ordinary course of business which secure payment of obligations not more
than sixty (60) days past due or which are being contested in good faith and by
appropriate proceedings; (c) Liens existing on the Issue Date; (d) Liens
securing only the Securities; (e) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or other appropriate provision
-------- -------
as shall be required in conformity with GAAP shall have been made therefor; (f)
easements, reservations of rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties, or minor
imperfections of title that in the aggregate are not material in amount and do
not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries; (g) Liens resulting from the deposit of cash or
securities in connection with contracts, tenders or expropriation proceedings,
or to secure workers' compensation, surety or appeal bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (h)
Liens securing Indebtedness consisting of Capitalized Lease Obligations of the
Company, Purchase Money
<PAGE>
-20-
Indebtedness of the Company, mortgage financings, industrial revenue bonds of
the Company or other monetary obligations of the Company, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or the Restricted Subsidiaries, or repairs, additions or improvements
to such assets, provided, however, that (I) such Liens secure Indebtedness in an
-------- -------
amount not in excess of the original purchase price or the original cost of any
such assets or repair, addition or improvement thereto (plus an amount equal to
the reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
Incurrence of such Indebtedness is permitted by Section 4.04 and (IV) such Liens
attach within 90 days of such purchase, construction, installation, repair,
addition or improvement; (i) Liens to secure any refinancings, renewals,
extensions, modifications or replacements (collectively, "refinancing") (or
-----------
successive refinancings), in whole or in part, of any Indebtedness secured by
Liens referred to in the clauses above so long as such Lien does not extend to
any other property (other than improvements thereto); and (j) Liens securing
letters of credit entered into in the ordinary course of business and consistent
with past business practice.
"Permitted Strategic Investment" means an Investment in a Person
------------------------------
(including, without limitation, a Restricted Subsidiary which is not a Wholly
Owned Restricted Subsidiary and an Unrestricted Subsidiary) engaged in a
Related Business if, at the time of and immediately after giving pro forma
effect to such Investment (and any related transaction or series of transac-
tions), the Debt to Operating Cash Flow Ratio would be less than or equal to (i)
7.0 to 1.0 if the date of such Investment is on or before December 31, 1998 and
(ii) 6.5 to 1.0 thereafter.
"Person" means any individual, corporation, partner ship, joint
------
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Preferred Equity Interest," in any Person, means an Equity Interest
-------------------------
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary
<PAGE>
-21-
or involuntary liquidation or dissolution of such Person, over Equity Interests
of any other class in such Person.
"principal" of a debt security means the principal of the security
---------
plus, when appropriate, the premium, if any, on the security.
"Principal Amount at Maturity" means, with respect to each $1,000
----------------------------
original principal amount at maturity of the Securities, (i) $1,000 if no Cash
Interest Election is made by the Issuers, or (ii) if the Cash Interest Election
is made, the Accreted Value of such Securities as of the Semi-Annual Accrual
Date on which the Cash Interest Election is made.
"Private Exchange Securities" has the meaning set forth in the
---------------------------
Registration Rights Agreement.
"Public Equity Offering" means, with respect to any Person, a public
----------------------
offering by such Person of some or all of its Qualified Equity Interests, the
net proceeds of which (after deducting any underwriting discounts and
commissions) exceed $25.0 million.
"Purchase Amount" has the meaning set forth in the definition of
---------------
"Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer
-------------
to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
---------------------------
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the Fair Market Value of such property or such purchase
price or cost.
"Purchase Price" has the meaning set forth in the definition of "Offer
--------------
to Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in
-------------------------
such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified under Rule 144A under the Securities Act.
<PAGE>
-22-
"redemption date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated the date hereof among the Issuers, J.P. Morgan Securities Inc.,
Chase Securities Inc., CIBC Wood Gundy Securities Corp., and First Union Capital
Markets Corp.
"Regulation S" means Regulation S under the Securities Act.
------------
"Related Business" means a cable or broadcast television,
----------------
telecommunications, Internet or data transmission business or a business
reasonably related thereto.
"Restricted Investment" means any Investment other than a Permitted
---------------------
Investment.
"Restricted Physical Security" means a Physical Security containing,
----------------------------
or required to contain, a Securities Act Legend.
"Restricted Subsidiary" means any Subsidiary of the Company that has
---------------------
not been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.17. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of such covenant.
"Rule 144" means Rule 144 under the Securities Act.
--------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the 11 7/8% Senior Discount Notes due 2007, as
----------
amended or supplemented from time to time pursuant to the terms of this
Indenture, that are issued under this Indenture.
<PAGE>
-23-
"Securities Custodian" means Colorado National Bank, as custodian with
--------------------
respect to the Securities in global form, or any successor entity thereto.
"Semi-Annual Accrual Date" has the meaning set forth in the definition
------------------------
of Accreted Value.
"Senior Credit Facility" means the Amended and Restated Credit
----------------------
Agreement, dated as of April 9, 1996, between the Company, the lenders named
therein, The Chase Manhattan Bank, as Administrative Agent, J.P. Morgan
Securities Inc., as Syndication Agent, and CIBC Inc., as Managing Agent,
including any deferrals, renewals, extensions, replacements, refinancings or
refundings thereof, or amendments, modifications or supplements thereto and any
agreement providing therefor, whether by or with the same or any other lender,
creditor, group of lenders or group of creditor, and including related notes,
guarantee and security agreements and other instruments and agreements executed
in connection therewith.
"Shelf Registration Statement" has the meaning set forth in the
----------------------------
Registration Rights Agreement.
"Significant Restricted Subsidiary" means, at any date of
---------------------------------
determination, (a) any Restricted Subsidiary that, together with its
Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent
fiscal year of the Company accounted for more than 10.0% of the consolidated
revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of
such fiscal year, owned more than 10.0% of the consolidated assets of the
Company and the Restricted Subsidiaries, all as set forth on the consolidated
financial statements of the Company and the Restricted Subsidiaries for such
year prepared in conformity with GAAP, and (b) any Restricted Subsidiary which,
when aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (8) of Section 6.01 has occurred, would constitute a Significant
Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity", when used with respect to any Security or any
---------------
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Strategic Equity Investment" means the issuance and sale of Qualified
---------------------------
Equity Interests of the Company for net pro-
<PAGE>
-24-
ceeds to the Company of at least $25.0 million to a Person engaged primarily in
the cable television, wireless cable television, telephone, or interactive
television business.
"Subordinated Indebtedness" means any Indebtedness of the Company
-------------------------
which is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (i) any corporation of
----------
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (ii) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Subsidiary Guarantee" has the meaning set forth in Section 4.19.
--------------------
"Subsidiary Guarantor" means any Subsidiary of the Company that enters
--------------------
into a Subsidiary Guarantee.
"Surviving Person" means, with respect to any Person involved in or
----------------
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
---
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 10.03.
"Total Consolidated Indebtedness" means, as at any date of
-------------------------------
determination, an amount equal to the aggregate amount of all Indebtedness and
Disqualified Equity Interests of the Company and the Restricted Subsidiaries
outstanding as of such date of determination.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
-------------
department (or any successor group of the Trustee) including any vice
president, assistant vice president, assistant secretary or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those per formed by the persons who at that time shall be such officers, and
also means, with respect to a particular corporate trust
<PAGE>
-25-
matter, any other officer to whom such trust matter is referred because of his
knowledge of and familiarity with the particular subject.
"Unrestricted Global Securities" means one or more Global Securities
------------------------------
that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
--------------------------------
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Securities" means the Securities that do not and are not
-----------------------
required to bear the Securities Act Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company
-----------------------
designated as such pursuant to Section 4.17. Any such designation may be
revoked by a resolution of the Board of Directors of the Company delivered to
the Trustee, subject to the provisions of Section 4.17.
"UVC Note" means all Indebtedness and other obligations of
--------
FrontierVision Operating Partners, L.P., under that certain Subordinated
Promissory Note dated November 9, 1995 to United Video Cablevision, Inc.
"Voting Equity Interests" means Equity Interests in a corporation or
-----------------------
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
----------------------------------
all of the outstanding Voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
<PAGE>
-26-
SECTION 1.02. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" 4.03
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Event of Default" 6.01
"Funding Guarantor" 11.05
"Global Security" 2.01(a)
"144A Global Security" 2.01(a)
"Other Indebtedness" 4.19
"Participants" 2.13
"Paying Agent" 2.03
"Permitted Indebtedness" 4.04
"Physical Security" 2.01(b)
"Registrar" 2.03
"Regulation S Global Security" 2.01(a)
"Required Filing Date" 4.12
"Restricted Payment" 4.06
"Revocation" 4.17
"Securities Act Legend" 2.06(f)
"United States Government Obligation" 9.01
"Unutilized Net Cash Proceeds" 4.05
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
----------
"indenture securities" means the Securities.
--------------------
"indenture security holder" means a Securityholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" or "obligors" on the indenture securities means the Issuers
------- --------
or any other obligor on the Securities.
<PAGE>
-27-
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transac tions; and
(6) "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.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
(a) Global Securities. Securities offered and sold to QIBs in
-----------------
reliance on Rule 144A shall be issued initially substantially in the form of
Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly executed by
- ---------
the Company and authenticated by the Trustee as hereinafter provided. Such
Security shall be referred to herein as the "144A Global Security." Securities
--------------------
offered and sold in reliance on Regulation S shall be issued initially
substantially in the form of Exhibit A hereto in the name of Cede & Co. as
---------
nominee of DTC, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Such Security shall be referred to herein as the
"Regulation S Global Security." Unrestricted Global Securities shall be issued
- -----------------------------
initially in accordance with Sections 2.06(b)(iv), 2.06(c)(ii)
<PAGE>
-28-
and 2.06(e) in the name of Cede & Co. as nominee of DTC, duly executed by the
Issuers and authenticated by the Trustee as hereinafter provided. The 144A
Global Security, Regulation S Global Security and Unrestricted Global Security
are collectively referred to herein as the "Global Securities." The aggregate
-----------------
Principal Amount at Maturity of each of the Global Securities may from time to
time be increased or decreased by adjustments made on the records of the Trustee
as hereinafter provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate Principal Amount at Maturity of outstanding Securities
from time to time endorsed thereon and that the aggregate Principal Amount at
Maturity of outstanding Securities represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges, redemptions and
transfers of interests therein in accordance with the terms of this Indenture.
Any endorsement of a Global Security to reflect the amount of any increase or
decrease in the Principal Amount at Maturity of outstanding Securities
represented thereby shall be made by the Trustee in accordance with instructions
given by the Holder thereof as required by Section 2.06.
Upon the issuance of the Global Security to DTC, DTC shall credit, on
its internal book-entry registration and transfer system, its Participants'
accounts with the respective interests owned by such Participants. Interests in
the Global Securities shall be limited to Participants, including Euroclear and
Cedel, and indirect Participants.
The Participants shall not have any rights either under this Indenture
or under any Global Security with respect to such Global Security held on their
behalf by DTC, and DTC may be treated by the Issuers, the Trustee and any agent
of the Issuers or the Trustee as the absolute owner of such Global Security for
the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on the Global Securities
and for all other purposes. Notwithstanding the foregoing, nothing herein
shall prevent the Issuers, the Trustee or any agent of the Issuers or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Participants,
the operation of customary practices of DTC governing the exercise of the
rights of an owner of a beneficial interest in any Global Security.
<PAGE>
-29-
The provisions of the "Operating Procedures of the Euroclear System,"
"Terms and Conditions Governing Use of Euroclear," "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel, and successor
provisions, shall be applicable to interests in the Regulation S Global Security
that are held by the Participants through Euroclear or Cedel.
(b) Physical Securities. Securities offered and sold to Institutional
-------------------
Accredited Investors who are not also QIBs shall be issued substantially in the
form of Exhibit A hereto, in certificated form and issued in the names of the
---------
purchasers thereof (or their nominees), duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided. Securities in
certificated form shall be referred to herein as the "Physical Securities."
-------------------
(c) Securities. The provisions of the form of Securities contained
----------
in Exhibit A hereto are incorporated herein by reference. The Securities and
---------
the Trustee's Certificates of Authentication shall be substantially in the form
of Exhibit A hereto. The Securities may have notations, legends or endorsements
---------
required by law, stock exchange rule or usage. The Issuers shall approve the
form of the Securities and any notation, legend or endorsement (including
notations relating to the Guarantee) on them. If required, the Securities shall
bear the appropriate legend regarding original issue discount for federal income
tax purposes. Each Security shall be dated the date of its authentication. The
terms and provisions contained in the Securities shall constitute, and are
hereby expressly made, a part of this Indenture.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers of each of the Issuers shall sign the Securities for each
of the Issuers by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized officer of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
<PAGE>
-30-
The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate original Principal Amount at Maturity of up to
$237,650,000 in one or more series, (ii) Private Exchange Securities from time
to time only in exchange for a like Principal Amount at Maturity of Initial
Global Securities as of the date of such exchange and (iii) Unrestricted
Securities from time to time only (x) in exchange for a like Principal Amount at
Maturity of Initial Securities as of the date of such exchange or (y) in an
aggregate Principal Amount at Maturity as of the date of authentication of not
more than the excess of $237,650,000 (reduced, if the Cash Interest Election is
made, by the aggregate unaccreted portion of the Accreted Value of all
Securities then outstanding which would have accreted if no Cash Interest
Election had been made) over the sum of the aggregate Principal Amount at
Maturity as of the date of authentication of (A) Initial Securities then
outstanding, (B) Private Exchange Securities then outstanding and (C)
Unrestricted Securities issued in accordance with clause (iii)(x), in each case
upon a written order signed by an Officer of each of the Issuers. The order
shall specify the amount of Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated. The order shall also
provide instructions concerning registration, amounts for each Holder and
delivery. The aggregate Principal Amount at Maturity of Securities outstanding
at any time may not exceed $237,650,000 (reduced, if the Cash Interest Election
is made, by the aggregate unaccreted portion of the Accreted Value of all
Securities then outstanding which would have accreted if no Cash Interest
Election had been made) except as provided in Section 2.07. The Securities
shall be issued only in registered form, without coupons and only in
denominations of $1,000 Principal Amount at Maturity and any integral multiple
thereof.
SECTION 2.03. Registrar; Paying Agent; Depository.
-----------------------------------
The Issuers shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
---------
office or agency where Securities may be presented for payment ("Paying Agent").
------------
The Issuers may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Issuers 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 that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Issuers shall notify the Trustee of
<PAGE>
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the name and address of any such Agent. If the Issuers fail to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
The Issuers initially appoint the Trustee as Registrar and Paying
Agent. The Issuers shall give written notice to the Trustee in the event that
either of the Issuers decides to act as Registrar or Paying Agent.
The Issuers initially appoint DTC to act as Depository with respect to
any Global Securities and initially appoint the Trustee to act as Securities
Custodian with respect to any Global Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust.
-----------------------------------
The Issuers shall require each Paying Agent to agree in writing to
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal or Accreted Value of or
interest on the Securities (whether such money has been paid to it by the
Issuers or any other obligor on the Securities), and the Issuers and the Paying
Agent shall each notify the Trustee of any default by either of the Issuers (or
any other obligor on the Securities) in making any such payment. If either of
the Issuers or a Subsidiary of either of the Issuers acts as Paying Agent, it
shall segregate the money and hold it as a separate trust fund. The Issuers 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 making such payment the Paying Agent
shall have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Issuers shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
<PAGE>
-32-
SECTION 2.06. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Securities. Transfer of the
------------------------------------------
Global Securities shall be by delivery. Global Securities will be exchanged by
the Issuers for Physical Securities only (i) if DTC notifies the Issuers that
it is unwilling or unable to continue to act as depositary with respect to the
Global Securities or ceases to be a clearing agency registered under the
Exchange Act and, in either case, a successor depositary registered as a
clearing agency under the Exchange Act is not appointed by the Issuers within
120 days, (ii) at any time if the Issuers in their sole discretion determine
that the Global Securities (in whole but not in part) should be exchanged for
Physical Securities or (iii) if the owner of an interest in the Global
Securities requests such Physical Securities, following an Event of Default
under this Indenture, in a writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the previous
paragraph, Physical Securities shall be issued in such names as DTC shall
instruct the Trustee in writing and the Trustee shall cause the aggregate
Principal Amount at Maturity of the applicable Global Security to be reduced
accordingly and direct DTC to make a corresponding reduction in its book-entry
system. The Issuers shall execute and the Trustee shall authenticate and make
available for delivery to the Person designated in the instructions a Physical
Security in the appropriate Principal Amount at Maturity. The Trustee shall
make available for delivery such Physical Securities to the Persons in whose
names such Securities are so registered. Physical Securities issued in exchange
for an Initial Global Security pursuant to this Section 2.06(a) shall bear the
Securities Act Legend and shall be subject to all restrictions on transfer
contained therein. Global Securities may also be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10. Every Security
authenticated and made available for delivery in exchange for, or in lieu of, a
Global Security or any portion thereof, pursuant to Section 2.07 or 2.10, shall
be authenticated and made available for delivery in the form of, and shall be, a
Global Security. A Global Security may not be exchanged for another Security
other than as provided in this Section 2.06(a).
(b) Transfer and Exchange of Interests in Global Securities. The
-------------------------------------------------------
transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
<PAGE>
-33-
required by the Securities Act. The Trustee shall have no obligation to
ascertain DTC's compliance with any such restrictions on transfer. Transfers
of interests in Global Securities shall also require compliance with
subparagraph (i) below, as well as one or more of the other following
subparagraphs as applicable:
(i) All Transfers and Exchanges of Interests in Global Securities.
-------------------------------------------------------------
In connection with all transfers and exchanges of interests in Global
Securities (other than transfers of interests in a Global Security to
Persons who take delivery thereof in the form of an interest in the same
Global Security), the transferor of such interest must deliver to the
Registrar (1) instructions given in accordance with the Applicable
Procedures from a Participant or an indirect Participant directing DTC to
credit or cause to be credited an interest in the specified Global Security
in an amount equal to the interest to be transferred or exchanged, (2) a
written order given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase and (3) instructions given by the Holder of the Global
Security to effect the transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global Security.
---------------------------------------------------------
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in the same Initial Global
Security in accordance with the transfer restrictions set forth in Section
2.06(f) hereof.
(iii) Transfer of Interests to Another Initial Global Security.
--------------------------------------------------------
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in another Initial Global
Security if the Registrar receives the following:
(A) if the transferee will take delivery in the form of an
interest in the 144A Global Security, then the transferor must deliver
a certificate in the form of Exhibit C hereto, including the
---------
certifications in item 1 thereof; or
(B) if the transferee will take delivery in the form of an
interest in the Regulation S Global Security, then the transferor
must deliver a certificate in the form of Exhibit C hereto, including
---------
the certifications in item 2 thereof.
<PAGE>
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(iv) Transfer and Exchange of Interests in Initial Global Security for
-----------------------------------------------------------------
Interests in an Unrestricted Global Security. Interests in any Initial
--------------------------------------------
Global Security may be exchanged by the holder thereof for an interest in
the Unrestricted Global Security or transferred to a Person who takes
delivery thereof in the form of an interest in the Unrestricted Global
Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such an interest in an Initial Global
Security proposes to exchange it for an interest in the
Unrestricted Global Security, a certificate from such Holder in
the form of Exhibit D hereto, including the certifications in
---------
item 1(a) thereof;
(2) if the holder of such an interest in an Initial Global
Security proposes to transfer it to a Person who shall take
delivery thereof in the form of an interest in an Unrestricted
Global Security, a certificate in the form of Exhibit C hereto,
---------
including the certification in item 4 thereof; and
(3) in each such case set forth in this paragraph (C), an
Opinion of Counsel in form reasonably acceptable to the Issuers,
to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer
contained herein and in Section 2.06(f) hereof are not required
in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time
when an Unrestricted Global Security has not yet been issued, the Issuers
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02, the Trustee shall authenticate one or more Unrestricted
Global Securities in an aggregate Principal Amount at Matu-
<PAGE>
-35-
rity equal to the Principal Amount at Maturity of interests in the Initial
Global Security transferred pursuant to paragraph (B) above.
(v) Notation by the Trustee of Transfer of Interests Among Global
-------------------------------------------------------------
Securities. Upon satisfaction of the requirements for transfer of
----------
interests in Global Securities pursuant to clauses (iii) or (iv) above,
the Trustee, as Registrar, shall reduce or cause to be reduced the
aggregate Principal Amount at Maturity of the relevant Global Security from
which the interests are being transferred, and increase or cause to be
increased the aggregate Principal Amount at Maturity of the Global Security
to which the interests are being transferred, in each case, by the
Principal Amount at Maturity so transferred and shall direct DTC to make
corresponding adjustments in its book-entry system. No transfer of
interests of a Global Security shall be effected until, and any transferee
pursuant thereto shall succeed to the rights of a holder of such interests
only when, the Registrar has made appropriate adjustments to the
applicable Global Security in accordance with this paragraph.
(c) Transfer or Exchange of Physical Securities for Interests in a
--------------------------------------------------------------
Global Security.
- ---------------
(i) If any Holder of Physical Securities required to contain the
Securities Act Legend proposes to exchange such Securities for an interest
in a Global Security or to transfer such Physical Securities to a Person
who takes delivery thereof in the form of an interest in a Global Security,
then, upon receipt by the Registrar of the following documentation (all of
which may be submitted by facsimile):
(A) if the Holder of such Physical Registered Securities proposes
to exchange such Securities for an interest in an Initial Global
Security, a certificate from such Holder in the form of Exhibit D
---------
hereto, including the certifications in item 2 thereof;
(B) if such Physical Securities are being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit C hereto, including the
---------
certifications in item 1 thereof; or
(C) if such Physical Securities are being transferred to a Non-
U.S. Person (as defined in Regulation S) in an offshore transaction in
accordance with
<PAGE>
-36-
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in item 2
---------
thereof,
the Trustee shall cancel the Physical Securities, increase or cause to be
increased the aggregate Principal Amount at Maturity of, in the case of
clause (B) above, the 144A Global Security or, in the case of clause (C)
above, the Regulation S Global Security, and direct DTC to make a
corresponding increase in its book-entry system.
(ii) A Holder of Physical Securities required to contain the
Securities Act Legend may exchange such Securities for an interest in the
Unrestricted Global Security or transfer such Restricted Physical
Securities to a Person who takes delivery thereof in the form of an
interest in the Unrestricted Global Security only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) upon receipt by the Registrar of the following documentation
(all of which may be submitted by facsimile):
(1) if the Holder of such Physical Securities proposes to
exchange such Securities for an interest in the Unrestricted
Global Security, a certificate from such Holder in the form of
Exhibit D hereto, including the certifications in item 1(b)
---------
thereof;
(2) if the Holder of such Registered Securities proposes to
transfer such Securities to a Person who shall take delivery
thereof in the form of an interest in the Unrestricted Global
Security, a certificate in the form of Exhibit C hereto,
---------
including the certifications in item 4 thereof; and
(3) in each such case set forth in this paragraph (C), an
Opinion of Counsel in form reasonably acceptable to the Issuers,
to the effect
<PAGE>
-37-
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in Section 2.06(f) hereof are not required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above
at a time when an Unrestricted Global Security has not yet been
issued, the Issuers shall issue and, upon receipt of an authentication
order in accordance with Section 2.02, the Trustee shall authenticate
one or more Unrestricted Global Securities in an aggregate Principal
Amount at Maturity equal to the Principal Amount at Maturity of
Physical Securities transferred pursuant to paragraph (B) above.
(d) Transfer and Exchange of Physical Securities.
--------------------------------------------
(i) Transfer of a Physical Security to Another Physical Security.
------------------------------------------------------------
Following the occurrence of one or more of the events specified in Section
2.06(a), a Physical Security may be transferred to Persons who take
delivery thereof in the form of another Physical Security if the Registrar
receives the following:
(A) if the transfer is being effected pursuant to and in
accordance with Rule 144A, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including the
---------
certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to and in
accordance with Regulation S, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including the
---------
certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical Securities for
-----------------------------------------------------------
Unrestricted Physical Securities. Following the occurrence of one or more
--------------------------------
of the events specified in Section 2.06(a), a Restricted Physical Security
may be exchanged by the Holder thereof for an Unrestricted Physical
Security or transferred to a Person who takes delivery thereof in the form
of an Unrestricted Physical Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
<PAGE>
-38-
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement; or
(C) the Registrar receives a certificate from such holder in the
form of Exhibit D hereto, including the certifications in item 1(c)
---------
thereof and an Opinion of Counsel in form reasonably acceptable to the
Issuers, to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in Section 2.06(f) hereof are not
required in order to maintain compliance with the Securities Act.
(iii) Exchange of Physical Securities. When Physical Securities
-------------------------------
are presented by a Holder to the Registrar with a request to register the
exchange of such Physical Securities for an equal Principal Amount at
Maturity of Physical Securities of other authorized denominations, the
Registrar shall make the exchange as requested only if the Physical
Securities are endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Registrar duly executed by such Holder or by
his attorney duly authorized in writing and shall be issued only in the
name of such Holder or its nominee. The Physical Securities issued in
exchange for Physical Securities shall bear the Securities Act Legend and
shall be subject to all restrictions on transfer contained herein in each
case to the same extent as the Physical Securities so exchanged.
(iv) Return of Physical Securities. In the event of a transfer
-----------------------------
pursuant to clauses (i) or (ii) above and the Holder thereof has delivered
certificates representing an aggregate Principal Amount at Maturity of
Securities in excess of that to be transferred, the Issuers shall execute
and the Trustee shall authenticate and make available for delivery to the
Holder of such Security, without service charge, a new Physical Security or
Securities of any authorized denomination requested by the Holder, in an
aggregate Principal Amount at Maturity equal to the portion of the Security
not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer (as
--------------
defined in the Registration Rights Agreement) in accordance with the
Registration Rights Agreement, the Issuers shall issue and, upon receipt of an
authentication order in accordance with Section 2.02, the Trustee shall
authenticate one or more Unrestricted Global Securities in an aggregate
Principal
<PAGE>
-39-
Amount at Maturity equal to the Principal Amount at Maturity of the interests in
the Initial Global Securities tendered for acceptance (and not withdrawn) by
persons participating therein. Concurrently with the issuance of such
Securities, the Trustee shall cause the aggregate Principal Amount at Maturity
of the applicable Initial Global Securities to be reduced accordingly and direct
DTC to make a corresponding reduction in its book-entry system. The Trustee
shall cancel any Restricted Physical Certificates in accordance with Section
2.11 hereof.
In the case that one or more of the events specified in Section
2.06(a) have occurred, upon the occurrence of such Exchange Offer, the Issuers
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02, the Trustee shall authenticate Unrestricted Physical Securities in
an aggregate Principal Amount at Maturity equal to the Principal Amount at
Maturity of the Restricted Physical Securities tendered for acceptance by
persons participating therein.
(f) Legends. Each Initial Global Security and each Restricted
-------
Physical Security shall bear the legend (the "Securities Act Legend") in
---------------------
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE REOFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT OR (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT,
(2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER
<PAGE>
-40-
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Global Security Legend. Each Global Security shall bear a legend
----------------------
in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO A NOMINEE
OF DTC, OR BY ANY SUCH NOMINEE OF DTC, OR BY DTC TO A SUCCESSOR DEPOSITORY
OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
"TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.06 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At such
----------------------------------------------------
time as all interests in the Global Securities have been exchanged for Physical
Securities, all Global Securities shall be returned to or retained and canceled
by the Trustee in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any interest in a Global Security is exchanged for an interest
in another Global Security or for Physical Securities, the Principal Amount at
Maturity of Securities represented by such Global Security shall be reduced
accord accordingly and an endorsement shall be made on such Global Security, by
the Trustee to reflect such reduction.
<PAGE>
-41-
(i) General Provisions Relating to All Transfers and Exchanges.
----------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Securities
and Physical Securities upon a written order signed by an Officer of each
of the Issuers or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any stamp or transfer tax or similar
governmental charge payable in connection therewith (other than any such
stamp or transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 4.05, 4.14 and 10.05
hereof).
(iii) All Global Securities and Physical Securities issued upon
any registration of transfer or exchange of Global Securities or Physical
Securities shall be the valid obligations of the Issuers, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Physical Securities surrendered upon such registration
of transfer or exchange.
(iv) The Issuers shall not be required (A) to issue, to register
the transfer of or to exchange Securities during a period beginning at the
opening of 15 Business Days before the day of any mailing of notice of
redemption of Securities under Section 3.02 and ending at the close of
business on the day of such mailing, (B) to register the transfer of or to
exchange any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part or (C)
to register the transfer of or to exchange a Security between a record date
and the next succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Agent and the Issuers may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal or
Accreted Value of and interest on such Securities and for all other
purposes, and none of the Trustee, any Agent or the Issuers shall be
affected by notice to the contrary.
<PAGE>
-42-
(vi) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfers of any interest in any Security (including any transfers between
or among Participants or beneficial owners of interests in any Global
Security) or Physical Security other than to require delivery of such
certificates and other documentation or evidence as are expressly required
by, and to do so if and when expressly required by the terms of, this
Indenture, and to examine the same to determine substantial compliance as
to form with the express requirements hereof.
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Issuers shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. An indemnity bond in an amount
sufficient in the judgment of the Issuers and the Trustee to protect the
Issuers, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced may be required by the Trustee or the Issuers. The
Issuers and the Trustee each may charge such Holder for its expenses in
replacing such Security.
Every replacement Security is an additional obligation of the Issuers.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Except as provided in paragraph 5(b) of the Securities, a Security does not
cease to be outstanding because either of the Issuers or an Affiliate of either
of the Issuers holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than either of the Issuers, a Subsidiary of
either of the Issuers or an Affiliate of either of the Issuers) holds on a
redemption date or Maturity Date money
<PAGE>
-43-
sufficient to pay the principal or Accreted Value of, and interest, if any, on
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and Accreted Value ceases to accrete or interest on them
ceases to accrue, as the case may be.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required Principal Amount at
Maturity of Securities have concurred in any direction, waiver or consent,
Securities owned by either of the Issuers, any Subsidiary Guarantor or any of
their respective Affiliates shall be disregarded, except that for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee actually knows
are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Issuers consider appropriate for temporary Securities.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
SECTION 2.11. Cancellation.
------------
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation. Except as provided in Section 2.07, the
Issuers may not issue new Securities to replace, or reissue or resell,
Securities which the Issuers have redeemed, paid, purchased on the open market
or otherwise, or otherwise acquired or have been delivered to the Trustee for
cancellation. The Trustee (subject to the record-retention requirements of the
Exchange Act) may, but shall not be required to destroy canceled Securities.
<PAGE>
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SECTION 2.12. Defaulted Interest.
------------------
If the Issuers default in a payment of interest on the Securities,
they shall pay the defaulted interest, plus any interest payable on the
defaulted interest pursuant to Section 4.01 hereof, to the persons who are
Securityholders on a subsequent special record date, and such term, as used in
this Section 2.12 with respect to the payment of any defaulted interest, shall
mean the fifteenth day next preceding the date fixed by the Issuers 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 Issuers shall mail to each
Security holder and to the Trustee a notice that states such special record
date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.13. Payments of Interest.
--------------------
(a) The Holder of a Physical Security at the close of business on the
regular record date with respect to any Interest Payment Date shall be entitled
to receive the interest payable on such Interest Payment Date notwithstanding
any transfer or exchange of such Physical Security subsequent to the regular
record date and prior to such Interest Payment Date, except if and to the extent
the Issuers shall default in the payment of the interest due on such Interest
Payment Date, in which case such defaulted interest shall be paid in accordance
with Section 2.12; and in the event of an exchange of a Physical Security for a
beneficial interest in any Global Security subsequent to a regular record date
or any special record date and prior to or on the related Interest Payment Date
or other payment date under Section 2.12, any payment of the interest payable on
such payment date with respect to any such Physical Security shall be made to
the Person in whose name such Physical Security was registered on such record
date. Payments of interest on the Global Securities will be made on each
Interest Payment Date to the Holder of the Global Security on the record date
with respect thereto; provided, however, that, in the event of an exchange of
-------- -------
all or a portion of a Global Security for a Physical Security subsequent to the
regular record date or any special record date and prior to or on the related
Interest Payment Date or other payment date under Section 2.12, any payment of
interest payable on such Interest Payment Date or other payment date with
respect to the Physical Security shall be made to the Holder of the Global
Security as of the applicable record date.
(b) Subject to Section 4.01, interest shall be paid to DTC, with
respect to any Global Security held by DTC, on the
<PAGE>
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applicable Interest Payment Date in accordance with instructions received from
DTC at least five Business Days before the applicable Interest Payment Date.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Issuers are to effect the redemption of any Securities pursuant
to paragraph 5 of the Securities at the applicable redemption price set forth
therein, they shall notify the Trustee in writing of the redemption date and the
Principal Amount at Maturity of Securities to be redeemed.
The Issuers shall give the notice provided for in this Section 3.01 at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed pro
---
rata or by lot or in such other manner as the Trustee shall deem appropriate and
- ----
fair. The Trustee shall make the selection from the Securities then outstanding,
subject to redemption and not previously called for redemption. The Trustee may
select for redemption portions of the Principal Amount at Maturity of Securities
but only such that no unredeemed Security shall be in a denomination of less
than $1,000 Principal Amount at Maturity. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a redemption date,
the Issuers shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
<PAGE>
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(2) the redemption price;
(3) the CUSIP number;
(4) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Issuers default in making the redemption payment,
Accreted Value on Securities called for redemption ceases to accrete and
interest on Securities called for redemption ceases to accrue on and after
the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender of such Securities
to the Paying Agent; and
(7) if any Security is being redeemed in part, the portion of the
Principal Amount at Maturity of such Security to be redeemed and that,
after the redemption date, upon surrender of such Security, a new Security
or Securities in Principal Amount at Maturity equal to the unredeemed
portion thereof will be issued.
At the Issuers' request, the Trustee shall give the notice of
redemption on behalf of the Issuers, in the Issuers' name and at the Issuers'
expense.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the redemption date.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
At least one Business Day before the redemption date, the Issuers
shall deposit with the Paying Agent (or if either of the Issuers is the Paying
Agent, such Issuer shall, on or before the redemption date, segregate and hold
in trust) money sufficient to pay the redemption price of and accrued and
unpaid interest, if any, on all Securities to be redeemed on that date other
than Securities or portions thereof called for redemption
<PAGE>
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on that date which have been delivered by the Issuers to the Trustee for
cancellation.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in Principal Amount at
Maturity to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Issuers shall pay the Accreted Value or principal of and interest
on the Securities in the manner provided in the Securities. An installment of
Accreted Value, principal or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than the Issuers, a Subsidiary or an
Affiliate of the Issuers) holds on that date money designated for and sufficient
to pay the installment in full and is not prohibited from paying such money to
the Holders of the Securities pursuant to the terms of this Indenture.
The Issuers shall pay cash interest on overdue Accreted Value or
principal at 11 7/8%. The Issuers shall pay interest on overdue installments of
interest at 11 7/8%, to the extent lawful.
Payments of the Accreted Value or principal of and interest on any
Global Securities will be made to the Depository or its nominee, as the case may
be, as the registered owner thereof. None of the Issuers, the Trustee nor any
Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in any Global Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Issuers shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Issuers in respect of the Securities and this
Indenture may
<PAGE>
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be served. The Issuers shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02.
The Issuers may also from time to time designate one or more other
offices or agencies where the Securities 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
- --------
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Issuers shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 4.03. Limitation on Transactions with
Affiliates and Related Persons.
-------------------------------
The Company will not, and will not permit, cause or suffer any
Restricted Subsidiary to, directly or indirectly, conduct any business or enter
into any transaction (or series of related transactions) with or for the benefit
of any of their respective Affiliates or any beneficial holder of 10% or more of
the Equity Interests of the Company or any officer, director or employee of the
Company or any Restricted Subsidiary (each an "Affiliate Transaction"), unless
---------------------
(a) such Affiliate Transaction is on terms which are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than would be avail
able in a comparable transaction with an unaffiliated third party, (b) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments or other consideration having a Fair Market Value in excess
of $5.0 million, a majority of the disinterested members of the Board of
Directors of the Company shall have approved such transaction and determined
that such transaction complies with the foregoing provisions and (c) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments or other consideration having a Fair Market Value of $25.0
million or more, the Company shall have obtained a written opinion from an
Independent Financial Advisor stating that the consideration to be paid or
received, as the case may be, by the Company or the Restricted Subsidiary
pursuant to such Affiliate Transaction is fair to the Company or the Restricted
Subsidiary, as the case may be, from a financial point of view.
<PAGE>
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Notwithstanding the foregoing, the restrictions set forth in this
Section 4.03 shall not apply to (i) transactions with or among the Company and
the Wholly Owned Restricted Subsidiaries, (ii) customary directors' fees,
indemnification and similar arrangements, consulting fees, employee salaries,
bonuses or employment agreements, compensation or employee benefit arrangements
and incentive arrangements with any officer, director or employee of the
Company entered into in the ordinary course of business (including customary
benefits thereunder) and payments under any indemnification arrangements
permitted by applicable law, (iii) the Agreement of Limited Partnership of the
Company or the Agreement of Limited Partnership of FVOP, in each case, as in
effect on the Issue Date, including any amendment or extension thereof that does
not otherwise violate any other covenant set forth in this Indenture, and any
transactions undertaken pursuant to any other contractual obligations in
existence on the Issue Date (as in effect on the Issue Date), (iv) the issue and
sale by the Company to its partners or stockholders of Qualified Equity
Interests, (v) any Restricted Payments made in compliance with Section 4.06
(including without limitation the making of any payments or distributions
permitted to be made in accordance with clauses (i) through (vi) of the
penultimate paragraph of Section 4.06), (vi) loans and advances to officers,
directors and employees of the Company and the Restricted Subsidiaries for
travel, entertainment, moving and other relocation expenses, in each case made
in the ordinary course of business and consistent with past business practices,
(vii) customary commercial banking, investment banking, underwriting, placement
agent or financial advisory fees paid in connection with services rendered to
the Company and its Subsidiaries in the ordinary course, (viii) the Incurrence
of intercompany Indebtedness permitted pursuant to clause (d) under the
definition of "Permitted Indebtedness" set forth in Section 4.04, (ix) the
pledge of Equity Interests of Unrestricted Subsidiaries to support the
Indebtedness thereof and (x) the Senior Credit Facility.
SECTION 4.04. Limitation on Indebtedness.
--------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness) or issue any Disqualified Equity Interests except for Permitted
Indebtedness; provided, however, that the Company or any Restricted Subsidiary
-------- -------
may Incur Indebtedness and the Company or any Restricted Subsidiary may issue
Disqualified Equity Interests if, at the time of and immediately after giving
pro forma effect to such Incurrence of Indebtedness or issuance of Disqualified
Equity Interests and the application of the proceeds therefrom, the Debt to
Operating Cash
<PAGE>
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Flow Ratio would be less than or equal to (i) 8.0 to 1.0 if the date of such
Incurrence is on or before December 31, 1998 and (ii) 7.50 to 1.0 thereafter.
The foregoing limitations will not apply to the Incurrence of any of
the following (collectively, "Permitted Indebtedness"), each of which shall be
----------------------
given independent effect:
(a) Indebtedness under the Securities and this Indenture;
(b) Indebtedness and Disqualified Equity Interests of the Company and
the Restricted Subsidiaries outstanding on the Issue Date (including
Indebtedness under the FVOP Indenture and the UVC Note);
(c) Indebtedness of the Company and the Restricted Subsidiaries under
the Senior Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the sum of (A) $650.0 million, which amount shall
be reduced by (x) any permanent reduction of commitments thereunder and (y)
any other repayment accompanied by a permanent reduction of commitments
thereunder (other than, in the case of either clause (x) or (y), in
connection with any refinancing thereof), plus (B) any amounts outstanding
----
under the Senior Credit Facility that utilize subparagraph (i) of this
paragraph of Section 4.04;
(d) (x) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Wholly Owned Restricted Subsidiary and (y) Indebtedness
of the Company owed to and held by any Wholly Owned Restricted Subsidiary
which is unsecured and subordinated in right of payment to the payment and
performance of the Issuers' obligations under this Indenture and the
Securities; provided, however, that an Incurrence of Indebtedness that is
-------- -------
not permitted by this clause (d) shall be deemed to have occurred upon (i)
any sale or other disposition of any Indebtedness of the Company or a
Wholly Owned Restricted Subsidiary referred to in this clause (d) to a
Person (other than the Company or a Wholly Owned Restricted Subsidiary),
(ii) any sale or other disposition of Equity Interests of a Wholly Owned
Restricted Subsidiary which holds Indebtedness of the Company or another
Wholly Owned Restricted Subsidiary such that such Wholly Owned Restricted
Subsidiary ceases to be a Wholly Owned Restricted Subsidiary or (iii)
designation of a Wholly Owned Restricted Subsidiary which holds
Indebtedness of the Company as an Unrestricted Subsidiary;
<PAGE>
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(e) guarantees by any Restricted Subsidiary of Indebtedness of the
Company;
(f) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary, as the case may be (which Indebtedness (i) bears
interest at fluctuating interest rates and (ii) is otherwise permitted to
be Incurred under this Section 4.04); provided, however, that the notional
-------- -------
principal amount of such Interest Rate Protection Obligations does not
exceed the principal amount of the Indebtedness to which such Interest Rate
Protection Obligations relate;
(g) Purchase Money Indebtedness and Capitalized Lease Obligations of
the Company or any Restricted Subsidiary which do not exceed $10.0 million
in the aggregate at any one time outstanding;
(h) Indebtedness or Disqualified Equity Interests of the Company or
any Restricted Subsidiary to the extent representing a replacement,
renewal, refinancing or extension (collectively, a "refinancing") of
-----------
outstanding Indebtedness or Disqualified Equity Interests of the Company
or any Restricted Subsidiary Incurred in compliance with the Debt to
Operating Cash Flow Ratio of the first paragraph of this Section 4.04 or
clause (a) or (b) of this paragraph of this Section 4.04; provided,
--------
however, that (i) Indebtedness or Disqualified Equity Interests of the
-------
Company may not be refinanced under this clause (h) with Indebtedness or
Disqualified Equity Interests of any Restricted Subsidiary, (ii) any such
refinancing shall not exceed the sum of the principal amount (or, if such
Indebtedness or Disqualified Equity Interests provide for a lesser amount
to be due and payable upon a declaration of acceleration thereof at the
time of such refinancing, an amount no greater than such lesser amount) of
the Indebtedness or Disqualified Equity Interests being refinanced plus the
amount of accrued inter est or dividends thereon and the amount of any
reasonably determined prepayment premium necessary to accomplish such
refinancing and such reasonable fees and expenses incurred in connection
therewith, (iii) Indebtedness representing a refinancing of Indebtedness of
the Company shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced, and (iv) Subordinated Indebtedness of the Company or
Disqualified Equity Interests of the Company may
<PAGE>
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only be refinanced with the Subordinated Indebtedness of the Company or
Disqualified Equity Interests of the Company; and
(i) in addition to the items referred to in clauses (a) through (h)
above, Indebtedness of the Company (including any Indebtedness under the
Senior Credit Facility that utilizes this subparagraph (i)) having an
aggregate principal amount not to exceed $25.0 million at any time
outstanding.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
--------------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) either (A) at least
75% of such consideration consists of cash or Cash Equivalents or (B) at least
75% of such consideration consists of (x) properties and capital assets
(including franchises and licenses required to own or operate such properties)
to be used in the same lines of business being conducted by the Company or any
Restricted Subsidiary at such time or (y) Equity Interests in one or more
Persons which thereby become Wholly Owned Restricted Subsidiaries whose assets
consist primarily of such properties and capital assets. The amount of any (i)
liabilities of the Company or any Restrict ed Subsidiary that are actually
assumed by the transferee in such Asset Sale and from which the Company and the
Restricted Subsidiaries are fully released shall be deemed to be cash for
purposes of determining the percentage of cash consideration received by the
Company or the Restricted Subsidiaries and (ii) notes or other similar
obligations received by the Company or the Restricted Subsidiaries from such
transferee that are immediately converted (or are converted within thirty days
of the related Asset Sale) by the Company or the Restricted Subsidiaries into
cash shall be deemed to be cash, in an amount equal to the net cash proceeds
realized upon such conversion, for purposes of determining the percentage of
cash consideration received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof
to repay (x) Indebtedness of the Company secured by a Lien on the property or
assets subject to such Asset Sale or (y) Indebtedness of any Restricted
Subsidiary and, in each case permanently reduce any related commitment;
provided, however, that if Indebtedness under the
- -------- -------
<PAGE>
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revolving credit portion of the Senior Credit Facility is repaid, the Company
need not reduce the commitments for such revolving credit portion, or (ii)
commit in writing to acquire, construct or improve properties and capital assets
(including franchises and licenses required to own or operate any such assets or
properties) to be used in the same line of business being conducted by the
Company or any Restricted Subsidiary at such time and so apply such Net Cash
Proceeds within 365 days of the receipt thereof.
To the extent all or part of the Net Cash Proceeds of any Asset Sale
are not so applied within 365 days of such Asset Sale (such Net Cash Proceeds,
the "Unutilized Net Cash Proceeds"), the Company shall, within 30 days of such
----------------------------
365th day, make an Offer to Purchase from all Holders of Securities with an
aggregate Accreted Value as of such Purchase Date equal to such Unutilized Net
Cash Proceeds, at a purchase price in cash equal to 100% of such Accreted Value
thereof plus accrued and unpaid interest, if any, to the applicable Purchase
Date; provided, however, that the Offer to Purchase may be deferred until there
-------- -------
are aggregate Unutilized Net Cash Proceeds equal to or in excess of $5.0
million, at which time the entire amount of such Unutilized Net Cash Proceeds,
and not just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph. In the event that any other Indebtedness of the
Company which ranks pari passu with the Securities requires the repayment or
---- -----
prepayment thereof, or an offer to purchase to be made to repurchase such
Indebtedness, upon the consummation of any Asset Sale, the Company may apply
the Unutilized Net Cash Proceeds otherwise required to be applied to an Offer
to Purchase to repay, prepay or offer to purchase such other Indebtedness and
to an Offer to Purchase pro rata based upon (i) the aggregate Accreted Value of
--- ----
the Securities then outstanding on the applicable Purchase Date and (ii) the
aggregate principal amount (or accreted amount, if less) of such other
Indebtedness then outstanding on such Purchase Date. The Offer to Purchase
shall remain open for a period of 20 Business Days or such longer period as may
be required by law. To the extent the aggregate Accreted Value of Securities
tendered pursuant to the Offer to Purchase exceeds the Unutilized Net Cash
Proceeds, Securities shall be purchased among Holders on a proportionate basis
(based on the relative aggregate Accreted Value of Securities validly tendered
for purchase by Holders thereof). To the extent the Unutilized Net Cash
Proceeds exceed the aggregate Accreted Value of Securities tendered by the
Holders of the Securities pursuant to the Offer to Purchase, the Company may
retain and utilize any portion of the Unutilized Net
<PAGE>
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Cash Proceeds not applied to repurchase the Securities for any purpose
consistent with the other terms of this Indenture.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
(b) The Company will mail the Offer for an Offer to Purchase
required pursuant to Section 4.05(a) not more than 395 days after consummation
of the Asset Sale resulting in the Offer to Purchase. Each Holder shall be
entitled to tender all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement that any portion
of a Security not tendered must be in an integral multiple of $1,000 Principal
Amount at Maturity and subject to any proration of the Offer among tendering
Holders.
(c) Not later than the date of the Offer with respect to an Offer to
Purchase pursuant to this Section 4.05, the Company shall deliver to the Trustee
an Officers' Certificate as to the Purchase Amount.
On or prior to the Purchase Date specified in the Offer to Purchase,
the Company shall (i) accept for payment (on a pro rata basis, if necessary)
Securities or portions thereof validly tendered pursuant to such Offer,
(ii) deposit with the Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 2.04) money
sufficient to pay the Purchase Price of all Securities or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee for
cancellation all Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof accepted for payment by the Company.
The Paying Agent (or the Company, if so acting) shall promptly mail or deliver
to Holders of Securities so accepted payment in an amount equal to the Purchase
Price for such Securities, and the Trustee shall promptly authenticate and mail
or deliver to each Holder a new Security or Securities equal in Principal Amount
at Maturity to any unpurchased portion of the Security surrendered as requested
by the Holder. Any Security not accepted for payment shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
<PAGE>
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announce the results of the Offer on or as soon as practicable after the
Purchase Date.
SECTION 4.06. Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than payments or distributions made to the Company or a
Wholly Owned Restricted Subsidiary and dividends or distributions payable
solely in Qualified Equity Interests of the Company or in options, warrants
or other rights to purchase Qualified Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or a Wholly Owned Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value more than one
year prior to the stated maturity thereof any Subordinated Indebtedness of
the Company (other than any such Subordinated Indebtedness held by a Wholly
Owned Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments) in
any Person (other than in the Company, a Wholly Owned Restricted Subsidiary
or a Person that becomes a Wholly Owned Restricted Subsidiary, or is merged
with or into or consolidated with the Company or a Wholly Owned Restricted
Subsidiary (provided the Company or a Wholly Owned Restricted Subsidiary is
the survivor), as a result of or in connection with such Investment)
(such payments or any other actions (other than Permitted Investments)
described in (i), (ii), (iii) and (iv) collectively, "Restricted Payments"),
-------------------
unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or after giving effect to such Restricted Payment;
<PAGE>
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(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of Indebtedness (other than Permitted
Indebtedness) under the Debt to Operating Cash Flow Ratio of the first
paragraph of Section 4.04; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to the sum of (1) the
difference between (x) the Cumulative Available Cash Flow determined at the
time of such Restricted Payment and (y) 140% of cumulative Consolidated
Interest Expense of the Company determined for the period commencing on the
Issue Date and ending on the last day of the latest fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment, plus (2) the aggregate net
----
proceeds (with the value of any non-cash proceeds to be the Fair Market
Value thereof as determined by an Independent Financial Advisor) received
by the Company either (x) as capital contributions to the Company after the
Issue Date or (y) from the issue and sale (other than to a Restricted
Subsidiary) of its Qualified Equity Interests after the Issue Date
(excluding the net proceeds from any issuance and sale of Qualified Equity
Interests financed, directly or indirectly, using funds borrowed from the
Company or any Restricted Subsidiary until and to the extent such borrowing
is repaid), plus (3) the principal amount (or accrued or accreted amount,
----
if less) of any Indebtedness of the Company or any Restricted Subsidiary
Incurred after the Issue Date which has been converted into or exchanged
for Qualified Equity Interests of the Company, plus (4) in the case of the
----
disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount (to the extent not included in
the computation of Cumulative Available Cash Flow) equal to the lesser of:
(i) the return of capital with respect to such Investment and (ii) the
amount of such Investment which was treated as a Restricted Payment, in
either case, less the cost of the disposition of such Investment, plus (5)
----
the Company's proportionate interest in the lesser of the Fair Market
Value or the net worth of any Unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the Issue Date in accordance
with Section 4.17 not to exceed in any case the Designation Amount with
respect to such Restricted Subsidiary upon its Designation, minus (6) the
-----
Designation Amount with respect to any Subsidiary of the Company which has
been designated
<PAGE>
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as an Unrestricted Subsidiary after the Issue Date in accordance with
Section 4.17.
The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of
this Indenture; (ii) so long as no Default or Event of Default shall have
occurred and be continuing, the retirement of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified
Equity Interests of the Company; provided, however, that any such net cash
-------- -------
proceeds and the value of any Equity Interests issued in exchange for such
retired Equity Interests are excluded from clause (c)(2) of the preceding
paragraph (and were not included therein at any time); (iii) so long as no
Default or Event of Default shall have occurred and be continuing, the purchase,
redemption, retirement or other acquisition of Subordinated Indebtedness of the
Company made in exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of (x) Qualified Equity Interests of the Company; provided, however, that any
-------- -------
such net cash proceeds and the value of any Equity Interests issued in exchange
for Subordinated Indebtedness of the Company are excluded from clauses (c)(2)
and (c)(3) of the preceding paragraph (and were not included therein at any
time) or (y) other Subordinated Indebtedness of the Company having no stated
maturity for the payment of principal thereof prior to the final stated maturity
of the Securities; (iv) the payment of any dividend or distribution on Equity
Interests of the Company or any Restricted Subsidiary to the extent necessary
to permit the direct or indirect beneficial owners of such Equity Interests to
pay federal and state income tax liabilities arising from income of the Company
or such Restricted Subsidiary and attributable to them solely as a result of the
Company or such Restricted Subsidiary (and any intermediate entity through which
such holder owns such Equity Interests) being a partnership or similar pass-
through entity for federal income tax purposes; (v) so long as no Default or
Event of Default has occurred and is continuing, any Investment made out of the
net cash proceeds of the substantially concurrent issue and sale (other than to
a Restricted Subsidiary) of Qualified Equity Interests of the Company;
provided, however, that any such net cash proceeds are excluded from clause
- -------- -------
(c)(2) of the preceding paragraph (and were not included therein at any time);
(vi) the purchase, redemption or other acquisition, cancellation
<PAGE>
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or retirement for value of Equity Interests, or options, warrants, equity
appreciation rights or other rights to purchase or acquire Equity Interests, of
the Company or any Restricted Subsidiary, or similar securities, held by
officers or employees or former officers or employees of the Company or any
Restricted Subsidiary (or their estates or beneficiaries under their estates),
upon death, disability, retirement or termination of employment, not to exceed
$2.0 million in any calendar year; (vii) the payment of any dividend or
distribution on Equity Interests of a Restricted Subsidiary out of such
Restricted Subsidiary's net income from the Issue Date to Persons other than the
Company or a Restricted Subsidiary; provided that such dividend or distribution
--------
is paid pro rata to all holders of such Equity Interests; (viii) Investments in
--- ----
Persons (including, without limitation, Restricted Subsidiaries which are not
Wholly Owned Restricted Subsidiaries and Unrestricted Subsidiaries) engaged in a
Related Business, not to exceed $30.0 million at any one time outstanding; and
(ix) Permitted Strategic Investments.
In determining the amount of Restricted Payments permissible under
this Section 4.06, amounts expended pursuant to clauses (i), (vi) and (ix) of
the immediately preceding paragraph shall be included as Restricted Payments and
amounts expended pursuant to clauses (ii) through (v) and (vii) and (viii) shall
be excluded. The amount of any non-cash Restricted Payment shall be deemed to
be equal to the Fair Market Value thereof at the date of the making of such
Restricted Payment.
SECTION 4.07. Corporate Existence.
-------------------
Subject to Article Five, the Issuers shall do or shall cause to be
done all things necessary to preserve and keep in full force and effect their
respective corporate or partnership existence, as the case may be, and the
corporate, partnership or other existence of each of the Restricted Subsidiaries
in accordance with the respective organizational documents of each such
Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Issuers and the Restricted Subsidiaries; provided, however,
-------- -------
that the Issuers shall not be required to preserve any such right, license or
franchise, or the corporate or partnership existence of any Restricted
Subsidiary, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuers and the Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not, and will not be, adverse in any material respect to the Holders;
provided, further, however, that a determination of the Board of Directors of
- -------- ------- -------
the Company shall not be required in the event of a merger of one
<PAGE>
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or more Wholly Owned Restricted Subsidiaries of the Company with or into another
Wholly Owned Restricted Subsidiary of the Company or another Person, if the
surviving Person is a Wholly Owned Restricted Subsidiary of the Company
organized under the laws of the United States or a State thereof or of the
District of Columbia.
SECTION 4.08. Payment of Taxes and Other Claims.
---------------------------------
The Issuers shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon either of the Issuers or any of
their Restricted Subsidiaries or upon the income, profits or property of either
of the Issuers or any of their Restricted Subsidiaries and (2) all lawful claims
for labor, materials and supplies which, in each case, if unpaid, might by law
become a material liability, or Lien (other than a Permitted Lien) upon the
property, of either Issuer or any of their Restricted Subsidiaries; provided,
--------
however, that the Issuers shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which appropriate reserves or other provision has been made.
SECTION 4.09. Notice of Defaults.
------------------
(1) In the event that any Indebtedness of either of the Issuers or
any of their Restricted Subsidiaries is declared due and payable before its
maturity because of the occurrence of any default (or any event which, with
notice or lapse of time, or both, would constitute such a default) under such
Indebtedness, the Issuers shall promptly give written notice to the Trustee of
such declaration, the status of such default or event and what action the
Issuers are taking or propose to take with respect thereto.
(2) Upon becoming aware of any Default or Event of Default, the
Issuers shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties.
-------------------------
The Company shall cause all material properties owned by or leased to
it or any of its Restricted Subsidiaries and used or useful in the conduct of
its business or the business of any of its Restricted Subsidiaries to be
maintained and kept in normal condition, repair and working order and supplied
with all
<PAGE>
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necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
--------
however, that nothing in this Section shall prevent the Company or any of its
- -------
Restricted Subsidiaries from discontinuing the use, operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Company or of the
board of directors of the Restricted Subsidiary concerned, or of an officer (or
other agent employed by the Company or of any of its Restricted Subsidiaries) of
the Company or such Restricted Subsidiary having responsibility for any such
property, desirable in the conduct of the business of the Company or any of its
Restricted Subsidiaries, and if such discontinuance or disposal is not adverse
in any material respect to the Holders.
SECTION 4.11. Compliance Certificate.
----------------------
The Issuers shall deliver to the Trustee within 100 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer of each of
the Issuers stating that a review of the activities of the Issuers has been made
under the supervision of the signing officers with a view to determining whether
a Default or Event of Default has occurred and whether or not the signers know
of any Default or Event of Default that occurred during such fiscal year. If
they do know of such a Default or Event of Default, the certificate shall
describe all such Defaults or Events of Default, their status and the action the
Issuers are taking or propose to take with respect thereto. The first
certificate to be delivered by the Issuers pursuant to this Section 4.11 shall
be for the fiscal year ending December 31, 1997.
SECTION 4.12. Provision of Financial Information.
----------------------------------
Whether or not the Issuers are subject to Section 13(a) or 15(d) of
the Exchange Act, or any successor provision thereto, the Issuers shall file
with the SEC the annual reports, quarterly reports and other documents which the
Issuers would have been required to file with the SEC pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Issuers were so
required, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Issuers would have
---------------------
been required so to file such documents if the Issuers were so required. The
Issuers shall
<PAGE>
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also in any event (a) within 15 days of each Required Filing Date (whether or
not permitted or required to file with the SEC) (i) transmit by mail to all
holders of Securities, as their names and addresses appear in the note register,
without cost to such holders, and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents which the Issuers are
required to file with the SEC pursuant to the preceding sentence or, if such
filing is not so permitted, information and data of a similar nature, and
(b) if, notwithstanding the preceding sentence, filing such documents by the
Issuers with the SEC is not permitted under the Exchange Act, promptly upon
written request supply copies of such documents to any prospective Holder. The
Issuers shall not be obligated to file any such reports with the SEC if the SEC
does not permit such filings for all companies similarly situated other than due
to any action or inaction by the Issuers. Notwithstanding the foregoing
provisions, this covenant shall be deemed to have been satisfied during the
period prior to the effectiveness of the Exchange Offer Registration Statement
if the Issuers cause such annual reports, quarterly reports and other documents
to be filed with the Commission by FVOP if such filings contain substantially
the same information that would be required if such documents were filed by the
Issuers. The Issuers will also comply with (S)314(a) of the TIA.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Issuers and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law, which would prohibit or
forgive either of the Issuers or such Subsidiary Guarantor from paying all or
any portion of the Accreted Value or principal of and/or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each of the Issuers
and the Subsidiary Guarantors hereby expressly waives all benefit or advantage
of any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.14. Change of Control.
-----------------
(a) The Company shall, within 35 days following the date of
consummation of a transaction resulting in a Change of
<PAGE>
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Control, commence an Offer to Purchase all outstanding Securities at a purchase
price in cash equal to 101% of the Accreted Value of the Securities on such
Purchase Date plus accrued and unpaid interest, if any, to such Purchase Date.
Such Offer to Purchase will be consummated not earlier than 20 Business Days and
not later than 65 days after the commencement thereof. Each Holder shall be
entitled to tender all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement that any
untendered portion of a Security must be in an integral multiple of $1,000
Principal Amount at Maturity.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04) money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted
together with an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Company. The Paying Agent (or the Company,
if so acting) shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Purchase Price for such Securities,
and the Trustee shall promptly authenticate and mail or deliver to each Holder a
new Security or Securities equal in Principal Amount at Maturity to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Offer on or as soon as practicable after the Purchase Date.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule14e-1 under, the Exchange Act and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed an Event of Default or an event that with the
passing of time or giving of notice, or both, would constitute an Event of
Default.
SECTION 4.15. [Intentionally Omitted.]
<PAGE>
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SECTION 4.16. Limitations on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
----------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions to the Company
or any other Restricted Subsidiary on its Equity Interests or with respect to
any other interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, the
Company or any other Restricted Subsidiary or (c) transfer any of its
properties or assets to the Company or any other Restricted Subsidiary (any such
encumbrance or restriction in the foregoing clauses (a), (b) and (c), a "Payment
-------
Restriction"), except for (i) any such encumbrance or restriction existing on
- -----------
the Issue Date, including, without limitation, pursuant to the Senior Credit
Facility or the FVOP Indenture, in each case as in effect on the Issue Date, and
any amendments, restatements, renewals, replacements or refinancings
(collectively, a "refinancing") thereof; provided, however, that such
----------- -------- -------
refinancings are either (x) no more restrictive in the aggregate with respect to
such encumbrances or restrictions than those contained in the FVOP Indenture as
in effect on the Issue Date or (y) do not prohibit the payment of dividends or
distributions to the Company in an amount sufficient to pay cash interest on
Securities (assuming no Cash Interest Election is made) as required under this
Indenture or to pay the Principal Amount at Maturity of the Securities at their
Stated Maturity unless an event has occurred which permits (or with the giving
of notice or lapse of time or both would permit) the acceleration of the
maturity of such Indebtedness, (ii) any such encumbrance or restriction existing
under or by reason of applicable law, (iii) any such encumbrance or restriction
existing under or by reason of any instrument governing Indebtedness or Equity
Interests of an Acquired Person acquired by the Company or any Restricted
Subsidiary as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred by such Acquired Person in connection with, as a
result of or in contemplation of such acquisition); provided, however, that such
-------- -------
encumbrances and restrictions are not applicable to the Company or any
Restricted Subsidiary, or the properties or assets of the Company or any
Restricted Subsidiary, other than the Acquired Person, (iv) any such
encumbrance or restriction existing under or by reason of customary non-
assignment provisions in leases or cable television franchises entered into in
the ordinary course of business and consistent
<PAGE>
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with past practices, (v) any such encumbrance or restriction existing under or
by reason of any agreement governing Purchase Money Indebtedness for property
acquired in the ordinary course of business that only imposes encumbrances and
restrictions on the property so acquired, (vi) any such encumbrance or
restriction existing under or by reason of any agreement for the sale or
disposition of the Equity Interests or assets of any Restricted Subsidiary;
provided, however, that such encumbrances and restrictions described in this
- -------- -------
clause (vi) are only applicable to such Restricted Subsidiary or assets, as
applicable, and any such sale or disposition is made in compliance with
Section 4.05 to the extent applicable thereto, (vii) any such encumbrance or
restriction existing under or by reason of any agreement governing refinancing
Indebtedness permitted under clause (h) of Section 4.04; provided, however, that
-------- -------
the encumbrances and restrictions contained in the agreements governing such
Indebtedness are no more restrictive in the aggregate than those contained in
the agreements governing the Indebtedness being refinanced immediately prior to
such refinancing, (viii) any such encumbrance or restriction existing under or
by reason of this Indenture or (ix) any such encumbrance or restriction existing
under any other agreement, instrument or document hereafter in effect; provided,
--------
however, that the terms and conditions of any such encumbrance or restriction
- -------
either (a) are not more restrictive than those contained in the FVOP Indenture
as in effect on the Issue Date or (b) in the case of any such agreement,
instrument or document governing Indebtedness, do not prohibit the payment of
dividends or distributions to the Company in an amount sufficient to pay cash
interest on the Securities (assuming no Cash Interest Election is made) as
required under this Indenture or to pay the Principal Amount at Maturity of the
Securities at their Stated Maturity unless an event has occurred which permits
(or with the giving of notice or lapse of time or both would permit) the
acceleration of the maturity of such Indebtedness.
SECTION 4.17. Designation of Unrestricted Subsidiaries.
----------------------------------------
The Company may designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
-----------
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(b) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional
<PAGE>
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Indebtedness under the Debt to Operating Cash Flow Ratio of the first
paragraph of Section 4.04; and
(c) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 4.06 in an amount (the "Designation Amount") equal to the Company's
------------------
proportionate interest in the Fair Market Value of such Subsidiary on such
date; provided, however, that the condition set forth in this clause (c)
-------- -------
shall not be applicable to the designation of a Subsidiary as an
Unrestricted Subsidiary which is made as part of an Investment or Permitted
Strategic Investment made in accordance with clause (viii) or (ix) of the
penultimate paragraph of Section 4.06.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, subject any of its property or assets (other
than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction
of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary, except, in the
case of clause (x) or (y), to the extent otherwise permitted under the terms of
this Indenture, including, without limitation, pursuant to Sections 4.04 and
4.06.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
----------
(a) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered
<PAGE>
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to the Trustee certifying compliance with the foregoing provisions.
SECTION 4.18. Limitation on Liens.
-------------------
The Company will not, directly or indirectly, Incur any Liens of any
kind against or upon any of its properties or assets now owned or hereafter
acquired, or any proceeds therefrom or any income or profits therefrom, to
secure any Indebtedness unless contemporaneously therewith effective provision
is made to secure the Securities equally and ratably with such Indebtedness with
a Lien on the same properties and assets securing Indebtedness for so long as
such Indebtedness is secured by such Lien, except for (i) Liens on Equity
Interests of Subsidiaries of the Company securing obligations under the Senior
Credit Facility, (ii) Liens on Equity Interests of Unrestricted Subsidiaries and
(iii) Permitted Liens.
SECTION 4.19. Limitation on Guarantees of Indebtedness
by Restricted Subsidiaries.
----------------------------------------
In the event that any Restricted Subsidiary (other than a Subsidiary
Guarantor), directly or indirectly, guarantees any Indebtedness of the Company
other than the Securities (the "Other Indebtedness"), the Company shall cause
------------------
such Restricted Subsidiary to concurrently guarantee (a "Subsidiary Guarantee")
--------------------
the Company's obligations under this Indenture and the Securities to the same
extent that such Restricted Subsidiary guaranteed the Company's obligations
under the Other Indebtedness (including waiver of subrogation, if any);
provided, however, that if such Other Indebtedness is (i) not Subordinated
- -------- -------
Indebtedness of the Company, the Subsidiary Guarantee shall be pari passu in
---- -----
right of payment with the guarantee of the Other Indebtedness or (ii)
Subordinated Indebtedness of the Company, the Subsidiary Guarantee shall be
senior in right of payment to the guarantee of the Other Indebtedness; provided,
--------
further, however, that each Subsidiary issuing a Subsidiary Guarantee will be
- ------- -------
automatically and unconditionally released and discharged from its obligations
under such Subsidiary Guarantee upon the release or discharge of the guarantee
of the Other Indebtedness that resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by, or as a result of, any payment
under the guarantee of such Other Indebtedness by such Subsidiary Guarantor.
The Company shall cause each Restricted Subsidiary issuing a Subsidiary
Guarantee to (i) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under
<PAGE>
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the Securities and this Indenture on the terms set forth in Article Eleven,
(ii) execute and deliver a Subsidiary Guarantee substantially in the form set
forth on Exhibit B hereto, (iii) deliver to the Trustee an opinion of counsel
---------
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary (which opinion may be
subject to customary assumptions and qualifications) and (iv) execute and
deliver to the Initial Purchasers (as defined in the Registration Rights
Agreement) a counterpart to the Registration Rights Agreement as a Subsidiary
Guarantor thereunder. Thereafter, such Restricted Subsidiary shall (unless
released in accordance with the terms of this Indenture) be a Subsidiary
Guarantor for all purposes of this Indenture.
SECTION 4.20. Limitation on Conduct of Business of Capital.
--------------------------------------------
Capital will not own any operating assets or other properties or
conduct any business other than to serve as an Issuer and an obligor on the
Securities and as a guarantor of obligations under the Senior Credit Facility.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Merger, Sale of Assets, etc.
---------------------------
(a) The Issuers will not consolidate with or merge with or into
(whether or not such Issuer is the Surviving Person) any other entity and the
Issuers will not and will not permit any of their respective Restricted
Subsidiaries to sell, convey, assign, transfer, lease or otherwise dispose of
all or substantially all of such Issuer's properties and assets (determined, in
the case of the Company, on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions, unless: (i) either (x) such Issuer shall be the Surviving
Person or (y) the Surviving Person (if other than such Issuer) shall be, in the
case of Capital, a corporation or, in any other case, a corporation,
partnership, limited liability company, limited liability limited partnership or
trust organized and validly existing under the laws of the United States of
America or any State thereof or the District of Columbia, and shall, in any such
case, expressly assume by a supplemental indenture, the due and punctual payment
of the principal of, premium, if any, and interest on all the Securities and the
performance and observance
<PAGE>
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of every covenant of this Indenture to be performed or observed on the part of
the applicable Issuer; (ii) immediately thereafter, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to any such transaction involving the Incurrence by the Company or any
Restricted Subsidiary, directly or indirectly, of additional Indebtedness (and
treating any Indebtedness not previously an obligation of the Company or any
Restricted Subsidiary in connection with or as a result of such transaction as
having been Incurred at the time of such transaction), the Surviving Person
could Incur, on a pro forma basis after giving effect to such transaction as if
it had occurred at the beginning of the latest fiscal quarter for which
consolidated financial statements of the Company are available, at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Debt to
Operating Cash Flow Ratio of the first paragraph of Section 4.04; and (iv)
immediately thereafter the Surviving Person shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of such Issuer immediately
prior to such transaction.
(b) Subject to the requirements of the immediately preceding
paragraph, in the event of a sale of all or substantially all of the assets of
any Subsidiary Guarantor or all of the Equity Interests of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, then the Surviving
Person of any such merger or consolidation, or such Subsidiary Guarantor, if all
of its Equity Interests are sold, shall be released and relieved of any and all
obligations under the Subsidiary Guarantee of such Subsidiary Guarantor if
(i) the Person or entity surviving such merger or consolidation or acquiring the
Equity Interests of such Subsidiary Guarantor is not a Restricted Subsidiary,
and (ii) the Net Cash Proceeds from such sale are used after such sale in a
manner that complies with the provisions of Section 4.05. Except as provided
in the preceding sentence, no Subsidiary Guarantor shall consolidate with or
merge with or into another Person, whether or not such Person is affiliated with
such Subsidiary Guarantor and whether or not such Subsidiary Guarantor is the
Surviving Person, unless (i) the Surviving Person is a corporation, partnership,
limited liability company, limited liability limited partnership or trust
organized or existing under the laws of the United States, any State thereof or
the District of Columbia, (ii) the Surviving Person (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor
under the Securities and this Indenture pursuant to a supplemental indenture in
a form reason ably satisfactory to the Trustee, (iii) at the time of and
immediately after such Disposition, no Default or Event of Default shall have
occurred and be continuing, and (iv) the
<PAGE>
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Surviving Person will have Consolidated Net Worth (immediately after giving pro
forma effect to the Disposition) equal to or greater than the Consolidated Net
Worth of such Subsidiary Guarantor immediately preceding the transaction;
provided, however, that clause (iv) of this paragraph shall not be a condition
- -------- -------
to a merger or consolidation of a Subsidiary Guarantor if such merger or
consolidation only involves the Company and/or one or more Wholly Owned
Restricted Subsidiaries.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which an Issuer or any
Subsidiary Guarantor is not the Surviving Person and the Surviving Person is to
assume all the obligations of such Issuer or any such Subsidiary Guarantor under
the Securities and this Indenture pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, such Issuer or such Subsidiary Guarantor, as the case
may be, and such Issuer or such Subsidiary Guarantor, as the case may be, shall
be discharged from its Obligations under this Indenture, the Securities or its
Subsidiary Guarantee, as the case may be.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
Each of the following shall be an "Event of Default":
(1) failure to pay interest on any Securities when the same becomes
due and payable and such Default continues for a period of 30 days;
(2) failure to pay the Accreted Value of any Securities when the
same becomes due and payable at maturity, upon redemption or otherwise;
(3) failure to perform or comply with any of the provisions of
Section 4.05, 4.14 or 5.01;
(4) failure to observe or perform any other covenant, warranty or
agreement contained in the Securities or this Indenture, and the Default
continues for the period and after the notice specified in the last
paragraph of this Section 6.01;
<PAGE>
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(5) a default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any Restricted
Subsidiary having an outstanding principal amount of $10 million or more
individually or in the aggregate that has resulted in the acceleration of
the payment of such Indebtedness or the failure to pay principal when due
at the stated maturity of any such Indebtedness;
(6) there shall have been any final judgment or judgments (not
subject to appeal) against the Company or any Restricted Subsidiary in an
amount of $10 million or more (net of any amounts covered by reputable and
creditworthy insurance companies) which remains undischarged or unstayed
for a period of 60 days after the date on which the right to appeal has
expired;
(7) any holder or holders of at least $10 million in aggregate
principal amount of Indebtedness of the Company or any Restricted
Subsidiary, after a default under such Indebtedness, shall notify the
Trustee of the intended sale or disposition of any assets of the Company or
any Restricted Subsidiary with an aggregate Fair Market Value (as deter
mined in good faith by the Board of Directors of the Company) of at least
$2 million that have been pledged to or for the benefit of such holder or
holders to secure such Indebtedness or shall commence proceedings, or take
any action (including by way of setoff), to retain in satisfaction of such
Indebtedness or to collect on, seize, dispose of or apply in satisfaction
of such Indebtedness, such assets of the Company or any Restricted
Subsidiary (including funds on deposit or held pursuant to lock-box and
other similar arrangements) which continues for five Business Days after
notice has been given to the Company and the representative of such
Indebtedness;
(8) either of the Issuers or any Significant Restrict ed Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
<PAGE>
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(D) makes a general assignment for the benefit of its creditors;
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either of the Issuers or any
Significant Restricted Subsidiary in an involuntary case or
proceeding,
(B) appoints a Custodian of either of the Issuers or any
Significant Restricted Subsidiary or for all or substantially all of
its property, or
(C) orders the liquidation of either of the Issuers or any
Significant Restricted Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60
consecutive days; provided, however, that if the entry of such order or
-------- -------
decree is appealed and dismissed on appeal then the Event of Default
hereunder by reason of the entry of such order or decree shall be deemed to
have been cured; or
(10) other than as provided in or pursuant to any Subsidiary
Guarantee or this Indenture, such Subsidiary Guarantee ceases to be in full
force and effect or is declared null and void and unenforceable or found
to be invalid or any Subsidiary Guarantor denies its liability under its
Subsidiary Guarantee (other than by reason of a release of such Subsidiary
Guarantor from its Subsidiary Guarantee in accordance with the terms of
this Indenture and such Subsidiary Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
--------------
Federal, state or foreign law for the relief of debtors. The term "Custodian"
---------
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until the
Trustee notifies the Issuers, or the Holders of at least 25% in aggregate
Principal Amount at Maturity of the outstanding Securities notify the Issuers
and the Trustee, of the Default in writing and the Issuers do not cure the
Default within 30 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default." Such notice shall be given by the Trustee
<PAGE>
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if so requested by the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Securities then outstanding. When a Default is cured, it
ceases.
SECTION 6.02. Acceleration.
------------
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (8) or (9) of Section 6.01 with respect to
either of the Issuers) occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate Principal Amount at Maturity of the outstanding
Securities by notice in writing to the Issuers (and to the Trustee if given by
the Holders) may declare the Accreted Value of all the outstanding Securities,
together with all accrued and unpaid interest, if any, thereon, as of such date
of declaration to be immediately due and payable (provided that Securities whose
Accreted Value remains unpaid after such date of declaration shall continue to
accrete pursuant to the definition of "Accreted Value" and accrue interest as
provided in the Securities). Upon any such declaration, such Accreted Value and
accrued and unpaid interest, if any, shall become immediately due and payable.
If an Event of Default specified in clause (8) or (9) of Section 6.01
with respect to either of the Issuers occurs, the Accreted Value of all of the
outstanding Securities, together with all accrued and unpaid interest, if any,
thereon, will ipso facto become immediately due and payable without any
---- -----
declaration or other act on the part of the Trustee or any Holder (provided that
Securities whose Accreted Value remains unpaid after the date of such Event of
Default shall continue to accrete pursuant to the definition of "Accreted Value"
and accrue interest as provided in the Securities).
After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate Principal Amount at Maturity of the
Securities then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other than
the nonpayment of Accreted Value or principal of and interest on the Securities
which has become due solely by virtue of such acceleration) have been cured or
waived and if the rescission would not conflict with any judgment or decree. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
<PAGE>
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SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of Accreted Value or principal of or interest on the Securities or to
enforce the performance of any provision of the Securities 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. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
----------------------
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate Principal Amount at Maturity of the then outstanding Securities, on
behalf of all the Holders, by written notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of Accreted Value or principal of or interest on any Security as
specified in clauses (1) and (2) of Section 6.01 or a Default in respect of any
term or provision of this Indenture that may not be amended or modified without
the consent of each Holder affected as provided in Section 10.02. The Issuers
shall deliver to the Trustee an Officers' Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such
consents. In case of any such waiver, the Issuers, the Trustee and the Holders
shall be restored to their former positions and rights hereunder and under the
Securities, respectively. This paragraph of this Section 6.04 shall be in lieu
of (S)316(a)(1)(B) of the TIA and such (S)316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Securities, as permitted by the
TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
<PAGE>
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SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in Principal Amount
at Maturity of the then outstanding Securities 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 it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided,
--------
however, that the Trustee may take any other action deemed proper by the Trustee
- -------
which is not inconsistent with such direction. In the event the Trustee takes
any action or follows any direction pursuant to this Indenture, the Trustee
shall be entitled to indemnification satisfactory to it in its sole discretion
against any loss or expense caused by taking such action or following such
direction. This Section 6.05 shall be in lieu of (S)316(a)(1)(A) of the TIA,
and such (S)316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the then outstanding Securities make a written request to the
Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in Principal
Amount at Maturity of the then outstanding Securities (excluding Affiliates
of either of the Issuers) do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
<PAGE>
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A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of Accreted Value or principal of and interest on
the Security, on or after the respective due dates expressed in the 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 the
Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of interest or principal specified
in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuers
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
--- -----
Securities and such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee 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 the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Issuers (or
any other obligor upon the Securities), their creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by each
Securityholder 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
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel,
<PAGE>
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and any other amounts due the Trustee under Section 7.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Securityholder 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 Securityholder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
Accreted Value or principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for Accreted Value or principal and interest, respectively; and
Third: to the Issuers.
The Trustee, upon prior written notice to the Issuers, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each holder of any Security
by his acceptance thereof shall be deemed to have agreed, that 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, a court in
its discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 shall not
apply to a suit by the Trustee, a suit by a Holder or group of Holders of more
than 10% in aggregate Principal Amount at Maturity of the outstanding
Securities, or to any suit instituted by any Holder for the enforcement or the
payment of the Accreted Value or principal or interest on any Securities on or
after the respective due dates expressed in the Security.
<PAGE>
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If a Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions conforming
to the requirements of this Indenture; however, the Trustee shall examine
the certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of para graph (b) of
this Section 7.01;
(2) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) 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 to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity reasonably satisfactory
to it against such risk, liability, loss, fee or expense which might be incurred
by it in compliance with such request or direction.
<PAGE>
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(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on an Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.
(d) Any request or direction of the Issuers mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Security holders pursuant to this Indenture, unless
such Security holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such re quest or direction.
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document,
<PAGE>
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but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Issuers, personally or by agent or attorney.
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 Issuers or their
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Issuers' use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Issuers in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
------------------
If a Default or an Event of Default occurs and is continuing and the
Trustee knows of such Defaults or Events of Default, the Trustee shall mail to
each Securityholder notice of the Default or Event of Default within 30 days
after the occurrence thereof. Except in the case of a Default or an Event of
Default in payment of principal of or interest on any Security or a Default or
Event of Default in complying with Section 5.01, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Securityholders.
This Section 7.05 shall be in lieu of the proviso to (S)315(b) of the TIA and
such proviso to (S)315(b) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S)313(a), within 60 days after each June 15
beginning with the June 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report
<PAGE>
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dated as of such June 15 that complies with TIA (S)313(a); provided, however,
-------- -------
that, if no event under TIA (S)313(a) has occurred in a 12 month period, no
such report need be transmitted. The Trustee also shall comply with TIA
(S)313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Issuers shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Issuers shall pay to the Trustee from time to time such
compensation as the Issuers and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Issuers shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including reasonable fees, disbursements and expenses of its
agents and counsel) incurred or made by it in addition to the compensation for
its services except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel and any taxes or other expenses
incurred by a trust created pursuant to Section 9.01 hereof.
The Issuers shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith. The Trustee
shall notify the Issuers promptly of any claim asserted against the Trustee for
which it may seek indemnity. However, the failure by the Trustee to so notify
the Issuers promptly shall not relieve the Issuers of their obligations
hereunder except to the extent that the Issuers are materially prejudiced
thereby. The Issuers shall
<PAGE>
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defend the claim and the Trustee shall cooperate in the defense (and may employ
its own counsel) at the Issuers' expense; provided, however, that the Issuers'
-------- -------
reimbursement obligation with respect to counsel employed by the Trustee will be
limited to the reasonable fees of such counsel. The Issuers need not pay for
any settlement made without their written consent, which consent shall not be
unreasonably withheld. The Issuers need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee as a result of the
violation of this Indenture by the Trustee.
To secure the Issuers' payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securi ties against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay Accreted Value or principal of or interest on
particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(8) or (9) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Issuers' obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuers' obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Issuers in
writing. The Holders of a majority in Principal Amount at Maturity of the then
outstanding Securities may remove the Trustee by so notifying the Trustee and
the Issuers in writing and may appoint a successor Trustee with the Issuers'
consent. The Issuers may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(3) a custodian or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
<PAGE>
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in Principal Amount at Maturity of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in Principal Amount at Maturity of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' 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 banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee, provided such corporation shall be otherwise qualified and
eligible under this Article Seven.
<PAGE>
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SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S)310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA (S)310(b), the
Trustee and the Issuers shall comply with the provisions of TIA (S)310(b). If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims
Against Company.
---------------------------------
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S)311(a) to the extent indicated therein.
ARTICLE EIGHT
[INTENTIONALLY OMITTED]
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Issuers' Obligations.
-----------------------------------
The Issuers may terminate their and the Subsidiary Guarantors'
substantive obligations in respect of the Securities by delivering all
outstanding Securities to the Trustee for cancellation and paying all sums
payable by them on account of principal of and interest on all Securities or
otherwise. In addition to the foregoing, the Issuers may, provided that no
Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default or Event of Default specified in
Section 6.01(8) or (9), any time on or prior to the 91st calendar day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day)) terminate their and the Subsidiary
Guarantors' substantive obligations in respect of the Securities (except for
their obligations to pay the principal of and inter-
<PAGE>
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est on the Securities to their Maturity Date and the Subsidiary Guarantors'
guarantee thereof) by (i) depositing with the Trustee, under the terms of an
irrevocable trust agreement, money or direct non-callable obligations of the
United States of America for the payment of which the full faith and credit of
the United States is pledged ("United States Government Obligations") sufficient
------------------------------------
(without reinvestment) to pay all remaining Indebtedness on the Securities to
their Maturity Date, (ii) delivering to the Trustee either an Opinion of Counsel
or a ruling directed to the Trustee from the Internal Revenue Service to the
effect that the Holders of the Securities will not recognize income, gain or
loss for federal income tax purposes solely as a result of such deposit and
termination of obligations, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Issuers' exercise of their option under this
paragraph will not result in any of the Issuers, the Trustee or the trust
created by the Issuers' deposit of funds pursuant to this provision becoming or
being deemed to be an "investment company" under the Investment Company Act of
1940, as amended, and (iv) delivering to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating compliance with all conditions precedent
provided for herein. In addition, the Issuers may, provided that no Default or
Event of Default has occurred and is continuing or would arise therefrom (or,
with respect to a Default or Event of Default specified in Section 6.01(8) or
(9), any time on or prior to the 91st calendar day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day)) terminate all of their and the Subsidiary
Guarantors' substantive obligations in respect of the Securities (including
their obligations to pay the principal of and interest on the Securities and the
Subsidiary Guarantors' guarantee thereof) by (i) depositing with the Trustee,
under the terms of an irrevocable trust agreement, money or United States
Government Obligations sufficient (without reinvestment) to pay all remaining
indebtedness on the Securities to their Maturity Date, (ii) delivering to the
Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes solely as a result of such
deposit and termination of obligations or an Opinion of Counsel based upon such
a ruling addressed to the Trustee or a change in the applicable Federal tax law
since the date of this Indenture to such effect, (iii) delivering to the Trustee
an Opinion of Counsel to the effect that the Issuers' exercise of their option
under this paragraph will not result in any of the Issuers, the Trustee or the
trust created by the Issuers' deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as
<PAGE>
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amended, and (iv) delivering to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating compliance with all conditions precedent
provided for herein.
Notwithstanding the foregoing paragraph, the Issuers' obligations in
Sections 2.03, 2.05, 2.06, 2.07, 4.01 (but not with respect to termination of
substantive obligations pursuant to the third sentence of the foregoing
paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until the Securities
are no longer outstanding. Thereafter the Issuers' obligations in Sections
7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Issuers' and the Subsidiary
Guarantors' obligations under the Securities and this Indenture except for those
surviving obligations specified above.
SECTION 9.02. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03. Repayment to Issuers.
--------------------
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Issuers upon written request any excess money held by it at any time. The
Trustee shall pay to the Issuers upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
- -------- -------
may at the expense of the Issuers cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money 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 shall
be repaid to the Issuers. After payment to the Issuers, Securityholders entitled
to money must look to the Issuers for payment as general creditors unless an
applicable abandoned property law designates another person and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
<PAGE>
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SECTION 9.04. Reinstatement.
-------------
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Issuers' and the Subsidiary Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Issuers have made any payment of
-------- -------
interest on or principal of any Securities because of the reinstatement of their
obligations, the Issuers shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
--------------------------
The Issuers and the Subsidiary Guarantors, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend or
supplement this Indenture or the Securities without notice to or consent of any
Securityholder:
(i) to cure any ambiguity, defect or inconsistency; provided,
--------
however, that such amendment or supplement does not materially and
-------
adversely affect the rights of any Holder under this Indenture or the
Securities;
(ii) to effect the assumption by a successor Person of all
obligations of either of the Issuers under the Securities and this
Indenture in connection with any transaction complying with Article Five of
this Indenture;
(iii) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(iv) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
<PAGE>
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(v) to make any change that would provide any additional benefit
or rights to the Holders;
(vi) to make any other change that does not materially and
adversely affect the rights of any Holder under this Indenture or the
Securities;
(vii) to evidence the succession of another Person to any
Subsidiary Guarantor and the assumption by any such successor of the
covenants of such Subsidiary Guarantor herein and in the Subsidiary
Guarantee;
(viii) to add to the covenants of the Issuers or the Subsidiary
Guarantors for the benefit of the Holders, or to surrender any right or
power herein conferred upon the Issuers or any Subsidiary Guarantor;
(ix) to secure the Securities pursuant to the requirements of
Section 4.18 or otherwise; or
(x) to reflect the release of a Subsidiary Guarantor from its
obligations with respect to its Subsidiary Guarantee in accordance with
the provisions of Section 11.03 and to add a Guarantor pursuant to the
requirements of Sections 4.19 and 11.07;
provided, however, that the Issuers have delivered to the Trustee an Opinion of
- -------- -------
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Issuers and the Subsidiary Guarantors,
when authorized by a resolution of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Securities with the
written consent of the Holders of at least a majority in aggregate Principal
Amount at Maturity of the then outstanding Securities. Subject to Section 6.07,
the Holders of a majority in aggregate Principal Amount of Maturity of the then
outstanding Securities, on behalf of all Holders, may waive compliance by the
Issuers or any Subsidiary Guarantor with any provision of this Indenture or the
Securities. However, without the consent of each Securityholder affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may not:
(1) change the definition of Accreted Value or change the
definition of Principal Amount at Maturity or change the
<PAGE>
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Stated Maturity of the principal of or any installment of interest on any
Security or alter the optional redemption or repurchase provisions of any
Security or this Indenture in a manner adverse to the holders of the
Securities;
(2) reduce the Accreted Value of or the Principal Amount at
Maturity of any Security;
(3) reduce the rate or extend the time for payment of interest on
any Security;
(4) change the place or currency of payment of the Accreted Value
of or the principal of or interest on any Security;
(5) modify any provisions of Section 6.04 (other than to add
sections of this Indenture or the Securities subject thereto) or 6.07 or
this Section 10.02 (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without the
consent of each Securityholder affected);
(6) reduce the percentage of the Principal Amount of Maturity of
outstanding Securities necessary for amendment to or waiver of compliance
with any provision of this Indenture or the Securities or for waiver of
any Default;
(7) waive a default in the payment of the Accreted Value or of the
principal of, interest on, or redemption payment with respect to, any
Security (except a recision of acceleration of the Securities by the
Holders as provided in Section 6.02 and a waiver of the payment of default
that resulted from such acceleration);
(8) modify the ranking or priority of the Securities or the
Subsidiary Guarantee of any Subsidiary Guarantor in any manner adverse to
the Holders;
(9) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or this Indenture otherwise than in
accordance with this Indenture; or
(10) modify the provisions relating to any Offer to Purchase
required pursuant to Section 4.05 or 4.14 in a manner materially adverse to
the Holders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any
<PAGE>
-89-
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 becomes
effective, the Issuers shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Issuers to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 10.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Effect of Consents.
------------------
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 that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security.
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then those persons who were
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 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, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return
<PAGE>
-90-
it to the Holder. Alternatively, if the Issuers or the Trustee so determines,
the Issuers in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or issue a new Security shall not affect the validity
and effect of such amendment, supplement or waiver.
SECTION 10.06. 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 Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Issuers and
the Subsidiary Guarantors, enforceable in accordance with its terms (subject to
customary exceptions). The Trustee may, but shall not (except to the extent
required in the case of a supplemental indenture entered into pursuant to
Section 10.01(iv)) be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive an indemnity reasonably satisfactory to it.
ARTICLE ELEVEN
SUBSIDIARY GUARANTEE
SECTION 11.01. Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees to each Holder of a Security authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns that: the
Accreted Value or principal of and interest on the Securities will be promptly
paid in full when due, subject to any applicable grace period, whether at
maturity, by acceleration or otherwise, and interest on the overdue Accreted
Value or principal and interest on any overdue interest on the Securities and
all other obligations of the Issuers to the Holders or the Trustee hereunder or
under the Securities will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; subject, however, to the
limitations set forth in Section 11.04. Each Subsidiary Guarantor hereby agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Securities or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any
<PAGE>
-91-
Holder of the Securities with respect to any provisions hereof or thereof, the
recovery of any judgment against the Issuers, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuers, any right to require a
proceeding first against the Issuers, protest, notice and all demands whatsoever
and covenants that the Subsidiary Guarantee will not be discharged except by
complete performance of the obligations contained in the Securities, this
Indenture, and this Subsidiary Guarantee. If any Holder or the Trustee is
required by any court or otherwise to return to the Issuers, any Subsidiary
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Issuers or any Subsidiary Guarantor, any amount paid
by the Issuers or any Subsidiary Guarantor to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect. Each Subsidiary Guarantor further agrees that, as
between each Subsidiary Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purpose of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Subsidiary Guarantor for the purpose of this
Subsidiary Guarantee.
SECTION 11.02. Severability.
------------
In case any provision of this Subsidiary Guarantee 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 11.03. Release of a Guarantor.
----------------------
(a) In the event that each holder of Other Indebtedness which
resulted in the creation of a Subsidiary Guarantee unconditionally releases a
Subsidiary Guarantor of all of its obligations under its guarantee of such Other
Indebtedness pursuant to a written agreement in form and substance satisfactory
to the Trustee (other than a release resulting from payment under such
guarantee) such Subsidiary Guarantor shall be automat-
<PAGE>
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ically and unconditionally released from all obligations under its Subsidiary
Guarantee.
(b) Additionally, if the Securities are defeased in accordance with
the terms of this Indenture, or if all or substantially all of the assets of
any Subsidiary Guarantor or all of the Equity Interests of any Subsidiary
Guarantor is sold (including by issuance or otherwise) by the Company or any of
its Subsidiaries in a transaction constituting an Asset Sale and if (x) the Net
Cash Proceeds from such Asset Sale are used in accordance with Section 4.05 or
(y) the Company delivers to the Trustee an Officers' Certificate covenanting
that the Net Cash Proceeds from such Asset Sale shall be used in accordance with
Section 4.05 and within the time limits specified by such Section 4.05, then
such Subsidiary Guarantor (in the event of a sale or other disposition of all of
the Equity Interests of such Subsidiary Guarantor) or the corporation acquiring
such assets (in the event of a sale or other disposition of all or substantially
all of the assets of such Subsidiary Guarantor), shall be deemed released from
all obligations under this Article Eleven without any further action required on
the part of the Trustee or any Holder.
(c) The Trustee shall, at the sole cost and expense of the Issuers,
upon receipt of a request by the Issuers accompanied by an Officers' Certificate
certifying as to the compliance with this Section and, with respect to clause
(b) of this Section 11.03, upon receipt at the reasonable request of the
Trustee of an Opinion of Counsel that the provisions of this Section 11.03 have
been complied with, deliver an appropriate instrument evidencing such release.
Any Subsidiary Guarantor not so released remains liable for the full amount of
Accreted Value or principal of and interest on the Securities and the other
obligations of the Issuers hereunder as provided in this Article Eleven.
SECTION 11.04. Limitation of Subsidiary Guarantor's Liability.
----------------------------------------------
Each Subsidiary Guarantor, and by its acceptance hereof each Holder
and the Trustee, hereby confirms that it is the intention of all such parties
that the guarantee by such Subsidiary Guarantor pursuant to its Subsidiary
Guarantee not constitute a fraudulent transfer or conveyance for purposes of
title 11 of the United States Code, as amended, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar U.S. Federal
or state or other applicable law or that the obligations of such Subsidiary
Guarantor under Section 11.01 would otherwise be held or determined to be void,
invalid or
<PAGE>
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unenforceable on account of the amount of its liability under said Section
11.01. To effectuate the foregoing intention, the Holders and such Subsidiary
Guarantor hereby irrevocably agree that the obligations of such Subsidiary
Guarantor under the Subsidiary Guarantee shall be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to Section 11.05, result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee not constituting such
fraudulent transfer or conveyance and not being held or determined to be void,
invalid or unenforceable.
SECTION 11.05. Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Subsidiary Guarantee, such Funding Guarantor
- ------------------
shall be entitled to a contribution from all other Subsidiary Guarantors in a
pro rata amount, based on the net assets of each Subsidiary Guarantor (including
- --- ----
the Funding Guarantor), determined in accordance with GAAP, subject to Section
11.04, for all payments, damages and expenses incurred by that Funding Guarantor
in discharging the Issuers' obligations with respect to the Securities or any
other Subsidiary Guarantor's obligations with respect to the Subsidiary
Guarantee.
SECTION 11.06. Execution of Subsidiary Guarantee.
---------------------------------
To further evidence their Subsidiary Guarantee to the Holders, the
Subsidiary Guarantors hereby agree to execute the Subsidiary Guarantee in
substantially the form set forth in Exhibit A to be endorsed on each Security
authenticated and delivered by the Trustee after such Subsidiary Guarantee is
executed. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on any particular Security a notation of such Subsidiary
Guarantee. Each such Subsidiary Guarantee shall be signed on behalf of each
Subsidiary Guarantor by its Chairman of the Board of Directors, its President
or one of its Vice Presidents prior to the authentication of the Security on
which it is endorsed, and the delivery of such Security by the Trustee, after
the authentication thereof hereunder, shall constitute due delivery of such
Subsidiary Guarantee
<PAGE>
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on behalf of such Subsidiary Guarantor. Such signature upon the Subsidiary
Guarantee may be the manual or facsimile signature of such officer and may be
imprinted or otherwise reproduced on the Subsidiary Guarantee, and in case such
officer who shall have signed the Subsidiary Guarantee shall cease to be such
officer before the Security on which such Subsidiary Guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the Person who signed the Subsidiary Guarantee had not
ceased to be such officer of the Subsidiary Guarantor.
SECTION 11.07. Additional Subsidiary Guarantors.
--------------------------------
Any Restricted Subsidiary of the Company which is required pursuant to
Section 4.19 to become a Subsidiary Guarantor shall execute and deliver to the
Trustee (a) a supplemental indenture in form and substance reasonably
satisfactory to the Trustee which subjects such Restricted Subsidiary to the
provisions of this Indenture as a Subsidiary Guarantor, and (b) an Opinion of
Counsel to the effect that such supplemental indenture has been duly authorized
and executed by such Restricted Subsidiary and constitutes the legal, valid,
binding and enforceable obligation of such Restricted Subsidiary (subject to
such customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles).
SECTION 11.08. Subordination of Subrogation and Other Rights.
---------------------------------------------
Each Subsidiary Guarantor hereby agrees that any claim against the
Issuers that arises from the payment, performance or enforcement of such
Subsidiary Guarantor's obligations under its Subsidiary Guarantee or this
Indenture, including, without limitation, any right of subrogation, shall be
subject and subordinate to, and no payment with respect to any such claim of
such Subsidiary Guarantor shall be made before, the payment in full in cash of
all outstanding Securities in accordance with the provisions provided therefor
in this Indenture.
ARTICLE TWELVE
[INTENTIONALLY OMITTED]
<PAGE>
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ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
----------------------------
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any
TIA provision that may be so modified, such TIA provision shall be deemed to
apply to this Indenture as so modified. If any provision of this Indenture
excludes any TIA provision that may be so excluded, such TIA provision shall be
excluded from this Indenture.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 13.02. Notices.
-------
Any notice or communication required or permitted to be given under
this Indenture shall be sufficiently given if in writing and delivered in
person, by facsimile and confirmed by overnight courier, or mailed by first-
class mail addressed as follows:
if to the Issuers:
FrontierVision Holdings, L.P.
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
Attention: Mr. John S. Koo, Senior Vice
President and Chief Financial Officer
Facsimile: (303) 757-6115
Telephone: (303) 757-1588
<PAGE>
-96-
with a copy to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Attention: Edward J. O'Connell, Esq.
Facsimile: (202) 776-2222
Telephone: (202) 776-2000
if to the Trustee:
U.S. Bank National Association
(d/b/a Colorado National Bank)
950 17th Street, Suite 650
Denver, Colorado 80202
Attention: Gretchen L. Middents
Facsimile: (303) 585-6865
Telephone: (303) 585-4596
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first class, postage prepaid, to a
Securityholder, including any notice delivered in connection with TIA (S)
310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to
him at his address as set forth on the registration books of the Registrar and
shall be sufficiently given to him if so mailed within the time prescribed. To
the extent required by the TIA, any notice or communication shall also be mailed
to any Person described in TIA (S) 313(c).
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE>
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SECTION 13.03. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take
or refrain from taking any action under this Indenture, the Issuers shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee 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
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of 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
<PAGE>
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(4) a statement as to whether or not, in the opinion of 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 13.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 13.07. Governing Law.
-------------
The laws of the State of New York shall govern this Indenture, the
Securities and the Subsidiary Guarantee without regard to principles of
conflicts of law.
SECTION 13.08. No Recourse Against Others.
--------------------------
A director, officer, employee, incorporator, limited or general
partner or stockholder, as such, of the Issuers or any Subsidiary Guarantor
shall not have any liability for any obligations of the Issuers or any
Subsidiary Guarantor under the Securities, any Subsidiary Guarantee or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability.
SECTION 13.09. Successors.
----------
All agreements of the Issuers in this Indenture and the Securities
shall bind their successors. All agreements of each Subsidiary Guarantor in
this Indenture and Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart Originals.
---------------------
The parties may sign any number of counterparts of this Indenture.
Each signed counterpart shall be an original, but all of them together represent
the same agreement.
SECTION 13.11. Severability.
------------
In case any provision in this Indenture, in the Securities or in the
Subsidiary Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the
<PAGE>
-99-
remaining provisions shall not in any way be affected or impaired thereby, and a
Holder shall have no claim therefor against any party hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of either of the Issuers or a Subsidiary of either of Issuers.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 13.13. Legal Holidays.
--------------
If a payment date occurs on a day that is not a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day, and no interest shall accrue for the intervening
period.
[Signature Pages Follow]
<PAGE>
-100-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P.,
its general partner
By: FVP GP, L.P.,
its general partner
By: FrontierVision Inc.,
its general partner
By: /s/ James W. McHose
---------------------------------------
Name: James W. McHose
Title: Vice President & Treasurer
FRONTIERVISION HOLDINGS CAPITAL
CORPORATION
By: /s/ James W. McHose
---------------------------------------
Name: James W. McHose
Title: Vice President & Treasurer
<PAGE>
-101-
U.S. BANK NATIONAL ASSOCIATION (d/b/a COLORADO
NATIONAL BANK),
as Trustee
By: /s/ Gretchen L. Middents
---------------------------------------
Name: Gretchen L. Middents
Title: Assistant Vice President
<PAGE>
[FORM OF SECURITY]
EXHIBIT A
CUSIP No. 35921QAA2
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
11 7/8% SENIOR DISCOUNT NOTE DUE 2007
No. [ ] $[ ]
This Security is issued with original issue discount for purposes of
Section 1271 et seq. of the Internal Revenue Code. For each $1,000 of original
-- ---
Principal Amount at Maturity of this Security, the issue price is $631.18 and
the amount of original issue discount is $368.82. The issue date of this
Security is September 19, 1997 and the yield to maturity is 11 7/8%.
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital
Corporation hereby jointly and severally promise to pay to [ ] or
registered assigns on the Maturity Date of September 15, 2007 the principal sum
of (x) [ ] DOLLARS or (y) if the Cash Interest Election is made, the
Accreted Value of this Security as of the Semi-Annual Accrual Date on which the
Cash Interest Election is made.
Interest Payment Dates: March 15 and September 15, commencing on the earlier of
(x) the March 15 or September 15, as the case may be, immediately following the
date of the Cash Interest Election and (y) March 15, 2002.
Record Dates: March 1 and September 1
Reference is hereby made to the further provisions on this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, FrontierVision Holdings, L.P. and FrontierVision
Holdings Capital Corporation have caused this instrument to be signed manually
or by facsimile by each of their respective duly authorized officers.
Dated: [ ]
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P.,
its general partner
By: FVP GP, L.P.,
its general partner
By: FrontierVision Inc.,
its general partner
By:
------------------------------------------------
Name:
Title:
By:
------------------------------------------------
Name:
Title:
<PAGE>
A-2
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
By:
------------------------------------------------
Name:
Title:
By:
------------------------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the 11 7/8% Senior Discount Notes due 2007 referred to
in the within-mentioned Indenture.
U.S. BANK NATIONAL ASSOCIATION
(d/b/a COLORADO NATIONAL BANK), as Trustee
By
-------------------------- Dated: [ ]
Authorized Signatory
<PAGE>
A-3
(Reverse Of Security)
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
11 7/8% Senior Discount Note due 2007
1. Interest.
--------
FrontierVision Holdings, L.P., a Delaware limited partnership (the
"Company"), and FrontierVision Holdings Capital Corporation, a Delaware
corporation ("Capital" and together with the Company, the "Issuers"), jointly
and severally promise to pay to the registered holder of this Security, until
the principal hereof is paid or duly provided for, interest on the principal
amount set forth on the face of this Security at a rate of 11 7/8% per annum.
--- -----
Interest on the Securities will accrue from and including the most recent date
to which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for, from and including the earlier of (x) the date of the
Cash Interest Election and (y) September 15, 2001 through but excluding the date
on which interest is paid or duly provided for. Interest shall be payable in
arrears on each March 15 and September 15 and at stated maturity, commencing on
the earlier of (a) the Interest Payment Date immediately following the date of
the Cash Interest Election and (b) March 15, 2002. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest until
the earlier of (x) the date of the Cash Interest Election and (y) September 15,
2001, except in the case of a default in payment of principal and/or premium, if
any, upon acceleration, redemption or purchase and, in such case, the overdue
principal and any overdue premium shall bear interest at the rate of 11 7/8% per
---
annum (compounded semiannually on each March 15 and September 15) (to the extent
- -----
that the payment of such interest shall be legally enforceable), from the dates
such amounts are due until they are paid or duly provided for. To the extent,
but only to the extent, interest on amounts in default constituting original
issue discount prior to the earlier of (a) the date of the Cash Interest
Election and (b) September 15, 2001 is not permitted by law, original issue
discount shall continue to accrete until paid or duly provided for. On or after
the earlier of (a) the date of the Cash Interest Election and (b) September 15,
2001, interest on overdue principal and premium, if, any, and, to the extent
permitted by law, on overdue
<PAGE>
A-4
installments of interest will accrue, until the principal and premium, if any,
is paid or duly provided for, at the rate of 11 7/8% per annum. Interest on any
--- -----
overdue principal or premium shall be payable on demand.
2. Method of Payment.
-----------------
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security is registered at the close of
business on the regular record date, which shall be the March 1 or September 1
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Issuers, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Issuers maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Issuers for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Issuers payment of
-------- -------
interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear in the Security register.
3. Paying Agent and Registrar.
--------------------------
Initially, U.S. Bank National Association (d/b/a Colorado National
Bank) (the "Trustee") will act as Paying Agent and Registrar. The Issuers may
change any Paying Agent, Registrar or co-Registrar without notice to the Holders
of Securities. The Issuers or any of their Subsidiaries may act as Registrar,
co-Registrar or, except in certain circumstances specified in the Indenture,
Paying Agent.
4. Indenture.
---------
This Security is one of a duly authorized issue of Securities of the
Issuers, designated as their 11 7/8% Senior Discount Notes due 2007 (the
"Securities"), limited in aggregate Principal Amount at Maturity to $237,650,000
(except for
<PAGE>
A-5
Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture dated as of September 19, 1997 (the "Indenture"),
among the Issuers and the Trustee. The terms of the Securities include those
stated in the Indenture and those required to be made part of the Indenture by
the Trust Indenture Act of 1939 (the "Act") (15 U.S. Code (S)(S) 77aaa-77bbbb)
as in effect on the date of the Indenture and the date the Indenture is
qualified under the Act. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and the Act for a statement
of them. Each Securityholder, by accepting a Security, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
-------------------
(a) The Securities are not redeemable prior to September 15, 2001,
except as provided in clause (b) below of this paragraph 5. On and after such
date, the Securities may be redeemed at any time, in whole or in part, at the
option of the Issuers, at redemption prices (expressed as percentages of the
principal amount) set forth below, if redeemed during the 12-month period
beginning September 15 of the year indicated below, in each case together with
interest accrued and unpaid to but excluding the date fixed for redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001.................................. 107.917%
2002.................................. 105.937%
2003.................................. 103.958%
2004.................................. 101.979%
2005 and thereafter................... 100.00%
</TABLE>
(b) At any time prior to September 15, 2000, the Issuers may redeem up
to 35% of the Principal Amount at Maturity of the Securities with the net cash
proceeds received by the Company from one or more Public Equity Offerings or
Strategic Equity Investments, at a redemption price of 111.875% of the Accreted
Value thereof, together with accrued and unpaid interest, if any, to the date
fixed for redemption; provided, however, that at least 65% in aggregate
-------- -------
Principal Amount at Maturity of the Securities originally issued remains
outstanding immediately after any such redemption (excluding any Securities
<PAGE>
A-6
owned by the Issuers or any of their Affiliates). Notice of redemption pursuant
to this paragraph must be mailed to Holders of Securities not later than 60 days
following consummation of such Public Equity Offering.
6. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 Principal Amount at Maturity may be redeemed in
part. On and after the redemption date, Accreted Value ceases to accrete or
interest ceases to accrue, as the case may be, on those Securities or portion
of them called for redemption.
7. Purchase upon Occurrence of a
Change of Control.
-----------------------------
Within 30 days of the occurrence of a Change of Control, the Company
will offer to purchase the Securities, in whole and not in part, at a purchase
price equal to 101% of the Accreted Value of the Securities on such Purchase
Date plus accrued and unpaid interest, if any, to such Purchase Date.
8. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 original Principal Amount at Maturity and integral multiples of $1,000
original Principal Amount at Maturity. A Holder may transfer 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 any taxes and fees required by law or permitted by the
Indenture. The Registrar need not transfer or exchange any Securities selected
for redemption.
9. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Issuers at
their request. After such repayment Holders of Securities entitled to such
funds must look
<PAGE>
A-7
to the Issuers for payment unless an abandoned property law designates another
person.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of
all the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in Principal Amount at Maturity of the outstanding Securities, and any past
default or compliance with any provision may be waived with the consent of the
Holders of a majority in Principal Amount at Maturity of the outstanding
Securities. Without notice to or the consent of any Holder, the Issuers, any
Subsidiary Guarantors and the Trustee may amend or supplement the Indenture or
the Securities to cure any ambiguity, defect or inconsistency, or to make any
change that does not materially and adversely affect the rights of any Holder of
Securities.
13. Restrictive Covenants.
---------------------
The Securities are general unsecured senior obligations of the Issuers
limited to the aggregate Principal Amount at Maturity of $[ ]. The
Indenture restricts, among other things, the ability of the Company or any of
its Restricted Subsidiaries to permit any Liens to be imposed on their assets,
to make certain payments and investments, limits the Indebtedness which the
Company and its Restricted Subsidiaries may incur and limits the terms on which
the Company and its Restricted Subsidiaries may engage in Asset Sales. The
Company is also obligated under certain circumstances to make an offer to
purchase Securities with the net cash proceeds of certain Asset Sales. The
Issuers must report annually to the Trustee on compliance with certain covenants
in the Indenture.
14. Successor Corporation.
---------------------
Pursuant to the Indenture, the ability of the Issuers to consolidate
with, merge with or into or transfer their assets to another person is
conditioned upon certain requirements,
<PAGE>
A-8
including certain financial requirements applicable to the surviving Person.
15. Defaults and Remedies.
---------------------
If an Event of Default shall occur and be continuing, the Accreted
Value of, or principal of all of the outstanding Securities, plus all accrued
and unpaid interest, if any, to the date the Securities become due and payable,
as the case may be, may be declared due and payable in the manner and with the
effect provided in the Indenture.
16. Trustee Dealings with Issuers.
-----------------------------
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for either of the Issuers or their Affiliates, and may
otherwise deal with the Issuers or their Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
--------------------------
A director, officer, employee, incorporator, limited or general
partner or stockholder, as such, of either of the Issuers or any Subsidiary
Guarantor shall not have any liability for any obligations of the Issuers or any
Subsidiary Guarantor under the Securities, any Subsidiary Guarantee 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 issue of the Securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Securityholder 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).
<PAGE>
A-9
20. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
21. Governing Law.
-------------
The laws of the State of New York shall govern the Indenture, this
Security and any Subsidiary Guarantee without regard to principles of conflicts
of law.
22. Subsidiary Guarantees.
---------------------
This Security may after the date hereof be entitled to certain
Subsidiary Guarantees made for the benefit of the Holders. Reference is hereby
made to the Indenture for the terms of any Subsidiary Guarantee.
The Issuers will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
<PAGE>
A-10
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint________________________________________________________,
agent to transfer this Security on the books of the Issuers. The agent may
substitute another to act for him.
Dated: Signed:
-------------------- -----------------------------
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:*
-----------------------------------------------------
- --------------------
* Signature must be guaranteed by a member of the Medallion Signature
Program.
<PAGE>
A-11
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [_]
If you want to elect to have only part of this Security purchased by the
Company, state the Principal Amount at Maturity: $
------------
Dated: Your signature:
--------------- ------------------------
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:*
- -------------------
* Signature must be guaranteed by a member of the Medallion Signature
Program.
<PAGE>
EXHIBIT B
[FORM OF SUBSIDIARY GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture referred to in
the Security upon which this notation is endorsed) hereby, jointly and
severally, unconditionally guarantee on a senior basis (such guarantee by each
Subsidiary Guarantor being referred to herein as the "Subsidiary Guarantee") the
due and punctual payment of the Accreted Value or the principal of, premium, if
any, and interest, if any, on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue Accreted Value or the principal, premium and interest, if any, on the
Securities, and the due and punctual performance of all other obligations of the
Issuers to the Holders or the Trustee, all in accordance with the terms set
forth in Article Eleven of the Indenture.
The obligations of each Subsidiary Guarantor to the Holders of
Securities and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Subsidiary Guarantee therein
made.
This Subsidiary Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Subsidiary Guarantee is subject to release upon the terms set
forth in the Indenture.
[Subsidiary Guarantor]
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
Attention: [ ]
[Name and Address of Registrar]
Re: 11 7/8% Senior Discount Notes due 2007
Reference is hereby made to the Indenture, dated as of September 19,
1997 (the "Indenture"), among FrontierVision Holdings, L.P., FrontierVision
---------
Holdings Capital Corporation (the "Issuers"), and U.S. Bank National Association
-------
(d/b/a Colorado National Bank), as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
________________ (the "Transferor") owns and proposes to transfer the
----------
Securities specified in Annex A hereto in the Principal Amount at Maturity of
$___ in such Securities (the "Transfer") to ________ (the "Transferee"), as
-------- ----------
further specified in Annex A hereto. In the event that Transferor holds
Physical Securities, this Certificate is accompanied by one or more certificates
aggregating at least the Principal Amount at Maturity of Securities proposed to
be Transferred. In connection with the Transfer, the Transferor hereby certifies
that:
1. [_] Check if Transferee will take an Interest in the 144A Global Security.
---------------------------------------------------------------------
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
----------
Act"), and, accordingly, the Transferor hereby further certifies that the
- ---
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
Security will be subject to the restrictions on transfer enumerated in the
Securities Act Legend and in the Indenture and the Securities Act.
<PAGE>
2. [_] Check if Transferee will take an Interest in the Regulation S Global
--------------------------------------------------------------------
Security pursuant to Regulation S. The Transfer is being effected pursuant to
- ---------------------------------
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to a
person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of Regulation
S under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the Security will be subject to the restrictions on Transfer
enumerated in the Securities Act Legend printed on the Regulation S Global
Security and in the Indenture and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a Restricted
-------------------------------------------------------------------
Physical Security pursuant to Rule 144A or Regulation S. One or more of the
- -------------------------------------------------------
events specified in Section 2.06(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and accordingly the Transferor hereby
further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144A under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 1 above; or
(b) [_] such Transfer is being effected pursuant to and in accordance
with Rule 904 under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 2 above.
4. [_] Check if Transferee will take an Interest in the Unrestricted Global
--------------------------------------------------------------------
Security The Transfer is being effected pursuant to and in accordance with Rule
- --------
144 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture, and the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred Securities will
no longer be subject to the restrictions on transfer enumerated in the
Securities Act Legend and in the Indenture and the Securities Act.
<PAGE>
5. [_] Check if Transferee will take an Interest in the Physical Global
----------------------------------------------------------------
Security that does not bear the Securities Act Legend One or more of the events
- -----------------------------------------------------
specified in Section 2.06(a) of the Indenture have occurred and the Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture,
and the restrictions on transfer contained in the Indenture and the Securities
Act Legend are not required in order to maintain compliance with the Securities
Act. Upon consummation of the proposed Transfer in accordance with the terms of
the Indenture, the transferred Securities will no longer be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
[Insert Name of Transferor]
By:
-------------------------------------
Name:
Title:
Dated:
------------------
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] Interests in the
(i) [_] 144A Global Security (CUSIP _____), or
(ii) [_] Regulation S Global Security (CINS _____).
(b) [_] Physical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) [_] Interests in the:
(i) [_] 144A Global Security (CUSIP _____), or
(ii) [_] Regulation S Global Security (CINS _____), or
(iii) [_] Unrestricted Global Security (CUSIP _____); or
(b) [_] Physical Securities that bear the Securities Act Legend;
(c) [_] Physical Securities that do not bear the Securities Act Legend;
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
Attention: [ ]
[Name and Address of Registrar]
Re: 11 7/8% Senior Discount Notes due 2007
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of September 19,
1997 (the "Indenture"), among FrontierVision Holdings, L.P., FrontierVision
---------
Holdings Capital Corporation (the "Issuers") and U.S. Bank National Association
-------
(d/b/a Colorado National Bank), as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
__________ (the "Holder") owns and proposes to exchange the Securities
------
specified herein, in the Principal Amount at Maturity of $___ in such Security
(the "Exchange"). In the event the Holder holds Physical Securities, this
--------
Certificate is accompanied by one or more certificates aggregating at least the
Principal Amount at Maturity of Securities proposed to be Exchanged. In
connection with the Exchange, the Holder hereby certifies that:
1. Exchange of Restricted Physical Securities or Interests in the Initial
Global Security for Physical Securities that do not bear the Securities Act
Legend or Unrestricted Global Securities
(a) [_] Check if Exchange is from Initial Global Securities to the
----------------------------------------------------------
Unrestricted Global Security. In connection with the Exchange of the Holder's
- ----------------------------
Initial Global Security for an interest in the Unrestricted Global Security in
an equal Principal Amount at Maturity, the Holder hereby certifies (i) the
Unrestricted Global Securities are being acquired for the Holder's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Initial Global Securities and pursuant
to and in accordance with the United States Securities Act of 1933, as amended
(the "Securities Act"), and (iii) the restrictions on transfer contained in the
--------------
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act.
<PAGE>
(b) [_] Check if Exchange is from Restricted Physical Securities to an
--------------------------------------------------------------
Interest in the Unrestricted Global Security. In connection with the Holder's
- --------------------------------------------
Exchange of Restricted Physical Securities for an interest in the Unrestricted
Global Security, (i) the interest in the Unrestricted Global Security is being
acquired for the Holder's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Physical Securities and pursuant to and in accordance with the
Securities Act and (iii) the restrictions on transfer contained in the Indenture
and the Securities Act Legend are not required in order to maintain compliance
with the Securities Act.
(c) [_] Check if Exchange is from Restricted Physical Securities to
-----------------------------------------------------------
Physical Securities that do not bear the Securities Act Legend. In connection
- --------------------------------------------------------------
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act Legend
are being acquired for the Holder's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events specified
in Section 2.06(a) of the Indenture have occurred.
2. [_] Check if Exchange is from Restricted Physical Securities to Interests
---------------------------------------------------------------------
in an Initial Global Security. In connection with the Exchange of the Holder's
- -----------------------------
Restricted Physical Security for interests in an Initial Global Security [[CHECK
ONE] [_] 144A Global Security, [_] Regulation S Global Security], with an equal
Principal Amount at Maturity, (i) the interests in the Initial Global Security
are being acquired for the Holder's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Physical Security and pursuant to and in accordance
with the Securities Act. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Initial Global Security issued
will be subject to the restrictions on transfer enumerated in the Securities Act
Legend printed on the Initial Global Securities and in the Indenture and the
Securities Act.
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
-------------------------------
[Insert Name of Holder]
By:
----------------------------
Name:
Title:
Dated:
------------------
<PAGE>
Exhibit 4.3
FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
$237,650,000
11 7/8% Senior Discount Notes due 2007
Purchase Agreement
September 16, 1997
J.P. Morgan Securities Inc.
Chase Securities Inc.
CIBC Wood Gundy Securities Corp.
First Union Capital Markets Corp.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
FrontierVision Holdings, L.P., a Delaware limited partnership (the
"Company"), and FrontierVision Holdings Capital Corporation, a Delaware
-------
corporation and a wholly owned subsidiary of the Company ("Capital" and,
-------
together with the Company, the "Issuers"), propose to issue and sell to J.P.
-------
Morgan Securities Inc., Chase Securities Inc., CIBC Wood Gundy Securities Corp.
and First Union Capital Markets Corp. (the "Initial Purchasers") $237,650,000
------------------
aggregate principal amount at maturity of their 11 7/8% Senior Discount Notes
due 2007 (the "Securities"). The Securities will be issued pursuant to the
----------
provisions of an Indenture (the "Indenture") to be dated as of September 19,
---------
1997 between the Issuers and U.S. Bank National Association (d/b/a Colorado
National Bank), as Trustee (the "Trustee").
-------
The offering and sale of the Securities to the Initial Purchasers will
be made without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption therefrom provided by Section
--------------
4(2) of the Securities Act. Holders of Securities will have the benefits of a
Registration Rights Agreement to be dated as of September 19, 1997 among the
Issuers and the Initial Purchasers,
<PAGE>
-2-
substantially in the form attached hereto as Exhibit A (the "Registration Rights
--------- -------------------
Agreement"). This Agreement, the Indenture, the Securities and the Registration
- ---------
Rights Agreement are collectively referred to herein as the "Offering
--------
Agreements."
- ----------
The Issuers hereby agree with the Initial Purchasers as follows:
1. The Issuers agree to issue and sell the Securities to the Initial
Purchasers as hereinafter provided, and each Initial Purchaser, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Issuers the respective principal amount at maturity of Securities set
forth opposite such Initial Purchaser's name in Schedule I hereto at a price
----------
(the "Purchase Price") equal to 60.909% of their principal amount at maturity.
--------------
2. The Issuers understand that the Initial Purchasers intend (i) to
offer privately their respective portions of the Securities as soon after this
Agreement has become effective as in the judgment of the Initial Purchasers is
advisable and (ii) initially to offer the Securities upon the terms set forth in
the Offering Memorandum (as defined below).
The Issuers confirm that they have authorized the Initial Purchasers,
subject to the restrictions set forth below, to distribute copies of the
Offering Memorandum in connection with the offering of the Securities. Each
Initial Purchaser hereby makes to the Issuers the following representations and
agreements:
(a) it is a qualified institutional buyer within the meaning of Rule
144A under the Securities Act;
(b) (A) it will not solicit offers for, or offer to sell, the
Securities by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) and (B) it
will solicit offers for the Securities only from, and will offer the
Securities only to, (1) persons whom it reasonably believes to be
"qualified institutional buyers" within the meaning of Rule 144A under the
Securities Act or (2) upon the terms and conditions set forth in Annex I to
-------
this Agreement; and
(c) it will deliver a copy of the Offering Memorandum to each person
who acquires Securities from it.
<PAGE>
-3-
3. Payment for the Securities shall be made by wire transfer in
immediately available funds, to the account specified by the Company to the
Initial Purchasers no later than noon on the Business Day (as defined below)
prior to the Closing Date (as defined below), on September 19, 1997, or at such
other time on the same or such other date as the Initial Purchasers and the
Issuers may agree upon in writing. The time and date of such payment are
referred to herein as the "Closing Date." As used herein, the term "Business
------------ --------
Day" means any day other than a day on which banks are permitted or required to
- ---
be closed in New York City.
Payment for the Securities shall be made against delivery to the
nominee of The Depository Trust Company for the account of the Initial
Purchasers of one or more global notes representing the Securities
(collectively, the "Global Note"), with any transfer taxes payable in connection
-----------
with the transfer to the Initial Purchasers paid by the Company. The Global Note
will be made available for inspection by the Initial Purchasers at the office of
J.P. Morgan Securities Inc. at the address set forth above, or at such other
location as the Company and the Initial Purchasers agree, not later than 1:00
P.M., New York City time, on the Business Day prior to the Closing Date.
4. The Issuers, jointly and severally, represent and warrant to each
Initial Purchaser as follows:
(a) A preliminary offering memorandum, dated September 2, 1997 (the
"Preliminary Offering Memorandum"), and an offering memorandum, dated
-------------------------------
September 16, 1997 (the "Offering Memorandum"), have been prepared in
-------------------
connection with the offering of the Securities. The Preliminary Offering
Memorandum or the Offering Memorandum and any amendments or supplements
thereto did not and will not, as of their respective dates or as of the
Closing Date, contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing shall not apply to statements or
-------- -------
omissions in the Preliminary Offering Memorandum, the Offering Memorandum
or any amendment or supplement thereto made in reliance upon and in
conformity with information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser expressly for use therein.
(b) The financial statements, and the related notes thereto, included
in the Offering Memorandum present
<PAGE>
-4-
fairly the financial position of (i) Operating Partners, (ii) the General
Partner (as defined herein), (iii) United Cable Vision, Inc. (selected
assets acquired by Operating Partners), (iv) Ashland and Defiance Clusters,
(v) C4 Media Cable Southeast, Limited Partnership, (vi) American Cable
Entertainment of Kentucky-Indiana, Inc., (vii) Triax Southeast Associates,
L.P., (viii) A-R Cable Services-ME, Inc., (ix) New Hampshire/Vermont
Systems (selected assets acquired from TCI Communications, Inc.) and (x)
Cox Central Ohio Cluster (the entities specified in clauses (iii) through
(x), collectively, the "Other Entities") as of the dates indicated and the
--------------
results of operations of the Company and each of the Other Entities and the
changes in their cash flows for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis. The pro forma
financial statements, and the related notes thereto, and other pro forma
financial information included in the Offering Memorandum have been
prepared in accordance with the applicable requirements of the Securities
Act with respect to pro forma financial statements and are based upon good
faith estimates and assumptions believed by the Issuers to be reasonable.
(c) Since the respective dates as of which information is given in the
Offering Memorandum, there has not been any change in the equity interests
or long-term debt of the Company or any of the Subsidiaries (as defined
below), or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
business, prospects, management, financial position, partners' equity or
results of operations of the Company and the Subsidiaries, taken as a
whole, otherwise than as set forth or contemplated in the Offering
Memorandum (a "Material Adverse Change" or a "Prospective Material Adverse
----------------------- ----------------------------
Change," respectively). Except as set forth or contemplated in the Offering
------
Memorandum, neither the Company nor any of the Subsidiaries has entered
into any transaction or agreement (whether or not in the ordinary course of
business) material to the Company and the Subsidiaries taken as a whole.
(d) Each of the Issuers has been duly organized or incorporated, as
the case may be, and is validly existing as a limited partnership or
corporation, as the case may be, in good standing under the laws of the
State of Delaware, with corporate or partnership power, as the case may be,
and authority and all necessary material authoriza-
<PAGE>
-5-
tions, approvals, orders, licenses, certificates and permits of and from
regulatory or governmental officials, bodies and tribunals to (i) own its
properties and conduct its business in all material respects as described
in the Offering Memorandum; and (ii) enter into, deliver, incur and perform
its obligations under the Offering Agreements; and each of the Issuers has
been duly qualified as a foreign limited partnership or foreign
corporation, as the case may be, for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, other than where the failure to be so qualified or in good
standing, singly or in the aggregate with all other such failures, would
not have a material adverse effect on the general affairs, business,
prospects, management, financial position, partners' equity or results of
operations of the Company and the Subsidiaries, taken as a whole (a
"Material Adverse Effect").
-----------------------
(e) The Company has, and, as of the Closing Date, will have, the
capitalization set forth in the Offering Memorandum under the caption
"Capitalization" under the subheading "Actual". Except as set forth in the
Offering Memorandum, all of the outstanding equity interests of the Company
have been duly authorized and validly issued and are not subject to any
preemptive or similar rights; and, except as described in or expressly
contemplated by the Offering Memorandum, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any equity
interests in the Company or any of the Subsidiaries, or any contract,
commitment, agreement, understanding or arrangement of any kind to which
the Company or any of the Subsidiaries is a party relating to the issuance
of any equity interests of the Company or of any such Subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or
options.
(f) Each of the subsidiaries of the Company (the "Subsidiaries") that
------------
is a corporation has been duly incorporated and is validly existing as a
corporation under the laws of its jurisdiction of incorporation, with
corporate power and authority to own and lease its properties and conduct
its business as described in the Offering Memorandum, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing
<PAGE>
-6-
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification,
other than where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. Each Subsidiary that is a limited
partnership has been duly formed and is validly existing as a limited
partnership in good standing under the laws of the state of its
organization, with partnership power and authority to own and lease its
properties and conduct its business as described in the Offering
Memorandum, and has been duly qualified as a foreign limited partnership
for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect. All of the issued equity interests of each Subsidiary have
been duly authorized and validly issued and, as to shares of capital stock
of any Subsidiary that is a corporation, are fully paid and non-assessable,
and (except as otherwise set forth in the Offering Memorandum) will be
owned, as of the Closing Date, by the Company, directly or indirectly, free
and clear of all material liens, encumbrances, security interests or
claims, except for the pledge of such stock pursuant to the Senior Credit
Facility (as defined in the Offering Memorandum) as described in the
Offering Memorandum.
(g) The general partner of the Company is FrontierVision Partners,
L.P., a Delaware limited partnership (the "General Partner"), which has
---------------
been duly organized and is validly existing as a limited partnership in
good standing under the laws of the State of Delaware with full partnership
power and authority to own its properties and to conduct its business as
described in the Offering Memorandum, and has been duly qualified as a
foreign limited partnership for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases property or conducts any business so as to require such
qualification other than where the failure to be so qualified or in good
standing would not reasonably be expected to have a Material Adverse
Effect.
(h) The general partner of the General Partner is FVP GP, L.P., a
Delaware limited partnership ("FVPGP"), which has been duly organized and
-----
is validly existing as a limited partnership in good standing under the
laws of the
<PAGE>
-7-
State of Delaware with full partnership power and authority to own its
properties and to conduct its business as described in the Offering
Memorandum, and has been duly qualified as a foreign limited partnership
for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases property or conducts any
business so as to require such qualification other than where the failure
to be so qualified or in good standing would not reasonably be expected to
have a Material Adverse Effect.
(i) The general partner of FVPGP is FrontierVision Inc., a Delaware
corporation ("FV Inc."), which has been duly incorporated and is validly
------
existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own its properties and
to conduct its business as described in the Offering Memorandum, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases property or conducts any business so as to
require such qualification other than where the failure to be so qualified
or in good standing would not reasonably be expected to have a Material
Adverse Effect.
(j) This Agreement has been duly authorized, executed and delivered by
the Issuers.
(k) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Issuers and constitutes a valid and legally
binding agreement of the Issuers, enforceable in accordance with its terms
except (a) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium (whether general or specific),
fraudulent conveyance or similar laws relating to or affecting the
enforcement of creditors' rights generally, (b) the enforceability thereof
may be subject to the application of general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law) and (c) no representation is made herein concerning the
enforceability of (i) waivers of notice or of any other constitutional,
statutory or common law rights, including, without limitation, waiver of
stay, extension or usury laws, (ii) indemnification provisions to the
extent such provisions are deemed to violate public policy or federal or
state securities laws, and (iii) submissions to the personal jurisdiction
of any particular court.
<PAGE>
-8-
(l) The Securities and the Exchange Securities (as defined in the
Registration Rights Agreement) have been duly authorized by each of the
Issuers, and, when issued and delivered pursuant to this Agreement or the
Registration Rights Agreement, as the case may be, and duly authenticated
by the Trustee, will have been duly executed, authenticated, issued and
delivered and will constitute valid and binding obligations of each of the
Issuers, entitled to the benefits provided by the Indenture, except (a) the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium (whether general or specific), fraudulent
conveyance or similar laws relating to or affecting the enforcement of
creditors' rights generally, (b) the enforceability thereof may be subject
to the application of general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (c) no
representation is made herein concerning the enforceability of (i) waivers
of notice or of any other constitutional, statutory or common law rights,
including, without limitation, waiver of stay, extension or usury laws,
(ii) indemnification provisions to the extent such provisions are deemed to
violate public policy or federal or state securities laws, and (iii)
submissions to the personal jurisdiction of any particular court; the
Indenture has been duly authorized by each of the Issuers and, when
executed and delivered by the Issuers and the Trustee (assuming due
authorization, execution and delivery by the Trustee), the Indenture will
constitute a valid and binding instrument; and the Securities and the
Indenture will conform in all material respects to the descriptions thereof
in the Offering Memorandum.
(m) Neither the Company nor any of the Subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under its respective Certificate of Limited Partnership, Limited
Partnership Agreement, Certificate of Incorporation or By-Laws (each an
"Organizational Document"), as the case may be, or any indenture, mortgage,
-----------------------
deed of trust, loan agreement or other agreement or instrument to which any
of them is a party or by which any of them or any of their respective
properties is bound, except for violations and defaults which would not
reasonably be expected to have a Material Adverse Effect; the issue and
sale of the Securities and the performance by each of the Issuers of all of
its obligations under the Offering Agreements and the consummation of the
transactions herein and therein contemplated will
<PAGE>
-9-
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default (including any default resulting after notice
or lapse of time or both) under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which any of them is bound or to which
any of the property or assets of any of them is subject, nor will any such
action result in any violation of the provisions of any of their respective
Organizational Documents or any applicable law or statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over any of them or any of their respective properties,
including, without limitation, any law, statute, rule or regulation or any
judgment, decree or order applicable to the cable television industry in
general, except for conflicts, breaches, defaults and violations which
would not reasonably be expected to have a Material Adverse Effect; and no
consent, approval, authorization, order, license, registration or
qualification of or with any such court or governmental agency or body,
including, without limitation, under the Communications Act of 1934, as
amended (the "Communications Act"), the Cable Communications Policy Act of
------------------
1984 (the "1984 Cable Act"), the Cable Television Consumer Protection and
--------------
Competition Act of 1992 (the "1992 Cable Act"), the Telecommunications Ac
--------------
of 1996 (the "1996 Telecom Act" and, together with the 1984 Cable Act and
----------------
the 1992 Cable Act, the "Cable Acts") or any order, rule or regulation of
----------
the Federal Communications Commission ("FCC"), is required for the issue
---
and sale of the Securities, the execution and delivery by each of the
Issuers of, and the performance by each of the Issuers of its obligations
under, the Offering Agreements or the consummation by each of the Issuers
of the transactions contemplated by the Offering Agreements, except (i)
such consents, approvals, authorizations, orders, licenses, registrations
or qualifications as have been obtained and are in full force and effect
under the Communications Act, the Cable Acts or any order, rule or
regulation of the FCC and such as may be required under state securities or
Blue Sky laws in connection with the purchase and resale of the Securities
by the Initial Purchasers, (ii) in the case of performance of the
Registration Rights Agreement, such as may be required under the Securities
Act and the Trust Indenture Act or (iii) where the failure to obtain such
consents, approvals, authorizations, orders, licenses, registrations or
qualifications would not reasonably be expected to have a Material Adverse
Effect.
<PAGE>
-10-
(n) Other than as set forth or contemplated in the Offering Memorandum
(including those matters referred to therein relating to general
rulemakings and similar matters relating generally to the cable television
industry, in each case on a national, regional, state or county basis),
there are no legal or governmental investigations, actions, suits or
proceedings pending or, to the best knowledge of each of the Issuers,
threatened against or affecting the Company or any of the Subsidiaries or
any of their respective properties or to which the Company or any of the
Subsidiaries is or may be a party or to which any property of the Company
or any of the Subsidiaries is or may be subject which, if determined
adversely to the Company or any of the Subsidiaries, would individually or
in the aggregate have, or would reasonably be expected to have, a Material
Adverse Effect, and, to the best of each of the Issuers' knowledge, no such
proceedings are threatened by governmental authorities or by others; and
there are no statutes, regulations, contracts or other documents that would
be required to be described in a registration statement or prospectus filed
with the Commission with respect to a public offering of the Securities
which are not described in the Offering Memorandum.
(o) KPMG Peat Marwick LLP, who have certified certain financial
statements of Operating Partners, the General Partner, A-R Cable Services
-ME, Inc., and the New Hampshire/Vermont Systems, Piaker & Lyons, P.C., who
have certified certain financial statements of United Video Cablevision,
Inc., Deloitte & Touche LLP, who have certified certain financial
statements of Ashland and Defiance Clusters, American Cable Entertainment
of Kentucky-Indiana, Inc. and Cox Central Ohio Cluster, Williams, Rogers,
Lewis & Co., P.C., who have certified certain financial statements of C4
Media Cable Southeast Limited Partnership, and Arthur Andersen LLP, who
have certified certain financial statements of Triax Southeast Associates,
L.P., respectively, are each independent public accountants as required by
the Securities Act.
(p) Each of the Company and the Subsidiaries has good and marketable
title in fee simple to all material items of real property owned by it and
good and marketable title to all material items of personal property owned
by it, in each case free and clear of all liens, encumbrances and defects,
except such as are described or referred to in the Offering Memorandum or
such liens, encumbrances or defects as do not materially affect the value
of such
<PAGE>
-11-
property and do not interfere with the use made or proposed to be made of
such property by the Company or any of the Subsidiaries in such a manner as
would reasonably be expected to result in a Material Adverse Effect; and
any real property and buildings held under lease by the Company or any of
the Subsidiaries are held by the Company or such Subsidiary under valid,
existing and enforceable leases with such exceptions as are not material
and do not interfere with the use made or proposed to be made of such
property and buildings by the Company or any of the Subsidiaries in such a
manner as would reasonably be expected to result in a Material Adverse
Effect.
(q) No relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries, on the one hand, and the directors,
officers, stockholders, holders of units of partnership interest, customers
or suppliers of the Company or any of the Subsidiaries, on the other hand,
which would be required by the Securities Act to be described in a
registration statement or prospectus filed with the Commission with respect
to a public offering of the Securities which is not described in the
Offering Memorandum.
(r) Neither of the Issuers is nor, after giving effect to the offering
and sale of the Securities, will be an "investment company" or entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").
----------------------
(s) [Intentionally Omitted]
(t) Each of the Company and the Subsidiaries owns or possesses, or can
acquire on reasonable terms, adequate licenses, trademarks, service marks,
trade names, copyrights and know-how (including trade secrets and other
proprietary or confidential information, systems or procedures)
(collectively, "intellectual property") necessary to conduct the business
---------------------
of the Existing Systems (as such term is defined in the Offering
Memorandum) now or proposed to be operated by it as described in the
Offering Memorandum, except where the failure to own, possess or have the
ability to acquire any such intellectual property would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse
Effect; and, except as disclosed in the Offering Memorandum, neither the
Company nor any of the Subsidiaries has received any notice of in-
<PAGE>
-12-
fringement of or conflict with (and neither knows of any such infringement
of or conflict with) asserted rights of others with respect to any of such
intellectual property which, if any such assertions of infringement or
conflict were sustained, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(u) Each of the Company and the Subsidiaries owns, possesses or has
obtained, or can acquire on reasonable terms, all franchises, licenses,
permits, certificates, consents, orders, approvals and other authorizations
(collectively, "Permits") from, and has made all declarations and filings
-------
(collectively, "Filings") with, all federal, state, local and other
-------
governmental authorities including the FCC, and all courts and other
tribunals (collectively, the "Governmental Authorities") required to own or
------------------------
lease, as the case may be, and to operate the Existing Systems and to carry
on the business of the Existing Systems in the manner and to the full
extent now operated or proposed to be operated as described in the Offering
Memorandum, except where the failure to obtain such Permits or make such
Filings, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect; such Permits contain no materially
burdensome restrictions not customarily imposed by Governmental Authorities
on cable television systems of the same class and type as those owned by
the Company and the Subsidiaries other than such as would not have a
Material Adverse Effect; the execution and delivery by each of the Issuers
of, and the performance by each of the Issuers of its obligations under,
the Offering Agreements, the consummation of the transactions contemplated
hereby and thereby, and the operation of the Existing Systems in the manner
and to the full extent now operated or proposed to be operated as described
in the Offering Memorandum, did not or will not result in a violation of
the Communications Act, the Cable Acts or any order, rule or regulation of
the FCC or any other Governmental Authority except for violations that,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect; the business and operations of the Company and
the Subsidiaries comply in all respects with the Communications Act, the
Cable Acts and all published orders, rules and regulations of the FCC
except for any such non-compliance as would not reasonably be expected to
have a Material Adverse Effect, and to the best of each of the Issuers'
knowledge, no event has occurred which permits, or with notice or lapse of
time or both would permit, the
<PAGE>
-13-
revocation or non-renewal of any Permits or Filings, or which might
result in any other material impairment of the rights of the Company or any
of the Subsidiaries in the Permits except for any such revocation,
non-renewal or impairment which would not reasonably be expected to have a
Material Adverse Effect; and, other than matters described in the Offering
Memorandum and except as to any other matters relating generally to the
cable television industry (in each case on a national, regional, state or
county basis), there is no proceeding pending or, to each of the Issuers'
best knowledge, threatened before the FCC or any other Governmental
Authority that has or would be reasonably expected to have a Material
Adverse Effect; and each of the Company and the Subsidiaries is in
compliance with all laws and regulations relating to the conduct of its
business as conducted as of the date hereof, except for any such
non-compliance as would not reasonably be expected to have a Material
Adverse Effect.
(v) The statistical and market-related data included in the Offering
Memorandum are based on or derived from sources which the Issuers believe
to be reliable and accurate.
(w) To the best knowledge of each of the Issuers, there are no
existing or threatened labor disputes with the employees of the Company or
any of the Subsidiaries which are reasonably likely to have a Material
Adverse Effect.
(x) Each of the Company and the Subsidiaries (i) is in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits,
------------------
licenses or other approvals required of it under applicable Environmental
Laws to conduct its respective businesses and (iii) is in compliance with
all terms and conditions of any such permit, license or approval, except
where such non-compliance with Environmental Laws or failure to receive
required permits, licenses or other approvals would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(y) Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
that is maintained, ad-
<PAGE>
-14-
ministered or contributed to by the Company or any of the Subsidiaries or
any of their affiliates for employees or former employees of the Company or
any of the Subsidiaries and their affiliates has been maintained in
compliance in all material respects with its terms and the requirements of
any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); no prohibited transaction, within the meaning of Section 406 of
----
ERISA or Section 4975 of the Code, has occurred with respect to any such
plan excluding transactions effected pursuant to a statutory or
administrative exemption; and for each such plan which is subject to the
funding rules of Section 412 of the Code or Section 302 of ERISA no
"accumulated funding deficiency" as defined in Section 412 of the Code has
been incurred, whether or not waived, and the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions
does not materially exceed the fair market value of the assets of such plan
(excluding for these purposes accrued but unpaid contributions).
(z) [Intentionally Omitted]
(aa) Neither of the Issuers and, to the knowledge of the Issuers, no
affiliate (as defined in Rule 501(b) of Regulation D under the Securities
Act ("Regulation D")) (other than an Initial Purchaser) thereof has
------------
directly, or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Securities in a manner that would require the registration under the
Securities Act of the offering contemplated by the Offering Memorandum.
(bb) Neither of the Issuers and, to the knowledge of the Issuers, no
person acting on behalf of either of them has offered or sold the
Securities by means of any general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act or, with respect
to Securities sold outside the United States to non-U.S. persons (as
defined in Rule 902 under the Securities Act), by means of any directed
selling efforts within the meaning of Rule 902 under the Securities Act,
and the Issuers and all persons acting on their behalf have complied with
and will implement the "offering restriction" within the meaning of such
Rule 902.
<PAGE>
-15-
(cc) Assuming, and subject to, the accuracy of, and compliance with,
the representations and agreements of the Initial Purchasers made herein,
including, without limitation, pursuant to Annex I, it is not necessary in
connection with the offer, sale and delivery of the Securities in the
manner contemplated by this Agreement to register the Securities under the
Securities Act or to qualify an indenture under the Trust Indenture Act.
(dd) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
5. The Issuers, jointly and severally, covenant and agree with each of
the Initial Purchasers as follows:
(a) before distributing any amendment or supplement to the Offering
Memorandum, to furnish to the Initial Purchasers a copy of the proposed
amendment or supplement for review and not to distribute any such proposed
amendment or supplement to which the Initial Purchasers reasonably object;
(b) if, at any time prior to the completion of the Offering (as
defined in the Offering Memorandum), any event shall occur as a result of
which it is necessary to amend or supplement the Offering Memorandum in
order that the Offering Memorandum does not contain an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Offering Memorandum to comply with
law, forthwith to prepare and furnish, at the expense of the Company, to
the Initial Purchasers and to the dealers (whose names and addresses the
Initial Purchasers will furnish to the Company) to which Securities may
have been sold by the Initial Purchasers and to any other dealers upon
request, such amendments or supplements to the Offering Memorandum as may
be necessary so that the Offering Memorandum as so amended or supplemented
will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances when the Offering Memorandum is delivered to a purchaser, not
misleading or so that the Offering Memorandum will comply with law;
(c) the Issuers will cooperate with the Initial Purchasers and their
counsel in connection with the registra-
<PAGE>
-16-
tion or qualification of the Securities for offering and sale by the
Initial Purchasers and by dealers under the securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may reasonably request and
will file such consents to service of process or other documents necessary
or appropriate in order to effect such registration or qualification;
provided that in no event shall any Issuer be obligated to qualify to do
--------
business as a foreign limited partnership or corporation, as the case may
be, or as a securities dealer in any jurisdiction where it is not now so
qualified or to take any action that would subject it to taxation or
service of process in suits, other than those specifically arising out of
the offering or sale of the Securities, in any jurisdiction where it is not
now so subject;
(d) for five years from the Closing Date, to furnish to the Initial
Purchasers copies of all reports or other communications (financial or
other) furnished to holders of Securities, and copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange;
(e) during the period beginning on the date hereof and continuing to
and including the Business Day following the Closing Date, not to offer,
sell, contract to sell, or otherwise dispose of any debt securities of or
guaranteed by the Company or any of the Subsidiaries which are
substantially similar to the Securities;
(f) to use the net proceeds received by the Company from the sale of
the Securities pursuant to this Agreement in the manner specified in the
Offering Memorandum under the caption "Use of Proceeds";
(g) to use their best efforts to cause such Securities to be eligible
for the PORTAL trading system ("PORTAL") of the National Association of
Securities Dealers, Inc.;
(h) during the period of two years after the Closing Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule
144 under the Securities Act) (other than any of the Initial Purchasers)
to, resell any of the Securities which constitute "restricted securities"
under Rule 144 that have been reacquired by any of them;
<PAGE>
-17-
(i) whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of their obligations
hereunder, including without limiting the generality of the foregoing, all
costs and expenses (i) incident to the preparation, issuance, execution,
authentication and delivery of the Securities, including any expenses of
the Trustee, (ii) incident to the preparation, printing and distribution of
the Preliminary Offering Memorandum and the Offering Memorandum (including
in each case all exhibits, amendments and supplements thereto), (iii)
incurred in connection with the registration or qualification and
determination of eligibility for investment of the Securities under the
laws of such jurisdictions as the Initial Purchasers may designate
(including reasonable fees of counsel for the Initial Purchasers and their
disbursements), (iv) in connection with the listing of the Securities on
any securities exchange or inclusion of the Securities on PORTAL, (v) in
connection with the printing (including word processing and duplication
costs) and delivery of the Preliminary and Supplemental Blue Sky Memoranda
and any Legal Investment Survey and the furnishing to the Initial
Purchasers and dealers of copies of the Preliminary Offering Memorandum and
Offering Memorandum (and any amendments and supplements thereto), including
mailing and shipping, as herein provided, (vi) payable to rating agencies
in connection with the rating of the Securities, and (vii) incurred by the
Issuers in connection with a "road show" presentation to potential
investors; provided, however, that except as provided in this Section 5 or
-------- -------
otherwise provided in Section 7 or 10 hereof, the Initial Purchasers will
pay all of their own costs and expenses, including, without limitation, the
fees of their counsel;
(j) to take all reasonable action that is appropriate or necessary to
assure that offerings of other securities will not be integrated for
purposes of the Securities Act with the offering contemplated hereby;
(k) not to solicit any offer to buy or offer to sell Securities by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D under the Securities Act;
(l) while the Securities remain outstanding and are "restricted
securities" within the meaning of Rule
<PAGE>
-18-
144(a)(3) under the Securities Act, to, during any period in which they are
not subject to Section 13 or 15(d) under the Exchange Act, make available
to the Initial Purchasers and any holder of Securities in connection with
any sale thereof and any prospective purchaser of Securities, in each case
upon request, the information specified in, and meeting the requirements
of, Rule 144A(d)(4) ("Rule 144A(d)(4) Information") under the Securities
---------------------------
Act (or any successor thereto); and
(m) not to take any action prohibited by Regulation M under the
Exchange Act in connection with the distribution of the Securities
contemplated hereby.
6. The several obligations of the Initial Purchasers hereunder to
purchase the Securities on the Closing Date are subject to the performance by
each of the Issuers of its obligations hereunder and to the following additional
conditions:
(a) The representations and warranties of the Issuers contained herein
shall be true and correct, in all material respects, on and as of the
Closing Date as if made on and as of the Closing Date and the Issuers shall
have complied, in all material respects, with all agreements and all
conditions on their part to be performed or satisfied hereunder at or prior
to the Closing Date.
(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any downgrading,
nor shall any notice have been given of (i) any downgrading, (ii) any
intended or potential downgrading or (iii) any review or possible change
that does not indicate an improvement, in the rating accorded any
securities of or guaranteed by the Company or any of the Subsidiaries by
any "nationally recognized statistical rating organization", as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act.
(c) Since the respective dates as of which information is given in the
Offering Memorandum, there shall not have been any change in the equity
interests or long-term debt of the Company or any of the Subsidiaries or
any Material Adverse Change, or any development involving a Prospective
Material Adverse Change, otherwise than as set forth or contemplated in the
Offering Memorandum, the effect of which in the judgment of the Initial
Purchasers makes it impracticable or inadvisable to proceed with the
<PAGE>
-19-
offering or the delivery of the Securities on the Closing Date on the
terms and in the manner contemplated in the Offering Memorandum.
(d) The Initial Purchasers shall have received on and as of the
Closing Date a certificate of two executive officers of each of the
Issuers, with specific knowledge about the Issuers' financial matters,
reasonably satisfactory to the Initial Purchasers to the effect set forth
in subsections (a) through (c) of this Section and to the further effect
that there has not occurred any Material Adverse Change, or any development
involving a Prospective Material Adverse Change.
(e) Dow, Lohnes & Albertson, PLLC, counsel for the Issuers, shall have
furnished to the Initial Purchasers their written opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that:
(i) each of the Company and FrontierVision Operating Partners,
L.P. ("Operating Partners") has been duly organized and is validly
------------------
existing as a limited partnership in good standing under the laws of
the State of Delaware, with partnership power and authority to own its
properties and conduct its business as described in the Offering
Memorandum;
(ii) each of Capital, FrontierVision Capital Corporation and
FrontierVision Operating Partners Inc. has been duly incorporated and
is validy existing as a corporation in good standing under the laws of
the State of Delaware with corporate power and authority to own its
properties and conduct its business as described in the Offering
Memorandum;
(iii) based solely on a review of certificates from the
appropriate governmental authorities in each jurisdiction listed
below, Operating Partners has been duly qualified as a foreign limited
partnership for the transaction of business and is in good standing
under the laws of Colorado, Georgia, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New Hampshire, North Carolina,
Ohio, Pennsylvania, Tennessee, Virginia and West Virginia;
(iv) the General Partner has been duly organized and is validly
existing as a limited partnership in
<PAGE>
-20-
good standing under the laws of the State of Delaware with full
partnership power and authority to own its properties and to conduct
its business as described in the Offering Memorandum, and, based
solely on a review of certificates from the appropriate governmental
authorities in such jurisdictions, has been duly qualified as a
foreign limited partnership for the transaction of business and is in
good standing under the laws of Colorado, Georgia, Maine, Maryland,
Massachusetts, Michigan, New Hampshire, North Carolina, Ohio,
Pennsylvania, Tennessee, Virginia and West Virginia;
(v) FVPGP has been duly organized and is validly existing as a
limited partnership in good standing under the laws of the State of
Delaware with full partnership power and authority to own its
properties and to conduct its business as described in the Offering
Memorandum, and, based solely on a review of certificates from the
appropriate governmental authorities in such jurisdictions, has been
duly qualified as a foreign limited partnership for the transaction of
business and is in good standing under the laws of Colorado, Georgia,
Maine, Maryland, Massachusetts, Michigan, New Hampshire, North
Carolina, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia;
(vi) FV Inc. has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to own its properties and to
conduct its business as described in the Offering Memorandum, and,
based solely on a review of certificates from the appropriate
governmental authorities in such jurisdictions, has been duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of Colorado, Georgia, Maine,
Maryland, Michigan, New Hampshire, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia and West Virginia;
(vii) to such counsel's knowledge, based solely upon its review
of the publicly available records of the FCC and upon inquiry of
Operating Partners' management, and only with respect to the period
that the Existing Systems have been owned by Operating Partners, other
than as set forth or contemplated in the
<PAGE>
-21-
Offering Memorandum (including those matters referred to therein
relating to general rulemakings and similar matters relating generally
to the cable television industry (in each case on a national,
regional, state or county basis)), there are no legal or governmental
investigations, actions, suits or proceedings pending or threatened
against or affecting specifically the Company or any of the
Subsidiaries or any of their respective properties or to which the
Company or any of the Subsidiaries is or may be a party or to which
any property of the Company or any of the Subsidiaries is or may be
subject which, if determined adversely to the Company or any of the
Subsidiaries, would individually or in the aggregate have, or
reasonably be expected to have, a Material Adverse Effect;
(viii) this Agreement and the Registration Rights Agreement have
been duly authorized, executed and delivered by each of the Issuers;
(ix) assuming due authorization, execution and delivery of the
Indenture by the Trustee, the Securities have been duly authorized,
executed and delivered by each of the Issuers and, when duly
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, will constitute valid and binding
obligations of each of the Issuers entitled to the benefits provided
by the Indenture, enforceable in accordance with the terms thereof
except (a) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium (whether general or specific),
fraudulent conveyance or similar laws relating to or affecting the
enforcement of creditors' rights generally, (b) the enforceability
thereof may be subject to the application of general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law) and (c) no opinion shall be expressed concerning the
enforceability of (i) waivers of notice or of any other
constitutional, statutory or common law rights, including, without
limitation, waiver of stay, extension or usury laws, (ii)
indemnification provisions to the extent such provisions are deemed to
violate public policy or federal or state securities laws, and (iii)
submis-
<PAGE>
-22-
sion to the personal jurisdiction of any particular court;
(x) the Indenture has been duly authorized, executed and
delivered by each of the Issuers and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a valid and
binding instrument of each of the Issuers, enforceable against each of
the Issuers in accordance with its terms, except (a) the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium (whether general or specific), fraudulent
conveyance or other similar laws relating to or affecting creditors'
rights generally, (b) the enforceability thereof may be subject to the
application of general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (c) no
opinion shall be expressed concerning the enforceability of (i)
waivers of notice or of any other constitutional, statutory or common
law rights, including, without limitation, waiver of stay, extension
or usury laws, (ii) indemnification provisions to the extent such
provisions are deemed to violate public policy or federal or state
securities laws, and (iii) submission to the personal jurisdiction of
any particular court;
(xi) the Securities, the Indenture and the Registration Rights
Agreement conform in all material respects to the descriptions thereof
in the Offering Memorandum under the caption "Description of the
Notes";
(xii) the execution and delivery of the Offering Agreements, the
issuance and sale of the Securities and the performance by each of the
Issuers of its obligations under the Securities and the Offering
Agreements and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default (including any
default resulting after notice or lapse of time or both) under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument that has been filed as an exhibit to any registration
statement or periodic or current report filed by the Company or any of
the Subsidiaries with the Commission, nor will any such action result
in any viola-
<PAGE>
-23-
tion of the provisions of the Organizational Documents of the
Company or any of the Subsidiaries or the Communications Act, the
Cable Acts, any rule or regulation of the FCC or any other law or
statute customarily applicable to transactions of the type
contemplated by the Offering Agreements or, to such counsel's
knowledge, any other applicable law or statute or, to such counsel's
knowledge, any order, rule or regulation of any court or governmental
agency or body having jurisdiction over any of them or any of their
respective properties, including, without limitation, any federal law,
statute, rule or regulation, or to such counsel's knowledge, any
judgment, decree or order specifically and primarily applicable to the
cable television industry (as opposed to such items generally
applicable to other industries), except for conflicts, breaches,
defaults and violations which individually and in the aggregate would
not reasonably be expected to have a Material Adverse Effect;
(xiii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental
agency or body customarily required for transactions of the type
contemplated by the Offering Agreements, including, without
limitation, under the Communications Act, the Cable Acts or any order,
rule or regulation of the FCC, is required for the issuance and sale
of the Securities, the execution and delivery by each of the Issuers
of, and the performance by each of the Issuers of its obligations
under, the Offering Agreements or the consummation by each of the
Issuers of the transactions contemplated by the Offering Agreements,
except such consents, approvals, authorizations, orders, licenses,
registrations or qualifications (i) as have been obtained and are in
full force and effect under the Communications Act, the Cable Acts or
any order, rule or regulation of the FCC and such as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Initial Purchasers,
(ii) in the case of the performance of the Registration Rights
Agreement, such as may be required under the Securities Act or the
Trust Indenture Act or (iii) that may be required in the future due to
the operations or actions of the Company or any of the Subsidiaries,
<PAGE>
-24-
the cable systems of Operating Partners or affiliated parties;
(xiv) the statements in the Offering Memorandum under the
captions "Risk Factors-- Regulation in the Cable Television Industry"
and "Legislation and Regulation," insofar as such statements summarize
applicable provisions of the Communications Act, the Cable Acts and
the published orders, rules and regulations of the FCC promulgated
thereunder, are accurate summarizies in all material respects of the
provisions purported to be summarized under such captions in the
Offering Memorandum, and the FCC statutes and regulations summarized
under such captions are the FCC statutes and regulations that are
material to the business of the Company and the Subsidiaries as
described in the Offering Memorandum;
(xv) neither of the Issuers is nor, after giving effect to the
offering and sale of the Securities, will be an "investment company"
or entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
(xvi) the statements made in the Offering Memorandum under the
caption "Certain Federal Income Tax Consequences," insofar as they
purport to constitute summaries of matters of United States federal
tax law and regulations or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein in all
material respects;
(xvii) no registration under the Securities Act of the Securities
is required in connection with the sale of the Securities to the
Initial Purchasers as contemplated by this Agreement and the Offering
Memorandum or in connection with the initial resale of the Securities
by the Initial Purchasers in accordance with Section 2 (including
Annex I) of this Agreement, and prior to the commencement of the
-------
Exchange Offer (as defined in the Registration Rights Agreement) or
the effectiveness of the Shelf Registration Statement (as defined in
the Registration Rights Agreement), the Indenture is not required to
be qualified under the Trust Indenture Act, in each case (i) assuming
that the purchasers who buy the Securities in the initial resales are
Qualified Institutional Buyers or non-U.S. Persons (as defined in
<PAGE>
-25-
Rule 902 under the Act), and (ii) assuming, and subject to, the
accuracy of, and compliance with, the Initial Purchasers'
representations and agreements and those of the Issuers contained in
this Agreement (including, without limitation, pursuant to Annex I)
regarding the absence of a general solicitation in connection with the
sale of the Securities to the Initial Purchasers and the initial
resales thereof (it being understood that no opinion is expressed as
to any subsequent resale of any of the Securities); and
(xviii) nothing has come to such counsel's attention to lead such
counsel to believe that (except for the financial statements and other
financial information and statistical data included therein as to
which such counsel need express no belief) neither the Offering
Memorandum nor any amendment or supplement thereto made by the Issuers
prior to the Closing Date contained as of its date or contains as of
the Closing Date any untrue statement of a material fact or omitted as
of its date or omits as of the Closing Date to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Issuers and certificates or other written
statements of public officials. With respect to the matters to be covered
in subparagraph (xviii) above, such counsel's opinion may state that their
opinion and belief expressed therein is based upon their participation in
conferences with officers and other representatives of the Issuers,
representatives of the independent certified public accountants of the
Issuers, and representatives and counsel of the Initial Purchasers, at
which conferences the contents of the Offering Memorandum and related
matters were discussed and that such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum and has not made an
independent investigation, check or verification of facts for the purpose
of rendering their opinion.
<PAGE>
-26-
The opinion of Dow, Lohnes & Albertson, PLLC described above shall be
rendered to the Initial Purchasers at the request of the Issuers and shall
so state therein.
(f) The Initial Purchasers shall have received on and as of the
Closing Date an opinion of Cahill Gordon & Reindel, counsel to the Initial
Purchasers, with respect to such matters as the Initial Purchasers may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters.
(g) On the date of the issuance of the Offering Memorandum and also on
the Closing Date, each of KPMG Peat Marwick (Denver), KPMG Peat Marwick
(Jericho) and Deloitte & Touche (Atlanta) shall have furnished to the
Initial Purchasers letters, dated the respective dates of delivery thereof,
in form and substance satisfactory to the Initial Purchasers, containing
statements and information of the type customarily included in accountants'
"comfort letters" with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(h) The Issuers shall have executed and delivered the Registration
Rights Agreement.
(i) On the Closing Date, the Senior Credit Facility (as defined in the
Offering Memorandum) shall be in full force and effect with respect to
Operating Partners on the terms described in the Offering Memorandum and no
breach or violation of any of the material terms or provisions thereof or
Event of Default (as defined in the Senior Credit Facility) (or an event
which, with notice or lapse of time or both, would constitute an Event of
Default) thereunder shall exist.
(j) On or prior to the Closing Date, the Issuers shall have furnished
to the Initial Purchasers such further certificates and documents as the
Initial Purchasers shall reasonably request.
7. The Issuers, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser, and each person, if any, that controls any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation,
<PAGE>
-27-
the reasonable legal fees and other expenses incurred in connection
with any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum, the Offering Memorandum or any amendment or
supplement thereto, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Initial Purchaser furnished to the Issuers in
writing by such Initial Purchaser expressly for use therein; provided, however,
-------- -------
that neither of the Issuers shall be liable to the Initial Purchasers or any
other person affiliated or associated therewith under the indemnification
provided for in this Section 7 to the extent that any such loss, claim, damage
or liability of such Initial Purchaser or other person results from the fact
that such Initial Purchaser sold Securities to a person or entity as to whom it
shall be established that there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Offering Memorandum or of the
Offering Memorandum as then amended or supplemented if the Company has
previously furnished copies thereof in sufficient quantity to the Initial
Purchasers, and the Offering Memorandum or the Offering Memorandum as then
amended or supplemented would have cured the defect giving rise to such loss,
claim, damage or liability.
Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless each of the Issuers, its directors and executive officers and
each person that controls either of the Issuers within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Issuers to each Initial Purchaser, but only
with reference to information relating to such Initial Purchaser furnished to
the Issuers in writing by such Initial Purchaser expressly for use in the
Preliminary Offering Memorandum, the Offering Memorandum or any amendment or
supplement thereto.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
------------------
notify the person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemni-
- ------
<PAGE>
-28-
fying Person, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others the Indemnifying Person may designate in such proceeding
and shall pay the reasonable fees and expenses of such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Initial Purchasers and such control persons of Initial
Purchasers shall be designated in writing by J.P. Morgan Securities Inc. and any
such separate firm for the Issuers, their directors, their respective executive
officers and such control persons of either of the Issuers shall be designated
in writing by the Company. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its written consent (not to be
unreasonably withheld or delayed), but if settled with such consent or if there
be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment to the extent provided in this Section 7.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for fees and expenses of counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed Indemnified Person in accordance with said third sentence prior to
the date of such settlement to the extent it considers such request to be
reasonable or provided written notice to the Indemnified Person to substantiate
the
<PAGE>
-29-
non-payment of the unpaid balance as reasonable. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person (not to be
unreasonably withheld or delayed), effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional written
release, in form and substance reasonably satisfactory to such Indemnified
Person, of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers on the one hand and the Initial Purchasers on
the other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Issuers on the one
hand and the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Issuers on the one hand and the Initial
Purchasers on the other hand shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting expenses but
after deducting the discount to the Initial Purchasers) received by the Issuers
and the total discounts and commissions received by the Initial Purchasers, in
each case as set forth in the table on the cover of the Offering Memorandum,
bear to the aggregate offering price of the Securities. The relative fault of
the Issuers on the one hand and the Initial Purchasers on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers or by the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
<PAGE>
-30-
The Issuers and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an Initial
Purchaser be required to contribute any amount in excess of the amount by which
the total price at which the Securities purchased by it were offered in
connection with the initial resale of the Securities exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective principal amount at maturity of Securities set forth opposite
their names in Schedule I hereto, and not joint.
----------
The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Issuers set forth in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Initial Purchaser or any person controlling any Initial Purchaser or by
or on behalf of the Issuers, such Issuers' respective officers or directors or
any other person controlling either of the Issuers and (iii) acceptance of and
payment for any of the Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Initial Purchasers, by notice given
to the Issuers, if after
<PAGE>
-31-
the execution and delivery of this Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock Exchange
or the National Association of Securities Dealers, Inc., (ii) trading of any
securities of or guaranteed by the Company or any of the Subsidiaries shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities, or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in the judgment of the Initial
Purchasers, is material and adverse and which, in the judgment of the Initial
Purchasers, makes it impracticable to market the Securities on the terms and in
the manner contemplated in the Offering Memorandum.
9. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
If on the Closing Date, any one or more of the Initial Purchasers
shall fail or refuse to purchase Securities which it or they have agreed to
purchase hereunder, and the aggregate principal amount at maturity of Securities
which such defaulting Initial Purchaser or Initial Purchasers agreed but failed
or refused to purchase is not more than one-tenth of the aggregate principal
amount at maturity of Securities to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount at maturity of Securities set forth opposite their respective names in
Schedule I bears to the aggregate principal amount at maturity of Securities set
- ----------
forth opposite the names of all such non-defaulting Initial Purchasers, or in
such other proportions as the Initial Purchasers may specify, to purchase the
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase on such date; provided, however, that in no
-------- -------
event shall the principal amount at maturity of Securities that any Initial
Purchaser has agreed to purchase pursuant to Section 1 be increased pursuant to
this Section 9 by an amount in excess of one-ninth of such principal amount at
maturity of Securities without the written consent of such Initial Purchaser. If
on the Closing Date, any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase Securities which it or they have agreed to purchase
hereunder, and the aggregate principal amount at maturity of Securities with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount at maturity of Se-
<PAGE>
-32-
curities to be purchased, and arrangements satisfactory to the Initial
Purchasers and the Issuers for the purchase of such Securities are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser or the Issuers. In
any such case either the Initial Purchasers or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Offering Memorandum or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability in
respect of any default of such Initial Purchaser under this Agreement or the
offering contemplated hereunder.
10. If this Agreement shall be terminated by the Initial Purchasers,
or any of them, because of any failure or refusal on the part of either of the
Issuers to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason either of the Issuers shall be unable to perform
its obligations under this Agreement or any condition of the Initial Purchasers'
obligations cannot be fulfilled, the Issuers agree to reimburse the Initial
Purchasers or such Initial Purchasers as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
reasonable fees and expenses of their counsel) reasonably incurred by such
Initial Purchasers in connection with this Agreement or the offering
contemplated hereunder, but the Issuers shall then be under no further liability
to the Initial Purchasers except as provided in Section 5(i) and Section 7
hereof.
11. This Agreement shall inure to the benefit of and be binding upon
the Issuers, the Initial Purchasers, any controlling persons referred to herein
and their respective successors and assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any other person, firm
or corporation any legal or equitable right, remedy or claim under or in respect
of this Agreement or any provision herein contained. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely of
such purchase.
12. Any action by the Initial Purchasers hereunder may be taken by
J.P. Morgan Securities Inc. alone on behalf of the Initial Purchasers, and any
such action taken by J.P. Morgan Securities Inc. alone shall be binding upon the
Initial Purchasers. All notices and other communications hereunder
<PAGE>
-33-
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be given to the Initial Purchasers c/o J.P. Morgan Securities
Inc., 60 Wall Street, New York, New York 10260 (telecopy: 212/648-5121 or
212/648-5951); Attention: Syndicate Department. Notices to the Issuers shall be
given at c/o FrontierVision Holdings, L.P., 1777 South Harrison Street, Suite
P-200, Denver, CO 80210 (telecopy: (303) 757-6105); Attention: John S. Koo,
Senior Vice President and Chief Financial Officer.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
<PAGE>
-34-
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners,
L.P., its general partner
By: FVP GP, L.P., its general
partner
By: FrontierVision Inc., its
general partner
By: /s/ James W. McHose
---------------------------------
Title: Vice President & Treasurer
FRONTIERVISION HOLDINGS CAPITAL
CORPORATION
By: /s/ James W. McHose
---------------------------------
Title: Vice President & Treasurer
Accepted: September 16, 1997
J.P. Morgan Securities Inc.
Chase Securities Inc.
CIBC Wood Gundy Securities Corp.
First Union Capital Markets Corp.
By: J.P. Morgan Securities Inc.
Acting on behalf of itself and
the several Initial Purchasers
listed in Schedule I hereto.
By: /s/ Steven Tulip
---------------------------------
Title: Vice President
<PAGE>
ANNEX I
(A) The Securities have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Initial Purchaser represents that it
has offered and sold the Securities and will offer and sell the Securities (i)
as part of their distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Closing Date, only in
accordance with Rule 903 of Regulation S, Rule 144A or pursuant to paragraph B
of this Annex under the Securities Act. Accordingly, each Initial Purchaser
agrees that neither it, its affiliates nor any persons acting on its or their
behalf has engaged or will engage in any directed selling efforts with respect
to the Securities and it and they have complied and will comply with the
offering restrictions requirement of Regulation S. Each Initial Purchaser agrees
that, at or prior to confirmation of sale of Securities (other than a sale
pursuant to Rule 144A or paragraph B of this Annex), it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered and
--------------
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the
closing date, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above have the
meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with its affiliates or with the prior written
consent of the Company.
(B) Notwithstanding the foregoing, Securities in registered form may
be offered, sold and delivered by the Ini-
<PAGE>
tial Purchasers in the United States and to U.S. persons pursuant to Section 2
of this Agreement without delivery of the written statement required by
paragraph (A) above.
(C) Each Initial Purchaser further represents and agrees that (i) it
has not offered or sold, and will not offer or sell, in the United Kingdom by
means of any document, any Securities other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or which
it is reasonable to expect will so do, or in circumstances which do not
otherwise constitute an offer to the public within the meaning of the Public
Offers of Securities Regulations 1995 of Great Britain, (ii) it has complied,
and will comply, with all applicable provisions of the Financial Services Act
1986 and any regulation promulgated thereunder of Great Britain with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on, and
will only issue or pass on, in the United Kingdom, any document received by it
in connection with the issuance of the Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 of Great Britain or is a person to whom
the document may otherwise lawfully be issued or passed on.
(D) Each Initial Purchaser agrees that it will not offer, sell or
deliver any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the applicable
laws thereof, and that it will take at its own expense whatever action is
required to permit its purchase and resale of the Securities in such
jurisdictions. Each Initial Purchaser understands that no action has been taken
to permit a public offering in any jurisdiction outside the United States where
action would be required for such purposes. Each Initial Purchaser agrees not to
cause any advertisement of the Securities to be published in any newspaper or
periodical or posted in any public place and not to issue any circular relating
to the Securities.
-2-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P.,
its general partner
By: FVP GP, L.P.,
its general partner
By: FrontierVision Inc.,
its general partner
By:
---------------------------------------
Title:
FRONTIERVISION HOLDINGS CAPITAL
CORPORATION
By:
---------------------------------------
Title:
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
CIBC WOOD GUNDY SECURITIES CORP.
FIRST UNION CAPITAL MARKETS CORP.
By: J.P. Morgan Securities Inc.
By:
---------------------------------------
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
at Maturity of
Securities to Be
Initial Purchaser Purchased
- ----------------- ----------------
<S> <C>
J.P. Morgan Securities Inc............................ $130,707,500
Chase Securities Inc.................................. 71,295,000
CIBC Wood Gundy Securities Corp....................... 23,765,000
First Union Capital Markets Corp...................... 11,882,500
------------
Total............................................ $237,650,000
===========
</TABLE>
<PAGE>
Exhibit 4.4
REGISTRATION RIGHTS AGREEMENT
Dated as of September 19, 1997
among
FRONTIERVISION HOLDINGS, L.P.,
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
and
J.P. MORGAN SECURITIES INC.,
CHASE SECURITIES INC.,
CIBC WOOD GUNDY SECURITIES CORP.
and
FIRST UNION CAPITAL MARKETS CORP.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
---------
September 19, 1997, by and among FRONTIERVISION HOLDINGS, L.P., a Delaware
limited partnership (the "Company"), FRONTIERVISION HOLDINGS CAPITAL
-------
CORPORATION, a Delaware corporation ("Capital," and together with the Company,
-------
the "Issuers"), and J.P. MORGAN SECURITIES INC., CHASE SECURITIES INC., CIBC
-------
WOOD GUNDY SECURITIES CORP. and FIRST UNION CAPITAL MARKETS CORP. (collectively,
the "Initial Purchasers").
------------------
This Agreement is entered into in connection with the Purchase
Agreement, dated as of September 16, 1997, between the Issuers and the Initial
Purchaser s (the "Purchase Agreement") relating to the sale by the Issuers to
------------------
the Initial Purchasers, severally, of $237,650,000 aggregate principal amount at
maturity of their 11 7/8% Senior Discount Notes due 2007 (the "Securities"). In
----------
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Issuers have agreed to provide the registration rights set forth in this
Agreement for the equal benefit of the Initial Purchasers and their direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Securities under
the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4.
-------------------
Advice: See Section 5.
------
Applicable Period: See Section 2(b).
-----------------
Capital: See the introductory paragraph to this Agreement.
-------
Company: See the introductory paragraph to this Agreement.
-------
Consummation Date: The 210th day after the Issue Date.
-----------------
<PAGE>
-2-
Effectiveness Date: The 180th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
--------------
Exchange Registration Statement: See Section 2(a).
-------------------------------
Exchange Securities: See Section 2(a).
-------------------
Filing Date: The 60th day after the Issue Date.
-----------
First Union: See Section 11.
-----------
Holder: Any record holder of Registrable Securities.
------
Indemnified Person: See Section 7.
------------------
Indemnifying Person: See Section 7.
-------------------
Indenture: The Indenture, dated as of September 19, 1997, between the
---------
Issuers and Colorado National Bank, as trustee, pursuant to which the Securities
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
------------------
Initial Shelf Registration: See Section 3(a).
--------------------------
Inspectors: See Section 5(p).
----------
Issue Date: The date of original issuance of the Securities.
----------
Issuers: See the introductory paragraph to this Agreement.
-------
JPMS: See Section 11.
----
<PAGE>
-3-
NASD: See Section 5(t).
----
Participant: See Section 7.
-----------
Participating Broker-Dealer: See Section 2(b).
---------------------------
Person: An individual, corporation, limited or general
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Private Exchange: See Section 2(b).
----------------
Private Exchange Securities: See Section 2(b).
---------------------------
Prospectus: The prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Records: See Section 5(p).
-------
Registrable Securities: The Securities upon original issuance
----------------------
of the Securities and at all times subsequent thereto, each Exchange Security as
to which Section 2(c)(1)(i) hereof is applicable upon original issuance and at
all times subsequent thereto and, if issued, the Private Exchange Securities,
until in the case of any such Securities, Exchange Securities or Private
Exchange Securities, as the case may be, (i) a Registration Statement (other
than, with respect to any Exchange Security as to which Section 2(c)(1)(i)
hereof is applicable, the Exchange Registration Statement) covering such
Securities, Exchange Securities or Private Exchange Securities has been declared
effective by the SEC and such Securities, Exchange Securities or Private
Exchange Securities, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Securities, Exchange
Securities or Private Exchange Securities, as the case may be, are sold in
compliance with Rule 144 or would be permitted to be sold pursuant to Rule
144(k), or (iii) such Securities, Exchange Securities or Pri-
<PAGE>
-4-
vate Exchange Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the
----------------------
Issuers, including, but not limited to, the Exchange Registration Statement,
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
--------
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
---------
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
--------
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities: See the preamble to this Agreement.
----------
Securities Act: The Securities Act of 1933, as amended, and
--------------
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
------------
Shelf Registration: See Section 3(b).
------------------
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
<PAGE>
-5-
Trustee: The trustee as defined in the Indenture and, if
-------
existent, the trustee under any indenture governing the Exchange Securities and
Private Exchange Securities (if any).
Underwritten registration or underwritten offering: A
--------------------------------------------------
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
--------------
(a) The Issuers agree to file with the SEC as soon as
practicable after the Issue Date, but in no event later than the Filing
Date, an offer to exchange (the "Exchange Offer") any and all of the
--------------
Registrable Securities for a like aggregate principal amount at maturity of
debt securities of the Issuers which are identical in all material respects
to the Securities (the "Exchange Securities") (and which are entitled to
-------------------
the benefits of the Indenture or a trust indenture which is identical in
all material respects to the Indenture (other than such changes as are
necessary to comply with any requirements of the SEC to effect or maintain
the qualification of such trust indenture under the TIA) and which has been
qualified under the TIA), except that the Exchange Securities shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no legend thereon with respect to
restrictions on transfer pursuant to the Securities Act. The Issuers agree
to use their reasonable best efforts to keep the Exchange Offer open for at
least 20 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to Holders and to consummate
the Exchange Offer on or prior to the Consummation Date. The Exchange Offer
will be registered under the Securities Act on the appropriate form (the
"Exchange Registration Statement") and will comply with all applicable
-------------------------------
tender offer rules and regulations under the Exchange Act. If after such
Exchange Registration Statement is initially declared effective by the SEC
and prior to the consummation of the Exchange Offer, the Exchange Offer or
the issuance of the Exchange Securities thereunder is interfered with by
any stop order, injunction or other order or requirement of the SEC or any
other governmental agency or court such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this
Agreement. Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will be
acquired in the ordinary course of its busi-
<PAGE>
-6-
ness, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement with any person to participate in the
distribution of the Exchange Securities in violation of the provisions of
the Securities Act, and that such Holder is not an affiliate of the Issuers
within the meaning of the Securities Act. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement
(other than the first four sentences of this Section 2(a)) shall continue
to apply, mutatis mutandis, solely with respect to Registrable Securities
------- --------
that are Private Exchange Securities and Exchange Securities held by
Participating Broker-Dealers, and the Issuers shall have no further
obligation to register Registrable Securities (other than Private Exchange
Securities and other than Exchange Securities as to which clause (c)(1)(i)
hereof applies) pursuant to Section 3 of this Agreement. No securities
other than the Exchange Securities shall be included in the Exchange
Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Registration Statement one or more section(s) reasonably
acceptable to the Initial Purchasers which shall contain a summary
statement of the publicly disseminated positions of the Staff of the SEC
with respect to the potential "underwriter" status of any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of Exchange Securities received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"). Such section(s) shall also allow
---------------------------
the use of the prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act (other than a Participating Broker
Dealer (an "Excluded Participating Broker Dealer") who either (x) acquired
------------------------------------
Securities other than for its own account as a result of market-making
activities or other trading activities or (y) has entered into any
arrangement or understanding with any Issuer or any affiliate of any Issuer
to distribute the Exchange Securities) and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange
Securities.
The Issuers shall use their reasonable best efforts to keep
the Exchange Registration Statement effective and to amend and supplement
the Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time
<PAGE>
-7-
as such persons must comply with such requirements in order to resell the
Exchange Securities; provided, however, that such period shall not exceed
-------- -------
180 days (or such longer period if extended pursuant to the last paragraph
of Section 5) (the "Applicable Period"); provided, further, however, that,
----------------- -------- ------- -------
if requested by the Company in the letter of transmittal for the Exchange
Offer, such persons shall have expressed that they may be subject to such
requirements and have undertaken to use their reasonable best efforts to
notify the Company when they are no longer subject to such requirements (if
they are no longer subject to such requirements at any time prior to the
expiration of the Applicable Period).
If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Securities acquired by it and having the status of an
unsold allotment in the initial distribution or if JPMS or First Union
holds any Securities (whether acquired in market making activities or
having the status of an unsold allotment) after consummation of the
Exchange Offer, the Issuers upon the request of such Initial Purchaser
shall, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue and deliver to each such Initial Purchaser, in
exchange (the "Private Exchange") for the Securities held by such Initial
----------------
Purchaser, a like principal amount at maturity of debt securities of the
Issuers that are identical in all material respects to the Exchange
Securities (the "Private Exchange Securities") (and which are issued
---------------------------
pursuant to the same indenture as the Exchange Securities) except for the
placement of a restrictive legend on such Private Exchange Securities. If
practicable, the Private Exchange Securities shall bear the same CUSIP
number as the Exchange Securities. Accreted Value (as defined in the
Indenture) will accrue on the Exchange Securities and Private Exchange
Securities in the same manner as the Securities.
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders
of any of the Exchange Securities and the Private Exchange Securities will
vote and consent together on all matters (to which such holders are
entitled to vote or consent) as one class and that none of the holders of
the Exchange Securities and the Private Exchange Securities will have the
right to vote or consent as a separate class on any matter (to which such
holders are entitled to vote or consent).
<PAGE>
-8-
(c) If (1) prior to the consummation of the Exchange Offer,
the Issuers reasonably determine in good faith or Holders of a majority in
aggregate principal amount at maturity of the Registrable Securities notify
the Issuers that they have reasonably determined in good faith that (i) in
the opinion of counsel, the Exchange Securities would not, upon receipt, be
tradeable by such Holders who are not affiliates of the Issuers or Excluded
Participating Broker Dealers without registration under the Securities Act
and without registration under applicable blue sky or state securities laws
or (ii) in the opinion of counsel, the SEC is unlikely to permit the
consummation of the Exchange Offer and/or (2) subsequent to the
consummation of the Private Exchange, any holder of Private Exchange
Securities so requests with respect to the Private Exchange Securities
and/or (3) the Exchange Offer is commenced and not consummated prior to the
60th day following the Consummation Date for any reason, then the Issuers
shall promptly deliver to the Holders and the Trustee notice thereof (the
"Shelf Notice") and shall thereafter file an Initial Shelf Registration as
------------
set forth in Section 3 (which only in the circumstances contemplated by
clause (2) of this sentence will relate solely to the Private Exchange
Securities) pursuant to Section 3. The parties hereto agree that, following
the delivery of a Shelf Notice to the Holders of Registrable Securities
(only in the circumstances contemplated by clauses (1) and/or (3) of the
preceding sentence), the Issuers shall not have any further obligation to
conduct the Exchange Offer or the Private Exchange under this Section 2.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then :
(a) Initial Shelf Registration. The Issuers shall as promptly
as reasonably practicable prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Registrable Securities (the "Initial Shelf
-------------
Registration"). If the Issuers shall have not yet filed an Exchange Offer
------------
and the Shelf Notice was delivered at least 45 days prior to the Filing
Date, the Issuers shall file with the SEC the Initial Shelf Registration on
or prior to the Filing Date. Otherwise, the Issuers shall file with the SEC
the Initial Shelf Registration within 60 days of the delivery of the Shelf
Notice. The Initial
<PAGE>
-9-
Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Securities for resale by such
holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall use
their reasonable best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the 120th day
after the filing thereof with the SEC and to keep the Initial Shelf
Registration continuously effective under the Securities Act until the date
which is 24 months from the Issue Date (the "Effectiveness Period"), or
--------------------
such shorter period ending when (i) all Registrable Securities covered by
the Initial Shelf Registration have been sold in the manner set forth and
as contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Securities has been
declared effective under the Securities Act.
Notwithstanding any other provision of this Agreement, the
Issuers may postpone or suspend the filing or effectiveness of a
Registration Statement (or any amendments or supplements thereto) if (i)
such action is required by applicable law or (ii) such action is taken by
the Issuers in good faith and for valid business reasons (not including the
avoidance of the Issuers' obligations hereunder), including the acquisition
or divestiture of assets, other pending corporate developments, public
filings with the SEC or other similar events, so long as the Issuers
promptly thereafter comply with the requirements of Section 5(b) hereof, if
applicable. Notwithstanding the occurrence of any event referred to in the
immediately preceding sentence, such event shall not suspend, postpone or
in any other manner affect the running of any time periods for the purpose
of determining the entitlement of the Holders to Additional Interest under
Section 4 hereof.
(b) Subsequent Shelf Registrations. If the Initial Shelf
------------------------------
Registration or any Subsequent Shelf Registration ceases to be effective
for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the
Issuers shall use their reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 45 days of such cessation of effectiveness amend the
Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof,
<PAGE>
-10-
or file an additional "shelf" Registration Statement pursuant to Rule 415
covering all of the Registrable Securities (a "Subsequent Shelf
----------------
Registration"). If a Subsequent Shelf Registration is filed, the Issuers
------------
shall use their reasonable best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such
filing and to keep such Registration Statement continuously effective for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As
used herein the term "Shelf Registration" means the Initial Shelf
------------------
Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
--------------------------
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for
such Shelf Registration or if required by applicable law.
4. Additional Interest
-------------------
(a) The Issuers and the Initial Purchasers agree that the
Holders of Registrable Securities will suffer damages if the Issuers fail
to fulfill their obligations under Section 2 or Section 3 hereof and that
it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, the Issuers agree to pay, as liquidated damages,
cash interest on the Registrable Securities (whether or not cash interest
is then payable on the Registrable Securities in accordance with the
Indenture) ("Additional Interest") under the circumstances and to the
-------------------
extent set forth below (each of which shall be given independent effect and
shall not be duplicative):
(i) if the Exchange Registration Statement has not been filed
on or prior to the Filing Date or the Initial Shelf Registration has not
been filed on or prior to the date by which it is required to be filed
pursuant to Section 3(a) hereof, Additional Interest shall accrue on the
Registrable Securities over and above the stated cash interest rate (if
any) at a rate of 25 basis points per annum for the first 90 days
immediately following the Filing Date or such required date, as the case
may be, such Additional Interest rate increasing by an additional 25 basis
points per annum at the beginning of each subsequent 90-day period;
<PAGE>
-11-
(ii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and the Exchange Registration Statement is not declared
effective by the SEC on or prior to the Effectiveness Date or the Initial
Shelf Registration is not declared effective on or prior to the 120th day
after filing thereof, Additional Interest shall accrue on the Registrable
Securities included or which should have been included in such Registration
Statement over and above the stated cash interest rate (if any) at a rate
of 25 basis points per annum for the first 90 days immediately following
the day after the Effectiveness Date, such Additional Interest rate
increasing by an additional 25 basis points per annum at the beginning of
each subsequent 90-day period; and
(iii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and 4(a)(ii) and (A) the Issuers have not exchanged
Exchange Securities for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the Consummation Date (including
by reason of the Exchange Registration Statement ceasing to be effective)
or (B) if applicable, the Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall be accrued on the
Registrable Securities (over and above the stated cash interest rate (if
any) otherwise payable on the Registrable Securities) at a rate of 25 basis
points per annum for the first 90 days commencing on the (x) 210th day
after the Issue Date, in the case of (A) above, or (y) the day such Shelf
Registration ceases to be effective, in the case of (B) above, such
Additional Interest rate increasing by an additional 25 basis points per
annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
-------- -------
Securities may not exceed at any one time in the aggregate 100 basis points
per annum; and provided, further, that (1) upon the filing of the Exchange
-------- -------
Registration Statement or a Shelf Registration as required hereunder (in
the case of clause (a)(i) of this Section 4), (2) upon the effectiveness of
the Exchange Registration Statement or the Shelf Registration as required
hereunder (in the case of clause (a)(ii) of this Section 4), or (3) upon
the exchange of Exchange Securities for all Notes tendered (in the case of
clause (a)(iii)(A) of this Section 4), or upon the effectiveness of the
Shelf Registration which had ceased to remain effective (in the
<PAGE>
-12-
case of clause (a)(iii)(B) of this Section 4), Additional Interest on the
Registrable Securities as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within five business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Issuers
----------
shall pay the Additional Interest due on the Registrable Securities by
depositing with the Trustee, in trust, for the benefit of the Holders
thereof, on or before the applicable semi-annual interest payment date (or
the calendar date which would be a semi-annual interest payment date if
cash interest were then payable on the Registrable Securities) immediately
available funds in sums sufficient to pay the Additional Interest then due
to Holders of Registrable Securities. The Additional Interest amount due
shall be payable on each such date to the record Holder of Registrable
Securities on the March 1 or September 1, as the case may be, immediately
preceding such semi-annual interest payment date (or the calendar date
which would be a semi-annual interest payment date if cash interest were
then payable on the Registrable Securities). The amount of Additional
Interest will be determined by applying the applicable Additional Interest
rate to the principal amount at maturity of the affected Registrable
Securities of such Holders, (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed). Each obligation to pay Additional Interest
shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. The parties hereto agree that the Additional
Interest provided for in this Section 4 constitutes the sole and exclusive
remedy for a breach of Sections 2 or 3 and is a reasonable estimate of the
damages that may be incurred by Holders of Registrable Securities by reason
of the failure of a Shelf Registration or Exchange Registration Statement
to be filed or declared effective, an Exchange Offer to be consummated or a
Shelf Registration to remain effective, as the case may be, in accordance
with this Section 4.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Securities
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of such Reg-
<PAGE>
-13-
istrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Issuers shall:
(a) Use their reasonable best efforts to prepare and file with the
SEC a Registration Statement or Registration Statements, as soon as
practicable after the date hereof but in any event prior to the applicable
date prescribed by Sections 2 or 3, and to use their reasonable best
efforts to cause each such Registration Statement to become effective and
remain effective as provided herein; provided, however, that, if (1) such
-------- -------
filing is pursuant to Section 3, or (2) a Prospectus contained in an
Exchange Registration Statement filed pursuant to Section 2 is required to
be delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall upon written request furnish to and
afford the Holders of the Registrable Securities (which in the case of
Registrable Securities in the form of global certificates shall be The
Depository Trust Company ("DTC")) and each such Participating Broker-
---
Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to
be filed.
(b) Prepare and file with the SEC such amendments and post-
effective amendments to each Shelf Registration or Exchange Registration
Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period
or the Applicable Period, as the case may be; cause the related Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of
all securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus; the Issuers shall not be deemed to have
used their reasonable best efforts to keep a Registration Statement
effective during the Applicable
<PAGE>
-14-
Period if the Issuers voluntarily take any action that would result in
selling Holders of the Registrable Securities covered thereby or
Participating Broker-Dealers seeking to sell Exchange Securities not being
able to sell such Registrable Securities or such Exchange Securities during
that period unless such action is required by applicable law or unless the
Issuers comply with this Agreement, including without limitation, the
provisions of paragraph 5(k) hereof and the last paragraph of this Section
5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, notify the selling Holders of Registrable
Securities, or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, who have provided the
Issuers with their names and addresses promptly (but in any event within
two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-
effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (iii) of the receipt
by the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold
by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (iv)
of the happening of any event or any information becoming known that makes
any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires
<PAGE>
-15-
the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and (v) of the Issuers' reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, use their reasonable best efforts to oppose
the issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus
or suspending the qualification (or exemption from qualification) of any of
the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use their reasonable best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is required pursuant to Section 3,
before filing any Registration Statement or prospectus or any amendment or
supplement thereto (including any document that would be incorporated by
reference therein) furnish counsel for the Holders of Registrable
Securities covered by such Shelf Registration a reasonable opportunity to
review copies of all such documents proposed to be filed.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, furnish to each selling Holder of Registrable
Securities and to each such
<PAGE>
-16-
Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed copy of the
Registration Statement or Statements and each post-effective amendment
thereto, including financial statements and schedules, and if requested,
all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, deliver to each selling Holder of Registrable
Securities, or each such Participating Broker-Dealer, as the case may be,
their counsel, and the underwriters, if any, without charge, as many copies
of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request;
and, subject to the last paragraph of this Section 5, the Issuers hereby
consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling holders of Registrable Securities or each
such Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the offering
and sale of the Registrable Securities covered by or the sale by
Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, to use their reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of
Registrable Securities or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriters reasonably request in writing; provided, however,
that where Exchange
<PAGE>
-17-
Securities held by Participating Broker-Dealers or Registrable Securities
are offered other than through an underwritten offering, the Issuers agree
to cause their counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other reasonable acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Securities held by Participating Broker-
Dealers or the Registrable Securities covered by the applicable
Registration Statement; provided, however, that no Issuer shall be required
-------- -------
to (A) qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject
or (C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
reasonably cooperate with the selling Holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any legends with respect to restrictions
on transfer pursuant to the Securities Act and shall be in a form eligible
for deposit with DTC; and enable such Registrable Securities to be
registered in such names as the managing underwriter or underwriters, if
any, or Holders may request.
(j) Use their reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other United States governmental agencies or authorities
of the United States as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of such
Registrable Securities, except as may be required solely as a consequence
of the nature of such selling Holder's business, in which case the Issuers
will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange
<PAGE>
-18-
Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Securities during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(iv) or 5(c)(v)
above, as promptly as practicable prepare and (subject to Section 5(a) and
the second paragraph of Section 3(a) above) file with the SEC, solely at
the expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder or to the
purchasers of the Exchange Securities to whom such Prospectus will be
delivered by a Participating Broker-Dealer, any such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(l) Use their reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement or the Exchange Securities,
as the case may be, to be rated with the appropriate rating agencies, if so
reasonably requested by the Holders of a majority in aggregate principal
amount at maturity of Registrable Securities covered by such Registration
Statement or the Exchange Securities, as the case may be, or the managing
underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with
certificates for the Registrable Securities in a form eligible for deposit
with DTC and (ii) provide a CUSIP number for the Registrable Securities.
(n) Use their reasonable best efforts to cause all Registrable
Securities covered by such Registration Statement or the Exchange
Securities, as the case may be, to be (i) listed on each securities
exchange, if any, on which similar securities issued by the Issuers are
then listed, or (ii) authorized to be quoted on the National Association of
Securities Dealers Automated Quotation System
<PAGE>
-19-
("NASDAQ") or the National Market System of NASDAQ if similar securities of
------
the Issuers are so authorized.
(o) In connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriters in order
to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the
business of the Issuers and their subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings and consistent with past
practice of the Issuers and their affiliates, and confirm the same if and
when requested; (ii) obtain an opinion of counsel to the Issuers and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and
consistent with past practice of the Issuers and their affiliates and such
other matters as may be reasonably requested by underwriters; (iii) obtain
"cold comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent certified
public accountant(s) of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and
consistent with past practice of the Issuers and their affiliates and such
other matters as may be reasonably requested by underwriters; and (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 7 hereof (or such other provisions and procedures
acceptable to the Issuers and to the Holders of a majority in aggregate
principal amount at maturity of Registrable Securities covered by such
Registration Statement and the managing underwriters or agents) with
respect to all parties to
<PAGE>
-20-
be indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(p) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Securities, if any,
and any attorney, accountant or other agent retained by any such selling
holder or each such Participating Broker-Dealer, as the case may be, or
underwriter (collectively, the "Inspectors"), at the offices where normally
----------
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Issuers (collectively,
the "Records"), as shall be reasonably necessary to enable them to exercise
-------
any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuers and their subsidiaries to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records determined in good
faith by the Issuers to be confidential shall not be disclosed by any
Inspector notified of such determination unless (i) the disclosure of such
Records is necessary to avoid or correct a material misstatement or
omission in such Registration Statement, (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public in a manner that does not otherwise
involve a breach of any confidentiality obligation by any party. Each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to agree that information obtained by it as
a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Issuers unless and until such is made generally available to the
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
<PAGE>
-21-
competent jurisdiction, give notice to the Issuers and allow them at their
own expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential.
(q) Provide an indenture trustee for the Registrable Securities or
the Exchange Securities, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Securities or the
Exchange Offer; and in connection therewith, cooperate with the trustee
under any such indenture and the holders of the Registrable Securities, to
effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and use their reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture to
be so qualified in a timely manner.
(r) Comply in all material respects with all applicable rules and
regulations of the SEC and make generally available to their
securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 90 days after the end
of any 12-month period (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters
in such an offering, commencing on the first day of the first fiscal
quarter of the Issuers after the effective date of a Shelf Registration
Statement, which statements shall cover said 12-month periods.
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Issuers shall mark, or caused to be marked, on such Registrable
Securities that such Registrable Securities are being cancelled in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
<PAGE>
-22-
may be; in no event shall such Registrable Securities be marked as paid or
otherwise satisfied.
(t) Reasonably cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
----
(u) Use their reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered
by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Issuers may, from time to time, reasonably request. The Issuers may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who fails to furnish such information within a
reasonable time after receiving such request and, notwithstanding anything to
the contrary in this Agreement, such Seller or Participating Broker Dealer shall
not be entitled to receive any Additional Interest pursuant to Section 4. Each
seller as to which any Shelf Registration is being effected is deemed to agree
to furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such seller
not materially misleading.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities or Exchange Securities to be sold by such Holder
that, upon receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v), such
Holder shall forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Issuers that the
------
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements
<PAGE>
-23-
thereto. In the event the Issuers shall give any such notice, each of the
Effectiveness Period and the Applicable Period shall be extended by the number
of days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not the Exchange Offer or a Shelf Registration is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to
filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees
and disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Securities or Exchange Securities and determination of the
eligibility of the Registrable Securities or Exchange Securities for
investment under the laws of such jurisdictions in the United States (x)
where the holders of Registrable Securities are located, in the case of the
Exchange Securities, or (y) as provided in Section 5(h), in the case of
Registrable Securities or Exchange Securities to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities or Exchange Securities in a form eligible for
deposit with DTC and of printing prospectuses if the printing of
prospectuses is reasonably requested by the managing underwriters, if any,
or, in respect of Registrable Securities or Exchange Securities to be sold
by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount at maturity of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Issuers,
(v) fees and disbursements of all independent certified public accountants
referred to in Section 5(o)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or
inci-
<PAGE>
-24-
dental to such performance), (vi) rating agency fees, (vii) Securities Act
liability insurance, if the Issuers desire such insurance, (viii) fees and
expenses of all other Persons retained by the Issuers, (ix) internal
expenses of the Issuers (including, without limitation, all salaries and
expenses of officers and employees of the Issuers performing legal or
accounting duties), (x) the expense of any annual audit, (xi) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, if applicable and (xii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement; provided, however, that notwithstanding the foregoing, the
-------- -------
Issuers will not be responsible for any underwriter's discounts,
commissions or fees attributable to the sale of Registrable Securities.
(b) In connection with any Shelf Registration hereunder, the
Issuers shall reimburse the Holders of the Registrable Securities being
registered in such registration for the reasonable fees and disbursements
of not more than one counsel chosen by the Holders of a majority in
aggregate principal amount at maturity of the Registrable Securities to be
included in such Registration Statement, subject to the reasonable approval
of the Issuers. Such Holders shall be responsible for any and all other
out-of-pocket expenses of the Holders of Registrable Securities incurred in
connection with the registration of the Registrable Securities.
7. Indemnification
---------------
The Issuers agree to indemnify and hold harmless each Holder of
Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each such
person, and each person, if any, who controls any such person within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages
-----------
and liabilities (including, without limitation, the reasonable legal fees and
other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) or Prospectus (as amended or supplemented if the Issu-
<PAGE>
-25-
ers shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by such Participant
expressly for use therein; provided, however, that the foregoing indemnity with
-------- -------
respect to any preliminary prospectus shall not inure to the benefit of any
Participant (or to the benefit of any person controlling such Participant) from
whom the person asserting any such losses, claims, damages or liabilities
purchased Registrable Securities or Exchange Securities if such untrue statement
or omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or supplements
thereto) and a copy of the related Prospectus (as so amended or supplemented)
shall not have been furnished to such person at or prior to the sale of such
Registrable Securities or Exchange Securities, as the case may be, to such
person.
Each Participant will be required to agree, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers and each
person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
------------------
notify the person against whom such indemnity may be sought (the "Indemnifying
------------
Person") in writing, and the Indemni-
- ------
<PAGE>
-26-
fying Person, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others the Indemnifying Person may designate in such proceeding
and shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and only to the extent that such failure
results in the loss or compromise of any rights or defenses). In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person
has failed within a reasonable time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the Participants
and such control persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Securities sold by
all such Participants and any such separate firm for the Issuers, their
directors, officers and such control persons of the Issuers shall be designated
in writing by the Issuers. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final non-appealable judgment for the
plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses actually incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such In-
<PAGE>
-27-
demnifying Person shall not have reimbursed the Indemnified Person in accordance
with said sentence prior to the date of such settlement to the extent it
considers such request to be reasonable or provided written notice to the
Indemnified Person to substantiate the non-payment of the unpaid balance as
reasonable. No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
If the Indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Issuers on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Issuers on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuers or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Sec-
<PAGE>
-28-
tion 7, in no event shall a Participant be required to contribute any amount in
excess of the amount by which proceeds received by such Participant from sales
of Registrable Securities exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and Rule 144A
----------------------
The Issuers covenant that they will file the reports required to be
filed by them under the Securities Act and the Exchange Act in a timely manner
and, if at any time the Issuers are not required to file such reports, they
will, upon the request of any Holder of Registrable Securities, make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144 and Rule 144A under the Securities Act. The Issuers further covenant
that they will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
and Rule 144A under the Securities Act, as such Rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount at maturity of such
Registrable Securities included in such offering, subject to the reasonable
approval of the Issuers.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the
<PAGE>
-29-
basis provided in any underwriting arrangements approved by the Issuers and the
Holders of a majority in aggregate principal amount at maturity of the
Registrable Securities included in such offering and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Issuers have not, as of the date
--------------------------
hereof, entered and shall not, after the date of this Agreement, enter into
any agreement with respect to any of their securities that is inconsistent
with the rights granted to the Holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. Except as may be
--------------------------------------------
required by the Indenture, the Issuers shall not, directly or indirectly,
take any action with respect to the Registrable Securities as a class that
would adversely affect the ability of the Holders of Registrable Securities
to include such Registrable Securities in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Issuers have obtained the written
consent of Holders of at least a majority of the then outstanding aggregate
principal amount at maturity of Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by Holders of at least a majority in aggregate
principal amount at maturity of the Registrable Securities being sold by
such Holders pursuant to such Registration Statement, provided that the
--------
provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding
sentence.
<PAGE>
-30-
(d) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Issuers; and
(ii) if to the Issuers, c/o FrontierVision Holdings, L.P., 1777 South
Harrison Street, Suite P-200, Denver, CO. 80210 (telecopy: (303) 757-6105),
Attention: John S. Koo, Senior Vice President and Chief Financial Officer.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when
telephonic confirmation of receipt is obtained, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under
the Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities; provided, that,
with respect to the indemnity and contribution agreements in Section 7,
each Holder of Registrable Securities subsequent to the Initial Purchasers
shall be bound by the terms thereof if such Holder elects to include
Registrable Securities in a Shelf Registration; provided, however, that
-------- -------
this Agreement shall not inure to the benefit of or be binding upon a
successor or assignee of a Holder unless and to the extent such successor
or assignee holds Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of
which when so executed
<PAGE>
-31-
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable best efforts to find and employ
an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(k) Securities Held by the Issuers or Their Affiliates. Whenever the
--------------------------------------------------
consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Issuers or any of their affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE>
-32-
(l) Subsidiary Guarantor a Party. Immediately upon the designation of
----------------------------
any subsidiary of the Company as a Guarantor (as defined in the Indenture),
the Company shall cause such Guarantor to guarantee the obligations of the
Issuers hereunder (including, without limitation, the obligation to pay
Additional Interest, if any, pursuant to the terms of Section 4 hereof), by
executing and delivering to the Initial Purchasers an appropriate amendment
to this Agreement.
11. Additional Agreements
---------------------
From and after the effectiveness of any Registration Statement with
respect to the Securities, the Exchange Securities or the Private Exchange
Securities, each of the Issuers will, for the benefit of J.P. Morgan Securities
Inc. ("JPMS") and First Union Capital Markets Corp. ("First Union") and for so
---- -----------
long as any of the Securities, Exchange Securities or Private Exchange
Securities are outstanding and JPMS, First Union or any of their respective
affiliates (as defined in the Securities Act) is required by applicable law to
deliver a prospectus in connection with sales of the Securities, Exchange
Securities or Private Exchange Securities (the "Undertaking Period"), (i) (a)
------------------
periodically amend each Registration Statement covering Securities, Exchange
Securities or Private Exchange Securities so that the information contained in
such Registration Statement complies with the requirements of Section 10(a)
under the Securities Act; (b) amend each such Registration Statement within 90
days following the end of the Company's most recent fiscal year so that the
information contained in such Registration Statement complies with the
requirements of Section 10(a) under the Securities Act; (c) if requested by JPMS
or First Union, within 45 days following the end of the Company's most recent
fiscal quarter (except for the fourth fiscal quarter of any fiscal year), file a
supplement to the Prospectus included in each such Registration Statement which
sets forth the consolidated financial results of the Issuers for the previous
quarter; and (d) promptly amend each such Registration Statement or supplement
each such Prospectus when reasonably requested by JPMS or First Union or when
necessary to reflect pro forma financial information set forth in the most
recent Form 8-K filed by the Company or to reflect any material changes in the
information provided therein or to reflect the occurrence of any fact or
information becoming known that should be set forth in an amendment to each such
Registration Statement or a supplement to each such Prospectus so that each such
Prospectus when delivered to a purchaser will comply with applicable law;
provided, however, that (x) prior to fil-
- -------- -------
<PAGE>
-33-
ing any amendment to any such Registration Statement or any supplement to any
such Prospectus, the Issuers will furnish for a reasonable period of time prior
to the proposed filing thereof to each of Cahill Gordon & Reindel, acting as
counsel to JPMS and First Union, and JPMS and First Union copies of all such
documents proposed to be filed, which documents will be subject to the review of
such counsel and JPMS and First Union, (y) the Issuers will not file any
amendment to any such Registration Statement or any supplement to any such
Prospectus to which such counsel or JPMS or First Union shall reasonably object,
and (z) the Issuers will provide such counsel and JPMS and First Union with such
number of copies of each amendment or supplement filed as JPMS and First Union
shall reasonably request; and (ii) indemnify JPMS and First Union, and if
applicable contribute to JPMS and First Union, in a manner substantially
identical to that specified in Section 7 hereof in connection with sales of the
Securities by Participants.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FRONTIERVISION HOLDINGS, L.P.
By: FrontierVision Partners, L.P.,
its general partner
By: FVP GP, L.P.,
its general partner
By: FrontierVision Inc.,
its general partner
By: /s/ James W. McHose
---------------------------------------
Title: Vice President & Treasurer
FRONTIERVISION HOLDINGS CAPITAL
CORPORATION
By: /s/ James W. McHose
---------------------------------------
Title: Vice President & Treasurer
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
CIBC WOOD GUNDY SECURITIES CORP.
FIRST UNION CAPITAL MARKETS CORP.
By: J.P. Morgan Securities Inc.
By: /s/ Steven Tulip
---------------------------------------
Title: Vice President
<PAGE>
[LETTERHEAD OF DOW, LOHNES & ALBERTSON, PLLC APPEARS HERE]
Exhibit 5.1
September 26, 1997
FrontierVision Holdings, L.P.
FrontierVision Holdings Capital Corporation
1777 South Harrison Street
Suite P-200
Denver, Colorado 90210-3925
Re: FrontierVision Holdings, L.P.
FrontierVision Holdings Capital Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
We refer to the Registration Statement (the "Registration Statement") on
Form S-4, filed on or about September 26, 1997 by FrontierVision Holdings, L.P.
("Holdings") and FrontierVision Holdings Capital Corporation ("Holdings Capital"
and, together with Holdings, the "Issuers"), with the Securities and Exchange
Commission (the "Commission"), for the purpose of registering under the
Securities Act of 1933, as amended (the "Securities Act"), the Issuers' 11-7/8%
Senior Discount Notes due 2007 (the "Exchange Notes"), to be offered in exchange
(the "Exchange Offer") for up to $237,650,000 aggregate principal amount of the
Issuers' outstanding 11-7/8% Senior Discount Notes (the "Old Notes"). The Old
Notes were issued under, and the Exchange Notes are to be issued under, an
Indenture, dated as of September 19, 1997, among Holdings, Holdings Capital and
Colorado National Bank, as Trustee (the "Indenture").
In connection with the foregoing registration, we have acted as special
counsel for the Issuers, and have examined originals or copies of (i) the
Agreement of Limited Partnership and Certificate of Limited Partnership of
Holdings in effect as of the date hereof, (ii) the Certificate of Incorporation
and Bylaws of Holdings Capital in effect as of the date hereof, (iii) the
Indenture, (iv) the Registration Rights Agreement, dated as of September 19,
1997 (the "Registration Rights Agreement") by and among Holdings, Holdings
Capital and J.P. Morgan Securities Inc., Chase Securities Inc., CIBC Wood Gundy
Corp. and First Union Capital Markets Corp., as Initial Purchasers, and (v) the
Registration Statement. We have also examined all such records of the Issuers
and all such agreements, certificates of public officials, certificates of
officers or representatives of the Issuers and others, and such other documents,
certificates and corporate or other records as we have deemed necessary or
appropriate as a basis for the opinion set forth herein. In our examination we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to
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2
original documents of all documents submitted to use as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to
any facts relevant to the opinion expressed herein, we have relied upon
statements and representations of officers and other representatives of the
Issuers and others (all of which we assume to be true, complete and accurate in
all respects).
We are members of the Bar of the District of Columbia and do not purport to
be experts on, or generally familiar with, or certified to express legal
conclusions based upon, the laws of any other jurisdiction, other than the
Delaware General Corporation Law, the Delaware Revised Uniform Limited
Partnership Act and the laws of the United States to the extent applicable
hereto. Accordingly, as to matters of law set forth below, our opinion is
limited to matters of law under the laws of the District of Columbia, the laws
of the United States to the extent applicable hereto, the Delaware General
Corporation Law and the Delaware Revised Uniform Limited Partnership Act, and we
express no opinion as to conflicts of law rules, or the laws of any states or
jurisdictions other than as specified above.
Based upon the foregoing and subject to the other qualifications stated
herein, we are of the opinion that the Exchange Notes have been duly authorized
and when executed by the proper officers of the Issuers, duly authenticated by
the Trustee, and issued by the Issuers in accordance with the provisions of the
Indenture, against surrender and cancellation of a like aggregate principal
amount of Old Notes pursuant to the Exchange Offer as contemplated in the
Registration Rights Agreement, will constitute the legal, valid and binding
obligations of the Issuers enforceable against the Issuers in accordance with
their terms, except to the extent that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (whether general
or specific), fraudulent conveyance or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights and remedies generally,
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be limited by equitable defenses and the discretion of the
court before which any proceeding therefor may be brought (whether such
proceeding is at law or in equity or in a bankruptcy proceeding) or limited by
other equitable principles of general applicability, and (c) the waiver as to
usury, stay or extension laws may be unenforceable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and any abbreviated registration statements relating
thereto that may be filed to register additional securities identical to those
covered by the
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3
Registration Statement (including a registration statement filed pursuant to
Rule 462(b) under the Securities Act), and to the reference to this firm under
the caption "Legal Matters" contained in this prospectus filed as a part
thereof. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act.
Very truly yours,
Dow, Lohnes & Albertson, PLLC
By: /s/ Edward J. O'Connell
---------------------------------
Edward J. O'Connell
Member
<PAGE>
Exhibit 10.16
ASSET PURCHASE AGREEMENT
AS OF MAY 8, 1997
BY AND BETWEEN
A-R CABLE SERVICES - ME, INC.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
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TABLE OF CONTENTS
<TABLE>
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PAGE
Section 1. Definitions................................................................................... 1
1.01 Certain Definitions........................................................................... 1
1.02 Other Definitional Provisions.................................................................12
Section 2. Purchase and Sale.............................................................................12
2.01 Transfer of Assets............................................................................12
2.02 Purchase Price................................................................................13
2.03 Adjustments and Prorations....................................................................13
2.04 Post Closing Adjustment.......................................................................14
2.05 Assumptions of Liabilities....................................................................17
2.06 Earnest Money and Indemnification Deposit.....................................................17
2.07 Sales and Transfer Taxes......................................................................17
2.08 Allocation of Purchase Price..................................................................17
Section 3. Representations and Warranties of Seller......................................................17
3.01 Organization and Authority of Seller..........................................................18
3.02 Legal Capacity; Approvals and Consents........................................................18
3.03 Financial Statements..........................................................................19
3.04 Changes in Operation..........................................................................20
3.05 Tax Returns...................................................................................20
3.06 Acquired Assets...............................................................................20
3.07 The CATV Business.............................................................................22
3.08 Employee Benefit Plans........................................................................26
3.09 Legal and Governmental Proceedings and Judgments..............................................28
3.10 Finders and Brokers...........................................................................28
3.11 Environmental Matters.........................................................................29
3.12 Bonds, Insurance and Letters of Credit........................................................30
3.13 Labor Contracts and Actions...................................................................30
Section 3A. Regarding the Representations and
Warranties of Seller.........................................................................31
Section 4. Representations and Warranties of Buyer.......................................................31
4.01 Organization and Authority of Buyer...........................................................31
4.02 Legal Capacity; Approvals and Consents........................................................31
4.03 Legal and Governmental Proceedings and Judgments..............................................32
4.04 Finders and Brokers...........................................................................32
4.05 Acquisition of Rights.........................................................................32
</TABLE>
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PAGE
Section 5. Covenants Pending Closing.....................................................................33
5.01 Business of Seller............................................................................33
5.02 Access to Information.........................................................................36
5.03 Notice of Subsequent Events...................................................................37
5.04 Delivery of Financial Information.............................................................37
5.05 Additional Financial Information..............................................................37
5.06 Rate Forms....................................................................................38
Section 6. Deliveries at Closing.........................................................................39
6.01 Deliveries by Seller..........................................................................39
6.02 Deliveries by Buyer...........................................................................40
Section 7. Conditions to the Obligations of Buyer........................................................41
7.01 Receipt of Consents...........................................................................41
7.02 Seller's Authority............................................................................41
7.03 Performance by Seller.........................................................................42
7.04 Absence of Breach of Warranties
and Representations..........................................................................42
7.05 Absence of Proceedings........................................................................42
7.06 No Encumbrances...............................................................................43
7.07 No Adverse Change.............................................................................43
7.08 Environmental Report..........................................................................43
7.09 Average Three Month Revenue...................................................................44
Section 8. Conditions to the Obligations of Seller.......................................................44
8.01 Receipt of Consents...........................................................................45
8.02 Buyer's Authority.............................................................................45
8.03 Performance by Buyer..........................................................................45
8.04 Absence of Breach of Representations
and Warranties...............................................................................45
8.05 Absence of Proceedings........................................................................45
8.06 Average Three Month Revenue...................................................................46
Section 9. Covenants.....................................................................................46
9.01 Compliance with Conditions....................................................................46
9.02 Compliance with HSR Act and Rules.............................................................46
9.03 Applications for Assignment of Contracts
or CATV Instruments and CATV Franchises......................................................47
9.04 Records, Taxes and Related Matters............................................................47
9.05 Absence of Consents...........................................................................48
9.06 Retained Franchises...........................................................................49
9.07 Noncompetition................................................................................55
9.08 Billing System Transition.....................................................................55
9.09 Use of Names and Logos........................................................................55
</TABLE>
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<TABLE>
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PAGE
Section 10. Survival of Representations, Warranties, Covenants and Other Agreements; Indemnification......56
10.01 Survival of Representations, Warranties, Covenants and other Agreements.......................56
10.02 Indemnification by Seller.....................................................................56
10.03 Indemnification by Buyer......................................................................57
10.04 Threshold; Cap; Escrow Amount.................................................................58
10.05 Third Party Claims............................................................................58
Section 11. Further Assurances............................................................................59
Section 12. Closing; Termination..........................................................................59
12.01 Closing.......................................................................................59
12.02 Termination...................................................................................60
12.03 Notice of Termination; Rights and Obligations of Parties......................................61
12.04 Remedies Upon Default.........................................................................61
Section 13. Miscellaneous.................................................................................61
13.01 Amendments; Waivers...........................................................................61
13.02 Entire Agreement..............................................................................62
13.03 Binding Effect; Assignment....................................................................62
13.04 Construction; Counterparts....................................................................62
13.05 Notices.......................................................................................62
13.06 Expenses of the Parties.......................................................................64
13.07 Non-Recourse..................................................................................64
13.08 Third Party Beneficiary.......................................................................64
13.09 Governing Law.................................................................................64
13.10 Press Releases................................................................................64
13.11 Severability..................................................................................64
</TABLE>
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EXHIBITS AND SCHEDULES
EXHIBIT A - Service Territory
EXHIBIT B - Form of Assumption Agreement
EXHIBIT C - Form of Earnest Money and Indemnification
Escrow Agreement
EXHIBIT D - Form of Bill of Sale and General Assignment
EXHIBIT E - Form of Opinion of Seller's Local Counsel
EXHIBIT F - Form of Opinion of Seller's FCC Counsel
EXHIBIT G - Form of Opinion of Buyer's Counsel
Schedule 1.01(a) - Current Assets
Schedule 1.01(b) - Current Liabilities
Schedule 1.01(c) - Excluded Assets
Schedule 1.01(d) - Excluded Liabilities
Schedule 1.01(e) - Encumbrances
Schedule 3.02 - Seller's Consents and Approvals
Schedule 3.04 - Changes in Operation
Schedule 3.05 - Tax Notices and Assessments
Schedule 3.06(b)(i)- Real Property
Schedule 3.06(d) - Equipment
Schedule 3.07(a) - CATV Business
Schedule 3.07(b) - Rates charged to Customers
Schedule 3.07(c) - Stations and Signals
Schedule 3.07(d) - Changes in Operations
Schedule 3.07(e) - Material Contracts; CATV Instruments
Schedule 3.07(f) - CATV Franchises
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Schedule 3.07(g) - CATV Towers
Schedule 3.07(h) - CATV Business
Compliance Exceptions
Schedule 3.07(i) - Intangible Property
Schedule 3.08 - Employee Benefit Plans
Schedule 3.09 - Legal Proceedings
Schedule 3.11 - Environmental Matters
Schedule 3.12 - Bonds, Insurance and Letters of Credit
Schedule 4.02 - Buyer's Consents and Approvals
Schedule 5.01(e) - CATV Franchises That Seller May Allow to Expire
Schedule 9.07 - Non-competition
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of May 8,
1997, by and between A-R Cable Services - ME, Inc., a Maine corporation
("Seller"), and FrontierVision Operating Partners, L.P., a Delaware limited
partnership ("Buyer").
R E C I T A L S
Seller owns and operates the CATV Business in the System Area
described in Exhibit A.
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the CATV Business and the assets used or held for the operation thereof
in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows, each intending to be
legally bound as and to the extent herein provided.
1. DEFINITIONS.
1.01 Certain Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
Access Agreements: The pole attachment agreements and other contracts
with utilities, easements, public and private rights of way, permits for
crossing over or under highways, railroads or other property, and similar grants
of authority, all of which are listed in Schedule 3.07(e) and true and correct
copies of which (including any amendments and modifications thereto and
including a written description of any Access Agreements that are not in written
form) have been provided to Buyer. In addition, all correspondence relating
thereto has been made available to Buyer.
Acquired Assets: All of the properties, assets, privileges, rights,
interests, claims, prepaid expenses, subscriber accounts receivable, deposits,
prepaid taxes and other Current Assets and goodwill, real and personal, tangible
and intangible, of every type and description, including Seller's leasehold
interests or rights to possession, whether owned or leased or otherwise
possessed, primarily used by Seller in
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connection with the CATV Business, now in existence or hereafter acquired by
Seller prior to the Closing, including, without limitation, the CATV
Instruments, the CATV Franchises, the Equipment, the Real Property, the
Contracts, the Inventory and the Intangible Property; provided that Acquired
Assets shall exclude the Excluded Assets but shall include cash and cash
equivalents in an amount equal to the lesser of (i) $500,000 or (ii) the net
income of the CATV Business during the period from the date hereof through the
Closing.
Additional Financial Statement: As defined in Section 5.05(a).
Agreement: This Agreement and the Schedules and Exhibits attached
hereto.
Allocation: As defined in Section 2.08.
Asserted Claim: As defined in Section 10.05.
Assumed Liabilities: All liabilities, obligations and commitments of
Seller (a) under the CATV Instruments, the CATV Franchises, the Equipment, the
Real Property, the Contracts, the Inventory, the Intangible Property and any
other Acquired Assets attributable to periods on and after the Closing Date, (b)
all other liabilities, obligations and commitments arising out of Buyer's
ownership of the Acquired Assets attributable to periods on and after the
Closing Date and (c) to the extent (and only to the extent) constituting Current
Liabilities that are included in the Final Working Capital Statement.
Average Three Month Revenue: As defined in Section 2.03(a)(i).
Balance Sheet: As defined in Section 3.03.
Basic Subscriber: As at any date of determination thereof, the sum of
(a) the total number of households (exclusive of "second outlets", as such term
is commonly understood in the cable television industry, and exclusive of
customers billed on a bulk-billing or commercial-account basis) subscribing on
such date to the basic tier service offered by the CATV Business that (i) are
not paying less than the standard rate per month set forth in Schedule 3.07(b)
with respect to such service and are not, as of such date, more than two monthly
billing periods in arrears in payment for services earned (exclusive of account
balances of $8 or less attributable to late fees) based on
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billing reports prepared in the ordinary course of business; (ii) are not
pending disconnection; (iii) have made payments to Seller for Seller's full
cable television installation fee; (iv) have paid to Seller at least one full
monthly payment for basic cable television services in accordance with Sellers'
regular monthly billing cycle at or above the standard basic rate; and (v) were
not solicited by Seller within 90 days prior to the date of determination by any
promotions or by offers of discounts other than those in the ordinary course of
business consistent with Seller's past practice, and (b) the total number of
Equivalent Subscribers on such date.
Benefit Plans: As defined in Section 3.08.
Buyer: As defined in the Preamble to this Agreement.
Buyer Indemnified Party: As defined in Section 10.03.
Buyer Required Consents: As defined in Section 8.01.
Buyer's Counsel: Edwards & Angell.
Buyer's Objection: As defined in Section 2.04(c).
CATV: Cable Television, which term also includes satellite master
antenna television not yet converted to cable television service.
CATV Business: The CATV business to be transferred to Buyer, presently
owned and operated by Seller, which consists of the transmission, distribution
and local origination of audio and video signals over the system used by the
CATV Business located in the System Area.
CATV Franchises: The franchises and licenses and similar grants of
governmental authority issued by any Governmental Authority used in the CATV
Business as presently conducted by Seller, all of which are listed in Schedule
3.07(f) and true and complete copies of which (including all amendments and
modifications thereto and including a written description of any franchise not
in written form) have been provided to Buyer. Seller has also made available to
Buyer any correspondence relating to any such amendment or modification.
CATV Instruments: All franchises, ordinances or licenses (other than
the CATV Franchises) granted to the Seller by any Governmental Authority,
including the FCC and the FAA; all
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Access Agreements; construction permits and certificates of occupancy; business
radio, Earth Station and other FCC licenses; copyright licenses and
registrations, community antenna relay services; federal, state, county and
municipal permits, orders, variances, exemptions, approvals, consents, licenses
and other authorizations; agreements for the purchase, sale, receipt or
distribution of news, data and microwave relay signals, or for satellite
services; and all other approvals, consents and authorizations used or held for
use in the CATV Business. The material CATV Instruments are listed on Schedule
3.07(e), and true and complete copies thereof (including all amendments and
modifications thereto) have been provided to Buyer. Seller has also made
available to Buyer copies of all correspondence relating to any such amendment
or modification. A written description of any CATV Instrument that is not in
written form has also been provided to Buyer.
CATV System: A complete CATV reception and distribution system
consisting of one or more head-ends, trunk cable, subscriber drops and
associated electronic equipment, which is, or is capable of being, operated as
an independent system without interconnections to other systems.
Closing: A meeting for the purpose of concluding the transactions
contemplated by this Agreement held at the place and on the date fixed in
accordance with Section 12.01.
Closing Date; Date of Closing: The date fixed for the Closing in
accordance with Section 12.01.
Code: The Internal Revenue Code of 1986, as amended.
Communications Act: As defined in Section 3.07(h).
Community Service Area: That portion of the CATV Business serving an
individual Franchise Area pursuant to a CATV Franchise.
Contract: Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, certificate, option, warrant, right, or other instrument,
document or written agreement relating to the CATV Business to which the Seller
is a party or by which the Seller or the assets of the Seller included within
the CATV Business is bound, excluding any CATV Instrument. The material
Contracts are listed on Schedule 3.07(e) and true complete copies thereof
(including all amendments and modifications thereto and including a written
description of any
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Contract not in written form) have been provided to Buyer. Seller has also made
available to Buyer all correspondence relating to any such amendment or
modification.
Copyright Act: As defined in Section 3.07(h).
CPA Firm: As defined in Section 2.04(c).
CPS: As defined in Section 3.07(g)(iv).
Current Assets: Means one hundred percent (100%) of active subscriber
accounts receivable that are less than or equal to sixty (60) days past due
(measured from the date the receivable was earned based on billing reports
prepared in the ordinary course of business), all deposits with utilities,
billing service, postage, the pro rata portion of any prepaid taxes, all prepaid
expenses, including in respect of pole rental or equipment maintenance
agreements that are Assumed Liabilities, and in respect of rent, postage and
security service or two-way radio, each as determined in accordance with GAAP
(unless otherwise specified herein) and consistent with Schedule 1.01(a) hereto,
which Schedule sets forth the type and amounts of Current Assets as of March 31,
1997.
Current Liabilities: Means accrued expenses related to Assumed
Liabilities determined in accordance with GAAP plus not more than $100,000 of
net losses of the CATV Business for the period from the date hereof through the
Closing Date, except that the current portion of the Excluded Liabilities shall
not be included, consistent with Schedule 1.01(b) hereto, which Schedule sets
forth the type and amounts of Current Liabilities as of March 31, 1997.
DOJ: The United States Department of Justice.
Earnest Money and Indemnification Escrow Agreement: As defined in
Section 2.06.
Earth Station: A satellite earth receiving station consisting of one
or more "dish" antennas, usually operated in conjunction with a building which
houses electronic signal processing and amplification equipment, all of which is
also referred to as a "head end".
Employees: Means all current or former employees of Seller.
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Encumbrances: Means liens, charges, encumbrances, security interests,
options, restrictions or any other claims or third party rights.
Enforceability Exception: As defined in Section 3.02(a).
Environmental Law: means all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States and political subdivisions thereof and all applicable judicial,
administrative and regulatory decrees, judgments and orders relating to and
governing the protection of human health and the environment (including air,
water, soil and natural resources) or the use, storage, handling, release or
disposal of any hazardous or toxic substance.
Environmental Notice: As defined in Section 3.11(b).
Environmental Report: As defined in Section 7.08.
Equipment: All tangible personalty; electronic devices; towers; trunk
and distribution cable; decoders and spare decoders for scrambled satellite
signals; amplifiers; power supplies; conduit; vaults and pedestals; grounding
and pole hardware; installed subscriber's devices (including, without
limitation, drop lines, converters and other signal control devices, encoders,
transformers behind television sets and fittings); "head-ends" and "Hubs"
(origination, testing, receiving, transmission and related equipment and
distribution system) hardware; tools; inventory; spare parts; maps and
engineering data; vehicles; supplies, tests and closed circuit devices;
furniture and furnishings; and all other tangible personal property and
facilities owned or leased by Seller and used in the CATV Business, a balance
sheet category summary of which is set forth on Schedule 3.06(d).
Equivalent Subscriber: At any date of determination thereof, the
number of Equivalent Subscribers shall be equal to the quotient of (a) the
aggregate billings by the CATV Business for basic and expanded basic service
provided by the CATV Business based on billing reports prepared in the ordinary
course of business, during the last full month ending on or prior to such date,
to residential multiple dwelling units, commercial accounts, other subscribers
that are billed for such service on a bulk basis and single family households
which pay less than the
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CATV Business' regular monthly rate for basic and expanded basic service,
divided by (b) the CATV Business' regular monthly subscriber rate for basic and
expanded basic service in effect for such month. For purposes of the foregoing,
there shall be excluded (A) all billings from premium services, installation or
other non-recurring charges, converter rental or from any outlet or connection
other than the first or from any pass-through charge for sales taxes,
line-itemized franchise fees, fees charged by the FCC and the like, and (B) all
billings to a commercial or bulk account or discounted family household (i)
which has not been an active subscriber of the CATV Business for at least one
month since the most recent activation of service to such account or household,
(ii) which is more than two monthly billing cycles in arrears in payment for
services earned (exclusive of account balances of $8.00 or less attributed to
late fees) based on billing reports prepared in the ordinary course of business,
or (iii) which is pending disconnection for any reason.
ERISA: The Employee Retirement Income Security Act of 1974, as the
same has been and may be amended from time to time.
ERISA Affiliate: As defined in Section 3.08(c).
Escrow Agent: As defined in Section 2.06.
Escrow Amount: As defined in Section 2.06.
Estimated Working Capital Amount: Means (i) if Current Liabilities
exceed Current Assets as reflected on the Estimated Working Capital Statement,
such excess, expressed as a negative number, or (ii) if Current Assets exceed
Current Liabilities as reflected on the Estimated Working Capital Statement,
such excess, expressed as a positive number.
Estimated Working Capital Statement: As defined in Section 2.03(b).
Excluded Assets: The assets and properties of Seller listed on
Schedule 1.01(c).
Excluded Liabilities: Liabilities, obligations and commitments of
Seller identified on Schedule 1.01(d).
FAA: The Federal Aviation Administration.
FCC: The Federal Communications Commission.
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Final Working Capital Amount: Means (i) if Current Liabilities exceed
Current Assets as reflected on the Final Working Capital Statement, such excess,
expressed as a negative number, or (ii) if Current Assets exceed Current
Liabilities as reflected on the Final Working Capital Statement, such excess,
expressed as a positive number.
Final Working Capital Statement: As defined in Section 2.04(c).
Financial Statements: As defined in Section 3.03.
Franchise Area: As defined in Section 9.06(g).
FTC: The Federal Trade Commission.
Full Per Subscriber Amount: As defined in Section 9.06(b)(iii).
GAAP: Means U.S. generally accepted accounting principles.
Governmental Authority: The Federal Government, any state, county,
municipal, local or foreign government and any governmental agency, bureau,
commission, authority or body.
Hazardous Substance: Means any substance listed, defined, designated
or classified as hazardous, toxic or radioactive under any applicable
Environmental Law, including petroleum products and any other substance,
pollutant contaminant chemical or industrial toxic or waste, including without
limitation hazardous materials within the meaning of any other applicable
federal law, regulation, ordinance or requirement relating to or imposing
liability of standards of conduct concerning any hazardous, toxic or dangerous
waste substance or material.
HSR Act and Rules: The Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations promulgated thereunder, as from time to time
in effect prior to the Closing.
HSR Report: The Notification and Report Form for certain mergers and
acquisitions mandated by the HSR Act and Rules.
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Income Statement: As defined in Section 3.03.
Indemnitee: As defined in Section 10.05.
Indemnitor: As defined in Section 10.05.
Intangible Property: The copyrights, patents, trademarks, service
marks and trade names used in the CATV Business excluding the right to use the
name "Cablevision" or "Cablevision Systems" or any derivative thereof or any
name which may include any of such terms, and all applications for, or licenses
or other rights to use any thereof, and the value associated therewith, which
are owned by Seller and used in the CATV Business, all of which are listed on
Schedule 3.07(i).
Interim Financial Statements: As defined in Section 3.03.
Interim Period: As defined in Section 9.05.
Inventory: Means all inventory as defined under GAAP, plus, without
limitation, all supplies, all maintenance equipment, all converters, all cables
and all amplifiers owned by Seller as determined by the Seller's inventory
control system and used in the CATV Business.
Judgment: Any judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
Law: The common law and any statute, ordinance, code or other law,
rule, regulation, order, technical or other standard, requirement or procedure
enacted, adopted, promulgated, applied or followed by any Governmental Authority
or court.
Losses: As defined in Section 10.02(a).
Management Agreement: As defined in Section 9.06(b)(iv).
1996 Financial Statements: As defined in Section 3.03.
1997 Budget: As defined in Section 5.01(f).
Organizational Documents: As defined in Section 3.02(b).
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Permitted Encumbrances: Means all Encumbrances, if any, which do not
materially detract from the value of the property subject thereto and which do
not materially interfere with the present and continued use of such property in
the operation of the CATV Business, other than Encumbrances for the payment of
money.
Person: Any natural person, corporation, general or limited partner,
partnership, joint venture, trust, association or unincorporated entity of any
kind.
Preliminary Working Capital Statement: As defined in Section 2.04(a).
Purchase Price: As defined in Section 2.02.
Real Property: All realty, fixtures, easements, rights-of-way,
leasehold and other interests in real property, buildings and improvements used
in the CATV Business or which relate to the operation of the CATV Systems, all
of which are listed on Schedule 3.06(b)(i) and true and complete copies of which
(including all amendments and modifications thereto and a written description of
each lease which is not in written form) have been provided to the Buyer. Seller
has also made available to Buyer copies of all correspondence relating to any
such amendment or modification.
Retained Assets: As defined in Section 9.06(a).
Retained Franchise Escrow Account: As defined in Section 9.06(b)(iii).
Retained Franchise Escrow Agent: As defined in Section 9.06(b)(iii).
Retained Franchise Escrow Agreement: As defined in Section
9.06(b)(iii).
Retained Franchise Escrow Amount: As defined in Section 9.06(b)(iii).
Retained Franchise Price: As defined in Section 9.06(a).
Retained Franchises: As defined in Section 9.06.
SEC: As defined in Section 5.05(c).
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Seller: As defined in the Preamble to this Agreement.
Seller Indemnified Party: As defined in Section 10.02.
Seller's FCC Counsel: Mintz, Levin, Ferris, Glovsky & Popeo, P.C.
Seller's Local Counsel: Eaton, Peabody, Bradford & Veague, P.A.
Seller Required Consents: As defined in Section 7.01.
Subscription Contracts: All Contracts with subscribers to the CATV
Business and all Contracts for bulk sales of CATV programming.
System: All of the CATV Franchises included for financial reporting
purposes in the Lewiston or Bangor system, as the case may be.
System Area: The geographical area as described in Exhibit A hereto.
Tax Benefit: As defined in Section 10.02(b).
Tax Returns: As defined in Section 3.05.
Transferable Franchise Area: As defined in Section 9.06(g).
1.02 Other Definitional Provisions. Terms defined in the singular
shall have a comparable meaning when used in plural, and vice versa.
2. PURCHASE AND SALE.
2.01 Transfer of Assets. At the Closing, upon the terms and conditions
set forth in this Agreement, Seller shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase, accept and receive, all of Seller's
right, title and interest in and to the Acquired Assets free and clear of any
Encumbrances other than Permitted Encumbrances, such transaction to be effective
as of the opening of business on the Closing Date.
2.02 Purchase Price. In consideration for the transfer of the Acquired
Assets pursuant to Section 2.01 and the
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other covenants, agreements, representations and warranties contained herein,
Buyer shall at Closing (i) pay to Seller a total purchase price of $78,160,000
(the "Purchase Price") plus, if a positive number, or minus, if a negative
number, the Estimated Working Capital Amount provided in Section 2.03, less the
Escrow Amount by federal funds wire transfer of immediately available funds to
such account at The Bank of New York as shall be designated by Seller, and (ii)
assume and agree to pay, discharge and perform the Assumed Liabilities as and
when due in accordance with the Assumption Agreement attached as Exhibit B
hereto.
2.03 Adjustments and Prorations.
(a) Adjustments Due to Revenues.
(i) The Purchase Price shall be reduced or increased in accordance
with Section 2.03(a)(ii) below, if the Average Three Month Revenue of
the Systems is less than $1,459,617 or more than $1,597,122, as the
case may be. As used herein, "Average Three Month Revenue" shall mean
(AA) the sum of advance billings of the Systems for reoccurring
revenues (but excluding advertising, installation, pay-per-view and
other non-reoccurring revenues) for the three calendar months
immediately prior to the Closing Date, plus or minus (as applicable)
debit and credit prorates for such three month period prior to the
Closing Date, divided by (BB) three. All determinations hereunder
shall be made on a basis consistent with Seller's past practices and,
to the extent not inconsistent with Seller's past practices, in
accordance with GAAP.
(ii) If the Average Three Month Revenue is less than $1,459,617 or
more than $1,597,122, the Purchase Price shall be reduced or
increased, as the case may be, proportionately to an amount equal to
the Purchase Price before giving effect to such adjustment multiplied
by a fraction, the numerator of which shall be the Average Three Month
Revenue and the denominator of which shall be $1,459,617, in the case
of a
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decrease or $1,597,122, in the case of an increase.
(b) Estimated Working Capital Statement. Seller shall prepare and
submit to the Buyer, not later than ten (10) days prior to the Closing, a
written good faith estimate of (i) the Current Assets and Current
Liabilities of the CATV Business as of the Closing Date and the Average
Three Month Revenue; and (ii) the amount of the adjustments to the Purchase
Price in accordance with this Section 2.03 (the "Estimated Working Capital
Statement"). The Estimated Working Capital Statement shall be based upon
the books and records of the Systems. The Estimated Working Capital
Statement submitted to the Buyer shall be accompanied by (a) a statement
setting forth in reasonable detail the calculation of the Estimated Working
Capital Statement, the Current Assets and Current Liabilities of the CATV
Business as of the Closing Date and the Average Three Month Revenue,
including appropriate back-up documentation related thereto and in support
thereof and (b) a certificate signed by a senior officer of the Seller
certifying that, to such officer's knowledge, but without any personal
liability to such officer, the Estimated Working Capital Statement was
calculated in accordance with the provisions of this Section 2.03. The
Seller shall also deliver to the Buyer such other information as may be
reasonably requested by the Buyer to verify the Estimated Working Capital
Statement.
2.04 Post Closing Adjustment.
(a) Within sixty (60) days after the Closing Date, Seller shall
prepare, or cause to be prepared, and deliver to Buyer a working capital
statement of the CATV Business as of the Closing Date, which statement
shall be prepared in accordance with GAAP and in a manner consistent with
the preparation of the 1996 Financial Statements, except as otherwise
required by this Agreement, and shall set forth the Current Assets and
Current Liabilities of Seller as of the Closing Date and the Average Three
Month Revenue (the "Preliminary Working Capital Statement"). Buyer shall
cooperate in providing to Seller all relevant books, records and personnel
of the CATV Business in order to facilitate the preparation of the
Preliminary Working Capital Statement.
(b) During the succeeding thirty (30) day period, Buyer shall have the
right to examine the Preliminary
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Working Capital Statement and all records used to prepare the Preliminary
Working Capital Statement.
(c) In the event Buyer determines that the Preliminary Working Capital
Statement has not been prepared on the basis set forth in Section 2.04(a)
hereof, Buyer shall so inform Seller in writing (the "Buyer's Objection"),
setting forth a reasonably specific description of the basis of the Buyer's
Objection on or before the last day of the thirty (30) day period referred
to in Section 2.04(b) hereof. In the event of the Buyer's Objection, Buyer
and Seller shall attempt to resolve the differences underlying the Buyer's
Objection within thirty (30) days of Seller's receipt thereof. If Seller
and Buyer are unable to resolve all their differences within such thirty
(30) day period, they shall refer their remaining differences to KPMG Peat
Marwick, certified public accountants, or such other nationally recognized
firm of independent public accountants as to which Buyer and Seller may
mutually agree (the "CPA Firm"), who shall, acting as experts and not as
arbitrators, determine on the basis of the standard set forth in Section
2.04(a) hereof and only with respect to the remaining differences so
submitted, whether and to what extent, if any, the Preliminary Working
Capital Statement requires adjustment. The CPA Firm will base its
determination only on evidence brought to it by the parties and shall not
conduct an audit, but may conduct such testing procedures as are
customarily used to make such determination on the evidence brought to it.
The CPA Firm shall deliver its written determination to Buyer and Seller no
later than the twentieth (20th) business day after the remaining
differences underlying the Buyer's Objection are referred to the CPA Firm.
The CPA Firm's determination shall be conclusive and binding upon the
parties. The fees and disbursements of the CPA Firm shall be allocated
between Buyer and Seller in the same proportion that the aggregate amount
of any disputed items submitted to the CPA Firm that are unsuccessfully
disputed by each (as finally determined by the CPA Firm) bears to the total
amount of any disputed items so submitted. Buyer and Seller shall make
readily available to the CPA Firm all relevant books and records and any
work papers relating to the Preliminary Working Capital Statement and all
other items reasonably requested by the CPA Firm. The "Final Working
Capital Statement" shall be (i) the Preliminary Working Capital Statement
in the event that (x) the Buyer's Objection is not delivered to Seller in
the period set forth in Section 2.04(b) hereof, or (y) Seller and Buyer so
agree; or (ii) the Preliminary Working
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Capital Statement, as adjusted by either (x) the agreement of Seller and
Buyer or (y) the CPA Firm.
(d) On the fifth (5th) business day following the determination of the
Final Working Capital Statement pursuant to Section 2.04(c), (i) if both
the Estimated and Final Working Capital Amounts are positive, then (AA) if
the Final Working Capital Amount exceeds the Estimated Working Capital
Amount, then Buyer shall pay to Seller an amount equal to such excess; and
(BB) if the Estimated Working Capital Amount exceeds the Final Working
Capital Amount, then Seller shall pay to Buyer an amount equal to such
excess; (ii) if both the Estimated and Final Working Capital Amounts are
negative, then (AA) if the absolute value of the Final Working Capital
Amount exceeds the absolute value of the Estimated Working Capital Amount,
then Seller shall pay to Buyer an amount equal to such excess; and (BB) if
the absolute value of the Estimated Working Capital Amount exceeds the
absolute value of the Final Working Capital Amount, then Buyer shall pay to
Seller an amount equal to such excess; (iii) if the Estimated Working
Capital Amount is negative and the Final Working Capital Amount is
positive, then Buyer shall pay to Seller an amount equal to the sum of the
absolute values thereof; and (iv) if the Estimated Working Capital Amount
is positive and the Final Working Capital Amount is negative, then Seller
shall pay to Buyer an amount equal to the sum of the absolute values
thereof.
(e) Any amount payable pursuant to Section 2.04(d) hereof shall be
paid by wire transfer of immediately available funds to a bank account
designated by Buyer or Seller, as the case may be.
2.05 Assumptions of Liabilities. At the Closing Date, Buyer shall
assume the Assumed Liabilities in accordance with the Assumption Agreement
attached hereto as Exhibit B.
2.06 Earnest Money and Indemnification Deposit. Concurrently herewith,
Buyer has delivered to The Bank of New York as escrow agent ("Escrow Agent"), by
federal funds wire transfer of immediately available funds, an amount equal to
$7,816,000 (together with the interest earned thereon and as adjusted subsequent
to the Closing pursuant to the Earnest Money and Indemnification Escrow
Agreement, the "Escrow Amount") to be held and applied pursuant to an escrow
agreement (the "Earnest Money and Indemnification Escrow Agreement")
substantially in the
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form of Exhibit C hereto. Upon the Closing, the Escrow Amount shall be
considered as a credit against the Purchase Price.
2.07 Sales and Transfer Taxes. All sales and use taxes and transfer
taxes, if any, arising from the transfer of the Acquired Assets shall be shared
equally by Buyer and Seller.
2.08 Allocation of Purchase Price. Prior to the Closing Date, Buyer
and Seller shall each use its reasonable efforts to agree upon the allocation
(the "Allocation") of the Purchase Price and the Assumed Liabilities to the
individual assets or classes of assets (within the meaning of Section 1060 of
the Code) consistent with an appraisal to be conducted at Buyer's expense by an
appraiser designated by Buyer and reasonably satisfactory to Seller. Buyer,
Seller and their respective affiliates shall file all tax returns and schedules
thereto, including, without limitation, those returns and forms required by
Section 1060 of the Code, consistent with the Allocation unless otherwise
required by applicable Law.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
3.01 Organization and Authority of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maine and is qualified to transact business in each other jurisdiction
in which the property owned, leased or operated by it requires it to be so
qualified. Seller has the requisite power and authority (i) to own, lease and
use the Acquired Assets as presently owned, leased and used by Seller, and (ii)
to conduct the business and operations of the Systems as presently conducted by
Seller.
3.02 Legal Capacity; Approvals and Consents.
(a) Authority and Binding Effect. Subject to Section 9.02 hereof and
the consents and approvals set forth on Schedule 3.02, Seller has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. All corporate action by Seller necessary
for the authorization, execution, delivery and performance by Seller of
this Agreement has been taken and such action has not been rescinded,
repealed or amended in any manner. This Agreement has been duly executed
and delivered by Seller and is the valid and binding obligation
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of Seller enforceable against it in accordance with its terms, except as
such enforceability may be affected by the laws of bankruptcy, insolvency,
reorganization and creditors' rights generally and by the availability of
equitable remedies (the "Enforceability Exception").
(b) No Breach. Subject only to obtaining the consents and approvals
set forth on Schedule 3.02, the execution, delivery and performance of this
Agreement does not, and will not, contravene the certificate of
incorporation or by-laws (such documents and similar constituent documents,
"Organizational Documents") of the Seller, and does not, and will not: (i)
conflict with or result in a breach or violation by the Seller of, or (ii)
constitute a default by the Seller under, or (iii) result in the
termination, suspension, modification or impairment of any CATV Instrument,
Law, Judgment, or Contract to which the Seller is a party or by which the
Seller, the CATV Business or any of the Acquired Assets is subject or bound
or may be affected; or (iv) create or impose any Encumbrance upon any of
the Acquired Assets, in each case under clause (i) through (iii) above,
which conflict, breach, violation, default or termination, suspension,
modification or impairment would not, individually or in the aggregate,
reasonably be expected to be material to any Community Service Area.
(c) Required Consents. Except for the parties listed in Schedule 3.02,
there are no parties whose approval or consent, or with whom the filing of
any certificate, notice, application, report or other document, is legally
or contractually required or otherwise is necessary in connection with the
execution, delivery or performance of this Agreement by Seller, except
where failure to obtain such consent would not, individually or in the
aggregate, reasonably be expected to be material to any Community Service
Area.
3.03 Financial Statements. Seller has delivered to Buyer true and
complete copies of the balance sheet of Seller as at December 31, 1996 (the
"Balance Sheet") and December 31, 1995, and related statements of income and
changes in financial position of Seller for the years ending December 31, 1996
(the "Income Statement"), 1995 and 1994 (collectively, the "Financial
Statements"). The Balance Sheet and Income Statement for the year 1996
(collectively, the "1996 Financial Statements") were prepared in accordance with
GAAP and present fairly in all
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material respects the financial position of the Seller as of those dates and the
results of its operations for the periods then ended. Seller has also provided
to Buyer a balance sheet and income statement as of March 31, 1997 and will
provide Buyer with a balance sheet and income statement as of June 30, 1997 and
other information in accordance with Section 5.04 (the "Interim Financial
Statements"), which Interim Financial Statements were or will be prepared in
accordance with the practices customarily followed by Seller in preparing its
interim statements and, subject to normal year-end adjustments and the
procedures followed in interim statements, present fairly in all material
respects the financial position and results of operation of Seller as at the
date and for the period indicated and are stated on a basis consistent with the
above-described Financial Statements. At the date of the Balance Sheet, Seller
had no material liabilities required by GAAP to be reflected or reserved against
therein that were not fully reflected or reserved against on the Balance Sheet.
3.04 Changes in Operation. Except as set forth in Schedule 3.04, since
the date of the Interim Financial Statements, there has not been any event or
circumstance which, individually or in the aggregate, has been or would be
material to any Community Service Area other than those events or circumstances
which may affect the cable television industry generally or in the State of
Maine.
3.05 Tax Returns. Seller has duly filed all material federal, state,
local and foreign income, information, franchise, sales, use, property, excise
and payroll and other tax returns or reports (herein "Tax Returns") required to
be filed by Seller on or prior to the date hereof. All taxes, fees and
assessments that are shown on such Tax Returns as due or payable by Seller on or
before the date hereof and that might result in an Encumbrance upon any of the
Acquired Assets have been duly paid. Except as set forth in Schedule 3.05,
Seller has received no notice or assessment to the effect that there is any
unpaid tax, interest, penalty or addition to tax due or claimed to be due from
the Seller in respect of such Tax Returns; Seller has received no notice of the
assertion or threatened assertion of any Encumbrances with respect to any
Acquired Assets on account of any unpaid taxes; and no audits of such Tax
Returns by any Governmental Authority are pending or, so far as Seller knows,
threatened. No event has occurred that could impose on Buyer any transferee
liability for any taxes, penalties or interest due or to become due from Seller.
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3.06 Acquired Assets.
(a) Title; Encumbrances. Seller holds good and marketable title to all
the Acquired Assets, including: (i) good and marketable title to all of the
Equipment, Real Property owned in fee, and (ii) the right and authority
(subject to the required consents specified herein) to transfer to Buyer
all of Seller's right, title and interest in and to the other property or
rights included in the Acquired Assets, in each instance free and clear of
any Encumbrances except Permitted Encumbrances, and those Encumbrances set
forth on Schedule 1.01(e).
(b) Real Property. Schedule 3.06(b)(i) sets forth a list of all Real
Property owned or leased by Seller in connection with the operation of the
CATV Business as presently conducted. Except as set forth in Schedule
3.06(b)(i), Seller has good and marketable title to such interests in Real
Property and has quiet enjoyment under all leasehold interests, in all
cases free of all Encumbrances except Permitted Encumbrances, and those
Encumbrances set forth on Schedule 1.01(e). No condemnation proceedings are
pending or, to the knowledge of Seller, threatened with respect to any of
the Real Property, nor has any such property been condemned.
(c) Acquired Assets. The Acquired Assets include all assets used by
Seller to conduct the CATV Business as it is presently being conducted,
except as would not be material to any Community Service Area. The Acquired
Assets are in good working order, ordinary wear and tear excepted.
(d) Equipment. Schedule 3.06(d) sets forth a balance sheet category
summary of all Equipment owned or leased by Seller in connection with the
operation of the CATV Business. Seller has good and marketable title to all
Equipment owned by Seller, and as of the Closing Date none of the Equipment
will be subject to any Encumbrances, except Permitted Encumbrances. All
leases on the Equipment, taken as a whole, are not material to the CATV
Business. All of the Equipment, and Seller's use of the same, (i) comply in
all material respects with all applicable ordinances and regulations and
building and other laws, and (ii) meet the rules and regulations of the FCC
and of the CATV Instruments, except as would not be material to any
Community Service Area. The Equipment comprises all material items of
personal property used in the CATV Business as now conducted by Seller. All
transmitting and
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studio equipment for the CATV Systems are operating in accordance with and
within the rules and regulations of the FCC and the CATV Instruments and
with all applicable federal, state and local laws, ordinances, rules and
regulations, except as would not be material to any Community Service Area.
3.07 The CATV Business. With respect to the CATV Business, Seller
makes the following warranties and representations:
(a) Basic Subscribers. The CATV Business includes not less than 50,000
Basic Subscribers and has the bandwidth capacity set forth on Schedule
3.07(a).
(b) Rates Charged to Customers. As of the date hereof, the rates
charged to customers for each class of service and categories of customers
for the Systems are set forth in Schedule 3.07(b). The rates charged for
services delivered by Seller with respect to the CATV Business are in
compliance with federal, state and local regulation, and no basis exists
for any rollback of rates for basic service, or any rollback refund or
forfeiture of rates for any cable programming service tiers, as defined by
the FCC with respect to any of the CATV Systems, except as would not be
material to any Community Service Area.
(c) Stations and Signals. Schedule 3.07(c) contains a materially true
and accurate description of the stations and signals carried by the CATV
Business and the channel position of each such signal and station.
(d) No Change in Operations. Except as set forth on Schedule 3.07(d),
since the time of the Interim Financial Statements, the CATV Business has
been operated in the ordinary course in all material respects except as
otherwise permitted by this Agreement. No assets material to any Community
Service Area previously used therein have been disposed of since the 1996
Financial Statements except in the ordinary course of business.
(e) Contracts. Schedule 3.07(e) contains a complete list of all
material Contracts in effect on the date of this Agreement. As used in this
Section 3.07(e), the term "material Contracts" means any Contract requiring
in any calendar year payments aggregating $50,000 or more and any Contract
that cannot be terminated on thirty (30) days'
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notice without liability. Except as set forth in Schedule 3.07(e), there
are no defaults by Seller under the Contracts (nor has Seller received
written notice of a threatened default or notice of default), and Seller
knows of no defaults by any other party to a Contract, except as would not
be material to any Community Service Area.
(f) CATV Franchises and Governmental Authorities. Schedule 3.07(f)
includes a true and complete list of all CATV Franchises that are held for
use in connection with the operations of the CATV Business. Seller has not
made any commitments material to any Community Service Area (oral or
written) that are still in effect to any Governmental Authority with
respect to the CATV Systems other than those contained in the CATV
Franchises. Seller holds all of the franchises, permits and licenses
reasonably necessary to enable it to operate the CATV Business as presently
conducted, and no other franchise, franchise applications, licenses,
registrations, authorizations or permits are required by applicable law in
connection with the conduct and operation of the CATV Business in the
ordinary course of business, except as would not be material to any
Community Service Area. Except as noted on Schedule 3.07(f), each of the
CATV Franchises is in full force and effect in accordance with its terms.
Except as noted on Schedule 3.07(f), there exists no fact or circumstance
which, with the passage of time or the giving of notice or both, would
constitute a material default under any CATV Franchise or permit any
Governmental Authority to cancel, terminate or suspend the rights
thereunder.
(g) CATV Systems.
(i) Schedule 3.07(g) contains a true and complete list of each
CATV System's towers, tower coordinates and total height above ground
level of each tower. All necessary FAA approvals have been obtained
with respect to the height and location of towers used in connection
with the operation of the Systems in the manner presently operated and
are listed in Schedule 3.07(g). Seller has made available to Buyer
true and complete copies of all such FAA approvals and authorizations
obtained in connection with the ownership and operation of the
Systems. The towers are being operated in material compliance with
applicable FCC and FAA rules.
(ii) As of the date of this Agreement and to
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Seller's knowledge, and except as disclosed on Schedule 3.07(g): (AA)
Seller is, as of the date of this Agreement, the only person providing
wireline or wireless cable television services or similar video
programming or related services (excluding direct broadcast satellite
services) within all or part of the geographic areas served by the
Systems; and (BB) no person other than the Seller has been granted a
cable television franchise in any of the geographic areas presently
served by the Systems.
(iii) All notices required to be given by the Seller to
subscribers of the CATV Systems have been given in material compliance
with the requirements of the Communications Act and applicable FCC
rules, regulations and policies.
(iv) Except as set forth on Schedule 3.07(g), no Governmental
Authority served by any CATV System has become certified by the FCC to
regulate such System's basic service rate, and Seller has not received
any complaint on FCC Form 329 concerning the cable programming service
("CPS") rates of any CATV System, and Seller is not aware of any CPS
rate regulation of any CATV System.
(h) CATV Business. Except as set forth in Schedule 3.07(h), (i) the
CATV Business is conducted by Seller in material compliance with all
applicable laws, regulations and other requirements of Governmental
Authorities, CATV Franchises, CATV Instruments and Contracts, including,
but not limited to, material compliance with the rules and regulations of
the FCC and the provisions of the Communications Act of 1934, as amended,
and the rules and regulations promulgated thereunder (collectively, the
"Communications Act"). Except as set forth in Schedule 3.07(h), Seller has
timely filed and paid to the FCC and any Governmental Authority all
filings, applications, reports, payments and fees, including, but not
limited to, cable television registration statements, annual reports,
aeronautical frequency usage notices, FCC Form 320, FCC Form 325, Schedule
A, FCC Form 395-A and FCC Form 759 that are required under the rules and
regulations of the FCC; and (ii) the CATV Business is in compliance with
all signal leakage criteria prescribed by the FCC for each relevant
semi-annual reporting period; and a request for renewal has been timely
filed under Section 626(a) of the Cable Act with
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the proper Governmental Authority with respect to each franchise expiring
within thirty-six (36) months after the date of this Agreement. Seller has
made available to Buyer copies of all reports and filings for the past
three (3) years made or filed by Seller pursuant to FCC rules and
regulations and shall make available to Buyer all other past reports and
filings made or filed by Seller pursuant to FCC rules and regulations.
Seller has filed and deposited with the U.S. Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the U.S.
Copyright Office under the Copyrights Act of 1976 (as amended, the
"Copyright Act"), with respect to the business and operations of the CATV
Systems as are required to obtain, hold and maintain the compulsory license
for cable television systems prescribed in Section 111 of the Copyright
Act. Seller has made available to Buyer true and complete copies of all
such statements of account and other documents and instruments filed and
deposited with the U.S. Copyright Office in connection with the ownership
and operation of the Systems for the past three (3) years. The CATV Systems
are in material compliance with the Copyright Act and the rules and
regulations of the U.S. Copyright Office. To the knowledge of Seller, there
is no inquiry, claim, action or demand pending before the U.S. Copyright
Office or from any other party which questions the copyright filings or
payments made by the CATV Systems. Except as disclosed in Schedule 3.07(h),
(i) Seller has not received any notice of any claimed or purported default
in any CATV Instruments and (ii) there are no proceedings pending, or, to
the knowledge of Seller, threatened, to cancel, modify or change any CATV
Franchise.
(i) Intangible Property. Except as set forth on Schedule 3.07(i),
Seller is not the owner, user or licensee of any patent, trademark,
servicemark, trade name or copyright (or application therefor), nor are any
of such items used in connection with the CATV Business. To Seller's
knowledge, and without notice to the contrary, Seller has not, nor has the
use of any such item in connection with the CATV Business, infringed upon
or conflicted with any patent, trademark, servicemark, trade name or
copyright of others, and Seller has not received any notice of any such
claimed infringement or conflict. During the past five (5) years, the
Seller has not existed under or used any name other than as set forth in
Schedule 3.07(i).
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3.08 Employee Benefit Plans.
(a) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA covering Employees, other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, and other benefit plans, contracts,
policies, practices, agreements or arrangements providing for compensation,
severance, termination pay, performance awards, stock or stock-related
awards or other equity-based awards, fringe benefits of any kind, whether
formal or informal, funded or unfunded, covering Employees (collectively,
the "Benefit Plans") are listed on Schedule 3.08, and copies or summaries
of any such written Benefit Plans (or related Insurance Policies) and any
amendments thereto have been provided or made available to Buyer. Schedule
3.08 also lists all multi-employer plans covering Employees. Except as
disclosed on Schedule 3.08, there is not now in effect or to become
effective after the date of this Agreement, any new Benefit Plan or any
amendment to an existing Benefit Plan which will affect the benefits of
Employees or former employees of the Systems.
(b) All Benefit Plans have been administered in substantial compliance
with their own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal and state
laws. There is no material pending or, to the knowledge of Seller,
threatened investigations, proceedings, actions, suits, claims or other
litigation (other than routine claims for benefits) relating to the Benefit
Plans. Seller has not engaged in a transaction with respect to any Benefit
Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject Seller to a tax or penalty imposed by either
Section 4975 of the Code or Section 406 or 502(i) of ERISA in an amount
which would be material.
(c) No liability under Subtitle C or D of Title IV or ERISA has been
or is expected to be incurred by Seller with respect to any ongoing, frozen
or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by it, or the
single-employer plan of any entity which is considered one employer with
Seller under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Seller has not incurred and does not expect to incur any
withdrawal liability with respect to a multi-employer plan under
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Subtitle E of Title IV of ERISA. No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Benefit Plan subject to Title IV of ERISA or by any ERISA Affiliate within
the 12-month period ending on the date hereof.
(d) Neither any Benefit Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA and
no ERISA Affiliate has an outstanding funding waiver. Seller has not
provided, nor is it required to provide, security to any Benefit Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(e) Except as disclosed in Schedule 3.08, Seller has not contributed
to any Multiemployer Plan at any time after September 26, 1980.
(f) Seller is not aware of the existence of any governmental audit or
examination of any of Seller's Benefit Plans or any facts that would lead
it to believe that any such audit or examination is pending or threatened.
There exists no action, suit or claim (other than routine claims for
benefits) with respect to any such Benefit Plan pending, or, to the
knowledge of Seller, threatened with respect to any of such Benefit Plan.
(g) No Benefit Plan which is an employee welfare benefit plan (as
defined in Section 3(1) of ERISA) provides for continuing benefits or
coverage for any participant or beneficiary after the termination of the
participant's employment or upon the participant's retirement except as may
be required under Section 4980B of the Code or applicable state statutory
law.
(h) Except as set forth on Schedule 3.08, the execution of this
Agreement and the consummation of the transactions contemplated hereby will
not (either alone or when taken together with any additional or subsequent
events) constitute an event under any Employee Plan that will or may result
in any payment, upon a change in control or otherwise, whether of
severance, accrued vacations or otherwise, acceleration, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
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3.09 Legal and Governmental Proceedings and Judgments. Except as may
affect the cable television industry generally, or as set forth on Schedule
3.09, there is no legal action, counterclaim, suit, arbitration, or proceeding,
pending or, so far as is known to Seller, any governmental investigation pending
or threatened against the Seller, the CATV Business or the Acquired Assets, nor
is there any Judgment, order or decree pending or outstanding against the Seller
or to or by which the Seller, any of the Acquired Assets or the CATV Business is
subject or bound, which (i) results in any modification, termination,
suspension, impairment or reformation of any CATV Instrument or Contract or any
right or privilege thereunder in a manner that could reasonably be expected to
be material to any Community Service Area; or (ii) materially adversely affects
the ability of Seller to consummate any of the transactions contemplated hereby.
3.10 Finders and Brokers. Seller has employed Waller Capital
Corporation as its broker in the sale provided herein and will pay and discharge
the claim thereof for commission or expense reimbursement in connection
therewith. Seller has not entered into any other contract, arrangement or
understanding with any Person or firm, nor is it aware of any claim or basis for
any claim based upon any act or omission of Seller or any of its affiliates,
which may result in the obligation of Buyer to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Seller agrees to indemnify and hold harmless Buyer against
any fee, commission, loss or expense arising out of any claim by any broker or
finder employed or alleged to have been employed by it.
3.11 Environmental Matters.
(a) Except as disclosed in Schedule 3.11, to Seller's knowledge (i)
the Real Property is free of all friable asbestos; (ii) no Hazardous
Substance is currently or has ever been located in, on, under or about any
of the Real Property in a manner which violates any Environmental Law in
any material respect or which requires cleanup or corrective action of any
kind under any Environmental Law; (iii) Seller is in past and current
compliance with, is not in violation of, and has no liability under, any
Environmental Law; (iv) the CATV Systems are capable of continued
cooperation in compliance with all Environmental Law; (v) no Hazardous
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Substances have been used, treated or disposed in, on, over or under the
Real Property by Seller, except for such substances which are in such
amounts and of the type typically found in commercial cleaning products or
standard office supplies of businesses similar to Seller's, as to which
Seller is in compliance with all applicable Environmental Law; and (vi)
there are no tanks below the surface of the Real Property.
(b) Except as disclosed in Schedule 3.11, Seller has not received any
notice from any Governmental Authority indicating that the Real Property or
any property adjacent thereto has been or may be placed on any federal or
state "Superfund" or "Superlien" list ("Environmental Notice"). To Seller's
knowledge, there has not been any Environmental Notice with respect to any
of the Real Property received by any prior owner or occupant of the Real
Property which has not been fully satisfied and complied with in a timely
fashion.
3.12 Bonds, Insurance and Letters of Credit. Except as otherwise
specified in Schedule 3.12, each insurance policy, each performance bond and
each letter of credit required to be maintained, or which is maintained covering
the property comprising the CATV Systems and Acquired Assets, and/or the
operation of the CATV Systems, is set forth in Schedule 3.12, and a copy of each
such policy, letter of credit or bond has been made available to Buyer by
Seller. Each of such policies, letters of credit and bonds is current and in
full force and effect. Seller has not received any notice of default under or
intended cancellation or nonrenewal of any such policies, letter of credit or
bonds. Seller has not failed to give any notice or present any claim under any
insurance policy or bond in a due and timely manner, nor has Seller made a claim
under any insurance policy or bond or requested the insurer to defend Seller
under a duty to defend provision, which coverage the insurer denied. There are
no pending or threatened requests to make a draw under any such letter of
credit. To Seller's knowledge, no application for any insurance, letter of
credit or bond with respect to the Acquired Assets or the Systems has been
denied for any reason. Seller will continue to maintain in effect through the
Closing Date, and for such periods thereafter as may be required under Section
9.05 hereof, those bonds, letters of credit and insurance policies in connection
with the Acquired Assets and/or the operation of the CATV Systems. During such
periods, Seller will not take any action or refrain from taking any action if
the taking of such action or failure to take such action,
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respectively, adversely affects the insurability of the Acquired Assets or the
CATV Systems.
3.13 Labor Contracts and Actions.
(a) Seller is not a party to any Contract with any labor organization,
nor has the Seller agreed to recognize any union or other collective
bargaining unit, nor has any union or other collective bargaining unit been
certified as representing any of the employees of the Seller with respect
to the operation of the CATV Business, and
(b) as of the date of this Agreement, Seller is not experiencing any
strikes, work stoppages, significant grievance proceedings or, to the
knowledge of Seller, claims of unfair labor practices filed with respect to
the operation of the CATV Business.
3A. REGARDING THE REPRESENTATIONS AND WARRANTIES OF SELLER.
It is specifically understood and agreed by Buyer that the
representations and warranties made by Seller in Section 3 of this Agreement and
the lack of qualification thereof as to materiality or time are made in the
light of the exceptions to the conditions of Buyer to closing set forth in
Section 7.03 and 7.04 and in the light of the cap provided in Section 10.04, and
no adverse inference shall be drawn by virtue of the scope and breadth of such
representations and warranties.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller as follows:
4.01 Organization and Authority of Buyer. Buyer is a limited
partnership, validly organized and existing and in good standing under the laws
of the State of Delaware and is qualified to transact business in each other
jurisdiction in which the property owned, leased or operated by it required it
to be so qualified. Buyer has the requisite power and authority (i) to own,
lease and use the Acquired Assets as presently owned, leased and used by Seller,
and (ii) to conduct the business and operations of the Systems as presently
conducted by Seller.
4.02 Legal Capacity; Approvals and Consents.
(a) Authority and Binding Effect. Subject to Section
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9.02 hereof and the consents and approvals set forth on Schedule 4.02,
Buyer has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. All partnership action
by Buyer necessary for the authorization, execution, delivery and
performance by Buyer of this Agreement has been taken and such action has
not been rescinded, repealed or amended in any manner. This Agreement has
been duly executed and delivered by Buyer and is the valid and binding
obligation of Buyer enforceable against it in accordance with its terms,
except for the Enforceability Exception.
(b) No Breach. Subject only to obtaining the consents and approvals
set forth on Schedule 4.02, the execution, delivery and performance of this
Agreement does not, and will not, contravene the Organizational Documents
of Buyer, and does not and will not: (i) conflict with or result in a
breach or violation by Buyer of, or (ii) constitute a default by Buyer
under, any Law, Judgment, contract, arrangement or understanding to which
Buyer is a party or by which Buyer is subject or bound or may be affected.
(c) Required Consents. Except for the parties listed in Schedule 4.02,
there are no parties whose approval or consent, or with whom the filing of
any certificate, notice, application, report or other document, is legally
or contractually required or otherwise is necessary in connection with the
execution, delivery or performance of this Agreement by Buyer, except where
failure to obtain such consent or approval or failure to make such filing
would not reasonably be expected to be material.
4.03 Legal and Governmental Proceedings and Judgments. There is no
legal action, proceeding, investigation or controversy pending or, to the
knowledge of Buyer, threatened against or otherwise involving Buyer, nor are
there any Judgments outstanding against Buyer or to or by which Buyer is, or may
be, subject or bound which may adversely affect the ability of Buyer to
consummate any of the transactions contemplated hereby.
4.04 Finders and Brokers. Buyer has not entered into any contract,
arrangement or understanding with any Person, and is not aware of any claim or
basis for any claim based upon any act or omission of Buyer or any of its
affiliates, which may result in the obligation of Seller to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or
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the consummation of the transactions contemplated hereby.
4.05 Acquisition of Rights. Buyer is not aware of, and has no reason
to believe there is, any reason relating to Buyer that any Governmental
Authority or other party whose consent is required or contemplated hereunder,
would refuse to consent to the transfer of CATV Instruments or any rights to
Buyer hereunder or would condition granting of any such consent on the
performance by Seller or Buyer of any material obligation not expressly set
forth herein.
5. COVENANTS PENDING CLOSING.
5.01 Business of Seller. From the date hereof to the Closing Date, and
except as otherwise consented to or approved by Buyer in writing (which consent
shall not be unreasonably withheld), Seller covenants and agrees as follows:
(a) Business in Ordinary Course. Except as otherwise agreed by the
parties or as provided herein, Seller shall conduct the CATV Business in
the ordinary course, consistent with past practices and will not engage in
any material transaction, including, without limitation, entering into or
amending in any material respect any CATV Instrument or Contract, entering
into or amending any CATV Franchise or making any material advance or
expenditure, other than in the ordinary course of business, nor change in
any material respect business policies or practices. Seller shall use its
reasonable commercial efforts to preserve the CATV Business and Acquired
Assets intact, to retain the services of its present employees and agents,
and to preserve its business relationships with, and the goodwill of, its
subscribers, customers, advertisers, suppliers and others. Seller shall pay
before delinquent all taxes and other charges upon or against Seller or any
of its properties or income, file when due all tax returns and other
reports required by Governmental Authorities and pay when due all
liabilities except those which it chooses to contest in good faith by
appropriate proceedings and for which appropriate reserves have been
maintained. Seller shall not (i) enter into any transaction or incur any
liability or obligation which, if entered into or incurred prior to the
date of this Agreement, would have been required to be listed on the
Schedules hereto, (ii) sell, lease, hypothecate, transfer or otherwise
dispose of any of the Acquired Assets, other than dispositions of assets in
an aggregate amount of less than $100,000 in the ordinary course of
business where suitable
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replacements have been made therefor, (iii) grant or agree to grant any
increase in the rates of salaries or compensation payable to employees
(other than as required by law and regularly scheduled bonuses and
increases in the ordinary course of business or bonuses to induce employees
to remain employed with Seller through the Closing Date), (iv) except as
provided in (iii) above provide for any new and material pension,
retirement or other employment benefits for employees or any material
increase in any existing benefits (other than as required by law), (v)
implement any retiering or repackaging of cable television programming
offered by the CATV Systems (other than as required by law or the terms of
the applicable CATV Franchise), or (vi) take or agree to take, any of the
foregoing actions or any actions that would (A) make any representation or
warranty of Seller contained in this Agreement untrue or incorrect in any
material respect as of the Closing Date, or (B) result in any of the
conditions to Closing in this Agreement not being satisfied.
(b) Books and Records. Seller shall maintain its books, accounts and
records in the usual, regular and ordinary manner.
(c) Litigation During Interim Period. Seller will advise Buyer in
writing promptly of the assertion, commencement or threat of any claim,
litigation, labor dispute, proceeding or investigation in which the Seller
is a party or the Acquired Assets or CATV Business may be affected and
which could reasonably be expected to be material or which relates to the
transactions contemplated hereby.
(d) Material Contracts. Seller shall deliver to Buyer copies of all
material Contracts that are entered into after the date hereof and prior to
the Closing in accordance with the terms of this Agreement.
(e) CATV Franchises. Except as set forth in Schedule 5.01(e) or as
otherwise agreed by the parties, Seller shall not cause or permit, by any
act or failure to act, any of the CATV Franchises to expire or to be
revoked, suspended, or materially adversely modified, or take any action
that could reasonably be expected to cause any governmental authority to
institute proceedings for the suspension, revocation, or material adverse
modification of any Franchise except as otherwise agreed to by the parties.
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(f) CATV Systems. Seller shall pay all obligations relating to the
CATV Systems as they become due, consistent with past practices, and shall
cause all such obligations to be paid or satisfied as of the Closing Date.
Seller shall not change customer rates for any service or charges for
remotes or installation, or change billing, disconnect or marketing
practices (other than as required by law or the terms of the applicable
CATV Franchise or as set forth in the budget for fiscal year 1997 for the
Systems (the "1997 Budget")or in the ordinary course of business).
(g) Acquired Assets. Seller shall maintain all of the Acquired Assets
in good working order (ordinary wear and tear excepted), consistent with
their overall condition on the date of this Agreement, and shall use,
operate and maintain all of the Acquired Assets in a reasonable manner.
Seller shall maintain inventories at levels consistent with past practices
in the ordinary course of business or in accordance with the budget for
fiscal year 1997 for the Systems.
(h) Compliance with Law. Seller shall comply with all laws, rules and
regulations applicable or related to the ownership and operation of the
CATV Systems, except for any noncompliance that would not be material to
any Community Service Area or to the CATV Business as a whole.
(i) Encumbrances. Seller shall not create, assume or permit to exist
any Encumbrance, claim or liability, upon the Acquired Assets, except for
Permitted Encumbrance.
(j) FCC Filings. Seller shall provide to Buyer, as soon as practicable
following the filing thereof, copies of all reports to and other filings
with the FCC relating to the CATV Systems.
(k) CATV Instruments. Seller shall provide to Buyer, as soon as
practicable following the receipt thereof by Seller, a copy of (i) any
notice from the FCC or any other Governmental Authority of the revocation,
suspension, or limitation of the rights under, or of any proceeding for the
revocation, suspension, or limitation of the rights under (or any written
notice to the effect that such authority may in the future, as the result
of failure to comply with laws or regulations or for any other reason,
revoke, suspend or limit the rights under) any CATV Instrument, FCC
license, or any other material license or permit held by Seller in
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respect of any CATV System, and (ii) copies of all protests, complaints,
challenges or other documents filed with the FCC by third parties
concerning any CATV System (if same has been provided to Seller) and, as
soon as practicable following the filing or making thereof, copies of
Seller's responses to such filings.
(l) Capital Expenditures. Seller shall make maintenance capital
expenditures in the ordinary course of business consistent with past
practices or in accordance with the 1997 Budget.
5.02 Access to Information.
(a) Access by Buyer. Between the date of this Agreement and the
Closing, Buyer shall have reasonable access during normal business hours to
all of the properties, books, reports, records, CATV Instruments and
Contracts of Seller, and Seller shall furnish Buyer with all information it
may reasonably request. All information obtained by Buyer pursuant to this
Agreement and in connection with the negotiation hereof shall be used by
Buyer solely for purposes related to this Agreement and the acquisition of
the Acquired Assets and, in the case of non-public information, shall,
except as may be required for the performance of this Agreement or by Law,
be kept in strict confidence by Buyer in accordance with the terms of the
confidentiality letter executed by Buyer and Seller.
(b) Access by Seller. Subsequent to the Closing, Buyer shall preserve
and give to Seller reasonable access during normal business hours to all of
the books, reports, records, CATV Franchises, CATV Instruments and
Contracts from files and records transferred to Buyer at the time of
Closing, for the purposes of the preparation of tax returns, the defense of
any claims asserted or which may be asserted with respect to which the
Seller is the Indemnitor as contemplated by the Agreement, or other proper
purposes.
5.03 Notice of Subsequent Events. Each Party agrees to promptly notify
the other of any circumstance, event or action by it or otherwise (i) that, if
known at the date of this Agreement, would have been required to be disclosed in
or pursuant to this Agreement or (ii) the existence, occurrence or taking of
which would result in any of its representation and warranties in this Agreement
not being true and correct in all material respects at Closing.
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5.04 Delivery of Financial Information. Seller shall deliver to Buyer:
(i) as soon as they are available, but in no event later than thirty (30) days
after the end of each month subsequent to the date of such latest monthly
financial statement through the end of the month preceding the Closing Date,
consistently prepared monthly financial statements; (ii) within thirty (30) days
after the end of each month a report prepared on a basis consistent with past
practice and showing monthly revenues and subscriber information for the CATV
Systems; and (iii) such other financial and operating information regarding the
CATV Systems and the Acquired Assets as Buyer reasonably requests. Such
financial statements have been and will be prepared on a basis consistent from
period to period.
5.05 Additional Financial Information.
(a) If requested by Buyer after the execution thereof, Seller agrees
to prepare, and cause Seller's independent accountants to audit (to the
extent indicated below), at Buyer's expense, the following financial
statements with respect to the CATV Systems, and to prepare related
management discussions and analyses (collectively, the "Additional
Financial Statement"), conforming with the requirements specified in this
Section 5.05:
(i) Balance Sheets and income statements and statements of cash
flows and changes in equity for such of the years ended December 31,
1994, 1995, 1996 and 1997, together with the required footnotes and
the auditor's report thereon, as may be required under Securities and
Exchange Commission ("SEC") Regulations S-K and S-X.
(ii) An unaudited balance sheet and income statement and
statement of cash flows for such interim period ending during 1997 or
1998 as Buyer may request, together with the required footnotes.
(b) If necessary in order to enable Buyer to comply with the
requirements of SEC Regulation S-K or S-X, Seller shall prepare and cause
Seller's independent accountants to audit at Buyer's expense the Additional
Financial Statements within sixty (60) days after Buyer's request therefor.
(c) The Additional Financial Statements shall be prepared from
the books and records of Seller in accordance
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with generally accepted accounting principles, consistently applied, and in
the form required by SEC Regulations S-K and S-X, so as to fairly present
the financial condition, results of operations and cash flows of Seller for
the periods indicated, and with respect to quarterly financial statements
required by this Section 5.05, subject to normal year-end adjustments.
(d) Seller agrees to provide, to the extent it is reasonably able to
do so, one or more audit representation letters as to the information
provided by Seller to its independent accountants in connection with any
audit required under this Section 5.05. The representation letter will be
in such form and make the representations reasonably required by such
independent accountants to enable them to issue an opinion acceptable to
the SEC for purposes of any registration statement with respect to the
audit of those Additional Financial Statements required to be audited by
SEC Regulations S-K and S-X and to be included in such registration
statement. Seller shall use its commercially reasonable efforts to cause
its independent accountants to provide all consents that are necessary for
the inclusion of their opinion and the Additional Financial Statements in
any such registration statement.
5.06 Rate Forms. Seller will furnish Buyer upon request with any
correspondence (including FCC rate forms and associated exhibits) from or to any
Governmental Authority relating to regulatory review of the rates charged by the
CATV Systems for cable television services and equipment. Seller agrees to
provide to Buyer the following, as soon as practicable upon request: (i)
complete and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215 and
1240 relating to rate regulation generally or specific rates charged to
customers of the Systems that have been prepared by Seller (either before or
after the date of this Agreement) for filing with the appropriate Governmental
Authorities; (ii) and, to the extent that Seller has not completed such forms
with respect to any community and/or any level or tier of cable television
service because such forms have not been required to be filed with any
Governmental Authority pursuant to applicable Law, such other information, work
papers and documents (including rate history information) reasonably necessary
for any rate defense necessary to defend and support the past, current and
proposed rates charged or to be charged to the customers of the CATV Business.
6. DELIVERIES AT CLOSING.
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6.01 Deliveries by Seller. At the Closing, Seller will deliver or
cause to be delivered to Buyer:
(a) Such special warranty or trustee's deeds, certificates or title
policies, bills of sale, endorsements, and other good and sufficient
instruments of conveyance, transfer and assignment as are necessary to vest
in Buyer the right, title and interest of Seller in accordance herewith in
and to the Acquired Assets in a form reasonably satisfactory to Buyer,
which shall include, without limitation, a form of Bill of Sale and General
Assignment in the form of Exhibit D hereto.
(b) A certificate signed by a principal officer of the Seller, dated
as of the Closing Date, representing and certifying to Buyer as to the
matters set forth in Sections 7.03, 7.04 and 7.06.
(c) The Assumption Agreement in the form of Exhibit B hereto.
(d) An opinion of Seller's Local Counsel, substantially in the form of
Exhibit E hereto.
(e) An opinion of Seller's FCC Counsel, substantially in the form of
Exhibit F hereto.
(f) A certificate signed by a principal officer of the Seller, dated
as of the Closing Date, representing and certifying (i) that the
resolutions, as attached to such certificate, were duly adopted by Seller's
directors and stockholders authorizing and approving the execution and
delivery of this Agreement and all Agreements referenced herein and
contemplated hereby and the consummation of the transactions contemplated
hereby and that such resolutions remain in full force and effect; and (ii)
as to the incumbency of each signatory to this Agreement and each other
Agreement, instrument or document delivered hereunder executed by Seller.
(g) Evidence that the waiting period under the HSR Act, if applicable,
has expired.
(h) Evidence in a form and substance reasonably satisfactory to Buyer
of receipt of all Seller Required Consents, except as waived by Buyer
pursuant to Section 7.01.
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6.02 Deliveries by BuyerDeliveries by Buyer. At the Closing, Buyer
will deliver or cause to be delivered to Seller:
(a) The Purchase Price as it may be adjusted in Section 2.02.
(b) The Assumption Agreement in the form of Exhibit B hereto.
(c) A certificate signed by a principal officer of Buyer, dated as of
the Closing Date, representing and certifying to Seller as to matters set
forth in Sections 8.03 and 8.04.
(d) An opinion of Buyer's Counsel, substantially in the form of
Exhibit G hereto.
(e) A certificate signed by a principal officer of the Buyer, dated as
of the Closing Date, representing and certifying (i) that the resolutions,
as attached to such certificate, were duly adopted by Buyer's partners
authorizing and approving the execution and delivery of this Agreement and
all Agreements referenced herein and contemplated hereby and the
consummation of the transactions contemplated hereby and that such
resolutions remain in full force and effect; and (ii) as to the incumbency
of each signatory to this Agreement and each other Agreement, instrument or
document delivered hereunder executed by Buyer.
(f) Evidence that the waiting period under the HSR Act, if applicable,
has expired.
(g) Evidence in a form and substance reasonably satisfactory to Seller
of receipt of all Buyer Required Consents, except as waived by Seller
pursuant to Section 8.01.
7. Conditions to the Obligations of Buyer.
The obligations of Buyer to complete the transactions provided for
herein are subject to the fulfillment of all of the following conditions any of
which may be waived in writing by Buyer:
7.01 Receipt of Consents. The conditions specified in
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Section 9.02 shall have been satisfied and such of the approvals and consents
described in Schedule 3.02 that are specifically noted therein as being required
as conditions to the Closing (the "Seller Required Consents"), shall have been
obtained. Notwithstanding the foregoing, to the extent that the approvals and
consents of Governmental Authorities have been obtained for CATV Franchise Areas
that are Transferable Franchise Areas (as defined in Section 9) represent at
least ninety-three percent (93%) of the aggregate number of Basic Subscribers in
all Franchise Areas, this closing condition shall have been fulfilled with
respect to all such approvals and consents of such Governmental Authorities;
provided, however, that upon completion of the Closing, the provisions of
Section 9.06 hereof with regard to Retained Franchises shall apply.
7.02 Seller's Authority. All actions under Seller's Organizational
Documents, and resolutions necessary to authorize (i) the execution and delivery
of this Agreement by Seller and the performance by Seller of its obligations
under this Agreement and (ii) the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by Seller and shall be in full
force and effect on the Closing Date.
7.03 Performance by Seller. Seller shall have performed in all
material respects its agreements and covenants hereunder (including, without
limitation, its covenants in Sections 5 and 6) to the extent such are required
to be performed at or prior to the Closing except for such failure to perform
that could not reasonably be expected to have a material adverse effect on the
assets, financial condition or results of operations of the CATV Business taken
as a whole other than any such effect resulting from changes in general economic
or political conditions or legal, governmental, regulatory or competitive
factors affecting CATV systems operators generally or in the State of Maine.
7.04 Absence of Breach of Warranties and Representations. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as if made on and as of such date, except to the extent
that such representations and warranties describe a condition on a specified
time or date and except for such breach that could not reasonably be expected to
have a material adverse effect on the assets, financial condition or results of
operations of the CATV Business taken as a whole other than any such effect
resulting from changes in general economic or
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political conditions or legal, governmental, regulatory or competitive factors
affecting CATV systems operators generally or in the State of Maine, except with
respect to the representation regarding number of Basic Subsidiaries contained
in Section 3.07(a), which shall not be subject to such materiality exception.
7.05 Absence of Proceedings. There shall not be in effect an
injunction or restraining order issued by a court of competent jurisdiction in
an action or proceeding against the consummation of the transactions
contemplated by this Agreement and no other action or proceeding brought by any
Governmental Authority shall be pending that may result in a Judgment, decree or
order that would prevent or make unlawful the consummation of the transactions
under this Agreement.
7.06 No Encumbrances. There shall be no Encumbrances other than
Permitted Encumbrances.
7.07 No Adverse Change. Since the date hereof, except as set forth on
Schedule 3.07(h), there shall have been no adverse change in or loss or damage
to the Acquired Assets, the CATV Systems or the CATV Business except for such
adverse change, loss or damage as could not reasonably be expected to have a
material adverse effect on the assets, financial condition or results of
operations of the CATV Business taken as a whole other than any such effect
resulting from changes in general economic or political conditions or legal,
governmental, regulatory or competitive factors affecting CATV systems operators
generally or in the State of Maine. If such material adverse change, loss or
damage is the result of damage to or destruction of the Acquired Assets, or any
portion thereof, then (i) unless Seller shall have provided for or cured (to the
extent that such adverse change shall no longer be material within the meaning
of the first sentence of this Section 7.07) such material adverse change, loss
or damage at Seller's expense within thirty days of receipt of Buyer's notice of
its intent to terminate pursuant to this Section 7.07, Buyer may terminate this
Agreement, in which event the Escrow Amount, and all interest earned thereon,
shall be returned to Buyer, or (ii) if Buyer and Seller mutually agree in
writing upon adjustments to the Purchase Price, payment of insurance proceeds,
limitations on the representations of Seller and all other matters with respect
to such material adverse change, loss or damage then Buyer and Seller shall
proceed to consummate the transactions contemplated herein.
7.08 Environmental Report. Buyer shall have received,
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at Buyer's option and expense, a Phase I environmental site assessment (the
"Environmental Report") of the Real Property performed by a nationally
recognized environmental firm designated by Buyer and reasonably satisfactory to
Seller. If Buyer shall elect to receive an Environmental Report, such
Environmental Report shall have been arranged for by Buyer not later than 10
business days from the date hereof and true and complete copies of the final
Environmental Report and all drafts thereof and correspondence relating thereto
shall be delivered to Seller not later than 45 days from the date hereof and
Buyer will confirm to Seller in writing not later than 45 days from the date
hereof which, if any, terms in the Environmental Report are material adverse
environmental conditions within the meaning of this Section 7.08. If prepared,
the Environmental Report shall show no environmental condition on or affecting
such Real Property that (i) could reasonably be expected to impair the use or
value of such Real Property for the continued operation of the CATV Systems as
operated by Seller on the Closing Date or subject Buyer to any liability for
fines, penalties, or cleanup or response costs if Buyer consummates this
Agreement, or (ii) would cause a reasonable purchaser experienced in
environmental matters to perform further investigation or testing before
proceeding with the transfer of the Real Property. Notwithstanding the
foregoing, this condition to closing shall not be applicable (a) with respect to
any Real Property as to which Buyer shall not have ordered an Environmental
Report at least 10 business days from the date hereof, (b) if at Seller's
expense, Seller shall have cured all material adverse environmental conditions
identified to Seller by Buyer in writing not later than 45 days from the date
hereof to the level that the appropriate governmental agency determines that no
further action is required, or, when no governmental agency is involved in the
remediation, to the level that Seller's environmental consultant has certified
to Seller and Buyer that all requirements of Environmental Law have been
satisfied (or provisions reasonably satisfactory to Buyer shall have been made
for such cure) prior to the Closing, (c) if the subject parcel of Real Property
is retained by Seller and replaced prior to Closing, at Seller's cost, with
another parcel of property of substantially equivalent utility, which
replacement property shall be fully equipped and operational in all material
respects as of the Closing or, (d) if Buyer and Seller mutually agree in writing
on adjustments to the Purchase Price, payment of insurance proceeds, limitations
on the representations of Seller and all other matters with respect to such
material adverse environmental condition.
7.09 Average Three Month Revenue
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Month Revenue. The Average Three Month Revenue shall be greater than $1,627,984,
unless Seller agrees that for purposes of the calculation of the Purchase Price
Average Three Month Revenue shall be $1,627,984.
8. CONDITIONS TO THE OBLIGATIONS OF SELLER.
The obligations of Seller to complete the transactions provided for
herein are subject to the fulfillment of all of the following conditions, any of
which may be waived in writing by Seller.
8.01 Receipt of Consents. The conditions specified in Section 9.02
shall have been satisfied and such of the approvals and consents described in
Schedule 4.02 that are specifically noted therein as being required as
conditions to the Closing (the "Buyer Required Consents") shall have been
obtained and all the approvals and consents of Governmental Authorities shall
have been obtained for CATV Franchises which represent at least ninety-three
percent (93%) of the Basic Subscribers; provided that, if Buyer elects to waive
the condition that Seller shall have received one or more of Seller Required
Consents and agrees in writing to fully indemnify all Seller Indemnified Parties
from and against any and all Losses to which they may become subject as a result
of such waiver by Buyer, then Seller shall be deemed to have waived in writing
the condition that Buyer shall have received the Buyer Required Consents.
8.02 Buyer's Authority. All actions under Buyer's Organizational
Documents and resolutions necessary to authorize (i) the execution and delivery
of this Agreement by Buyer and the performance by Buyer of its obligations under
this Agreement, and (ii) the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by Buyer and shall be in full
force and effect on the Closing Date.
8.03 Performance by Buyer. Buyer shall have performed in all material
respects its agreements and covenants hereunder to the extent such are required
to be performed at or prior to the Closing.
8.04 Absence of Breach of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as if then made, on and as of such date, except to the extent that
such representations and warranties describe a condition on a specified time or
date.
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8.05 Absence of Proceedings. There shall not be in effect an
injunction or restraining order issued by a court of competent jurisdiction in
an action or proceeding against the consummation of the transactions
contemplated by this Agreement and no other action or proceeding brought by any
governmental authority shall be pending that may result in a Judgment, decree or
order that would prevent or make unlawful the consummation of the transactions
under this Agreement.
8.06 Average Three Month Revenue. The Average Three Month Revenue
shall be less than $1,429,365, unless Buyer agrees that for purposes of the
calculation of the Purchase Price Average Three Month Revenue shall be
$1,429,365.
9. COVENANTS.
9.01 Compliance with Conditions. Each of the parties hereto covenants
and agrees with the other to exercise reasonable commercial efforts to perform,
comply with and otherwise satisfy each and every one of the conditions to be
satisfied by such party hereunder, and each party shall use reasonable
commercial efforts to notify promptly the other if it shall learn that any
conditions to performance of either party will not be fulfilled.
9.02 Compliance with HSR Act and Rules.
(a) The performance of the obligations of all parties under this
Agreement is subject to the condition that, if the HSR Act and Rules are
applicable to the transactions contemplated hereby, the waiting period
specified therein, as the same may be extended, shall have expired without
action taken to prevent the consummation of the transactions contemplated
hereby.
(b) Each of the parties hereto will use its reasonable commercial
efforts to comply promptly with any applicable requirements under the HSR
Act and rules relating to filing and furnishing of information to the FTC
and the Antitrust Division of the DOJ, the parties' actions to include,
without limitation, (i) filing or causing to be filed the HSR report
required to be filed by them, or by any other Person that is part of the
same "person" (as defined in the HSR Act and Rules) or any of them, and
taking all other action required by the HSR Act or Rules; (ii) coordinating
the filing of such HSR Reports (and exchanging drafts thereof) so as to
present both HSR Reports to the FTC and
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the DOJ at the time selected by the mutual agreement of Seller and Buyer,
and to avoid substantial errors or inconsistencies between the two in the
description of the transaction; and (iii) using their reasonable commercial
efforts to comply with any additional request for documents or information
made by the FTC or the DOJ or by a court and assisting the other parties to
so comply.
9.03 Applications for Assignment of Contracts or CATV Instruments and
CATV Franchises. In order to secure requisite consents or approvals of the
transfer of control to Buyer of any Contracts, CATV Franchises or CATV
Instruments, Buyer (with respect to CATV Franchises) and Seller (with respect to
CATV Instruments and Contracts) shall proceed as promptly as practicable and in
good faith and using best efforts, to prepare, file and prosecute such
application or applications as may be necessary to obtain each such consent or
approval. Buyer and Seller shall use best efforts to promptly assist each other
and shall take such prompt and affirmative actions as may be reasonably
necessary in obtaining such approvals and shall cooperate with each other in the
preparation, filing and prosecution of such applications as may be reasonably
necessary, and agree to furnish all information required by the approving
entity, and to be represented at such meetings or hearings as may be scheduled
to consider such applications. Without limiting in any respect the foregoing,
each party agrees to file mutually acceptable applications to all appropriate
Governmental Authorities for all consents or approvals required to consummate
the transactions hereunder within thirty (30) days after the date of this
Agreement. Buyer further agrees that it will not, without the prior written
consent of Seller, take any action to amend or that would amend or modify any
application with respect to a CATV Franchise filed as provided in this Section
9.03 after the date that such application is accepted as complete.
9.04 Records, Taxes and Related Matters. Seller and Buyer shall each
make their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party, or
by its duly authorized representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a three (3) year period after
the Closing Date with respect to all transactions of the CATV Business occurring
prior to or relating to the Closing, and the historical financial condition,
assets, liabilities, results of operation and cash flows of the CATV Business
for any period prior to the Closing. In the case of records owned by Seller,
such records shall be made available
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at Seller's executive office, and in the case of records owned by Buyer, such
records shall be made available at the office at which such records are
maintained. As used in this Section 9.04, the right of inspection includes the
right to make copies for reasonable business purposes. In all cases where Buyer,
pursuant to the terms hereof, has assumed Seller's liability for the payment of
taxes (including, without limitation, deposits), Buyer shall (unless and to the
extent otherwise requested by Seller) prepare and file all returns, reports,
information statements, forms or other documents required to be filed with
respect to such taxes, all in a timely and proper fashion and as may be
necessary or appropriate to assure that the Seller shall be in full and prompt
compliance with law, and Buyer shall pay or cause to be paid all such taxes when
due.
9.05 Absence of Consents. The parties acknowledge that their intent
and agreement is for Seller to transfer the CATV Business to Buyer at Closing in
an orderly manner without interruption in service, and that certain required
consents to the transfer to Buyer of Seller's rights under the Contracts, the
CATV Franchises and CATV Instruments relating to the operation of the CATV
Business may not have been obtained on the Closing Date, or that such rights may
not be transferred at the Closing for other reasons; provided, however, that
Buyer shall have no obligation to close the transactions contemplated hereby in
the absence of receiving the Seller Required Consents and the transfer of such
rights. If said transfer is not completed on the Closing Date, Seller agrees
thereafter to maintain such Contracts and CATV Instruments and, should Buyer so
request, any insurance policies and performance bonds related to any Retained
Franchises, in full force and effect for the benefit of Buyer (with any casualty
insurance policies naming Buyer and Buyer's lenders as loss payees and any
liability insurance policies so maintained naming Buyer, Buyer's lenders, Seller
and such other parties as are required to be so named as additional insureds)
until such transfer is completed (the "Interim Period"). During the Interim
Period, Buyer shall be responsible for obtaining such consents, and Seller will
provide reasonable assistance to Buyer but at Buyer's sole cost and expense.
Seller also agrees to permit Buyer, at Buyer's option, to utilize the benefits
of such Contracts, CATV Instruments, insurance policies and performance bonds in
compliance with the terms thereof in order to continue to operate the Systems.
Buyer agrees that all expenses incurred by Seller in complying with the
foregoing during the Interim Period (other than charges for personnel or
internal operating, administrative or overhead expenses of Seller or any
creditor of Seller) shall be reimbursed to Seller by Buyer on a monthly
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basis, within twenty (20) days after receipt by Buyer of Seller's reasonably
detailed statement therefor for each calendar month during the Interim Period.
9.06 Retained Franchises. After satisfaction or waiver of the
conditions precedent to Buyer's obligation to close as set forth in Section
7.01, those CATV Franchises (and all assets related thereto) with respect to
which consent to transfer has not been obtained by the Closing Date (the
"Retained Franchises") shall be retained by the Seller and subsequently
transferred to the Buyer in accordance with the terms hereof.
(a) At the Closing, Seller shall sell and assign to Buyer, and Buyer
shall purchase and acquire from Seller, all Acquired Assets, except only
for the Retained Franchises and all of the other Acquired Assets which are
used exclusively in the operation of the Franchise Areas services pursuant
to such Retained Franchises (the "Retained Assets"). From and after the
Closing, Seller shall retain the Retained Franchises and the Retained
Assets, and, subject to the terms and conditions in this Section 9.06,
Seller shall sell and assign to Buyer, and the Buyer shall purchase and
acquire from Seller, the Retained Franchises and the Retained Assets in
accordance with the terms of this Section 9.
(b) At the Closing:
(i) The amount payable by Buyer to Seller pursuant to Section 2.02
shall be reduced by an amount that Buyer is required to deposit in
escrow pursuant to Section 9.06(b)(iii).
(ii) All conveyance documents, certificates and other documents
contemplated by this Agreement to be delivered at the Closing shall be
in the form and substance provided for in this Agreement with such
modifications as are necessary or appropriate to reflect the
provisions of this Section 9.06.
(iii) Buyer shall deliver to one of Buyer's senior lenders, as
escrow agent or to another mutually acceptable escrow agent (the
"Retained Franchise Escrow Agent"), by wire transfer of federal
reserve funds, an amount equal to that portion of the Purchase Price
allocable to the Retained Franchises and the Retained Assets, which
amount shall be the product of the number of Basic Subscribers in the
Franchise Areas serviced
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under such Retained Franchises multiplied by $1,459 (the "Full Per
Subscriber Amount") (such number of Basic Subscribers to be determined
based on the information in Schedule 3.07(a)). The amount delivered to
the Retained Franchise Escrow Agent (the "Retained Franchise Escrow
Amount") shall be in an escrow account (the "Retained Franchise Escrow
Account") pursuant to the terms of an escrow agreement, which shall
contain the basic terms provided for herein and shall be mutually
agreeable to the parties hereto (the "Retained Franchise Escrow
Agreement"), with any revisions thereto that are reasonably requested
by Buyer's senior lenders to grant them a perfected security interest
in the Retained Franchise Escrow Amount (subject to the rights of
Seller under this Agreement). All interest earned on the Retained
Franchise Escrow Amount shall be disbursed to Seller as provided in
this Section 9.06.
(iv) Buyer and Seller shall enter into a mutually acceptable
management agreement (the "Management Agreement") pursuant to which
Buyer shall manage the Systems serviced by the Retained Franchises.
The Management Agreement shall provide that Buyer will be entitled to
receive and retain all revenues, and will be responsible for all costs
and expenses, attributable to the operations of the Retained
Franchises and the Retained Assets, the intent of the parties being
that Buyer will enjoy the economic rewards and bear the economic risks
resulting from the operation of the Retained Systems and the Retained
Assets during the term of the Management Agreement.
(c) After the Closing, Buyer and Seller shall cooperate in obtaining
any authorizations, consents, orders or approvals of any municipal
authority necessary to cause any Franchise Area that was not a Transferable
Franchise Area on the Closing Date to become a Transferable Franchise Area,
and the agreements and obligations of Buyer and Seller under the other
provisions of this Agreement shall be fully applicable in seeking such
authorizations, consents, orders, or approvals after the Closing. Seller
shall give to Buyer written notice of the receipt of any authorizations,
consents, orders, or approvals of any municipal authority necessary to
cause any Franchise Area that was not a Transferable Franchise Area on the
Closing Date to become a Transferable Franchise Area.
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(d) If any Franchise Area that was not a Transferable Franchise Area
on the Closing Date becomes a Transferable Franchise Area within two (2)
years after the Closing Date, then, a closing shall be held on a date to be
agreed to between Buyer and Seller (or, if Buyer and Seller fail to agree,
on the first business day that is at least ten days after such Franchise
Area becomes a Transferable Franchise Area), in accordance with the
following:
(i) At such closing, the Seller shall sell and assign to Buyer,
and Buyer shall purchase and acquire from Seller, those Retained
Franchises that cover Franchise Areas that have become Transferable
Franchise Areas by such closing date and all Retained Assets relating
thereto, as evidenced by bills of sale and assignment and assumption
agreements in form and substance substantially identical to those
delivered by the parties at the Closing;
(ii) The closing conditions of Buyer and Seller provided herein
shall apply to such closing insofar as such conditions related to the
Retained Franchises and Retained Assets described in paragraph (i)
above;
(iii) At such closing, Buyer and Seller shall make to one another
mutually acceptable representations and warranties with respect to the
Retained Franchises and the Retained Assets and the transactions
contemplated herein with appropriate exceptions taken for actions
taken or omitted to be taken by Buyer or Seller between the Closing
Date and such closing date as manager or pursuant to the Management
Agreement;
(iv) At such closing, Buyer and Seller shall execute and deliver
conveyance documents, certifications and other documents (other than
opinions of counsel) corresponding to those delivered at the Closing
with such modifications as are necessary or appropriate to reflect the
provisions of this Section 9.06 and to relate to the Retained
Franchises and Retained Assets being purchased by Buyer at such
closing;
(v) Upon such closing, the Management Agreement shall be
terminated with respect to the Franchise Areas covered by the Retained
Franchises that are transferred at such closing; and
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(vi) At such closing, to the extent the Transferable Subscriber
Percentage is less than or equal to ninety-three percent (93%), then
no disbursement shall be made from the Retained Franchise Escrow
Account. To the extent the Transferable Subscriber Percentage then
exceeds ninety-three percent (93%), Buyer and Seller shall direct the
Retained Franchise Escrow Agent to disburse to Seller the Full Per
Subscriber Amount times the number of Basic Subscribers (in excess of
such ninety-three percent (93%) threshold) in the Franchise Areas
covered by the Retained Franchises described in paragraph (i) above
(as determined pursuant to Schedule 3.07(a)), together with all
interest then earned under and credited to the Retained Franchise
Escrow Account.
(e) If any Franchise Areas do not become Transferable Franchise Areas
within two (2) years after the Closing Date, then a closing shall be held
on the first business day that is two (2) years after the Closing Date or
such earlier date as Buyer shall designate in writing to Seller at least
thirty (30) days prior to such earlier date, in accordance with the
following:
(i) At such closing, Seller must sell and assign to Buyer, and
Buyer shall purchase and acquire from Seller, all Retained Franchises
and Retained Assets pertaining to Franchise Areas that shall not have
become Transferable Franchise Areas, as evidenced by bills of sale and
assignment and assumption agreements in form and substance
substantially identical to those delivered by the parties at the
Closing;
(ii) The closing conditions of Buyer and Seller provided herein
shall apply to such closing insofar as such conditions relate to the
Retained Franchises and Retained Assets described in paragraph (i)
above, except that Buyer shall be deemed to have waived the condition
that any authorization, consent, order or approval of any municipal
authority necessary for the transfer of such Retained Franchise shall
have been obtained and shall be final;
(iii) At such closing, Buyer and Seller shall make to one another
mutually acceptable representations and warranties with respect to the
Retained Franchises
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and the Retained Assets and the transactions contemplated herein with
appropriate exceptions taken for actions taken or omitted to be taken
by Buyer or Seller between the Closing Date and such closing date as
manager or pursuant to the Management Agreement;
(iv) At such closing, Buyer and Seller shall execute and deliver
conveyance documents, certificates and other documents (other than
opinions of counsel) corresponding to those delivered at the Closing
with such modifications as are necessary or appropriate to reflect the
provisions of this Section 9.06 and to relate to the Retained
Franchises and Retained Assets being purchased by Buyer at such
closing;
(v) Upon such closing, the Management Agreement shall be
terminated; and
(vi) At such closing, Buyer and Seller shall direct the Retained
Franchise Escrow Agent to disburse the Retained Franchise Escrow
Amount to Seller.
This Section 9.06(e) shall not be construed to require or permit the transfer of
any CATV Franchise without the approval of the applicable Governmental
Authority.
(f) Buyer and Seller shall negotiate in good faith any other changes
to this Agreement necessary or appropriate to effectuate the intent of this
Section 9.06.
(g) For purposes of this Section 9.06, the following terms shall have
the following meanings ascribed to them:
(i) "Franchise Area" means any of the geographic areas in which
Seller is authorized to provide cable television service pursuant to a
Franchise granted by a municipal authority or provides cable
television service in any geographic area in which a Franchise granted
by a municipal authority is not required pursuant to applicable law;
(ii) "Transferable Franchise Area" means any Franchise Area with
respect to which (AA) any authorization, consent, order or approval of
any municipal authority necessary for the assignment of the Franchise
for such Franchise Area in connection with the consummation of the
transactions contemplated by
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this Agreement shall have been obtained and shall be effective, on
terms not materially less favorable to Buyer or Seller as are
currently in place in Seller's CATV Franchises or as otherwise agreed
by the parties, or (BB) no authorization, consent, order or approval
of any municipal authority is necessary for the assignment of the
Franchise for such Franchise Area in connection with the consummation
of the transactions contemplated by this Agreement, or (CC) no
Franchise is required for the provision of cable television service in
the Franchise Area.
9.07 Noncompetition. Cablevision Systems Corporation and Seller
covenant and agree that for a period of three (3) years from the Closing Date
neither they nor any of their controlled affiliates will own, manage, operate,
control or engage, directly or indirectly, in the business of operating a
wireline or wireless video cable television system within the System Area other
than as contemplated by Schedule 9.07 and other than as a result of any change
in the structure, ownership or control of Cablevision Systems Corporation (or
any of its controlled affiliates) as part of any transaction not solely related
to the operation of a wireline or wireless video cable television system in the
State of Maine. Notwithstanding the foregoing, nothing herein shall be construed
to prohibit or restrict the ownership of a company's securities listed on a
national securities exchange or the National Association of Securities Dealers
Automated Quotation System, which (a) constitutes less than 5% of each class of
equity of such company, (b) does not constitute control over such company and
(c) is held solely for investment purposes.
9.08 Billing System TransitionBilling System Transition. Prior to and
following the Closing, Seller will cooperate with Buyer with respect to the
conversion of the System's billing and collection functions to the billing
system utilized by Buyer. In furtherance of the foregoing, for one hundred and
eighty (180) days following the Closing, or until such earlier time as the CATV
Systems' billing and collection functions have been converted to the system
utilized by Buyer, Seller will continue to perform or cause to be performed all
of the Systems' billing and collection services in the same manner as presently
conducted, and Buyer shall promptly reimburse Seller for Seller's out-of-pocket
cost in providing such services.
9.09 Use of Names and Logos. For a period of ninety (90) days after
the Closing Date, Buyer shall be entitled to use
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trademarks, trade names, service marks, service names, logos, and similar
proprietary rights of Seller to the extent incorporated in the Acquired Assets
transferred to it at Closing; provided that Buyer shall use commercially
reasonable efforts to remove all names, marks, logos and other rights of Seller
from the Acquired Assets as soon as reasonably practicable after Closing.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS;
INDEMNIFICATION10.
10.01 Survival of Representations, Warranties, Covenants and other
Agreements. All representations and warranties made by Seller or Buyer in this
Agreement or in any other documents or instruments delivered pursuant hereto
shall be deemed continuing representations, warranties, covenants and
agreements, and shall survive the Closing for a period of one year, unless a
longer period of survival is provided for in this Agreement; provided, however,
that the representations and warranties set forth in Sections 3.05 and directly
relating to title (and Encumbrances thereon) to the Acquired Assets shall
survive through the expiration of all statutes of limitation (if any) applicable
to any claim, right of action or Losses to which Buyer could be subject in the
event of a breach of such representations or warranties. The provision of a
reasonably detailed notice of claim setting forth the basis for such claim with
respect to the breach or alleged breach of any representation or warranty shall
extend the period during which such representation and warranty survives through
the date such claim is resolved.
10.02 Indemnification by Seller10.02 Indemnification by Seller. (a)
Provided the Closing shall have occurred, subject to Section 10.01, Seller
agrees to indemnify, defend and hold harmless Buyer, its affiliates and their
respective shareholders, directors, officers, partners, employees, agents,
successors and assigns (a "Seller Indemnified Party"), from and against all
losses, damages, liabilities, deficiencies and obligations, including, without
limitation, all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including, without
limitation, settlement costs and reasonable legal fees and expenses)
(collectively, "Losses") to which they may become subject as a result of (i) the
ownership and operation of the Acquired Assets and the CATV Business prior to
the Closing; (ii) the Excluded Liabilities; (iii) any and all misrepresentations
or breaches of a representation herein or warranty or the nonperformance or
breach of any covenants or agreements of Seller contained herein and in
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the agreements or instruments executed in connection herewith or pursuant
hereto; (iv) any and all obligations of Seller other than Assumed Liabilities;
and (v) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses, including without limitation, reasonable legal
fees and expenses, incident to any of the foregoing or incurred in investigating
or attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(b) Payment. Any obligations of Seller under the provisions of this
Section 10 shall be paid promptly out of the Earnest Money and
Indemnification Escrow to the Seller Indemnified Party by Seller and shall
represent a retrospective adjustment to Purchase Price. The amount of such
payment (and adjustment) shall be equal to the amount of the Loss incurred
by the Seller Indemnified Party on account of the matter for which
indemnification is required hereunder less (x) any payments made or to be
made to the Seller Indemnified Party under any insurance, indemnity or
similar policy or arrangement (net of any negative tax effects and (y) the
net present value of any deduction, amortization, credit, exclusion from
income or other tax benefit (a "Tax Benefit") realized by Buyer or its
successors, on account of any such Loss.
10.03 Indemnification by Buyer. (a) Provided the Closing shall have
occurred, Buyer agrees to indemnify, defend and hold harmless Seller and its
shareholders, partners, directors, officers, employees, agents, successors and
assigns (a "Buyer Indemnified Party"), from and against all losses, damages,
liabilities, deficiencies and obligations including, without limitation, all
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including, without limitation,
settlement costs and reasonable legal fees) to which they may become subject as
a direct result of: (i) any and all misrepresentations or breaches of a
representation or warranty or the nonperformance or breach of any covenant or
agreement of Buyer contained herein and in the agreements or instruments
executed in connection herewith or pursuant hereto; (ii) the Assumed
Liabilities; (iii) the ownership and operation of the Acquired Assets and the
CATV Business after the Closing or (iv) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses, including without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
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(b) Payment. Any obligations of Buyer under the provisions of this
Section 10 shall be paid promptly to the Buyer Indemnified Party by Buyer
and shall represent a retrospective adjustment to Purchase Price. The
amount of such payment (and adjustment) shall be equal to the amount of the
Loss incurred by the Buyer Indemnified Party on account of the matter for
which indemnification is required hereunder less (x) any payments made or
to be made to the Seller Indemnified Party under any insurance, indemnity
or similar policy or arrangement (net of any negative tax effects) and (y)
the net present value of any Tax Benefit realized by Seller or its
successors, on account of any such Loss.
10.04 Threshold; Cap; Escrow Amount. Notwithstanding anything
contained herein to the contrary, the indemnification provided under Sections
10.02 and 10.03 above shall only apply to the extent that, and not until, the
aggregate of all amounts subject to indemnification exceeds $300,000 and as to
any particular indemnity claim or series of related indemnity claims only to the
extent that, and only if, such indemnity claim or series of related indemnity
claims equals or exceeds $100,000. In any event, the maximum amount that either
party will be required to pay under this Agreement in respect of all claims by
all parties (other than claims relating to adjustments and pro rations made
pursuant to Sections 2.03 and 2.04) is the Escrow Amount, and with respect to
claims under this Agreement against Seller, Buyer shall be able to look only to
the Escrow Account and the amounts then therein for satisfaction of any and all
claims.
10.05 Third Party Claims. If any claim ("Asserted Claim") covered by
the foregoing indemnities is asserted by a third party against any indemnified
party ("Indemnitee"), it shall be a condition to the obligations under this
Section 10 that the Indemnitee shall promptly give the indemnifying party
("Indemnitor") notice thereof in accordance with Section 13.05. The Indemnitee
shall give Indemnitor an opportunity to control negotiations toward resolution
of such claim without the necessity of litigation, and, if litigation ensues, to
defend the same with counsel reasonably acceptable to Indemnitee, at
Indemnitor's expense, and Indemnitee shall extend reasonable cooperation at
Indemnitor's expense in connection with such defense; provided, however, that
the Indemnitor shall not have the right to control the defense until the
Indemnitor agrees to indemnify the Indemnitee in full irrespective of the
indemnity
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<PAGE>
limitations set forth in Section 10.04. Notwithstanding the foregoing, the
Indemnitor shall only have the right to assume the defense as provided above in
connection with claims for damages and shall have no right to assume the defense
in connection with any claims or actions of specific performance. If the
Indemnitor fails to assume control of the negotiations prior to litigation or to
defend such action within fifteen (15) business days of receipt of such notice
(or by such other advance notice that does not unduly prejudice the Indemnitee)
by Indemnitee, Indemnitee shall be entitled, but not obligated, to assume
control of such negotiations or defense of such action, and Indemnitor shall be
liable to the Indemnitee for its expenses reasonably incurred in connection
therewith which Indemnitor shall promptly pay. Neither Indemnitor nor Indemnitee
shall settle, compromise, or make any other disposition of any Asserted Claims,
which would or might result in any liability to Indemnitee or Indemnitor,
respectively, under this Section 10 without the written consent of Indemnitee or
Indemnitor, respectively, which shall not be unreasonably withheld.
11. FURTHER ASSURANCES.
From time to time at and after the Closing, each party will execute
and deliver such other instruments of conveyance and transfer, fully cooperate
with the other party and take such other actions as the other party reasonably
may request to effect the purposes and intent of this Agreement; provided,
however, that nothing in this Agreement shall be deemed to require or permit the
Seller or Buyer to take any action that would otherwise require approval of any
CATV Franchises by any Governmental Authority prior to the time such approval is
obtained.
12. CLOSING; TERMINATION.
12.01 Closing. The Closing shall take place at the offices of Seller's
Counsel (or if Buyer so elects, at the office of counsel to Buyer's senior
lenders) at 10:00 A.M., local time, on a date specified by Buyer upon at least
ten (10) days' prior written notice to Seller, which date (the "Closing Date")
is not earlier than the date on which the conditions set forth in Section 7.01
shall have been satisfied and not later than thirty (30) days after the date the
aggregate number of Basic Subscribers in those Franchise Areas that are
Transferable Franchise Areas shall be at least ninety-three percent (93%) of the
aggregate number of Basic Subscribers in all Franchise Areas, but in no event
later than twelve months after the date hereof.
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<PAGE>
12.02 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) At any time, by the mutual written agreement of Buyer and Seller;
(b) By either Buyer or Seller if the Closing Date does not occur on or
before the date that is twelve months after the date hereof;
(c) By Buyer, upon and effective as of the date of written notice to
Seller, if any of the conditions to the obligations of Buyer set forth in
Section 7 shall not have been waived or materially satisfied at the time of
the Closing or if the Seller shall have breached any of its
representations, warranties or obligations hereunder in any material
respect, and such breach shall not have been cured in all material respects
or waived prior to the earlier of the Closing Date and thirty (30) days
after the Buyer has given notice to Seller of such breach except for such
conditions or breaches that could not reasonably be expected to have a
material adverse effect on the assets, financial condition or results of
operations of the CATV Business taken as a whole other than any such effect
resulting from changes in general economic or political conditions or
legal, governmental, regulatory or competitive factors affecting CATV
systems operators generally or in the State of Maine;
(d) By Seller, upon and effective as of the date of written notice to
Buyer, if any of the conditions to the obligations of Seller set forth in
Section 8 shall not have been waived or materially satisfied at the time of
the Closing or if the Buyer shall have breached any of its representations,
warranties or obligations hereunder in any material respect, and such
breach shall not have been cured in all material respects or waived prior
to the earlier of the Closing Date and thirty (30) days after the Seller
has given notice to Buyer of such breach.
12.03 Notice of Termination; Rights and Obligations of Parties. In the
event of the termination of this Agreement by Buyer or Seller pursuant to this
Section 12, written notice thereof shall promptly be given to the other party
and, except as otherwise provided herein the transactions contemplated by this
Agreement shall be terminated, without further action by any
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<PAGE>
party. Notwithstanding the foregoing, no party may terminate this Agreement if
such party is then in default hereunder.
12.04 Remedies Upon Default. If (i) Seller terminates this Agreement
pursuant to Section 12.02(d) hereof or (ii) Buyer refuses to proceed or tender
performance at the Closing, then, unless at the Closing there is a
nonfulfillment of any of the conditions precedent specified in Section 7 hereof,
Seller shall be entitled to receive the Escrow Amount pursuant to the Earnest
Money and Indemnification Escrow Agreement as liquidated damages, which shall be
the sole remedy of Seller for such breach, and neither party shall have any
other recourse against the other or any of its affiliates under or in connection
with this Agreement or the transactions contemplated hereby. In any other case,
if the Closing does not occur and this Agreement is terminated, then, pursuant
to the Earnest Money and Indemnification Escrow Agreement, the Escrow Amount
shall be delivered to Buyer, which shall be the sole remedy of Buyer under any
such other case (except as set forth in the immediately following sentence).
Nothing in this Section 12 shall be deemed to impair the rights of Buyer to
compel specific performance of Seller of its obligations under this Agreement.
13. MISCELLANEOUS.
13.01 Amendments; Waivers. This Agreement cannot be changed or
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless evidenced by
an instrument in writing duly executed by the party hereto sought to be charged
with such waiver or consent. No waiver of any term or provision hereof shall be
construed as a further or continuing waiver of such term or provision or any
other term or provision. Any condition to the performance of any party hereto
which may legally be waived at or prior to the Closing may be waived in writing
at any time by the party or parties entitled to the benefit thereof.
13.02 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the subject
matter hereof other than any letter or agreement that specifically refers to
this Section 13.02. No representation, warranty, promise, inducement or
statement of intention has been made by any party which is not contained in this
Agreement, and no party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not contained
herein or therein.
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<PAGE>
13.03 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party without the
prior written consent of the other parties hereto.
13.04 Construction; Counterparts. The Section headings of this
Agreement are for convenience of reference only and do not form a part hereof
and do not in any way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.05 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered in
person, or three business days after such notice is enclosed in a properly
sealed envelope, certified or registered, and deposited (postage and
certification or registration prepaid) in a post office or collection facility
regularly maintained by the United States Postal Service, or one business day
after delivery to a nationally recognized overnight courier service, and
addressed as follows:
If to Seller: A-R Cable Services - ME, Inc.
One Media Crossways
Woodbury, New York 11797
Telephone: (516) 496-1149
Telecopy: (516) 496-3607
Attention: John J. Bier
copies to (which shall not constitute notice):
Cablevision Systems Corporation
One Media Crossways
Woodbury, New York 11797
Telephone: (516) 364-8450
Telecopy: (516) 364-2663
Attention: General Counsel
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Telecopy: (212) 558-3588
Attention: John P. Mead, Esq.
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<PAGE>
If to Buyer: FrontierVision Operating Partners, L.P.
1777 Harrison Street
Suite P-200
Denver, CO 80210
Telephone: (303) 757-1588
Telecopy: (303) 757-6105
Attention: James C. Vaughn
President and CEO
copies to (which shall not constitute notice):
Edwards & Angell
101 Federal Street
Boston, MA 02110
Telephone: (617) 439-4444
Telecopy: (617) 439-4170
Attention: Stephen O. Meredith, Esq.
Any party may change its address for the purpose of notice by giving notice in
accordance with the provisions of this Section 13.05.
13.06 Expenses of the Parties. Except as otherwise provided herein,
all expenses incurred by or on behalf of the parties hereto in connection with
the authorization, preparation and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
13.07 Non-Recourse. No partner, officer, director, shareholder or
other holder of an ownership interest of or in either party to this Agreement
shall have any personal liability in respect of any such party's obligations
under this Agreement by reason of his or its status as such partner, officer,
director, shareholder or other holder.
13.08 Third Party Beneficiary. This Agreement is entered into only for
the benefit of the parties and their respective successors and assigns, and
nothing hereunder shall be deemed to constitute any person a third party
beneficiary to this Agreement.
13.09 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF NEW YORK.
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13.10 Press Releases. No press release or other public information
relating to the purchase and sale contemplated in this Agreement shall be made
or disclosed by either party hereto without the consent of the other party;
provided, however, that either party may disclose such information if reasonably
deemed to be required by law by the legal counsel for such party.
13.11 Severability. If any provision of this Agreement is finally
determined to be illegal, void or unenforceable, such determination shall not,
of itself, nullify this Agreement which shall continue in full force and effect
subject to the conditions and provisions hereof.
(SIGNATURE PAGE FOLLOWS)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
A-R CABLE SERVICES - ME, INC.
By:/s/ Barry J. O'Leary
--------------------
Barry J. O'Leary
Senior Vice President, Finance
and Treasurer
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P.
By FrontierVision Partners, L.P., its general partner
By FVP GP, L.P., its general partner
By FrontierVision Inc., its general partner
By:/s/ James C. Vaughn
-------------------
James C. Vaughn
President and CEO
CABLEVISION SYSTEMS CORPORATION (with respect solely to and in recognition of
its obligations set forth in Section 9.07 hereof)
By:/s/ Barry J. O'Leary
--------------------
Barry J. O'Leary
Senior Vice President, Finance
and Treasurer
<PAGE>
Exhibit 10.17
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FRONTIERVISION OPERATING PARTNERS, L.P.
AND
TCI CABLEVISION OF VERMONT, INC., AND
WESTMARC DEVELOPMENT JOINT VENTURE
DATED AS OF
May 12, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS............................................................................................1
1.1 Adjustment Time............................................................................................1
1.2 Affiliate..................................................................................................1
1.3 Assets.....................................................................................................2
1.4 Basic Services.............................................................................................2
1.5 Business...................................................................................................2
1.6 Business Day...............................................................................................2
1.7 Closing....................................................................................................2
1.8 Encumbrance................................................................................................2
1.9 Environmental Law..........................................................................................3
1.10 Equipment.................................................................................................3
1.11 Equivalent Basic Subscribers (or EBSs)....................................................................3
1.12 ERISA Affiliate...........................................................................................4
1.13 Expanded Basic Service....................................................................................4
1.14 FCC.......................................................................................................4
1.15 GAAP......................................................................................................4
1.16 Governmental Authority....................................................................................4
1.17 Governmental Permits......................................................................................4
1.18 Hazardous Substances......................................................................................4
1.19 Intangibles...............................................................................................5
1.20 Legal Requirement.........................................................................................5
1.21 Losses....................................................................................................5
1.22 Pay TV....................................................................................................5
1.23 Pay Unit..................................................................................................5
1.24 Permitted Encumbrances....................................................................................5
1.25 Person....................................................................................................6
1.26 Rate Regulatory Matters...................................................................................6
1.27 Rate Order................................................................................................6
1.28 Real Property.............................................................................................6
1.29 Required Consents.........................................................................................7
1.30 Seller Contracts..........................................................................................7
1.31 Service Area..............................................................................................7
1.32 System....................................................................................................7
1.33 Third Party...............................................................................................7
1.34 Other Definitions.........................................................................................7
SECTION 2. SALE OF ASSETS.........................................................................................8
SECTION 3. CONSIDERATION..........................................................................................8
3.1 Purchase Price.............................................................................................8
3.2 Adjustments to Purchase Price..............................................................................9
3.3 Determination of Adjustments..............................................................................10
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS...............................................................11
4.1 Assignment and Assumption.................................................................................11
4.2 Excluded Assets...........................................................................................12
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................12
5.1 Organization and Qualification............................................................................13
5.2 Authority and Validity....................................................................................13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.3 No Conflict; Required Consents............................................................................14
5.4 Assets....................................................................................................14
5.5 Governmental Permits......................................................................................14
5.6 Seller Contracts..........................................................................................15
5.7 Real Property.............................................................................................15
5.8 Environmental Matters.....................................................................................16
5.9 Compliance with Legal Requirements........................................................................17
5.10 Patents, Trademarks and Copyrights.......................................................................18
5.11 Legal Proceedings........................................................................................19
[5.12 Tax Returns; Other Reports..............................................................................19
5.13 Employment Matters.......................................................................................19
[5.14 Subscriber Numbers......................................................................................20
5.15 Finders and Brokers......................................................................................21
5.16 Systems and Business Information.........................................................................21
5.17 Financial Statements.....................................................................................21
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES................................................................22
6.1 Organization and Qualification............................................................................22
6.2 Authority and Validity....................................................................................22
6.3 No Conflicts; Required Consents...........................................................................22
6.4 Finders and Brokers.......................................................................................23
6.5 Financial Statements......................................................................................23
6.6 Disclaimer of Warranty....................................................................................24
SECTION 7. ADDITIONAL COVENANTS..................................................................................24
7.1 Access to Premises and Records............................................................................24
7.2 Continuity and Maintenance of Operations; Financial Statements............................................24
7.3 Employee Matters..........................................................................................27
7.4 Franchise Extensions; Franchise Renewals Required Consents................................................29
7.5 HSR Notification..........................................................................................32
7.6 No Shopping...............................................................................................32
7.7 Lien and Judgment Searches................................................................................32
7.8 Transfer Taxes............................................................................................33
7.9 Distant Broadcast Signals.................................................................................33
7.10 Updated Schedules........................................................................................33
7.11 Use of Names and Logos...................................................................................33
7.12 Satisfaction of Conditions...............................................................................34
7.13 Confidentiality and Publicity............................................................................34
7.14 Bulk Transfers...........................................................................................34
7.15 Transitional Billing Services...........................................................................34
7.16 Notice of Certain Matters................................................................................35
7.17 MDU Access Agreements....................................................................................35
SECTION 8. CONDITIONS PRECEDENT..................................................................................35
8.1 Conditions to the Obligations of Buyer and Sellers........................................................35
8.2 Conditions to the Obligations of Buyer....................................................................36
8.3 Conditions to Obligations of Sellers......................................................................37
8.4 Waiver of Conditions......................................................................................38
SECTION 9. CLOSING...............................................................................................38
9.1 The Closing; Time and Place...............................................................................38
9.2 Sellers' Delivery Obligations.............................................................................38
9.3 Buyer's Delivery Obligations..............................................................................39
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 10. TERMINATION..........................................................................................40
10.1 Termination Events.......................................................................................40
10.2 Effect of Termination....................................................................................41
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..........................................41
11.1 Survival of Representations and Warranties...............................................................41
11.2 Indemnification by Seller................................................................................41
11.3 Indemnification by Buyer.................................................................................42
11.4 Third Party Claims.......................................................................................43
11.5 Limitations on Indemnification - Sellers.................................................................44
11.6 Limitations on Indemnification - Buyer...................................................................44
SECTION 12. MISCELLANEOUS........................................................................................44
12.1 Parties Obligated and Benefited..........................................................................44
12.2 Notices..................................................................................................45
12.3 Attorneys' Fees..........................................................................................47
12.4 Right to Specific Performance............................................................................47
12.5 Waiver...................................................................................................47
12.6 Captions.................................................................................................47
12.7 Choice of Law............................................................................................47
12.8 Terms....................................................................................................47
12.9 Rights Cumulative........................................................................................47
12.10 Further Actions.........................................................................................47
12.11 Time....................................................................................................48
12.12 Late Payments...........................................................................................48
12.13 Counterparts............................................................................................48
12.14 Entire Agreement........................................................................................48
12.15 Severability............................................................................................48
12.16 Construction............................................................................................48
12.17 Expenses................................................................................................48
12.18 Risk of Loss; Condemnation..............................................................................49
</TABLE>
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - Bill of Sale
B - Assumption Agreement
C - Opinion of Sellers' Counsel
D - FCC Opinion
E - Noncompetition Agreement
F - Opinion of Buyer's Counsel
G - Form of Franchise Consent
SCHEDULES
1 - The Business (including Rate Schedule)
2 - Governmental Permits
3 - Seller Contracts
4 - Required Consents
5 - Owned Equipment and Vehicles
6 - Real Property
7 - Encumbrances to Be Discharged Prior to Closing
8 - Proceedings and Judgments
9 - Employee Matters
10 - Excluded Assets
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the
12th day of May, 1997, by and between FrontierVision Operating Partners, L.P., a
Delaware limited partnership ("Buyer"), and TCI Cablevision of Vermont, Inc., a
Delaware corporation ("TCI Vermont") and WestMarc Development Joint Venture, a
Colorado general partnership ("WestMarc") (each referred to as a "Seller" and
collectively as "Sellers").
RECITALS
TCI Vermont is engaged in the business of providing cable
television service to subscribers in and around St. Albans and Swanton, Vermont.
WestMarc is engaged in the business of providing cable
television service to subscribers in and around Morrisville, Johnson, Hyde Park,
Morristown, North Hyde Park, Hardwick, East Hardwick, Hartford, Hartland and
Norwich, Vermont and Lebanon, Enfield, Canaan, Hanover, Sunapee and Newport, New
Hampshire.
Buyer desires to purchase and Sellers desire to sell
substantially all the assets of Sellers used or useful in connection with the
Business (as defined herein).
AGREEMENT
In consideration of the above recitals and the mutual
agreements stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the meanings
set forth below:
1.1 Adjustment Time. 12.01 a.m. (local Denver time) on the
Closing Date or, in the event that the net Base Purchase Price proceeds due and
payable to Sellers at the Closing are not received by Sellers at or prior to
9:00 a.m. (local Denver time) on the Closing Date, 12:01 a.m. (local Denver
time) on the calendar day following the Closing Date.
1.2 Affiliate. With respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the
<PAGE>
management and policies of a Person, whether through the ownership of voting
securities or voting interests, by contract or otherwise.
1.3 Assets. All properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used or useful in the Business in
which either Seller has any right, title or interest or in which either Seller
acquires any right, title or interest on or before the Closing Date, including
Governmental Permits, Intangibles, Seller Contracts, Equipment, Real Property,
accounts receivable and deposits relating to the Business that are held by third
parties for the account of either Seller or for security for either Seller's
performance of its obligations, but excluding any Excluded Assets.
1.4 Basic Services. The lowest tier of service offered to
subscribers of a System which includes broadcast and satellite service
programming for which such subscribers pay a fixed monthly fee to a Seller.
1.5 Business. The cable television business conducted by
Sellers as of any applicable date through one or more Systems in and around the
Service Area, as described on Schedule 1.
1.6 Business Day. Any day other than Saturday, Sunday or a day
on which banking institutions in Denver, Colorado or New York, New York are
required or authorized to be closed.
1.7 Closing. The consummation of the transactions contemplated
by this Agreement, as described in Section 9, the date of which is referred to
as the Closing Date.
1.8 Encumbrance. Any security interest, security agreement,
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option, right of
first refusal, encumbrance, adverse interest, constructive trust or other trust,
claim, attachment, exception to or defect in title or other ownership interest
(including but not limited to reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights-of-way, restrictive covenants, leases
and licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, Governmental
Permit, Seller Contract or otherwise.
2
<PAGE>
1.9 Environmental Law. Any Legal Requirement relating to
pollution or protection of public or employee health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
1.10 Equipment. All electronic devices, trunk and distribution
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, including all of the foregoing
described on Schedule 5 (and with respect to leased Equipment, on Schedule 3).
1.11 Equivalent Basic Subscribers (or EBSs). As of any date of
determination and for each franchise area served by a System, an active customer
for Basic Services or Expanded Basic Services either in a single household, a
commercial establishment or in a multi-unit dwelling (including a hotel unit);
provided, however, that the number of customers in a multi-unit dwelling or
commercial establishment that obtain service on a "bulk-rate" basis shall be
determined on a System by System basis by dividing the gross bulk-rate billings
for Basic Services and Expanded Basic Services (but not billings from a la carte
tiers or premium services, installation or other non-recurring charges,
converter rental or from any outlet or connection other than the first or from
any pass-through charge for sales, taxes, line-itemized franchise fees, fees
charged by the FCC and the like) attributable to such multi-unit dwelling or
commercial establishment during the most recent billing period ended prior to
the date of determination (but excluding billings in excess of a single month's
charge) by the rate charged at the time of determination to individual
households for the highest level of Basic Services and Expanded Basic Services
offered by such System. For purposes of this definition, an "active customer"
shall mean any person, commercial establishment or multi-unit dwelling as of any
date of determination that (i) is subscribing to and pays for Basic Services or
Expanded Basic Services at the standard, non-discounted monthly service fee
applicable to such level of service (or, in the case of a commercial
establishment or multi-dwelling unit, the "bulk-rate" applicable to such
customer); (ii) has paid for at least one month's Basic Service or Expanded
Basic Services at the fee or rate described in (i) above; (iii) has no
outstanding balance (other than de minimis charges not in excess of $5.00) more
than two months past due from the earliest date for which the service giving
rise to such balance was provided, (iv) (A) has not required or requested
service
3
<PAGE>
disconnection, (B) is not currently subject to a service disconnection order for
non-payment, and (C) has not been subject to a service disconnection order for
non-payment within the past three months; and (v) was not solicited by Sellers
within 90 days prior to the date of determination by any promotions or by offers
of discounts other than those in the ordinary course of business consistent with
the applicable Seller's past practices.
1.12 ERISA Affiliate. As to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
single employer within the meaning of Section 4001 of ERISA.
1.13 Expanded Basic Service. Any level of video programming
service greater than Basic Services provided over a System regardless of service
tier other than: Basic Services, any new product tier, any migrated product tier
and video programming offered on a per channel (and packages of such per channel
services) or per program basis.
1.14 FCC Federal Communications Commission.
1.15 GAAP. Generally accepted accounting principles as in
effect from time to time in the United States of America.
1.16 Governmental Authority. The United States of America,
any state, commonwealth, territory or possession of the United States of America
and any political subdivision or quasi-governmental authority of any of the
same, including any court, tribunal, department, commission, board, bureau,
agency, county, municipality, province, parish or other instrumentality of any
of the foregoing.
1.17 Governmental Permits. All franchises, approvals,
authorizations, permits, licenses, certifications, easements, registrations,
qualifications, leases, variances and similar rights obtained from any
Governmental Authority and used or held for use in the Business, including all
amendments and modifications thereto and any renewals thereof, including those
set forth on Schedule 2.
1.18 Hazardous Substances. Any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a hazard
or potential hazard to the Real Property or to Persons in or about the Real
Property or
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cause the Real Property to be in violation of any laws, regulations or
ordinances of federal, state or applicable local governments, (b) asbestos or
any asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls ("PCBs"), as regulated by the Toxic Substances Control Act, 15
U.S.C.' 2601 et seq., (d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C.' 1251 et seq., (e)
"economic poison," as defined in the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C.' 135 et seq., (f) "chemical substance," "new chemical
substance" or "hazardous chemical substance or mixture" pursuant to the Toxic
Substances Control Act, 15 U.S.C.' 2601 et seq., (g) "hazardous substances"
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C.' 9601 et seq. and (h) "hazardous waste" pursuant to
the Resource Conservation and Recovery Act, 42 U.S.C.' 6901 et seq.
1.19 Intangibles. All intangible assets, including subscriber
lists, accounts receivable, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
in the Business.
1.20 Legal Requirement. Applicable common law and any statute,
ordinance, code, or other law, rule, regulation, order, technical or other
written standard or policy or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement, in each case, as amended.
1.21 Losses. Any claims, losses, liabilities, damages,
Encumbrances, penalties, costs and expenses, including interest that may be
imposed in connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts, and the cost to any Person making a
claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect to
which indemnification is sought.
1.22 Pay TV. Premium programming services selected by and sold
to subscribers on a per channel or per program basis.
1.23 Pay Unit. Each per channel Pay TV service subscribed for
by any subscriber of a System.
1.24 Permitted Encumbrances. The following Encumbrances: (a)
liens securing taxes, assessments and governmental charges not yet due and
payable, (b) any zoning law
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or ordinance or any similar Legal Requirement, (c) any right reserved to any
Governmental Authority to regulate the affected property, (d) as to Real
Property interests, any Encumbrance reflected in the public records and that
does not individually or in the aggregate interfere with the right or ability to
own, use or operate the Real Property or to convey good, marketable and
indefeasible fee simple title to such Real Property or diminish the value of the
Real Property, and (e)Tower Space Lease Agreement dated January 1, 1993, and
Landlord's Waiver and Consent dated September 23, 1994, between TCI Vermont and
Vermont RSA Limited Partnership and Contel Cellular, Inc., provided that
"Permitted Encumbrances" will not include any Encumbrance which secures or
otherwise relates to a monetary obligation or could prevent or inhibit in any
way the conduct of the business of the affected System and provided further that
classification of any Encumbrance as a "Permitted Encumbrance" will not affect
any liability Sellers may have for such Encumbrance, including pursuant to any
indemnity obligation under this Agreement.
1.25 Person. Any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.26 Rate Regulatory Matters Any matter or any effect on
either Seller or any of the Systems or the Business arising out of or related to
the Communications Act of 1934, as amended (including all of the provisions of
the Cable Communications Policy Act of 1984, as amended, the Cable Television
Consumer Protection and Competition Act of 1992, as amended, and the
Telecommunications Act of 1996), any regulations adopted thereunder, or any
other federal, state or local law or regulation dealing with, limiting or
affecting the rates which can be charged by cable television systems to their
customers (whether for programming, equipment, installation, service or
otherwise).
1.27 Rate Order Any final order or decision, or any tolling
order or accounting order pursuant to 47 C.F.R. 76.933, issued by a federal,
state or local Governmental Authority relating to a Rate Regulatory Matter.
1.28 Real Property. All assets held by either Seller and used
or held for use in the Business consisting of realty, including appurtenances,
improvements and fixtures located on such realty, and any other interests in
real property, including fee interests, leasehold interests and easements, wire
crossing permits, rights of entry (except agreements related to multiple
dwelling units), including those described on Schedule 6.
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1.29 Required Consents. All franchises, licenses,
authorizations, approvals and consents required under Governmental Permits
(including any Governmental Permit that is extended or renewed in connection
with the transactions contemplated by this Agreement), Seller Contracts or by
any Legal Requirement or otherwise for (a) Sellers to transfer the Assets and
the Business to Buyer, (b) Buyer to conduct the Business and to own, lease, use
and operate the Assets at the places and in the manner in which the Business is
conducted as of the date of this Agreement and on the Closing Date and (c) Buyer
to assume and perform the Governmental Permits and Seller Contracts assigned to
Buyer hereunder and the other Assumed Liabilities.
1.30 Seller Contracts. All contracts and agreements, other
than Governmental Permits, pertaining to the ownership, operation and
maintenance of the Assets or the Business or used or held for use in the
Business, including those described on Schedule 3 or, in the case of contracts
and agreements relating to Real Property, on Schedule 6.
1.31 Service Area. The area in which Sellers operate the
Business, specifically in and around St. Albans, Swanton, Morrisville, Johnson,
Hyde Park, Morristown, North Hyde Park, Hardwick, East Hardwick, Hartford,
Hartland and Norwich, Vermont and Lebanon, Enfield, Canaan, Hanover, Sunapee and
Newport, New Hampshire.
1.32 System. A complete cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems. Any systems
which are interconnected or which are served in total or in part by a common
headend will be considered a single System.
1.33 Third Party. Any Person other than Seller or Buyer and
their respective Affiliates.
1.34 Other Definitions. The following terms are defined in the
Sections indicated:
Term Section
---- -------
Action 11.4
Antitrust Division 7.5
Assumed Liabilities 4.1
Base Purchase Price 3.1
Buyer Damages 11.5
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Closing Date 1.6
Desired Employees 7.3.1
Employee Benefit Plans 5.13.2
ERISA 5.13.1
Estoppel Certificates 7.4.2
Excluded Assets 4.2
Excluded Liabilities 4.1
Final Adjustments Report 3.3.2
Financial Statements 6.5
FTC 7.5
Hired Employee 7.3.6
HSR Act 7.5
Indemnified Party 11.4
Indemnifying Party 11.4
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Purchase Price 3.1
Retained Employees 7.3.1
SEC 7.1
Seller Damages 11.6
Taking 12.18.2
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this
Agreement, at the Closing, Sellers will sell, transfer, assign and deliver to
Buyer, and Buyer will purchase from Sellers, all of each Seller's rights, titles
and interests in, to and under the Assets free and clear of all Encumbrances
except for Permitted Encumbrances. All the Assets are intended to be transferred
to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION.
3.1 Purchase Price. Subject to the satisfaction or waiver of
Buyer's closing conditions set forth in Sections 8.1 and 8.2, at Closing Buyer
will pay to Sellers total cash consideration of Thirty-Four Million Five Hundred
Thousand Dollars ($34,500,000) subject to adjustment pursuant to this Section 3
("Purchase Price"). The Purchase Price is subject
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to adjustment as provided in Sections 3.2 and 3.3 and will be adjusted downward
by One Thousand Six Hundred Five Dollars ($1,605.00) for each EBS less than
21,500 EBS as of the end of the month prior to the Closing Date. The Purchase
Price shall be allocated to TCI Vermont in the amount of Eight Million One
Hundred Thousand Dollars ($8,100,000) and to WestMarc in the amount of Twenty
Six Million Four Hundred Thousand Dollars ($26,400,000) (to be ratably adjusted
to reflect adjustments to the Purchase Price). The Buyer and Sellers shall
mutually agree upon the allocation of the Purchase Price among the Assets for
all purposes (including financial, accounting and tax purposes). Sellers and
Buyer shall each file their respective tax returns, including IRS Form 8594, in
a manner consistent with the agreed upon allocations. Neither Sellers nor Buyer
shall revoke or amend IRS Form 8594 without the written consent of the other
party.
3.2 Adjustments to Purchase Price. The Purchase Price will be
adjusted as follows:
3.2.1 Adjustments on a pro rata basis as of the
Adjustment Time will be made for all prepaid expenses (but only to the extent
the full benefit thereof will be realizable by Buyer within 12 months after the
Adjustment Time), accrued expenses (including real and personal property taxes),
prepaid income, subscriber prepayments and accounts receivable related to the
Business, all as determined in accordance with GAAP consistently applied, and to
reflect the principle that all expenses and income attributable to the Business
for the period prior to the Adjustment Time are for the account of Sellers, and
all expenses and income attributable to the Business for the period after the
Adjustment Time are for the account of Buyer except that there shall be no
adjustment for, and Sellers shall remain solely liable with respect to, all
Excluded Liabilities. Sellers will receive no credit for any subscriber accounts
receivable (i) any portion of which is 90 days or more past due as of the
Adjustment Time or (ii) from subscribers whose accounts are inactive and Sellers
shall remit to Buyer from and after the Adjustment Time all payments received by
Sellers in respect of the accounts receivable.
3.2.2 Buyer's account shall be credited for the amount of
all advance payments to, or funds of third parties on deposit with, either
Seller as of the Adjustment Time, relating to the Business, including advance
payments and deposits by subscribers served by the Business for converters,
encoders, decoders, cable television service and related sales. Buyer's account
shall be credited for the economic value of all accrued vacation time credited
to the Hired Employees as of the Adjustment Time pursuant to Section 7.3.6(a),
where economic value is the amount equal to the cash compensation that would be
payable to each such employee at his or her current level of compensation for a
period equal to such employee's accrued vacation.
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3.2.3 The Purchase Price will be adjusted, if necessary
as contemplated by Section 7.4.2.
3.3 Determination of Adjustments. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
3.3.1 Not later than a date Sellers reasonably believe is
at least 10 Business Days prior to the Closing Date, Sellers will deliver to
Buyer a report (the "Preliminary Adjustments Report"), certified as to
completeness and accuracy by each Seller, showing in detail the preliminary
determination of the adjustments referred to in Section 3.1 and Section 3.2,
which are calculated as of the Adjustment Time (or as of any other time agreed
by the parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a complete list of subscribers, a detailed calculation of the number of
Equivalent Basic Subscribers and a schedule setting forth advance payments made
to or by each Seller and deposits made by each Seller, as well as accounts
receivable information relating to the Business (showing sums due and their
respective aging as of the Adjustment Time). Each Seller also will furnish to
Buyer its billing report for the most current period as of the Adjustment Time.
Following receipt of such Preliminary Adjustments Report and supporting
information as Buyer shall reasonably request, Buyer shall have five Business
Days to review such Preliminary Adjustments Report and supporting information
and to notify Sellers of any disagreements with Sellers' estimates. If Buyer
provides a notice of disagreement with Sellers' estimates of the adjustments
referred to in Section 3.1 or Section 3.2 within such five Business Day period,
Buyer and Sellers shall negotiate in good faith to resolve any such dispute and
to reach an agreement prior to the Closing on such estimated adjustments as of
the Adjustment Time. The estimate so agreed upon by Buyer and Sellers (or if
Buyer fails to provide a notice of disagreement with Sellers' estimates of such
adjustments within the time provided) the estimates of such adjustments set
forth in the Preliminary Adjustments Report initially delivered by Sellers to
Buyer shall be the basis for determining the adjusted Purchase Price which shall
be paid to Sellers at Closing (the "Base Purchase Price"). Any disagreements
that may exist with respect to the Preliminary Adjustments Report, if any, shall
be resolved in connection with the preparation of the Final Adjustments Report
pursuant to Sections 3.3.2 and 3.3.3.
3.3.2 Within 60 days after the Closing, Sellers will
deliver to Buyer a report (the "Final Adjustments Report"), similarly certified
by each Seller, showing in detail the final determination of all adjustments
which were not calculated as of the Adjustment Time and
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containing any corrections to the Preliminary Adjustments Report, together with
any documents substantiating the adjustments proposed in the Final Adjustments
Report or reasonably requested by Buyer. Buyer will provide Sellers with
reasonable access to all records which Buyer has in its possession and which are
necessary for Sellers to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final
Adjustments Report, Buyer will give Sellers written notice of Buyer's
objections, if any, to the Final Adjustments Report. If Buyer makes any such
objection, the parties will agree on the amount, if any, which is not in dispute
within 30 days after Sellers' receipt of Buyer's notice of objections to the
Final Adjustments Report. Any undisputed amount shall be payable within three
Business Days after agreement on the undisputed portion of the Final Adjustments
Report. Any amounts which remain disputed after such 30 day period may be
submitted by Sellers, on the one hand, or Buyer, on the other hand, by written
notice to the other party, to a mutually acceptable Big Six accounting firm, as
that term is currently understood in the accounting industry, whose
determination will be conclusive and binding on the parties and shall be made as
soon as practicable after the date of submission. Sellers and Buyer will bear
equally the fees and expenses payable to such firm in connection with such
determination. The payment required after determination of all disputed amounts
will be made by the responsible party by wire transfer of immediately available
funds to the other party within three Business Days after the final
determination.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. As of the Closing Buyer will
assume and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Sellers' obligations to subscribers of the Business
for (i) subscriber deposits held by Sellers as of the Adjustment Time and which
are refundable, in the amount for which Buyer received credit under Section 3.2,
(ii) subscriber advance payments held by Sellers as of the Adjustment Time for
services to be rendered by a System after the Adjustment Time, in the amount for
which Buyer received credit under Section 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Adjustment Time; and
(b) obligations accruing and relating to the Systems and the period after the
Adjustment Time under Governmental Permits listed on Schedule 2 (to the extent
that such Governmental Permits are transferred to Buyer at Closing and excluding
Governmental Permits listed on Schedule 10) and Seller Contracts listed on
Schedule 3 and Schedule 6 (to the extent such Seller Contracts are assigned to
Buyer at Closing and excluding Seller Contracts listed on Schedule 10). Buyer
will not assume or have any responsibility for any liabilities or obligations of
Seller other than the Assumed Liabilities. In no
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event will Buyer assume or have any responsibility for any liabilities or
obligations (i) associated with the Excluded Assets, or (ii) relating to any
claims or pending litigation or proceedings relating to the Business prior to
the Closing, or (iii) under capitalized leases or other financing arrangements
(it being understood that Sellers shall satisfy all such capitalized and
financing leases with respect to any of the Assets and obtain good title thereto
so that such Assets shall be transferred to Buyer at Closing free of any
interest of the lessors and otherwise in accordance with this Agreement), or
(iv) incurred after the date of this Agreement in violation of either Seller's
covenants made in this Agreement, or (v) under any Seller's or Seller's
Affiliate's employee pension, retirement or other benefit plan or collective
bargaining agreement except for such liabilities or obligations assumed by Buyer
pursuant to Section 7.3 or (vi) except for such liabilities or obligations
assumed by Buyer pursuant to Section 7.3. any obligation to any employee or
former employee of either Seller or any Affiliate of either Seller for salary,
wages or other employee compensation or benefits, including, without limitation,
severance benefits, vacation time or sick leave related to such period of time
the employee was employed by such Seller or any such Affiliate, however, arising
(including by virtue of the consummation of the transactions contemplated by
this Agreement), or (vii) except to the extent that the Purchase Price is
adjusted in favor of Buyer as provided in Section 3.2, and except as
specifically set forth herein, relate to the Business or otherwise arise out of
actions of either Seller prior to the Adjustment Time (such excluded obligations
and liabilities being sometimes collectively referred to herein as the "Excluded
Liabilities").
4.2 Excluded Assets. The Excluded Assets, which will be
retained by Sellers, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for any
of the foregoing set forth on Schedule 3); (b) Employee Benefit Plans; (c)
subject to Section 12.18 hereof, insurance policies and rights and claims
thereunder; (d) bonds, letters of credit, surety instruments and other similar
items; (e) cash and cash equivalents and notes receivable; (f) Sellers'
trademarks, trade names, service marks, service names, logos and similar
proprietary rights; (g) Sellers' rights under any agreement governing or
evidencing an obligation of either Seller for borrowed money; (h) Seller
Contracts for subscriber billing and all CSG equipment; (i) all equipment owned
or utilized by TCI Satellite Entertainment, Inc. (a/k/a "Primestar by TCI") and
which is enumerated on Schedule 10 (j) ad sales equipment owned by Adelphia
Communications, Inc.; and (k) the assets described on Schedule 10.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS.
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Each Seller, jointly and severally, represents and warrants to
Buyer, as of the date of this Agreement as follows:
5.1 Organization and Qualification. TCI Vermont is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. WestMarc Joint Venture is a general partnership,
validly existing and in good standing under the laws of the State of Colorado.
Each Seller has all requisite corporate or partnership (as the case may be)
power and authority to own, lease and use the Assets owned, leased or used by it
and to conduct the Business as it is currently conducted. Each Seller is
qualified to do business and is in good standing under the laws of each
jurisdiction in which the ownership, leasing or use of the Assets owned, leased
or used by it or the nature of its activities makes such qualification
necessary, except in any such jurisdiction where the failure to be so qualified
and in good standing would not have a material adverse effect on either Seller,
the Business, the Assets or the Systems or on the ability of either Seller to
perform its obligations under this Agreement. Schedule 1 lists each Person which
owns a partnership interest in WestMarc. Schedule 1 sets forth (i) all of the
fictitious and trade names which each Seller has used or is currently using in
connection with the Business and, to the best of each Seller's knowledge, all
fictitious and trade names used by any prior owner or operator of the Assets in
the past five (5) years in connection with the business of the Systems, and (ii)
the location of the principal office of each Seller.
5.2 Authority and Validity. Each Seller has all requisite
corporate or partnership (as the case may be) power and authority to execute and
deliver, to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and all other documents and instruments to be
executed and delivered in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents") to which it is a party.
The execution and delivery by each Seller of, the performance by each Seller of
its obligations under, and the consummation by each Seller of the transactions
contemplated by, this Agreement and the Transaction Documents to which such
Seller is a party have been duly and validly authorized by all necessary action
by or on behalf of TCI Vermont and WestMarc. This Agreement has been, and when
executed and delivered by Sellers the Transaction Documents will be, duly and
validly executed and delivered by each Seller and the valid and binding
obligations of each Seller, enforceable against each Seller in accordance with
their terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the enforcement of creditors' rights generally or by
principles governing the availability of equitable remedies.
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5.3 No Conflict; Required Consents. Subject to receipt of the
Required Consents which are listed on Schedule 4 and subject to the requirements
of the HSR Act, the execution and delivery by each Seller, the performance of
each Seller under, and the consummation of the transactions contemplated by,
this Agreement and the Transaction Documents to which such Seller is a party do
not and will not: (a) conflict with or violate any provision of the charter or
bylaws of TCI Vermont or the partnership agreement of WestMarc; (b) violate any
provision of any Legal Requirement; (c) require any consent, approval or
authorization of, or filing of any certificate, notice, application, report or
other document with any Governmental Authority or other Person; or (d) (i)
conflict with, violate, result in a breach of or constitute a default under
(without regard to requirements of notice, lapse of time, or elections of other
Persons, or any combination thereof), (ii) permit or result in the termination,
suspension or modification of, or (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of either Seller under any
Seller Contract or other instrument evidencing any of the Assets or by which
either Seller or any of its assets is bound or affected except for purposes of
this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications, and accelerations as would not, individually or in
the aggregate, have a material adverse effect on any System, the Business or
Sellers or on the ability of either Seller to perform its obligations under this
Agreement or the Transaction Documents to which such Seller is a party, or (e)
result in the creation or imposition of any Encumbrance upon any of the Assets.
5.4 Assets. Each Seller has exclusive, good and marketable
title to (or, in the case of Assets that are leased, valid leasehold interests
in) the Assets owned or leased by such Seller (other than Real Property, as to
which the representations and warranties in Section 5.7 apply). The Assets are
free and clear of all Encumbrances, except (a) Permitted Encumbrances and (b)
Encumbrances described on Schedule 7, all of which will be terminated, released
or, in the case of rights of refusal listed on Schedule 7, waived, as
appropriate, at or prior to the Closing. Except as described on Schedules 3 or
5, none of the Equipment is leased by Sellers from any other Person. All the
Equipment is in good operating condition and repair (ordinary wear and tear
excepted) and is suitable and adequate for continued use in the manner in which
it is presently used. The Assets constitute all the assets necessary to permit
Buyer to conduct the Business and to operate the Systems substantially as they
are being conducted and operated on the date of this Agreement and in compliance
with all Legal Requirements, Governmental Permits and Seller Contracts and to
perform all the Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits (including
expiration dates) and to the knowledge of Sellers each document relating thereto
or comprising a part thereof are listed by name and date on Schedule 2 or
Schedule 10. Complete and correct copies
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of all such Governmental Permits documents have been delivered by Sellers to
Buyer. Except as set forth on Schedule 2, each Governmental Permit is in full
force and effect and is valid under all applicable Legal Requirements according
to its terms and the Seller party to each such Governmental Permit is not and,
to such Seller's knowledge, the other party thereto is not, in breach or default
of any terms or conditions thereunder. Except as set forth in Schedule 2, there
is no legal action, proceeding or investigation, pending or threatened, to
terminate, suspend or modify any Governmental Permit and each Seller is in
compliance with the terms and conditions of all the Governmental Permits to
which such Seller is a party and with other applicable requirements of all
Governmental Authorities (including the FCC, United States Copyright Office and
the Register of Copyrights) relating to the Governmental Permits or the
Business, including all requirements for notification, filing, reporting,
posting and maintenance of logs and records. Neither Seller has made (and to
each Seller's best knowledge, no prior holder has made) any commitments (oral or
written) to any Governmental Authority with respect to the Business or Systems
other than those contained in the Governmental Permits documents listed on
Schedule 2. Except as set forth on Schedule 2, no upgrade, modification or
rebuild is required for the Systems to comply with the corresponding
Governmental Permits or applicable Legal Requirements.
5.6 Seller Contracts. All Seller Contracts are described on
Schedule 3, Schedule 6 or Schedule 10. Complete and correct copies of all Seller
Contracts, including all instruments pertaining to the Real Property or Sellers'
interests therein, have been delivered by Sellers to Buyer. Except as noted on
Schedules 3 and 6, each Seller Contract is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of the Seller
party thereto and to the knowledge of Sellers each other party thereto and such
Seller is not and to such Seller's knowledge each other party thereto is not, in
breach or default of any terms or conditions thereunder.
5.7 Real Property.
5.7.1 All the Assets consisting of Real Property
interests are described on Schedule 6. Except as otherwise disclosed on Schedule
6, each Seller holds good, marketable and indefeasible fee simple title to the
Real Property shown as being owned by each Seller on Schedule 6 and the valid
and enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Each Seller has valid and enforceable leasehold
interests and, to the knowledge of Sellers, enforceable rights to nondisturbance
and quiet enjoyment in Real Property shown as being leased by such Seller on
Schedule 6 and, with respect to other Real Property not owned or leased by such
Seller, such Seller has the valid and
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enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on Schedule 6, subject only to
Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The current
use and occupancy of the Real Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Sellers to Buyer as
evidence of each Seller Contract that is a lease of Real Property constitute the
entire agreement with the landlord in question. There are no leases or other
agreements, oral or written, granting to any Person other than the rightful
Seller the right to occupy or use any Real Property or, to the knowledge of each
Seller, the right to foreclose upon such Seller's leasehold interest, except as
described on Schedule 2 or Schedule 6. All easements, rights-of-way and other
rights appurtenant to, or which are necessary for the rightful Seller's current
use of, any Real Property are valid and in full force and effect, and such
Seller has not received any notice with respect to the termination, breach or
impairment of any of those rights. Except for routine repairs, all of the
material improvements, leasehold improvements and the premises of the Real
Property are in good condition and repair and are suitable for the purposes
used.
5.8 Environmental Matters.
5.8.1 Each Seller has complied with, and to the best of
each Seller's knowledge, the Real Property currently complies with and has
previously been operated in compliance with, all Environmental Laws. Neither
Seller has discovered, been made aware of, generated, released, stored, used,
treated, handled, discharged or disposed of any Hazardous Substances at, on,
under, in or about, or in any other manner affecting, any Real Property,
transported any Hazardous Substances to or from any Real Property or discharged
any Hazardous Substances from any Real Property into any body of water, directly
or indirectly or caused to be undertaken any other activities relating to the
Real Property which would support a claim or cause of action under any
Environmental Law, and, to each Seller's best knowledge, no other present or
previous owner, tenant, occupant or user of any Real Property or any other
Person has committed or suffered any of the foregoing. To the best of each
Seller's knowledge, no release of Hazardous Substances outside the Real Property
has entered or threatens to enter any Real Property, nor is there any pending or
threatened claim based on Environmental Laws which arises from any condition of
the land surrounding any Real Property. No claim or investigation based on
Environmental Laws which relates to any Real Property or any operations on it
(a) has
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been asserted or conducted in the past or is currently pending against or with
respect to either Seller or, to each Seller's best knowledge, any other Person,
or (b) is threatened or contemplated.
5.9 Compliance with Legal Requirements.
5.9.1 The ownership, leasing and use of the Assets as
they are currently owned, leased and used and the conduct of the Business and
the operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect any Legal Requirement (except that
this sentence shall not apply to any Legal Requirements described in Section
5.5, 5.8, 5.9.3 and 5.9.4 as to which the representations and warranties set
forth in those subsections shall apply).
5.9.2 Except as set forth on Schedule 2 with respect to
the State of Vermont Public Service Board's failure to renew certain
Governmental Permits notwithstanding Sellers' timely renewal request in respect
thereof, a valid request for renewal has been duly and timely filed under
Section 626 (a) of the Cable Communications Policy Act of 1984, as amended, with
the proper Governmental Authority with respect to applicable Governmental
Permits with franchising authorities that have expired prior to or will expire
within 36 months after the date of this Agreement.
5.9.3 Each Seller has complied, and the Business is in
compliance, in all material respects, with (i) the specifications set forth in
Part 76, Subpart K of the rules and regulations of the FCC, (ii) Section 111 of
the U.S. Copyright Act of 1976, as amended, and the applicable rules and
regulations thereunder and the applicable rules and regulations of the U.S.
Copyright Office, the Register of Copyrights, the Copyright Royalty Tribunal and
(iii) the Communications Act of 1934 as amended, and the rules and regulations
thereunder, including any provisions thereof pertaining to signal leakage, to
utility pole make ready and to grounding and bonding of cable television systems
(in each case as the same is currently in effect).
5.9.4 Notwithstanding the foregoing, each Seller has used
its best efforts to comply in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996 and the FCC rules and regulations promulgated
thereunder (collectively, as amended, the "1992 Cable Act" and the
"Telecommunications Act", respectively) as such Legal Requirements relate to the
operation of the Business. All broadcast television station signals carried on
any of the Systems are being carried either pursuant to a valid must carry
election or a retransmission consent agreement authorizing the retransmission of
the station's signal and there is no dispute (or valid
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basis therefor) with respect to the carriage (or channel position) or
non-carriage of any broadcast station by the Systems and each Seller has
complied in all other material respects with the must carry and retransmission
consent provisions of the 1992 Cable Act. Seller has used its best efforts to
establish rates charged to subscribers, effective since September 1, 1993, that
are permitted (except as would not have a material adverse effect on such rates)
under rules and regulations promulgated under the 1992 Cable Act and the
Telecommunications Act and any authoritative interpretation thereof now or then
in effect, whether or not such rates are or were subject to regulation at that
date by any Governmental Authority, including any local franchising authority
and/or the FCC, unless such rates were not subject to regulation pursuant to a
specific exemption from rate regulation contained in the 1992 Cable Act and the
Telecommunications Act other than the failure of any franchising authority to
have been certified to regulate rates or the failure of a valid rate complaint
to have been filed with the FCC. Sellers have made available to Buyer complete
and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215 and 1240
relating to rate regulation generally or specific rates charged to customers of
the Systems subject to regulation. Except as disclosed in Schedule 1 or Schedule
8, there have been no Rate Orders with respect to the Systems and there are no
pending or unresolved Rate Regulatory Matters.
5.9.5 Neither Seller has received any notice of any
violation by such Seller or the Business of any Legal Requirement applicable to
such Seller, the Business or the Systems or any notice or inquiry from the
United States Copyright Office concerning its copyright filings, statements of
account or royalty payments or any notice from any other Person to the effect
that the conduct of the Business or operations of the Systems as currently
conducted infringes on the rights of any Person and to such Seller's best
knowledge, there is no basis for the allegation of any such violation, notice or
inquiry.
5.9.6 Other than as disclosed in Schedule 2, Sellers are
not party to any leased commercial access agreement and have not received any
request or demand to lease channel capacity on any of the Systems pursuant to
Section 612 of the Communications Act of 1934, as amended. Sellers have
delivered true and complete copies to Buyer of all correspondence relating to
leased commercial access on the Systems, all leased commercial access agreements
relating to the Systems and all leased access rate cards for the Systems.
5.10 Patents, Trademarks and Copyrights. Each Seller has
timely and accurately made all requisite filings and payments with the United
States Copyright Office and Register of Copyrights. Sellers have delivered to
Buyer complete and correct copies of all current reports and filings, and all
reports and filings for the past five years, made or filed
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pursuant to copyright rules and regulations with respect to the Business.
Neither Seller possesses any patent, patent right, trademark or copyright or is
a party to any license or royalty agreement with respect to any patent,
trademark or copyright except for licenses respecting program material and
obligations under the Copyright Act of 1976, as amended, applicable to cable
television systems generally. The Business and the System have been operated in
such a manner so as not to violate or infringe upon the rights of, or give rise
to any colorable claim of any Person for copyright, trademark, service mark,
patent, license, trade secret infringement or the like.
5.11 Legal Proceedings. Except as set forth on Schedule 8,
there is no judgment or order outstanding, or any action, claim, suit,
proceeding, arbitration, investigation, hearing by or before any Governmental
Authority or any private arbitration tribunal pending, or to each Seller's best
knowledge, threatened, involving or affecting all or any part of the Assets,
Business or Sellers.
5.12 Tax Returns; Other Reports. Each Seller has duly and
timely filed in correct form all federal, state and local income, franchise,
sales, use, property, excise, payroll, unclaimed property and other tax returns
and all other reports (whether or not relating to taxes) required to be filed by
such Seller and has timely paid all taxes, fees and assessments of whatever
nature due and payable by such Seller the failure of which to be filed or paid
could affect, or result in the imposition of an Encumbrance upon, the Assets or
that could impose on Buyer any transferee liability for any taxes, penalties or
interest due or to become due from either Seller in regard to tax liabilities of
the Sellers arising before the Closing Date, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as set forth on Schedule 8, there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any federal,
state, local or foreign income tax return for any period, and except as set
forth on Schedule 8, there are no tax audits pending. Neither Seller has
received any notice of, nor does either Seller have any knowledge of, any
deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any Governmental Authority which could affect, or result in the imposition
of an Encumbrance upon, the Assets or that could impose on Buyer any transferee
liability for any taxes, penalties or interest due or to become due from either
Seller in regard to tax liabilities of either of the Sellers arising before the
Closing Date.
5.13 Employment Matters.
5.13.1 Schedule 9 contains a complete and correct list of
names and positions of all employees of each Seller engaged in the Business.
Upon request of Buyer,
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Sellers will promptly provide Buyer with the current hourly wages or monthly
salaries and other compensation of each employee identified on Schedule 9. Each
Seller has complied in all respects with all Legal Requirements relating to the
employment of labor, including WARN, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), continuation coverage requirements with respect
to group health plans, and those relating to wages, hours, collective
bargaining, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control and the
payment and withholding of taxes.
5.13.2 Each "employee benefit plan" or "multiemployer
plan" (as those terms are defined in ERISA) maintained by either Seller or any
Affiliate of either Seller is set forth on Schedule 9 (the "Employee Benefit
Plans"). Neither Seller nor its ERISA Affiliates is in violation of any
provision of ERISA. No "reportable event," (as defined in Section 4.43 of ERISA)
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Title I of ERISA, has occurred
with respect to any such Employee Benefit Plan, and no "accumulated funding
deficiency" or "withdrawal liability" (both as defined in Title IV of ERISA)
exists with respect to any such Employee Benefit Plan. After the Closing, Buyer
will not be required, under ERISA, the Code or any collective bargaining
agreement, to establish, maintain or continue any Employee Benefit Plan
currently maintained by either Seller or any of its ERISA Affiliates.
5.13.3 Neither Seller is a party to any collective
bargaining agreements or has recognized or agreed to recognize or has any duty
to bargain with any labor organization or collective bargaining unit. Except as
set forth on Schedule 9, there are not pending any unfair labor practice charges
against either Seller, any demand for recognition or any other request or demand
from a labor organization for representative status with respect to any Person
employed by either Seller. To each Seller's best knowledge, its employees are
not engaged in organizing activity with respect to any labor organization.
Neither Seller has any employment agreement, either written or oral, express or
implied, that would require Buyer to employ any Person after the Closing Date.
5.14 Subscriber Numbers. As of the Closing Date, the Business
will have no fewer than 21,000 EBSs. Schedule 1 sets forth, with respect to each
franchise area (or other service area) in each System, the number of EBSs
(including the number of basic EBSs and bulk EBSs) and the number of Pay Units
in such area as of March 31, 1997, the most recent practicable date for which
such information is available. Schedule 1 also lists all of each Seller's
standard, non-discounted, non-bulk rates and charges for each franchise area (or
other service
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area) at the date of this Agreement, together with all discounts offered or
applied to all such rates and charges.
5.15 Finders and Brokers. Neither Seller has employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Buyer could be liable.
5.16 Systems and Business Information. Schedule 1 lists each
of the Systems, each community served thereby, the channel lineup for each
System (including the basis for carriage of each broadcast signal) and the
respective bandwidth capabilities and channel capacity for each System. Sellers
have delivered to Buyer a description of the marketing programs, subscriber
installation policies and collection practices in effect for the Business as of
the date of this Agreement.
5.17 Financial Statements. Sellers have delivered to Buyer
complete and correct copies of an unaudited balance sheet and related statement
of income for the Systems, on a system by system basis, for and as of the years
ended 1993, 1994, 1995 and 1996 and the quarter ended March 31, 1997
(collectively, the "Systems Financial Statements"). The Systems Financial
Statements were prepared from the books and records of Sellers with respect to
the Systems and were prepared in accordance with GAAP applied on a consistent
basis throughout the period covered thereby and present fairly, in all material
respects, the Systems' financial position and results of operations, on a system
by system basis, as of the dates and for the periods indicated, subject only to
standard year-end adjustments (none of which was or would be material in amount)
and the omission of footnotes. The unaudited balance sheets included in the
Systems Financial Statements for the year ended 1996 is herein called the
Systems Balance Sheet. At the date of the Systems Balance Sheet, neither Seller
had any liability or obligation with respect to the Systems, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or reserved
against therein that were not fully reflected or reserved against on the Systems
Balance Sheet, other than liabilities included in current liabilities, and none
of which was or would be material to the Business, financial condition or
results of operations of the Systems, nor to either Seller's best knowledge,
does any aspect of the Business form a basis for any claim by any Person which,
if asserted, could result in a liability not disclosed by or reserved against in
the Systems Balance Sheet. Since the date of the Systems Balance Sheet, Sellers
have conducted the Business in the ordinary and usual course consistent with
past practices in all material respects,
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and there has not occurred any material adverse change in the Business, the
Assets or the Systems.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Sellers to enter into this Agreement, Buyer
represents and warrants to Sellers, as of the date of this Agreement as follows:
6.1 Organization and Qualification. Buyer is a limited
partnership, validly existing under the laws of the State of Delaware and has
all requisite partnership power and authority to own, lease and use the assets
owned, leased or used by it and to conduct its business as it is currently
conducted. Buyer is duly qualified to do business and is in good standing under
the laws of each jurisdiction in which the ownership, leasing or use of the
assets owned, leased or used by it or the nature of Buyer's activities makes
such qualification necessary, except in any such jurisdiction where the failure
to be so qualified and in good standing would not have a material adverse effect
on Buyer or on the ability of Buyer to perform its obligations under this
Agreement.
6.2 Authority and Validity. Buyer has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of, the
performance by Buyer of its obligations under, and the consummation by Buyer of
the transactions contemplated by, this Agreement and the Transaction Documents
to which Buyer is a party have been duly and validly authorized by all necessary
action by or on behalf of Buyer. This Agreement has been, and when executed and
delivered by Buyer the Transaction Documents will be, duly and validly executed
and delivered by Buyer and the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
6.3 No Conflicts; Required Consents. Subject to receipt of the
Required Consents as described on Schedule 4 and the requirements of the HSR
Act, the execution and delivery by Buyer, the performance of Buyer under, and
the consummation of the transactions contemplated by this Agreement and the
Transaction Documents to which Buyer is a party will not (a) violate any
provision of the partnership agreement or other organizational documents of
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Buyer, (b) violate any Legal Requirement, (c) require any consent, approval or
authorization of, or filing with or notice to, any other Person (other than such
consents of lenders and limited partners of Buyer as have already been obtained)
or (d) (i) violate, conflict with or constitute a breach of or default under
(without regard to requirements of notice, passage of time or elections of any
Person), (ii) permit or result in the termination, suspension, modification of,
(iii) result in the acceleration of (or give any Person the right to accelerate)
the performance of Buyer under, any instrument or other agreement to which Buyer
is a party or by which Buyer or any of its assets is bound or affected, except
for purposes of this clause (d) such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications and accelerations as would not,
individually or in the aggregate, have a material adverse effect on Buyer or on
the validity, binding effect or enforceability of this Agreement.
6.4 Finders and Brokers. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Sellers could be liable.
6.5 Financial Statements Buyer has delivered to Sellers
complete and correct copies of its (a) audited balance sheets and related
statements of income, equity and cash flows for and as of the years ended 1995
and 1996 and all notes and schedules thereto and (b) the unaudited balance sheet
of Buyer, and the related unaudited statement of income for the quarter ended
March 31, 1997 (collectively, the "Financial Statements"). The Financial
Statements were prepared from the books and records of Buyer and were prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly, in all material respects, Buyer's financial
position, results of operations and changes in financial position as of the
dates and for the periods indicated, subject in the case of the unaudited
Financial Statements only to standard year-end adjustments (none of which will
be material in amount) and the omission of footnotes. The audited balance sheet
as of December 31, 1996 is herein called the Buyer Balance Sheet. At the date of
the Buyer Balance Sheet, Buyer had no liability or obligation, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or reserved
against therein that were not fully reflected or reserved against on the Buyer
Balance Sheet, other than liabilities included in current liabilities, and none
of which was or would be material to the business, financial condition or
results of operations of Buyer, nor to Buyer's best knowledge does any aspect of
its business form a basis for any claim by any Person which, if asserted, could
result in a liability not disclosed by or reserved against in such Buyer Balance
Sheet.
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6.6 Disclaimer of Warranty Buyer acknowledges and agrees that
Sellers shall not be liable for or bound in any manner by, and Buyer has not
relied upon, any express or implied, oral or written, information, warranty,
guaranty, promise, statement, inducement, or representation pertaining to the
Business, the Assets and operations, prospects, income, expense, or liabilities
of the Business or the Systems except as is expressly set forth in Section 5,
elsewhere in this Agreement, the Transaction Documents or in the Schedules.
Buyer has conducted its own inspection of the Business and the Systems to its
own satisfaction and has independently investigated, analyzed, and appraised the
condition, value, prospects, and profitability thereof and the risk associated
therewith.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this
Agreement and the Closing Date, Sellers will give Buyer and its counsel,
accountants and other representatives full access, at times when a Seller is
present (if Sellers elect to be present), to all the premises and books and
records of the Business and to all the Assets and to the System personnel
provided that Buyer shall conduct its due diligence in a manner so as not to
unreasonably interfere with the operation of the Business and will furnish to
Buyer and such representatives all such documents, financial information, and
other information regarding the Business and the Assets as Buyer from time to
time reasonably may request. In addition, from and after the execution of this
Agreement (or May 15, 1997, whichever is later) Sellers shall give Buyer and its
counsel, accountants and other authorized representatives reasonable access to
Sellers' financial and other books and records and Sellers' employees, counsel,
accountants and other representatives for the purpose of complying with
applicable legal requirements, including preparing and auditing such Seller
financial statements as Buyer determines, in its judgment, are required or
advisable to comply with federal or state securities laws and the rules and
regulations of securities markets, as a result of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
Buyer shall pay the cost of the audit of any such Seller financial statements.
7.2 Continuity and Maintenance of Operations; Financial
Statements. Except as Buyer may otherwise consent in writing, between the date
of this Agreement and the Closing:
7.2.1 Each Seller will conduct the Business and operate
the Systems only in the usual, regular and ordinary course consistent with past
practices (including making capital expenditures and fulfilling installation
requests in the ordinary course with respect to the
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Business) and will (a)comply with all franchise terms and conditions from the
date of this Agreement until the Closing Date, (b) preserve its current business
intact, including preserving existing relationships with franchising
authorities, suppliers, customers and others having business dealings with such
Seller relating to the Business unless Buyer requests otherwise, (c) keep
available the services of its employees and agents providing services in
connection with the Business and (d) continue making marketing, advertising and
promotional expenditures in the ordinary course with respect to the Business.
7.2.2 Each Seller will maintain the Assets in good
repair, order and condition, will maintain in full force and effect, policies of
insurance with respect to the Business in such amounts and with respect to such
risks as customarily maintained by operators of cable television systems of the
size and geographic location as the Systems and will maintain its books, records
and accounts in the usual, regular and ordinary manner on a basis consistent
with past practices. Neither Seller will itself or will permit any of its
officers, directors, shareholders, agents or employees to, pay any of such
Seller's subscriber accounts receivable (other than for their own residences)
prior to the Closing Date. Each Seller will continue to implement its procedures
for disconnection and discontinuance of service to subscribers whose accounts
are delinquent in accordance with those in effect on the date of this Agreement.
7.2.3 Neither Seller will (a) sell, transfer or assign
any portion of the Assets or permit the creation of any Encumbrance on any
Asset, (b) modify, terminate, renew, suspend or abrogate any Governmental
Permits, Seller Contracts or any other contract or agreement (other than those
constituting Excluded Assets), (c) enter into any contract or commitment or
incur any indebtedness or other liability or obligation of any kind relating to
any System or the Business involving an expenditure in excess of $50,000, (d)
take or omit to take any action that would result in any of its representations
or warranties in this Agreement or in any Transaction Document not being true
and correct when made or as of the Closing, (e) engage in any marketing,
subscriber installation or collection practices that are inconsistent with its
past practices, or (f) implement any increase or decrease in the rates charged
to customers of the Systems or implement any channel line-up changes or
implement any programming retiering or repackaging, except as required by any
applicable laws or with Buyer's consent (which shall not be unreasonably
withheld). Sellers will reimburse the Buyer in connection with any credits due
to subscribers after the Closing as a result of Sprint promotions by the
Sellers, and Buyer agrees to credit such amounts to subscribers.
7.2.4 Each Seller promptly will deliver to Buyer true and
complete copies of (i) operating reports and any reports with respect to the
operations of the Business
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prepared by or for such Seller at any time from the date of this Agreement to
the Closing Date and prior to the date of submission to the appropriate
Governmental Authority and (ii) within 30 days after the end of each quarter
ending between the date of this Agreement and the Closing Date an operating
income statement for the Business, which shall be prepared from the books and
records of the Sellers with respect to the Business and in accordance with GAAP
and shall present fairly, in all material respects, the operating income of the
Systems for the periods indicated, subject only to standard year-end adjustments
(none of which will be material in amount) and the omission of footnotes. Buyer
shall provide to Sellers its quarterly Financial Statements (as soon as they are
prepared after each quarter) between the date of this Agreement and the Closing.
7.2.5 The appropriate Seller will duly and timely file a
valid notice of renewal under Section 626 of the Cable Communications Policy Act
of 1984 with the appropriate Governmental Authority with respect to all cable
television franchises of the Business that will expire within 36 months after
any date between the date of this Agreement and the Closing Date.
7.2.6 Sellers will (i) take all actions required by
applicable Legal Requirements with respect to the proposed increase to the rates
to be charged to the customers of the Systems, (ii) provide all information
reasonably requested by any Governmental Authority with respect to such proposed
rate increases, and (iii) take all reasonable actions to defend and support the
past, current and proposed rates charged or to be charged to the customers of
the Systems on a basis consistent with all applicable Legal Requirements.
Sellers will furnish Buyer with any correspondence from or to any Governmental
Authority in respect of the foregoing. In addition, in acknowledgment that it
may be necessary for Buyer to defend and support the past, current and proposed
rates charged or to be charged to the customers of the Systems (a "Rate
Defense"), Sellers agree to provide to Buyer the following, promptly upon
request: (i) complete and correct copies of all FCC Forms 393, 1200, 1205, 1210,
1215 and 1240 relating to rate regulation generally or specific rates charged to
customers of the Systems that have been prepared by Sellers (either before or
after the date of this Agreement) for filing with the appropriate Governmental
Authorities; (ii) and, to the extent that Sellers have not completed such forms
with respect to any community and/or any level or tier of cable television
service because such forms have not been required to be filed with any
Governmental Authority pursuant to applicable Legal Requirements, such other
information, work papers and documents (including rate history information) in
the possession of Sellers or any of its Affiliates and reasonably necessary for
a Rate Defense, which information, work papers and documents shall be certified
by an executive officer of the applicable Seller to be true, complete and
accurate to the best of
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Sellers' knowledge as of the date delivered. Each Seller will use (and cause its
Affiliates to use) reasonable efforts to preserve such forms, information, work
papers and documents.
7.3 Employee Matters.
7.3.1 Buyer may, but shall have no obligation to, employ
or offer employment to any employee of the Business (other than Retained
Employees). Not more than 60 days after the date of this Agreement, Sellers
shall provide to Buyer a list of all employees of the Systems, as of a recent
date, showing then-current positions, rates of compensation and dates of hire
and indicating which of such employees each Seller desires to retain as its
employees (the "Retained Employees"). Within 30 days after receipt of this list
(or such later date as Buyer and Sellers may mutually agree to), Buyer will
provide to Sellers in writing a list of employees Buyer or its Affiliates
desires to employ following the Closing, which list shall not include any
Retained Employees (the "Desired Employees"). Buyer shall notify Sellers prior
to distributing offer notices to the Desired Employees and shall coordinate all
hiring procedures relating to such Desired Employees with Sellers. Each Seller
agrees to cooperate in all reasonable respects with Buyer to allow Buyer to
evaluate and interview employees of the Business to make hiring decisions. As of
the Adjustment Time, each Seller shall terminate the employment of all its
employees who were employed incidental to the conduct of such Seller's Business
other than Retained Employees.
7.3.2 Sellers will pay or cause to be paid to all
employees employed in the Business all compensation, including salaries,
commissions, bonuses, deferred compensation, severance, insurance, pensions,
profit sharing, vacation (other than vacation which is allowed to be carried
over pursuant to Section 7.3.6(a)), sick pay and other compensation or benefits
to which they are entitled for periods prior to the Adjustment Time, including,
without limitation, all amounts, if any, payable on account of the termination
of their employment as of the Adjustment Time.
7.3.3 Each Seller will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as defined in
ERISA) maintained by such Seller pursuant to the provisions of such plans. Buyer
will not assume any obligation or liability for any such accrued benefits nor
any fiduciary or administrative responsibility to account for or dispose of any
such accrued benefits under any employee benefit plans maintained by either
Seller.
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7.3.4 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Sellers or arising under any Legal Requirement affecting
employees of Sellers incurred on or before the Adjustment Time or resulting from
or arising from events or occurrences occurring or commencing on or before the
Adjustment Time will remain the responsibility of Sellers, whether or not such
employees are hired by Buyer after the Closing. Buyer will not have and assume
any obligation or liability under or in connection with any such plan.
7.3.5 Each Seller will remain solely responsible for, and
will indemnify and hold harmless Buyer from and against all Losses arising from
or with respect to, all salaries and all severance, vacation (except for
adjustments pursuant to Section 3.2.2), medical, sick, holiday, continuation
coverage and other compensation or benefits to which its employees may be
entitled, whether or not such employees may be hired by the Buyer, as a result
of their employment by it prior to the Adjustment Time, the termination of their
employment as of the Adjustment Time, the obligation, if any, to notify and/or
bargain with any labor organization, the consummation of the transactions
contemplated hereby or pursuant to any applicable Legal Requirement (including
without limitation WARN) or otherwise relating to their employment prior to the
Adjustment Time.
7.3.6 Notwithstanding anything to the contrary herein,
Buyer will (a) credit each employee of Sellers (other than a Retained Employee)
who is offered employment by Buyer prior to the Closing and becomes an employee
of Buyer after the Closing (a "Hired Employee") the lesser of the amount of
vacation accrued by him or her as an employee of Sellers through and including
the Adjustment Time or the vacation permitted to be accrued by employees of
Buyer in accordance with Buyer's standard practices (the economic value of which
shall be credited to Buyer's account in accordance with Section 3.2.2. hereof);
(b) permit each Hired Employee to participate in Buyer's employee benefit plans
to the same extent as similarly situated employees of Buyer and their
dependents; and (c) give each hired employee credit for his or her past service
with the Sellers as of the Adjustment Time (including past service with any
prior owner or operator of seller) for purposes of eligibility and vesting under
Buyer's employee benefit and other plans to the same extent as other similarly
situated employees of Buyer except that for purposes of the Buyer's 401-k plan,
Hired Employees shall be treated as employees of the Buyer who have been hired
as of the Adjustment Time; and (d) not subject any Hired Employee to any waiting
periods or limitations on benefits for pre-existing conditions under Buyer's
employee benefit plans, including any group health plans, except to the extent
such employees were subject to such limitations under Sellers' employee benefit
plans.
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7.3.7. If Buyer discharges without cause within 180 days
after Closing any former employees of either Seller hired by Buyer at Closing,
and such employees would have been entitled to severance payments pursuant to
such Seller's severance benefits plan if such employees had been discharged
without cause by such Seller in accordance with Section 7.3.1 and not hired by
Buyer as of Closing, then Buyer shall pay severance benefits to such employees
in accordance with such Seller's severance benefit plan to the extent such plan
would have paid severance to any such employees.
7.3.8 Nothing in this Section 7.3 or elsewhere in this
Agreement shall be deemed to make any employee of the parties a third party
beneficiary of this Agreement.
7.4 Franchise Extensions; Franchise Renewals Required
Consents.; Estoppel Certificates
7.4.1 Each Seller shall use its reasonable efforts to
obtain, as promptly as possible a three year (from the Closing Date) extension
(a "Franchise Extension") of each Governmental Permit that is expired as of the
date of this Agreement (or that will expire prior to Closing) in form and
substance satisfactory to Buyer. Sellers agree and acknowledge that Buyer's
obligation in Section 7.4.2 to consent to a Franchise Renewal Requirement with
respect to a Franchise Renewal does not extend to Franchise Extensions and that
nothing in this Agreement (including Section 7.4.2) shall obligate Buyer to make
any payment to any Governmental Authority or to any other Person in assisting
Sellers in obtaining any Franchise Extension or to accept any adverse change in
any Governmental Permit or to accept any adverse condition in any Required
Consent with respect to a Governmental Permit in respect of which Sellers are
seeking a Franchise Extension.
7.4.2 In the event either Seller fails to obtain a
Franchise Extension that satisfies Section 7.4.1 with respect to such a
Governmental Permit, each Seller will use its reasonable efforts to obtain, as
promptly as possible and at its expense (except as set forth herein), a renewal
of each Governmental Permit that is expired as of the date of this Agreement (or
that will expire prior to Closing), each such renewed Governmental Permit (a
"Franchise Renewal") to have a term that will expire not less than ten years
after the Closing Date and otherwise in form and substance satisfactory to
Buyer. Each Seller will use its reasonable efforts to obtain in writing, as
promptly as possible (at its own expense pursuant to Section 12.17 hereof) all
the Required Consents and any other consent, authorization or approval required
to be obtained by such Seller in connection with the transactions contemplated
by this Agreement, in form and substance satisfactory to Buyer and deliver to
Buyer copies of such Required Consents
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and such other consents, authorizations or approvals promptly after they are
obtained by such Seller. Buyer will cooperate with Sellers to obtain all
Required Consents, Franchise Extensions and all Franchise Renewals, provided,
however, that except as expressly provided below in this Section 7.4.2, Buyer
shall have no obligation to (i) make any payment to any Governmental Authority
or to any other Person in assisting Sellers in obtaining any of the Required
Consents, Franchise Extensions or Franchise Renewals, or (ii) to accept any
adverse change in any Governmental Permit (including any Franchise Extension or
Franchise Renewal) or Seller Contract to be assigned to Buyer hereunder, or
(iii) to accept any adverse condition in any Required Consent with respect to
any such Governmental Permit (including any Franchise Extension or Franchise
Renewal) or Seller Contract, and neither Seller will agree to any such adverse
change or adverse condition without Buyer's consent. Notwithstanding the
foregoing, Sellers and Buyer hereby agree that to the extent that a Governmental
Authority requires Buyer to agree that it will upgrade, modify or rebuild a
System or provide public education and government facilities and equipment
including institutional networks for a System (other than any such upgrade,
modification, rebuild or programming that is required to bring a System into
compliance with Sellers' existing Governmental Permits as currently in effect or
with applicable Legal Requirements as currently in effect, which shall be the
sole responsibility of Sellers) as a condition to obtaining a Franchise Renewal
(any such condition, a "Franchise Renewal Requirement"), Buyer will consent to
such Franchise Renewal Requirement to the extent that the costs and expenses
that would be incurred in complying with such Franchise Renewal Requirements
does not exceed $3,000,000 (it being understood that Buyer shall have no
obligation to accept any such Franchise Renewal Requirements to the extent that
the costs and expenses that would be incurred in complying with them would
exceed $3,000,000), provided that Buyer shall be responsible for the first Two
Million Dollars ($2,000,000.00) of all costs and expenses incurred in complying
with any such Franchise Renewal Requirements and Sellers shall be responsible
for one-half of the costs and expenses greater than Two Million Dollars
($2,000,000.00) and less than Two Million Five Hundred Thousand Dollars
($2,500,000.00). Buyer's engineers and Sellers' engineers shall attempt in good
faith to agree prior to the Closing on the amount of such costs and expenses
that will be incurred in complying with all Franchise Renewal Requirements.
Costs payable by Sellers pursuant to this Section 7.4.2 that are not disputed by
Buyer's engineers and Sellers' engineers are payable as a Purchase Price
adjustment at the Closing. In the event of a disagreement in regard to the
amount of any or all of such costs, Buyer and Sellers will agree on a mutually
acceptable engineering firm which shall resolve the disputed amount of such
costs (and whose decision shall be final and binding on the parties) no later
than fifteen business days after the date on which the dispute was submitted to
such firm. To the extent such determination affects the amount of Sellers'
obligation with respect to such costs and expenses as described above, the
Purchase Price shall be appropriately adjusted (if such
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determination is made prior to the Closing) or the appropriate party shall make
an appropriate payment to the other party (if such determination is made after
the Closing) within three days after receipt of the decision of the engineering
firm. Sellers and Buyer will share equally all fees and expenses payable to such
firm in connection with such determination. Seller shall not be responsible for
costs in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00).
Buyer and Sellers shall mutually agree whether Form 394 shall be filed with
Government Authorities in connection with franchise consents. Any application or
other instrument requesting a Required Consent, Franchise Extension or Franchise
Renewal shall be reasonably acceptable to Buyer and, in the case of a Required
Consent for the transfer of a franchise substantially in the form attached
hereto as Exhibit G. The parties will furnish each other with any correspondence
from or to any Governmental Authority or other Person in respect of obtaining
the Required Consents, Franchise Extensions or Franchise Renewals and will
otherwise keep the other parties informed regarding the status with respect to
obtaining the Required Consents, Franchise Extensions or Franchise Renewals.
Buyer shall have the right, at its own expense, to participate in any hearings
or proceedings before the FCC or other Governmental Authorities with respect to
obtaining the Required Consents, Franchise Extensions or Franchise Renewals.
From and after the Closing, with respect to any Governmental Permit or Seller
Contract in respect of which Buyer, in its discretion, waived the requirement
under this Agreement that a Required Consent, Franchise Extension or Franchise
Renewal be obtained and that such Governmental Permit or Seller Contract be
assigned to Buyer at Closing, each Seller will provide reasonable assistance to
Buyer in connection with giving Buyer the benefit thereof and obtaining the
Required Consent, Franchise Extension or Franchise Renewal in respect thereof.
7.4.3. Each Seller shall use its reasonable efforts to
provide to Buyer, at or prior to the Closing, estoppel certificates (the
"Estoppel Certificates") satisfactory to Buyer of the lessor of each leasehold
interest included in the Real Property the transfer of which to Buyer does not
require such lessor's consent. To the extent any of the Governmental Permit
documents listed on Schedule 2 or delivered to Buyer refer to or incorporate by
reference any documents not listed on Schedule 2, Sellers will use their
reasonable best efforts to obtain confirmation from the franchising authority
which issued such Governmental Permit (either as part of the transfer resolution
with respect to a Required Consent, by separate letter or by any other means
acceptable to Buyer) substantially to the effect that the Governmental Permit
documents separately listed on Schedule 2 with respect to the Governmental
Permit issued by such franchising authority constitute all of the franchise
documents pertaining to such Governmental Permit and that none of the documents
referred to or incorporated by reference in such Governmental Permit documents
(unless such incorporated or referenced document is itself
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separately listed by name and date on Schedule 2 and was delivered to Buyer)
exists or contains any franchise commitments or obligations that would be
binding upon Buyer after Closing. In addition Sellers will provide an opinion of
local counsel that each Seller, as the case may be, has the authority under
local law to own and operate such systems, including but not limited to, those
franchise areas whose franchise has no expiration date.
7.5 HSR Notification. As soon as practicable after the
execution of this Agreement, but in any event no later than 15 Business Days
after such execution, Sellers and Buyer will each complete and file, or cause to
be completed and filed, any notification and report required to be filed under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Buyer and Sellers shall each pay one-half of
the required filing fee. The parties shall use their reasonable best efforts to
respond as promptly as reasonably practicable to any inquiries received from the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional information or
documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Authority in
connection with antitrust matters. The parties shall use their respective
reasonable efforts to overcome any objections which may be raised by the FTC,
the Antitrust Division or any other Governmental Authority having jurisdiction
over antitrust matters.
7.6 No Shopping. Neither Seller, nor their stockholders or
partners or any agent or representative of any of them will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (a) solicit or initiate the submission of proposals or
offers from any Person for, (b) participate in any discussions pertaining to or
(c) furnish any information to any Person other than Buyer relating to, any
direct or indirect acquisition or purchase of all or any portion of the Assets.
7.7 Lien and Judgment Searches. Sellers will obtain, the
expense of which shall be paid one-half by Sellers and one-half by Buyer, and
deliver to Buyer, the results of a lien and docket search (including UCC, state
and federal tax lien and judgment and real estate searches with respect to each
of the names listed in Schedule 1), conducted by a professional search company
of records in the offices of the secretaries of state in each state and county
clerks in each county where there exist tangible Assets, and in the state and
county where Sellers' principal offices are located and of the dockets of the
clerk of each federal and state court sitting in the city, county or other
applicable political subdivision where Sellers' principal offices
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or the tangible Assets may be located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company. Buyer may obtain, at its expense, real estate
title searches and real estate surveys for each of the fee estates included in
the Real Property. Buyer may obtain, the expenses of which shall be Buyer's sole
responsibility, title commitments for owner's title insurance policies for each
of the fee estates included in the Real Property.
7.8 Transfer Taxes. Any state or local sales, use, transfer or
similar taxes or fees or any other charge (including filing, recording and
vehicle registration fees) imposed by any Governmental Authority arising from or
payable by reason of the transfer of any of the Assets (including Real Property)
pursuant to this Agreement will be paid one-half by Buyer and one-half by
Sellers. All transfer and similar taxes or assessments, including transfer fees
and similar assessments for or under Governmental Permits or Seller Contracts
arising from or payable by reason of the conveyance of the Assets will be paid
one-half by Buyer and one-half by Sellers.
7.9 Distant Broadcast Signals. Unless otherwise restricted or
prohibited by any Governmental Authority or applicable Legal Requirement, if
requested by Buyer, Sellers will delete immediately prior to the Closing Date
any distant broadcast signals which Buyer determines will result in unacceptable
liability on the part of Buyer for copyright payments with respect to continued
carriage of such signals after the Closing.
7.10 Updated Schedules. Not less than five Business Days prior
to Closing, Sellers will deliver to Buyer revised copies of Schedules 1 through
10 which shall have been updated and marked to show any changes occurring
between the date of this Agreement and the date of delivery; provided, however,
that for purposes of each Seller's representations and warranties and covenants
in this Agreement, all references to the Schedules will mean the version of the
Schedules delivered with this Agreement on the date of signing, and provided
further that if the effect of any such updates to Schedules is to disclose any
one or more additional properties, privileges, rights, interests or claims as
Assets, Buyer, at or before Closing, will have the right (to be exercised by
written notice to Sellers) to cause any one or more of such items to be
designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
7.11 Use of Names and Logos. For a period of 60 days after the
Closing Date, Buyer will be entitled to use all trademarks, tradenames, service
marks, service names, logos and similar proprietary rights of Sellers and all
derivations and abbreviations of such names and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
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Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such tradename or mark that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.12 Satisfaction of Conditions. Each party will use its best
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement, as set forth in Section 9 and to take such other actions as
shall be reasonably necessary to give full effect to the transactions
contemplated by this Agreement provided that Buyer shall not be obligated to
take any action that it has no obligation to take pursuant to Section 7.4.
7.13 Confidentiality and Publicity. Neither party will issue
any press release or make any other public announcement or any oral or written
statements to either Seller's employees concerning this Agreement or the
transactions contemplated hereby except as required by applicable Legal
Requirements, without the prior written consent of the other party. Each party
will hold, and will cause its employees, consultants, advisors and agents to
hold the terms of this Agreement in confidence; provided that (a) such party may
use and disclose such information once it has become publicly disclosed (other
than by such party in breach of its obligations under this Section) or which
rightfully has come into the possession of such party (other than from the other
party) and (b) to the extent that such party may be compelled by Legal
Requirements to disclose any of such information, but the party proposing to
disclose such information will first notify and consult with the other party
concerning the proposed disclosure, to the extent reasonably feasible. Each
party also may disclose such information to employees, consultants, advisors,
agents and actual or potential lenders whose knowledge is necessary to
facilitate the consummation of the transactions contemplated by this Agreement.
The obligation by each party to hold information in confidence pursuant to this
Section will be satisfied if such party exercises the same care with respect to
such information as it would exercise to preserve the confidentiality of its own
similar information. Notwithstanding the foregoing, this Agreement may be
submitted to attorneys for US West who agree in writing to be bound by a
confidentiality agreement reasonably satisfactory to Buyer.
7.14 Bulk Transfers. Buyer waives compliance by Sellers with
Uniform Commercial Code Article 6 relating to the transactions contemplated
hereby.
7.15 Transitional Billing Services Each Seller will provide to
Buyer, upon request, access to and the right to use its billing system
computers, software and related fixed assets
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in connection with the Systems acquired by Buyer for a period of up to 90 days
following the Closing to allow for conversion of existing billing arrangements
("Transitional Billing Services"). Buyer will notify Sellers at least 10 days
prior to the Closing as to whether it desires Transitional Billing Services from
Sellers. All Transitional Billing Services, if any, that are requested by Buyer
will be provided on terms and conditions reasonably satisfactory to Sellers;
provided, however, that the amount to be paid by Buyer will not exceed the cost
to Sellers of providing such Transitional Billing Services. Sellers will notify
Buyer, upon the request of the Buyer, at least 45 days prior to the Closing, of
the cost to Sellers of providing such Transitional Billing Services.
7.16 Notice of Certain Matters. Sellers shall promptly give
notice to Buyer of (i) any fact, event, circumstances or action the existence or
occurrence of which has caused or is reasonably likely to cause any of either
Seller's representations or warranties under this Agreement not to be true in
any material respect, (ii) any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of the Assets or
the Systems, (iii) any notice of violation or complaint under any Governmental
Permit, (iv) any complaint, challenge or other inquiry from any Governmental
Authority with respect to Sellers' past, current or proposed rates for cable
services and equipment charged by the Systems, and (v) any other event or change
in circumstances which, if not corrected prior to the Closing, would prevent
either Seller from fulfilling any condition to Closing set forth in this
Agreement.
7.17 MDU Access Agreements Sellers will use their reasonable
best efforts to obtain, prior to the Closing on terms reasonably acceptable to
Buyer, written access agreements with the appropriate party for the three
largest MDU accounts at the date of this Agreement as described in Schedule 3,
Section G. If consent to transfer is to be required, such agreements shall
either include a consent to the transfer of such agreement to Buyer, subject to
the occurrence of the Closing, or Sellers shall obtain such consent by separate
instrument.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to the Obligations of Buyer and Sellers. The
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or before the Closing, of the
following, which may be waived by the parties to the extent permitted by
applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR
Act have been made and the applicable waiting period has expired or been earlier
terminated without the
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receipt of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or
proceeding is pending or threatened by or before any Governmental Authority and
no Legal Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement or have a material adverse effect on
the right of Buyer to exercise full rights of ownership of the Systems or (d)
prevent or make illegal the consummation of any transactions contemplated by
this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or before the Closing, of the following conditions,
which may be waived by Buyer to the extent permitted by applicable Legal
Requirements:
8.2.1 Representations and Warranties. The representations
and warranties of each Seller in this Agreement and any Transaction Document, if
specifically qualified by materiality, are true in all respects and, if not so
qualified, are true in all material respects, at and as of the Closing with the
same effect as if made at and as of the Closing.
8.2.2 Performance of Agreements. Each Seller has
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants and conditions in this Agreement and
any Transaction Document to be performed or complied with by such Seller at or
before the Closing.
8.2.3 Deliveries. Each Seller has delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required under Section 9.2.
8.2.4 Franchise Extensions; Franchise Renewals; Consents.
Sellers have delivered to Buyer evidence, in form and substance satisfactory to
Buyer, that all of the
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Franchise Extensions, Franchise Renewals and Required Consents have been
obtained or given (or deemed to have been given pursuant to Section 617 of the
Communications Act of 1934, as amended, also known as 47 U.S.C. 537) and are in
full force and effect without the imposition of any adverse change or condition,
except for (i) any such change or condition that Buyer accepts or (ii) any
Franchise Renewal Requirement that Buyer is obligated to accept under Section
7.4.2 hereof. The FCC shall have consented, to the extent such consent is
legally required, to the transfer to Buyer of all Governmental Permits issued by
the FCC, and the time for filing petitions for reconsideration of such consents
shall have passed.
8.2.5 Retransmission Consent. With respect to any
retransmission consent agreements for broadcast signals carried on the Systems
that are pending or are included as part of the Excluded Assets, all required
retransmission consents for continued carriage of such broadcast signals shall
have been obtained on terms reasonably acceptable to Buyer.
8.2.6 No Material Adverse Change. There has not been any
material adverse change in either Seller, the Business, the Assets or the
Systems since the date of this Agreement.
8.2.7 Equivalent Basic Subscribers. As of the Closing,
the Systems shall be serving, in the aggregate, not less than 21,000 Equivalent
Basic Subscribers.
8.2.8 Pole Agreements. With respect to any pole
attachment agreements that are pending as of the Closing, an interim
authorization for the continued maintenance of the Systems' pole attachments
shall have been obtained on terms reasonably acceptable to Buyer.
8.3 Conditions to Obligations of Sellers. The obligations of
each Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by such Seller, to the extent permitted by applicable Legal
Requirements:
8.3.1 Representations and Warranties. All representations
and warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
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8.3.2 Performance of Agreements. Buyer has performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions in this Agreement and any
Transaction Document to be performed or complied with by Buyer at or before the
Closing.
8.3.3 Deliveries. Buyer has delivered the items and
documents required to be delivered by it, pursuant to this Agreement, including
those required under Section 9.3.
8.4 Waiver of Conditions. Any party may waive in writing any
or all of the conditions to its obligations under this Agreement.
SECTION 9. CLOSING.
9.1 The Closing; Time and Place. The Closing will be held on a
date agreed upon by Buyer and Seller that is within 15 days after all conditions
to the Closing contained in Sections 8.1.1 and 8.2.4 of this Agreement (other
than those based on acts to be performed at the Closing) have been satisfied or
waived provided that neither party shall be deemed to have waived any other
conditions imposed for its benefit by virtue of this sentence. The Closing will
be held at 9:00 a.m. local Denver time at Sellers' office located at 5619 DTC
Parkway, Englewood, Colorado 80111, or will be conducted by mail or fax or at
such place and time as Buyer and Sellers may agree.
9.2 Sellers' Delivery Obligations.
At the Closing, Sellers will deliver (or caused to be
delivered) to Buyer the following:
(a) a Bill of Sale and Assignment in the form attached as
Exhibit A;
(b) a special warranty deed in a form reasonably
acceptable to Buyer (and complying with applicable state laws) with respect to
each parcel of owned Real Property, duly executed and acknowledged and in
recordable form;
(c) motor vehicle title certificates and such other
transfer instruments as Buyer may deem necessary or advisable to transfer the
Assets to Buyer and to
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perfect Buyer's rights in the Assets free and clear of all Encumbrances except
Permitted Encumbrances;
(d) duly executed releases and other termination
instruments, in form satisfactory to Buyer, of all Encumbrances affecting any of
the Assets (other than Permitted Encumbrances);
(e) a certificate, dated the Closing Date, signed on
behalf of each Seller by the CEO, President or a Vice President of each Seller,
stating that the conditions set forth in Sections 8.2.1 and 8.2.2 are satisfied;
(f) a manually executed original of any instrument
evidencing receipt of a Required Consent and any Estoppel Certificate received
by Sellers;
(g) an opinion of Mary S. Willis, Esq., Sellers' counsel,
addressed to Buyer and its lenders, dated the Closing Date, in the form attached
as Exhibit C and an opinion of Cole, Raywid & Braverman, L.L.P., Seller's
special communications counsel, addressed to Buyer and its lenders, dated the
Closing Date, in the form attached as Exhibit D;
(h) a Noncompetition Agreement, duly executed by each
Seller and each Affiliate of Seller listed on the signature pages thereto, in
the form attached as Exhibit E;
(i) pursuant to Section 7.4.3, an opinion of Downs,
Rachlin & Martin, P.C., Sellers' local Vermont and New Hampshire counsel,
addressed to Buyer and its lenders, dated the Closing Date to the substantive
effect contemplated by Section 7.4.3 and otherwise in form and substance
reasonably acceptable to Buyer and its lenders;
(j) Tax Clearance Certificates or letters issued by the
Department of Revenue (or other appropriate Governmental Authorities) of the
State of Vermont and the State of New Hampshire, respectively, certifying that
the Sellers have paid all taxes due and payable as of the Closing Date or other
date as close as possible to the Closing Date; and
(k) such other documents as Buyer may reasonably request
in connection with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations.
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At the Closing, Buyer will deliver (or caused to be
delivered) to Sellers the following:
(a) the Base Purchase Price pursuant to Section 3.
(b) an Assumption Agreement in the form attached as
Exhibit B.
(c) (i) a certificate, dated the Closing Date, signed on
behalf of Buyer by the chief executive officer or a vice president of Buyer,
stating that the conditions set forth in Sections 8.3.1 and 8.3.2 are satisfied;
and (ii) such other documents as Sellers may reasonably request in connection
with the transactions contemplated by this Agreement.
(d) an opinion of Dow, Lohnes & Albertson, Buyer's
counsel, addressed to each Seller and dated the Closing Date, in the form
attached as Exhibit F.
SECTION 10. TERMINATION.
10.1 Termination Events. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of
Buyer and Sellers;
10.1.2 By Sellers, on the one hand, or Buyer, on the
other hand, at any time, if the other is in material breach or default of any of
its covenants, agreements or other obligations in this Agreement or in any
Transaction Document, or if any of its representations in this Agreement or in
any Transaction Document is not true in all material respects when made or when
otherwise required by this Agreement or any Transaction Document to be true and
such breach or default or failure to be true is not cured or waived within 30
days of receipt of notice of such breach or default;
10.1.3 By Sellers, on one hand, or Buyer, on the other
hand, upon written notice to the other, if the Closing has not occurred on or
before December 31, 1997, for any reason other than a material breach or default
by such party of its respective covenants, agreements or other obligations under
this Agreement, or any of its representations in this Agreement not being true
and accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate in all material respects;
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10.1.4 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in Sections 7.13 and 12.17.
Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3 or 12.18 will
not limit or impair any remedies that any party may have with respect to a
breach or default by the other of its covenants, agreements or obligations under
this Agreement.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
representations and warranties of each Seller in this Agreement and in the
Transaction Documents to be delivered by such Seller pursuant to this Agreement
will survive the Closing for the period of the applicable statute of limitations
(except that representations and warranties relating to matters of title shall
survive indefinitely). The representations and warranties of Buyer in this
Agreement and in the Transaction Documents to be delivered by Buyer pursuant to
this Agreement will survive the Closing for the period of the applicable statute
of limitations. The covenants and agreements of the parties in this Agreement
and in the Transaction Documents to be delivered by Seller or Buyer pursuant to
this Agreement, will survive the Closing and will continue in full force and
effect without limitation. All representations, warranties and covenants shall
be unaffected by (and shall not be deemed waived by) any investigation, audit,
appraisal or inspection at any time made by or on behalf of any party hereto or
by any notice or information delivered by any party hereto (including the
updated Schedules to be delivered to Buyer pursuant to Section 7.10).
11.2 Indemnification by Seller. Each Seller will, jointly and
severally, indemnify and hold harmless Buyer and its shareholders and its and
their respective Affiliates, and the shareholders, directors, officers,
employees, agents, successors and assigns and any Person claiming by or through
any of them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any
breach of any representation or warranty made by either Seller in this Agreement
or any Transaction Document, (ii) any breach of any covenant, agreement or
obligation of either Seller contained in this Agreement or any Transaction
Document, (iii) any act or omission of either Seller with respect to, or any
event or circumstance related to, the ownership or operation of the Assets or
the conduct of the Business, which act, omission, event or circumstance occurred
or existed prior to or at the Closing Date, without regard to whether a claim
with respect to such matter is
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asserted before or after the Closing Date, including any matter described on
Schedule 8, (iv) any claim that the transactions contemplated by this Agreement
violates WARN, or any similar state or local law or fraudulent conveyance laws
or UCC Article 6 of any jurisdiction, (v) any rate refund ordered by any
Governmental Authority for periods prior to the Closing Date, (vi) any and all
of the Excluded Liabilities, including any liabilities arising at any time under
any Governmental Permit or Seller Contract not assigned to Buyer at Closing,
(vii) any claim for brokerage or agent's or finder's commissions or compensation
in respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Sellers; and (viii) all costs, if any, for which
Seller is responsible pursuant to Section 7.4.2 hereof; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.3 Indemnification by Buyer. Buyer will indemnify and hold
harmless each Seller and each Seller's shareholders, directors, officers,
employees, agents, successors and assigns, and any Person claiming by or through
any of them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any
breach of any representation or warranty made by Buyer in this Agreement or any
Transaction Document, (ii) any breach of any covenant, agreement or obligation
of Buyer contained in this Agreement or any Transaction Document, (iii) any act
or omission of Buyer with respect to, or any event or circumstance related to,
the ownership or operation of the Assets or the conduct of the Business, which
act, omission, event or circumstance occurred or existed after the Closing, (iv)
the failure by Buyer to perform any of its obligations in respect of the Assumed
Liabilities, (v) any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any Person purporting to act on behalf of Buyer, and (vi) all costs for which
Buyer is responsible pursuant to Section 7.4.2 hereof; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
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11.4 Third Party Claims. Promptly after the receipt by any
party of notice of any claim, action, suit or proceeding by any Person who is
not a party to this Agreement (collectively, an "Action"), which Action is
subject to indemnification under this Agreement, such party (the "Indemnified
Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The Indemnified Party
will be entitled, at the sole expense and liability of the Indemnifying Party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the Indemnifying Party, within a reasonable time after the giving
of such notice by the Indemnified Party, (a) admits in writing to the
Indemnified Party the Indemnifying Party's liability to the Indemnified Party
for such Action under the terms of this Section 11, (b) notifies the Indemnified
Party in writing of the Indemnifying Party's intention to assume such defense,
(c) provides evidence reasonably satisfactory to the Indemnified Party of the
Indemnifying Party's ability to pay the amount, if any, for which the
Indemnified Party may be liable as a result of such Action and (d) retains legal
counsel reasonably satisfactory to the Indemnified Party to conduct the defense
of such Action. The other party will cooperate with the party assuming the
defense, compromise or settlement of any such Action in accordance with this
Agreement in any manner that such party reasonably may request. If the
Indemnifying Party so assumes the defense of any such Action, the Indemnified
Party will have the right to employ separate counsel and to participate in (but
not control) the defense, compromise or settlement of the Action, but the fees
and expenses of such counsel will be at the expense of the Indemnified Party
unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money damages is sought against the
Indemnified Party or (iii) the Indemnified Party will have been advised by its
counsel that there may be one or more defenses available to it which are
different from or additional to those available to the Indemnifying Party, and
in any such case that portion of the fees and expenses of such separate counsel
that are reasonably related to matters covered by the indemnity provided in this
Section 11 will be paid by the Indemnifying Party. No Indemnified Party will
take any unilateral action at any time which may affect the liability of the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party or take any unilateral
action (other than actions expressly required or permitted by the provisions of
this Agreement) at any time which may affect the liability of the Indemnifying
Party, unless the Indemnifying Party has failed, after reasonable notice, to
undertake control of such Action in the manner provided in this Section 11.4. No
Indemnifying Party will settle or compromise any such Action (A) in which any
relief other than the payment of money damages is sought against any Indemnified
Party or (B) in the case of any Action relating to the Indemnified Party's
liability for any tax, if the effect of such settlement would be an increase in
the liability of the Indemnified Party for the payment of any tax for any period
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beginning after the Closing Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
11.5 Limitations on Indemnification - Sellers. Sellers will
not be liable for indemnification arising solely under (a)(i) through (a)(vii)
of Section 11.2 for (a) any Losses of or to Buyer or any other person entitled
to indemnification from Sellers or (b) any claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incidental or relating to or resulting from any of the
foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this Section 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Sellers would, but for the provisions of this
Section 11.5, be liable exceeds, on an aggregate basis, $175,000, in which case
Seller will be liable for all such Buyer Damages up to $2,000,000, which will be
due and payable within 15 days after Seller's receipt of a statement therefor.
In regard to Buyer Damages arising under Section 11.2, Sellers' total liability
to Buyer shall not exceed $2,000,000. In regard to Buyer's Damages arising
pursuant to Section 11.2, Seller shall be liable for indemnification arising
thereunder for the period of the applicable statute of limitations.
11.6 Limitations on Indemnification - Buyer. Buyer will not be
liable for indemnification arising solely under (a)(i) through (a)(vi) of
Section 11.3 for (a) any Losses of or to Sellers or any other person entitled to
indemnification from Buyer or (b) any claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incidental or relating to or resulting from any of the
foregoing the items described in clauses (a) and (b) collectively being referred
to for purposes of this Section 11.6 as "Seller Damages") unless the amount of
Seller Damages for which Buyer would, but for the provisions of this Section
11.6, be liable exceeds, on an aggregate basis, $175,000, in which case Buyer
will be liable for all such Seller Damages up to $2,000,000, which will be due
and payable within 15 days after Buyer's receipt of a statement therefor. In
regard to Seller Damages arising under Section 11.3, Buyer's total liability to
Sellers shall not exceed $2,000,000. In regard to Seller's Damages arising
pursuant to Section 11.3, Buyer shall be liable for indemnification arising
thereunder for the period of the applicable statute of limitations.
SECTION 12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding upon the parties and
their respective assigns
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and successors in interest and will inure solely to the benefit of the parties
and their respective assigns and successors in interest, and no other Person
will be entitled to any of the benefits conferred by this Agreement. Without the
prior written consent of the other party, neither Buyer nor either Seller may
assign any of its rights or obligations under this Agreement or delegate any of
its duties under this Agreement. Notwithstanding the foregoing, Sellers may
assign all or part of its rights under this Agreement to a qualified
intermediary as that term is defined in Treasury Reg. 1.1031 (k-1(g)(4))
provided that any such assignment shall not materially delay the Closing.
12.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier:
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To Buyer at:
1777 South Harrison Street
Suite P-200
Denver, CO 80210-3925
ATTN: James C. Vaughn
Telecopy: 303-757-6105
With a copy addressed to the attention of:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
ATTN: Leonard J. Baxt, Esq.
Telecopy: 202-776-2222
To Sellers at:
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Dan Buchanan
Telecopy: 303-488-3219
With a copy addressed to the attention of Mary S.
Willis, Esq. at fax 303-488-3217
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, except that any notice of a change of address will be effective
only upon actual receipt.
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12.3 Attorneys' Fees. In the event of any action or suit based
upon or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.
12.4 Right to Specific Performance. Each Seller acknowledges
that the unique nature of the Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by either
Seller of its obligations under this Agreement, and Seller agrees that in the
event of such breach, Buyer will upon proper action instituted by it, be
entitled to a decree of specific performance of this Agreement.
12.5 Waiver. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
12.6 Captions. The captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.7 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE
WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS
RULES OF COLORADO.
12.8 Terms. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
12.9 Rights Cumulative. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.10 Further Actions. Sellers and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost
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to the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
12.11 Time. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
12.12 Late Payments. If either party fails to pay the other
any amounts when due under this Agreement, the amounts due will bear interest
from the due date to the date of payment at the annual rate publicly announced
from time to time by The Bank of New York as its prime rate (the "Prime Rate")
plus 3%, adjusted as and when changes in the Prime Rate are made.
12.13 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original.
12.14 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) and the Transaction Documents contain
the entire agreement of the parties and supersedes all prior oral or written
agreements and understandings with respect to the subject matter. This Agreement
may not be amended or modified except by a writing signed by the parties.
12.15 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefited by such provision or any
other provisions of this Agreement.
12.16 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
12.17 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection
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with the negotiation of this Agreement, the performance of its obligations and
the consummation of the transactions contemplated by this Agreement.
12.18 Risk of Loss; Condemnation.
12.18.1 Sellers will bear the risk of any loss or damage
to the Assets resulting from fire, theft or other casualty (except reasonable
wear and tear) at all times prior to the Closing. If any such loss or damage is
sufficiently substantial so as to preclude or prevent resumption of normal
operations of any material portion of a System or the replacement or restoration
of the lost or damaged property within 20 days from the occurrence of the event
resulting in such loss or damage, Sellers will immediately notify Buyer in
writing of that fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Sellers either (i) to waive such defect
and proceed toward consummation of the transaction in accordance with terms of
this Agreement or (ii) terminate this Agreement. If Buyer elects to so terminate
this Agreement, Buyer and Seller will stand fully released and discharged of any
and all obligations under this Agreement except as set forth in the second
sentence of Section 10.2 in regard to remedies related to circumstances other
than those described in this Section 12.18. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Sellers
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Sellers to Buyer, or the rights to such proceeds will be assigned by Sellers
to Buyer if not yet paid over to Sellers, and Sellers will pay to Buyer (or
Buyer may withhold from the Base Purchase Price) an amount equal to the
difference between the amount of such insurance proceeds and the full
replacement cost of the damaged or lost Assets.
12.18.2 If, prior to the Closing, any part of or interest
in the Assets is taken or condemned as a result of the exercise of the power of
eminent domain, or if a Governmental Authority having such power informs Sellers
or Buyer that it intends to condemn all or any part of the Assets (such event
being called, in either case, a "Taking"), then Buyer may terminate this
Agreement. If Buyer does not elect to terminate this Agreement, then (a) Buyer
will have the sole right, in the name of Sellers, if Buyer so elects, to
negotiate for, claim, contest and receive all damages with respect to the
Taking, (b) Sellers will be relieved of its obligation to convey to Buyer the
Assets or interests that are the subject of the Taking, (c) at the Closing
Sellers will assign to Buyer all of Sellers' rights to all damages payable with
respect to such Taking and will pay to Buyer all damages previously paid to
Sellers with respect to the Taking
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and (d) following the Closing, Sellers will give Buyer such further assurances
of such rights and assignment with respect to the taking as Buyer may from time
to time reasonably request.
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The parties have executed this Agreement as of the day and year first above
written.
SELLERS:
WESTMARC DEVELOPMENT JOINT VENTURE,
by WestMarc Development, Inc., its Managing Partner
By: /s/ William R. Fitzgerald
-------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI CABLEVISION OF VERMONT, INC.
By: /s/ William R. Fitzgerald
-------------------------
Name: William R. Fitzgerald
Title: Vice President
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware
limited partnership, by FrontierVision Partners, L.P.,
its general partner, by FVP GP, L.P., its general
partner, by FrontierVision Inc. its general partner
By: /s/ James. C. Vaughn
--------------------
Name: James C. Vaughn
Title: President
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Exhibit 10.18
THE CHASE MANHATTAN BANK
CHASE SECURITIES INC.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
J.P. MORGAN SECURITIES INC.
September 15, 1997
FrontierVision Operating Partners, L.P.
Senior Secured Credit Facilities
--------------------------------
Commitment Letter
-----------------
FrontierVision Operating,
Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attention: John S. Koo
Senior Vice President and
Chief Financial Officer
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("CHASE"), Chase Securities
Inc. ("CSI"), Morgan Guaranty Trust Company of New York ("MORGAN", and together
with Chase, the "INITIAL LENDERS") and J.P. Morgan Securities Inc. ("JPMSI")
that FrontierVision Operating Partners, L.P. a Delaware limited partnership (the
"BORROWER"), requires senior bank financing in an aggregate principal amount up
to $650,000,000, which under certain circumstances described in the Term Sheet
(referred to below) may be increased to $900,000,000 (i) to refinance senior
debt outstanding under the Borrower's existing credit facilities, (ii) to
finance the acquisition (the "ACQUISITION") of certain cable properties owned
and operated by TCI Northeast, Cablevision Systems located in Maine and cable
properties owned and operated by Cox Communications Inc. located in Ohio (such
cable properties to be acquired being herein called the "ACQUIRED SYSTEMS"), and
to pay for fees, commissions and expenses incurred in connection therewith,
(iii) to finance future acquisitions of cable properties and (iv) for general
corporate purposes.
Each of Chase and Morgan is pleased to offer to commit to provide such
required senior bank financing in the amounts of $390,000,000 and $260,000,000,
respectively, all on the terms and conditions set forth herein (this letter, the
"COMMITMENT LETTER"), in the Term Sheet attached hereto as Exhibit A (the "TERM
SHEET") and in the letter of even date herewith (the "FEE LETTER") addressed by
the Initial Lenders to you providing, among other things, for certain fees
relating to the senior bank financing (such required senior bank financing as
described in the
<PAGE>
FrontierVision Operating -2- September 15, 1997
Partners, L.P.
attached Term Sheet is hereinafter referred to as the "SENIOR FACILITY"). The
Initial Lenders, in consultation with you, reserve the right to arrange,
directly or indirectly through one or more of their affiliates (including CSI
and JPMSI), a syndicate of banks and/or other financial institutions acceptable
to the Initial Lenders (including the Initial Lenders, the "LENDERS") and the
Borrower to provide a portion of the Senior Facility that the Initial Lenders
have offered to commit to provide. The Initial Lenders shall be relieved of
their obligation to provide the Senior Facility to the extent that you accept
the offers of Lenders other than the Initial Lenders to provide a portion of the
Senior Facility that the Initial Lenders have offered to commit to provide. The
obligations of the Initial Lenders hereunder are several and not joint.
Each Initial Lender has submitted this letter after reviewing certain
historical financial statements and other information provided to the Initial
Lenders by you and your financial advisor(s). Each Initial Lender may terminate
its obligations under the preceding paragraph to provide its respective portion
of the Senior Facility: (i) if the terms of the proposed transaction are
changed in any respect determined by such Initial Lender to be material, (ii) if
any information submitted to such Initial Lender proves to have been inaccurate,
incomplete or misleading; (iii) if any material adverse change occurs after, or
any additional information is disclosed to or discovered by such Initial Lender
that such Initial Lender deems materially adverse, in respect of the condition
(financial or otherwise), business, operations, assets, nature of assets,
liabilities or prospects of the general partner of the Borrower (the "GENERAL
PARTNER") or the Borrower (taken as a whole), the Acquisition or the Acquired
Systems; (iv) if any of the fees or other compensation provided for by the Fee
Letter are not paid when due; (v) if any condition to such Initial Lender's
obligations set forth herein or in the Term Sheet cannot be satisfied; or (vi)
if any material adverse change shall occur after the date of this letter in loan
syndication or capital market conditions generally, or in the regulatory
environment applicable to cable television systems generally. In the event that
either Initial Lender shall terminate its commitment to provide a portion of the
Senior Facility, the other Initial Lender shall have the right to terminate its
commitment to provide its respective portion of the Senior Facility. In
addition, each Initial Lender's obligations under this letter are subject to the
negotiation, execution and delivery of mutually satisfactory financing
documentation.
By your acceptance of this offer, you hereby agree to indemnify and
hold harmless each Initial Lender, CSI, JPMSI and the other Lenders and each
director, officer, employee and affiliate thereof (each, an "INDEMNIFIED
PERSON") from and against any and all losses, claims, damages, liabilities (or
actions or other proceedings commenced or threatened in respect thereof) and
expenses that arise out of, result from or in any way relate to this letter, the
Term Sheet or the Fee Letter, the other transactions contemplated hereby or the
provision or syndication of the Senior Facility, and you hereby agree to
reimburse each indemnified person, upon its demand, for any legal or other
expenses incurred in connection with investigating, defending or participating
in any such loss, claim, damage, liability or action or other proceeding
(whether or not such indemnified person is a party to any action or proceeding
out of which any
<PAGE>
FrontierVision Operating -3- September 15, 1997
Partners, L.P.
such expenses arise), other than any of the foregoing claimed by any indemnified
person to the extent finally determined by a court of competent jurisdiction to
be incurred by reason of the gross negligence or willful misconduct of such
indemnified person. None of the Initial Lenders, CSI, JPMSI nor any other Lender
shall be responsible or liable to the Borrower, any of its shareholders or any
other person or entity for any consequential damages that may be alleged as a
result of this letter. In addition, you hereby agree to reimburse each Initial
Lender from time to time upon such Initial Lender's demand for such Initial
Lender's reasonable out-of-pocket costs and expenses (including, without
limitation, legal fees and expenses and printing, reproduction, document
delivery, communication and travel costs) incurred in connection with the
syndication of the Senior Facility and the preparation, review, negotiation,
execution and delivery of this letter, the Term Sheet, the Fee Letter, the
definitive financing agreements and the other documents relating to the Senior
Facility. Your obligations under this paragraph shall survive any termination of
the obligations of the Initial Lender under this letter and shall be effective
regardless of whether the definitive financing agreements are executed or any
loans are made.
In accordance with market practice, an information package containing
relevant information concerning the Senior Facility, the Acquisition, the
Acquired Systems, the General Partner and the Borrower and the transactions
contemplated hereby will be provided, on a confidential basis, by the Borrower
to potential lenders and participants. The Initial Lenders, CSI and JPMSI will
be pleased to assist the Borrower in the preparation of this package. The
Borrower agrees to cooperate, and to cause the management of the Borrower to
cooperate, with the Initial Lenders, CSI and JPMSI in effecting the syndication
of the Senior Facility (including participation in a reasonable number of
meetings with potential lenders and participants). The Initial Lenders, CSI and
JPMSI will manage all aspects of the primary syndication process, including,
without limitation, the invitation and timing of offers to potential lenders and
participants, the acceptance of commitments and the amounts of commitments
accepted. To assist the Initial Lenders, CSI and JPMSI in its syndication
efforts, you agree promptly to prepare and provide to the Initial Lenders, CSI
and JPMSI all information with respect to the Borrower, the Acquisition, the
Acquired Systems and the other transactions contemplated hereby, including all
financial information and projections (the "PROJECTIONS"), as we may reasonably
request in connection with the arrangement and syndication of the Senior
Facility. You hereby represent and covenant that (a) all information other than
the Projections (the "INFORMATION") that has been or will be made available to
the Initial Lenders, CSI or JPMSI by you or any of your representatives is or
will be, when furnished, complete and correct in all material respects and does
not or will not, when furnished, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (b) the Projections that have been or will be
made available to the Initial Lenders, CSI or JPMSI by you or any of your
representatives have been or will be prepared in good faith based upon
reasonable assumptions. You understand that in arranging and syndicating the
Senior Facility we may use and rely on the Information and Projections without
independent verification thereof.
<PAGE>
FrontierVision Operating -4- September 15, 1997
Partners, L.P.
You acknowledge that the Initial Lenders, CSI and JPMSI and their
affiliates may be providing debt financing, equity capital or other services
(including financial advisory services) to other companies in respect of which
you or your affiliates may have conflicting interests. None of the Initial
Lenders, CSI nor JPMSI will use confidential information obtained from you by
virtue of the transactions contemplated by this letter or its other
relationships with you in connection with the engagements of the Initial
Lenders, CSI and JPMSI with other companies, and none of the Initial Lenders,
CSI nor JPMSI will furnish any such information to such other companies;
provided that nothing herein shall prevent the Initial Lenders, CSI or JPMSI
- --------
from using such information (a) which had been publicly disclosed other than as
a result of a disclosure by the Initial Lenders, CSI or JPMSI prohibited by the
terms of this letter or (b) already in its possession prior to its disclosure by
you.
This letter is delivered to you upon the condition that, prior to your
acceptance of this offer, unless otherwise agreed to by the Initial Lenders, CSI
and JPMSI, neither the existence of this letter, the Term Sheet or the Fee
Letter nor any of their contents shall be disclosed by you except (a) as may be
compelled to be disclosed in a judicial or administrative proceeding or as
otherwise required by law or (b) on a confidential and "need to know" basis, to
your directors, officers, employees, advisors and agents. In addition, except
as provided in the previous sentence, neither the existence of the Fee Letter
nor the contents thereof shall be disclosed, whether before or after acceptance
of this offer, to any third party (including, without limitation, through the
filing of a copy thereof with any governmental agency), without the prior
written consent of the Initial Lenders, CSI and JPMSI.
The Initial Lenders, CSI and JPMSI shall have the right to review and
approve all public announcements and filings relating to the Senior Facility
that refer to the Initial Lenders, the other Lenders, CSI or JPMSI, before they
are made (such approval not to be unreasonably withheld) other than filings made
with the Securities and Exchange Commission relating to the Senior Facility.
Each Initial Lenders' offer set forth in this letter will terminate at
12:00 noon (New York City time) on September 17, 1997 unless you accept this
letter and the Fee Letter at or prior to that time by (a) signing and returning
to each of Chase and Morgan counterparts of this letter and the Fee Letter and
(b) paying to each Initial Lender the fees stated in the Fee Letter to be
payable on or prior to the date on which you accept this letter. Each Initial
Lender's commitment under this letter, if accepted by you, will in any event
terminate if definitive financing agreements have not been executed at or prior
to 5:00 p.m. (New York City time) on December 12, 1997 (such financing
agreements to provide that the initial extension of credit thereunder will occur
on a date (the "Closing Date") not later than December 12, 1997).
------------
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FrontierVision Operating -5- September 15, 1997
Partners, L.P.
We are pleased to have been given the opportunity to assist you in
connection with this important financing.
THE CHASE MANHATTAN BANK CHASE SECURITIES INC.
By: /s/ David Staples By: /s/ Thomas G. Malone
--------------------- -----------------------
Name: David Staples Name: Thomas G. Malone
Title: Title: Managing Director
MORGAN GUARANTY TRUST COMPANY J.P. MORGAN SECURITIES INC.
OF NEW YORK
By: /s/ R. Blake Witherington By: /s/ Kenneth A. Lang
---------------------------- -----------------------
Name: R. Blake Witherington Name: Kenneth A. Lang
Title: Vice President Title: Managing Director
Accepted and agreed to
as of the date first
written above by:
FRONTIERVISION OPERATING
PARTNERS, L.P.
By: Frontiervision Partners, L.P.,
as general partner of
FrontierVision Operating Partners, L.P.
By: FVP GP, L.P., as general partner
of FrontierVision Partners, L.P.
By: FrontierVision Inc.,
as general partner of FVP GP, L.P.
By: /s/ John S. Koo
----------------------
Name: John S. Koo
Title: Senior Vice President & Chief
Financial Officer
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
SUMMARY OF TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
EXHIBIT A
BORROWER: FRONTIERVISION OPERATING PARTNERS, L.P. ("FrontierVision"
or "Borrower"), a Delaware limited partnership.
PURPOSE: To partially fund the following (i) the refinancing of
existing senior debt outstanding under the existing
credit facilities; (ii) the acquisition of cable
properties; (iii) expenses related to the Transaction;
(iv) general corporate purposes; and (v) to acquire TCI
Northeast, Cablevision Systems in Maine and Cox in Ohio.
FACILITIES: $200 Million Senior Secured Revolving Credit Facility
("Revolving Credit")
$250 Million Senior Secured Tranche A Term Loan Facility
("Term Loan")
$200 Million Senior Secured Tranche B Term Loan Facility
("Term Loan B")
The Term Loan and Term Loan B must be fully drawn as a
condition to availability under the Revolving Credit.
ADMINISTRATIVE AGENT: The Chase Manhattan Bank ("Chase")
CO-ARRANGERS: Chase Securities Inc. and J.P. Morgan Securities, Inc.
SYNDICATION AGENT: Morgan Guaranty Trust Company of New York
LENDERS: A group of institutions satisfactory to the Borrower and
the Co-Arrangers.
MATURITY: Revolving Credit and Term Loan - 8.0 years from Closing,
or approximately October 30, 2005.
Term Loan B - 8.5 years from Closing, or approximately
April 30, 2006.
AMORTIZATION: The Revolving Credit will be fully repaid on October 30,
2005.
The Term Loan will be repaid in equal quarterly
amortizations for each year specified in percentages
equivalent to those specified below on the dates
specified below:
<TABLE>
<CAPTION>
YEAR ANNUAL % REDUCTION
------ -------------------
<S> <C>
1999 3.0%
2000 8.0%
2001 12.0%
2002 16.0%
2003 20.0%
2004 26.0%
2005 15.0%
</TABLE>
The Term Loan B will be repaid in equal quarterly
amortizations in percentages equivalent to those
specified below on the dates specified below:
- --------------------------------------------------------------------------------
[LOGO CHASE] 1
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE ANNUAL % REDUCTION
------------ -------------------
<S> <C>
2000 0.83%
2001 0.83%
2002 0.83%
2003 0.83%
2004 0.83%
2005 0.83%
01/31/2006 45.0%
04/30/2006 50.0%
</TABLE>
INCREMENTAL FACILITY: $250 Million Incremental Term Loan Facility ("Incremental
Facility")
The Incremental Facility may be made available by any of
the Lenders, in their sole discretion, following a
request by the Borrower. No Lender will have committed or
be required to commit to this facility at the time of
Closing. Incurrence is subject to no default and pro
forma compliance under the Credit Agreement. Pricing is
as described in Exhibit I.
The Incremental Facility will be available for future
acquisitions.
The standby period for the Incremental Facility will
terminate 2.0 years from Closing and the final maturity
will be equal to the maturity of Term Loan B.
The Incremental Facility will be repaid in equal
quarterly amortizations for each year specified in
percentages equivalent to those specified below on the
dates specified below :
<TABLE>
<CAPTION>
YEAR ANNUAL % REDUCTION
------------ ------------------
<S> <C>
2000 0.83%
2001 0.83%
2002 0.83%
2003 0.83%
2004 0.83%
2005 0.83%
01/31/2006 45.0%
04/30/2006 50.0%
</TABLE>
GUARANTEES: The Facilities will be guaranteed by the General Partner
of the Borrower (on a limited recourse basis) and by all
of the Borrower's subsidiaries.
SECURITY: The Facilities will be secured by a pledge of ownership
interests of the Borrower and a first priority lien on
the assets of the Borrower and its Subsidiaries other
than real estate that is not material to the Borrower and
its Subsidiaries.
INTEREST: Base Rate, at the Borrower's option, LIBOR loans will be
available, as follows:
- --------------------------------------------------------------------------------
[LOGO CHASE] 2
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
(i) Base Rate Option: Interest shall be at the Base
-----------------
Rate of the Administrative Agent plus the Applicable
Margin, calculated on the basis of the actual number
of days elapsed in year of 360 days, payable
quarterly in arrears. The Base Rate is defined as
the higher of the Federal Funds Rate, as published
by the Federal Reserve Bank of New York, plus 1/2 of
1%, or the prime commercial lending rate of the
Administrative agent, as announced from time to time
at its head office. Base Rate drawings shall require
one business day's prior notice and shall be in
minimum amounts of $500,000 and incremental
multiples of $100,000.
(ii) LIBOR Option: Interest Periods shall consist
-------------
of one, two, three or six months and (if available
and agreed to by all of the Lenders) nine or twelve
months (as selected by the Borrower) and shall be at
an annual rate equal to the London Interbank Offered
Rate ("LIBOR") for the corresponding deposits of
U.S. Dollars plus the Applicable Margin. LIBOR will
be determined by the Administrative Agent at the
start of each Interest Period. Interest will be paid
at the end of each Interest Period or quarterly,
whichever is earlier, and will be calculated on the
basis of actual number of days elapsed in a year of
360 days. LIBOR will be adjusted for maximum
statutory Regulation D reserve requirements (if
any). LIBOR drawings shall require three business
days' prior notice and shall be in minimum amounts
of $2,000,000 and incremental multiples of
$1,000,000.
APPLICABLE MARGIN: See Exhibit I.
COMMITMENT FEE: See Exhibit I.
POST-DEFAULT RATE: 2.00% per annum in excess of the highest applicable rate
upon a payment default, until cured or waived.
MANDATORY PREPAYMENTS: Beginning in Year 4 in respect of Year 3 (i.e. the fiscal
year ending December 31, 2001) Mandatory Prepayments
shall include 50% of Excess Cash Flow. In addition,
Mandatory Prepayments shall include 100% of the net
proceeds from (i) any sales or dispositions of property
or business, subject to limits to be agreed upon (see
little "B" Covenants below) and (ii) property or casualty
insurance not applied to replacement assets. Any such
prepayments will be applied ratably between the Term Loan
Facilities and Incremental Facility in each case
allocated pro rata to remaining amortization payments.
The Excess Cash Flow Recapture will be eliminated when
the ratio of Total Debt/EBITDA is less than 5.0x.
FINANCIAL COVENANTS: Applicable to the Borrower and its subsidiaries and to
include, without limitation, the following:
i) Total Debt/EBITDA
-----------------
The ratio of Total Debt to Annualized EBITDA will
not exceed 7.0x with step downs to be agreed upon.
ii) Senior Debt/EBITDA
------------------
The ratio of Senior Debt to Annualized EBITDA will
not exceed 5.5x with step downs to be agreed upon.
iii) EBITDA/Total Interest Expense
-----------------------------
The ratio of Annualized EBITDA to Total Interest
Expense will not be less than 1.5x with step ups to
be agreed upon.
- --------------------------------------------------------------------------------
[LOGO CHASE] 3
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
iv) Net EBITDA/Total Fixed Charges
------------------------------
Commencing with the fiscal quarter ending 12/31/97,
the ratio of the Annualized EBITDA (inclusive of
interest income) to Total Fixed Charges will not be
less than 1.00x at any time. This ratio will step up
to 1.05% beginning with the fiscal quarter ending
12/31/99.
v) Capital Expenditures
--------------------
Capital Expenditures limitations to be agreed upon.
vi) Restricted Payments
-------------------
After 12/31/2001 or such earlier date as of which
Total/Debt/EBITDA is less than 5.0x, the Borrower
may make dividend payments to service regularly
scheduled payments of interest on the Senior
Discount Notes and distributions to its partners to
make payments of income taxes so long as immediately
prior to such payments and after giving effect
thereto the Borrower is in compliance with the
Credit Agreement.
ADDITIONAL COVENANTS: Applicable to FrontierVision and its subsidiaries and to
include, without limitation, the following:
(a) Limitation on modifications of organizational
documents of the Borrower and other material
documents;
(b) Limitation on dispositions of assets, provided that
sales of up to $150 million in the aggregate are
permitted without the need to permanently reduce the
facilities provided that net proceeds are (i) applied
to temporarily reduce the revolver or are deposited
in a cash collateral account and (ii) redeployed for
acquisitions within one year.
(c) Limitation on loans and investments; The Company may
make deposits relating to acquisitions in an
aggregate amount to be agreed upon. The Company may
also make investments of up to $25 million in the
aggregate in related businesses. This amount will
rise to $50 million when Total Debt/EBITDA is less
than 5.0 times. These investments will not be pledged
to the banks, and the bank agreement will not contain
restrictions on liens relating to these investments.
(d) Limitation on liens;
(e) Limitation on transactions with affiliates;
(f) Limitations on distributions and other payments to
holders of partnership interests;
(g) Limitations on mergers or acquisitions; The Company
may make acquisitions of up to $150 million in the
aggregate increased by proceeds of dispositions being
held pending reinvestment, without lender approval.
(h) Delivery of financial statements and reports on a
quarterly and annual audited basis; and
(i) Limitations on additional indebtedness.
(j) Limitations on changes of lines of business or
material ownership.
- --------------------------------------------------------------------------------
[LOGO CHASE] 4
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
Applicable to FrontierVision Holding Company to include,
without limitation, the following:
(a) Limitation on indebtedness, liens, acquisitions and
business activity.
EVENTS OF DEFAULT: Will include (without limitation and subject, in certain
cases, to notice and cure provisions to be agreed upon)
non-payment, misrepresentation, breach of covenants,
material environmental claims, bankruptcy, ERISA,
judgment, change of material ownership or control (to be
defined), cross-defaults, and the failure of both Jim
Vaughn and Jack Koo to be actively engaged in the
management of the Borrower and its Subsidiaries.
CONDITIONS PRECEDENT
TO CLOSING OF THE FACILITIES:
Will include, without limitation:
a) No material adverse change in the operations,
prospects, business or financial condition of
FrontierVision and cable systems being acquired;
b) Receipt as equity of at least $100,000,000 from
proceeds (net of fees and expenses) of the Senior
Discount Notes;
c) Total Debt/Annualized EBITDA less than or equal to
7.0x;
d) Appropriate Interest Rate Hedging to be agreed upon;
and
e) Lenders review of and satisfaction with recent
financial statements, and completion of (and
satisfaction with the results of) due diligence with
respect to the cable systems being acquired.
CONDITIONS PRECEDENT
FOR EACH LOAN: Conditions to each extension of credit under the
Facilities will be customary for a transaction of this
type and others determined by the Lenders to be
appropriate, including, without limitation, (a) the
absence of any continuing default or event of default and
(b) the continuing truth of representations and
warranties.
DOCUMENTATION: The Facilities will be subject to the negotiation,
execution and delivery of a definitive credit agreement
(including schedules, exhibits and ancillary
documentation) and related security agreements,
guarantees and other support documentation satisfactory
to the Lenders. Such credit agreement will contain
representations and warranties, funding and yield
protection provisions (including, without limitation, a
requirement for compensation for the cost of compliance
by the Lenders with changes in capital adequacy and
similar requirements ), conditions precedent, covenants,
events of default and other provisions determined by the
Lenders to be appropriate for transactions of this type,
including (without limitation) the following:
a) The Lenders' review and satisfaction with the
Borrower's projections and pro forma statements
reflecting the forecasted financial condition, income
and expenses of the Borrower and its subsidiaries
after giving effect to the Closing, the borrowings
under the Facility and the other transactions
contemplated hereby, and the Lenders' continuing
satisfaction with the condition (financial and
other), operations, assets, nature of assets,
liabilities and prospects of the Borrower and its
subsidiaries and environmental matters;
- --------------------------------------------------------------------------------
[LOGO CHASE] 5
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
b) The Agents' review of and satisfaction with the
following (in each case after giving effect to the
pending acquisitions): (i) the Borrower's tax
assumptions, (ii) the capital structure of the
Borrower and its subsidiaries, (iii) the value, scope
and extent of the collateral available to secure the
Facilities and (iv) the Borrower's and its
subsidiaries' material contracts;
c) A certificate of the Chief Financial Officer of the
Borrower, to the effect that after giving effect to
the Closing, the borrowings under the Facilities and
the other transactions contemplated hereby, none of
the entities liable to the Lenders is insolvent or
will be left with unreasonably small capital with
which to engage in its business or will have incurred
debts beyond its ability to pay such debts as they
mature;
d) The Lenders' review of satisfaction with the
insurance program of the Borrower and its
subsidiaries;
e) The Lenders' satisfaction with any litigation;
f) The Lenders' receipt of satisfactory legal opinions
from counsel to the Borrower covering such matters as
are appropriate for transactions of this type;
g) All agreements and other documents governing the
security arrangements and guarantees shall have been
duly executed and delivered and shall be in full
force and effect;
h) Lenders' review of and satisfaction with the most
recent financial statements of the Borrower.
DEFINITIONS Capital Expenditures
--------------------
All expenditures, including capital lease obligations,
incurred during a period to acquire or construct fixed
assets, plant and equipment, but excluding acquisitions.
EBITDA
------
Cash revenue for any period, minus operating expenses but
excluding depreciation, amortization, interest expense
(including interest on the existing seller notes paid in
cash) other non-cash (including pension expense) charges,
income taxes accrued for such period, restructuring
charges, extraordinary gains or losses, gains or losses
from the sale of assets to the extent such items are not
included in operating expenses and any distribution to
its partners to make income tax payments.
Annualized EBITDA
-----------------
EBITDA for the most recent fiscal quarter times four.
Excess Cash Flow
----------------
The annual excess (if any) of (a) EBITDA for the four
fiscal quarters of such Fiscal Year over (b) Total Fixed
Charges plus any cash payments made to service the Senior
Discount Notes, plus or minus the cash portion of any
extraordinary gains or losses incurred during such Fiscal
Year, without duplication of Mandatory Prepayments plus
interest paid in cash on the existing seller notes (to
the extent not paid with the proceeds of any additional
equity).
Total Debt
----------
All Indebtedness of the Borrower on a consolidated basis
(including letters of credit, and excluding the existing
seller notes and performance bonds). For this purpose
- --------------------------------------------------------------------------------
[LOGO CHASE] 6
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
such indebtedness shall be deemed reduced to the extent
of asset disposition proceeds on deposit in the cash
collateral account.
Senior Debt
-----------
Indebtedness other than Permitted Subordinated
Indebtedness. For this purpose such indebtedness shall be
deemed reduced to the extent of asset disposition
proceeds on deposit in the cash collateral account.
Total Debt Service
------------------
For any period of four consecutive quarters, the sum of
Total Interest Expense plus any scheduled amortization
payments made payable during such period.
Total Fixed Charges
-------------------
For any period of four consecutive quarters, the sum of
(i) Total Debt Service, (ii) Capital Expenditures
(excluding expenditures financed with purchase money
debt,) (iii) taxes paid or payable and (iv) distributions
to partners to make income tax payments.
Total Interest Expense
----------------------
For any period of four consecutive quarters, all interest
whether paid in cash or accrued as a liability (excluding
capitalized financing fees), on Total Debt, plus interest
paid in cash on the existing seller notes.
ASSIGNMENTS AND
PARTICIPATIONS: Assignments in minimum amounts of $5,000,000 will be
permitted subject to approval by the Administrative Agent
and the Borrower, not to be unreasonably withheld.
MAJORITY LENDERS: Lenders holding at least 50% of aggregate Commitments.
EXPENSES AND
INDEMNIFICATION: Customary expenses and indemnification provisions,
including, without limitation, the payment of all
expenses and costs of each Lender in connection with
enforcement proceedings or any workout or restructuring
of the Loans.
GOVERNING LAW: The law of the State of New York.
LENDER'S COUNSEL: Milbank, Tweed, Hadley & McCloy.
- --------------------------------------------------------------------------------
[LOGO CHASE] 7
<PAGE>
CONFIDENTIAL FRONTIERVISION OPERATING PARTNERS, L.P.
- --------------------------------------------------------------------------------
EXHIBIT I:
APPLICABLE MARGIN: REVOLVING CREDIT AND TERM LOAN
------------------------------
The initial Applicable Margin of 2.250% will be in place
for the first six months after Closing. Thereafter, the
Applicable Margin will be based on the ratio of Total
Debt to Annualized EBITDA as set forth below:
LIBOR +
--------
Initial 2.250%
Greater than 6.5x 2.250%
Greater than 6.0x 2.000%
Greater than 5.5x 1.750%
Greater than 5.0x 1.500%
Greater than 4.5x 1.375%
Greater than 4.0x 1.250%
Less than or equal to 4.0x 1.125%
TERM LOAN B AND INCREMENTAL FACILITY
------------------------------------
The Applicable Margin will be based on the ratio of Total
Debt to Annualized EBITDA.
LIBOR +
--------
Greater than or equal to 5.5x 2.375%
Less than 5.5x 2.125%
COMMITMENT FEE: A commitment fee on the unused amount of the Revolving
Credit will be payable quarterly in arrears commencing at
the first quarterly date following Closing, and
calculated on a 360 day basis. The commitment fee will be
based on the ratio of Total Debt to Annualized EBITDA as
set forth below:
COMMITMENT FEE
--------------
Greater than or equal to 5.5x 0.375%
Less than 5.5x 0.250%
UNDERWRITING FEE: 1.375% on total commitment amount
- --------------------------------------------------------------------------------
[LOGO CHASE] 8
<PAGE>
EXHIBIT 12.2
FRONTIERVISION HOLDINGS, L.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30, 1997 Year ended December 31, 1997
------------------------------ ----------------------------
Pro Forma Pro Forma
for Existing for Existing
Systems, Pro Forma Systems, Pro Forma
Acquisition for Existing Acquisition for Existing
Systems Systems Systems Systems
and the and the Actual and the and the Actual Actual
Offering Offering FVOP Offering Offering FVOP FVOP
1997 1997 1997 1996 1996 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (Loss) $ (36,008) $ (26,246) $ (21,415) $ (71,647) $ (50,508) $ (23,801) $ (2,703)
Add (Deduct):
Income Tax Provision
(Benefit) - - - - - - -
Less: Minority Interest - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Pre Tax Income (Loss) (36,008) (26,246) (21,415) (71,647) (50,508) (23,801) (2,703)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Add: Fixed Charges
Interest 38,225 27,571 21,938 75,629 54,727 23,210 1,451
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 2,217 $ 1,325 $ 523 $ 3,982 $ 4,219 $ (591) $ (1,252)
============ ============ ============ ============ ============ ============ ============
Fixed Charges $ 38,225 $ 27,571 $ 21,938 $ 75,629 $ 54,727 $ 23,210 $ 1,451
============ ============ ============ ============ ============ ============ ============
Ratio of Earnings to Fixed
Charges N/A N/A N/A N/A N/A N/A N/A
Deficiency of Earnings to
Fixed Charges $ 36,008 $ 26,246 $ 21,415 $ 71,647 $ 50,508 $ 23,801 $ 2,703
</TABLE>
<PAGE>
$$nofolio
Exhibit 23.18
CONSENT OF INDEPENDENT AUDITORS
To the Partners of FrontierVision
Holdings, L.P.
We consent to the inclusion in the registration statement on Form S-4 of
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation of
our report dated September 24, 1997, relating to the consolidated balance sheet
of FrontierVision Holdings, L.P. and subsidiary as of September 18, 1997,
included herein and to the reference to our firm under the heading "Experts" in
the registration statement.
KPMG Peat Marwick LLP
Denver, Colorado
September 26, 1997
1
<PAGE>
Exhibit 23.19
CONSENT OF INDEPENDENT AUDITORS
To the Shareholder of FrontierVision
Holdings Capital Corporation
We consent to the inclusion in the registration statement on Form S-4 of
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation of
our report dated September 24, 1997, relating to the balance sheet of
FrontierVision Holdings Capital Corporation as of September 18, 1997, included
herein and to the reference to our firm under the heading "Experts" in the
registration statement.
KPMG Peat Marwick LLP
Denver, Colorado
September 26, 1997
<PAGE>
Exhibit 23.20
CONSENT OF INDEPENDENT AUDITORS
To the Partners of FrontierVision
Operating Partners, L.P.
We consent to the inclusion in the registration statement on Form S-4 of
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation of
our reports dated March 12, 1997, relating to the consolidated balance sheets of
FrontierVision Operating Partners, L.P. and subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of operations, cash flows and
partners' capital for the year ended December 31, 1996 and the period from
inception (April 17, 1995) through December 31, 1995, included herein and to the
reference to our firm under the heading "Experts" in the registration statement.
KPMG Peat Marwick LLP
Denver, Colorado
September 26, 1997
<PAGE>
Exhibit 23.21
CONSENT OF INDEPENDENT AUDITORS
To the Partners of FrontierVision
Partners, L.P.
We consent to the inclusion in the registration statement on Form S-4 of
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation of
our reports dated March 19, 1997, relating to the consolidated balance sheets of
FrontierVision Partners, L.P. and subsidiaries as of December 31, 1996 and 1995,
included herein and to the reference to our firm under the heading "Experts" in
the registration statement.
KPMG Peat Marwick LLP
Denver, Colorado
September 26, 1997
<PAGE>
Exhibit 23.22
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 7, 1996 on the financial statements of United Video Cablevision, Inc.
- - Maine and Ohio Divisions included in or made part of FrontierVision Holdings,
L.P.'s Form S-4 registration statement.
PIAKER & LYONS, P.C.
Vestal, New York
September 26, 1997
<PAGE>
Exhibit 23.23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 11, 1996 on the consolidated financial statements of C4 Media Cable
Southeast, Limited Partnership included in or made part of FrontierVision
Holdings, L.P.'s Form S-4 filing.
Williams, Rogers, Lewis & Co., P.C.
Plainview, Texas
September 26, 1997
<PAGE>
Exhibit 23.24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 27, 1996 on the financial statements of Triax Southeast
Associates, L.P. included in or made part of FrontierVision Holdings, L.P.'s
Form S-4 registration statement.
Arthur Andersen LLP
Denver, Colorado
September 26, 1997
<PAGE>
Exhibit 23.25
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of FrontierVision Holdings,
L.P. on Form S-4 of our report dated March 15, 1996 (August 1, 1996 as to note
1) (which expresses an unqualified opinion and includes an explanatory paragraph
relating to the American Cable Entertainment of Kentucky-Indiana, Inc.'s ability
to continue as a going concern), 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.
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
September 26, 1997
<PAGE>
Exhibit 23.26
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of FrontierVision Holdings,
L.P. and FrontierVision Holdings Capital Corporation on Form S-4 of our report
dated April 10, 1996 (relating to the combined financial statements of the
Ashland and Defiance Clusters) 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.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 26, 1997
<PAGE>
Exhibit 23.27
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
A-R Cable Services-ME, Inc.:
We consent to the use of our report, included herein, and to the reference to
our firm under the heading "Experts" in the Prospectus and the Registration
Statement of FrontierVision Holdings, L.P. and FrontierVision Holdings Capital
Corporation on Form S-4.
KPMG Peat Marwick LLP
Jericho, New York
September 25, 1997
<PAGE>
Exhibit 23.28
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
TCI Communications, Inc.:
We consent to the inclusion in the registration statement on Form S-4 of
FrontierVision Holdings, L.P. and FrontierVision Holdings Capital Corporation of
our reports, dated July 11, 1997, relating to the combined balance sheets of the
New Hampshire/Vermont Systems (as defined in Note 1 to the combined financial
statements) as of December 31, 1996 and 1995, and the related combined
statements of operations and retained earnings and cash flows for the years then
ended and to the reference to our firm under the heading "Experts" in the
registration statement.
KPMG Peat Marwick LLP
Denver, Colorado
September 26, 1997
<PAGE>
Exhibit 23.29
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of FrontierVision Holdings,
L.P. and FrontierVision Holdings Capital Corporation on Form S-4 of our report
dated August 29, 1997(relating to the combined financial statements of the
Central Ohio Cluster) 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.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 26, 1997
<PAGE>
Exhibit 25.1
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
---------------------------------
U. S. BANK NATIONAL ASSOCIATION d/b/a
COLORADO NATIONAL BANK
(Exact name of trustee as specified in its charter)
Not Applicable 41-0417860
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. National Bank) Identification No.)
950 17th Street, Suite 650
Denver, Colorado 80202
(Address of principal executive offices) (Zip code)
---------------------------------
FrontierVision Holdings, L.P.
FrontierVision Holdings Capital Corporation
(Exact name of obligor as specified in its charter)
Delaware 84-1432334
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210
(Address of principal executive offices) (Zip code)
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11 7/8% Senior Discount Notes due 2007
(Title of the indenture securities)
<PAGE>
1. General Information Furnish the following information as to the Trustee.
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(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH THE OBLIGOR If the obligor is an affiliate of the Trustee,
-----------------------------
describe each such affiliation.
None
Items 3-15 are not applicable because to the best of the Trustee's knowledge
the obligor is not in default under any Indenture for which the Trustee acts
as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
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of eligibility.
Each of the exhibits listed below, other than Exhibit 6, are
incorporated herein by reference from registration numbers
referenced after each exhibit below.
1. Copy of Articles of Association. Registration #333-30939
2. Copy of Certificate of Authority to Commence Business. Registration
#333-30939
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
Registration #333-30939
4. Copy of existing By-Laws. Registration #333-30939
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321 (b) of the Act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority. Registration #333-26679
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank National Association d/b/a Colorado National Bank, an
Association organized and existing under the laws of the United States, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested on the 26th day of September, 1997.
U.S. BANK NATIONAL ASSOCIATION d/b/a
COLORADO NATIONAL BANK
[SEAL]
/s/ Gretchen L. Middents
-----------------------------------
Gretchen L. Middents
Assistant Vice President
/s/ William W. MacMillan
- -------------------------------
William W. MacMillan
Assistant Secretary
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U. S. Bank National Association d/b/a Colorado National Bank, an
Association organized and existing under the laws of the United States, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, on the 26th day of September, 1997.
U.S. BANK NATIONAL ASSOCIATION d/b/a
COLORADO NATIONAL BANK
[SEAL]
/s/ Gretchen L. Middents
------------------------
Gretchen L. Middents
Assistant Vice President
/s/ William W. MacMillan
- ------------------------
William W. MacMillan
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U. S. BANK NATIONAL ASSOCIATION d/b/a COLORADO NATIONAL BANK
hereby consents that reports of examination of the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon its request therefor.
Dated: September 26, 1997
U.S. BANK NATIONAL ASSOCIATION d/b/a
COLORADO NATIONAL BANK
/s/ Gretchen L. Middents
---------------------------
Gretchen L. Middents
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U. S. BANK NATIONAL ASSOCIATION d/b/a COLORADO NATIONAL BANK
hereby consents that reports of examination of the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon its request therefor.
Dated: September 26, 1997
U.S. BANK NATIONAL ASSOCIATION d/b/a
COLORADO NATIONAL BANK
/s/ Gretchen L. Middents
------------------------
Gretchen L. Middents
Assistant Vice President
<PAGE>
AMENDED AND RESTATED
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ARTICLES OF ASSOCIATION
U.S. BANK NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "U.S. Bank
National Association."
SECOND. The main office of the Association shall be in the City of
Minneapolis, County of Hennepin, State of Minnesota. The general business of the
Association shall be conducted at its main office and branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five members. At any meeting of the
shareholders held for the purpose of electing Directors, or changing the number
thereof, the number of Directors may be determined by a majority of the votes
cast by the shareholders in person or by proxy. Between meetings of the
shareholders held for the purpose of electing Directors, the Board of Directors
by a majority vote of the full Board may increase the size of the Board by not
more than four Directors in any one year, but not to more than a total of
twenty-five Directors, and fill any vacancy so created in the Board. A majority
of the Board of Directors shall be necessary to constitute a quorum for the
transaction of business at any Directors' meeting. Each Director, during the
full term of his directorship, shall own a minimum of $1,000 par value of stock
of this Association, or any equivalent interest in stock of First Bank System,
Inc.
FOURTH. The regular annual meeting of the shareholders of this
Association shall be held at its main banking house, or other convenient place
duly authorized by the Board of Directors, on such day of each year as is
specified therefor in the By-laws, but if no election is held on that day, it
may be held on any subsequent day according to such lawful rules as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be divided into 5,000,000 shares of common stock at the par value of One Hundred
Dollars ($100.00) each; but said capital stock may be increased or decreased
from time to time, in accordance with the provisions of the laws of the United
States.
If the capital stock is increased by the sale of additional shares
thereof, each shareholder shall be entitled to subscribe for such additional
share in proportion to the number of shares of said capital stock owned by him
at the
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time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a resolution
adopted by the shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable period of time within
which the preemptive rights to subscribe to the new shares of capital stock must
be exercised.
If the capital stock is increased by a stock dividend, each shareholder
shall be entitled to his proportionate amount of such increase in accordance
with the number of shares of capital stock owned by him at the time the increase
is authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
The Association, and at any time and from time to time, may authorize
and issue debt obligations, whether or not subordinated, without the approval of
the shareholders. In the event said debt obligations are convertible to capital
stock of the Association, each shareholder shall be entitled to subscribe for
such additional shares in proportion to the number of shares of capital stock
owned by him one month prior to the issuance of capital stock in satisfaction of
said convertible debt obligations.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board may also appoint
one or more of its members to serve as Vice Chairman. The Board shall have the
power to appoint such officers and employees as may be required to transact the
business of this Association; to fix the salaries to be paid to such officers
and employees of this Association; and to dismiss any of such officers or
employees and appoint others to take their place.
The Board of Directors shall have the power to define the duties of
officers and employees of this Association and to require adequate bonds from
them for the faithful performance of their duties; to regulate the manner in
which any increase of the capital of the Association shall be made; to make all
By-laws that may be lawful for the general regulation of the business of this
Association and the management of its affairs; and generally to do and perform
all acts that may be lawful for a Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office of this Association to any other place within the
limits of the City of Minneapolis, Minnesota, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the
Page 2 of 6
<PAGE>
Currency; and shall have the power to change the location of any branch or
branches of this Association to any other location, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency.
EIGHTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this Association, may call a special meeting of shareholders at any time;
provided, however, that unless otherwise provided by law, not less than ten days
prior to the date fixed for any such meeting, a notice of the time, place, and
purpose of the meeting shall be given by first-class mail, postage prepaid, to
all shareholders of record of this Association at their respective addresses as
shown upon the books of the Association.
TENTH. Any action required to be taken at a meeting of the shareholders
or directors of or any action which may be taken at a meeting of shareholders or
directors may be taken without a meeting if consent in writing, setting forth
the action as taken shall be signed by all the shareholders or directors
entitled to vote with respect to the matter thereof. Such action shall be
effective on the date on which the last signature is place on the writing, or
such earlier date as is set forth therein.
ELEVENTH. Meetings of the Board of Directors or shareholders, regular
or special, may be held by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can simultaneously hear each other, and participation in such meeting by
such aforementioned means shall constitute presence in person at such meeting.
TWELFTH. (a) 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 any action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be
Page 3 of 6
<PAGE>
indemnified by the Corporation, unless similar indemnification is provided by
such other corporation, partnership, joint venture, trust or other enterprise
(any funds received by any person as a result of the provisions of this Article
being deemed an advance against his receipt of any such other indemnification
from any such other 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 such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interest of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
---- ----------
itself, create a presumption that the person seeking indemnification did not act
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) 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 is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other corporation, partnership, joint venture, trust or other enterprise shall
be indemnified by the Corporation, unless similar indemnification is provided by
such other corporation, partnership, joint venture, trust or other enterprise
(any funds received by any person as a result of the provisions of this Article
being deemed an advance against his receipt of any such other indemnification
from any such other corporation, partnership, joint venture, trust or other
enterprise), against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the corporation and except that
no indemnification shall be made in respect of 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 of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and reasonably entitled
to indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
Page 4 of 6
<PAGE>
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, such person shall be indemnified by the
Corporation against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
(d) Except as set forth in paragraph (c) of this Article, any
indemnification under paragraphs (a) and (b) of this Article (unless ordered by
the court), shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in paragraphs (a) and (b) of this
Article. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, of if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or seeking advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in another capacity
while holding such office.
(g) By action of the Board of Directors, notwithstanding any interest
of the directors in the action, the Corporation may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not
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<PAGE>
the Corporation shall have the power to indemnify him against such liability
under the provisions of this Article.
(h) For purpose of this Article, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Article with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this Article, references to "other enterprises"
shall include employee benefit plans; reference to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
(j) The indemnification and advancement of expenses hereby provided
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
THIRTEENTH. These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the holders of
a majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at which
an amendment to the Articles of Association of this Association is to be
considered shall be given as hereinabove set forth.
Page 6 of 6
<PAGE>
(Adopted August 1, 1997)
Page 7 of 6
<PAGE>
BYLAWS
OF
U.S. BANK NATIONAL ASSOCIATION
ARTICLE I.
MEETINGS OF SHAREHOLDERS
The regular annual meeting of the shareholders for the election of
directors and for the transaction of such other business as properly may come
before the meeting shall be held at the main banking house of the Association in
the City of Minneapolis, Minnesota, or other convenient place duly authorized by
the Board of Directors (hereinafter referred to as the "Board"), on the last
Thursday in February of each year at 9:30 o'clock A.M. of said day, or such
other date or time which the Board may designate at any Board meeting held prior
to the required date for sending notice of the annual meeting to the
shareholders. The holders of a majority of the outstanding shares entitled to
vote, and represented at any annual or special meeting of the shareholders, may
choose persons to act as Chairman and as Secretary of the meeting.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number. As provided in the Articles of Association, the
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Board of this Association shall consist of not less than five nor more than
twenty-five members. At any meeting of the shareholders held for the purpose of
electing directors, or changing the number thereof, the number of directors may
be determined by a majority of the votes cast by the shareholders in person or
by proxy. Any vacancy occurring in the Board shall be filled by the remaining
directors. Between meetings of the shareholders held for the purpose of electing
directors, the Board by a majority vote of the full Board may increase the size
of the Board by not more than four directors in any one year, but not to more
than a total of twenty-five directors, and fill any vacancy so created in the
Board. All directors shall hold office until their successors are elected and
qualified.
Section 2. Powers. The Board shall have and may exercise all of the
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powers granted to or conferred upon it by the Articles of Association and Bylaws
of the Association and by law. The Board may appoint from time to time one or
more committees for any purposes and with such powers as the Board may
determine.
Section 3. Organization. The President or the Chairman of the Board
------------
shall notify the directors-elect of their election and of the time at which they
are required to meet for the purpose of organizing the new Board. If, at the
time fixed for such
<PAGE>
meeting, there is not a quorum in attendance, the members present may adjourn
from time to time until a quorum is secured, and no business shall be transacted
until a majority of the directors-elect shall have taken the oath of office
prescribed by law and shall otherwise duly qualified.
The Board shall appoint one of its members President of this
Association, who shall be Chairman of the Board, but the Board may appoint a
Director in lieu of the President, to be Chairman of the Board, in which case
the latter shall preside at all meetings and shall perform such other duties as
may be designated by the Board. If a Chairman of the Board is so appointed in
lieu of the President, in his absence the President shall preside at meetings of
the Board. In the absence of a presiding officer, the Board shall appoint a
Chairman pro tem. The Board shall appoint a recording officer who shall keep a
record of the meetings and proceedings of the Board. The recording officer need
not be a member of the Board.
Section 4. Meetings. The regular meetings of the Board shall consist of
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the annual meeting following the annual election of directors by the
shareholders, and quarterly meetings which shall be held at such place and at
such time as the Chairman or President from time to time may designate. When the
date of any regular meeting of the Board falls on a holiday, the meeting shall
be held on the next ensuing business day other than a Saturday, or on such day
and at such time as may have been ordered.
Special meetings of the Board shall be held at any time upon the call
of the Chairman of the Board, a Vice Chairman, the President, or the acting
Chief Executive Officer, or upon written request of any three (3) directors.
Notice of all meetings of the Board, whether regular or special, shall
be given to each director either orally in person or by mail, telegraph or
telephone, on or before the day of the meeting. Meetings of the Board or
shareholders may be held by conference telephone or similar communication device
by means of which all persons participating in the meeting can simultaneously
hear each other. Participating in such a meeting shall constitute presence in
person at such meeting.
Section 5. Quorum. A majority of all the qualified directors shall
------
constitute a quorum and shall be necessary for the transaction of business, but,
if at any meeting there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum is in
attendance.
Section 6. Advisory Board of Directors. The Board may appoint persons,
---------------------------
who need not be shareholders or directors, to serve as advisory directors on an
Advisory Board of Directors established to serve this bank or a group of
affiliated
2
<PAGE>
banks of which this bank is one. An advisory director shall have such power and
duties as may be determined by the Board, provided that advisory directors shall
have no power to vote on matters presented to the Board for final decision and,
provided further, that the Board's responsibility for the affairs of the
Association shall in no respect be delegated or diminished.
Section 7. Directors' Fees, etc. The Board shall have the power to fix
--------------------
and vote fees and compensation to directors and advisory directors of the
Association for their services as directors and advisory directors, and also for
their services as member of any committee or committees of the Association
contemplated by these Bylaws or otherwise created or appointed by the Board, the
Executive Committee, or the President of the Association. Nothing herein
contained shall be construed to preclude any director or advisory director from
serving the Association in any other capacity and being paid compensation
therefor by the Association.
ARTICLE III.
OFFICERS
Section 1. Officers. The Board may elect a Chairman of the Board of
--------
Directors and one (1) or more Vice Chairmen. The Board shall also elect a
President. The Board shall elect, as appropriate, such additional officers as it
may determine, including Executive Vice Presidents or Senior Vice Presidents.
The Chief Executive Officer or in the absence of the Chief Executive Officer,
the President, may appoint such other officers necessary to conduct the affairs
of the Association.
Section 2. Chief Executive Officer. The Board of Directors may
-----------------------
designate a Chief Executive Officer of the Association, who shall be either the
President or Chairman of the Board. The Board may also designate an officer or
director to serve as acting Chief Executive Officer in the absence or incapacity
of the Chief Executive Officer. Subject to the law and the control of the Board
and the Executive Committee, the Chief Executive Officer, or, in the absence of
the Chief Executive Officer, the President shall have authority to manage the
affairs and business of the Association and prescribe and define the duties of
its officers, agents and employees.
Section 3. Term of Office. Any officer elected by the Board shall hold
--------------
his office for the current year for which the Board by which he is elected was
elected, unless he shall resign, become disqualified or be removed. The
Chairman, Vice Chairman, and President can be removed by action of a majority of
the Board. All other elected officers can be removed by order of the Chief
Executive Officer, or in
3
<PAGE>
his absence, the President. Any other officer shall hold his office at the
pleasure of the Chief Executive Officer, or, in his absence, the President.
Section 4. Bonds. All officers, agents or employees as the business of
-----
the Association may require, shall give bond with surety to be approved and in a
sum to be fixed by the Board or the Chairman or the President, conditioned upon
the faithful and honest discharge of their respective duties.
ARTICLE IV.
STOCK CERTIFICATES
Section 1. Forms. Certificates of stock, signed by any elected officer
-----
and any other officer, shall be issued to the shareholders, and each certificate
shall state upon its face that such stock is transferable only upon the books of
the Association.
Section 2. Transfers. Certificates of stock of this Association shall
---------
be assignable and transferable only on the books of this Association subject to
the restrictions and provisions of the national banking laws, and a transfer
book shall be provided in which all assignments and transfers of stock shall be
made. When stock is transferred, the certificates representing the same shall be
returned to the bank, canceled and preserved, and new certificates issued.
Section 3. Dividends. Transfers of stock shall not be suspended
---------
preparatory to the declaration of dividends; and, unless an agreement to the
contrary shall be expressed in the assignment or assignments, dividends shall be
paid to the shareholders in whose name the stock shall stand at the date of
declaration of dividends.
ARTICLE V.
MINUTE BOOK
The organization papers of this Association, the Bylaws as revised or
amended from time to time and the proceedings of all regular and special
meetings of the shareholders and the directors shall be recorded in a minute
book or books. All reports of committees required to be made to the Board shall
be recorded in a minute book or shall be filed by the recording officer. The
minutes of each meeting of the shareholders and the Board shall be signed by the
recording officer and approved by the Chairman of the meeting.
ARTICLE VI.
CONVEYANCES, CONTRACTS, ETC.
4
<PAGE>
All transfers and conveyances of real estate, mortgages, and transfers,
endorsements or assignments of stock, bonds, notes, debentures or other
negotiable instruments, securities or personal property shall be signed by any
elected or appointed officer.
All checks, drafts, certificates of deposit and all funds of the
Association held in its own or in a fiduciary capacity may be paid out by an
order, draft or check bearing the manual or facsimile signature of any elected
or appointed officer of the Association.
All mortgage satisfactions, releases, all types of loan agreements, all
routine transactional documents of the Association, and all other instruments
not hereinabove specifically provided for, whether to be executed in a fiduciary
capacity or otherwise, may be signed on behalf of the Association by any elected
or appointed officer thereof.
The Secretary of the Association or other proper officer may execute
and certify that required action or authority has been given or has taken place
by resolution of the Board under this Bylaw without the necessity of further
action by the Board.
ARTICLE VII.
SEAL
The Association shall have no corporate seal; provided, however, that
if the use of a seal is required by, or is otherwise convenient or advisable
pursuant to, the laws or regulations of any jurisdiction, the following seal may
be used:
ARTICLE VIII.
INDEMNIFICATION OF DIRECTORS,
OFFICERS, AND EMPLOYEES
Section 1. The Association shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed
5
<PAGE>
action, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the pertinent corporation) by reason
of the fact that he is or was a director, advisory director or officer of the
Association, or is or was serving at the request of the Association as a
director or officer of another corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorneys' fees), judgments,
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 interest
of the pertinent corporation. The termination of any action, suit, or proceeding
by judgment, order, settlement, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the pertinent corporation.
Section 2. The Association shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the pertinent corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, advisory director or officer of the Association, or is or was serving
at the request of the Association as a director or officer of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses, (including attorney's 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 pertinent corporation and except that no indemnification
shall be made in respect to any claim, issue, or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the pertinent corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which such court shall deem proper.
Section 3. To the extent that a director, advisory director, or officer
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in Sections 1 or 2 of this Article, or in 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.
Section 4. Any indemnification under Sections 1 and 2 of this Article
(unless ordered by a court) shall be made by the Association only upon a
determination that indemnification of the director, advisory director, or
officer is proper in the circumstances because he has met the applicable
standards of conduct set fourth in said Sections 1 and 2. Such determination
shall be made: (a) by the Board of the
6
<PAGE>
Association by a majority vote of a quorum consisting of directors who were not
parties to such action, suit, or proceeding; or (b) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel (who may be regular counsel for the
Association or pertinent corporation) in a written opinion; or (c) by the
stockholders of the Association.
Section 5. Expenses incurred by any person who may have a right of
indemnification under this Article in defending a civil or criminal action,
suit, or proceeding may be paid by the Association in advance of the final
disposition of such action, suit, or proceeding as authorized by its Board upon
receipt of an undertaking by or on behalf of such person, to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Association pursuant to this Article.
Section 6. The indemnification provided by this Article is in addition
to and independent of and shall not be deemed exclusive of any other rights to
which any person may be entitled under any certificate of incorporation,
articles of incorporation, articles of association, bylaw, agreement, vote of
stockholders, or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another while holding such office, and
shall continue as to a person who has ceased to be a director, advisory
director, or officer and shall inure to the benefit of the heirs, executors, and
administrators of such a person; provided, that any indemnification realized
other than under this Article shall apply as a credit against any
indemnification provided by this Article.
Section 7. The Association may purchase and maintain insurance on
behalf of any person who is or was a director, advisory director, officer,
employee, or agent of the Association, or is or was serving at the request of
the Association as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, if the Association would have the power to
indemnify him against such liability under the provisions of the Article or of
applicable law, if and whenever the Board of the Association deems it to be in
the best interest of the Association to do so.
Section 8. For purposes of this Article and indemnification hereunder,
any person who is or was a director or officer of any other corporation of which
the Association owns or controls or at the time owned or controlled directly or
indirectly a majority of the shares of stock entitled to vote for election of
directors of such other corporation shall be conclusively presumed to be serving
or to have served as such director or officer at the request of the Association.
7
<PAGE>
Section 9. The Association may provide indemnification under this
Article to any employee or agent of the Association or of any other corporation
of which the Association owns or controls or at the time owned or controlled
directly or indirectly a majority of the shares of stock entitled to vote for
election of directors or to any director, officer, employee, or agent of any
other corporation, partnership, joint venture, trust, or other enterprise in
which the Association)'n has or at the time had an interest as an owner,
creditor, or otherwise, if and whenever the Board of the Association deems it in
the best interest of the Association to do so.
Section 10. The Association may, to the fullest extent permitted by
applicable law from time to time in effect, indemnify any and all persons whom
the Association shall have power to indemnify under said law from and against
any and all of the expenses, liabilities, or other matters referred to in or
covered by said law, if and whenever the Board of the Association deems it to be
in the best interest of the Association to do so.
ARTICLE IX.
AMENDMENTS
These Bylaws, or any of them, may be added to, altered, amended or
repealed by the Board at any regular or special meeting of the Board.
(As adopted on August 1, 1997)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION AS OF SEPTEMBER 18, 1997
EXTRACTED FROM THE BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH BALANCE SHEET CONTAINED IN THIS FORM S-4.
</LEGEND>
<CIK> 0001045710
<NAME> FRONTIER VISION HOLDINGS, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> SEP-18-1997
<PERIOD-END> SEP-18-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 100
<TOTAL-LIABILITY-AND-EQUITY> 100
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11-7/8% SENIOR DISCOUNT NOTES DUE SEPTEMBER 15, 2007
OF
FrontierVision Holdings, L.P.
FrontierVision Holdings Capital Corporation
PURSUANT TO THE PROSPECTUS DATED SEPTEMBER 26, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON OCTOBER , 1997 UNLESS EXTENDED.
TO: U.S. BANK NATIONAL ASSOCIATION d/b/a COLORADO NATIONAL BANK (THE "EXCHANGE
AGENT")
By Registered or Certified Mail: By Overnight Courier:
Colorado National Bank Colorado National Bank
950 17th Street, Suite 650 950 17th Street, Suite 650
Denver, Colorado 80202 Denver, Colorado 80202
Attn: Gretchen L. Middents Attn:Gretchen L. Middents
By Hand: By Facsimile: (303) 585-6865
Confirm by telephone: (303) 585-4596
Colorado National Bank Attn: Gretchen L. Middents
950 17th Street, Suite 650
Denver, Colorado 80202
Attn: Gretchen L. Middents
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
The undersigned acknowledges receipt of the Prospectus, dated September 26,
1997 (the "Prospectus") of FrontierVision Holdings, L.P. and FrontierVision
Holdings Capital Corporation (the "Issuers") and the related Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Issuers'
offer (the "Exchange Offer") to exchange $1,000 principal amount of their 11-
7/8% Senior Discount Notes due 2007 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement, for each $1,000 principal amount of their
outstanding 11-7/8% Senior Discount Notes due 2007 (the "Old Notes"), of which
$237,650,000 original Principal Amount at Maturity is outstanding. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on October , 1997,
unless the Issuers, in their sole discretion, extend the Exchange Offer, in
which case the term shall mean the latest date and time to which the Exchange
Offer is extended. The term "Holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Issuers or
any other person who has obtained a properly completed bond power from the
registered holder. Capitalized terms used but not defined herein have the
respective meanings set forth in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Old Notes if
certificates representing the Old Notes are to be physically delivered to the
Exchange Agent herewith. Holders of Old Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or a
confirmation of a book-entry transfer of their Old Notes to the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility") and
all other documents required by this Letter of Transmittal to the Exchange Agent
on or prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 below.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE ISSUERS HAVE AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES (PROVIDED THAT THE ISSUERS RECEIVE NOTICE FROM ANY
PARTICIPATING BROKER-DEALER OF ITS STATUS AS A BROKER-DEALER).
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Attention: _________________________________________________________________
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal amount
of Old Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
<PAGE>
BOX 1 DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------
NAME(S)AND ADDRESS(ES)
OF REGISTERED PRINCIPAL AMOUNT
HOLDER(S) AGGREGATE PRINCIPAL TENDERED (MUST BE
(PLEASE FILL IN, IF CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All
other tenders must be in integral multiples of $1,000.
BOX 2 SPECIAL REGISTRATION BOX 3 SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS (See Instructions 4, 5 and 6)
(See Instructions 4, 5 and 6)
To be completed ONLY if
To be completed ONLY if certificates for Old Notes in a
certificates for Old Notes in a principal amount not tendered, or
principal amount not tendered, or Exchange Notes issued in exchange
Exchange Notes issued in exchange for Old Notes accepted for exchange,
for Old Notes accepted for exchange, are to be sent to an address other
are to be issued in a name other than the address appearing in Box
than the name appearing in Box 1 1 above, or if Box 2 is filled in,
above. to an address other than the
address appearing in Box 2.
Issue certificate(s) to:
Deliver certificate(s) to:
Name ______________________________
(Please Print) Name ______________________________
(Please Print)
Address ___________________________
Address ___________________________
-----------------------------------
(Include Zip Code) -----------------------------------
(Include Zip Code)
-----------------------------------
(Tax Identification or Social -----------------------------------
Security Number) (Tax Identification or Social
Security Number)
<PAGE>
BOX 4 BROKER-DEALER STATUS
[_] Check this box if the beneficial owner of the Old Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Old Notes for
its own account as a result of market-making activities or other trading
activities.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to FrontierVision Holdings, L.P. and FrontierVision Holdings
Capital Corporation (the "Issuers"), the principal amount of Old Notes indicated
above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Issuers
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuers) with respect to the tendered Old Notes with
the full power of substitution to (i) present such Old Notes and all evidences
of transfer and authenticity to, or transfer ownership of, such Old Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Issuers, (ii) deliver certificates for such Old Notes to the
Issuers and deliver all accompanying evidences of transfer and authenticity to,
or upon the order of, the Issuers and (iii) present such Old Notes for transfer
on the books of the Issuers and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuers will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims, when the same are acquired by the Issuers.
The undersigned hereby further represents that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder in the ordinary course of business, (ii) the
holder or any such other person is not engaging and does not intend to engage,
in the distribution of the Exchange Notes, (iii) the holder or any such other
person has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or any other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Old Notes must acknowledge that it (i)
acquired the Old Notes for its own account as a result of market-making
activities or other trading activities, (ii) has not entered into any
arrangement or understanding with the Issuers or any "affiliate" of the Issuers
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer and (iii) will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuers to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a Prospectus in connection with any resale of
such Exchange Notes, however, by so acknowledging and by delivering a
Prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Unless otherwise
notified in accordance with the instructions set forth herein in Box 4 under
"Broker-Dealer
<PAGE>
Status," the Issuers will assume that the undersigned is not a Participating
Broker-Dealer.
For purposes of the Exchange Offer, the Issuers shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuers have given oral
or written notice thereof to the Exchange Agent.
If any Old Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Notes will be returned, without expense, to the undersigned at the address shown
below or to a different address as may be indicated herein in Box 3 under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Issuers upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration Instructions,"
please issue the certificates representing the Exchange Notes issued in exchange
for the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged, in the name(s) of the registered holder of the Old
Notes appearing in Box 1 above. Similarly, unless otherwise indicated in Box 3
under "Special Delivery Instructions," please send the certificates, if any,
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange and any certificates for Old Notes not tendered or not exchanged
(and accompanying documents, as appropriate) to the undersigned at the address
shown below in the undersigned's signature(s). In the event that the box
entitled "Special Registration Instructions" and the box entitled "Special
Delivery Instructions" both are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange in the name(s) of, and return any certificates for Old Notes not
tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Issuers have no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered Holder(s) thereof if the Issuers do
not accept for exchange any of the Old Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver the Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2.
<PAGE>
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Old Notes or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relate are held of record by
two or more joint holders, then all such holders must sign this Letter of
Transmittal.
SIGNATURES
x
---------------------------------------------------------- ----------
Date
x
---------------------------------------------------------- ----------
Date
Area Code and Telephone Number: ___________________________
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Issuers of such
person's authority so to act. See Instruction 5.
Name(s): ________________________________________________________________
(Please Print)
Capacity: _______________________________________________________________
Address: ________________________________________________________________
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: _________________________
(Authorized Signature)
-----------------------------------------------------------------------------
(Title)
-----------------------------------------------------------------------------
(Name of Firm)
-----------------------------------------------------------------------------
(Address, Include Zip Code)
-----------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: __________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly completed
and duly executed copy of this Letter of Transmittal (or facsimile thereof) (or,
in the case of a book-entry transfer, an Agent's Message), a Substitute Form W-9
(or facsimile thereof) and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. The method of delivery of certificates for
Old Notes and all other required documents is at the election and sole risk of
the tendering holder and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holder may wish to use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. Neither the Issuers nor the Exchange Agent is under an obligation to
notify any tendering holder of the Issuers' acceptance of tendered Old Notes
prior to the completion of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old Notes
but whose Old Notes are not immediately available and who cannot deliver their
certificates for Old Notes (or comply with the procedures for book-entry
transfer prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed delivery
procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Old Notes, and the principal
amount of tendered Old Notes and stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account with the Book-Entry Transfer Facility), together
with the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial owner of Old Notes who is not the registered
holder and who wishes to tender should arrange with such holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
completing and executing this Letter of Transmittal and delivering such Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder.
<PAGE>
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Old Notes is tendered, the tendering holder should fill in the
principal amount tendered in the column labeled "Principal Amount Tendered" of
the box entitled "Description of Old Notes" (Box 1) above. The entire principal
amount of Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of Old Notes
is not tendered, Old Notes for the principal amount of Old Notes not tendered
and Exchange Notes exchanged for any Old Notes tendered will be sent to the
holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Old Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Old Notes are held in different names on several Old Notes, it will be necessary
to complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Old Notes are held.
If this Letter of Transmittal is signed by the registered holder, and Exchange
Notes are to be issued and any untendered or unaccepted principal amount of Old
Notes are to be reissued or returned to the registered holder, then, the
registered holder need not and should not endorse any tendered Old Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Old Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the Issuers
of their authority to so act must be submitted with this Letter of Transmittal.
No medallion signature guarantee is required if (i) this Letter of Transmittal
is signed by the registered holder(s) of the Old Notes tendered herewith and the
issuance of Exchange Notes (and any Old Notes not tendered or not accepted) are
to be issued directly to such registered holder(s) and neither the "Special
Registration Instructions" (Box 2) nor the "Special Delivery Instructions" (Box
3) has been completed. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be sent, if different from the name and address or
account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the indicated and
the tendering holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Old Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Old Notes.
7. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any, applicable
to the sale and transfer of Old Notes to the Issuers or their order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason other
than the transfer and sale of Old Notes to the Issuers or their order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
from taxes therefrom is not submitted with this Letter of Transmittal, the
amount of transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a holder of
any Old Notes which are accepted for exchange must provide the Issuers (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number. If
the Issuers is not provided with the correct TIN, the Holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders (including,
among other, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report a interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Issuers reserve the right in their sole discretion to take whatever steps
are necessary to comply with the Issuers' obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Old Notes will be
determined by the Issuers, in their sole discretion, which determination will be
final and binding. The Issuers reserve the right to reject any and all Old Notes
not validly tendered or any Old Notes, the Issuers' acceptance of which would,
in the opinion of the Issuers or their counsel, be unlawful. The Issuers also
reserve the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any 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 (includes this Letter of Transmittal and
the instructions hereto) by the Issuers shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuers shall determine. The
Issuers will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Old Notes, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Old Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OLD NOTES. Any tendering holder
whose Old Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address set forth on the first page of this Letter
of Transmittal. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Issuers will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Issuers
shall be deemed to have accepted tendered Old Notes when, as and if the Issuers
have given written and oral notice thereof to the Exchange Agent. If any
tendered Old Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Old Notes will be returned, without expense, to the
undersigned at the address shown above or at a different address as may be
indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
<PAGE>
PAYERS' NAME: FRONTIERVISION HOLDINGS, L.P.
FRONTIERVISION HOLDINGS CAPITAL CORPORATION
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE Social Security Number
YOUR TAXPAYER IDENTIFICA- or TIN
TION NUMBER ("TIN") IN THE
BOX AT RIGHT AND CERTIFY
BY SIGNING AND DATING
BELOW
//
- --------------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3408(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject
to backup withholding.
[_]
-----------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION Part 3--
SUBSTITUTE PROVIDED ON THIS FORM IS TRUE, CORRECT Awaiting
FORM W-9 AND COMPLETE. TIN . [_]
DEPARTMENT OF THE
TREASURY SIGNATURE DATE
-----------------------------------------------------------
INTERNAL REVENUE
SERVICE Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part I
below. See instructions if your name has changed.)
PAYER'S REQUEST
FOR -----------------------------------------------------------
TAXPAYER
IDENTIFICATION Address
NUMBER (TIN) -----------------------------------------------------------
City, State and ZIP Code
------------------------------------------------------ NOTE:
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
List account number(s) here (optional)
