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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 333-43339
KNOLOGY HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 58-2203141
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
KNOLOGY HOLDINGS, INC.
1241 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 645-8553
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X* No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated herein by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
is not applicable as no public market exists for the voting stock of the
registrant.
As of March 1, 1998, there were 394 shares of the registrant's Common
Stock outstanding and 49,852 shares of the registrant's Preferred Stock
outstanding.
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* The Company does not have any class of equity securities registered
under the Securities Exchange Act of 1934 and files periodic reports
with the Securities and Exchange Commission pursuant to contractual
obligations with third parties.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS .......................................................... 1
ITEM 2. PROPERTIES......................................................... 35
ITEM 3. LEGAL PROCEEDINGS.................................................. 36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 36
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS............................................... 37
ITEM 6. SELECTED FINANCIAL DATA............................................ 39
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................... 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 45
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING FINANCIAL DISCLOSURE................................... 45
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 45
ITEM 11. EXECUTIVE COMPENSATION............................................. 49
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................... 53
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K............................................... 56
SIGNATURES......................................................................... 62
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS......................................... F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON THE FINANCIAL STATEMENT
SCHEDULES.................................................................... S-1
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THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION, MEMBERS OF THE
COMPANY'S SENIOR MANAGEMENT MAY, FROM TIME TO TIME, MAKE CERTAIN
FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, PERFORMANCE AND
OTHER DEVELOPMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS, INCLUDING THOSE SET FORTH UNDER THE CAPTION "BUSINESS--RISK FACTORS"
AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K, AS WELL AS FACTORS WHICH MAY
BE IDENTIFIED FROM TIME TO TIME IN THE COMPANY'S OTHER FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION OR IN THE DOCUMENTS WHERE SUCH
FORWARD-LOOKING STATEMENTS APPEAR. UNLESS THE CONTEXT SUGGESTS OTHERWISE,
REFERENCES IN THIS ANNUAL REPORT ON FORM 10-K TO "KNOLOGY" OR TO THE "COMPANY"
MEAN KNOLOGY HOLDINGS, INC. AND ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED,
DOLLAR AMOUNTS OVER $1 MILLION HAVE BEEN ROUNDED TO ONE DECIMAL PLACE AND
DOLLAR AMOUNTS LESS THAN $1 MILLION HAVE BEEN ROUNDED TO THE NEAREST THOUSAND.
PART I
ITEM 1. BUSINESS
GENERAL
KNOLOGY offers residential and business customers broadband
communications services ("Broadband Services"), including analog and digital
cable television, local and long distance telephone, high-speed Internet access
service, and broadband carrier services ("BCS"). The Company provides these
Broadband Services using high capacity hybrid fiber-coaxial networks that are
two-way interactive ("Interactive Broadband Networks"). The Company operates
Interactive Broadband Networks in five metropolitan areas (collectively the
"Systems"): Montgomery, Alabama; Columbus and Augusta Georgia; Panama City;
Florida, and Charleston, South Carolina and plans to expand to additional
mid-sized cities in the southeastern United States. In addition, KNOLOGY
provides analog cable television services in Huntsville, Alabama and plans to
upgrade the Huntsville network to an Interactive Broadband Network during 1999,
which will allow the Company to offer additional Broadband Services in the
Huntsville market.
KNOLOGY has been providing cable television service since 1995 and
commenced providing telephone and high-speed Internet access service in 1997.
BCS services were initially offered by the Company in 1998. The Company
believes its ability to provide numerous services over the same network
facilities and to bundle the services at an attractive price, coupled with its
emphasis on customer service, provides it with a competitive advantage.
KNOLOGY commenced providing cable television service by acquiring
cable television systems in Montgomery, Alabama and Columbus, Georgia in 1995
and by using those systems as a base for constructing new Interactive Broadband
Networks. Since acquiring the Montgomery and Columbus systems, the Company has
upgraded the purchased networks to allow the Company to offer additional
Broadband Services.
The Company acquired a cable television system in Panama City Beach,
Florida in December 1997. Since the acquisition, the Company has begun
upgrading the Beach Cable system and extending the network into Panama City.
In early 1998, the Company began expansion into Augusta, Georgia and
Charleston, South Carolina by obtaining new franchise agreements with the local
governments and by constructing new Interactive Broadband Networks.
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In June 1998, the Company acquired TTE Inc., a non-facilities based
reseller of local, long distance and operator services to small and
medium-sized business customers throughout South Carolina. As the Company
expands its network in the Charleston area, it plans to convert TTE Inc.'s
customers to the Company's Interactive Broadband Network.
On October 30, 1998, the Company acquired the Cable Alabama cable
television system which serves the Huntsville, Alabama area. The Company plans
to upgrade the existing Cable Alabama plant into an Interactive Broadband
Network.
In 1995, the Company was originally formed as a limited liability
company and later was incorporated in the State of Delaware. The Company's
principal executive offices are located at 1241 O. G. Skinner Drive, West
Point, Georgia 31833 and its telephone number is (706) 645-8553.
BROADBAND SERVICES STRATEGY
The Company has developed the following strategy for the
implementation and operation of its Broadband Services business.
BUILD RELIABLE INTERACTIVE BROADBAND NETWORKS. By constructing and
operating its own Interactive Broadband Networks, the Company provides its
residential and business customers with access to high-quality networks capable
of supporting a wide range of Broadband Services. The Company's networks
contain extra, unused capacity that will be available for planned and future
Broadband Services, and such capacity has been designed to be expanded later if
warranted by customer demand. The Company believes that this will provide a
competitive advantage over cable, telephone and wireless systems that do not
have the capability to provide a wide range of broadband services. The Company
also believes that its newly constructed, Interactive Broadband Networks will
give it a quality and reliability advantage over lower-capacity coaxial cable
systems. KNOLOGY's Interactive Broadband Networks utilize a 750 MHz signal
(built on a 1GHz platform for easier upgrade when additional capacity is
needed) and are substantially protected by redundant paths for communications
segments, including a Syncronous Optical Network, ("SONET") ring connecting
hubs for telephony restoration and security purposes and an Asyncronous
Transfer Mode ("ATM") self healing ring for the protection of data network
traffic to the hubs. By comparison, most traditional cable television systems
utilize 450 MHz to 550 MHz signals and do not have significant redundancy
protection. The Company uses a specially designed powering system which is
backed up at each hub site by a generator and uninterruptable power source
("UPS") to allow service to continue in case of a power outage. The Interactive
Broadband Networks are monitored 24 hours per day, seven days per week, at
KNOLOGY's network operations center.
PROVIDE BUNDLED OFFERINGS. The Company believes that by bundling
Broadband Services it can distinguish itself from the competition. The Company
believes that the cost savings of purchasing a bundle of services and the
advantages of one-stop shopping (including a single point of purchase and one
relationship to manage all services included in the bundle) will be attractive
to new customers, particularly since most of its prospective customers
presently buy services from multiple sources. The Company also believes that
because of the cost savings associated with purchasing a bundle of services
from the Company, customers will be less likely to switch should competitors
offer lower prices on individual services. The ability to realize an overall
return on a bundle of services should give the Company greater pricing
flexibility.
BE FIRST TO MARKET WITH MULTIPLE BROADBAND SERVICES. The Company
believes that it is the first provider of a bundled video, voice and data
Broadband Services package in Montgomery, Columbus, Panama City, Augusta, and
Charleston and intends to be first to market a bundled video, voice and data
Broadband Services package in each of the cities in which it proposes to
construct and operate Interactive Broadband Networks. KNOLOGY seeks to
capitalize on its position as a new communications company that brings
competition and choice to cities where it provides service. The Company
believes that a large number of companies may seek to provide multiple
Broadband Services over the next several years, and that market share earned by
the early entrants will create financial barriers to entry in the Company's
target markets. Since constructing Interactive Broadband Networks requires a
large capital investment, the Company expects that later entrants will have
greater difficulty in demonstrating economic returns
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that support such an investment. In addition, constructing networks uses space
on various rights of way, which may be limited or more expensive for later
entrants.
EXPAND TO ADDITIONAL MARKETS. The Company intends to expand to
additional mid-sized cities in the southeastern United States. The Company
intends to target cities (1) that have a geographic density such that network
plant can be constructed to pass an average of 70 homes per mile, (2) that
generally have populations of at least 100,000 and (3) in which the Company
believes it can capture a substantial portion of the cable television customers
and can be the leading provider of bundled Broadband Services. The Company
believes that such cities will support a Broadband Services business and that
most of the large cable companies and other service providers currently are
focusing primarily on larger metropolitan areas.
FOCUS ON THE CUSTOMER. Customer service is an essential element of the
Company's operations. The Company believes the quality and responsiveness of
its customer service differentiates it from its competitors. Customer service
representatives in each market handle customer-related functions such as order
taking, customer activations, billing inquiries and collections and service
upgrades. The Company provides 24-hour customer service, operates customer
phone centers in each of the Company's service areas, and operates a back-up
customer phone center in West Point, Georgia. The Company monitors its networks
24 hours a day, seven days a week and strives to resolve problems prior to the
customer being aware of any service interruptions.
PURSUE STRATEGIC RELATIONSHIPS WITH OTHER SERVICE PROVIDERS. KNOLOGY
offers certain of its Broadband Services in conjunction with or through
strategic partners. KNOLOGY was founded in 1995 by the corporate predecessor of
ITC Holding Company, Inc. (together with such predecessor, "ITC Holding"),
which holds significant interests in a variety of communications companies
("ITC Companies"), including Interstate Telephone Company, an independent local
exchange carrier ("LEC") serving communities in western Georgia and eastern
Alabama for over 100 years, MindSpring Enterprises, Inc. ("MindSpring"), a
large Internet service provider, and until October 1997, ITC DeltaCom, Inc.
("ITC DeltaCom"), which is a provider of retail long distance services to
mid-sized and major regional businesses using ITC DeltaCom's own fiber optic
network in the southern United States (now owned, in part by ITC Holding's
stockholders). The Company uses ITC DeltaCom's telecommunications facilities
and services for communications facilities and operator services and jointly
operates a network operations center with ITC DeltaCom in West Point, Georgia.
Interstate Telephone Company provides the Company with telephone billing and
switching services. The Company recently entered into an agreement to sell to
Mindspring transportation facilities for Mindspring's Internet product.
BROADBAND CARRIER SERVICES STRATEGY. KNOLOGY's broadband carrier
strategy is based on leveraging the use of extra, unused capacity on its
Interactive Broadband Networks to develop and offer wholesale services to other
competitive local exchange carriers, interexchange carriers, Internet services
providers and other integrated services providers. The Company's entry into a
local market with a newly constructed Interactive Broadband Network offers
other competitive service providers a highly reliable and cost competitive
alternative to telephone services provided by the incumbent local exchange
carrier. The Company believes that it has a competitive advantage due to the
fact that its networks are fiber intensive and pass substantially every home
and business in its service area. The Company believes that it can bundle its
SONET and ATM ring-based high capacity transport services with its hybrid
fiber-coaxial based local loops to offer local loop alternatives to other
telecommunications companies.
INDUSTRY STRUCTURE AND TECHNOLOGY
GENERAL
As a result of the passage of the Telecommunications Act of 1996 (the
"1996 Telecom Act"), cable television companies are permitted to provide
telephone service and vice versa, local telephone companies are permitted to
provide long distance service and vice versa, and all are permitted to provide
numerous ancillary services. Municipalities are required to grant cable
television franchises to qualified applicants. This change in the regulatory
landscape, along with the substantial growth in use of the Internet, has led,
and is generally expected to continue to lead, to a rush by communications
companies and other companies (such as power companies) to provide a full range
of voice, video and data communications services to consumers.
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Compared to the individual services offered by its competitors, the Company
believes that its bundled service offerings are more attractive to consumers.
Although the process of building broadband networks and expanding to other
services has begun, the Company believes that most of the large cable companies
and other service providers currently are focusing primarily on major
metropolitan areas and that by being among the first providers of a wide range
of Broadband Services in its targeted markets the Company will have a
competitive advantage. See "--Broadband Services Strategy."
COMMUNICATIONS TECHNOLOGIES AND SERVICES
Set forth below is a brief description of the current communications
industry structure and the technology generally used by each system (although
numerous variations exist, and some systems combine a variety of technologies),
including certain hurdles each set of providers faces in offering new services.
CABLE TELEVISION. Cable television systems generally consist of
coaxial cable (which carries signals via radio frequency) and/or fiber optic
cable (which carries signals via light waves generated by a laser) that runs
along aerial or underground rights of way past the homes in a service area,
connecting to each house individually through a cable connection box located
outside of the house. Subscriber homes have internal wiring running from the
cable connection box to one or more boxes or "jacks" into which television sets
and set-top terminals (which are used for special services, descrambling,
"pay-per-view" and other features) may be connected. Coaxial cable networks
have numerous amplifiers located along the network to restore the strength of
the signal, which is diminished as it travels. The use of amplifiers produces
interference or noise which will cause the signal to degrade as the number of
amplifiers increases. Networks which are primarily fiber optic do not use
amplifiers in the fiber optic portion of the network. Fiber optic networks use
larger lasers to send signals further from the headend. The number of channels
or features that a cable system can offer is limited by the capacity of the
cable network and the electronic equipment which compresses and amplifies the
signal. Additional equipment may compensate for a lower capacity network, but
too much equipment results in noise or interference, leading to a lower quality
signal.
Many traditional cable companies have sought to compete by increasing
capacity through the use of additional equipment, and customers have
experienced increased interference. Many cable television systems generally use
one-way (non interactive) cable, and accordingly do not have the ability to
provide telephone service which requires use of a two-way interactive cable.
Several cable companies, including large cable companies, are beginning to
offer high-speed data transmission and are currently providing Internet access
using cable modems. However, such service generally cannot deliver high-speed
performance until the cable system infrastructure has been upgraded to increase
capacity and add two-way interactivity.
WIRELESS CABLE. Wireless cable or multichannel multipoint distribution
service technology allows the transmission of television programming, including
high speed computer data, high definition television and facsimile
transmissions, via microwave frequencies from a single location. Wireless cable
was designed to serve primarily rural areas where laying traditional coaxial
cable is not economically feasible. The wireless cable system's signal is sent
from a centrally located facility equipped with transmitters, antennas,
satellite dishes and scrambling and descrambling equipment, and is received by
subscribers with rooftop antennas and the necessary converters. Because
wireless cable signals are sent via microwaves, they require line-of-sight
transmission from the central source to the subscribers. Obstructions such as
large buildings and trees or uneven terrain can interfere with reception,
although repeaters that aid in reaching subscribers in certain obstructed areas
are being used to alleviate these shortcomings. As a result, the Company
believes that at present this technology is not well suited to providing
Broadband Services in urban areas such as those targeted by the Company.
DTH, DBS AND OTHER SATELLITE TECHNOLOGIES. Direct-to-home satellite
television ("DTH") companies provide the satellite transmission of television
products and services. As part of the programming package, DTH companies
generally include hardware and software for the reception and decryption of
satellite television programming. Echostar and DirecTv provide subscription
direct broadcast satellite ("DBS") services via high-power communications
satellites and small dish receivers, and other companies provide direct-to-home
video services using lower-power satellites and larger receivers. DBS systems
generally offer more channels (often over 100 channels in
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all) than cable systems, although DBS providers usually do not offer local
programming. Unlike cable television, DBS and DTH do not require ground
construction to install, maintain or upgrade services. Rather, the programming
is transmitted from a ground station to the subscriber via a communications
satellite. These systems require the subscriber to purchase or lease a
satellite dish to receive signals and a receiver system to process and
descramble signals for television viewing.
The small satellite dishes available at present are not two-way
interactive, and therefore not suitable for telephone or Internet services,
although businesses that can afford to do so purchase larger dishes with
two-way interactivity to receive each of the Broadband Services. Residential
systems have been designed using telephone lines to transmit to the Internet
and satellite transmission for reception from the Internet, which typically
involves much greater quantities of data. This approach still is subject to
dial-up delays, but has many of the same advantages over two-way telephone
communications as Broadband Services. However, satellite transmission may cause
an echo during voice transmissions due to the long distance to and from the
satellite.
WIRELINE TELEPHONY. Local wireline telephone systems consist of a
network of switches, transmission facilities between switches, and the "local
loop" connections between customer premises and a local exchange switch. A call
initiated by a customer can be routed by the local exchange switch either
directly to the called party, if that party is served by the same switch, to
another local or toll switch for delivery to the called party, or through one
or more switches to the point of presence ("POP") of a long distance carrier
that transmits the call to a more distant local switch for ultimate delivery to
the called party. The transmission facilities connecting switches are comprised
primarily of very high capacity fiber optic cables. However, local loops
generally consist of twisted copper wire pairs that run along aerial or
underground rights-of-way to each of the premises served. These local loops
generally carry analog transmissions and have relatively low transmission
capacity, sufficient to carry only one two-way voice conversation. Local loop
capacity can be expanded somewhat by using advanced techniques such as
Integrated Services Digital Network ("ISDN"), which permits voice and data
transmissions to occur simultaneously and can support some level of video
teleconferencing. However, ISDN currently is not available in all areas.
Local loops (even with ISDN) generally do not have sufficient capacity
for large scale provision of video services. Telephone service is the most
common way of communicating with the Internet, but telephone lines do not have
enough capacity for rapid downloading of large volumes of data (such as
graphics), leading many Internet users to experience delays and ISPs to
experience overloading of their circuits.
Digital subscriber line (DSL) involves the use of digital transmission
equipment placed at the customer premises and at the central office to boost
transmission speeds on incumbent local exchange carrier copper local loops.
While in some geographical areas various types of DSL services will provide
bandwidth up to 1.54 Mbps, widespread deployment of DSL technology will be
limited by the length and wire gauge of the copper loop plus the existing use
of bridged taps, loading coils and digital loop carriers.
WIRELESS TELEPHONY (CELLULAR AND PCS). Wireless telephone technology
is based upon the division of a given market area into a number of smaller
geographic areas, or "cells." Each cell has a "base station" or "cell site,"
which are physical locations equipped with transmitter-receivers and other
equipment that communicate by radio signal with wireless telephones located
within range of the cell. Cells generally have an operating range from two to
25 miles. Each cell site is connected to a mobile telephone switching office
("MTSO"), which, in turn, is connected to the local landline telephone network.
When a subscriber in a particular cell dials a number, the wireless telephone
sends the call by radio signal to the cell's transmitter-receiver, which then
sends it to the MTSO. The MTSO then completes the call by connecting it with
the landline telephone network or another wireless telephone unit. Incoming
calls are received by the MTSO, which instructs the appropriate cell to
complete the communications link by radio signal between the cell's
transmitter-receiver and the wireless telephone. Like wireline local loops,
wireless telephony technologies generally do not have sufficient capacity for
large scale provision of video and data services. However, recent tests of
Wideband CDMA ("WCDMA") have resulted in a product which yields a higher
bandwidth multimedia product and supports a wide range of wireless multimedia
services, including Internet and other IP-based systems, video, high-speed data
services and interactive services.
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INTERNET ACCESS. Most Internet access takes place over telephone lines
using computer modems. This form of transmission works well for smaller amounts
of data, but telephone lines generally are not capable of handling large
volumes of information, multimedia applications or high-speed data
transmissions, resulting in lengthy delays. Also, ISPs have limited numbers of
ports available for customers to dial in to the Internet, and their customers
may experience difficulties obtaining access to the Internet or be disconnected
if activity is too limited. A few satellite companies provide broadband access
to the Internet from desktop PCs using a small dish antenna and receiver kit
comparable to that used for satellite television reception, although such
systems generally provide only one-way satellite transmission, requiring
communications in the other direction to be over telephone lines. High-speed
cable modems used over traditional non-interactive cable networks similarly
permit high-speed broadband reception from the Internet, but require
communications from the user to the Internet to be over telephone lines. While
DSL service will provide high-speed Internet access at differing speeds
depending on the type of DSL service, Consumer DSL (CDSL) or GADSL Lite
(G-Lite) may provide a competitive residential Internet access technology with
speeds up to 1 Mbps downstream and 128 Kbps upstream.
THE COMPANY'S INTERACTIVE BROADBAND NETWORKS
The Company's Interactive Broadband Networks are high capacity,
two-way interactive, hybrid fiber-coaxial networks with a bandwidth of 750 MHz
(designed to allow upgrades to 1,000 MHz). Each network includes hub sites with
a minimum of four fiber pairs running from each hub to nodes, each of which
serves an average of 500 homes. This design incorporates redundant fibers
running between hubs for restoration and security purposes, forming a SONET
ring. By comparison, most traditional cable television systems are 450 MHz to
550 MHz and do not have significant redundancy protection. The Company provides
power to its system from the hub sites, each of which is equipped with a
generator and UPS to allow service to continue in case of a power outage. For
each of the Broadband Services to be offered, the Company has added electronic
equipment at various hub sites and cards in various electronic housings along
the network.
The Company's Interactive Broadband Networks are capable of supporting
numerous channels of basic and premium cable television (including
pay-per-view) services (approximately 65-75 channels are offered by the Company
today, without digital compression), telephone services, Internet access and
other Broadband Services. The Company's Interactive Broadband Networks have
been designed with extra capacity, so that new services can be added as content
and technology become available.
Local telephone service is offered over the Company's Interactive
Broadband Networks in much the same way local phone companies provide service,
since the network structure includes a return path suitable for voice
transmission. To provide local telephone service, the Company provides
switching services and installs a network interface device outside the
customer's home, and may, depending on the location of telephone and cable
boxes or "jacks" inside the home, add inside wiring as well. The Company can
offer multiple lines of telephone service using its Interactive Broadband
Networks. The Company's networks are interconnected with those of other local
phone companies through a nine-state interconnection agreement with BellSouth.
The Company provides long distance service using leased facilities from other
telecommunications service providers.
High speed Internet access services are provided by the Company using
high speed cable modems in much the same way customers currently receive
Internet services over modems linked to the local telephone network. The cable
modems presently being used with the Company's Interactive Broadband Networks
are typically 100 times faster than regular phone dial-up. The customer's cable
line (with cable modem) is connected directly into the Internet. Since the cable
modem connects through a cable line rather than through a telephone line, the
Internet connection is always active, and there is no need to dial up for access
to the Internet or wait to connect through a port leased by an ISP.
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THE COMPANY'S BROADBAND SERVICES
THE COMPANY OPERATES IN THE FOLLOWING SEGMENTS:
CABLE TELEVISION. The Company offers its customers four levels of
cable television services: basic, expanded basic, premium, and digital. Most
customers choose to subscribe to basic and expanded basic levels of service.
Together, these services consist of approximately 65-75 channels of
programming, including television signals available off-air, a limited number
of television signals from so-called "super stations" (such as WGN (Chicago)),
numerous satellite-delivered non-broadcast channels (such as Cable News
Network, MTV, ESPN, The Discovery Channel and Nickelodeon), displays of
information featuring news, weather, stock and financial market reports and
public, government and educational access channels.
Basic service, a more limited version of the Company's expanded basic
package, is offered on a discounted basis to customers but this service
consists primarily of off-air channels. The Company also offers a variety of
premium services to its customers for an extra monthly charge. Premium services
include various channels that consist of feature motion pictures presented
without commercial interruptions (such as Home Box Office ("HBO"), Showtime and
Cinemax) or other special channels. Customers generally pay fixed monthly fees
for cable programming and premium television services, which constitute the
principal sources of revenue to the Company. The Company also provides its
customers access to additional channels offering pay-per-view feature movies,
live and taped sports events, concerts and other special features which involve
a charge for each viewing, access to home shopping networks and specialty
services such as digital audio service.
Programming for the Company's cable television systems, each of which
provides a range of 65-75 channels, comes from over 70 national and local
television networks, including most major cable networks such as ESPN, HBO,
Showtime, Disney and CourtTV, and local networks such as local affiliates of
ABC, CBS, NBC and Fox. Since January 1, 1996, the Company's arrangements with
many of these networks, constituting approximately 60% of the Company's
channels, have been handled through the National Cable Television Cooperative,
Inc. (the "National Cable Television Cooperative"), which obtains programming
from most major networks and provides it to its members. By obtaining
programming through the cooperative (for which the Company has paid a one time
membership fee and pays ongoing monthly programming and administrative fees),
the Company benefits from volume discounts not otherwise available to the
Company and which more than offset the fees to the cooperative. In addition,
the cooperative handles the contracting and billing arrangements for the
Company with the networks. The Company began offering digital video service in
November 1998, which uses compression technology to significantly increase the
number of television channels (to over 100 channels). Digital technology
converts numerous analog signals (now used to transmit video and voice) into a
digital format and compresses many such signals into the space normally
occupied by one analog signal. At the home, a set-top video terminal (which is
provided by the Company for a fee) converts the digital signal back into analog
channels that can be viewed on a normal television set. The Company added
digital video as an additional service without reducing the current number of
expanded basic channels. Digital technology also permits the Company to offer
near video-on-demand (movies or other programs that commence in frequent
intervals, such as every 15 minutes) to customers for a fee per viewing.
TELEPHONY. The Company's telephony service includes residential and
business local and long distance telephone services. Local telephone service
includes several bundled packages and additional services similar to those
offered by the Regional Bell Operating Companies ("RBOCs"), including BellSouth
Corp. ("BellSouth"). The Company's customers pay a fixed monthly rate for all
local calling. Customers may elect call waiting, call forwarding, voice mail
and other value added services, which generally involve an additional fixed
charge per month per telephone line. The Company generally prices its services
at rates comparable to those of its competitors, although typically the
Company's value-added services are less expensive than those of its
competition. The Company offers all customers of its cable television services
a discount on telephone service. Long distance service offers features and is
priced at levels comparable to those of the Company's competitors.
INTERNET SERVICES. The Company's high-speed data service offers
customers high-speed connections to the Internet (20 times faster than 28.8
kilobits/second dial-up service) using cable modems. The Internet connection
using a cable modem is always active, so the customers do not have to dial in
and wait for access. Since the customer's service is offered over the coaxial
network in the home, no second phone line is required and there is no
disruption of service when the phone rings or when the television is on. The
Company charges a fixed monthly fee for connection to the Internet and does not
currently offer different plans based on the amount of interconnection time or
quantity of data received, although the Company does charge a higher rate to
customers who desire higher
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speeds, which requires more capacity. The Company offers discounts on its
high-speed Internet service to customers who also receive the Company's cable
television service or telephone service.
BROADBAND CARRIER SERVICES. The Company's local transport and
interconnection services include special access, local private line, local
exchange transport ("LET") and local Internet transport ("LIT"). Traditional
special access and local private lines services at DS1, DS3, and OC-n rates are
offered via the Company's local SONET transport network providing high capacity
connectivity to medium and large commercial end users, incumbent local exchange
carrier central offices and other carrier points of presence throughout the
metropolitan service area. LET service provides local loops across the
Company's hybrid fiber-coaxial network to connect competitive local exchange
carriers to small business customers. LIT provides high-speed cable modem
access to connect certain Internet service providers and their residential
subscribers over the Company's Interactive Broadband Network. The Company
entered into a LIT agreement with Mindspring Enterprises, Inc. in August of
1998. The LIT service was launched in Montgomery, Alabama in January 1999.
Mindspring plans to offer its cable modem service utilizing the Company's LIT
product in Columbus, Augusta, Charleston and Panama City in 1999. In addition,
the Company entered into an Agreement with A World of Difference Inc., a large
locally owned Internet service provider serving the Charleston market.
FUTURE BROADBAND SERVICES. The Company believes that its Interactive
Broadband Networks could in the future enable it to provide additional
Broadband Services, including (i) interactive energy management services (in
partnership with power companies), which involve active monitoring by the
customer of energy usage and cost; (ii) security services, including
closed-circuit television security monitoring and alarm systems; (iii) voice
over Internet Protocol ("IP") when the technology is available to provide a
premium grade lifeline telephony product. The Company also plans to develop and
offer local transport services (local loops) to carry Voice over IP for other
carriers and service providers and (iv) high capacity ATM based local transport
services. The Company expects to commence trials of certain of these services
in 1999. See "--Risk Factors--Demand for Bundle of Broadband Services is
Uncertain."
Proposed interactive energy management services would involve a
utility sending and receiving consumption and pricing information over the
Company's network to and from customers' homes to enable customers to monitor
energy consumption. Proposed security services are expected to include primary
security monitoring through closed-circuit television and back-up alarm
networking. Voice over IP transport would utilize cable modems and the
Company's local ATM transport network. Additional network switching elements
allowing the Company to provide a premium grade lifeline telephony end user
service may be added to the network as this technology becomes available. High
capacity ATM based local transport services providing connectivity to medium
and large commercial end users, incumbent local exchange carrier central
offices and other carrier points of presence are planned for deployment in
certain portions of the Company's service areas.
For further information on the Company's operating segments, see Note
10 of Notes to Consolidated Financial Statements.
MARKETS AND SUBSCRIBERS
CURRENT MARKETS. The Company's Interactive Broadband Networks
currently serve the Montgomery, Alabama; Columbus and Augusta, Georgia:
Charleston, South Carolina; and Panama City, Florida metropolitan areas. The
Company also provides analog cable television services in the Huntsville,
Alabama area with plans to upgrade the Huntsville network to an Interactive
Broadband Network.
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Subscribers, by operating segment, as of December 31, 1998 consisted
of the following:
<TABLE>
<CAPTION>
<S> <C>
Subscribers
Cable 77,744
Telephone 5,615
Data 758
Bundled Customers(1) 2,184
</TABLE>
(1) Represents customers who subscribe to two or more of KNOLOGY's
services.
The Company believes that its ability to increase and maintain its
subscribers has been due largely to (1) its commitment to customer service, (2)
the greater number of channels offered by the Company, and (3) the greater
reliability and quality of the picture and sound offered by the Company over
its Interactive Broadband Networks as compared to the more traditional cable
networks operated by the Company's competitors.
NEW MARKETS. The Company intends to expand to additional mid-sized
cities in the southeastern United States, targeting cities (1) that have a
geographic density such that network plant can be constructed to pass an
average of 70 homes per mile, (2) that generally have populations of at least
100,000 and (3) in which the Company believes it can capture a substantial
portion of the cable television customers and can be the leading provider of
bundled Broadband Services. The Company believes that such cities will support
a Broadband Services business, and that currently most of the large cable
companies and other service providers are focusing primarily on larger
metropolitan areas. Consummation of this expansion plan is subject to a number
of significant contingencies. See "--Risk Factors."
NETWORK CONSTRUCTION AND OPERATIONS
NETWORK CONSTRUCTION. The Company uses contractors for the
construction of its Interactive Broadband Networks. The Company serves as the
manager of the construction process, directing and supervising the various
construction crews. The Company has 59 employees dedicated to monitoring and
facilitating the construction of the Company's networks, including a Vice
President of Construction. The Company's approach to construction also reflects
its commitment to customer service, as the Company notifies potential customers
before commencing underground construction and restores any damaged property.
Based on completed expansion and construction during 1997 and 1998, the Company
believes the build-out of a greenfield network will take approximately three
years, depending on various factors, including construction delays. The Company
has experienced construction
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<PAGE> 12
delays in certain markets related to the installation of aerial portions of the
network construction caused by pole change-out requirements.
NETWORK OPERATIONS AND MAINTENANCE. Technicians located in each of the
Company's service areas schedule and perform installations and repairs and
monitor the performance of the Interactive Broadband Networks. The Company's
Interactive Broadband Networks utilize a 750 MHz signal (designed to allow for
upgrade to 1,000 MHz) and are protected by redundant paths for communications
segments, including a SONET ring connecting hubs for restoration and security
purposes. By comparison, most traditional cable television systems utilize 450
MHz to 550 MHz signals and do not have significant redundancy protection. The
Company operates a network operations center in West Point, Georgia, and
monitors its networks 24 hours a day, seven days a week and strives to resolve
problems prior to the customer being aware of any service interruptions. The
network operations center monitors network activity, receiving real-time
information regarding network performance, power supply status, and telephony
customer premise equipment activation. The Company's technicians perform
maintenance and repair of the network on an ongoing basis. The Company plans to
maintain the quality of its networks to minimize service interruptions and
extend the networks' operational life.
FRANCHISES. Cable television systems generally are constructed and
operated under the authority of nonexclusive permits or "franchises" granted by
local and/or state governmental authorities. Franchises typically contain many
conditions, such as time limitations on commencement and completion of system
construction, customer service standards, minimum number of channels and the
provision of free service to schools and certain other public institutions. The
Company believes that the conditions in its franchises are fairly typical. The
Company's franchises generally provide for the payment of fees to the issuing
authority ranging from 3% to 5% of revenues from cable television service.
The Company's Columbus franchise was renewed in March 1999. The
Company's franchises generally have ten to fifteen year terms and the Company
expects the franchises to be renewed before or upon expiration by the relevant
governmental agency. See "--Legislation and Regulation."
INTERCONNECTION. The Company relies on local telephone companies and
other companies to provide communications capacity for the Company's local and
long distance telephone service. The Company obtains access to BellSouth's
telephone network under a nine-state interconnection agreement pursuant to the
1998 Telecom Act. The terms of such interconnection agreement have been filed
for approval with the Georgia, Alabama, Florida and South Carolina state public
utility commissions. Approvals of other state public utility commissions will
be required in connection with the Company's provision of telephone service in
other states. In addition, the 1996 Telecom Act established certain
requirements and standards for interconnection arrangements, and the Company's
interconnection agreement with BellSouth is based in part on such requirements.
However, these requirements and standards are still being developed and
implemented by the FCC in conjunction with the states through a process of
negotiation and arbitration. To the extent that the implemented standards are
unfavorable to the Company, the Company's interconnection arrangement with
BellSouth could be adversely affected. The Company's ability to offer telephony
services at competitive rates depends upon maintaining interconnection and
access on competitive terms. The 1996 Telecom Act creates incentives for certain
local exchange carriers to permit access to their facilities by denying such
carriers the right to provide long distance services until they have taken the
required steps to open the local market to competition. BellSouth is not yet
permitted to offer long distance services. There can be no assurance that
BellSouth or other local exchange carriers will not be less accommodating to the
Company's interconnection, collocation or access requests once they are
permitted to offer long distance service. The interconnection agreement expires
in April of 2000 and there can be no assurance that it will be renewed on
favorable terms, or at all. See "--Risk Factors--Dependence on Interconnections"
and "--Legislation and Regulation--Federal Regulation of Telecommunications
Services."
SALES AND MARKETING
MARKETING STRATEGY. The Company believes that it is the first provider
of a bundled video, voice and data Broadband Services package in Montgomery,
Columbus, Panama City, Augusta, and Charleston and intends to be
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<PAGE> 13
first to market a bundled video, voice and data Broadband Services package in
each of the cities in which it proposes to construct and operate Interactive
Broadband Networks. The Company believes that cost savings on a bundle of
services and the advantages of one-stop shopping (including a single point of
purchase and one relationship to manage all services included in the bundle)
will be attractive to new customers, particularly since most of its prospective
customers presently buy services from multiple sources. The Company seeks to
capitalize on its position as a new communications company that brings
competition and choice to cities where it provides service. The Company's
marketing strategy since commencing construction of its Interactive Broadband
Networks has been to focus on attracting new cable television subscribers in
areas in which its network has expanded. The Company plans to dedicate
additional marketing resources to pursuing new customers in areas already served
by the network to increase its penetration rate once its networks are fully
constructed. In particular, the Company expects to focus its marketing efforts
on multiple dwelling units, many of which are subject to exclusivity
arrangements with other cable providers that have not yet expired or which
involve more complex arrangements with the property owner.
The Company plans to use the availability of its bundle of Broadband
Services to pursue potential customers in existing service areas who did not
purchase the Company's cable television service. Marketing of telephone service
and high-speed Internet access service commenced in July 1997 in Montgomery. In
Columbus, high-speed Internet access service was introduced in September 1997
and telephone service was introduced in the fourth quarter of 1997. Telephone
and high-speed internet service was introduced in Panama City in the fourth
quarter of 1998. In Charleston and Augusta, the Company launched the full
bundle of cable, telephone and Internet services in the fourth quarter of 1998.
While the Company expects its subscribers for cable television (which are
primarily residential) to serve as the Company's initial customer base for its
telephone and Internet services, the Company also targets small- and
medium-sized businesses using a bundled offering emphasizing telephone and
Internet access services. In marketing its bundle of services, the Company
offers savings on one or more of such services.
CABLE TELEVISION SALES AND MARKETING. To attract cable television
subscribers in newly served areas, the Company mounts extensive marketing
campaigns in such areas prior to initiation of service by means of door-to-door
solicitations and flyers ("door hangers"), with direct mail and telemarketing
to follow up on the door-to-door solicitation in its markets. The Company has a
sales staff in each of its markets, including residential and business sales
managers, approximately 10-12 sales representatives and 14-16 customer service
representatives. The Company also uses its own installation and repair crews
and those of outside contractors to install new service quickly. The Company's
sales representatives receive commissions based on the value created by each
sale, and accordingly are encouraged to focus on sales of premium services and
enhanced basic service.
The Company also uses these solicitation efforts to market its cable
services in its existing areas to encourage customers who previously have not
received any cable service or to switch to the Company's service from that of
the competing franchise holder. The Company provides technical and engineering
support and training of sales and service representatives from its headquarters
in West Point, Georgia.
TELEPHONE AND INTERNET SALES AND MARKETING. The Company's initial
marketing of its telephone and Internet Broadband Services has focused on
subscribers for the Company's cable television services through direct mail,
including placing promotional inserts in its billing materials, door-to-door
solicitations, door hangers and telemarketing. Customers of the Company's cable
television services are offered discounted rates for telephone service and
high-speed Internet services. The Company emphasizes a bundle of Broadband
Services that includes savings on one or more services as additional services
are added. The Company is also providing high-speed Internet access to certain
ISPs who in turn resell the service to their customers. The Company will also
start an agent program consisting of third parties who serve as
customer-resellers or distributors for the Company. The Company has sales
managers for telephone and Internet service, and sales representatives focusing
on Broadband Services.
CUSTOMER SERVICE
Customer service is an essential element of the Company's operations
and marketing, and the Company believes the quality and responsiveness of its
customer service differentiates it from its competitors. A significant number
of the Company's employees are dedicated to customer service activities,
including order taking, customer
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<PAGE> 14
activations, billing inquiries and collections, service upgrades, provision of
customer premises equipment, and administration of the Company's customer
satisfaction program. In addition, the Company provides 24-hour customer
service, operates customer phone centers in each of the Company's service
areas, and operates a back-up customer phone center in West Point, Georgia. The
Company's commitment to customer service is also reflected in its approach to
construction, where the Company notifies potential customers before commencing
underground construction and restores any damaged property. The Company
monitors its networks 24 hours a day, seven days a week and strives to resolve
problems prior to the customer being aware of any service interruptions.
COMPETITION
TELEVISION
Cable television competes for customers in local markets with other
distributors of video programming and other providers of entertainment, news
and information. The competitors in these markets include broadcast television
and radio, satellite and wireless video distribution systems and directly
competitive cable television operations, newspapers, magazines and other
printed sources of information and entertainment. The enactment of the 1996
Telecom Act may initiate more competition with cable television, because it
allows local exchange carriers to provide video services in their local service
areas, in direct competition with local cable companies.
OTHER CABLE SYSTEMS. There are directly competitive cable television
operations in each of Montgomery, Columbus, Panama City, Augusta, Charleston,
and Huntsville service areas, and the Company expects that there will be
competitive cable television providers in the cities in which the Company
constructs additional Interactive Broadband Networkin the future. In addition,
Federal law prohibits cities from granting exclusive cable franchises and from
unreasonably refusing to grant additional, competitive franchises, so
additional cable television competitors could obtain franchises in the future.
An increasing number of cities are exploring the feasibility of owning their
own cable systems in a manner similar to city-provided utility services.
Certain of the Company's cable television competitors may have exclusive
arrangements with cable programming vendors, preventing the Company from
offering certain programming on its cable television systems.
The table below summarizes certain industry data for each of the
Company's markets:
<TABLE>
<CAPTION>
ANALOG
CABLE CURRENT CHANNELS
PENETRATION CABLE OFFERED BY
SERVICE AREA LEVEL COMPETITORS COMPETITORS
- ------------ ----------- ----------- -----------
<S> <C> <C> <C>
Montgomery, AL 68% TCI 63
Columbus, GA 72% TCI 54
Charter Communications 62
Panama City, FL 68% Comcast Cable Communications 62
Jones Spacelink 36
Augusta, GA 61% Jones Intercable 60
Charleston, SC 65% Comcast Cable Communications 53
Time Warner Cable (1) 37
Huntsville, AL 71% Comcast Cable Communications 61
Mediacom 48
</TABLE>
- ---------------
(1) Summerville, Franchise Area.
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<PAGE> 15
OTHER TELEVISION PROVIDERS. There are alternative methods of
distributing the same or similar video programming offered by cable television
systems, although cable television systems currently account for a large
percentage of total subscribership to multichannel video programming
distributors ("MVPDs"). Further, these technologies have been encouraged by
Congress and the FCC to offer services in direct competition with existing
cable systems. In addition to broadcast television stations, the Company
competes in a variety of areas with other multichannel programming service
providers on a direct basis. Multichannel programming services are distributed
by communications satellites directly to High-Speed Data devices ("HSDs")
serving residences, private businesses and various nonprofit organizations.
Cable programmers have developed marketing efforts directed to HSD owners.
A more significant competitive impact is expected from medium power
and higher power communications DBS satellites that transmit signals that can
be received by dish antennas owned by the end-user. DirecTV and Echostar offer
multichannel programming services via high-power communications satellites that
require a dish antenna with a diameter of only approximately 18 inches.
Although DBS providers presently serve a relatively small percentage of pay
television subscribers at this time, their share has been growing steadily.
Competition from both medium and high power DBS services could become
substantial as developments in technology continue to increase satellite
transmitter power and decrease the cost and size of equipment needed to receive
these transmissions; however, the Company believes that equipment and
programming costs presently are limiting DBS's market share in cabled areas.
DBS has advantages and disadvantages as an alternative means of
distributing video signals to the home. Among the advantages are that the
capital investment (although initially high) for the satellite and uplinking
segment of a DBS system is fixed and does not increase with the number of
subscribers receiving satellite transmissions; that DBS is not currently
subject to local regulation of service or required to pay franchise fees; and
that the capital costs for the ground segment of a DBS system (the reception
equipment) are directly related to and limited by the number of service
subscribers. DBS's disadvantages presently include limited ability to tailor
the programming package to the interests of different geographic markets, such
as providing local news, other local origination services and local broadcast
stations; signal reception being subject to line of sight angles; intermittent
interference from atmospheric conditions and terrestrially generated radio
frequency noise; and the customer being required to purchase or lease the
satellite dish. The long term effect of competition from these services cannot
be predicted; however, the Company nonetheless believes that such competition
could be substantial in the near future.
Multichannel multipoint distribution systems ("MMDS") represent
another type of video distribution service. MMDS systems deliver programming
services over microwave channels received by subscribers with a special
antenna. MMDS systems are less capital intensive, are not required to obtain
local franchises or pay franchise fees, and are subject to fewer regulatory
requirements than cable television systems. Although there are relatively few
MMDS systems in the United States that are currently in operation or under
construction, many markets have been licensed or tentatively licensed. The FCC
has taken a series of actions intended to facilitate the development of these
"wireless cable systems" as alternative means of distributing video
programming, including reallocating the use of certain frequencies to these
services and expanding the permissible use of certain channels reserved for
educational purposes. The FCC's actions enable a single entity to develop an
MMDS system with a potential of up to 35 channels, and thus compete more
effectively with cable television. Developments in compression technology have
significantly increased the number of channels that can be made available from
other over-the-air technologies. Subscribership to MMDS services is projected
to continue to increase over the next several years.
The Company also competes with master antenna television ("MATV")
systems and satellite master antenna television ("SMATV") systems, which
provide multichannel program services directly to hotel, motel, apartment,
condominium and similar multiunit complexes within a cable television system's
franchise area, generally free of any regulation by state and local
governmental authorities. The 1996 Telecom Act changes the definition of a
"cable system" to include only systems that cross public rights-of-way.
Therefore, SMATV systems that serve buildings that are not commonly owned or
managed, but which do not cross public rights-of-way, are no longer considered
cable systems and no longer require a franchise to operate.
Prior to enactment of the 1996 Telecom Act, LECs were prohibited from
offering video programming directly to subscribers in their telephone service
areas (except in limited circumstances in rural areas). The 1996
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<PAGE> 16
Telecom Act eliminated many restrictions on LECs, and the Company may face
increased competition from local telephone companies, which, in most cases,
have greater financial resources than the Company. Several major LECs,
including BellSouth, have announced plans to acquire cable television systems
or provide video services to the home through fiber optic or wireless
technology.
The 1996 Telecom Act provides LECs with four options for providing
video programming directly to customers in their local exchange areas.
Telephone companies may provide video programming by radio-based systems,
common carrier systems, "open video" systems, or "cable systems." LECs that
elect to provide service via "open video" systems must allow others to use up
to two-thirds of their activated channel capacity. They will be relieved of
regulation as "common carriers," and are not required to obtain local
franchises, but are still subject to many other regulations applicable to cable
systems. LECs operating as "cable systems" are subject to all rules governing
cable systems, including franchising requirements. It is unclear which model
LECs will ultimately choose, but the video distribution services developed by
local telephone companies are likely to represent a direct competitive threat
to the Company.
The ability of local telephone companies to compete with the Company
by acquiring an existing cable system however, is limited. The 1996 Telecom Act
prohibits a LEC or its affiliate from acquiring more than a 10% financial or
management interest in any cable operator providing cable service in its
telephone service area. It further prohibits a cable operator or its affiliate
from acquiring more than a 10% financial or management interest in any LEC
providing telephone exchange service in its franchise area. A LEC and cable
operator that have a telephone service area and cable franchise area in the
same market may not enter into a joint venture to provide telecommunications
services or video programming. There are exceptions to these limitations for
rural facilities, very small cable systems, and small LECs in non-urban areas,
and such restrictions do not apply to LECs that were not providing local
exchange service prior to January 1, 1993.
TELEPHONE
The Company is likely to face intense competition in providing local
and long distance telephone and other broadband telecommunications services.
The 1996 Telecom Act is expected to have a substantial impact on the degree of
competition because it permits providers to enter markets that were previously
closed to them. Specifically, the 1996 Telecom Act pre-empts state barriers to
entry that have historically protected incumbent LECs from significant
competition in local service markets. In addition, the 1996 Telecom Act
supersedes the antitrust consent decree that prohibited the RBOCs from
providing long distance services, and establishes the terms and conditions
under which RBOC entry into the long distance market will be permitted. The
overall effect of these provisions is to blur the distinctions that previously
existed between local and long distance services.
One major impact of the 1996 Telecom Act may be a trend toward the use
and acceptance of bundled service packages, consisting of local and long
distance telephony, combined with other elements such as cable television and
wireless telecommunications service. As a result, the Company will be competing
with the incumbent LEC, BellSouth, with traditional providers of long distance
services such as AT&T Corp. ("AT&T"), MCI WorldCom, Inc. ("MCI"), Sprint
Corporation ("Sprint") and with competitive local service providers, and may
face competition from other providers of cable television service. TCI is a
competitor of the Company in certain markets and may be a competitor in markets
in which the Company builds Interactive Broadband networks in the future.
AT&T's acquisition of TCI may impact the Company's competitive environment,
depending on the timing and nature of AT&T/TCI product offerings in the
Company's service areas. The Company's ability to compete successfully will
depend on the attributes of the overall bundle of services the Company is able
to offer, including price, features, and customer service.
Wireless telephone service (cellular and PCS) now is generally viewed
by consumers as a supplement to, not a replacement for, wireline telephone
service. Generally, wireless service is more expensive than wireline local
service and is generally priced on a usage-sensitive basis. In addition, the
transmission quality of wireless service is not comparable to wireline service.
However, it is possible that in the future the rate and quality differential
between wireless and wireline service will decrease, leading to more direct
competition between providers of these two types
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<PAGE> 17
of services. In that event, the Company's telecommunications operations may
also face competition from wireless operators.
INTERNET SERVICES
Internet service is provided by Internet service providers ("ISPs"),
which provide both Internet access and on-line services, providers of
satellite-based Internet services, long distance carriers that offer Internet
access services, and other cable television companies offering Internet access
services. The Company principally provides Internet access service. At present,
the Company is bundling its high-speed Internet service with its own on-line
"content", as well as offering high-speed capacity to certain other ISPs for
their customer bases.
A large number of companies provide businesses and individuals with
direct access to the Internet and a variety of supporting services. In
addition, many companies (such as America Online, CompuServe, MSN, Prodigy and
WebTV) offer "online" services consisting of access to closed, proprietary
information networks with services similar to those available on the Internet,
in addition to direct access to the Internet. Such companies generally offer
Internet services over telephone lines using computer modems. The Company
believes that this form of transmission works well for smaller amounts of data,
but telephone lines generally are not capable of handling large volumes of
information, multimedia applications or high-speed data transmissions,
resulting in lengthy delays. Also, ISPs have limited numbers of ports available
for customers to dial in to the Internet, and their customers may experience
difficulties obtaining access to the Internet or be disconnected if activity is
too limited. A few ISPs also offer high-speed ISDN connections to the Internet;
however, the Company believes that broadband transmission is the most efficient
means of transmitting large volumes of data and information on a high-speed
basis to and from the Internet.
A few satellite companies provide broadband access to the Internet
from desktop PCs using a small dish antenna and receiver kit comparable to that
used for satellite television reception. DirecPC, principally owned and
operated by Hughes, is one of the largest providers of satellite-based Internet
services in the United States.
Long distance companies are aggressively entering the Internet access
markets. Long distance carriers have substantial transmission capabilities that
traditionally carry data to millions of customers and have an established
billing system infrastructure that permits them easily to add new services. For
example, AT&T began providing Internet access in the United States through a
new service called WorldNet, offering its long distance customers Internet
access including unlimited usage at a fixed monthly rate or on a per hour fee
basis. The Company expects competition for the end-consumer from such companies
to be vigorous due to such competitors' greater resources, operating history
and name recognition.
Other cable television companies can enter the Internet services
market. Traditional cable networks provide only one-way transmission and must
be upgraded (and often reconfigured) to permit two-way data transmission, which
would require significant investments on the part of service providers.
Broadband technology must be incorporated to enable digital data to be
transmitted over a separate channel. The Company believes that some of the
existing cable television providers (such as Time Warner and Comcast) are
beginning to provide such services in certain of their major markets or
clusters, including certain major metropolitan areas in the southeast. @Home, a
joint venture among TCI and several other large cable companies, is offering
high-speed Internet service using cable modems in areas where its affiliates
have hybrid fiber-coaxial networks. The Company believes that high-speed
Internet services ultimately will be offered by other cable providers and
companies such as @Home in most of the Company's present and future service
areas.
FEDERAL LEGISLATION AND REGULATION
The cable television industry currently is regulated by the FCC, some
state governments and most local governments. Telecommunications services are
regulated by the FCC and state public utility commissions. Internet services
generally are not subject to regulation. In addition, legislative and
regulatory proposals under consideration by Congress and federal agencies may
materially affect the cable television and telecommunications industries. The
following is a summary of federal laws and regulations affecting the growth and
operation of the cable television and telecommunications industries and a
description of certain state and local laws.
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<PAGE> 18
CABLE COMMUNICATIONS POLICY ACT OF 1984
The Cable Communications Policy Act of 1984 (the "1984 Cable Act"),
which amended the Communications Act, established comprehensive national
standards and guidelines for the regulation of cable television systems and
identified the boundaries of permissible federal, state and local government
regulation. The FCC was charged with responsibility for adopting rules to
implement the 1984 Cable Act. Among other things, the 1984 Cable Act affirmed
the right of franchising authorities (state or local, depending on the practice
in individual states) to award one or more franchises within their
jurisdictions. It also prohibited non-grandfathered cable television systems
from operating without a franchise in such jurisdictions. The 1984 Cable Act
provides that in granting or renewing franchises, franchising authorities may
establish requirements for cable-related facilities and equipment, but may not
establish or enforce requirements for video programming or information services
other than in broad categories.
CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION ACT OF 1992
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") permitted a greater degree of regulation of the cable
industry with respect to, among other things: (i) cable system rates for both
basic and certain cable programming services; (ii) program access and
exclusivity arrangements; (iii) access to cable channels by unaffiliated
programming services; (iv) leased access terms and conditions; (v) horizontal
and vertical ownership of cable systems; (vi) customer service requirements;
(vii) television broadcast signal carriage and retransmission consent; (viii)
technical standards; and (ix) cable equipment compatibility. Additionally, the
legislation encouraged competition with existing cable television systems by
allowing municipalities to own and operate their own cable television systems
without a franchise, preventing franchising authorities from granting exclusive
franchises or unreasonably refusing to award additional franchises covering an
existing cable system's service area, and prohibiting the common ownership of
cable systems and co-located MMDS or SMATV systems (except that SMATV systems
may be co-owned by the local cable operator if the SMATV system is operated
pursuant to the terms of the franchise agreement). The 1992 Cable Act also
precluded video programmers affiliated with cable television companies from
favoring cable operators over competitors and required such programmers to sell
their programming to other multichannel video distributors. The legislation
required the FCC to initiate a number of rulemaking proceedings to implement
various provisions of the statute, the majority of which have been completed.
Various cable operators challenged the constitutionality of several sections of
the 1992 Cable Act, although the courts have disposed of most of these
challenges.
On June 28, 1996, the Supreme Court upheld cable operators' ability to
enforce prospective written policies against carrying programming that depicts
sexual or excretory activities on commercial leased access channels. The Court
also ruled that cable operators may not be required to block, scramble and
segregate indecent commercial leased access programming, finding that this
statutory provision violated cable operators' First Amendment rights. The Court
also struck down on First Amendment grounds the statutory provision that
enabled cable operators to prohibit obscene material, sexually explicit conduct
or material soliciting unlawful acts on Public, Educational and Government
("PEG") channels.
TELECOMMUNICATIONS ACT OF 1996
On February 8, 1996, the 1996 Telecom Act was enacted. The 1996
Telecom Act and the FCC rules implementing the 1996 Telecom Act radically
altered the regulatory structure of telecommunications markets by mandating
that states permit competition for local exchange services. The 1996 Telecom
Act also requires incumbent local exchange carriers ("ILECs") to provide
competitors with access to ILEC facilities on an unbundled basis and to provide
competitors with telecommunications services for resale at wholesale rates. The
1996 Telecom Act replaced (among other restrictions imposed by an earlier
consent decree) the ban on Regional Bell Operating Companies ("RBOCs")
provision of long distance services within their respective geographic areas
with a statutory procedure permitting RBOCs to apply to the FCC for authority
to provide long distance services, subject to certain conditions (See RBOC
Entry into Long Distance Services below). Constitutional challenges raised by
certain RBOCs to this provision of the 1996 Telecom Act proved unsuccessful.The
1996 Telecom Act also included significant changes in the regulation of cable
operators. Specifically, the 1996 Telecom Act reverses much of the
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cable rate regulation established by the 1992 Cable Act over a three-year
period. The rates for cable programming service ("CPS" or "non-basic") tiers
offered by small cable operators in small cable systems are deregulated
immediately. The FCC's authority to regulate the CPS tier rates of all other
cable operators will expire on March 31, 1999. The legislation also (i) repeals
the anti-trafficking provisions of the 1992 Cable Act; (ii) limits the rights
of franchising authorities to require certain technology or to prohibit or
condition the provision of telecommunications services by the cable operator;
(iii) requires cable operators to fully block or scramble both the audio and
video on sexually-explicit or indecent programming on channels primarily
dedicated to sexually-oriented programming; (iv) adjusts the pole attachment
laws; and (iv) allows cable operators to enter telecommunications markets which
historically have been closed to them, while also allowing some
telecommunications providers to begin providing competitive cable service in
their local service areas.
FEDERAL REGULATION OF CABLE SERVICES
The FCC, the principal federal regulatory agency with jurisdiction
over cable television, has promulgated regulations covering many aspects of
cable television operations, and is required to adopt additional regulations or
repeal or modify existing regulations to implement the 1996 Telecom Act. The
FCC may enforce its regulations through the imposition of fines, the issuance
of cease and desist orders and/or the imposition of other administrative
sanctions, such as the revocation of FCC licenses needed to operate certain
transmission facilities often used in connection with cable operations. A brief
summary of certain federal regulations follows.
RATE REGULATION. Prior to implementation of the 1992 Cable Act, most
cable systems were largely free to adjust cable service rates without
governmental approval. The 1992 Cable Act authorized rate regulation for
certain cable communications services and equipment in communities where the
cable operator is not subject to "effective competition." The 1992 Cable Act
requires the FCC to resolve complaints about rates for CPS tier services and to
reduce any such rates found to be unreasonable. It also limits the ability of
many cable systems to raise rates for basic services (together with non-basic,
the "Regulated Services"). Cable services offered on a per channel or on a per
program basis are not subject to rate regulation by either franchising
authorities or the FCC. Notwithstanding the above, the 1996 Telecom Act
immediately deregulates the CPS rates of "small cable operators" and will
deregulate the CPS rates of all other cable operators by March 31, 1999.
The 1992 Cable Act requires communities to certify with the FCC before
regulating basic cable rates. Upon certification, the local community obtains
the right to evaluate the reasonableness of basic rates under standards
established by the FCC. Certified franchising authorities are also empowered to
regulate rates charged for additional 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. These equipment rates must be
based on actual cost plus a reasonable profit, as defined by the FCC. Cable
operators may be required to refund overcharges with interest. The 1992 Cable
Act permits communities to certify at any time, so it is possible that the
Company's franchising authorities may choose in the future to certify to
regulate the Company's basic rates in areas where the Company's cable systems
are not subject to "effective competition." The FCC's rate regulations do not
apply where a cable operator demonstrates that it is subject to "effective
competition." Under the 1992 Cable Act, a system is subject to effective
competition where (i) fewer than 30% of the households in the franchise area
subscribe to the cable service of a cable system; (ii) the franchise area is
served by at least two unaffiliated MVPDs each of which offers comparable video
programming to at least 50% of the households in the franchise area and the
number of households subscribing to programming services offered by MVPDs other
than the largest MVPD exceeds 15% of the households in the franchise area; or
(iii) a MVPD operated by the franchising authority offers video programming to
at least 50% of the households in the franchise area. The 1996 Telecom Act also
provides that effective competition exists if a local exchange carrier or its
affiliate provides video programming in the franchise area. The Company is
subject to effective competition in several of the areas that it currently
serves.
In implementing the 1992 Cable Act, the FCC adopted a benchmark
methodology as the principal method of regulating rates for Regulated Services.
Cable operators with rates above the level established by the FCC's benchmark
methodology may attempt to justify such rates using a cost-of-service
methodology. The FCC has instituted rate relief for small cable operators.
Cable operators with fewer than 400,000 subscribers are eligible to file
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a streamlined cost-of-service analysis to justify their per-channel rates in
those systems serving 15,000 or fewer subscribers. Per-channel rates that fall
below a prescribed benchmark are presumed reasonable.
The 1996 Telecom Act deregulates immediately CPS rates for small cable
operators that have less than 50,000 subscribers in the franchise area. A
"small operator" is an operator that, with its affiliates, serves less than 1%
of all subscribers in the United States (defined by the FCC as 617,000
subscribers) and is not affiliated with entities with annual aggregate gross
revenues of more than $250 million. Rates for basic service continue to be
regulated, however, unless the cable system had a single regulated tier as of
December 31, 1994. For all other cable systems, the FCC's rate regulation
authority for CPS tiers expires March 31, 1999. Rates for basic tiers will
continue to be subject to regulation.
The 1996 Telecom Act allows cable operators to pass through franchise
fees and regulatory fees to subscribers without any prior notice. Notices of
other rate changes may be given by any reasonable written means, at the cable
operator's "sole discretion." Bulk discounts for multi-dwelling units no longer
must meet any uniform rate requirement.
CARRIAGE OF BROADCAST TELEVISION SIGNALS. The 1992 Cable Act
established signal carriage requirements. These requirements allow commercial
television broadcast stations which are "local" to a cable system, to elect
every three years whether to require the cable system to carry the station,
subject to certain exceptions, or whether to require the cable system to
negotiate for "retransmission consent" to carry the station. The first
must-carry/retransmission consent elections were made in June 1993. The second
elections were made in October 1996. Stations are generally considered local to
a cable system where the system is located in the station's 1992 Area of
Dominant Influence ("ADI"), as determined by Arbitron. This method for
determining whether a station is local to a cable system will change at the
time of the October 1999 election when Nielsen DMAs will be used to define the
market where a station is "local" for mandatory carriage purposes. Cable
systems must obtain retransmission consent for the carriage of all "distant"
commercial broadcast stations, except for certain "superstations" (i.e.,
commercial satellite-delivered independent stations such as WGN). All
commercial stations entitled to must-carriage were to have been carried by June
1993, and any non-must-carry stations (other than superstations) for which
retransmission consent had not been obtained could no longer be carried after
October 5, 1993. The Company carries some stations pursuant to retransmission
consents and pays fees for such consents or has agreed to carry additional
services pursuant to retransmission consent agreements.
Local non-commercial television stations are also given mandatory
carriage rights, subject to certain exceptions, within the larger of (i) a
50-mile radius of the station's city of license; or (ii) the station's Grade B
contour (a measure of signal strength). Non-commercial stations are not given
the option to negotiate for retransmission consent. All non-commercial stations
entitled to carriage were to have been carried by December 1992.
NONDUPLICATION OF NETWORK PROGRAMMING. Cable television systems that
have 1,000 or more subscribers must, upon the appropriate request of a local
television station, delete or "black out" the simultaneous or nonsimultaneous
network programming of a distant same-network station when the local station
has contracted for such programming on an exclusive basis.
DELETION OF SYNDICATED PROGRAMMING. Cable television systems that have
1,000 or more subscribers must, upon the appropriate request of a local
television station, delete or "black out" the simultaneous or nonsimultaneous
syndicated programming of a distant station when the local station has
contracted for such programming on an exclusive basis.
REGISTRATION PROCEDURES AND REPORTING REQUIREMENTS. Prior to
commencing operation in a particular community, all cable television systems
must file a registration statement with the FCC listing the broadcast signals
they will carry and certain other information. Additionally, cable operators
periodically are required to file various informational reports with the FCC.
Cable operators that operate in certain frequency bands, including the Company,
are required on an annual basis to file the results of their periodic
cumulative leakage testing measurements.
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Operators that fail to make this filing or who exceed the FCC's allowable
cumulative leakage index risk being prohibited from operating in those
frequency bands in addition to other sanctions.
TECHNICAL REQUIREMENTS. Historically, the FCC has imposed technical
standards applicable to the cable channels on which broadcast stations are
carried, and has prohibited franchising authorities from adopting standards
which were in conflict with or more restrictive than those established by the
FCC. The FCC has applied its standards to all classes of channels which carry
downstream National Television System Committee ("NTSC") video programming. The
FCC also has adopted standards applicable to cable television systems using
frequencies in the 108-137 MHz and 225-400 MHz bands in order to prevent
harmful interference with aeronautical navigation and safety radio services and
has also established limits on cable system signal leakage. The 1992 Cable Act
requires the FCC to update periodically its technical standards. The 1996
Telecom Act requires that the FCC adopt minimal regulations to assure
compatibility among televisions, VCRs and cable systems, leaving all features,
functions, protocols and other product and service options for selection
through open competition in the market. The 1996 Telecom Act also prohibits
States or franchising authorities from prohibiting, conditioning or restricting
a cable system's use of any type of subscriber equipment or transmission
technology.
FRANCHISE AUTHORITY. The 1984 Cable Act affirmed the right of
franchising authorities (the cities, counties or political subdivisions in
which a cable operator provides cable service) to award franchises within their
jurisdictions and prohibited non-grandfathered cable systems from operating
without a franchise in such jurisdictions. The Company holds cable franchises
in all of the franchise areas in which it provides service. The 1992 Cable Act
encouraged competition with existing cable systems by (i) allowing
municipalities to operate their own cable systems without franchises; (ii)
preventing franchising authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area; and (iii) prohibiting (with limited exceptions) the
common ownership of cable systems and co-located MMDS or SMATV systems (a
prohibition which is limited by the 1996 Telecom Act to cases in which the
cable operator is not subject to effective competition).
The 1996 Telecom Act exempts from cable franchise requirements those
telecommunications services provided by a cable operator or its affiliate
although municipalities retain authority to regulate the manner in which a
cable operator uses the public rights-of-way to provide telecommunications
services. Franchise authorities may not require a cable operator to provide
telecommunications service or facilities, other than institutional networks, as
a condition of franchise grant, renewal, or transfer. Similarly, franchise
authorities may not impose any conditions on the provision of such service.
FRANCHISE FEES. Although franchising authorities may impose franchise
fees under the 1984 Cable Act, as modified by the 1996 Telecom Act, such
payments cannot exceed 5% of a cable system's annual gross revenues derived
from the operation of the cable system to provide cable services. Franchise
fees apply only to revenues for cable services. Franchising authorities are
permitted to charge a fee for any telecommunications providers' use of public
rights-of-way "on a competitively neutral and nondiscriminatory basis."
FRANCHISE RENEWAL. The 1984 Cable Act established renewal procedures
and criteria designed to protect incumbent franchisees against arbitrary
denials of renewal. These formal procedures are mandatory only if timely
invoked by either the cable operator or the franchising authority. Even after
the formal renewal procedures are invoked, franchising authorities and cable
operators remain free to negotiate a renewal outside the formal process.
Although the procedures provide substantial protection to incumbent
franchisees, renewal is by no means assured, as the franchisee must meet
certain statutory standards. Even if a franchise is renewed, a franchising
authority may impose new and more onerous requirements such as upgrading
facilities and equipment, although the municipality must take into account the
cost of meeting such requirements.
The 1992 Cable Act made several changes to the process which may make
it easier in some cases for a franchising authority to deny renewal. The cable
operator's timely request to commence renewal proceedings must be in writing
and the franchising authority must commence renewal proceedings not later than
six months after receipt of such notice. Within a four-month period beginning
with the submission of the renewal proposal, the franchising authority must
grant or deny the renewal. Franchising authorities may consider the "level" of
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programming service provided by a cable operator in deciding whether to renew.
Franchising authorities currently may deny renewal based on failure to
substantially comply with the material terms of the franchise, even if the
franchising authority has "effectively acquiesced" to such past violations. The
franchising authority is estopped only if, after giving the cable operator
notice and opportunity to cure, the authority fails to respond to a written
notice from the cable operator of its failure or inability to cure. Courts may
not reverse a denial of renewal based on procedural violations found to be
"harmless error."
CHANNEL SET-ASIDES. The 1984 Cable Act permits local franchising
authorities to require cable operators to set aside certain channels for
public, educational and governmental access programming. The 1984 Cable Act
further requires cable television systems with 36 or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties. The 1992 Cable Act requires leased access rates to
be set according to a FCC-prescribed formula.
OWNERSHIP. The 1996 Telecom Act eliminates the 1984 Cable Act
provisions prohibiting LECs from providing video programming directly to
customers within their local exchange telephone service areas, except in rural
areas or by specific waiver. Under the 1996 Telecom Act, LECs may provide video
programming by radio-based systems, common carrier systems, "open video"
systems, or "cable systems." LECs that elect to provide "open video" systems
must allow others to use up to two-thirds of their activated channel capacity.
These LECs are relieved of regulation as "common carriers," and are not
required to obtain local franchises, but are still subject to many other
regulations applicable to cable systems. LECs operating as "cable systems" are
subject to all rules governing cable systems, including franchising
requirements.
The 1996 Telecom Act prohibits a LEC or its affiliate from acquiring
more than a 10% financial or management interest in any cable operator
providing cable service in its telephone service area. It also prohibits a
cable operator or its affiliate from acquiring more than a 10% financial or
management interest in any LEC providing telephone exchange service in its
franchise area. A LEC and cable operator whose telephone service area and cable
franchise area are in the same market may not enter into a joint venture to
provide telecommunications services or video programming. There are exceptions
to these limitations for rural facilities, very small cable systems, and small
LECs in non-urban areas, and such restrictions do not apply to LECs that were
not providing local exchange service prior to January 1, 1993.
The FCC's rules prohibit the common ownership, operation, control or
interest in a cable system and a local television broadcast station whose
predicted Grade B contour covers any portion of the community served by the
cable system. The 1996 Telecom Act repeals this statutory restriction on
broadcast-cable cross-ownership, but does not require the FCC to repeal its
cross-ownership rule. Nevertheless, the FCC intends to review this rule. The
1996 Telecom Act also eliminates the FCC's restriction against the ownership or
control of both a broadcast network and a cable system, but it authorizes the
FCC to adopt regulations which will ensure carriage, channel positioning and
nondiscriminatory treatment of non-affiliated broadcast stations by cable
systems which are owned by a broadcast network.
The 1992 Cable Act prohibits the common ownership, affiliation,
control or interest in cable television systems and MMDS facilities or SMATV
systems with overlapping service areas. However, a cable system may acquire a
co-located SMATV system if it provides cable service to the SMATV system in
accordance with the terms of its cable television franchise. The 1996 Telecom
Act provides that these rules shall not apply where the cable operator is
subject to effective competition.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the
number of cable systems a single cable operator may own. In general, no cable
operator may hold an attributable interest in cable systems which pass more
than 30% of all homes nationwide. Attributable interests for these purposes
include voting interests of 5% or more (unless there is another single holder
of more than 50% of the voting stock), officerships, directorships and general
partnership interests.
POLE ATTACHMENTS. The 1996 Telecom Act requires utilities (all local
exchange carriers and electric utilities, except those owned by municipalities
and co-ops) to provide cable operators and telecommunications
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carriers with nondiscriminatory access to poles, ducts, conduit and
right-of-way. The right to mandatory access is beneficial to facilities-based
providers such as KNOLOGY. The 1996 Telecom Act also establishes principles to
govern the pricing of such access. Presently, the rates charged to cable and
telecommunications providers are the same. Starting in 2001, telecommunications
providers will be charged a higher rate than cable operators for pole
attachments. Companies that provide both cable and telecommunications services
over the same facilities, such as KNOLOGY, may be required to pay the higher
telecommunications rate.
INSIDE WIRING OF MULTIFAMILY DWELLING UNITS. The FCC has adopted rules
to promote competition among multichannel video program distributors ("MVPDs")
in multifamily dwelling units ("MDUs"). The rules provide generally that, in
cases where the MVPD owns the wiring inside an MDU, but has no right of access
to the premises, the MDU owner may give the cable operator notice that it
intends to permit another MVPD to provide service there. An MVPD then must
elect whether to remove the inside wiring, sell the inside wiring to the MDU
owner (at a price not to exceed the replacement cost of the wire, on a per-foot
basis), or abandon the inside wiring.
PRIVACY. The 1984 Cable Act imposes a number of restrictions on the
manner in which cable system operators can collect and disclose data about
individual system customers. The statute also requires that the system operator
periodically provide all customers with written information about its policies
regarding the collection and handling of data about customers, their privacy
rights under federal law and their enforcement rights. In the event that a
cable operator is found to have violated the customer privacy provisions of the
1984 Cable Act, it could be required to pay damages, attorneys' fees and other
costs. Under the 1992 Cable Act, the privacy requirements are strengthened to
require that cable operators take such actions as are necessary to prevent
unauthorized access to personally identifiable information.
FRANCHISE TRANSFER. The 1996 Telecom Act repeals most of the
anti-trafficking restrictions imposed by the 1992 Cable Act, which prevented a
cable operator from selling or transferring ownership of a cable system within
36 months of acquisition. However, a local franchise may still require prior
approval of a transfer or sale. The 1992 Cable Act requires franchising
authorities to act on a franchise transfer request within 120 days after
receipt of all information required by FCC regulations and the franchising
authority. Approval is deemed granted if the franchising authority fails to act
within such period.
COPYRIGHT. Cable television systems are subject to federal compulsory
copyright licensing covering carriage of broadcast signals. In exchange for
making semi-annual payments to a federal copyright royalty pool and meeting
certain other obligations, cable operators obtain a statutory license to
retransmit broadcast signals. The amount of the royalty payment varies,
depending on the amount of system revenues from certain sources, the number of
distant signals carried, and the location of the cable system with respect to
over-the-air television stations. Adjustments in copyright royalty rates are
made through an arbitration process supervised by the U.S. Copyright Office.
Various bills have been introduced in Congress in the past several
years that would eliminate or modify the cable television compulsory license.
Without the compulsory license, cable operators might need to negotiate rights
from the copyright owners for each program carried on each broadcast station
retransmitted by the cable system.
Copyright music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and cable programming networks
(such as USA Network) has generally been licensed by the networks through
private agreements with the American Society of Composers and Publishers
("ASCAP") and BMI, Inc. ("BMI"), the two major performing rights organizations
in the United States. ASCAP and BMI offer "through to the viewer" licenses to
the cable networks which cover the retransmission of the cable networks'
programming by cable television systems to their subscribers.
INTERNET SERVICE PROVIDERS. In 1998, a number of Internet service
providers (ISPs) requested that the FCC adopt rules requiring cable operators
that provide Internet access service keep unaffiliated ISPs with direct
unbundled access to operators' underlying broadband cable facilities. The FCC
to date has rejected these requests, but it may in the future require cable
operators to provide such direct access to competing ISPs. A number of local
franchising authorities also are considering this type of direct access
requirement.
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REGULATORY FEES AND OTHER MATTERS. The FCC requires payment of annual
"regulatory fees" by the various industries it regulates, including the cable
television industry. In 1997, cable television systems were required to pay
regulatory fees of $0.54 per subscriber. In 1998, the fee was $0.44 per
subscriber. Per-subscriber regulatory fees may be passed on to subscribers as
"external cost" adjustments to rates for basic cable service. Fees are also
assessed for other FCC licenses, including licenses for business radio, cable
television relay systems ("CARS") and earth stations. These fees, however, may
not be collected directly from subscribers as long as the FCC's rate
regulations remain applicable to the cable system.
In December 1994, the FCC adopted new cable television and broadcast
technical standards to support a new Emergency Alert System. Cable system
operators must install and activate equipment necessary to implement the new
Emergency Broadcast System by December 31, 1998 or October 1, 2002, depending
on the size of the system.
FCC regulations also address the carriage of local sports programming;
restrictions on origination and cablecasting by cable system operators;
application of the rules governing political broadcasts; customer service
standards; and limitations on advertising contained in nonbroadcast children's
programming.
REGULATION OF TELECOMMUNICATIONS SERVICES
The Company's telecommunications services are subject to varying
degrees of federal, state and local regulation. Pursuant to the Communications
Act of 1934, as amended by the 1996 Telecom Act, the FCC generally exercises
jurisdiction over the facilities of, and the services offered by,
telecommunications carriers that provide interstate or international
communications services. State regulatory authorities retain jurisdiction over
the same facilities to the extent that they are used to provide intrastate
communications services. Various international authorities may also seek to
regulate the provision of certain services.
FEDERAL REGULATION
TARIFFS AND DETARIFFING. The Company is classified by the FCC as a
non-dominant carrier with respect to both its domestic interstate and
international long distance carrier ("IXC") services and its competitive local
exchange carrier ("CLEC") services. All telecommunications carriers that
provide domestic interstate and international long distance services must file
tariffs with the FCC prescribing rates, terms and conditions of service.
Carriers must also file so-called "informational tariffs" with the FCC
describing their operator services. Non-dominant CLECs may, but no longer are
required to, file tariffs with the FCC for interexchange access services. The
Company has filed tariffs with the FCC for its domestic interstate and
international long distance services, interstate access services and interstate
operator services.
In October 1996, pursuant to its forbearance authority, the FCC issued
an order prohibiting non-dominant carriers from filing tariffs for domestic
interstate long distance services. The FCC's detariffing rules were stayed, in
February 1997, by an appellate court pending judicial review. The Company is
currently unable to predict what effect, if any, the outcome of the FCC's
detariffing proceeding will have on its future operations.
INTERCONNECTION. The 1996 Telecom Act establishes local exchange
competition as a national policy by preempting laws that prohibit competition
for local exchange services and by establishing uniform requirements and
standards for local network interconnection, local network unbundling and local
service resale. The 1996 Telecom Act also requires incumbent local exchange
carriers to enter into mutual compensation arrangements with new local
telephone companies for transport and termination of local calls on each
others' networks. Most state Public Utility Commissions ("PUCs") have ruled
that traffic to Internet service providers is covered by this requirement. The
FCC recently decided that calls to ISPs could be jurisdictionally interstate,
although the FCC did not preempt these state decisions. The Act's
interconnection, unbundling and resale standards have been developed initially
by the FCC and have been, and will continue to be, implemented by the states in
numerous proceedings and through a process of negotiation and arbitration. In
August 1996, the FCC adopted a wide-ranging decision regarding the statutory
interconnection obligations of the LECs. Among other things, the order
established pricing principles, based upon
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an incremental costing methodology known as "TELRIC", for use by the states in
determining rates for unbundled local network elements and for calculating
discounts to reflect costs saved by the LECs in offering their retail services
to other carriers on a wholesale basis. Various LECs appealed both the TELRIC
pricing methodology and other FCC rules which the appellants contended were too
favorable to competitors. In July 1997, the United States Court of Appeals for
the 8th Circuit struck down the pricing rules established by the FCC. The court
ruled that the FCC did not have jurisdiction under the 1996 Telecom Act to
establish pricing rules to be applied by the states. In January 1999, the
Supreme Court reversed the Eighth Circuit decision, finding that the FCC had
jurisdiction to implement the pricing provisions of the 1996 Act. The Eighth
Circuit is expected, on remand, to rule on the merits of the FCC's TELRIC
pricing rules. The Supreme Court also upheld the FCC's rule requiring LECs to
provide a "platform" that includes all of the network elements required by a
competitor to provide a retail telecommunications service. Competitors using
such platforms may conceivably be able to provide retail local services
entirely through the use of the LECs' facilities at lower discounts than those
available for local resale. The availability of such platforms could benefit
the Company's local competitors who, unlike the Company, do not operate their
own facilities. However, the Supreme Court reversed in part the FCC's decision
which specifically identified the particular unbundled network elements that
LECs must provide. The FCC is expected to release a new list of unbundled
network elements sometime in the summer or fall of 1999. It is possible,
therefore, that - depending upon how the FCC comprises this list, not all
elements of the LECs' networks will be made available to competitors on an
unbundled basis. Nor, therefore, does the availability of platforms necessarily
guarantee that competitors will be able to assemble cost based, local services
without having to own facilities. In any event, the Company cannot predict at
this time the ultimate outcome of the FCC's remand proceeding on pricing or the
effect the FCC's new UNE list may have on the Company's operations.
NUMBER PORTABILITY. Another new statutory provision requires that all
carriers offering local exchange services provide customers with the ability to
retain, at the same location, existing telephone numbers without impairment of
quality, reliability or convenience (i.e., "number portability"). Number
portability will remove one barrier to entry faced by new competitors, which
would otherwise face the difficult task of persuading customers to switch local
service providers despite having to change telephone numbers. The FCC ordered
permanent number portability to be made available in the 100 largest
metropolitan areas by December 31, 1998. Recently, the FCC reported that this
has thus far been accomplished in only (roughly) sixty of these areas,
Charleston included. The FCC has granted a limited number of parties'
extensions of this December 31, 1998 deadline due to technical problems that
have been encountered. While number portability benefits its CLEC operations,
the Company, at his time, is unable to predict the impact, if any, of possible
number portability delays or complications in its service territories.
UNIVERSAL SERVICE AND ACCESS CHARGE REFORM. The FCC has adopted rules
implementing the universal service requirements of the 1996 Telecom Act.
Pursuant to those rules, all telecommunications providers (including the
Company) must contribute a small percentage of their telecommunications
revenues to a newly established Universal Service Fund ("Fund"). There is,
however, an exemption for providers whose contribution would be less than
$10,000 in a particular year. The Company currently is within this exemption
but, as the Company's business grows, it will be required to contribute to the
Fund. Carriers providing service to low-income customers, as well as to
customers in high-cost and rural areas, are eligible to seek disbursements from
the Fund. The Fund also will subsidize service provided to schools, libraries
and rural health care providers at discounted rates. Significantly, the Fund is
designed to replace subsidies historically collected by LECs to recover their
costs of serving high cost areas. The FCC, accordingly, has revised the rules
governing access charges, which historically included such subsidies and LECs
assess on IXCs for use of the local network to complete long distance calls.
The FCC's access reform measures (recently affirmed on appeal by the Eighth
Circuit Court) are intended, over time, to establish an access charge rate
structure that better reflects LECs actual costs of providing access once the
universal service subsidies have been shifted to the Fund., and thus results in
lower costs of access for IXCs.
When the Company begins contributing to the Fund, it is not certain
whether the Company will be able to either recover the costs of Fund
contributions from its customers or to receive offsetting Fund disbursements.
Moreover, the Company, in those areas where it uses its own (or its affiliated)
cable plant for its CLEC operations, is largely unaffected by LECs' access
charge fluctuations. However, overall decreases in LECs' access charges - as
contemplated by the FCC's access reform policies - would likely put downward
pricing pressure on the Company's
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charges to IXCs for comparable access. Consequently, over time, statutory
universal service funding obligations, coupled with FCC's new access charge
regime, could adversely affect the Company by limiting its ability to offset
its Fund contributions through higher charges to IXCs for originating and
terminating interstate traffic over the Company's cable facilities.
RBOC ENTRY INTO LONG DISTANCE. The 1996 Telecom Act also establishes
standards for RBOCs and their affiliates to provide long distance
telecommunications services between a local access and transport area and
points outside that area. Prior to the 1996 Telecom Act, RBOCs were generally
prohibited from offering such "interLATA" services. Under the 1996 Telecom Act,
such services may be offered by a RBOC outside of its local exchange service
territory immediately. RBOCs may offer (so-called "in region") interLATA
services within their local exchange territory only when (and if) (i) the FCC
determines either that the RBOC is providing certain access and interconnection
to a facilities based provider of competing telephone exchange service provider
under a state-approved interconnection agreement or (ii) that no such provider
has requested such access and interconnection within ten months after
enactment, and the state has approved the RBOC's general statement of terms and
conditions for providing such access and interconnection. In either case, the
FCC, after consulting with the respective state commission, also must conclude
that the RBOC has satisfied a "competitive checklist" of interconnection and
other requirements specified in the 1996 Telecom Act and that RBOC entry is in
the public interest. In 1997, BellSouth filed applications with the FCC for
authority to offer in-region, interLATA services in South Carolina and
Louisiana; in 1998, BellSouth filed a second application at the FCC for
authority to offer such services in Louisiana. In December 1997, the FCC
rejected the South Carolina application. The Louisiana applications were
rejected in February 1998, and October 1998, respectively. Notwithstanding
these decisions, BellSouth likely will file additional applications to offer
interLATA services for other states in its territory, including states in which
the Company provides interLATA services. Because of its existing base of local
exchange service customers and its extensive telecommunications network, it is
anticipated that BellSouth will be a significant competitor in the interLATA
market in each of the states (if any) in which it obtains in-region, interLATA
authority from the FCC.
ADDITIONAL REQUIREMENTS. The FCC imposes additional obligations on all
telecommunications carriers, including obligations to: (1) interconnect with
other carriers and not to install equipment that cannot be connected with the
facilities of other carriers; (2) ensure that their services are accessible and
usable by persons with disabilities; (3) provide Telecommunications Relay
Service ("TRS"), either directly or through arrangements with other carriers or
service providers (TRS enables hearing impaired individuals to communicate by
telephone with hearing individuals through an operator at a relay center); (4)
comply with verification procedures in connection with changing a customer's
carrier so as to prevent "slamming," a practice by which a customer's chosen
long distance or local carrier is switched without the customer's consent; (5)
protect the confidentiality of proprietary information obtained from other
carriers, manufacturers and customers; (6) pay annual regulatory fees to the
FCC; and (7) contribute to the Telecommunications Relay Services Fund.
FORBEARANCE. The 1996 Telecom Act permits the FCC to forbear from
requiring telecommunications carriers to comply with certain regulations.
Specifically, the Act permits the FCC to forbear from applying statutory
provisions or regulations if the FCC determines that enforcement is not
necessary to protect consumers, or to ensure that a carrier's terms are
reasonable and nondiscriminatory, and that forbearance is in the public
interest and, in particular, that it will promote competition. The FCC has
exempted certain carriers from tariffing and reporting requirements pursuant to
this provision of the 1996 Telecom Act. The FCC may take similar action in the
future to reduce or eliminate other requirements. Such actions could free the
Company from regulatory burdens, but might also increase the pricing
flexibility of the Company's competitors.
ADVANCED SERVICES AND COLLOCATION. Section 706 of the 1996 Telecom Act
requires the FCC to encourage the deployment of advanced telecommunications
capabilities to all Americans through the promotion of local telecommunications
competition. In August 1998, the FCC issued a notice of proposed rulemaking to
develop rules and regulations, if necessary, to govern the availability of
collocation space at ILEC premises and the availability of ILEC local loops for
the provision of advances services such as DSL. Recently, the FCC adopted rules
designed to improve competitor access to ILEC collocation space and to reduce
the delays and costs associated with collocation. The FCC may take additional
future steps to facilitate competitors' access to local loops for purposes of
DSL deployment. While having better collocation arrangements at ILEC central
offices is to the Company's benefit, the
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FCC's advanced services proceeding, inasmuch as it primarily benefits DSL
providers who compete directly with the Company's Broadband Service offerings,
may prove on balance to have an adverse competitive effect on the Company.
OTHER. KNOLOGY must obtain additional franchises in cities to which it
plans to expand. The Communications Act provides that municipalities may not
unreasonably refuse to award competitive franchises. The Company believes that
it will be able to obtain franchises in its expansion cities on acceptable
terms and within acceptable time frames, although there can be no assurance
that this will occur.
STATE REGULATION
The 1996 Telecom Act contains provisions that prohibit states and
localities from adopting or imposing any legal requirement that may prohibit,
or have the effect of prohibiting, market entry by new providers of interstate
or intrastate telecommunications services. The FCC is required to preempt any
such state or local requirement to the extent necessary to enforce the 1996
Telecom Act's open market entry requirements. State and localities may,
however, continue to regulate the provision of intrastate telecommunications
services and require carriers to obtain certificates or licenses before
providing service.
The states of Alabama, Georgia, Florida, and South Carolina have
adopted statutory and regulatory schemes that require the Company to comply
with telecommunications certification and other regulatory requirements. To
date, the Company is authorized to provide intrastate local exchange,
interexchange and operator services in the states of Alabama, Georgia, Florida
and South Carolina. In addition, the Company has executed local network
interconnection agreements with BellSouth for the transport and termination of
local exchange traffic. These agreements have been filed with, and approved by,
the applicable regulatory authority in each of the states in which the Company
conducts its operations. As a condition of providing intrastate
telecommunications services, the Company, among other things, is required (i)
to file and to maintain intrastate tariffs or price lists describing the rates,
terms and conditions of the Company's services, (ii) to comply with state
regulatory reporting, tax and fee obligations (e.g., universal service), (iii)
to comply with, and to submit to, state regulatory jurisdiction over consumer
protection policies (e.g., "anti-slamming" regulations), complaints, transfers
of control and certain financing transactions. Generally, state regulatory
authorities can condition, modify, cancel, terminate or revoke certificates of
authority to operate in a state for failure to comply with state laws or the
rules, regulations and policies of the state regulatory authority. Fines and
other penalties may also be imposed for such violations.
LOCAL REGULATION
The Company is occasionally required to obtain street use and
construction permits and franchises to install and expand its Interactive
Broadband Network using state, city, county or municipal rights-of-way.
Termination of the existing franchise or license agreements prior to their
expiration dates or a failure to renew the franchise or license agreements and
a requirement that the Company remove its facilities or abandon its Interactive
Broadband Network in place could have a material adverse effect on the Company.
In some municipalities where the Company has installed or anticipates
constructing networks, it will be required to pay license or franchise fees
based upon a percentage of gross revenues or on a per linear foot basis. There
can be no assurance that, following the expiration of existing franchises, fees
will remain at their current levels. In addition, the Company could be at a
competitive disadvantage if its competitors do not pay the same level of fees
as the Company. However, the 1996 Telecom Act requires municipalities to manage
public rights-of-way in a competitively neutral and non-discriminatory manner.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR DISCOUNT NOTES. The Company completed the offering of its
Senior Discount Notes on October 22, 1997 ("Offering") and completed the
Exchange Offer in which the Senior Discount Notes were exchanged for the
Exchange Notes on March 24, 1998. See "Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." Interest will not accrue on the Notes prior to October 15,
2002. Thereafter, interest on the Notes will accrue at a rate of 11-7/8% per
annum and will be payable semiannually on April 15 and October 15 of each year,
commencing April 15, 2003.
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The Notes are unsubordinated indebtedness of the Company, ranking pari
passu in right of payment with all other existing and future unsubordinated
indebtedness of the Company, junior in right of payment to all secured
indebtedness of the Company and senior in right of payment to all subordinated
indebtedness of the Company.
The Notes will mature on October 15, 2007. The Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after October
15, 2002, initially at 105.9375% of their principal amount at maturity, plus
accrued interest, declining ratably to 100% of their principal amount at
maturity, plus accrued interest, on and after October 15, 2004. In addition, at
any time prior to October 15, 2000, the Company may redeem up to 35% of the
aggregate principal amount at maturity of the Notes from the proceeds of one or
more public equity offerings at 111.875% of their Accreted Value on the
redemption date; provided that after any such redemption, at least $288.7
million principal amount at maturity of the Notes remains outstanding.
The indenture pursuant to which the Notes were issued (the
"Indenture") contains certain covenants that affect, and in certain cases
significantly limit or prohibit, among other things, the ability of the Company
to incur indebtedness, pay dividends, prepay subordinated indebtedness, redeem
capital stock, make investments, engage in transactions with stockholders and
affiliates, create liens, sell assets and engage in mergers and consolidations.
If the Company fails to comply with these covenants, the Company's obligation
to repay the Notes may be accelerated. However, these limitations are subject
to a number of important qualifications and exceptions. In particular, while
the Indenture restricts the Company's ability to incur additional indebtedness
by requiring compliance with specified leverage ratios, it permits the Company
and its subsidiaries to incur an unlimited amount of indebtedness to finance
the acquisition of equipment, inventory and network assets and to secure such
indebtedness, and up to $50.0 million of additional secured indebtedness.
Upon a "Change of Control" of the Company (as defined in the
Indenture), the Company will be required to make an offer to purchase the Notes
at a purchase price equal to 101% of the Accreted Value thereof, plus accrued
interest.
CREDIT FACILITY. On December 22, 1998, the Company entered into a $50
million four-year senior secured credit facility ("Credit Facility") with First
Union National Bank and First Union Capital Markets Corp., which may be used for
working capital and other purposes, including capital expenditures and permitted
acquisitions. At the Company's option, interest will accrue based on either the
Alternate Base Rate plus applicable margin or the LIBOR rate plus applicable
margin. Obligations under the Credit Facility are secured by substantially all
tangible and intangible assets of the Company and its current and future
subsidiaries. The Credit Facility includes a number of covenants including,
among others, covenants limiting the ability of the Company and its subsidiaries
and their present and future subsidiaries to incur debt, create liens, pay
dividends, make distributions or stock repurchases, make certain investments,
engage in transactions with affiliates, sell assets, and engage in certain
mergers and acquisitions. The Credit Facility includes covenants requiring
compliance with certain operating and financial ratios on a consolidated basis.
The Credit Facility allows the Company to borrow up to five times certain
individual subsidiary's "consolidated adjusted cash flow" as defined in the
credit facility agreement. As of February 28, 1999, no funds have been drawn
against the facility.
RISK FACTORS
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, set forth below are cautionary
statements identifying important factors that could cause the Company's actual
results to differ materially from those projected in any forward-looking
statements of the Company made by or on behalf of the Company, whether oral or
written. These forward-looking statements can be identified by use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. The Company wishes to ensure that any forward-looking statements
are accompanied by meaningful cautionary statements in order to maximize to the
fullest extent possible the protections of the safe harbor established in the
Private Securities Litigation Reform Act of 1995. Accordingly, any such
statements are qualified in their entirety by reference to, and are accompanied
by, the following important factors, among others, that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements of the Company.
HISTORY OF LOSSES; EXPECTATION OF FUTURE LOSSES AND NEGATIVE CASH FLOWS FROM
OPERATIONS
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The Company has incurred net losses and negative cash flow from
operations since it commenced of operations. Since the Company acquired the
Montgomery and Columbus Systems in April and September 1995, respectively, the
Company has incurred aggregate net losses, as of December 31, 1998 of
approximately $54.2 million and aggregate cash flow from operations of $15.2
million, and as of December 31, 1998, the Company had an accumulated deficit of
$54.2 million. The implementation of the Company's business plan to build out
the Systems and commence construction of new systems involves significant
additional expenditures and is expected to result in substantially increased
depreciation and amortization. Revenues from new services are expected to be
subject to start-up delays. Accordingly, the Company expects to incur net
losses and negative cash flow (after capital expenditures) during the next
several years as it expands its operations and expects its net losses to
continue to increase as new Broadband Services are introduced and as the
Company continues to expand its business. In addition to timely and
cost-effective construction efforts, the ability of the Company to achieve
profitability and positive cash flow will depend in large part on the
successful marketing of the cable television and other Broadband Services
offered by the Company. There can be no assurance the Company can successfully
compete in obtaining subscribers for its Broadband Services or that the Company
will generate sufficient revenues such that the Company's operations will
become profitable or generate positive cash flows in the future. If the Company
cannot achieve operating profitability or positive cash flows from operating
activities, it may not be able to meet its working capital or debt service
requirements. See "--Risk Factors--Significant Capital Requirements," "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
COMPETITION
The television, telephone and Internet service businesses are highly
competitive and the level of competition is increasing. Many of the Company's
existing and potential competitors have long-standing customer relationships
and experience, financial, technical and other resources, marketing
capabilities and name recognition far greater than those of the Company. The
ability of the Company to compete will depend in part on the technical
advantages of its systems, its focus on customer service, the pricing of its
services and its ability to offer a bundle of services not available from any
other single vendor. There can be no assurance that the Company will be able to
compete successfully or that competitive pressures will not have a material
adverse effect on the Company's business, operating results or financial
condition. See "Business--Competition."
TELEVISION. In providing cable television service, the Company
currently competes with other cable television providers (including TCI in
Montgomery, TCI and Charter in Columbus, Jones and Comcast in Panama City,
Jones in Augusta, Comcast and Time Warner in Charleston, and Comcast and
Mediacom in Huntsville) and competes or may compete with other means of video
distribution, including broadcast television stations, direct broadcast
satellite companies, multichannel multipoint distribution services ("MMDS"),
satellite master antenna systems ("SMATV") and private home dish earth
stations. Additional competition may also come from new wireless local
multipoint distribution services ("LMDS") authorized by the FCC, for which
spectrum was auctioned by the FCC in February and March 1998. In addition, the
1996 Telecom Act repealed the cable/television cross ownership ban and
telephone companies will now be permitted to provide cable television service
within their service areas. The Company also faces competition from other
communications and entertainment media, including newspapers, movie theaters,
live sporting events and entities that make videotaped movies and programs
available for home rental.
TELEPHONE. In providing local and long distance telephone service and
long distance access services, the Company competes and will compete with the
incumbent local exchange carrier in the Company's markets. BellSouth is the
incumbent local exchange carrier and a particularly strong competitor in its
current markets and most of the markets targeted by the Company. The Company
will also compete with long distance carriers (such as AT&T, MCI and Sprint).
Other competitors are likely to include independent local exchange carriers,
including other RBOCs, competitive local exchange carriers, microwave, wireless
and satellite carriers and utilities.
INTERNET SERVICES. In providing Internet access services, the Company
will compete with other network providers which provide Internet access
services; providers of satellite-based Internet services; and long distance
carriers that offer Internet access services and other cable television
companies that offer Internet access services.
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Although the Company believes that broadband transmission is the most efficient
means of transmitting large volumes of data and information on a high-speed
basis to and from the Internet, technologies such as ISDN and direct broadcast
satellite also offer high-speed or broadband connections to the Internet. In
providing Internet services, the Company likely will compete with companies
such as DirecPC, one of the principal providers of satellite-based Internet
services in the United States, long distance carriers such as AT&T and MCI,
traditional dial-up Internet service providers, and cable modem services such
as @Home, a joint venture among TCI and other large cable companies. In
addition, it is possible that regulators could decide to require the Company to
provide competing Internet service providers with access to the Company's
broadband networks.
HIGH LEVERAGE; ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS
At December 31, 1998, the Company had $315.1 million of indebtedness
and its stockholders' equity was $15.0 million. In addition, the Company
entered into a $50 million four-year senior secured credit facility on December
22, 1998. As of February 28, 1999, no funds have been drawn against the
facility. However, the Company
expects to utilize the credit facility in the future for capital expenditures
or general corporate purposes. The level of the Company's indebtedness could
adversely affect the Company in a number of ways, including the following: (i)
a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness and will
not be available for other purposes; (ii) the ability of the Company to obtain
any necessary financing in the future for working capital, capital
expenditures, debt service requirements or other purposes may be limited; (iii)
the Company's level of indebtedness could limit its flexibility in planning
for, or reacting to, changes in its business; (iv) the Company may be more
highly leveraged than some of its competitors, which may place it at a
competitive disadvantage; and (v) the Company's degree of indebtedness may make
it more vulnerable to a downturn in its business or the economy generally.
For the years ended December 31, 1996, 1997 and 1998, the Company's
earnings were insufficient to cover its fixed charges by $3.4 million, $9.1
million and $43.3 million, respectively. There can be no assurance that the
Company will be able to improve its earnings before fixed charges or that the
Company will be able to meet its debt service obligations. If the Company is
unable to generate sufficient cash flow or otherwise obtain funds necessary to
make required payments, or if the Company otherwise fails to comply with the
various covenants in its indebtedness, it would be in default under the terms
thereof, which would permit the holders of such indebtedness to accelerate the
maturity of such indebtedness and could cause defaults under other indebtedness
of the Company. The ability of the Company to meet its obligations will be
dependent upon the future performance of the Company, which will be subject to
prevailing economic conditions and to financial, business and other factors.
See "--Description of Certain Indebtedness."
The successful implementation of the Company's strategy, including
increasing the number of cable television subscribers, obtaining customers for
other Broadband Services, expanding or constructing Interactive Broadband
Networks in Montgomery, Columbus, Panama City, Charleston, Augusta, and
Huntsville, and significant and sustained growth in the Company's cash flow are
necessary for the Company to be able to meet its debt service requirements.
There can be no assurance that the Company will successfully implement its
strategy or that the Company will be able to generate sufficient cash flow from
operating activities to meet its debt service obligations and working capital
requirements. In the event the implementation of the Company's strategy is
delayed or is unsuccessful or the Company does not generate sufficient cash
flow to meet its debt service and working capital requirements, the Company may
need to seek additional financing. There can be no assurance that any such
financing could be obtained on terms that are acceptable to the Company, or at
all. In the absence of such financing, the Company could be forced to dispose
of assets in order to make up for any shortfall in the payments due on its
indebtedness under circumstances that might not be favorable to realizing the
highest price for such assets. There can be no assurance that the Company's
assets could be sold quickly enough or for sufficient amounts to enable the
Company to meet its obligations.
The Indenture and the Credit Facility impose, operating and financial
restrictions on the Company and its subsidiaries. These restrictions will
affect, and in certain cases significantly limit or prohibit, among other
things, the ability of the Company and its subsidiaries to incur additional
indebtedness, create liens upon assets, apply the proceeds from the disposal of
assets, make investments, make dividend payments and other distributions on
capital
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stock and redeem capital stock. In addition, the Credit Facility is requires
the Company to maintain certain financial ratios. See "--Description of Certain
Indebtedness." There can be no assurance that the Company will be able to
maintain such ratios or that such covenants will not adversely affect the
Company's ability to finance its future operations or capital needs or to
engage in other business activities that may be in the interest of the Company.
The limitations in the Indenture are subject to a number of important
qualifications and exceptions. In particular, while the Indenture restricts the
Company's ability to incur indebtedness by requiring compliance with specified
leverage ratios, it permits the Company to incur an unlimited amount of
additional indebtedness to finance the acquisition of equipment, inventory or
network assets.
NETWORK CONSTRUCTION UNCERTAINTIES
The timing of completion of the various phases of construction is
subject to uncertainties. Expansion into additional cities will require the
Company to obtain franchises and other regulatory approvals, including
construction permits, and there can be no assurance that they will be obtained
on a timely basis. See "--Need for Favorable Franchises and Franchise Renewals"
and "--Legislation and Regulation." Delays in receiving the necessary
construction permits and financing, in performing the "make-ready" work to
attach the cable to utility poles, and in conducting the construction itself
(due to inclement weather and other causes) have adversely affected the
Company's schedule in the past, and could do so again in the future. In
constructing the network, the Company will be dependent on the performance of
contractors. There can be no assurance that these contractors will perform in
accordance with the Company's expectations.
ABILITY TO MANAGE GROWTH
The Company's future performance will depend, in part, upon its
ability to successfully implement its sales and marketing strategy, evaluate
markets, secure financing, construct facilities, acquire rights of way, effect
pole attachments and obtain any required government authorizations, all in a
timely manner, at reasonable costs and on satisfactory terms and conditions.
Rapid growth may place a significant strain on a company's management,
administrative, operational and financial resources. The Company's ability to
manage its growth successfully will require the Company to further enhance its
operational, management, financial and information systems and controls. The
Company's success will also depend in part upon its ability to hire and retain
qualified sales, marketing, administrative, operating and technical personnel.
There can be no assurance that the Company will be able to recruit, train,
manage and retain sufficient qualified personnel. In addition, as the Company
increases its service offerings and expands its targeted markets, there will be
additional demands on customer support, sales and marketing, administrative
resources and network infrastructure. The Company's inability to effectively
manage its growth could have a significant adverse effect on the Company's
business, results of operations and financial condition.
If the Company acquires existing companies or networks, or enters into
joint ventures as part of its expansion plan, it will be subject to the risks
generally attendant to an acquisition strategy or joint venture. Such risks
include the acquired company or joint venture not having all the benefits that
are anticipated, the diversion of resources and management time, the
integration of the acquired business or joint venture with the Company's
operations, the potential impairment of relationships with employees or
customers as a result of changes in management, the Company becoming subject to
liabilities or taking on obligations as a result of the acquisition or joint
venture, the additional debt burden or dilution incurred to pay the purchase
price or capital investment requirements, and other matters. There are also
risks in participating in joint ventures, including the risk that the other
joint venture partners may at any time have economic, business or legal
interests or goals that are inconsistent with those of the joint venture or the
Company or that a joint venture partner may be unable to meet its economic or
other obligations in the joint venture and that the Company may be required to
fulfill some or all of those obligations.
SIGNIFICANT CAPITAL REQUIREMENTS
The Company's business requires substantial investment to finance
capital expenditures and related expenses to expand the Interactive Broadband
Networks, to fund subscriber equipment, to fund operating deficits in
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new systems as it builds its customer base and to maintain the quality of its
networks. The Company currently expects to spend approximately $90 million
during 1999 to expand and/or upgrade the Montgomery, Panama City, Augusta,
Charleston and Huntsville networks. In addition, the Company estimates the cost
of constructing networks in additional cities and funding initial subscriber
equipment at approximately $35 million to $50 million per city. Actual costs
may vary significantly from this range and will depend in part on the number of
miles of network to be constructed, the geographic and demographic
characteristics of the city, other factors affecting construction costs, costs
associated with the cable franchise in each city, the number of subscribers,
the mix of services purchased, the cost of subscriber equipment paid for or
financed by the Company and other factors. Although there can be no assurance,
the Company believes that present cash reserves, cash flow from operations and
amounts available under the Credit Facility, will provide sufficient funds to
expand the Systems as currently planned and fund the expansion into Panama
City, Charleston and Augusta into the year 2000. The Company will need
additional financing to expand into additional cities, for new business
activities or in the event it decides to make additional acquisitions. Sources
of additional capital may include cash flow from operations, and public and
private equity and debt financings. There can be no assurance that such
financing will be available to the Company on acceptable terms or at all. If
the Company is not successful in obtaining sufficient funds it may be required
to defer or abandon its expansion plans, which could limit the Company's growth
and prospects, and reduce some of the economies of scale the Company expects to
obtain, including with respect to purchases of equipment, programming and
advertising, which could have an adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NEED FOR FAVORABLE FRANCHISES AND FRANCHISE RENEWALS
In order to construct and operate its Interactive Broadband Networks
in a city, the Company must obtain a franchise from the city (along with other
regulatory approvals). See "--Legislation and Regulation--Federal Regulation of
Cable Services--Franchise Authority." The Company's business is dependent on
its ability to obtain and renew its franchises in a timely manner. Each city
has some flexibility in determining the terms of a franchise (including
franchise fees), and to some extent can impose conditions on such franchise,
such as build-out requirements. The Company cannot predict whether it will
obtain franchises in new cities on terms that will make construction of a
network and provision of Broadband Services (including cable television)
economically attractive for the Company. In addition, although the
Communications Act limits the ability of franchise authorities to decline to
award or renew a franchise and specifies a period within which franchise
authorities must act, franchises may be withheld and are subject to non-renewal
or termination under certain circumstances. The Company's franchises for
Montgomery, Columbus, Panama City, Augusta, Charleston and Huntsville will
expire in March 2005, March 2009, July 2007, January 2013, April 2013 and March
2001, respectively.
DEPENDENCE ON INTERCONNECTIONS
The Company relies on local telephone companies and other companies to
provide communications capacity for the Company's local and long distance
telephone service. The Company obtains access to BellSouth's telephone network
under a nine-state interconnection agreement. The terms of such interconnection
agreement have been filed for approval with the Georgia, Alabama, Florida and
South Carolina state public utility commissions. Approvals of other state
public utility commissions will be required in connection with the Company's
provision of telephone service in those states. In addition, the 1996 Telecom
Act established certain requirements and standards for interconnection
arrangements, and the Company's interconnection agreement with BellSouth is
based in part on such requirements. However, these requirements and standards
are still being developed and implemented by the FCC and the states. To the
extent that the standards as implemented are unfavorable to the Company, the
Company's interconnection arrangement with BellSouth could be adversely
affected. The Company's ability to offer telephony services at competitive
rates depends upon maintaining interconnection and access on economic terms
acceptable to the Company. The 1996 Telecom Act creates incentives for RBOCs to
permit access to their facilities by denying such carriers the ability to
provide long distance services until they have taken the required steps to open
the local market to competition. BellSouth is not yet permitted to offer long
distance services. There can be no assurance that BellSouth or other local
exchange carriers will not be less accommodating to the Company once they are
permitted to offer long distance service. The interconnection agreement expires
in April 2000 and there can be no assurance
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that it will be renewed on favorable terms, or at all. See "--Legislation and
Regulation--Federal Regulation of Telecommunications Services."
DEPENDENCE ON TELEPHONY BILLING AND INFORMATION SYSTEMS
The Company is dependent on Interstate Telephone Company, an ITC
Company, and others for provision of sophisticated telephony information and
processing systems to monitor costs, bill customers, fill customer orders and
achieve operating efficiencies. As the Company increases its provision of
telephone services, its dependence on billing and information systems will
increase significantly. The inability of the Company to adequately identify all
of its information and processing needs, or to obtain upgraded systems as
necessary, could have a material adverse impact on the Company's ability to
expand its telephone business and on its results of operations and financial
condition.
THE YEAR 2000 ISSUE
The term "Year 2000 issue" is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000
is approached and reached. These problems generally arise from the fact that
most of the world's computer hardware and software have historically used only
two digits to identify the year in a date, often meaning that the computer will
fail to distinguish dates in the "2000's" from dates in the "1900's." These
problems may also arise from other sources as well, such as the use of special
codes and conventions in software that make use of the date field.
STATE OF READINESS
The Company has established a Year 2000 Program Office to coordinate
appropriate activity and report to the Company's Executive Management and Board
of Directors on a continuing basis with regard to the Year 2000 issue. The
Company's Year 2000 Program Office has developed and is implementing a
comprehensive plan (the "Year 2000 Plan") for the Company to become Year 2000
ready by the middle of the fourth quarter 1999. The Year 2000 Plan covers the
following Company systems (collectively, the "Systems"):
- the Company's business-critical information technology and
operating systems ("Critical IT Systems") which are comprised
substantially of commercial off-the-shelf software and other
third party software and hardware relating to, among others,
- billing of the Company's cable, telephone and
Internet services,
- customer service,
- financial operations and reporting, including
accounts payable,
- materials management, and
- network monitoring;
- the Company's non-critical information technology and
operating systems ("Non-Critical IT Systems") which also are
substantially comprised of commercial off-the-shelf software
and other third party software and hardware relating to,
among others, spreadsheet, word processing, Internet
intracorporate communications and supporting and related
operating systems;
- the systems of the Company's major vendors, third party
network service providers and other material service and
content providers ("Third Party Systems") which include,
without limitation, cable content providers, network long
distance telephone carriage providers and telephony switching
services; and
- the Company's non-information technology systems, including
embedded technology ("Non-IT Systems") relating to, among
others, security systems and HVAC.
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<PAGE> 34
The Year 2000 Plan consists of six phases: (i) awareness, (ii)
assessment, (iii) remediation (whether by upgrade or replacement), (iv) testing
and validation, (v) implementation and (vi) creation of contingency plans in
the event of year 2000 failures. The Company has completed the awareness and
assessment phase of its Year 2000 Plan for all the Company's Critical IT
Systems and Non-Critical IT Systems. In addition, the Company continues the
awareness phase of its Year 2000 Plan regarding its Third Party Systems. As
part of the assessment phase, the Company has polled substantially all of the
third parties who provide material hardware, software or services to the
Company as part of its Critical IT Systems, Non-Critical IT Systems and Third
Party Systems regarding each of such third party's Year 2000 compliance plan
and state of readiness. The Company has received responses regarding Year 2000
compliance from some of third parties with respect to the Company's Critical IT
Systems and Non-Critical IT Systems. A majority of all third parties that
responded have assured the Company that their hardware and/or software is or
will be Year 2000 compliant. Interstate Telephone Company, Inc. and Valley
Telephone Company, however, have informed the Company that they are in the
early stages of their year 2000 programs and remain unable to predict with
certainty whether or when they will be Year 2000 ready. These companies provide
telephony carrier access billing, customer care and billing, and switching
services to the Company. The Company is actively seeking responses from the
remainder of such third parties and expects to have substantially all of such
responses by the middle of the second quarter of 1999. In addition, the Company
has completed the assessment phase of the Year 2000 Plan regarding the
Company's Non-IT Systems, which the Company believes are not as crucial to the
Company's business, financial condition and operations as the other systems.
The initial actions in the remediation phase are being conducted, and
will be conducted, by the third parties who provide software, hardware or
services that comprise the Systems. The Company participated in certain
upgrades or replacements, and/ or demonstrations of Year 2000 compliance
regarding its Critical IT Systems during the fourth quarter of 1998. The
Company intends to complete the remainder of required upgrades or replacements
and/or demonstrations of Year 2000 compliance regarding its Systems beginning
in the during the second quarter of 1999.
The Company intends to commence testing of the individual software and
hardware components and, eventually, end-to-end testing of each of the Systems
as the remediation phase nears completion as to each of the Company's Systems.
The Company will start the tests with the Critical IT Systems and Third Party
Systems and finish with the Non-Critical IT Systems and Non-IT Systems. The
Company's Year 2000 Plan provides for completion of all testing regarding the
Systems during the fourth quarter of 1999.
The Company's Year 2000 Plan provides that the implementation phase of
the Year 2000 Plan will be conducted during the second, third and fourth
quarters of 1999.
The Company has formed a Year 2000 Contingency Planning Committee and
has started to consider possible general contingency plans for Year 2000
failures. However, until the Company has further identified and assessed the
risks of any such failures, the Company is unable to formulate and implement
such contingency plans. As the Company progresses in its Year 2000 Plan and
identifies specific material risks presented by the Year 2000 issue, the
Company will develop remedial and contingency plans to address such risks.
In addition, the Company retained an outside consultant to assess the
Company's Year 2000 Plan to determine whether, if properly administered, it can
result in Year 2000 readiness, and to audit the Company's initial progress
through the first two phases. The Company has also engaged consultants to
assist in the project coordination and execution of the Year 2000 Plan until
its completion. The Company anticipates that the engagement of such consultants
will cost at least $300,000.
Interstate Telephone Company, Inc. and Valley Telephone Company, Inc.,
each a wholly-owned subsidiary of the Company's majority stockholder, ITC
Holding Company, Inc., have informed the Company that they are in the early
stages of their year 2000 programs and remain unable to predict with certainty
whether or when they will be Year 2000 ready. The Company depends on these
companies for its telephony carrier access billing, customer care and billing,
and switching services. These companies rely on third party vendors for the
telephony customer care and billing, and switching services and use a legacy
system for telephony carrier access billing services. These companies rely on
third party vendors for the telephony customer care and billing, and switching
services and use a legacy system for telephony carrier access billing services.
These companies have contacted such third party
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<PAGE> 35
vendors and have scheduled demonstrations of Year 2000 compliance in the second
quarter of 1999. The legacy system used in connection with telephony carrier
access billing has completed remediation and is in the process of being tested.
The Company is working with both companies to monitor their year 2000 plans and
to prepare contingency arrangements, if necessary. Although revenues derived
from the Company's telephony services currently comprise an immaterial
percentage of the Company's total revenues, the failure to timely remedy any
year 2000 problems and/or develop a viable contingency plan could result in the
Company's temporary inability to provide telephony services to its customers
and have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, a material Year 2000 problem with any other of the
Company's material vendors could interrupt the Company's ability to provide
cable, telephone or Internet services to its customers. The Company intends to
test, and have each such vendor demonstrate, the Year 2000 readiness of each
vendor's hardware, software or services that comprisea part of or affects the
Company's Systems. The Company and the Year 2000 Contingency Planning Committee
are unable to formulate or implement contingency plans regarding any of the
material vendor relationships until such tests and demonstrations are nearer
completion and the Company has identified the material risks to the Company, if
any.
The scheduled commencement and completion dates for each of the phases
of the Year 2000 Plan are based upon management's good faith estimates and may
be updated or revised as additional information becomes available.
COSTS
To date, the Company has incurred costs of approximately $100,000 in
connection with its Year 2000 Plan. Future costs will include, among others,
the continued use of an outside consultant, development and execution of
testing Systems, upgrades or replacements of hardware and software, and
implementation of viable contingency plans. The Company expenses costs
associated with the Year 2000 Plan as they are incurred and anticipates funding
the costs of the Year 2000 Plan from cash flows. To date, the Company has not
deferred any specific IT project due to the costs of the Year 2000 Plan.
RISKS
The failure to remediate a material Year 2000 problem or develop and
implement a viable contingency plan could result in an interruption in, or a
failure of, certain normal business activities or operations. Such failures
could materially and adversely affect the Company's business, financial
condition and results of operations. Due to the general uncertainty inherent in
the Year 2000 issue and the current phase in which the Company is in of its
Year 2000 Plan, the Company is currently unable to determine the most
reasonably likely worst case Year 2000 scenarios or whether the Year 2000 issue
will have a material impact on the Company. As the Company progresses in its
Year 2000 Plan, the Company should be better positioned to disclose the nature
and extent of material risks to the Company as a result of any failure to
remediate a Year 2000 problem.
CONTINGENCY PLANS
Due to the current phase in which the Company is in of its Year 2000
Plan, the Company is currently unable to fully assess its most reasonably
likely worst case Year 2000 scenarios and its material risks to determine the
appropriate contingency plans to implement to address such risks. The Company
has formed a Year 2000 Contingency Planning Committee which has started to
consider possible general contingency plans regarding year 2000 failures. As
the Company progresses in its Year 2000 Plan and identifies specific risk
areas, the Company and the Contingency Planning Committee will timely implement
appropriate remedial actions and contingency plans and will fully disclose such
remedial actions and contingency plans in the appropriate reports filed with
the SEC.
DEMAND FOR BUNDLE OF BROADBAND SERVICES IS UNCERTAIN
The Company's business strategy to provide an integrated bundle of
Broadband Services is comparatively untested and subject to certain risks such
as future competition, pricing, regulatory uncertainties, operating and
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<PAGE> 36
technical difficulties. Accordingly, the demand for an integrated bundle of
such services, at the prices charged by the Company is uncertain. In addition,
some of the Broadband Services being considered by the Company, including
high-speed data transmission services for residential customers and interactive
energy management services, are not generally available currently. The demand
for these new services also is uncertain. The Company's business could be
materially adversely affected if demand for an integrated bundle of Broadband
Services is materially lower than anticipated.
RISK OF RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant
changes in technology. Even though the Company believes its networks will be
"state-of-the-art" when constructed, there can be no assurance that subsequent
technological developments will not reduce the competitiveness of the Company's
networks, and require upgrades or additional equipment that could be expensive
and time consuming. In addition, the Company may be required to select in
advance one technology over another, but it will be impossible to predict with
any certainty, at the time the Company is required to make its investment,
which technology will prove to be the most economic, efficient or capable of
attracting customer usage.
SOURCES OF SUPPLIES
The Company purchases customer premises equipment and plant materials
from outside vendors. Although numerous suppliers market and sell customer
premises equipment and plant materials, the Company currently purchases each
customer premises component from a single vendor and has one or two suppliers
for plant materials. The Company maintains a limited inventory of these
components and materials. If one or more suppliers are unable to meet the
Company's needs as it continues to build out its network infrastructure, then
delays and increased costs in the expansion of the Company's network could
result, which would adversely affect operating results.
EVOLVING REGULATORY ENVIRONMENT
Although the 1996 Telecom Act, together with the 1992 Cable Act and
other recent laws and regulations, eliminated most limitations on competition
in the Broadband Services business, the 1996 Telecom Act is complex and in many
areas sets forth policy objectives to be implemented by regulation. It is
generally expected that the 1996 Telecom Act will undergo considerable
interpretation and implementation through regulation and court decisions over
the next several years. There can be no assurance that such interpretation or
implementing regulations will be favorable to the Company. In certain areas,
particularly telephony, further regulation is expected to affect the Company's
provision of service. The Company's ability to compete successfully in the
provision of telephone service will depend in part on the timing of such
implementing regulations and whether they are favorable to the Company. It is
also important to the Company that the provisions limiting the ability of
franchise authorities to deny awarding or renewing franchises not change in a
manner adverse to the Company. See "--Risk Factors--Dependence on
Interconnections" and "--Legislation and Regulation."
RELATIONSHIPS WITH ITC COMPANIES; POTENTIAL CONFLICTS OF INTERESTS
The Company has relationships with several ITC Companies. The Company
offers special access services, including long distance access services, to
small- and medium-sized businesses and other customers in certain of the
Company's markets by carrying traffic to ITC DeltaCom's POP. The Company
obtains telephone billing and switching services from Interstate Telephone
Company, another ITC Company. See "Certain Relationships and Related
Transactions." Certain members of the Company's Board of Directors (Campbell B.
Lanier, III, William H. Scott, III, Donald W. Burton and Donald W. Weber) are
directors, stockholders, and/or officers of ITC Holding, ITC DeltaCom and/or a
number of other ITC Companies. ITC Holding and Messrs. Lanier and Scottas
significant stockholders of the Company, are in positions involving the
possibility of conflicts of interest with respect to certain transactions
concerning the Company. When the interests of ITC Holding or other ITC
Companies and its affiliates (other than the Company) and the Company diverge,
ITC Holding and its affiliates may exercise their influence in their own best
interests. Certain decisions concerning the operations or financial structure
of the Company may
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<PAGE> 37
present conflicts of interest between the Company and ITC Holding and/or its
affiliates. See "Risk Factors--Control by Principal Stockholders; Conflicts of
Interest."
DEPENDENCE ON KEY PERSONNEL
The Company's business is currently managed by a small number of key
management and operating personnel. The Company does not have any term
employment agreements with, nor does the Company maintain "key man" insurance
on, these or any other employees. The loss of the services of key personnel, or
the inability to attract, recruit and retain sufficient or additional qualified
personnel, could have a material adverse effect on the Company. See "Directors
and Executive Officers of the Registrant."
CONTROL BY PRINCIPAL STOCKHOLDERS; CONFLICTS OF INTEREST
As of January 31, 1999, Intercall Inc. (a wholly-owned subsidiary of
ITC Holding) owned approximately 85.4% and AT&T Venture Fund II, L.P. and
related funds (collectively "AT&T Venture Funds") owned approximately 14.3%, of
the outstanding capital stock of the Company. As a result, these stockholders
are in a position to control matters requiring approval by the stockholders of
the Company, including the election of a majority of the directors and the
approval of significant corporate matters, including certain change-of-control
transactions. In addition, certain decisions concerning the operations or
financial structure of the Company may present conflicts of interest between
such shareholders or management and the holders of the Notes. For example, if
the Company encounters financial difficulties or is unable to pay its debts as
they mature, the interests of such shareholders and management might conflict
with those of the holders of the Notes. In addition, such shareholders and
management may have an interest in pursuing transactions that, in their
respective judgments, could enhance their equity investment, even though such
transactions might involve risk to the holders of the Notes.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its
capital stock and does not anticipate paying cash dividends in the foreseeable
future. See "Market for Registrant's Common Equity and Related Stockholder
Matters--Dividends."
EMPLOYEES
As of February 28, 1999, the Company had 569 full-time employees of
which 118 are customer service representatives, 183 are technicians or others
performing installation, maintenance and repair on the Company's networks, 128
are involved principally in sales and marketing, 54 are involved in matters
relating to construction of the Company's networks and 86 have management or
administrative responsibilities.
The Company considers its relations with its employees to be good and
structures its compensation and benefit plans to facilitate the attraction and
retention of high caliber personnel. The Company will need to recruit
additional employees to implement its expansion plan, including general
managers for each new city and additional personnel for installation, sales,
customer service and network construction. The Company recruits from several
major industries for employees with skills in voice, video and data
technologies. The Company believes it will not be difficult to retain personnel
with the necessary qualifications.
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<PAGE> 38
ITEM 2. PROPERTIES
The Company owns or leases property in the following locations:
<TABLE>
<CAPTION>
LEASE/
LOCATION ADDRESS OWN PRIMARY USE
- -------- ------- ------ -----------
<S> <C> <C> <C>
West Point, GA 1241 O.G. Skinner Drive Own Corporate Admin. Offices
West Point, GA 312 West 8th Street Lease Corporate Construction Offices
West Point, GA 206 West 9th Street Lease Network Operations Center
West Point, GA 1201 O.G. Skinner Drive Lease Production Studio & Training Facility
Montgomery, AL 3173 Taylor Road Lease Admin. Offices
Montgomery, AL 1450 Ann Street Lease Headend & Technical Offices
Montgomery, AL 2630 Zelda Road Lease Technical Offices
Montgomery, AL 4142-A Carmichael Road Lease Sales Offices
Columbus, GA 1701 Boxwood Place Lease Admin. Offices & Headend
Columbus, GA 6440 West Hamilton Park Drive Lease Sales Offices
Panama City, FL 13200 P.C.B. Pkwy. Lease Admin. Offices & Headend
Panama City, FL 2325 Frankfort Avenue Lease Sales Offices
Panama City, FL 2143 Sherman Avenue Lease Construction Offices
Augusta, GA 3714 Wheeler Road Own Admin. Offices & Headend
Charleston, SC 4506 Dorchester Rd. Own Admin. Offices & Headend
Huntsville, AL 2401 10th St. Own Admin. Offices & Headend
Madison, AL 915 Miller Blvd. Madison Own Construction Office
</TABLE>
In addition to these properties, the Company also holds operating
leases for Hub sites in each market. The Company's principal physical assets
consist of fiber optic and coaxial broadband network and equipment, located
either at the equipment site or along the network. The Company's distribution
equipment along the network is generally 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 Company's
franchises from the cities in which it operates give the Company rights of way
for its network. The physical components of the networks require maintenance
and periodic upgrading to keep pace with technological advances. The Company
believes that its properties, taken as a whole, are in good operating condition
and are suitable for the Company's business operations.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to various
litigation; however, in management's opinion, there are no legal proceedings
pending against the Company which would have a material adverse effect on the
financial position, results of operations, or liquidity of the Company. The
Company is also party to regulatory proceedings affecting the relevant segments
of the communications industry generally.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE> 39
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is no established public trading market for the Company's
capital stock, and accordingly, no high and low bid information or quotations
are available with respect to the Company's Common Stock.
As of February 28, 1999, there were 394 shares of Common Stock
outstanding held of record by one stockholder, and 49,852 shares of Preferred
Stock outstanding held of record by 13 stockholders.
DIVIDENDS
The Company has never declared or paid any cash dividends on its
capital stock and does not anticipate paying cash dividends on its capital
stock in the foreseeable future. It is the current policy of the Company's
Board of Directors to retain earnings to finance the expansion of the Company's
operations. Future declaration and payment of dividends, if any, will be
determined in light of the then-current conditions, including the Company's
earnings, operations, capital requirements, financial condition, and other
factors deemed relevant by the Board of Directors. In addition, the Company's
ability to pay dividends is limited by the terms of the Indenture governing the
Notes and by the terms of the Credit Facility.
RECENT SALES OF UNREGISTERED SECURITIES
In December 1995 and January 1996, in connection with the initial
capitalization of the Company, the Company issued 7,780 shares of Preferred
Stock for a purchase price of $1,000 per share to certain of the current
stockholders of the Company for an aggregate amount of $7,780,000. ITC Holding
contributed $4,000,000 plus all of its direct and indirect interests in
Cybernet Holding, L.L.C. (a predecessor of the Company) and in KNOLOGY of
Columbus, Inc. (then known as American Cable, Inc.) in exchange for Preferred
Stock.
In April 1996, in connection with a private placement of Preferred
Stock of the Company, the Company issued 9,312 shares of Preferred Stock for a
purchase price of $1,200 per share to certain of the current stockholders of
the Company for an aggregate amount of $11,174,400.
In February 1997, the Company issued 8,960 shares of Preferred Stock
to certain of the current stockholders of the Company for a purchase price of
$1,200 per share, for an aggregate amount of $10,752,000.
In October 1997, the Company issued approximately 21,400 shares of
Preferred Stock to qualified investors in the Equity Private Placement for a
purchase price of $1,500 per share, for an aggregate amount of approximately
$32.2 million. ITC Holding, Century Telephone Enterprises, Inc. ("Century
Telephone"), South Atlantic, AT&T Venture Funds and SCANA purchased
approximately $10.0 million, $2.5 million, $5.5 million, $5.0 million and $5.0
million of Preferred Stock, respectively, in the Equity Private Placement. ITC
Holding subsequently repurchased all shares of the Company's Preferred Stock
owned by Century Telephone, South Atlantic and SCANA during 1998.
On October 22, 1997, the Company issued 444,100 Units, each of which
consists of one Senior Discount Note and one Warrant to purchase .003734 shares
of Preferred Stock of the Company, for net proceeds of approximately $242.4
million. The Warrants may be exercised at a price of $.01 per share, subject to
adjustment, at any time beginning one year after the date of issuance and prior
to the close of business on the tenth anniversary of such grant. Morgan Stanley
& Co. Incorporated, J.P. Morgan Securities, Inc. and First Union Capital
Markets Corp. served as placement agents for the Company in the transaction.
SCANA purchased 71,050 of such Units in the transaction for an aggregate
purchase price of $39,998,308.
Pursuant to the Company's 1995 Stock Option Plan, the Company has
granted options to purchase Common Stock of the Company to key employees and
non-employee directors of the Company and its subsidiaries. As of
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<PAGE> 40
December 31, 1998, the Company has issued and outstanding options to purchase
692,168 shares of Common Stock pursuant to the 1995 Stock Option Plan at
exercise prices ranging from $8.00 to $11.33 per share.
In May 1998, the Company issued 394 shares of common stock, at an
exercise price of $8 per share, to an employee who exercised options granted
under the Company's 1995 stock option plan.
Each issuance of securities described above was made in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act
or Regulation D promulgated thereunder for transactions by an issuer not
involving any public offering. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for distribution in connection with
such transactions. All recipients had adequate access to information about the
Company through their relationship with the Company or through information
about the Company made available to them.
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<PAGE> 41
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and
operating data for the Company. The selected financial and operating data as of
and for the year ended December, 31, 1994, the four months ended April 30,
1995, the eight months ended December 31, 1995 and the years ended December 31,
1996, 1997 and 1998 have been derived from the audited financial statements of
Montgomery Cablevision and Entertainment, Inc. (the "Predecessor Company") and
the Company. The selected financial and operating data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the notes
thereto included elsewhere in this report. The financial and operating data for
periods after April 28, 1995 (the date the Company acquired the Predecessor
Company, the owner and operator of the Montgomery System), are not comparable
to the financial and operating data for prior periods as a result of the
amortization of the cost in excess of net assets in connection with the
acquisition of the Montgomery System, and the acquisition of the Columbus
System on September 29, 1995. See notes 1 and 2 to the Company's Consolidated
Financial Statements included elsewhere in this report.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (A) SUCCESSOR COMPANY (A)
-------------------------- ------------------------------------------------------------
EIGHT
YEAR FOUR MONTHS MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1995 (B) 1996 1997 1998
------------ ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................ $ 2,111,952 $ 857,161 $ 2,196,998 $ 5,334,183 $ 10,355,068 $ 25,770,427
Operating expenses:
Cost of Service ....................... 1,042,186 409,325 1,029,959 2,513,693 4,758,730 11,854,733
Selling, Operations, Administrative ... 1,020,088 290,607 1,502,688 3,883,738 7,392,540 25,393,015
Depreciation and amortization ......... 768,496 259,336 745,004 1,640,025 3,715,184 12,367,374
----------- --------- ----------- ----------- ------------ ------------
Total operating expenses ............ 2,830,770 959,268 3,277,651 8,037,456 15,866,454 49,615,122
----------- --------- ----------- ----------- ------------ ------------
Operating loss .......................... (718,818) (102,107) (1,080,653) (2,703,273) (5,511,386) (23,844,695)
----------- --------- ----------- ----------- ------------ ------------
Other income and expenses ............... (155,417) (21,878) (549,169) (795,478) (3,580,147) (18,834,891)
----------- --------- ----------- ----------- ------------ ------------
Loss before minority interest
and income tax benefit ................ (874,235) (123,985) (1,629,822) (3,498,751) (9,091,533)
(42,679,586)
Minority interest ....................... -- -- 109,837 -- --
Income tax benefit ...................... -- -- 334,451 373,323 -- 6,785,691
----------- --------- ----------- ----------- ------------ ------------
Cumulative Effect of Change in
Accounting Principle .................. -- -- -- -- --
(582,541)
Net loss ................................ (874,235) (123,985) (1,185,534) (3,125,428) (9,091,533)
(36,476,436)
Preferred stock dividends ............... (591,175) (230,407) -- -- -- --
----------- --------- ----------- ----------- ------------ ------------
Net loss after preferred stock
dividends ............................. $(1,465,410) $(354,392) $(1,185,534) $(3,125,428) $ (9,091,533) $(36,476,436)
=========== ========= =========== =========== ============ ============
PER SHARE DATA:
Net loss per share (c) .................. $ 1.05 $ 1.53(c) $ 2.10 $ 4.87
Weighted average common share
equivalents outstanding ............... 1,128,000 2,043,900(c) 4,325,250 7,488,450
OTHER FINANCIAL DATA:
Capital expenditures .................... $ 717,325 $ 42,504 $ 1,291,080 $14,416,135 $ 39,625,408 $111,272,219
Net cash provided by (used in)
operating activities .................. 82,590 144,076 (742,928) (1,998,007) (1,266,688) 18,868,797
Net cash used in investing
activities ............................ (717,325) (42,504) (1,744,816) (14,441,268) (267,983,480) (18,646,551)
Net cash provided by (used in)
financing activities .................. 596,947 (104,889) 2,771,619 16,221,873 272,778,281 (1,507,319)
EBITDA (d) .............................. 124,836 157,229 (207,068) (1,123,248) (1,925,235) (11,275,227)
Ratio of earnings to fixed
charges (e) ........................... -- -- -- -- -- --
OTHER OPERATING DATA:
Cable subscribers ....................... 14,219 18,169 37,716 77,744
Average monthly cable revenue
per subscriber ........................ $ 25.47 $ 26.71 $ 29.20 $ 36.14
Homes passed ............................ 124,773 232,202
Cable penetration level (f).............. 30.2% 33.5%
</TABLE>
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<PAGE> 42
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY (A) SUCCESSOR COMPANY (A)
------------ ---------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ........................ $(3,559,715) $ 3,498,482 $ (3,201,202) $ 226,830,160 $ 52,705,437
Property and equipment, net ............ 4,833,142 6,976,268 21,477,209 62,567,736 195,496,617
Total assets ........................... 4,987,354 19,346,317 29,941,745 316,198,100 332,550,650
Total liabilities ...................... 4,734,947 12,992,682 15,743,318 262,073,186 315,075,364
Minority interest ...................... -- 84,479 -- -- --
Accumulated deficit .................... (6,056,198) (1,185,534) (4,310,962) (13,402,495) (49,878,931)
Total stockholders' equity ............. 252,407 6,269,156 14,198,427 51,637,954 14,988,326
</TABLE>
- ---------------------
(a) "Successor Company" refers to the Company and its subsidiaries. The
Company, initially capitalized as a limited liability company in March
1995, was established for the purpose of acquiring the Predecessor
Company. The acquisition of Montgomery Cablevision (the "Montgomery
Acquisition"), which was accounted for as a purchase, was consummated
on April 28, 1995, and the Company acquired the remaining minority
interest in the Predecessor Company in January 1996. See note 1 to the
Company's Consolidated Financial Statements included elsewhere in this
report.
(b) Includes the operations of the Columbus System from September 29,
1995. The acquisition of the Columbus System was accounted for as a
purchase.
(c) Net loss per share is computed using the weighted average number of
shares of common stock and dilutive common stock equivalent shares
from convertible preferred stock (using the if converted method). As
the Company has 394 shares of common stock outstanding, the preferred
stock is assumed to be converted for purposes of this calculation. The
Predecessor Company net losses per share are not shown, as they are
not comparable with the Successor Company's. All options and warrants
have been excluded from the calculation of net loss per share as they
are anti-dilutive.
(d) EBITDA represents earnings before preferred stock dividends, interest
expense, interest income, income taxes, depreciation and amortization.
EBITDA is provided because it is a measure commonly used in the
industry. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and should not be considered
an alternative to net income as a measure of performance or to cash
flow as a measure of liquidity. EBITDA is not necessarily comparable
with similarly titled measures for other companies.
(e) Earnings consist of income before minority interest, preferred stock
dividends, income taxes, plus fixed charges. Fixed charges consist of
interest charges and amortization of debt issuance costs and the
portion of rent expense under operating leases representing interest
(estimated to be 1/3 of such expense). Earnings were insufficient to
cover fixed charges for the year December 31, 1994, the four months
ended April 30, 1995, the eight months ended December 31, 1995 and the
years ended December 31, 1996, 1997, and 1998 by $874,235, $123,985,
$1,629,822, $3,498,751, $9,091,533, and $43,262,127, respectively.
(f) Determined by dividing the number of subscribers by the number of
homes passed. Because the Company does not begin to market its
services in an area until its network has been expanded and the
Company typically needs 60 to 90 days once marketing has commenced to
build its subscriber base, the Company's penetration rate is adversely
affected during rapid expansion of the networks.
-40-
<PAGE> 43
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION, MEMBERS OF THE
COMPANY'S SENIOR MANAGEMENT MAY, FROM TIME TO TIME, MAKE CERTAIN FORWARD-LOOKING
STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, PERFORMANCE AND OTHER
DEVELOPMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH UNDER THE CAPTION "BUSINESS--RISK FACTORS" AND
ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K, AS WELL AS FACTORS WHICH MAY BE
IDENTIFIED FROM TIME TO TIME IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION OR IN DOCUMENTS WHERE SUCH FORWARD-LOOKING STATEMENTS
APPEAR.
The following is a discussion of the consolidated financial condition
and results of operations of the Company for the three years ended December 31,
1998 and certain factors that are expected to affect the Company's prospective
financial condition. The following discussion and analysis should be read in
conjunction with the financial statements and notes thereto and other financial
data included elsewhere in this Form 10-K.
GENERAL
KNOLOGY offers residential and business customers Broadband Services,
including analog and digital cable television, local and long distance
telephone, high-speed Internet access service, and broadband carrier services
("BCS"). The Company provides these Broadband Services using high capacity
hybrid fiber-coaxial networks that are two-way interactive ("Interactive
Broadband Networks"). The Company owns, operates and manages Interactive
Broadband Networks in five metropolitan areas (collectively the "Systems"):
Montgomery, Alabama; Columbus and Augusta Georgia; Panama City; Florida, and
Charleston, South Carolina and plans to expand to additional mid-sized cities in
the southeastern United States. In addition, KNOLOGY provides analog cable
television services in Huntsville, Alabama and plans to upgrade the Huntsville
network to an Interactive Broadband Network during 1999, which will allow the
Company to offer additional Broadband Services in the Huntsville market.
KNOLOGY has been providing cable television service since 1995 and
commenced providing telephone and high-speed Internet access services in 1997.
BCS services were initially offered by the Company in 1998. The Company believes
its ability to provide numerous services over the same network facilities and to
bundle the services at an attractive price, coupled with its emphasis on
customer service, provides it with a competitive advantage.
KNOLOGY commenced providing cable television service by acquiring cable
television systems in Montgomery, Alabama and Columbus, Georgia in 1995 and by
using those systems as a base for constructing new Interactive Broadband
Networks. Since acquiring the Montgomery and Columbus systems, the Company has
upgraded the acquired networks to allow the Company to offer additional
Broadband Services.
The Company acquired a cable television system in Panama City Beach,
Florida in December 1997. Since the acquisition, the Company has begun upgrading
the Beach Cable system and extending the network into Panama City.
In early 1998, the Company began expansion into Augusta, Georgia and
Charleston, South Carolina by obtaining new franchise agreements with the local
governments and by constructing new Interactive Broadband Networks.
<PAGE> 44
In June 1998, the Company acquired TTE Inc., a non-facilities based
reseller of local, long distance and operator services to small and medium-sized
business customers throughout South Carolina. As the Company expands its network
in the Charleston area, it plans to convert TTE Inc.'s customers to the
Company's Interactive Broadband Network.
On October 30, 1998, the Company acquired the Cable Alabama cable
television system which serves the Huntsville, Alabama area. The Company plans
to upgrade the existing Cable Alabama plant into an Interactive Broadband
Network.
Substantially all of the Company's revenues through December 31, 1998
come from its cable television operations. The Company began to offer Internet
access and telephone services during the third quarter of 1997. Operating
revenues include charges earned for providing cable television, local and long
distance telephone and Internet access services, as well as miscellaneous
revenues resulting principally from converter rentals, installation fees,
franchise fees and late payment charges. Cable television revenues consist of
fixed monthly fees for basic and premium cable television services, as well as
fees from pay-per-view movies and events, such as boxing matches and concerts,
which involve a charge for each viewing. Revenues from the Company's telephone
services consist primarily of fixed monthly fees for local service and enhanced
services such as call waiting and voice mail, and usage fees for long distance
service. Revenues from Internet access services consist primarily of fixed
monthly fees for service and rental of cable modems.
The Company's operating expenses through December 31, 1998 consisted of
cost of services to provide cable television, telephone and Internet access
services, general and administrative expenses, depreciation and amortization
expense, field and technical expenses, customer service expenses and sales and
marketing costs. Cable television cost of services consist primarily of monthly
fees to the National Cable Television Cooperative and other programming
providers, and are generally based on the average number of subscribers to each
program. Cost of services related to the Company's Internet access and telephone
services include primarily costs of Internet transport and telephone switching,
interconnect and transport charges payable to local and long distance carriers.
General and administrative expenses consist of corporate and subsidiary general
management and administrative costs. Depreciation and amortization include
depreciation of the Company's Interactive Broadband Networks and equipment, and
amortization of cost in excess of net assets and other intangible assets related
to acquisitions. Field and technical expenses include payroll and departmental
costs incurred for network design, maintenance monitoring. Customer service
expenses include payroll and departmental costs incurred for customer service
representatives and management. Sales and marketing costs include the cost of
sales and marketing personnel and advertising and promotional expenses.
The Company has been expanding its networks and adding corporate
staffing necessary to grow the business into new markets. Accordingly, the
Company's operating expenses and capital expenditures have increased
significantly and are expected to continue to increase as the Company continues
to expand the existing Systems and into new markets.
The Company has incurred net losses in each quarter since its
inception, and as of December 31, 1998, the Company had an accumulated deficit
of $49.9 million. The Company anticipates that it will continue to incur net
losses during the next several years as it continues to expand its operations as
a result of substantially increased depreciation and amortization from the
construction of new networks and operating expenses incurred as it builds its
customer base. There can be no assurance that growth in the Company's revenue or
subscriber base will continue or that the Company will be able to achieve or
sustain profitability or positive cash flow. See "Business--Risk
Factors--History of Losses; Expectation of Future Losses and Negative Cash Flows
from Operations."
<PAGE> 45
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
REVENUES. Total revenues for the year ended December 31, 1998 increased
149% to $25.8 million, compared to $10.4 million for the year ended December 31,
1997. The increased revenues resulted primarily from:
- - added subscribers in 1998 due to the extension of the Company's
Broadband networks in the Montgomery, Columbus, and Panama City
markets,
- - the offering of services in the Augusta and Charleston markets at the
end of the third quarter of 1998 and
- - the acquisition of the Beach Cable, TTE and Cable Alabama systems in
December 1997, June 1998 and October 1998, respectively (see Note 9 to
the Company's consolidated financial statements filed as part of this
Form 10-K).
EXPENSES. The Company's operating expenses for the year ended December
31, 1998, excluding depreciation and amortization, increased 205% to $37.2
million, compared to $12.2 million for the year ended December 31, 1997. Cost of
services were $11.9 million in 1998 compared to $4.8 million in 1997. Selling,
operating, and administrative expenses were $25.4 million and $7.4 million,
respectively, for such periods. The increases in the Company's cost of services
and selling, operating, and administrative expenses is consistent with the
growth in revenues due to the expansion of the Company's operations and the
increase in the number of employees in connection with such expansion and growth
into new markets.
Depreciation and amortization for the year ended December 31, 1998
increased to $12.4 million, compared to $3.7 million for the year ended December
31, 1997 due to a significant increase in property, plant, equipment and
intangible assets resulting from the expansion of the Company's networks, the
acquisition of the Beach Cable, TTE and Cable Alabama systems and the purchase
of buildings, computers and office equipment at the corporate and subsidiary
locations.
Interest expense for the year ended December 31, 1998 increased to
$28.7 million, compared to $6.2 million for the year ended December 31, 1997.
The increase in interest expense reflects the accrual of a full year of the
interest expense attributable to the Senior Discount Notes issued in October
1997.
INTEREST INCOME. Interest income for the year ended December 31, 1998
increased to $9.6 million, compared to $2.8 million for the year ended December
31, 1997 and reflects primarily interest income from the investment of certain
proceeds received from the issuance of the Senior Discount Notes in October
1997.
INCOME TAX BENEFIT. The Company recorded an income tax benefit of $6.8
million the utilization of the Company's tax loss by the Company's parent
company, ITC Holding Company, Inc. (See Note 6 to the Company's consolidated
financial statements filed as part of this Form 10-K).
CHANGE IN ACCOUNTING PRINCIPLE. The Company recorded a cumulative
effect of a change in accounting principle of $583,000 representing the
write-off of pre-operating and organizational costs that were previously
capitalized (See Note 2 to the Company's consolidated financial statements filed
as part of this Form 10-K).
NET LOSS. The Company incurred a net loss for the year ended December
31, 1998 of $36.5 million compared to a net loss of $9.1 million for the year
ended December 31, 1997. The Company expects its net losses to continue to
increase as the Company continues to expand its business. See "Business--Risk
Factors--History of Losses; Expectation of Future Losses and Negative Cash Flows
from Operations."
<PAGE> 46
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
REVENUES. Total revenues for the year ended December 31, 1997 increased
94% to $10.4 million, compared to $5.3 million for the year ended December 31,
1996. The increased revenues resulted primarily from additional subscribers in
1997 as the Company extended its Broadband networks in the Montgomery and
Columbus markets. During 1997, the Montgomery and Columbus networks were
extended to pass approximately 56,000 additional homes. The additional homes
reached by the extension of the Montgomery and Columbus networks combined with
the Company's marketing and sales efforts resulted in approximately 15,270 new
subscribers being added to the Company's customer base during 1997.
EXPENSES. The Company's operating expenses for the year ended December
31, 1997, excluding depreciation and amortization, increased 90% to $12.2
million, compared to $6.4 million for the year ended December 31, 1996. Cost of
services were $4.8 million in 1997 compared to $2.5 million in 1996. Selling,
operations and administrative expenses were $7.4 million and $3.9 million in
1997 and 1996, respectively. The increases in the Company's cost of services and
selling, operations and administrative expenses reflect the Company's expansion
of the Interactive Broadband Networks in the Montgomery and Columbus markets and
the significant increase in the number of employees in connection with such
expansion and the planned growth of the business into new markets in the
southeastern region of the United States.
Depreciation and amortization for the year ended December 31, 1997
increased to $3.7 million, compared to $1.6 million for the year ended December
31, 1996 reflecting a significant increase in capital expenditures during 1997
to expand the Montgomery and Columbus networks.
Interest expense for the year ended December 31, 1997 increased to $6.2
million, compared to $1.1 million for the year ended December 31, 1996. The
increased expense reflects the accrual of interest expense attributable to the
Senior Discount Notes issued in October 1997.
INTEREST INCOME. Interest income for the year ended December 31, 1997
increased to $2.8 million, compared to $46,000 for the year ended December 31,
1996 and reflects primarily the interest income from the investment of certain
proceeds received from the sale of the Senior Discount Notes in October 1997.
NET LOSS. The Company incurred a net loss for the year ended December
31, 1997 of $9.1 million compared to a net loss of $3.1 million for the year
ended December 31, 1996. The Company expects its net losses to continue to
increase as the Company continues to expand its business. See "Business--Risk
Factors--History of Losses; Expectation of Future Losses and Negative Cash Flows
from Operations."
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had working capital of $52.7
million, compared to $226.8 million as of December 31, 1997.
The Company has required significant capital for investing activities
in the development of its business. For the years ended December 31, 1998 and
1997, the Company invested approximately $18.6 million and $268.0 million,
respectively in investing activities. The Company's investing activities for the
year ended December 31, 1998 primarily consisted of $111.3 million of capital
expenditures (including inventory), $67.7 million related to the acquisition of
TTE and Cable Alabama, an $825,000 investment in ClearSource, Inc. (See Note 2
to the Company's consolidated financial statements filed as part of this Form
10-K) and net proceeds for purchases and sales of investments of $161.6 million.
Investing activities for the year ended December 31, 1997 primarily consisted of
$228.0 million investment of proceeds from the Offering and $39.7 million of
capital expenditures (including inventory). Management reviews inventory for
obsolescence on a periodic basis in connection with physical and cycle count
inventory procedures.
The Company's net cash provided by operating activities was $18.9
million in 1998 compared to net cash used of $1.3 million in 1997. The net cash
provided by operations in 1998 was primarily due to an
<PAGE> 47
increase in accrued liabilities of $38.4 million which was offset by an increase
in accounts receivable of $10.3 million.
On October 22, 1997, the Company received net proceeds of approximately
$242.4 million from the Offering. Interest will not accrue on the Notes prior to
October 15, 2002. From and after October 15, 2002, the Notes will bear interest,
which will be payable in cash, at a rate of 11-7/8% per annum on April 15 and
October 15 of each year, commencing April 15, 2003. The Indenture contains
certain covenants that affect, and in certain cases significantly limit or
prohibit, among other things, the ability of the Company to incur indebtedness,
pay dividends, prepay subordinated indebtedness, redeem capital stock, make
investments, engage in transactions with stockholders and affiliates, create
liens, sell assets and engage in mergers and consolidations. If the Company
fails to comply with these covenants, the Company's obligation to repay the
Notes may be accelerated. However, these limitations are subject to a number of
important qualifications and exceptions. In particular, while the Indenture
restricts the Company's ability to incur additional indebtedness by requiring
compliance with specified leverage ratios, it permits the Company and its
subsidiaries to incur an unlimited amount of indebtedness to finance the
acquisition of equipment, inventory and network assets and to secure such
indebtedness, and up to $50.0 million of additional secured indebtedness. Upon a
"Change of Control" of the Company (as defined in the Indenture), the Company
will be required to make an offer to purchase the Notes at a purchase price
equal to 101% of the Accreted Value thereof, plus accrued interest. See
"Business--Description of Certain Indebtedness--Senior Discount Notes."
In connection with the Offering, the Company completed the Equity
Private Placement, pursuant to which the Company issued approximately 21,400
additional shares of Preferred Stock at $1,500 per share for aggregate proceeds
of approximately $32.2 million.
On December 22, 1998, the Company entered into a $50 million four-year
senior secured credit facility with First Union National Bank and First Union
Capital Markets Corp., which may be used for working capital and other purposes,
including capital expenditures and permitted acquisitions. At the Company's
option, interest will accrue based on either the Alternate Base Rate plus
applicable margin or the LIBOR rate plus applicable margin of the Company and
its current and future subsidiaries. The credit facility includes a number of
covenants including, among others, covenants limiting the ability of the Company
and its subsidiaries and their present and future subsidiaries to incur debt,
create liens, pay dividends, make distributions or stock repurchases, make
certain investments, engage in transactions with affiliates, sell assets, and
engage in certain mergers and acquisitions. The credit facility also will
include covenants requiring compliance with certain operating and financial
ratios on a consolidated basis. The Credit Facility allows the Company to borrow
up to five times certain individual subsidiary's "consolidated adjusted cash
flow" as defined in the credit facility agreement. To date, no funds have been
drawn against the credit facility.
The Company's financing prior to the Offering and the Equity Private
Placement was provided primarily by private sales of equity securities
aggregating $29.2 million and loans aggregating $24.0 million, including
approximately $11.0 million in borrowings from SCANA and promissory notes
aggregating $11.0 million due in 2000 used for the purchase of the Montgomery
and Columbus Systems. A portion of the proceeds from the Offering and the Equity
Private Placement were used to repay the borrowings from SCANA and the
promissory notes for the purchase of the Montgomery and Columbus Systems.
The Company's business requires substantial investment to finance
capital expenditures and related expenses to expand and/or upgrade the
Interactive Broadband Networks, to fund subscriber equipment, to fund operating
deficits in new systems until it builds its customer base and to maintain the
quality of its networks. The Company currently expects to spend at least $90.0
million during 1999 to expand and/or upgrade the Montgomery, Columbus, Panama
City, Augusta, Charleston and Huntsville networks. The Company may seek to raise
approximately $8.0 million during 1999 in a private equity offering to fund the
Huntsville upgrade. In addition, the Company estimates the cost of constructing
networks in additional cities and funding initial subscriber equipment at
approximately $35 million to $50 million per city. Actual costs may vary
significantly from this range and will depend in part on the number of miles of
network to be constructed, the geographic and demographic characteristics of the
city, other
<PAGE> 48
factors affecting construction costs, costs associated with the cable franchise
in each city, the number of subscribers, the mix of services purchased, the cost
of subscriber equipment paid for or financed by the Company and other factors.
The Company expects to enter into purchase agreements through 1999 in the
ordinary course of business for programming services and construction related
services to expand its service offerings and to expand and upgrade the Systems.
Although there can be no assurance, the Company believes that present cash
reserves, cash flow from operations and amounts available under the Credit
Facility, will provide sufficient funds to expand the Systems as currently
planned into the year 2000. The Company will need additional financing to expand
into additional cities for new business activities or in the event it decides to
make additional acquisitions. See "Business--Risk Factors--Significant Capital
Requirements."
THE YEAR 2000 ISSUE
The term "Year 2000 issue" is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field. See - "Risk Factors -
The Year 2000 Issue."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8 is incorporated by reference to pages F-1 through F-22 and S-1
through S-2 herein.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are listed below.
Directors of the Company are elected at the annual meeting of stockholders.
Executive officers of the Company are appointed at the first meeting of the
Board of Directors after each annual meeting of stockholders. Directors and
executive officers of the Company are elected to serve until they resign or are
removed, or are otherwise disqualified to serve, or until their successors are
elected and qualified. The ages of the persons set forth below are as of
December 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY
---- --- ------------------------
<S> <C> <C>
William E. Morrow.............. 36 Chief Executive Officer and Director
Rodger L. Johnson.............. 50 President, Chief Operating Officer
Marcus R. Luke, Ph.D........... 43 Chief Technology Officer
Felix L. Boccucci, Jr.......... 41 Chief Financial Officer and
Vice President of Business Development
James T. Markle................ 39 Vice President of Network Operations
Bret T. McCants................ 39 Vice President of Network Construction
and Maintenance
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
Peggy B. Warner................ 47 Vice President of Marketing and Carrier Sales
Ancel A. Hamilton, Jr.......... 49 Vice President of Strategic Planning
Chad S. Wachter................ 32 Vice President, General Counsel and Secretary
Campbell B. Lanier, III (1).... 48 Chairman of the Board of Directors
Richard Bodman................. 60 Director
Donald W. Weber (2)............ 62 Director
Donald W. Burton(2)............ 54 Director
L. Charles Hilton, Jr (1)...... 67 Director
William H. Scott, III (2)...... 51 Director
Alan A. Burgess (1)........... 63 Director
</TABLE>
- ----------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation and Stock Option Committee.
WILLIAM E. MORROW has been Chief Executive Officer and Director of the
Company since February 1997. Mr. Morrow serves as a Director of ClearSource
Inc. Prior to joining the Company, from August 1996 to February 1997, Mr.
Morrow served as Senior Vice President and General Manager of Network Alliances
for UtiliCom Networks. Prior to that time, Mr. Morrow served in various
capacities at Central and South West Corp. from March 1985 to August 1996,
including Marketing, Area Management, Governmental/Regulatory Lobbyist,
Ventures/Business Development and Founder and Managing Director of CSW
Communications ("CSW") from December 1993 to August 1996. While at CSW
Communications, Mr. Morrow oversaw the company's energy management services
over a 750 MHz two-way broadband network, the construction, maintenance,
operation and marketing of long-haul fiber capacity, and the design,
construction, operation and marketing of competitive access services.
RODGER L. JOHNSON was named as the Company's President and Chief
Operating Officer effective April 1999. Prior to joining the Company, Mr.
Johnson had served as President and Chief Executive Officer, as well as a
Director, of Communications Central Inc.("CCI"), a provider of coin-operated and
inmate telephones, since November 1995. Prior to joining CCI, Mr. Johnson served
as the President and Chief Executive Officer of JKC Holdings, Inc., a consulting
company providing advice to the information processing industry. In that
capacity, Mr. Johnson also served as the Chief Operating Officer of Infomed
Systems, Inc., a publicly-held medical software manufacturer. Mr. Johnson will
retain his positions and continue to serve both JKC Holdings, Inc. and Infomed
Systems, Inc. in a more limited management capacity for the immediately
foreseeable future. Before founding JKC Holdings, Inc., Mr. Johnson served for
approximately eight years as the President and Chief Operating Officer and as
the President and Chief Executive Officer of Brock Control Systems, Inc., a
publicly-held sales and marketing software provider.
MARCUS R. LUKE, PH.D. has served as Chief Technology Officer of the
Company since August 1997. Prior thereto, he served as Vice President of
Network Construction of the Company, since November 1995, and Director of
Engineering of Cybernet Holding, L.L.C., from May 1995 until November 1995.
Prior to joining the Company, Dr. Luke served as Southeast Division
Construction Manager for TCI from July 1993 to May 1995. From July 1987 to June
1993, he served as Area Technical Manager for TCI's southeast area, which
included Montgomery. Dr. Luke worked for Storer Communications Inc. from 1985
to 1987 as Vice President of Engineering. Prior to 1985, he spent 12 years in
various engineering and management positions with Storer Communications Inc.
FELIX L. BOCCUCCI, JR. is currently serving as Chief Financial Officer
and has served as the Vice President of Business Development of the Company
since August 1997 and served as Chief Financial Officer, Treasurer and
Secretary of the Company from November 1995 through August 1997. In addition,
he currently serves as Chief Financial Officer for Interstate and Valley
Telephone Companies. From October 1994 until December 1995, Mr. Boccucci served
as Vice President Finance Broadband of ITC Holding. Prior to such time, Mr.
Boccucci worked for GTE Corporation ("GTE"), a telecommunications company,
which merged with Contel Corporation ("Contel") in March 1991. From May 1993 to
October 1994, he served as a Senior Financial Analyst for GTE. From 1991 to
1993, Mr. Boccucci served as Financial Director for GTE's Central Area
Telephone Operations. From 1987 to 1991,
-46-
<PAGE> 50
he was the controller in charge of Contel's Eastern Region Telephone Operations
comprising 13 companies in twelve states.
BRET T. MCCANTS has served as Vice President of Network Services since
April 1997. Prior to joining the Company, Mr. McCants was a co-founder of CSW
Communications and from January 1996 to April 1997 served as Director of
Operations and from 1994 to 1996 participated in the development and managed
the deployment of interactive energy management equipment to homes in Laredo,
Texas. Prior to joining CSW Communications, he served in various capacities
with Central Power and Light Company including as Corporate Manager of
Commercial and Small Industrial Marketing from 1992 to 1994 and as Business
Manager from 1990 to 1992. From 1982 to 1990, Mr. McCants also held several
positions in the Sales, Marketing and Engineering departments at Central Power
and Light Company.
ANCEL A. HAMILTON, JR. has been Vice President Strategic Planning
since October 1998 and served as Vice President of Operations from October 1997
through October 1998. Prior to joining the Company, from June 1994 to October
1997, Mr. Hamilton served as Vice President--Operations for InterCall where he
managed call center and network operations. Prior to joining InterCall, Mr.
Hamilton served as General Manager--Information Services for SCANA Corporation
from June 1991 to June 1994, where he managed all facets of the information
systems function including computer operations, programming and customer
support. From 1983 until 1991, Mr. Hamilton served in numerous marketing and
sales positions with International Business Machines Corporation, primarily in
the electric utility and government arenas.
JAMES T. MARKLE joined the Company in March 1999 as Vice President of
Network Operations. Prior to joining the Company, Mr. Markle was employed by
Mindspring Enterprises where he served as the Executive Vice President of
Network Operations from March 1998 and as Vice President of Network Operations
since April 1995. Prior to joining Mindspring, Mr. Markle served as the
Director of Technical Support for Concert Communications Co., a
telecommunications company, from April 1994 until April 1995. From August 1990
to April 1994, Mr. Markle served as Senior Manager of Network Operations for
MCI Communications, a telecommunications company. Mr. Markle served in various
operation positions at SouthernNet/Telecom*USA, including Director of
Operations for a multistate region, from July 1985 until July 1990.
PEGGY B. WARNER joined the Company as Vice President of Marketing and
Carrier Sales in January 1998. Prior to joining the Company, from February 1995
to December 1997, Ms. Warner held various positions at SCANA Communications,
Inc., including Manager Sales, Marketing and Customer Service and General
Manager. While at SCANA Communications, Inc., Ms. Warner was responsible for
the company's fiber optic carriers' carrier and 800 MHz trunked radio lines of
business. Prior to that time, she was an Executive National Accounts Manager
with MCI Telecommunications Corporation where she developed and managed a
nationwide Government Systems regional sales organization between December 1993
and January 1994. Ms. Warner also held various other sales and marketing
management positions with MCI between May 1986 and January 1995. She was an
Account Manager with AT&T Information Systems between January 1983 and April
1986 and held various sales positions with BellSouth prior to 1983.
CHAD S. WACHTER has served as General Counsel and Secretary of KNOLOGY
since August 1998. From April 1997 to August 1998, Mr. Wachter served as
Assistant General Counsel of Powertel, Inc., an affiliate of ITC that operates
cellular and PCS businesses. From May 1990 until April 1997, Mr. Wachter was an
associate and then as a partner with Capell, Howard, Knabe & Cobbs, P.A. in
Montgomery, Alabama.
CAMPBELL B. LANIER, III has been a Director of the Company since
November 1995 and was elected Chairman of the Board in June 1998. Mr. Lanier
serves as Chairman of the Board and Chief Executive Officer of ITC Holding and
served as a director of the corporate predecessor of ITC Holding from its
inception in May 1985. He is Chairman of the Board and a director of
ITC DeltaCom, a director of MindSpring, National Vision Associates, Ltd. (a
full service optical retailer), K&G Men's Centers, Inc., Vice Chairman of the
Board of AvData and Chairman of the Board of Powertel, Inc. He served as
Chairman of the Board of AvData from June 1988 to September 1990. Mr. Lanier
has served as a Managing Director of South Atlantic Private Equity Fund IV,
Limited Partnership since 1997.
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<PAGE> 51
RICHARD BODMAN has been a Director of the Company since June of 1996.
Mr. Bodman is currently the Managing General Partner of AT&T Ventures. From
August 1990 to May 1996, Mr. Bodman served as Senior Vice President of
Corporate Strategy and Development for AT&T. Mr. Bodman also is currently a
director of the following public companies: Internet Security Systems, Inc.,
Tyco International Inc., Reed Elsevier and NHP, Inc.
DONALD W. WEBER has been a Director of the Company since August 1998.
Mr. Weber also is a director of ITC Holding, Powertel and HeadHunter.Net. He is
also a director of Healthdyne Information Enterprise and Pegasus Communications
Corporation, both of which are public companies. From 1981 until his retirement
in October 1991, Mr. Weber held various executive positions, including
President and Chief Executive Officer, at Contel Corporation ("Contel"), a
telecommunications company which merged with GTE Corporation in March 1991. Mr.
Weber was a director of Contel from 1985 until 1991 and was a director or
Contel Cellular, Inc., a cellular telephone company, from 1981 until 1991.
DONALD W. BURTON has been a Director of the Company since January
1996. Since January 1981, he has served as Managing General Partner of South
Atlantic Venture Fund I, II and III, Limited Partnerships and Chairman of South
Atlantic Private Equity Fund IV, Limited Partnership. Mr. Burton has been the
general partner of The Burton Partnership, Limited Partnership since January
1979. Since January 1981, he has served as President of South Atlantic Capital
Corporation. Mr. Burton also serves on the Board of Directors of ITC Holding,
ITC DeltaCom, Powertel, Inc., AvData Systems, Inc. ("AvData") (a company
providing data communications networks), K&G Men's Centers, Inc. (a discount
retailer of men's clothing), the Heritage Group of Mutual Funds and several
private companies. Mr. Burton also serves as a director of the National Venture
Capital Association.
L. CHARLES HILTON, JR. has been a Director of the Company since the
Company acquired the Beach Cable System in December 1997. Mr. Hilton has been
elected to serve a one-year term as a member of the Board of Directors pursuant
to the Beach Cable System acquisition agreement. Mr. Hilton was the founder and
sole stockholder of Beach Cable, Inc., and served as its Chief Executive
Officer from 1991 to December 1997. Since 1958, Mr. Hilton has served as
Chairman and Chief Executive Officer of Gulf Asphalt Corporation, a general
construction firm. Mr. Hilton has been a partner in the law firm of Hilton,
Hilton, Kolk & Roesch since 1984, and currently serves as Chief Executive
Officer of Hilton, Inc., a family corporation which owns and operates various
commercial buildings in Bay County, Florida. He also is a member of the board
of directors of several private companies.
WILLIAM H. SCOTT, III has been a Director of the Company since
November 1995. Mr. Scott has served as President of the corporate predecessor
of ITC Holding since December 1991 and has been a director of the corporate
predecessor of ITC Holding since May 1989. Mr. Scott is a director of several
ITC Companies, including ITC Holding, PowerTel, Inc., AvData, ITC DeltaCom, and
MindSpring. From 1989 to 1991, he served as Executive Vice President of the
corporate predecessor of ITC Holding. From 1985 to 1989, Mr. Scott was an
officer and director of Async Corporation. Between 1984 and 1988, Mr. Scott
held several offices with SouthernNet, including Chief Operating Officer, Chief
Financial Officer, and Vice President--Administration. He was a director of
SouthernNet from 1984 to 1987.
ALAN A. BURGESS was appointed a director of the Company in January
1999. From 1967 until his retirement in 1997 Mr. Burgess was a partner with
Andersen Consulting. Over his thirty-year career he held a number of positions
as Managing Partner, including Managing Partner of Regulated Industries from
1974 to 1989. In 1989 he assumed the role of Managing Partner of the
Communications Industry Group. In addition, he served on Andersen Consulting's
Global Management council and was a member of the Partner Income Committee. Mr.
Burgess is also the Chief Financial Officer of Seventh Wave Technologies, Inc.
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<PAGE> 52
COMMITTEES OF THE BOARD OF DIRECTORS
The Board currently has two committees, the Audit Committee and the
Compensation and Stock Option Committee.
The Audit Committee, among other things, recommends the firm to be
appointed as independent accountants to audit the Company's financial
statements, discusses the scope and results of the audit with the independent
accountants, reviews with management and the independent accounts the Company's
interim and year-end operating results, considers the adequacy of the internal
accounting controls and audit procedures of the Company and reviews the
non-audit services to be performed by the independent accountants. The current
members of the Audit Committee are Messrs. Hilton, Burgess and Lanier.
The Compensation and Stock Option Committee reviews and recommends the
compensation arrangements for management of the Company and administers the
Company's stock option plans. The current members of the Compensation and Stock
Option Committee are Messrs. Scott, Weber, and Burton.
DIRECTOR COMPENSATION
Directors of the Company receive no directors' fees. Directors are
reimbursed for their reasonable out-of-pocket travel expenditures incurred.
Directors of the Company are also eligible to receive grants of stock options
under the Company's Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation and Stock Option Committee are
Messrs. Scott, Burton and Weber.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the cash
and non-cash compensation paid or accrued during the periods indicated to the
Chief Executive Officer and the other most highly compensated officers of the
Company for the fiscal year ended December 31, 1998 (the "Named Executive
Officers").
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<PAGE> 53
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
YEAR(1) SALARY BONUS OPTIONS(2) COMPENSATION(3)
------- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
William E. Morrow 1998 $ 134,539 $ 76,800 105,000 $ 8,014
President and Chief Executive 1997 $ 102,462(5) $ 22,602 45,000 $ 24,526
Officer(4)
James K. McCormick 1998 $ 110,962 $ 4,800 37,500 $ 35,819
Chief Financial Officer(11) 1997 $ 30,770(6) $ 17,609 15,000 $ 33,700
Felix L. Boccucci, Jr. 1998 $ 98,250 $ 33,385 7,500 $ --
Vice President of Business 1997 $ 92,430 $ 9,473 -- $ 36,159(8)
Development(7) 1996 $ 84,015 $ 46,102 16516.5 $ 68,464(9)
Bret T. McCants 1998 $ 101,494 $ 29,926 30,000 $ 5,041
Vice President of Network 1997 $ 58,847(10) $ 21,177 10,500 $ 35,535
Construction and Maintenance
Marcus R. Luke 1998 $ 97,307 $ 31,275 22,500 $ 4,800
Chief Technology Officer 1997 $ 90,292 $ 6,102 -- $ 5,111
1996 $ 72,547 $ 7,102 6,405 $ 5,076
</TABLE>
- ---------------
(1) Most of the Named Executive Officers were initially employed by
the Company during 1997 or are in a different position with the
Company than the position held by such Named Executive Officer in
1996.
(2) All options are exercisable for shares of Common Stock of the Company.
(3) Includes car allowances, relocation expenses and premiums on life
insurance.
(4) Mr. Morrow has served as President and Chief Executive Officer of the
Company since the resignation of Mr. Walker in February 1997.
(5) Reflects amounts paid to Mr. Morrow based on an annual salary rate of
approximately $120,000.
(6) Reflects amounts paid to Mr. McCormick based on an annual salary rate
of approximately $100,000.
(7) Mr. Boccucci served as Chief Financial Officer, Treasurer and Secretary
of the Company from November 1995 through August 1997.
(8) Includes grants of ITC Holding capital stock valued at $30,789 at the
time of grant.
(9) Includes grants of ITC Holding capital stock valued at $63,448 at the
time of grant.
(10) Reflects amounts paid to Mr. McCants based on an annual salary rate of
approximately $90,000.
(11) Mr. McCormick resigned his position with the Company in February 1999.
INCENTIVE COMPENSATION PLAN
1995 Stock Option Plan. The Company's 1995 Stock Option Plan (the
"Stock Option Plan") provides for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), as well as the grant of non-qualifying
options to key employees (including key employees who are officers and
directors of the Company) and non-employee directors of the Company and its
subsidiaries. The Stock Option Plan, as amended in February 1998, authorizes
the issuance of up to 700,000 shares of Common Stock pursuant to options
granted under the Stock Option Plan (subject to anti-dilution adjustments in
the event of a stock split, recapitalization or similar transaction). The
maximum number of shares subject to options that may be awarded under the Stock
Option Plan to any person is 450,000 shares. The
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<PAGE> 54
Compensation and Stock Option Committee of the Board of Directors will
administer the Stock Option Plan and will grant options to purchase Common
Stock.
The option exercise price for incentive stock options granted under
the Stock Option Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option (or 110% in the case of an
incentive stock option granted to an optionee beneficially owning more than 10%
of the outstanding Common Stock). The option exercise price for non-incentive
stock options granted under the Stock Option Plan may not be less than the par
value of the Common Stock on the date of grant of the option. The maximum
option term is ten years (or five years in the case of an incentive stock
option granted to an optionee beneficially owning more than 10% of the
outstanding Common Stock). Options may be exercised at any time after grant,
except as otherwise provided in the particular option agreement. There is also
a $100,000 limit on the value of Common Stock (determined at the time of grant)
covered by incentive stock options that become exercisable by an optionee in
any year. The Board of Directors may amend, suspend or terminate the Stock
Option Plan with respect to shares of Common Stock as to which options have not
been granted.
At December 31, 1998, options to purchase 675,715 shares of Common
Stock were outstanding pursuant to the Stock Option Plan.
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<PAGE> 55
OPTION GRANTS
The following table sets forth information with respect to grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 1998. No stock appreciation rights have been granted.
OPTION GRANTS DURING 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO POTENTIAL REALIZED VALUE AT
UNDERLYING EMPLOYEES ASSUMED ANNUAL RATES OF STOCK
OPTIONS IN FISCAL EXERCISE EXPIRATION PRICE APPRECIATION
NAME GRANTED YEAR(2) PRICE GRANT DATE DATE FOR OPTION TERM(3)
- ---- ---------- ----------- -------- ---------- ---------- -----------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Morrow 105,000 18.6% $ 10 February 4, February 4, $ 660,450 $ 1,673,700
President and Chief 1998 2008
Executive Officer
James K. McCormick 37,500 5.8% $ 10 February 4, February 4, $ 237,875 $ 562,500
Chief Financial Officer 1998 2008
(Now cancelled)
Felix L. Boccucci, Jr. 7,500 1.3% $ 10 February 4, February 4, $ 47,175 $ 119,550
Vice President of 1998 2008
Business
Development(4)
Bret T. McCants 30,000 5.3% $ 10 February 4, February 4, $ 188,700 $ 478,200
Vice President of 1998 2008
Network Construction
and Maintenance
Marcus R. Luke 22,500 4.0% $ 10 February 4, February 4, $ 141,525 $ 358,650
Chief Technology 1998 2008
Officer
</TABLE>
- ---------------
(1) All options are exercisable for shares of Common Stock and are granted
under the Stock Option Plan. Such options generally vest over five
years unless such person's employment with the Company is terminated,
in which case options that have not vested at that time will
terminate.
(2) Based on 565,374 options granted in fiscal 1998.
(3) These amounts are based on compounded annual rates of stock price
appreciation of five and ten percent over the 10-year term of the
options, are mandated by rules of the Securities and Exchange
Commission and are not indicative of expected stock price performance.
Actual gains, if any, on stock option exercises are dependent on
future performance of the Common Stock, overall market conditions, as
well as the option holders' continued employment throughout the
vesting period. The amounts reflected in this table may not
necessarily be achieved or may be exceeded.
(4) Mr. Boccucci served as Chief Financial Officer, Treasurer and
Secretary of the Company from November 1995 through August 1997.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
None of the Named Executive Officers exercised stock options during the
fiscal year ended December 31, 1998. Since the Company's Common Stock is not
traded, the Company has no presently available estimates of the market value of
such shares at December 31, 1998. No stock appreciation rights have been
granted.
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<PAGE> 56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information at February 28,
1999, regarding beneficial ownership of the capital stock of the Company by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding capital stock of the Company, (ii) each director of the Company,
(iii) each executive officer of the Company and (iv) all directors and
executive officers as a group. The information as to beneficial ownership has
been furnished by the respective stockholders, directors and executive officers
of the Company, and, unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND TOTAL SHARES OF
NAMES AND ADDRESS OF NATURE OF SHARES CAPITAL STOCK
BENEFICIAL OWNERS AND DIRECTORS BENEFICIALLY OWNED(1)(2) OUTSTANDING(2)
- ------------------------------- ------------------------ ---------------
<S> <C> <C>
InterCall Inc (3)......................................... 6,384,750 84.5%
AT&T Venture Funds(4)..................................... 1,066,950 14.1
Richard Bodman(4)......................................... 1,066,950 14.1
Felix L. Boccucci, Jr.(5)(8)(9)........................... 11,400 *
William E. Morrow(8)(9)................................... 3,000 *
James McCormick(7)(8)(9).................................. 3,000 *
Marcus R. Luke(6)(8)(9)................................... 6,525 *
James T. Markle........................................... -- *
Bret McCants(8)(9)........................................ 1,200 *
Peggy A. Warner........................................... -- *
Rodger L. Johnson.......................................... -- *
Ancel A. Hamilton, Jr.(8)(9).............................. -- *
Peggy B. Warner(9)........................................ -- *
Chad S. Wachter(9)........................................ -- *
Campbell B. Lanier (10)................................... 6,384,750 84.5%
Donald W. Weber........................................... -- *
Donald W. Burton.......................................... -- *
L. Charles Hilton, Jr..................................... -- *
William H. Scott, III..................................... -- *
Alan A. Burgess........................................... -- *
All executive officers and directors as a group
(17 persons)(5)(6)(8)..................................... 1,092,075 14.4%
</TABLE>
- --------------------
* Less than one percent.
(1) The Company has 394 shares of Common Stock outstanding issued to a
former employee under the stock option plan. The Company's Preferred
Stock is assumed to be converted using a ratio of 150:1 Preferred to
Common for the purpose of this table.
(2) In accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended, a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of capital stock if such person
has or shares voting power or investment power with respect to such
security, or has the right to acquire beneficial ownership at any time
within 60 days from January 31, 1999. As used herein, "voting power"
is the power to vote or direct the voting of shares and "investment
power" is the power to dispose or direct the disposition of shares.
Each share of capital stock owned represented in this table represents
a share of Common Stock of the Company, including options to purchase
9,909.9 shares of Common Stock granted to Mr. Boccucci and an option
to purchase 3,285 shares of Common Stock granted to Mr. Luke which are
currently exercisable.
(3) The address of Intercall Inc. is 1211 O.G. Skinner Drive, West Point,
Georgia 31833. Intercall is a wholly owned subsidiary of ITC Holding.
(4) The address of each of the AT&T Venture Funds and of Mr. Bodman is 2
Wisconsin Circle, #610, Chevy Chase, Maryland 20815. Includes 543
shares owned by Venture Fund I, L.P., of which Venture Management I, a
general partnership, is the general partner, of which Mr. Bodman is
the managing general partner; 4,886 shares owned by AT&T Venture Fund
II, L.P., of which Venture Management, L.L.C. is the general partner,
of which Mr. Bodman is a manager; includes 256 shares owned by Special
Partners Fund, L.P., of which Venture Management III, L.L.C. is the
general partner, of which Mr. Bodman is a manager; and includes 1,428
shares owned by Special Partners Fund International, L.P., of which
the investment general partner is
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<PAGE> 57
Venture Management III, L.L.C., of which Mr. Bodman is a manager. Each
of the respective AT&T Venture Funds has sole voting and investment
power with respect to the shares beneficially owned by such fund.
(5) Includes options to purchase 9,909.9 shares of Common Stock which are
currently exercisable.
(6) Includes options to purchase 3,825 shares of Common Stock which are
currently exercisable.
(7) Mr. McCormick has shared voting and investment power with respect to
such shares with his wife.
(8) Does not include options to purchase 25,080, 14,106.6, 150,000, 52,500
40,500, 37,500, 37,500, and 30,000 shares of Common Stock held by
Messrs. Luke, Boccucci, Morrow, McCants, Hamilton, Warner and
Wachter respectively, which are not exercisable within 60 days from
January 31, 1998.
(9) The address of each of Messrs. Hilton, Lanier, Scott, Walker, Boccucci,
Luke, Morrow, McCants, Hamilton, Wachter and Ms. Warner is c/o KNOLOGY
Holdings, Inc., 1241 O.G. Skinner Drive, West Point, Georgia 31833.
(10) These are the shares owned by Intercall, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adopted a policy requiring that any material
transactions between the Company and persons or entities affiliated with
officers, directors or principal stockholders of the Company be on terms no
less favorable to the Company than reasonably could have been obtained in
arm's-length transactions with independent third parties.
TRANSACTIONS WITH ITC COMPANIES
As of January 31, 1999, ITC Holding (through its wholly owned
subsidiaries) owned approximately 84.4% of the outstanding capital stock of the
Company. See "Security Ownership of Certain Beneficial Owners and Management."
As of December 31, 1998, Mr. Lanier beneficially owned approximately 23.25% of
the common stock of ITC Holding, and Mr. Scott and Mr. Burton beneficially owned
approximately 1.1% and 8.1%, respectively, of the common stock of ITC Holding as
of such date.
Mr. Walker and Mr. Boccucci served as executive officers of ITC
Holding prior to October 1997. Mr. Walker currently serves as Chief Executive
Officer and director of ITC DeltaCom, which until October 1997 was owned by ITC
Holding and now is owned by substantially the same stockholders as ITC Holding.
Mr. Boccucci currently serves as Chief Financial Officer of Interstate and
Valley Telephone Companies. Mr. Lanier and Mr. Scott serve as executive
officers and directors of ITC Holding and as executive officers and directors
of a number of ITC Companies, including ITC DeltaCom. Mr. Burton serves as a
director of several ITC Companies, including ITC Holding, ITC DeltaCom and
Powertel, Inc.
ITC Holding occasionally provides certain administrative services,
such as legal and tax planning services, for the Company. The costs of these
services are charged to the Company based primarily on the salaries and related
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<PAGE> 58
expenses for certain of the ITC Holding executives and an estimate of their time
spent on projects specific to the Company. For the year ended December 31, 1998,
the Company recorded $102,000 in selling, operations, and administrative
expenses related to these services. In the opinion of management, the
methodology used to calculate the amounts charged to the Company is reasonable.
Certain of ITC Holding's other wholly owned or majority-owned
subsidiaries provide the Company with various services and/or receive services
provided by the Company. These entities include Interstate Telephone Company
and Valley Telephone Company, which provide local and long-distance telephone
services; ITC DeltaCom, Inc., which provides long-distance and related services
and which leases capacity on certain of its fiber routes, and InterCall, Inc.,
which provides conference calling services. ITC Holding also holds equity
investments in the following entities which do business with the Company:
Powertel, Inc., which provides cellular services, and MindSpring Enterprises,
Inc. ("MindSpring"), which is a regional provider of Internet access and which
purchases LIT services from the Company. In management's opinion, the Company's
transactions with these affiliated entities are representative of arm's-length
transactions.
For the year ended December 31, 1998, the Company received services
from these affiliated entities in the amount of $1,681,000 which is reflected
in cost of services and selling, operations, and administrative expenses in the
Company's statement of operations.
Relatives of the stockholders of ITC Holding are stockholders and
employees of the Company's insurance provider. The costs charged to the Company
for insurance services were approximately $386,000 for the year ended December
31, 1998.
The chief executive officer of an affiliate served from July 15, 1996
to February 20, 1997 as president and chief executive officer of the Company.
He served in his capacity as chief executive officer and president of the
Company at the request of the Company and ITC Holding and received no
compensation from the Company for the year ended December 31, 1996. The value
of his services provided through February 20, 1997 is estimated to total
approximately $20,000.
SALES OF CAPITAL STOCK
In December 1995 and January 1996, in connection with the initial
capitalization of the Company, the Company issued 7,780 shares of Preferred
Stock for a purchase price of $1,000 per share to certain of the current
stockholders of the Company for an aggregate amount of $7,780,000. ITC Holding
contributed $4,000,000 plus all of its direct and indirect interests in
Cybernet Holding, L.L.C. (a predecessor of the Company) and in KNOLOGY of
Columbus, Inc. (then known as American Cable, Inc.) in exchange for Preferred
Stock.
In April 1996, in connection with a private placement of Preferred
Stock of the Company, the Company issued 9,312 shares of Preferred Stock for a
purchase price of $1,200 per share to certain of the current stockholders of
the Company for an aggregate amount of $11,174,400. In connection with this
private placement, the Company, ITC Holding, South Atlantic, Century Telephone
and AT&T Venture Funds entered into an Agreement Among Shareholders, which was
amended and restated as of July 28, 1997, pursuant to which the parties thereto
agreed to take all action within their respective power as may be required, for
as long as Century Telephone (and its affiliates) and/or Venture Fund I, L.P.
(and their respective affiliates) own equity securities of the Company with a
combined voting power in excess of 5% of the aggregate voting power of all
outstanding equity securities of the Company (each, a "5% Stockholder" for so
long as it owns in excess of 5% of the outstanding equity securities of the
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<PAGE> 59
Company), to cause to be elected to the Board of Directors of the Company one
director designated by each such 5% Stockholder.
In February 1997, the Company issued 8,960 shares of Preferred Stock
to certain of the current stockholders of the Company for a purchase price of
$1,200 per share, for an aggregate amount of $10,752,000. As part of this
private placement, ITC Holding, Century Telephone, South Atlantic and AT&T
Venture Funds contributed $4,302,000, $2,096,400, $1,000,800 and $1,416,000,
respectively, in exchange for such Preferred Stock. See "Description of Capital
Stock."
The Company is a party to a Stockholders' Agreement (the
"Stockholders' Agreement"), dated October 1997, as of December 8, 1995, as
amended, with all of the stockholders of the Company. None of the parties to
the Stockholders' Agreement may transfer any share of any class or series of
capital stock of the Company or any right or option to acquire any share of
capital stock of the Company held by such party to third parties (subject to
limited exceptions) without having offered rights of first refusal to purchase
such securities to the Company.
The Company issued approximately 21,400 shares of Preferred Stock to
qualified investors in the Equity Private Placement for a purchase price of
$1,500 per share, for an aggregate amount of approximately $32.2 million. ITC
Holding, Century Telephone, South Atlantic, AT&T Venture Funds and SCANA
purchased approximately $10.0 million, $2.5 million, $5.5 million, $5.0 million
and $5.0 million of Preferred Stock, respectively, in the Equity Private
Placement.
On October 22, 1997, the Company completed a private offering of
444,100 Units, each of which consisted of one 11-7/8% Senior Discount Note and
one Warrant to purchase .003734 shares of Preferred Stock of the Company at an
exercise price of $.01 per share, subject to adjustment, for $444.1 million
aggregate principal amount at maturity yielding net proceeds of approximately
$242.4 million. The Senior Discount Notes issued in the Offering were
subsequently exchanged for $444.1 million aggregate principal amount at
maturity of substantially identical Exchange Notes that had been registered
under the Securities Act in the Exchange Offer that expired on March 24, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A)(1) The following Consolidated Financial Statements of the
Company and independent auditor's report are included in Item 8 of this Form
10-K.
Report of Independent Public Accountants.
Company's Consolidated Balance Sheets as of December 31, 1997
and 1998.
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997 and 1998.
Consolidated Statements of Cash Flows for the the Years Ended
December 31, 1996, 1997 and 1998.
Consolidated Statements of Stockholders' (Deficit) Equity for
the Years Ended December 31, 1996, 1997 and 1998.
Notes to Consolidated Financial Statements.
(A)(2) The following financial statement schedule is filed as part
of this report and is attached hereto as pages S-1 and S-2.
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Independent Auditor's Report on the Financial Statement
Schedules.
Schedule II--Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission either have been included
in the Consolidated Financial Statements of the Company or the notes thereto,
are not required under the related instructions or are inapplicable, and
therefore have been omitted.
(A)(3) The following exhibits are either provided with this Form
10-K or are incorporated herein by reference:
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated December 5, 1997, by and among
KNOLOGY Holdings, Inc., KNOLOGY of Panama City, Inc., Beach Cable,
Inc. and L. Charles Hilton (Filed as Exhibit 2.1 to the Registration
Statement on Form S-4, File No. 333-43339 (the "Form S-4") and
incorporated herein by reference).
2.2 Purchase Agreement between Cable Alabama Corporation and Knology of
Huntsville, Inc., dated as of October 19, 1998.
3.1 Certificate of Amendment of Certificate of Incorporation of KNOLOGY
Holdings, Inc. (Filed as Exhibit 3.1 to the Form 10-Q for the
quarter ended March 31, 1998 and incorporated herein by reference).
3.2 Amended and Restated Bylaws of KNOLOGY Holdings, Inc. (Filed as
Exhibit 3.2 to the Form S-4 and incorporated herein by
reference).
3.3 Certificate of Amendment to Certificate of Designation of Preferred
Stock. (Filed as Exhibit 3.2 to the Form 10-Q for the quarter ended
March 31, 1998 and incorporated herein by reference).
4.1 Indenture dated as of October 22, 1997 between KNOLOGY Holdings,
Inc. and United States Trust Company of New York, as Trustee,
relating to the 11-7/8% Senior Discount Notes Due 2007 of KNOLOGY
Holdings, Inc. (Filed as Exhibit 4.1 to the Form S-4 and
incorporated herein by reference).
4.2 Registration Rights Agreement, dated October 22, 1997, between
KNOLOGY Holdings, Inc., the Placement Agents and SCANA
Communications, Inc. (Filed as Exhibit 4.2 to the Form S-4 and
incorporated herein by reference).
4.3 Form of Senior Discount Note (contained in Indenture filed as
Exhibit 4.1).
4.4 Form of Exchange Note (contained in Indenture filed as Exhibit 4.1).
10.1 Unit Purchase Agreement, dated as of October 16, 1997 between
KNOLOGY Holdings, Inc. and SCANA Communications, Inc. (Filed as
Exhibit 10.1 to the Form S-4 and incorporated herein by reference).
10.2 Warrant Agreement, dated as of October 22, 1997, between KNOLOGY
Holdings, Inc. and United States Trust Company of New York
(including form of Warrant Certificate) (Filed as Exhibit
10.2 to the Form S-4 and incorporated herein by reference).
10.3 Warrant Registration Rights Agreement, dated as of October 22, 1997,
between KNOLOGY Holdings, Inc. and United States Trust
Company of New York (Filed as Exhibit 10.3 to the Form S-4
and incorporated herein by reference).
10.4 Lease Agreement dated April 15, 1996 by and between D.L. Jordan and
American Cable Company, Inc. (Filed as Exhibit 10.5 to the Form S-4 and
incorporated herein by reference).
10.5 Pole Attachment Agreement dated January 1, 1998 by and between Gulf Power
Company and Beach Cable, Inc. (Filed as Exhibit 10.7 to the Form S-4 and
incorporated herein by reference).
10.6* Telecommunications Facility Lease and Capacity Agreement, dated September
10, 1996, by and between Troup EMC Communications, Inc. and Cybernet
Holding, Inc. (Filed as Exhibit 10.16 to the Form S-4 and
incorporated herein by reference).
</TABLE>
<PAGE> 61
<TABLE>
<S> <C>
10.7 Master Pole Attachment Agreement dated January 12, 1998 by and
between South Carolina Electric and Gas and KNOLOGY Holdings, Inc.
d/b/a/ KNOLOGY of Charleston (Filed as Exhibit 10.17 to the Form S-4
and incorporated herein by reference).
10.8 License Agreement dated September 29, 1995 by and between Montgomery
Cablevision and Entertainment, Inc. and American Communications
Services of Montgomery, Inc. (Filed as Exhibit 10.22 to the Form S-4
and incorporated herein by reference).
10.9* License Agreement dated January 17, 1996 by and between American
Cable, Inc. and American Communication Services of Columbus, Inc.
(Filed as Exhibit 10.23 to the Form S-4 and incorporated herein by
reference).
10.10 Addendum to License Agreement dated April 21, 1997 by and between
American Cable, Inc. and American Communication Services of
Columbus, Inc. (Filed as Exhibit 10.24 to the Form S-4 and
incorporated herein by reference).
10.11 Lease Agreement, dated December 5, 1997 by and between The Hilton
Company and KNOLOGY of Panama City, Inc. (Filed as Exhibit 10.25 to
the Form S-4 and incorporated herein by reference).
10.12 Billing and Collection Services Agreement dated April 2, 1997 by and
between Interstate Telephone Company and Cybernet Holding, Inc.
(Filed as Exhibit 10.26 to the Form S-4 and incorporated herein by
reference).
10.13 Certificate of Membership with National Cable Television
Cooperative, dated January 29, 1996, of Cybernet Holding, Inc.
(Filed as Exhibit 10.34 to the Form S-4 and incorporated herein by
reference).
10.14 Stockholders' Agreement among KNOLOGY Holdings, Inc. and Certain
Stockholders Thereof dated as of December 8, 1995 (Filed as Exhibit
10.35 to the Form S-4 and incorporated herein by reference).
10.15 Amendment No. 1 to Stockholders' Agreement dated as of January 25, 1996
(Filed as Exhibit 10.36 to the Form S-4 and incorporated herein by
reference).
10.16 Amendment No. 2 to Stockholders' Agreement dated as of April 18, 1996
(Filed as Exhibit 10.37 to the Form S-4 and incorporated herein by
reference).
10.17 Amended and Restated Agreement Among Shareholders Among KNOLOGY
Holdings, Inc. and Certain Shareholders thereof dated as of July 28,
1997 (Filed as Exhibit 10.38 to the Form S-4 and incorporated herein
by reference).
10.18 Ordinance No. 99-16 effective March 16, 1999 between Columbus consolidated
Government and KNOLOGY of Columbus, Inc.
10.19 Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990 (Filed as
Exhibit 10.44 to the Form S-4 and incorporated herein by reference).
10.20 Ordinance No. 50-76 (Montgomery, Alabama) (Filed as Exhibit 10.45 to the
Form S-4 and incorporated herein by reference).
10.21 Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990 (Filed
as Exhibit 10.45.1 to the Form S-4 and incorporated herein by
reference).
10.22 Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995 (Filed as
Exhibit 10.46 to the Form S-4 and incorporated herein by reference).
10.23 Resolution No. 92-7 (Panama City Beach, Florida) dated July 23, 1992
(Filed as Exhibit 10.47 to the Form S-4 and incorporated herein by
reference).
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
10.24 License (Bay County, Florida) dated January 5, 1993 (Filed as Exhibit 10.48
to the Form S-4 and incorporated herein by reference).
10.25 Resolution No. 97-22 (Panama City Beach, Florida) dated December 3, 1997
(Filed as Exhibit 10.49 to the Form S-4 and incorporated herein by
reference).
10.26 Resolution No. 2075 (Bay County, Florida) dated November 18, 1997 (Filed as
Exhibit 10.50 to the Form S-4 and incorporated herein by reference).
10.27 Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998 (Filed as
Exhibit 10.53 to the Company's 1997 Annual Report on Form 10-K).
10.28 Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998 (Filed
as Exhibit 10.54 to the Company's 1997 Annual Report on Form 10-K).
10.30 Ordinance No. 98054 (Mount Pleasant, South Carolina) dated March 9, 1999.
10.31 Franchise Agreement (Charleston County, South Carolina) dated December 15, 1998.
10.32 Ordinance No. 1998-47 (North Charleston, South Carolina) dated May 28, 1998.
10.33 Ordinance No. 1998-77 (Charleston, South Carolina) dated April 28, 1998.
10.34 Ordinance No. 98-5 (Columbia County, Georgia) dated August 18, 1998.
10.35+ Switching Agreement dated May 1, 1998 between Interstate Telephone Company and
KNOLOGY Holdings, Inc.
10.36 Network Access Agreement dated July 1, 1998 between SCANA Communications, Inc.,
f/k/a MPX Systems, Inc. and KNOLOGY Holdings, Inc.
10.37 Internet Access Contract dated September 1, 1998 between ITC DataCom
Communications, Inc. and KNOLOGY Holdings, Inc.
10.38+ Collocation Agreement for Multiple Sites dated on or about June 1998 between
Interstate FiberNet, Inc. and KNOLOGY Holdings, Inc.
10.39+ Lease Agreement dated October 12, 1998 between Southern Company Services, Inc.
and KNOLOGY Holdings, Inc.
10.40 Facilities Transfer Agreement dated February 11, 1998 between South
Carolina Electric and Gas Company and KNOLOGY Holdings, Inc., d/b/a
KNOLOGY of Charleston.
10.41 License Agreement dated March 3, 1998 between BellSouth Telecommunications, Inc.
and KNOLOGY Holdings, Inc.
10.44 Pole Attachment Agreement dated February 18, 1998 between KNOLOGY Holdings, Inc.
and Georgia Power Company.
10.46 Assignment Agreement dated March 4, 1998 between Gulf Power Company and Knology
of Panama City, Inc.
10.47 Adoption Agreements dated March 1, 1999 between KNOLOGY Holdings, Inc. and
BellSouth Telecommunications, Inc.
10.48+ Lease Switching Agreement between South Carolina Net for TTE and KNOLOGY
Holdings, Inc.
</TABLE>
<PAGE> 63
<TABLE>
<S> <C>
10.50+ Carrier Services Agreement dated September 30, 1998 between Business Telecom,
Inc. and KNOLOGY Holdings, Inc.
10.51+ Reseller Services Agreement dated September 9, 1998 between Business Telecom,
Inc. and KNOLOGY Holdings, Inc.
10.52+ Private Line Services Agreement dated September 10, 1998 between BTI
Communications Corporation and KNOLOGY Holdings, Inc.
10.53 Credit Facility Agreement between First Union National Bank, First Union
Capital Markets Corp. and KNOLOGY Holdings, Inc. dated December 22,
1998.
10.54 Ordinance No. 284 (Cedar Grove, Florida) dated June 9, 1998.
10.55 License Agreement dated January 5, 1993 between County Commissioners of Bay
County Florida and Beach Cable, Inc.
10.56 Ordinance No. 647 (Lynn Haven, Florida) dated May 12, 1998 between Knology
of Panama City, Inc. and the City of Lynn Haven.
10.57 Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998 between Knology
of Panama City, Inc. and the City of Panama City.
10.58 Resolution No. 97-22 (Panama City Beach, Florida) dated December 3, 1997
between Panama City Beach, Florida and KNOLOGY Holdings, Inc.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of KNOLOGY Holdings, Inc. (Filed as Exhibit 21.1 to the Form 10-Q
for the quarter ended September 30, 1998 and incorporated herein by reference).
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
</TABLE>
- ----------------------
+ Knology has applied for confidential treatment of portions of this Agreement.
Accordingly, portions thereof have been omitted and filed separately with the
Securities and Exchange Commission.
* Confidential treatment has been granted. The copy filed as an exhibit omits
the information subject to the confidential treatment request.
<PAGE> 64
(B) REPORTS ON FORM 8-K.
On February 17, 1998, the Company filed a Current Report on Form 8-K
to report the acquisition on December 5, 1997 of Beach Cable, Inc. and to
include the relevant financial statements of KNOLOGY of Panama City, Inc.,
including the relevant pro forma financial information for the Company.
On November 9, 1998, the Company filed a Current Report on Form 8-K to
report the acquisition on October 30, 1998 of Cable Alabama Corporation. On
January 13, 1999 a form 8-K/A was filed to include the relevant financial
statements of Cable Alabama Corporation, including the relevant pro forma
financial information for the Company.
(C) EXHIBITS
The Company hereby files as part of this Form 10-K the Exhibits listed
in the Index to Exhibits.
(D) FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are
inapplicable or the information required to be set forth therein is provided in
the Consolidated Financial Statements of the Company or notes thereto.
-61-
<PAGE> 65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized as of the 30th day
of March, 1999.
KNOLOGY HOLDINGS, INC.
By: /s/ William E. Morrow
-------------------------------------
William E. Morrow
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Campbell B. Lanier, III Chairman of the Board and Director March 30, 1999
- --------------------------------------
Campbell B. Lanier, III
/s/ William E. Morrow President, Chief Executive Officer March 30, 1999
- -------------------------------------- and Director (Principal executive officer)
William E. Morrow
/s/ Felix L. Boccucci Chief Financial Officer March 30, 1999
- -------------------------------------- (Principal financial officer and principal
Felix L. Boccucci accounting officer)
/s/ Donald W. Burton
- -------------------------------------- Director March 30, 1999
Donald W. Burton
/s/ William H. Scott, III
- -------------------------------------- Director March 30, 1999
William H. Scott, III
/s/ Donald W. Weber
- -------------------------------------- Director March 30, 1999
Donald W. Weber
</TABLE>
-62-
<PAGE> 66
<TABLE>
<S> <C> <C>
- -------------------------------------- Director March __, 1999
Richard Bodman
/s/ L. Charles Hilton, Jr.
- -------------------------------------- Director March 30, 1999
L. Charles Hilton, Jr.
/s/ Alan A. Burgess
- -------------------------------------- Director March 30, 1999
Alan A. Burgess
</TABLE>
-63-
<PAGE> 67
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
KNOLOGY HOLDINGS, INC.
Report of Independent Public Accountants................................................................... F-1
Consolidated Balance Sheets--December 31, 1998 and 1999.................................................... F-2
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996................. F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the Years Ended
December 31, 1998, 1997 and 1996........................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
<PAGE> 68
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
KNOLOGY Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of KNOLOGY
HOLDINGS, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31,
1998 and 1997 and the related consolidated statements of operations,
stockholders' (deficit) equity, and cash flows for each of the years in the
three-year period ended December 31, 1998. 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 KNOLOGY Holdings, Inc. and
subsidiaries as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 19, 1999
F-1
<PAGE> 69
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,859,508 $ 6,144,581
Marketable securities 66,231,397 227,880,923
Accounts receivable:
Trade, less allowance for doubtful accounts of $393,767 and
$108,529 in 1998, and 1997, respectively 5,108,491 1,607,859
Affiliate (Note 2) 6,785,691 0
Deferred tax assets (Note 6) 0 0
Prepaid expenses 430,811 37,060
------------- -------------
Total current assets 83,415,898 235,670,423
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Cable system and installation equipment 153,878,352 56,909,159
Test and office equipment 5,784,363 1,628,485
Automobiles and trucks 2,952,912 837,490
Production equipment 857,028 297,286
Land 2,449,269 0
Buildings 10,239,696 1,936,035
Inventory, less allowance for shrinkage of $180,000 and $30,000 in
1998 and 1997, respectively 32,142,503 5,806,320
Leasehold improvements 599,441 324,270
------------- -------------
208,903,564 67,739,045
Less accumulated depreciation and amortization (13,406,947) (5,171,309)
------------- -------------
Property, plant and equipment, net (Note 2) 195,496,617 62,567,736
------------- -------------
OTHER LONG-TERM ASSETS:
Intangible and other assets, net of accumulated amortization of
$4,156,946 in 1998 and $817,471 in 1997, respectively (Note 2) 52,606,063 17,896,146
Investment (Note 2) 825,072 0
Other 207,000 63,795
------------- -------------
Total assets $ 332,550,650 $ 316,198,100
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-2
<PAGE> 70
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 3) $ 12,174 $ 25,094
Accounts payable 6,366,923 5,817,733
Accounts payable--affiliate (Note 8) 0 452,346
Accrued liabilities 22,215,281 1,638,042
Unearned revenue 2,116,083 907,048
------------- -------------
Total current liabilities 30,710,461 8,840,263
NONCURRENT LIABILITIES:
Long-term notes payable (Note 3) 122,070 120,804
Long-term accrued interest payable 21,036,541 3,201,688
Bonds payable, net of discount of $180,893,708 and $194,189,569 in
1998 and 1997, respectively 263,206,292 249,910,431
------------- -------------
315,075,364 262,073,186
Total liabilities ------------- -------------
DEFERRED TAX LIABILITIES, NET OF ALLOWANCE OF $14,588,370 AND $4,165,308
IN 1998 AND 1997, RESPECTIVELY (NOTE 6) 0 0
------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTES 4 AND 5) ------------- -------------
2,486,960 2,486,960
WARRANTS (NOTE 3) ------------- -------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value per share; 100,000 and
50,000 shares authorized, 49,852 and 49,985 shares issued and
outstanding in 1998 and 1997, respectively (Note 7) 499 500
Common stock, $.01 par value per share; 16,000,000 and 200,000 shares
authorized, 394 and 0 shares issued and outstanding in 1998 and
1997, respectively (Note 7) 4 0
Additional paid-in capital 64,864,366 65,060,712
Accumulated deficit (49,878,931) (13,402,495)
Unrealized gains (losses) on marketable securities (Note 2) 2,388 (20,763)
------------- -------------
Total stockholders' equity 14,988,326 51,637,954
------------- -------------
Total liabilities and stockholders' equity $ 332,550,650 $ 316,198,100
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 71
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES $ 25,770,427 $ 10,355,068 $ 5,334,183
OPERATING EXPENSES:
Cost of services 11,854,733 4,758,730 2,513,693
Selling, operations and administrative 25,393,015 7,392,540 3,883,738
Depreciation and amortization 12,367,374 3,715,184 1,640,025
------------ ------------ ------------
Total Operating Expenses 49,615,122 15,866,454 8,037,456
------------ ------------ ------------
OPERATING LOSS (23,844,695) (5,511,386) (2,703,273)
------------ ------------ ------------
OTHER INCOME AND EXPENSES:
Interest income 9,639,050 2,774,909 46,221
Interest expense (28,676,035) (6,226,023) (1,055,498)
Affiliate interest income (Note 8) 0 0 273,799
Other income (expense), net 202,094 (129,033) (60,000)
------------ ------------ ------------
Total Other Expenses (18,834,891) (3,580,147) (795,478)
------------ ------------ ------------
LOSS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (42,679,586) (9,091,533) (3,498,751)
INCOME TAX BENEFIT (NOTE 2) 6,785,691 0 373,323
------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE (35,893,895) (9,091,533) (3,125,428)
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE - write-off of
capitalized start-up costs (Note 2) (582,541) 0 0
------------ ------------ ------------
NET LOSS $(36,476,436) $ (9,091,533) $ (3,125,428)
============ ============ ============
Basic and diluted LOSS PER SHARE
(Note 2):
Weighted average shares outstanding--7,488,450,
4,325,250, and 2,043,900 shares in 1998, 1997,
and 1996, respectively $ (4.87) $ (2.10) $ (1.53)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 72
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
UNREALIZED
PREFERRED STOCK COMMON STOCK (LOSS) GAIN TOTAL
--------------- -------------- ADDITIONAL ON STOCKHOLDERS'
PAID-IN ACCUMULATED MARKETABLE (DEFICIT)
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT SECURITIES EQUITY
------ ------ ------ ------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 7,520 $ 75 0 $ 0 $ 7,454,615 $ (1,185,534) 0 $ 6,269,156
Issuance of preferred stock, net
of related offering expenses 11,054,603 0 0 11,054,699
of $379,701 9,572 96 0
Net loss 0 0 0 0 0 (3,125,428) 0 (3,125,428)
------ ----- --- --- ------------ ------------ -------- ------------
BALANCE AT DECEMBER 31, 1996 17,092 171 0 0 18,509,218 (4,310,962) 0 14,198,427
Issuance of preferred stock, net
of related offering expenses
of $99,677 30,408 304 0 0 42,824,019 0 0 42,824,323
Purchase of Beach Cable (Note 9) 2,485 25 0 0 3,727,475 0 0 3,727,500
Net loss 0 0 0 0 0 (9,091,533) 0 (9,091,533)
Unrealized loss on marketable
securities 0 0 0 0 0 0 (20,763) (20,763)
------ ----- --- --- ------------ ------------ -------- ------------
BALANCE AT DECEMBER 31, 1997 49,985 $ 500 0 $ 0 $ 65,060,712 $(13,402,495) $(20,763) $ 51,637,954
====== ===== === === ============ ============ ======== ============
Issuance of common stock under
stock options 0 0 394 4 3,148 0 0 3,152
BeachCable purchase price
adjustment (134) (1) 0 0 (199,494) 0 0 (199,495)
Net loss 0 0 0 0 0 (36,476,436) 0 (36,476,436)
Unrealized gain on marketable
securities 0 0 0 0 0 0 23,151 23,151
------ ----- --- --- ------------ ------------ -------- ------------
BALANCE AT DECEMBER 31, 1998 49,851 $ 499 394 $ 4 $ 64,864,366 $(49,878,931) $ 2,388 $ 14,988,326
====== ===== === === ============ ============ ======== ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 73
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (36,476,436) $ (9,091,533) $ (3,125,428)
--------------- --------------- ---------------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 12,367,374 3,715,184 1,640,025
Amortization of bond discount 13,295,861 2,386,856 0
Loss on disposition of assets 61,559 23,464 21,370
Cumulative affect of accounting change 582,542 0 0
Deferred income tax benefit 0 0 (373,323)
Changes in current assets and liabilities:
Accounts receivable (10,286,324) (721,396) (512,337)
Prepaid expenses (393,750) 244,199 (180,950)
Accounts payable 96,844 4,302,245 (39,648)
Accrued liabilities and interest 38,412,092 163,317 293,394
Unearned revenue 1,209,035 243,007 278,757
Other 0 1,345 133
--------------- --------------- ---------------
Total adjustments 55,345,233 10,358,221 1,127,421
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 18,868,797 (1,266,688) (1,998,007)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of retirements $ (111,272,219) $ (39,625,408) $ (14,416,135)
Acquisitions, net (67,732,864) 0 0
Organizational cost expenditures (251,815) (470,923) (20,133)
Purchase of investments (3,953,028,406) (1,346,150,712) (5,000)
Proceeds from sales of investments 4,114,677,932 1,118,194,411 0
Investment in ClearSource, Inc. (825,072) 0 0
Proceeds from sales of property 32,075 69,152 0
Other (246,182) 0 0
--------------- --------------- ---------------
Net cash used in investing activities (18,646,551) (267,983,480) (14,441,268)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt and short-term borrowings (11,654) (29,903,385) (160,900)
Expenditures related to issuance of debt and consummation of
credit facility (1,498,817) 0 0
Proceeds from issuance of common stock 3,152 0 0
Proceeds from issuances of debt and short-term borrowings, net of
discount and issue costs on bonds 0 257,370,383 1,258,238
Proceeds from issuance of preferred stock, net of related
offering expenses 0 42,824,323 10,868,699
Proceeds from issuance of warrants 0 2,486,960 0
(Advances to) repayments from affiliate 0 0 4,255,836
--------------- --------------- ---------------
Net cash (used in) provided by financing activities (1,507,319) 272,778,281 16,221,873
--------------- --------------- ---------------
NET (DECREASE) INCREASE IN CASH (1,285,073) 6,061,489 (217,402)
CASH AT BEGINNING OF PERIOD 6,144,581 83,092 300,494
--------------- --------------- ---------------
CASH AT END OF PERIOD $ 4,859,508 $ 6,144,581 $ 83,092
=============== =============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 10,911 1,543,125 $ 1,016,039
=============== =============== ===============
Cash paid during the period for income taxes $ 0 $ 0 $ 0
=============== =============== ===============
Details of acquisitions
Property, plant and equipment $ 30,133,876 $ 4,756,005 $ 0
Intangible Assets 37,598,988 2,796,139 0
Liabilities Assumed 0 (3,824,644) 0
Preferred stock issued 0 (3,727,500) 0
--------------- --------------- ---------------
Net cash paid for acquisitions $ 67,732,864 $ 0 $ 0
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 74
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997, AND 1996
1. ORGANIZATION, NATURE OF BUSINESS AND BASIS OF PRESENTATION
ORGANIZATION
KNOLOGY Holdings, Inc. was incorporated in Delaware in November 1995
under the name CyberNet Holding, Inc. In April 1997, the Company
formally changed its name to KNOLOGY Holdings, Inc.
NATURE OF BUSINESS
KNOLOGY Holdings, Inc. and its subsidiaries (the "Company") owns and
operates advanced hybrid fiber-coaxial networks and provides
residential and business customers broadband communications services,
including analog and digital cable television, local and long distance
telephone, high-speed Internet access and broadband carrier services
to various markets in the southeastern United States.
The Company has experienced operating losses as a result of the
expansion of the advanced broadband communications networks and
services into new and existing markets. The Company expects to
continue to focus on increasing its customer base and expand its
broadband operations. Accordingly, the Company expects that its
operating expenses and capital expenditures will continue to increase
as it extends its broadband communications networks in the existing
and new markets in accordance with its business plan. While management
expects its expansion plans to result in profitability, there can be
no assurance that growth in the Company's revenue or customer base
will continue or that the Company will be able to achieve or sustain
profitability and/or positive cash flow.
BASIS OF PRESENTATION
The consolidated financial statements are prepared on the accrual
basis of accounting and include the accounts of the Company and all
subsidiaries. All significant intercompany balances have been
eliminated. Certain prior year amounts have been reclassified to
conform with the current year presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amount 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.
F-7
<PAGE> 75
CASH AND CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with
an original maturity date of three months or less to be cash
equivalents. Cash and cash equivalents are stated at cost, which
approximates fair value.
MARKETABLE SECURITIES
The Company's marketable securities are categorized as
available-for-sale securities, as defined by the Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Unrealized holding gains
and losses are reflected as a net amount in a separate component of
stockholders' equity until realized. For the purpose of computing
realized gains and losses cost is identified on a specific
identification basis. Securities available for sale at December 31,
1998 are primarily comprised of commercial paper.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and
amortization are calculated using the straight-line method over the
estimated useful lives of the assets, commencing when the asset is
installed or placed in service. Maintenance, repairs, and renewals are
charged to expense as incurred. The cost and accumulated depreciation
of property and equipment disposed of are removed from the related
accounts and any gain or loss is included in or deducted from income.
Depreciation and amortization are provided over the estimated useful
lives as follows:
<TABLE>
<S> <C>
Buildings 25 years
Cable system and installation equipment 7-10 years
Production equipment 7 years
Test and office equipment 3-7 years
Automobiles and trucks 5 years
Leasehold improvements 5 years
</TABLE>
Inventories are valued at the lower of cost or market (determined on a
weighted average basis) and include customer premise equipment and
certain plant construction materials. These items are transferred to
cable system and installation equipment when installed.
Interest is capitalized in connection with the construction of the
company's broadband networks. The capitalized interest is recorded as
part of the asset to which it relates and is amortized over the
asset's estimated useful life. In 1998 and 1997, $2,468,941 and
$676,160 of interest cost was capitalized, respectively. No interest
was capitalized prior to 1997.
INTANGIBLE AND OTHER ASSETS
Intangible and other assets include the excess of the purchase price
of acquisitions over the fair value of net assets acquired as well as
various other acquired intangibles and costs associated with the
issuance of debt and the consummation of a credit facility. Intangible
and other assets and the related useful lives and accumulated
amortization as of December 31, 1998 and 1997 are as follows:
F-8
<PAGE> 76
<TABLE>
<CAPTION>
Amortization Period
1998 1997 (Years)
-------------------------------------------------------
<S> <C> <C> <C>
Goodwill $ 10,914,834 $ 9,875,262 40
Subscriber base 34,863,072 0 3
Debt issuance costs 9,382,124 7,883,307 4 - 10
Noncompete agreement 1,500,000 0 3
Organizational costs 0 955,048
Other 102,979 0 10-15
-----------------------------
56,763,009 18,713,617
Less: accumulated amortization 4,156,946 817,471
-----------------------------
Intangibles and other, net $ 52,606,063 $ 17,896,146
=============================
</TABLE>
During 1998, the Company adopted the provisions of AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities," which
requires that all non-governmental entities expense costs of start-up
activities, including pre-operating, pre-opening and organization
activities, as the costs are incurred. Adoption of this statement
resulted in a cumulative effect of accounting change, net of the
change of $582,541 or $.08 per basic and diluted share.
LONG-LIVED ASSETS
In 1995, the Company 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." SFAS
No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and cost in
excess of net assets acquired related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to
be disposed of. The effect of adopting SFAS No. 121 was not material.
The Company periodically reviews the values assigned to long-lived
assets such as inventory, property and equipment, and cost in excess
of net assets acquired to determine whether any impairments are other
than temporary. Management believes that the long-lived assets in the
accompanying balance sheets are appropriately valued.
INVESTMENT
At December 31, 1998, the investment represents the Company's 11%
ownership in ClearSource, Inc. ClearSource was formed during 1998 to
build and operate advanced broadband networks offering a bundle of
communications services to residential business customers. The
Company's investment in ClearSource is accounted for under the cost
method of accounting.
REVENUE RECOGNITION
Subscriber revenues are recognized in the month of service. Subscriber
fees billed in advance are included in the accompanying balance sheets
as unearned revenue and are deferred until the month the service is
provided.
ADVERTISING COSTS
The Company expenses all advertising costs as incurred. Approximately
$576,000, $158,000 and $165,000 of advertising expense is recorded in
the Company's statements of operations for the years ended December
31, 1998, 1997 and 1996, respectively.
F-9
<PAGE> 77
SOURCES OF SUPPLIES
The Company purchases customer premise equipment and plant materials
from outside vendors. Although numerous suppliers market and sell
customer premise equipment and plant materials, the Company currently
purchases each customer premise component from a single vendor and has
one or two suppliers for plant materials. If the suppliers are unable
to meet the Company's needs as it continues to build out its network
infrastructure, then delays and increased costs in the expansion of
the Company's network could result, which would adversely affect
operating results.
CREDIT RISK
The Company's accounts receivable potentially subject the Company to
credit risk, as collateral is generally not required. The Company's
risk of loss is limited due to advance billings to customers for
services and the ability to terminate access on delinquent accounts.
The potential for material credit loss is mitigated by the large
number of customers with relatively small receivable balances. The
carrying amount of the Company's receivables approximates their fair
values.
INCOME TAXES
The Company utilizes the liability method of accounting for income
taxes, as set forth in SFAS No. 109, "Accounting for Income Taxes."
Under the liability method, deferred taxes are determined based on the
difference between the financial and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Deferred tax benefit
represents the change in the deferred tax asset and liability balances
(Note 6).
Effective August 1998, the Company will be included in the
consolidated federal income tax return of its parent company, ITC
Holding Company, Inc. (See Note 7 - Capital Transactions). The Company
and its subsidiaries file separate state income tax returns. Under a
tax sharing arrangement, the Company recorded an income tax benefit
and an affiliate receivable in the amount of $6,785,691 for the
utilization of net operating losses included in the consolidated tax
return.
NET LOSS PER SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share." That
statement requires the disclosure of basic net income (loss) per share
and diluted net income (loss) per share. Basic net income (loss) per
share is computed by dividing net income (loss) available to common
shareholders by the weighted-average number of common shares
outstanding during the period. As the Company has no significant
common stock outstanding, the convertible preferred stock is assumed
to be converted for purposes of this calculation. Diluted net loss per
share gives effect to all potentially dilutive securities. The
Company's potentially dilutive securities are not included in the
computation of diluted net loss per share as their effect is
antidilutive.
F-10
<PAGE> 78
3. LONG-TERM DEBT
Long-term debt at December 31, 1998, and 1997 consists of the
following:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Senior Discount Notes, with a face value of $444,100,000, bearing interest
at 11.875% beginning October 15, 2002, payable semi-annually beginning
April 15, 2003 with principal and any unpaid interest due October 15, 2007 $ 263,206,292 $ 249,910,431
Troup capitalized lease obligation, at a rate of 10%, payable in
quarterly installments of $6,304 through December 2006, secured 134,244 145,898
------------- -------------
263,340,536 250,056,329
Less current maturities 12,174 25,094
------------- -------------
$ 263,328,362 $ 250,031,235
============= =============
</TABLE>
Following are maturities of long-term debt for each of the next five
years as of December 31, 1998:
<TABLE>
<S> <C> <C>
1999 $ 12,174
2000 13,438
2001 14,833
2002 16,374
2003 18,074
Thereafter 444,159,353
-------------
Total $ 444,234,246
=============
</TABLE>
The fair values of long-term debt, including current maturities, at
December 31, 1998 and 1997 are estimated to be approximately
$280,803,977 and $253,781,000, respectively, based on a valuation
technique that considers cash flows discounted at current rates.
On December 22, 1998, the Company entered into a $50 million four-year
senior secured credit facility with First Union National Bank and First
Union Capital Markets Corp., which may be used for working capital and
other purposes, including capital expenditures and permitted
acquisitions. At the Company's option, interest will accrue based on
either the Alternate Base Rate plus applicable margin or the LIBOR rate
plus applicable margin. Obligations under the credit facility will be
secured by substantially all tangible and intangible assets of the
Company and its current and future subsidiaries. The credit facility
includes a number of covenants including, among others, covenants
limiting the ability of the Company and its subsidiaries and their
present and future subsidiaries to incur debt, create liens, pay
dividends, make distributions or stock repurchases, make certain
investments, engage in transactions with affiliates, sell assets, and
engage in certain mergers and acquisitions. The credit facility also
includes covenants requiring compliance with certain operating and
financial ratios on a consolidated basis. The Credit Facility allows
the Company to borrow up to five times certain individual subsidiary's
"consolidated adjusted cash flow" as defined in the credit facility
agreement. In connection with the initiation of the revolving credit
facility, the Company incurred $1,255,681 in related costs which are
being amortized on a straight-line basis over its five year term.
F-11
<PAGE> 79
In the fourth quarter of 1997, the Company issued units consisting of
senior discount notes due 2007 and warrants to purchase Preferred
Stock for gross proceeds of approximately $250 million. The notes were
offered at a substantial discount from face value, with no interest
payable for the first five years. Approximately $2.5 million of the
gross proceeds have been allocated to the warrants. Each warrant
allows the holder to purchase .003734 shares of the Company's
preferred stock. The Company incurred approximately $7.9 million in
costs to issue the senior discount notes. These costs are being
amortized at an effective rate over the life of the notes. The
indenture relating to the Notes contains certain covenants that, among
other things, limit the ability of the Company to incur indebtedness,
pay dividends, prepay subordinated indebtedness, repurchase capital
stock, make investments, engage in transactions with stockholders and
affiliates, create liens, sell assets, and engage in mergers and
consolidations. The proceeds from the offering of the units have been,
and will be, used to repay certain indebtedness of the Company, fund
expansion of the Company's business, and for additional working
capital and general corporate purposes.
On June 2, 1997, the Company borrowed $3 million under a promissory
note from SCANA at 12% interest with an original maturity of June 30,
1997. In July 1997, and again in September 1997, the Company and SCANA
amended the promissory note agreement to increase the borrowings to
$10 million and to extend the maturity date until January 1, 1998. On
September 29, 1997, the Company borrowed an additional $1 million at
12% interest under an oral agreement with SCANA with similar terms. In
connection with the SCANA notes discussed above, SCANA received
warrants to purchase 753 shares of the Company's preferred stock. On
October 24, 1997, the Company repaid all of these borrowings.
On May 13, 1997, the Company obtained a $3 million bridge loan
facility from First National Bank of West Point (the "Bridge
Facility") to provide additional liquidity until long-term financing
could be arranged. Interest accrued at the prime rate (as announced by
SunTrust Bank, Atlanta) plus .5% per annum on all outstanding
principal amounts, plus accrued but unpaid interest. As amended on
September 18, 1997, the Bridge Facility was payable on demand, with a
final maturity date of December 15, 1997. On December 15, 1997, the
Company repaid all of these borrowings.
4. OPERATING LEASES
The Company leases office space, utility poles, and other assets for
varying periods. Leases that expire are generally expected to be
renewed or replaced by other leases.
Future minimum rental payments required under the operating leases
that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 1998 are as follows:
<TABLE>
<S> <C> <C>
1999 $ 212,517
2000 133,243
2001 118,367
2002 110,165
2003 107,248
---------
Total minimum lease payments $ 681,540
=========
</TABLE>
Total rental expense for all operating leases was approximately
$181,000, $75,000 and $70,000, the years ended December 31, 1998, 1997
and 1996, respectively.
F-12
<PAGE> 80
5. COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
The Company has entered into contracts with various entities to
provide programming to be aired by the Company. The Company pays a
monthly fee as cost for the programming services, generally based on
the number of average subscribers to the program, although some fees
are adjusted based on the total number of subscribers to the system
and/or the system penetration percentage. Certain contracts have
minimum monthly fees. The Company estimates that it will pay
approximately $6.5 million in programming fees under these contracts
during 1999.
LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to various
litigation; however, in management's opinion, there are no legal
proceedings pending against the Company which would have a material
adverse effect on the financial position, results of operations, or
liquidity of the Company.
6. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The significant components of deferred tax assets and
liabilities as of December 31, 1998, 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,924 $ 7,221 $ 3,875
Deferred bond interest 12,919 0 0
Other 1,395 279 92
Valuation allowance (14,588) (4,165) (2,475)
-------- -------- --------
Total deferred tax assets 8,650 3,335 1,492
Deferred tax liabilities--depreciation and amortization
(8,650) (3,335) (1,492)
-------- -------- --------
Net deferred tax liabilities 0 0 0
Portion included in current assets 0 0 0
-------- -------- --------
Net deferred taxes $ 0 $ 0 $ 0
======== ======== ========
</TABLE>
Effective August 1998, the Company will be included in the
consolidated federal income tax return of its parent company, ITC
Holding Company, Inc. (See Note 7 - Capital Transactions). The Company
and its subsidiaries file separate state income tax returns. Under a
tax sharing arrangement, the Company recorded an income tax benefit
and an affiliate receivable in the amount of $6,785,691 for the
utilization of net operating losses included in the consolidated tax
return. The Company has available, at December 31, 1998, 1997 and
1996, unused operating loss carryforwards of approximately $8,924,000,
$7,221,000 and $3,875,000, respectively, expiring in various years
from 2005 to 2013, unless utilized. Management has recorded a
valuation allowance of approximately $14,588,000, $4,165,000 and
$2,475,000 in 1998, 1997 and 1996, respectively, on these operating
loss carryforwards, the majority of which contain limitations on
utilization.
F-13
<PAGE> 81
A reconciliation of the income tax provision computed at statutory tax
rates to the income tax provision for the years ended December 31,
1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at statutory rate (34)% (34)% (34)%
State income taxes, net of federal benefit
(5) (4) (2)
Prior year actualization 4 3 (6)
Benefit from tax sharing agreement (16) 0 0
Goodwill 0 1 (1)
Deferred tax valuation allowance 35 34 32
-- -- --
(16)% 0% (11)%
== == ==
</TABLE>
7. EQUITY INTERESTS
CAPITAL TRANSACTIONS
The Company has authorized 16,000,000 shares of $.01 par value common
stock and 100,000 shares of $.01 par value convertible preferred stock
at December 31, 1998. In February 1998, the Company completed a
150-for-1 stock split of the Company's common stock, par value $.01
per share, which was effected in the form of a stock dividend of new
shares of common stock. In connection with the stock split, the
Company increased the number of shares of authorized common stock from
200,000 to 16,000,000 and changed the conversion ratio between the
common stock and the preferred stock from 1 to 1 to a ratio of 150 to
1.
In June 1998, ITC Holding Company, Inc. ("ITC") made an offer to
acquire outstanding shares of the Company in exchange for $100 in cash
and ITC Common Stock valued at $1,600 for each share of the Company's
Preferred Stock exchanged (the "Exchange"). The Exchange was completed
effective July 31, 1998. Prior to the exchange, ITC (through its
wholly owned subsidiaries) owned approximately 42% of the outstanding
stock of the Company, representing the largest stockholder of the
Company. As a result of the exchange, ITC owns approximately 85% of
the outstanding stock of the Company.
In May 1998, the Company issued 394 shares of common stock, valued at
$8 per share, to an employee under the Company's 1995 stock option
plan. In February 1997, the Company offered and accepted 8,960 shares
of preferred stock for subscription at $1,200 per share. Additionally,
in October 1997, the Company offered and accepted 21,448 shares of
preferred stock for subscription at $1,500 per share. In December
1997, in conjunction with the acquisition of KNOLOGY of Panama City,
Inc., the Company issued 2,485 shares of preferred stock valued at
$1,500 per share. During 1998, 134 shares of preferred stock issued in
connection with the acquisition was returned to the Company as part of
a purchase price adjustment. The amount of the consideration paid in
excess of the par value, net of expenses incurred in connection with
each issuance, is included in additional paid-in capital on the
accompanying balance sheets. Each share of convertible preferred stock
is automatically convertible into common stock on a 150-for-1 basis at
the earlier of either the effective date of a public offering of
common stock by the Company or on December 8, 2005. In the event of
liquidation of the Company, whether voluntary or involuntary, the
holders of convertible preferred stock are entitled to receive
preferential distributions of $1,000, $1,200, or
F-14
<PAGE> 82
$1,500 per share (depending on when the stock was issued) before any
distributions to common stockholders. The holders of the preferred
stock are not entitled to any other preferences, including dividends.
STOCKHOLDERS' AGREEMENT
The Company entered into a stockholders' agreement (the "Stockholders'
Agreement"), dated as of December 8, 1995 and amended as of January
25, 1996 and April 19, 1996, with all of the stockholders of the
Company. None of the parties to the Stockholders' Agreement may
transfer any class or series of capital stock of the Company or any
right or option to acquire any share of capital stock of the Company
held by such party to third parties (subject to limited exceptions)
without having offered rights of first refusal to purchase such
securities to the Company. The Stockholders' Agreement will
irrevocably terminate upon the consummation of an initial public
offering.
STOCK OPTION PLAN
Under the Company's 1995 stock option plan (the "Stock Option Plan"),
as adopted in December 1995 and amended in February 1998, 700,000
shares (after giving effect to the 150-for-1 common stock split) of
common stock are reserved and authorized for issuance upon the
exercise of the options. All employees of the Company are eligible to
receive options under the Stock Option Plan. The Stock Option Plan is
administered by the compensation and stock option committee of the
board of directors. Options granted under the Stock Option Plan are
intended to qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code of 1986, as amended. All options were
granted at an exercise price equal to the estimated fair value of the
common stock at the dates of grant as determined by the board of
directors based on equity transactions and other analyses. The options
expire ten years from the date of grant.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
During 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which defines a fair
value-based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to
remain with the accounting methodology required by APB Opinion No. 25
must make pro forma disclosures of net income and, if presented,
earnings per share as if the fair value-based method of accounting
defined in SFAS No. 123 had been applied.
The Company has elected to account for its stock-based compensation
plans under APB Opinion No. 25, under which no compensation cost has
been recognized by the Company. However, the Company has computed, for
pro forma disclosure purposes, the value of all options for shares of
the Company's common stock to employees of the Company using the
minimum value option pricing model and the following weighted average
assumptions in 1998, 1997 and 1996:
F-15
<PAGE> 83
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate 5.42% 6.43% 6.31%
Expected dividend yield 0% 0% 0%
Expected lives SEVEN YEARS Seven years Seven years
Expected forfeiture rate 7% 7% 7%
</TABLE>
The weighted average fair value of options granted was $10.21, $8.44
and $8 for 1998, 1997 and 1996, respectively. The total value of
options for the Company's stock granted to employees of the Company
during 1998, 1997 and 1996 was computed as approximately $1,832,224,
$304,000 and $154,000, respectively, which would be amortized on a pro
forma basis over the five-year vesting period of the options. If the
Company had accounted for these plans in accordance with SFAS No. 123,
the Company's net loss for the periods presented would have increased
as follows:
<TABLE>
<CAPTION>
AS
REPORTED PRO FORMA
------------- -------------
<S> <C> <C>
Net loss for the years ended December 31,
1998 $ (36,476,436) $ (36,766,159)
1997 $ (9,091,533) $ (9,188,862)
1996 $ (3,125,428) $ (3,155,917)
Earnings per share for the years ended December 31,
1998 $ (4.87) $ (4.91)
1997 $ (2.10) $ (2.12)
1996 $ (1.53) $ (1.54)
</TABLE>
A summary of the status of the Company's stock option plan at December
31, 1998 is presented in the following table (after giving effect to
the 150-for-1 common stock split):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
PRICE PER
SHARES SHARE
------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995 $
Granted 75,442 8.00
Forfeited (22,645) 8.00
-------
Outstanding at December 31, 1996 52,797 8.00
Granted 126,384 8.44
Forfeited (15,939) 8.00
-------
Outstanding at December 31, 1997 163,242 8.34
Granted 565,376 10.18
Forfeited (36,056) 9.52
Exercised (394) 8.00
-------
Outstanding at December 31, 1998 692,168 --
=======
</TABLE>
F-16
<PAGE> 84
<TABLE>
<CAPTION>
Exercisable shares as of December 31:
<S> <C> <C>
1998 30,006 8.00
======
1997 6,606 8.00
======
1996 0
======
</TABLE>
8. RELATED-PARTY TRANSACTIONS
ITC Holding occasionally provides certain administrative services,
such as legal and tax planning services, for the Company. The costs of
these services are charged to the Company based primarily on the
salaries and related expenses for certain of the ITC Holding
executives and an estimate of their time spent on projects specific to
the Company. For the years ended December 31, 1998, 1997 and 1996, the
Company recorded $102,000, $31,000, and $24,000, respectively, in
selling, operations, and administrative expenses related to these
services. In the opinion of management, the methodology used to
calculate the amounts charged to the Company is reasonable.
Additionally, during 1997, ITC Holding paid several invoices related
to the construction of the Company's building. At December 31, 1997,
there is approximately $419,000 related to these payments included in
Accounts Payable--Affiliate in the Company's balance sheet.
Certain of ITC Holding's other wholly-owned or majority-owned
subsidiaries provide the Company with various services and/or receive
services provided by the Company. These entities include Interstate
Telephone Company, which provides switching and billing telephone
services; ITC DeltaCom, Inc., which provides wholesale long-distance
and related services and which leases capacity on certain of its fiber
routes; and InterCall, Inc., which provides conference calling
services. ITC Holding also holds equity investments in the following
entities which do business with the Company: PowerTel, Inc., which
provides cellular services, and MindSpring Enterprises, Inc.
("MindSpring"), which is a regional provider of Internet access. In
management's opinion, the Company's transactions with these affiliated
entities are representative of arm's-length transactions.
For the years ended December 31, 1998, 1997 and 1996, the Company
received services from these affiliated entities in the amounts of
$1,681,000, $247,000, and $48,000, respectively, which are reflected
in cost of services and selling, operations, and administrative
expenses in the Company's statements of operations. In addition, in
1997 and 1996, the Company received services from these affiliated
entities in the amount of $13,000 and $11,000, respectively, which is
reflected in field and technical expenses in the Company's statement
of operations. At December 31, 1997, amounts payable for these
services of $33,000 are recorded in the Company's balance sheet as
accounts payable--affiliate.
During 1998, the Company leased office space to ITC DeltaCom, Inc and
Powertel. Approximately $234,000 of lease income related to these
transactions are recorded as other income in the Company's statement
of operations for the year ended December 31, 1998.
F-17
<PAGE> 85
In December 1996 and 1997, the Company invested $5,000 and $55,000,
respectively, in an airplane co-owned by ITC Holding and several of
its subsidiaries and other affiliated entities.
Advances to affiliate which were outstanding for the majority of 1996
represent excess funds from the issuance of the Company's convertible
preferred stock which were loaned to ITC Holding at an annual interest
rate of 7%. The Company recorded interest income of approximately
$274,000 for the year ended December 31, 1996, on these advances, of
which approximately $1,000 is reflected as interest
receivable--affiliate in the accompanying balance sheets as of
December 31, 1996. The advances were repaid in December 1996.
Relatives of the stockholders of ITC Holding are stockholders and
employees of the Company's insurance provider. The costs charged to
the Company for insurance services were approximately $386,000,
$134,000 and $36,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
The chief executive officer of an affiliate served from July 15, 1996
to February 20, 1997 as president and chief executive officer of the
Company. He served in his capacity as chief executive officer and
president of the Company at the request of the Company and ITC Holding
and received no compensation from the Company for the year ended
December 31, 1996. The value of his services provided through February
20, 1997 is estimated to total approximately $20,000.
9. BUSINESS ACQUISITIONS
On October 30, 1998, the Company acquired substantially all of the
assets of Cable Alabama Corporation ("Cable Alabama") for
approximately $60,733,000 in cash and also purchased for $5,000,000 in
cash, certain real property located in Huntsville, Alabama. Cable
Alabama owned and operated a cable television system serving the
Huntsville, Alabama area. KNOLOGY plans to upgrade the existing Cable
Alabama plant into a high-speed fiber-coaxial network that is two-way
interactive to provide additional broadband communications services
such as local and long-distance service, digital television and
high-speed Internet access. The Acquisition has been accounted for
under the purchase method of accounting.
The assets acquired are held by KNOLOGY of Huntsville, Inc. and have
been included in the Company's consolidated financial statements
effective September 1, 1998. The following unaudited pro forma results
of operations for the years ended December 31, 1998 and 1997 assumes
the Acquisition occurred on January 1, 1997. The pro forma information
is presented for informational purposes only and may not be indicative
of the actual results of operations had the Acquisition occurred on
the assumed date, nor is the information necessarily indicative of
future results of operations.
On June 1, 1998, the Company acquired TTE, Inc., a non-facilities
based reseller of local, long distance and operator services to small
and medium-sized business customers throughout South Carolina, for a
purchase price of $1.3 million. The acquisition has been accounted for
under the purchase method of accounting.
On December 5, 1997, the Company consummated the acquisition of Beach
Cable, Inc., a Florida corporation that owned and operated a cable
television system in Panama City Beach, Florida ("Beach Cable"). The
acquisition was effected pursuant to an Agreement and Plan of Merger
dated December 5, 1997 (the "Merger Agreement") by and among the
Company, KNOLOGY of Panama City, Inc., Beach Cable, and L. Charles
Hilton, Jr., the sole stockholder of Beach Cable, under
F-18
<PAGE> 86
which KNOLOGY of Panama City, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company, merged (the "Merger") with and
into Beach Cable. Beach Cable, the surviving corporation in the
Merger, was renamed KNOLOGY of Panama City, Inc. as of the effective
time of the Merger (the "Effective Time") and became a wholly-owned
subsidiary of the Company. At the Effective Time, all of the issued
and outstanding shares of Common Stock, no par value, of KNOLOGY of
Panama City were converted into 2,485 shares of preferred stock, par
value $.01 per share, of the Company valued at approximately $3.7
million. Immediately following the Merger, the Company also
contributed cash of approximately $3.9 million to KNOLOGY of Panama
City to repay an existing note and related accrued interest to Hilton,
Inc., a holding company owned by L. Charles Hilton, Jr. The Merger has
been accounted for under the purchase method of accounting.
As a result of the acquisition of KNOLOGY of Panama City, Inc.,
approximately one month's operations of KNOLOGY of Panama City are
included in the accompanying statement of operations for the year
ended December 31, 1997.
The merged company, now KNOLOGY of Panama City has been included in
the consolidated financial statements since December 5, 1997. The
following unaudited pro forma results of operations for the years
ended December 31, 1998 and 1997 assumes the Acquisition occurred on
January 1, 1997. The pro forma information is presented for
informational purposes only and may not be indicative of the actual
results of operations had the Acquisition occurred on the assumed
date, nor is the information necessarily indicative of future results
of operations.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Operating revenues $ 35,987,109 $ 26,288,684
Income before extraordinary items (45,959,350) (22,972,184)
Net income (46,541,891) (22,972,184)
Earnings per share (a) (6.22) (5.31)
</TABLE>
(a) Earnings per share is computed using 7,488,450 and
4,325,250 as number of shares outstanding in 1998
and 1997, respectively.
10. SEGMENT INFORMATION
Effective January 1998, the Company adopted SFAS 131, "Disclosures
about segments of an Enterprise and Related Information," which
established revised standards for the reporting of financial and
descriptive information about operating segments in financial
statements.
The Company owns and operates advanced hybrid fiber-coaxial networks
and provides residential and business customers broadband
communications services, including analog and digital cable
television, local and long distance telephone, data and broadband
carrier services ("BCS"). Data services include high-speed Internet
access via cable modems. BCS includes local transport services such as
local Internet transport, special access, local private line, and
local exchange transport services.
While management of the Company monitors the revenue generated from
each of the various broadband services, operations are managed and
financial performance is evaluated based upon the delivery of a
multiple of the services to customers over a single network. As a
result of multiple services being provided over a single network,
there are many shared expenses and shared assets
F-19
<PAGE> 87
related to providing the various broadband services to customers.
Management believes that any allocation of the shared expenses or
assets to the broadband services would be arbitrary and impractical.
Revenues by broadband communications service are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
Cable Television $22,193,992 $10,319,495 $5,334,183
Telephone 3,289,660 16,490 0
Data and BCS 286,775 19,083 0
----------- ----------- ----------
Consolidated Revenues $25,770,427 $10,355,068 $5,334,183
=========== =========== ==========
</TABLE>
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<PAGE> 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing
standards, the financial statements of KNOLOGY Holdings, Inc. included in this
Annual Report on Form 10-K and have issued our report thereon dated February 19,
1999. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule II--Valuation
and Qualifying Accounts ("Schedule II") is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a part of the basic financial
statements. The Schedule II has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 30, 1999
S-1
<PAGE> 89
SCHEDULE II
KNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND KNOLOGY OF MONTGOMERY, INC.
(PREDECESSOR COMPANY)
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Allowance for doubtful accounts,
balance at beginning of year $ 17,113 $ 23,342 $ 108,528
Addition charged to cost and expense 81,082 367,527 1,303,372
Deductions (74,853) (282,341) (1,018,134)
---------- ---------- ----------
Allowance for doubtful accounts,
balance at end of year $ 23,342 $ 108,528 $ 393,766
========== ========== ==========
</TABLE>
S-2
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated December 5, 1997,
by and among KNOLOGY Holdings, Inc., KNOLOGY of Panama
City, Inc., Beach Cable, Inc. and L. Charles Hilton
(Filed as Exhibit 2.1 to the Registration Statement on
Form S-4, File No. 333-43339 (the "Form S-4") and
incorporated herein by reference).
2.2 Purchase Agreement between Cable Alabama Corporation and
Knology of Huntsville, Inc., dated as of October 19,
1998.
3.1 Certificate of Amendment of Certificate of Incorporation
of KNOLOGY Holdings, Inc. (Filed as Exhibit 3.1 to the
Form 10-Q for the quarter ended March 31, 1998 and
incorporated herein by reference).
3.2 Amended and Restated Bylaws of KNOLOGY Holdings, Inc.
(Filed as Exhibit 3.2 to the Form S-4 and incorporated
herein by reference).
3.3 Certificate of Amendment to Certificate of Designation
of Preferred Stock. (Filed as Exhibit 3.2 to the Form
10-Q for the quarter ended March 31, 1998 and
incorporated herein by reference).
4.1 Indenture dated as of October 22, 1997 between KNOLOGY
Holdings, Inc. and United States Trust Company of New
York, as Trustee, relating to the 11-7/8% Senior
Discount Notes Due 2007 of KNOLOGY Holdings, Inc. (Filed
as Exhibit 4.1 to the Form S-4 and incorporated herein
by reference).
4.2 Registration Rights Agreement, dated October 22, 1997,
between KNOLOGY Holdings, Inc., the Placement Agents and
SCANA Communications, Inc. (Filed as Exhibit 4.2 to the
Form S-4 and incorporated herein by reference).
4.3 Form of Senior Discount Note (contained in Indenture
filed as Exhibit 4.1).
4.4 Form of Exchange Note (contained in Indenture filed
as Exhibit 4.1).
10.1 Unit Purchase Agreement, dated as of October 16, 1997
between KNOLOGY Holdings, Inc. and SCANA Communications,
Inc. (Filed as Exhibit 10.1 to the Form S-4 and
incorporated herein by reference).
10.2 Warrant Agreement, dated as of October 22, 1997, between
KNOLOGY Holdings, Inc. and United States Trust Company
of New York (including form of Warrant Certificate)
(Filed as Exhibit 10.2 to the Form S-4 and incorporated
herein by reference).
10.3 Warrant Registration Rights Agreement, dated as of
October 22, 1997, between KNOLOGY Holdings, Inc. and
United States Trust Company of New York (Filed as
Exhibit 10.3 to the Form S-4 and incorporated herein by
reference).
10.4 Lease Agreement dated April 15, 1996 by and between D.L.
Jordan and American Cable Company, Inc. (Filed as
Exhibit 10.5 to the Form S-4 and incorporated herein by
reference).
10.5 Pole Attachment Agreement dated January 1, 1998 by and
between Gulf Power Company and Beach Cable, Inc. (Filed
as Exhibit 10.7 to the Form S-4 and incorporated herein
by reference).
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
10.6* Telecommunications Facility Lease and Capacity Agreement, dated
September 10, 1996, by and between Troup EMC Communications, Inc. and
Cybernet Holding, Inc. (Filed as Exhibit 10.16 to the Form S-4 and
incorporated herein by reference).
10.7 Master Pole Attachment Agreement dated January 12, 1998 by and between
South Carolina Electric and Gas and KNOLOGY Holdings, Inc. d/b/a/
KNOLOGY of Charleston (Filed as Exhibit 10.17 to the Form S-4 and
incorporated herein by reference).
</TABLE>
<PAGE> 92
<TABLE>
<S> <C>
10.8 License Agreement dated September 29, 1995 by and between Montgomery Cablevision and Entertainment, Inc. and
American Communications Services of Montgomery, Inc. (Filed as Exhibit 10.22 to the Form S-4 and incorporated
herein by reference).
10.9* License Agreement dated January 17, 1996 by and between American Cable, Inc. and American Communication Services
of Columbus, Inc. (Filed as Exhibit 10.23 to the Form S-4 and incorporated herein by reference).
10.10 Addendum to License Agreement dated April 21, 1997 by and between American Cable, Inc. and American Communication
Services of Columbus, Inc. (Filed as Exhibit 10.24 to the Form S-4 and incorporated herein by reference).
10.11 Lease Agreement, dated December 5, 1997 by and between The Hilton Company and KNOLOGY of Panama City, Inc. (Filed
as Exhibit 10.25 to the Form S-4 and incorporated herein by reference).
10.12 Billing and Collection Services Agreement dated April 2, 1997 by and between Interstate Telephone Company and
Cybernet Holding, Inc. (Filed as Exhibit 10.26 to the Form S-4 and incorporated herein by reference).
</TABLE>
<PAGE> 93
<TABLE>
<S> <C>
10.13 Certificate of Membership with National Cable Television Cooperative, dated January 29, 1996, of Cybernet Holding,
Inc. (Filed as Exhibit 10.34 to the Form S-4 and incorporated herein by reference).
10.14 Stockholders' Agreement among KNOLOGY Holdings, Inc. and Certain Stockholders Thereof dated as of December 8, 1995
(Filed as Exhibit 10.35 to the Form S-4 and incorporated herein by reference).
10.15 Amendment No. 1 to Stockholders' Agreement dated as of January 25, 1996 (Filed as Exhibit 10.36 to the Form S-4 and
incorporated herein by reference).
10.16 Amendment No. 2 to Stockholders' Agreement dated as of April 18, 1996 (Filed as Exhibit 10.37 to the Form S-4 and
incorporated herein by reference).
10.17 Amended and Restated Agreement Among Shareholders Among KNOLOGY Holdings, Inc. and Certain Shareholders thereof dated
as of July 28, 1997 (Filed as Exhibit 10.38 to the Form S-4 and incorporated herein by reference).
10.18 Ordinance No. 99-16 effective March 16, 1999 between Columbus consolidated Government and KNOLOGY of Columbus, Inc.
10.19 Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990 (Filed as Exhibit 10.44 to the Form S-4 and incorporated
herein by reference).
10.20 Ordinance No. 50-76 (Montgomery, Alabama) (Filed as Exhibit 10.45 to the Form S-4 and incorporated herein by
reference).
10.21 Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990 (Filed as Exhibit 10.45.1 to the Form S-4 and
incorporated herein by reference).
10.22 Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995 (Filed as Exhibit 10.46 to the Form S-4 and
incorporated herein by reference).
10.23 Resolution No. 92-7 (Panama City Beach, Florida) dated July 23, 1992 (Filed as Exhibit 10.47 to the Form S-4 and
incorporated herein by reference).
10.24 License (Bay County, Florida) dated January 5, 1993 (Filed as Exhibit 10.48 to the Form S-4 and incorporated herein
by reference).
10.25 Resolution No. 97-22 (Panama City Beach, Florida) dated December 3, 1997 (Filed as Exhibit 10.49 to the Form S-4 and
incorporated herein by reference)
</TABLE>
<PAGE> 94
<TABLE>
<S> <C>
10.26 Resolution No. 2075 (Bay County, Florida) dated November 18, 1997 (Filed as Exhibit 10.50 to the Form S-4 and
incorporated herein by reference).
10.27 Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998 (Filed as Exhibit 10.53 to the Company's 1997 Annual
Report on Form 10-K).
10.28 Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998 (Filed as Exhibit 10.54 to the Company's 1997 Annual
Report on Form 10-K).
10.30 Ordinance No. 98054 (Mount Pleasant, South Carolina) dated March 9, 1999.
10.31 Franchise Agreement (Charleston County, South Carolina) dated December 15, 1998.
10.32 Ordinance No. 1998-47 (North Charleston, South Carolina) dated May 28, 1998.
10.33 Ordinance No. 1998-77 (Charleston, South Carolina) dated April 28, 1998.
10.34 Ordinance No. 98-5 (Columbia County, Georgia) dated August 18, 1998.
10.35+ Switching Agreement dated May 1, 1998 between Interstate Telephone Company and KNOLOGY Holdings, Inc.
10.36 Network Access Agreement dated July 1, 1998 between SCANA Communications, Inc., f/k/a MPX Systems, Inc. and KNOLOGY
Holdings, Inc.
10.37 Internet Access Contract dated September 1, 1998 between ITC Data Com Communications, Inc. and KNOLOGY Holdings, Inc.
10.38+ Collocation Agreement for Multiple Sites dated on or about June, 1998 between Interstate FiberNet, Inc. and KNOLOGY
Holdings, Inc.
10.39+ Lease Agreement dated October 12, 1998 between Southern Company Services, Inc. and KNOLOGY Holdings, Inc.
10.40 Moldings, Inc., d/b/a KNOLOGY Facilities Transfer Agreement dated February 11, 1998 between South Carolina Electric and
Gas Company and KNOLOGY Holdings, Inc., d/b/a KNOLOGY of Charleston.
10.41 License Agreement dated March 3, 1998 between BellSouth Telecommunications, Inc. and KNOLOGY Holdings, Inc.
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
10.44 Pole Attachment Agreement dated February 18, 1998 between KNOLOGY
Holdings, Inc. and Georgia Power Company.
10.46 Assignment Agreement dated March 4, 1998 between Gulf Power Company
and Knology of Panama City, Inc.
10.47 Adoption Agreements dated March 1, 1999 between KNOLOGY Holdings,
Inc. and BellSouth Telecommunications, Inc.
10.48+ Lease Switching Agreement between South Carolina Net for TTE and
KNOLOGY Holdings, Inc.
10.50+ Carrier Services Agreement dated September 30, 1998 between Business
Telecom, Inc. and KNOLOGY Holdings, Inc.
10.51+ Reseller Services Agreement dated September 9, 1998 between Business
Telecom, Inc. and KNOLOGY Holdings, Inc.
10.52+ Private Line Services Agreement dated September 10, 1998 between BTI
Communications Corporation and KNOLOGY Holdings, Inc.
10.53 Credit Facility Agreement between First Union National Bank, First
Union Capital Markets Corp. and KNOLOGY Holdings, Inc. dated December
22, 1998.
10.54 Ordinance No. 284 (Cedar Grove, Florida) dated June 9, 1998.
10.55 License Agreement dated January 5, 1993 between County Commissioners
of Bay County Florida and Beach Cable, Inc.
10.56 Ordinance No. 647 (Lynn Haven, Florida) dated May 12, 1998 between
Knology of Panama City, Inc. and the City of Lynn Haven.
10.57 Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998
between Knology of Panama City, Inc. and the City of Panama City.
10.58 Resolution No. 97-22 (Panama City Beach, Florida) dated December 3,
1997 between Panama City Beach, Florida and KNOLOGY Holdings, Inc.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of KNOLOGY Holdings, Inc. (Filed as Exhibit 21.1 to the
Form 21.1 to the Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
</TABLE>
- --------------------
+ Knology has applied for confidential treatment of portions of this Agreement.
Accordingly, portions thereof have been omitted and filed separately with the
Securities and Exchange Commission.
<PAGE> 96
- ----------
* Confidential treatment has been granted. The copy filed as an exhibit omits
the information subject to the confidential treatment request.
<PAGE> 1
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BETWEEN
CABLE ALABAMA CORPORATION
an Alabama corporation
AND
KNOLOGY OF HUNTSVILLE, INC.
a Delaware corporation
DATED AS OF
October 19, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. CERTAIN DEFINITIONS.............................................................................................1
2. PURCHASE AND SALE OF THE ASSETS............................................................................... 10
2.1. Agreement to Purchase and Sell...........................................................................10
2.2. Excluded Assets..........................................................................................11
2.3. Purchase Price...........................................................................................12
2.4. Subscriber Adjustment....................................................................................12
2.5. Current Items Amount.....................................................................................12
2.6. Calculations of Adjustments..............................................................................13
2.7. Certain Additional Financial Arrangements................................................................14
2.8. Assumption of Liabilities................................................................................15
2.9. Allocation...............................................................................................15
2.10. Transfer Taxes and Fees..................................................................................15
2.11. Allocation of Franchise Settlement Payment...............................................................15
2.12. Audited Financial Statement Expenses.....................................................................16
2.13. Franchise Settlement Payments............................................................................16
3. SELLER'S REPRESENTATIONS.......................................................................................16
3.1. Organization and Qualification...........................................................................16
3.2. Authorization............................................................................................16
3.3. System Information.......................................................................................17
3.4. Title and Condition of Personal Property.................................................................17
3.5. Franchises, Licenses, and Contracts......................................................................18
3.6. No Conflicts; Consents...................................................................................19
3.7. Litigation and Judgments.................................................................................19
3.8. Employment Matters.......................................................................................20
3.9. Taxes....................................................................................................21
3.10. Financial Statements.....................................................................................21
3.11. No Adverse Change........................................................................................22
3.12. Compliance with Legal Requirements.......................................................................22
3.13. Environmental Laws and Regulations.......................................................................25
3.14. Real Property............................................................................................26
3.15. Commitments..............................................................................................28
3.16. Non-Infringement.........................................................................................28
3.17. Books and Records........................................................................................28
3.18. Accounts Receivable......................................................................................29
3.19. Bonds....................................................................................................29
3.20. Sufficiency of Assets....................................................................................29
3.21. Disclosure...............................................................................................29
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
3.22. Affiliates..............................................................................................29
4. BUYER'S REPRESENTATIONS.......................................................................................29
4.1. Organization............................................................................................29
4.2. Authorization...........................................................................................30
4.3. No Conflicts; Consents..................................................................................30
4.4. Litigation..............................................................................................30
4.5. Disclosure..............................................................................................30
5. COVENANTS.....................................................................................................30
5.1. Certain Affirmative Covenants of Seller.................................................................30
5.2. Certain Negative Covenants of Seller....................................................................33
5.3. Certain Affirmative Covenants of Buyer..................................................................33
5.4. HSR Act Compliance......................................................................................34
5.5. Employees of Seller.....................................................................................34
5.6. Employee Retention Program..............................................................................35
5.7. Forms 394...............................................................................................35
5.8. Programming.............................................................................................35
5.9. Satisfaction of Closing Conditions......................................................................35
5.10. Notice of Developments..................................................................................35
5.11. Transitional Services...................................................................................35
5.12. Environmental Audits....................................................................................36
5.13. Termination of Leases...................................................................................36
6. CONDITIONS PRECEDENT..........................................................................................36
6.1. Conditions Precedent to Buyer's Obligations.............................................................36
6.2. Conditions Precedent to Seller's Obligations............................................................38
7. CLOSING.......................................................................................................40
7.1. Time and Place..........................................................................................40
7.2. Seller's Deliveries.....................................................................................40
7.3. Buyer's Obligations.....................................................................................41
8. TERMINATION...................................................................................................41
8.1. Termination Events......................................................................................41
8.2. Effect of Termination...................................................................................42
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY.....................................................................43
9.1. Survival of Representations and Warranties..............................................................43
9.2. Seller's Indemnity......................................................................................43
9.3. Buyer's Indemnity.......................................................................................44
9.4. Procedure for Indemnified Third Party Claim.............................................................45
10. RISK OF LOSS.................................................................................................46
11. CONFIDENTIALITY AND PRESS RELEASES...........................................................................46
11.1. Confidentiality.........................................................................................46
11.2. Press Releases..........................................................................................47
12. BROKERAGE FEES...............................................................................................48
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
13. MISCELLANEOUS................................................................................................48
13.1. Further Assurances.....................................................................................48
13.2. Notices................................................................................................48
13.3. Assignment; Binding Effect.............................................................................49
13.4. Expenses...............................................................................................49
13.5. Collection of Accounts.................................................................................49
13.6. Entire Agreement; Amendments; and Waivers..............................................................49
13.7. Counterparts...........................................................................................50
13.8. Severability...........................................................................................50
13.9. Schedules and Exhibits, Headings.......................................................................50
13.10. Governing Law..........................................................................................50
13.11. Third Parties; Joint Ventures..........................................................................50
13.12. Construction...........................................................................................51
13.13. Commercially Reasonable Efforts........................................................................51
13.14. Specific Performance...................................................................................51
EXHIBIT A.......................................................................................................A-1
EXHIBIT B.......................................................................................................B-1
EXHIBIT C.......................................................................................................C-1
EXHIBIT D.......................................................................................................D-1
</TABLE>
-iii-
<PAGE> 5
EXHIBITS TO THE AGREEMENT
<TABLE>
<S> <C>
Exhibit A Form of Dyrek Noncompetition Agreement
Exhibit B Form of Seller Noncompetition Agreement
Exhibit C Form of Indemnity Escrow Agreement
Exhibit D Form of Bill of Sale, Assignment and Assumption Agreement
</TABLE>
SCHEDULES TO THE AGREEMENT
<TABLE>
<S> <C>
Schedule 2.2 Excluded Rights, Assets and Properties
Schedule 2.8 Additional Assumed Liabilities
Schedule 2.9 Allocation
Schedule 3.3 System Information
Schedule 3.4 Personal Property
Schedule 3.5 Franchises, Licenses and Contracts
Schedule 3.6 Conflicts; Consents
Schedule 3.7 Litigation and Other Proceedings
Schedule 3.8 ERISA
Schedule 3.9 Taxes
Schedule 3.11 No Adverse Change
Schedule 3.12 Compliance with Cable Act; Current Proceedings
Schedule 3.14 Real Property
Schedule 3.15 Persons Entitled to Free Service
Schedule 3.19 Bonds
Schedule 3.22 Affiliated Transactions
</TABLE>
-iv-
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 19th day
of October, 1998, by and between KNOLOGY OF HUNTSVILLE, INC., a Delaware
corporation ("Buyer") and CABLE ALABAMA CORPORATION, an Alabama corporation
("Seller").
RECITALS
A. Seller owns and operates a cable television system operating
in and around Madison County, Alabama and Limestone County, Alabama (the
"System").
B. Seller desires to sell, and Buyer desires to purchase,
substantially all of Seller's assets comprising the System on the terms and
conditions set forth in this Agreement.
C. CableAmerica Corporation, Seller's parent ("Seller's
Parent"), has entered into the Seller's Guaranty dated the date hereof
("Seller's Guaranty").
D. Knology Holdings, Inc., Buyer's parent ("Buyer's Parent"),
has entered into the Buyer's Guaranty dated the date hereof ("Buyer's
Guaranty").
AGREEMENTS
In consideration of the mutual promises and covenants hereinafter set
forth, Buyer and Seller hereby agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms, whether in singular or
plural form, shall have the following meanings:
1.1. "ACCOUNTS RECEIVABLE" means the rights of Seller as of a
specified date to payment for services rendered by Seller prior to such date in
connection with the operation of the System as reflected on the billing records
of Seller, provided, however, the term "Accounts Receivable" shall not include
any Advertising Accounts Receivable.
1.2 "ACCOUNTS RECEIVABLE AMOUNT" means an amount equal to the sum
of (i) 100% of the face amount of all Accounts Receivable that were not more
than 30 days past due as of the Balance Sheet Date, plus (ii) 90% of the face
amount of all Accounts Receivable that were from 31 to 90 days past due as of
the Balance Sheet Date.
<PAGE> 7
1.3. "ADVERTISING ACCOUNTS RECEIVABLE" means the rights of Seller
as of the Closing to payment for sales of advertising availabilities on the
System prior to the Closing Date as reflected on the billing records of Seller.
1.4. "AFFILIATE" shall mean a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
1.5. "ASSUMED CONTRACTS" means (i) all Contracts listed in
SCHEDULE 3.5; (ii) any Contracts entered into by Seller in the ordinary course
of business and which are permitted by this Agreement between the date hereof
and the Closing Date; and (iii) all subscription agreements with subscribers
for the cable services provided by the System.
1.6. "BENEFIT PLAN" means all of Seller's or any of its
Affiliate's compensation or benefit plans, policies, practices, arrangements
and agreements covering any employee or former employee of Seller or its
Affiliates or the beneficiaries or dependents of such employee or former
employee which are or have been established or maintained and are currently in
effect, or to which contributions are being made by Seller or by any other
Person which is or has been treated as a single employer together with Seller
under Section 414 of the Code (such Persons, "Related Persons") or to which
Seller or any Related Person is obligated to contribute, including, but not
limited to, "employee benefit plans" within the meaning of Section 3(3) of
ERISA, employment, retention, change of control, severance, stock option or
other equity based, bonus, incentive compensation, deferred compensation,
retirement fringe benefit and welfare plans.
1.7. "CABLE ACT" means Title VI of the Communications Act of 1934,
as amended, and all other provisions of the Cable Communications Policy Act of
1984, the Cable Television Consumer Protection and Competition Act of 1992, and
the provisions of the Telecommunications Act of 1996 amending Title VI of the
Communications Act, as such statutes may be amended from time to time, and the
rules and regulations promulgated thereunder.
1.8. "CODE" means the Internal Revenue Code of 1986, as amended,
and all Legal Requirements promulgated pursuant thereto.
1.9. "CONSENTS" means all of the consents, permits or approvals
required to be obtained by Seller from any Governmental Authority or other
Person for (i) Seller to transfer the Assets to Buyer or otherwise to lawfully
consummate the transaction contemplated hereby; and (ii) Buyer to conduct the
business of the System substantially in the manner in which the business of the
System is conducted as of the date of this Agreement.
-2-
<PAGE> 8
1.10. "CONTRACTS" means all leases, contracts and other agreements,
written or oral (including any amendments and other modifications thereto) to
which Seller is a party and which relate to the Assets or the business or
operations of the System.
1.11. "DYREK NONCOMPETITION AGREEMENT" means the Noncompetition
Agreement to be executed by Christopher A. Dyrek and the Buyer at Closing in
the form attached hereto as Exhibit A.
1.12. "ENVIRONMENTAL LAWS" means any federal, state or local law
(including the common law), rule, requirement or regulation relating to
pollution, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation, laws and
regulations relating to releases of Hazardous Substances, or otherwise relating
to the manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances or relating to
management of asbestos in buildings.
1.13. "ENVIRONMENTAL PERMITS" means any permits, licenses,
certificates or approvals required under Environmental Laws.
1.14 "EPA" means the Environmental Protection Agency and any
successor Governmental Authority thereto.
1.15. "EQUIVALENT BASIC SUBSCRIBER" or "EBS" shall mean with
respect to the System, an active customer for basic service 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
will be determined by dividing the gross bulk-rate billings for basic service
(excluding any installation or non-recurring revenue) attributable to such
multi-unit dwelling or commercial establishment during the most recent billing
period ended prior to the date of the calculation by the applicable expanded
basic rate for non-bulk subscribers. For purposes of this definition, an
"ACTIVE CUSTOMER" will mean any Person, commercial establishment or multi-unit
dwelling at any given time that is paying for and receiving basic service from
the System who has an account that is not more than 90 days past due (except
for past due amounts of $5.00 or less, provided such account is otherwise
current). For purposes of this definition, an "active customer" does not
include any Person, commercial establishment or multi-unit dwelling that (i) as
of the date of calculation has not paid in full the charges for at least one
month of the services ordered; (ii) any subscriber whose service is pending
disconnection for any reason; or (iii) any subscriber of the System which was
obtained since July 1, 1998 through extraordinary marketing or promotional
programs or marketing or promotional programs not consistent with the past
practices of the System.
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1.16. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and rules and regulations promulgated thereunder and
published interpretations with respect thereto.
1.17. "FCC" means the Federal Communications Commission.
1.18. "FRANCHISES" means all municipal, county, and state
franchises and franchise applications (if any), and any material
authorizations, ordinances, permits, resolutions and agreements relating to the
System, other than the Licenses, together with all amendments thereto.
1.19. "FRANCHISE SETTLEMENT PAYMENTS" means all amounts payable to
Seller and its assigns by the City of Huntsville pursuant to Paragraphs 4 and 7
of the Huntsville Resolution.
1.20. "GOVERNMENTAL AUTHORITY" means the United States of America,
any state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same, including but
not limited to courts, tribunals, departments, commissions, boards, bureaus,
agencies, counties, municipalities, provinces, parishes and other
instrumentalities.
1.21. "HAZARDOUS SUBSTANCES" means (i) any "hazardous waste" or
"solid waste" as defined by the Resources Conservation and Recovery Act of
1976, as amended, 42 U.S.C. ss. 6901 et seq. ("RCRA"); (ii) any "hazardous
substance, pollutant or contaminant" as defined by or listed pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. ss. 9601 et seq. ("CERCLA"); (iii) any substance
regulated by the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.
("TSCA"); (iv) asbestos or asbestos containing materials; (v) polychlorinated
biphenyls ("PCBs"); (vi) any petroleum or petroleum products (including,
without limitation, crude oil or any fraction thereof) and any substances
regulated under the provisions of Subtitle I of RCRA relating to underground
storage tanks; (vii) any substance the presence, use, treatment, storage or
disposal of which on the Real Property is regulated or prohibited by any Legal
Requirements; and (viii) any other substance which by virtue of any Legal
Requirements require special handling, reporting or notification of any
Governmental Authority in its collection, storage, use, treatment, or disposal.
1.22. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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1.23. "HUNTSVILLE RESOLUTION" means that certain Resolution No.
91-519 dated August 22, 1991, adopted by the City Council of the City of
Huntsville and approved by the Mayor of the City of Huntsville.
1.24. "JUDGMENT" means any judgment, writ, order, injunction, award
or decree of any court, judge, justice or magistrate and any similar order of
any Governmental Authority.
1.25. "KNOWLEDGE" of any Person of or with respect to any matter
means that such Person (if a natural person) or, in the case of Seller, any of
William G. Jackson, William H. Lewis and Christopher A. Dyrek has actual
awareness or knowledge of such matter.
1.26. "LEGAL REQUIREMENTS" means any applicable common law and any
statute, ordinance, law, rule, regulation or order of, any Governmental
Authority, including Judgments.
1.27. "LICENSES" means all domestic satellite, business radio,
CARS, microwave and other licenses, authorizations and permits relating to the
System granted to Seller by any Governmental Authority, except the Franchises
or any public easements or rights-of-way related thereto.
1.28. "LIEN" means any conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any lien, security interest, mortgage, indenture, pledge, or other similar
encumbrance, provided, however, the term "Lien" shall not include any Permitted
Lien.
1.29. "LITIGATION" means any claim, action, suit, proceeding,
arbitration, investigation, hearing or other legal procedure by or before any
Governmental Authority.
1.30. "LOSSES" means any demands, claims, losses, liabilities,
damages, Liens, assessments, penalties, costs, and expenses, including, without
limitation, expenses of investigation, reasonable fees and disbursements of
counsel and other experts.
1.31. "MATERIAL ADVERSE EFFECT" means any material adverse effect,
individually or in the aggregate, on the Assets or the business, financial
condition or results of operations of Seller or the System.
1.32. "OSHA" means the Occupational Safety and Health
Administration and any successor Governmental Authority thereto.
1.33. "OWNERS" means, collectively, William G. Jackson and Gloria
J. Jackson.
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1.34. "PERMITTED LIENS" means (a) Liens for Taxes not yet due and
payable; (b) zoning and subdivision laws and ordinances; (c) rights reserved to
any Governmental Authority to regulate the affected property; (d) statutory or
common law liens to secure landlords, lessors or renters under leases or rental
agreements to the extent that no payment or performance under any such lease or
rental agreement is in arrears; (e) deposits or pledges made in connection
with, or to secure payment of, worker's compensation, unemployment insurance,
old age pension programs mandated under applicable laws or other social
security regulations and that are listed and described on SCHEDULE 3.4; and (f)
statutory or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, statutory or common law liens to secure claims for labor,
materials or suppliers and other like liens, which secure obligations to the
extent that payment thereof is not in arrears.
1.35. "PERSON" means any natural person, Governmental Authority,
corporation, limited liability company, general or limited partnership, joint
venture, trust, association or unincorporated entity of any kind.
1.36. "PERSONAL PROPERTY" means all of the equipment, plant,
inventory, vehicles, spare parts, supplies and other tangible personal property
which are owned, leased or licensed by Seller and used, useful or held for use
in the conduct of the business or operations of the System, including, without
limitation, any of Seller's towers, tower equipment, antennas, aboveground and
underground cable, distribution systems, head end amplifiers, line amplifiers,
earth satellite receive stations and related equipment, microwave equipment,
testing equipment, motor vehicles, office equipment, furniture and fixtures,
supplies, inventory and other physical assets, plus such additions thereto and
deletions therefrom arising in the ordinary course of business and permitted by
this Agreement between the date of this Agreement and the Closing Date.
1.37. "RATE REGULATORY MATTERS" shall mean any matter or any effect
on the Seller or the System or the operations thereof, arising out of or
related to the Cable Act, 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 subscribers.
1.38. "RATE REGULATORY REDUCTION ORDER" shall mean a final order
issued by a federal, state or local governmental or regulatory authority
relating to Rate Regulatory Matters which effectuates after the date hereof and
prior to or as of the Closing Date a reduction in the aggregate rates charged
to subscribers for basic service.
1.39. "REAL ESTATE AGREEMENT" means the agreement dated the date
hereof between Buyer and William G. and Gloria J. Jackson relating to the
purchase by Buyer of certain property identified therein for $5,000,000.
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<PAGE> 12
1.40. "REAL PROPERTY" means all of the fee estates and buildings
and other improvements thereon, leasehold interests in real estate, private
easements, private rights to access, private rights-of-way, and other real
property interests which are owned or leased or, for purposes of Section 3.13
hereof, operated by Seller, and used, useful or held for use in the conduct of
the business or operations of the System. "Real Property" shall include,
without limitation, the real property being conveyed to Buyer pursuant to the
Real Estate Agreement.
1.41. "REDSTONE ARSENAL PROPERTY" means the Real Property subject
to that certain Lease dated March 1, 1989, as amended, between the United
States Secretary of the Army and Seller.
1.42. "RELATED REAL PROPERTY" means the Real Property to be
purchased by Buyer pursuant to the Real Estate Agreement.
1.43. "RELEASE" means any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
or release from any source (including without limitation the Real Property)
into or upon the environment, including the air, soil, improvements, surface
water, groundwater, the sewer, septic system, or waste treatment, storage, or
disposal systems at, on, above, from, or under the Real Property.
1.44. "SELLER NONCOMPETITION AGREEMENT" means the Noncompetition
Agreement to be executed by Seller, William G. Jackson and Buyer at Closing in
the form attached hereto as Exhibit B.
1.45. "SURVEY" means the survey for the parcel or parcels of the
Related Real Property prepared by a registered land surveyor licensed in the
state where the Related Real Property is located (the "Surveyor"), prepared
prior to Closing in accordance with the "Minimum Standard Detail Requirements
and Classification for Land Title Surveys" jointly established and adopted by
ALTA, ACSM and NSPS in 1997, certified by the Surveyor to Buyer and showing (a)
the location of all lot and street lines, (b) the location of encroachments,
overhangs or projections by buildings or improvements erected on adjacent lands
or on the Related Real Property, (c) adequate means of ingress and egress to
public roads, (d) the location of all utility and other easements, rights of
way, set-back lines and other matters of record affecting such real property;
(e) a description and the location of all existing improvements (including
parking areas), and (f) such other facts and information as Buyer may
reasonably require.
1.46. "TAXES" means all levies and assessments of any kind or
nature imposed by any Governmental Authority, including but not limited to all
income, sales, use, ad valorem, value added, franchise, severance, net or gross
proceeds, withholding, payroll, employment, excise or property taxes, together
with any interest and penalties thereon.
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<PAGE> 13
1.47. "TITLE INSURANCE COMMITMENT" means an irrevocable title
insurance commitment issued prior to Closing by a title insurance company
acceptable to Buyer for (a) an owner's policy of title insurance (on ALTA 1992
Owner's Form), showing good and marketable fee simple title to the Related Real
Property in Buyer or, with respect to the Redstone Arsenal Property, a valid
leasehold interest in Buyer, and (b) a prepaid full-coverage mortgagee policy
of title insurance (on the ALTA 1992 Lender's Form or as otherwise required by
Buyer's lender), naming Buyer's lender as the insured party, insuring that the
mortgage of Buyer's lender constitutes a valid and recorded first lien on a
good and marketable fee simple interest in the Related Real Property or on a
valid leasehold interest in the Redstone Arsenal Property, and providing full
protection against filed and unfiled mechanics' and materialmen's liens, which
Title Insurance Commitment shall not include any (i) survey matters exceptions
(except those matters shown on the Survey and not reasonably disapproved of by
Buyer prior to Closing), (ii) standard printed exceptions, (iii) creditor's
rights exceptions, (iv) mechanics and materialmen's liens exceptions, or (v)
any other exceptions that are not Permitted Exceptions (as defined below).
"Permitted Exceptions" shall mean (i) the lien of real estate taxes not yet due
and payable, (ii) all matters revealed in the Title Insurance Commitment which
are not reasonably disapproved by Buyer in writing prior to Closing (it being
understood that if the Closing occurs, all matters revealed in the Title
Insurance Commitment (or, if Buyer fails to obtain the Title Insurance
Commitment, all matters of record) which are not discharged or otherwise
eliminated from the Title Insurance Commitment at or prior to Closing shall be
deemed to be Permitted Exceptions), and (iii) all existing building, zoning and
other city, state, county or federal laws, codes and regulations affecting the
Related Real Property or the Redstone Arsenal Property, as applicable.
1.48. "TRANSACTION DOCUMENTS" means all instruments and documents
executed and delivered by or on behalf of Buyer or Seller pursuant to this
Agreement.
1.49. LIST OF ADDITIONAL DEFINITIONS. The following is a list of
additional terms used in this Agreement and a reference to the Section hereof
in which such term is defined:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
active customer 1.15
Adjustment Amounts 2.6.1
Adjustment Time 2.5
Affiliate Transactions 3.22
Agreement Preamble
Assets 2.1
Assumed Liabilities 2.8.1
Audited Financial Statements 5.1.5
Balance Sheet 3.10
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
Balance Sheet Date 3.10
Business Combination 5.1.4
Buyer Preamble
Buyer Indemnified Person 9.2
Buyer's Guaranty Recitals
Buyer's Parent Recitals
CLI 3.12.4
Closing 7.1
Closing Date 7.1
Commonly Controlled Entity 3.8.1
Current Items Amount 2.5
EBITDA of the System 2.7.1
Employee Benefit Plan 3.8.1
Escrow Agent 2.3
Excluded Assets 2.2
FAA 3.12.5
Final Adjustment 2.6.2
Forms 394 5.7
GAAP 2.5
Indemnity Escrow Agreement 2.3
Indemnitee 9.4
Indemnitor 9.4
Information 11.1.1
Initial Adjustment Certificate 2.6.1
Interim Cost of Capital Amount 2.7.2
Interim EBITDA Amount 2.7.1
Interim Financial Statements 3.10
Interim Period 2.7.1
Landlord Estoppel Certificates 5.1.6
Material Consent 6.1.2
Multiemployer Plan 3.8.1
Non-Assumed Liabilities 2.8.2
Outside Closing Date 7.1
Permitted Exceptions 1.47
Pro Forma Statement 2.7.3
Purchase Price 2.3
Seller Preamble
Seller's Guaranty Recitals
Seller's Parent Recitals
Signals 3.12.2
Subject Property 5.12
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C>
Subscriber Adjustment Amount 2.4
System Recitals
Tenant Estoppel Certificates 5.1.6
Vacation Pay Amount 5.5
1997 Audited Financial Statements 5.1.5
1998 Audited Financial Statements 5.1.5
</TABLE>
2. PURCHASE AND SALE OF THE ASSETS.
2.1. Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase from
Seller, free and clear of all Liens, the System and all of Seller's real,
personal and mixed assets, rights, benefits and privileges, both tangible and
intangible, wheresoever situated or located, used, useful or held for use in
connection with the conduct of the business or operations of the System,
including without limitation the following (collectively, the "Assets"),
provided, however, the "Assets" shall not include the Excluded Assets as
defined in Section 2.2.
2.1.1. the Personal Property;
2.1.2. the Real Property;
2.1.3. the Franchises;
2.1.4. the Assumed Contracts;
2.1.5. the Accounts Receivable;
2.1.6. the Advertising Accounts Receivable;
2.1.7. the Licenses;
2.1.8. all of Seller's intellectual property and
proprietary information, technical information and data, machinery and
equipment warranties, maps, computer disks and tapes, plans, diagrams,
blueprints and schematics relating to the System, including, without
limitation, filings with the FCC, and any trademarks, trade names and
service marks;
2.1.9. all of Seller's training materials, manuals,
technical documents and other information relating to the System;
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<PAGE> 16
2.1.10. all of Seller's customer records, personnel records,
financial records, other records of every kind, books, documents,
files, accounts receivable information and credit history and customer
lists relating to, used or held for use by Seller in conducting, the
business of the System, subject to the right of Seller to have such
books and records made available to Seller for a reasonable period,
not to exceed the statute of limitations for any claims related to the
same; provided, however, that Buyer shall have no obligation to
maintain or preserve any such books and records for any period longer
than the period that Seller would have been required to maintain and
preserve such books and records under applicable Legal Requirements
had the transactions hereunder not been consummated;
2.1.11. the goodwill and going concern value generated by
Seller with respect to the System, if any; and
2.1.12. all intangible assets of Seller relating to the
System and not specifically described above.
2.2. Excluded Assets. The following assets shall not be
transferred to Buyer by Seller and are specifically excluded from the Assets
(collectively, the "Excluded Assets"):
2.2.1. Seller's cash on hand as of the Closing Date and all
other cash in any of Seller's bank or savings accounts, any and all
insurance policies, construction and performance bonds, letters of
credit or other similar items and any cash surrender value in regard
thereto, and any stocks, bonds, certificates of deposit and similar
investments;
2.2.2. Seller's programming contracts and Benefit Plans;
2.2.3. any books and records that Seller is required by law
to retain, subject to the right of Buyer to have access to and to copy
for a reasonable period, not to exceed three years from the Closing
Date, and Seller's minute books and other books and records related to
internal corporate matters and financial relationships with Seller's
lenders;
2.2.4. any claims, rights and interests in and to any
refunds of federal, state or local franchise, income or other taxes or
fees for periods prior to the Closing Date;
2.2.5. any notes receivable from Affiliates; and
2.2.6. the rights, assets and properties described on
SCHEDULE 2.2.
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<PAGE> 17
2.3. Purchase Price. Subject to the terms and conditions of this
Agreement, at the Closing, Buyer shall deliver to Seller by wire transfer of
immediately available funds, to such account or accounts as are designated in
written instructions by Seller to Buyer, which written instructions shall be
provided to Buyer at least two business days prior to the Closing Date, the sum
of $60,000,000 (the "Purchase Price"), which sum shall be (i) reduced by an
amount equal to $3,250,000, which is to be retained by Regions Bank ("Escrow
Agent") for a period of one hundred twenty (120) days following the Closing
Date (or such longer period as may be contemplated by the Indemnity Escrow
Agreement), to secure payment by Seller of any indemnification obligations to
Buyer in accordance with the terms of an Indemnity Escrow Agreement in the form
attached hereto as Exhibit C (the "Indemnity Escrow Agreement") and (ii)
subject to upward or downward adjustment, as the case may be, pursuant to
Sections 2.4 and 2.5 below.
2.4. Subscriber Adjustment. If on the Closing Date, the System has
less than 31,390 Equivalent Basic Subscribers, the Purchase Price shall be
decreased by an amount equal to $2,071 for each Equivalent Basic Subscriber
less than 31,390. If on the Closing Date, the System has more than 31,500
Equivalent Basic Subscribers, the Purchase Price shall be increased by an
amount equal to $2,071 for each Equivalent Basic Subscriber more than 31,500;
provided no upward adjustment to the Purchase Price will be made for any
Equivalent Basic Subscribers exceeding 31,850 (the amount of any adjustment
pursuant to this Section 2.4 is the "Subscriber Adjustment Amount").
2.5. Current Items Amount. Buyer or Seller, as appropriate, shall
pay to the other (by increasing or decreasing the Purchase Price paid by Buyer
to Seller at Closing) the net amount of the adjustments and prorations effected
pursuant to Sections 2.5.1, 2.5.2 and 2.5.3 below (the "Current Items Amount").
The adjustments provided for herein shall be made in accordance with generally
accepted accounting principles ("GAAP") as of 11:59 p.m. (Huntsville, Alabama
time) on the last day of the month during which the Closing occurs (the
"Adjustment Time").
2.5.1. Advance Payments and Deposits. The Purchase Price
shall be decreased by an amount equal to the aggregate of (i) all
deposits of subscribers of the System for converters, decoders, and
similar items, and (ii) all payments previously paid to Seller for
services to be rendered by Buyer to subscribers of the System or other
third parties after the Adjustment Time. The Purchase Price shall be
increased by an amount equal to the aggregate of all deposits made by
Seller under utility, pole rental and other agreements that are
Assumed Contracts assumed by Buyer hereunder.
2.5.2. Expenses. The following expenses shall be prorated,
in accordance with GAAP, so that all expenses for periods prior to the
Adjustment Time shall be for the account of Seller, and all expenses
for periods after the Adjustment Time shall be for
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<PAGE> 18
the account of Buyer: (i) all payments and charges under the
Franchises, the Licenses, and the Assumed Contracts; (ii) Taxes levied
or assessed against any of the Assets, including an estimate of any
real estate taxes payable for the year of Closing; (iii) Taxes, if
any, payable with respect to cable television service and related
sales to subscribers of the System; (iv) charges for utilities and
other goods or services furnished to the System; (v) copyright fees
based on signal carriage by the System; (vi) all refund liabilities
due to subscribers in connection with the rates of the System; (vii)
prepaid expenses of Seller which relate to the Assets to be acquired
except prepaid expenses related to any Excluded Asset; and (viii) all
other items of expense relating to the System; provided, however, that
Seller and Buyer shall not prorate any items of expense to the extent
payable with respect to (a) any Excluded Assets, which shall remain
and be solely for the account of Seller and (b) any Assumed Liability
described in Section 2.8.1(iii) which shall be solely for the account
of Buyer.
2.5.3. HSR Act Expenses. The Purchase Price shall be
decreased by an amount equal to one-half of the $45,000 filing fee
paid by Buyer to the Federal Trade Commission in connection with the
HSR Act filing.
2.6. Calculations of Adjustments.
2.6.1. Initial Adjustment Certificate. The Subscriber
Adjustment Amount and Current Items Amount (collectively, the
"Adjustment Amounts"), shall be estimated in good faith by Seller and
set forth, together with a detailed statement of the calculation
thereof, in a certificate executed by the Chief Financial Officer of
Seller and delivered to Buyer not later than ten days prior to Closing
(the "Initial Adjustment Certificate"). Seller shall use reasonable
efforts to keep Buyer informed during its preparation of the Initial
Adjustment Certificate and shall provide Buyer with such documentation
as Buyer may reasonably request to support such Initial Adjustment
Certificate. The Initial Adjustment Certificate shall constitute the
basis on which the Adjustment Amounts are calculated for purposes of
Closing.
2.6.2. Final Adjustment. Seller and Buyer shall endeavor in
good faith to agree upon the actual Adjustment Amounts within 90 days
after the Closing (the "Final Adjustment"). Seller or Buyer, as
appropriate, shall pay to the other party within 10 business days
after the Final Adjustment, the amount by which the parties agree that
the actual Adjustment Amounts differ from the Adjustment Amounts as
estimated in the Initial Adjustment Certificate. Any amounts in
dispute at the end of such 90 day period will be determined within 120
days after the Closing Date by Arthur Andersen & Co., whose
determination will be conclusive. Buyer and Seller will each be
responsible for one-half of the fees and expenses payable to such firm
in connection with such determination. Any appropriate payment
required after determination of all disputed
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<PAGE> 19
amounts will be made by the responsible party within 10 business days
after the final determination.
2.7. Certain Additional Financial Arrangements.
2.7.1. EBITDA of the System. The parties acknowledge and
agree that the EBITDA of the System (as defined below) during the
period between September 1, 1998, and the Closing Date (the "Interim
Period") shall be for the benefit of Buyer (the "Interim EBITDA
Amount"). As used herein, "EBITDA of the System" shall mean all
earnings (excluding proceeds from insurance) before interest, taxes,
depreciation and amortization of Seller in connection with the
business and operations of the System, derived from financial
statements prepared in accordance with GAAP consistent with past
practice. Seller shall pay to Buyer at Closing in accordance with
Buyer's written instructions, which written instructions shall be
provided to Seller at least two business days prior to the Closing
Date, an amount equal to the Interim EBITDA Amount. In the event of
any dispute between Buyer and Seller regarding the calculation of the
Interim EBITDA Amount which cannot be resolved by the parties within a
reasonable time period prior to Closing, Buyer and Seller shall submit
the dispute to a mutually acceptable outside accounting firm (which
shall be instructed to determine the Interim EBITDA Amount in
accordance with this Section 2.7.1), whose determination will be
conclusive, final and binding on the parties.
2.7.2. Interim Cost of Capital Amount. In consideration for
the payment of the Interim EBITDA Amount to Buyer, Buyer shall pay to
Seller at Closing an amount equal to interest on $65 million during
the Interim Period calculated at a rate per annum (computed on the
basis of a 360 day year and applied to the actual number of days
elapsed in the interest calculation period) equal to eight and
one-half percent (8.5%) (the "Interim Cost of Capital Amount"). If the
Closing does not occur on or prior to October 30, 1998, then the
parties agree to renegotiate in good faith the interest rate used to
calculate the Interim Cost of Capital Amount; provided, however, that
in renegotiating such interest rate, the parties shall consider
factors internal to Seller and the System (such as internal rates of
return on capital), and not then prevailing market rates of interest.
2.7.3. Pro Forma. SCHEDULE 2.7.3 hereto contains a pro
forma calculation of the Interim EBITDA Amount and the Interim Cost of
Capital Amount as if the Closing occurred as of September 30, 1998,
and the Interim Period was September 1, 1998, through September 30,
1998 (the "Pro Forma Statement"). SCHEDULE 2.7.3 is attached hereto
solely for the purpose of demonstrating by example the manner in which
the Interim Cash Flow Amount and the Interim Cost of Capital Amount
shall be calculated as of the Closing Date.
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<PAGE> 20
2.8. Assumption of Liabilities.
2.8.1. Assumed Liabilities. As of and from the Closing
Date, Buyer shall assume, pay, discharge, and perform when due the
following (the "Assumed Liabilities"): (i) all liabilities and
obligations of Seller with respect to periods subsequent to the
Adjustment Time under any Franchise, License, or Assumed Contract;
(ii) other obligations and liabilities of Seller only to the extent
that there shall be an adjustment in favor of Buyer with respect
thereto pursuant to Section 2.5; (iii) the accounts payable of Seller
of the type listed on SCHEDULE 2.8 up to an aggregate amount equal to
the Accounts Receivable Amount and (iv) all obligations and
liabilities arising out of Buyer's ownership or operation of the
Assets or System, to the extent that such obligations and liabilities
relate to the time period after the Adjustment Time.
2.8.2. Non-Assumed Liabilities. Except for those
liabilities expressly assumed by Buyer pursuant to Section 2.8.1
hereof, Buyer assumes no other liabilities of any kind or description
whether connected with the business and operations of the System,
Seller or otherwise, including, without limitation, all claims,
liabilities, obligations, requirements, penalties, fines or costs
(including costs of environmental remediation or removal) arising from
the ownership or operation of any of the Assets or the business and
operations of the System or Seller prior to the Closing Date (such
liabilities of the System or Seller which are not assumed by Buyer are
hereinafter collectively referred to as the "Non-Assumed
Liabilities"). Without limiting the foregoing, Buyer assumes no
liabilities or obligations under any Affiliate Transactions (as
defined in Section 3.22) or any Benefit Plans. All Non-Assumed
Liabilities shall remain with and be solely the responsibility of
Seller.
2.9. Allocation. For federal income and other applicable tax
purposes, the Purchase Price shall be allocated among the Assets in the manner
described on SCHEDULE 2.9, which Schedule will be prepared by Buyer and
provided to Seller prior to Closing, and which Schedule shall be reasonably
acceptable to Seller.
2.10. Transfer Taxes and Fees. Any sales, use, transfer or
documentary taxes imposed in connection with the sale and delivery of the
Assets and rights acquired by Buyer under this Agreement and the Real Estate
Agreement, including, without limitation, those taxes payable by Buyer pursuant
to Section 11(a) of the Real Estate Agreement, shall be paid equally by Seller
and Buyer.
2.11. Allocation of Franchise Settlement Payment. Buyer agrees to
pay to Seller within 5 business days after the receipt by Buyer of the
Franchise Settlement Payment paid in respect of the 1998 calendar year, an
amount equal to (i) the amount of such Franchise
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Settlement Payment received by Buyer multiplied by (ii) the number of months in
1998 prior to the Adjustment Time (including the month during which the
Adjustment Time occurs) divided by twelve.
2.12. Audited Financial Statement Expenses. Buyer shall, within 5
business days after Buyer's receipt of a copy of the bill from Seller's
auditors for the work performed in connection with the preparation of the
Audited Financial Statements pursuant to Section 5.1.5 hereof, reimburse Seller
for (a) all of the expenses incurred by Seller in complying with Section 5.1.5
hereof with respect to preparation of the 1998 Audited Financial Statements and
(b) half of the expenses incurred by Seller in complying with Section 5.1.5
hereof with respect to the preparation of the 1997 Audited Financial
Statements; provided, however, that the maximum amount payable by Buyer
pursuant to this Section 2.12(b) shall not exceed Ten Thousand Dollars
($10,000).
2.13. Franchise Settlement Payments. At all times from and after
the Closing Date, Seller shall take such actions as may be necessary to insure
and guarantee that the Franchise Settlement Payments are made to Buyer no later
than six (6) months after such payments are due pursuant to the provisions of
Paragraphs 4 and 7 of the Huntsville Resolution; provided, however, that
Seller's obligations under this Section 2.13 shall be limited to the amounts of
the Franchise Settlement Payments that Seller would have been entitled to
receive had (i) Seller not assigned to Buyer its rights to receive the
Franchise Settlement Payments, and (ii) Seller remained in compliance with all
obligations and conditions under the Huntsville Resolution. If Seller shall
receive any of the Franchise Settlement Payments at any time after the Closing
Date, Seller shall promptly pay such amounts to Buyer in accordance with
Buyer's instructions.
3. SELLER'S REPRESENTATIONS. Seller represents and warrants to Buyer as
follows:
3.1. Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Alabama and has all requisite corporate power and authority to own and lease
the properties and assets it currently owns and leases and to conduct its
activities and to carry on its business as such activities and business are
currently conducted. Seller has no subsidiaries or any equity interest in any
Person.
3.2. Authorization. Seller has full corporate power and authority
to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated in this Agreement. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated in this Agreement on the part of Seller have been duly and validly
authorized and approved by all necessary corporate action on the part of
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<PAGE> 22
Seller. This Agreement has been duly and validly executed and delivered by
Seller and is the valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms.
3.3. System Information.
3.3.1. SCHEDULE 3.3 sets forth the following complete, true
and correct information in all material respects as of the date of
this Agreement with respect to the System: (i) a description of the
basic and tier services, and communications and data services,
available from the System, the rates charged by Seller for each,
together with any other charges by Seller for services to subscribers;
(ii) rental payments under current real property and material personal
property lease obligations; (iii) pole attachment rentals; (iv)
personal property taxes payable with respect to the Assets; (v) the
signals and programming services carried on the System and the channel
position of each such station and service; (vi) approximate number of
miles of activated aerial and underground plant in the System and
approximate number of dwelling units passed; (vii) agreements with or
commitments or obligations to subscribers for free service or service
with rates departing from the System's standard rate schedule; (viii)
listing and description of all performance bonds maintained by Seller
with respect to the System; (ix) the channel and megahertz capacity of
the System and all aeronautical frequencies used by the System and (x)
Federal Aviation Administration tower clearances and approvals.
3.3.2. The System meets the technical standards of Part 76,
Subpart K, of the rules and regulations of the FCC in all material
respects. SCHEDULE 3.3 sets forth a complete, true and correct, in all
material respects, description of the cable network system of Seller.
Seller has made available to Buyer and its representatives at the
Huntsville, Alabama office of the System, current and accurate copies
of all of the blue prints, schematics, as-built drawings and
engineering records maintained with respect to the System.
3.3.3. The System had not less than Thirty One Thousand
Five Hundred Fifty-Four (31,554) Equivalent Basic Subscribers as of
the Balance Sheet Date.
3.4. Title and Condition of Personal Property.
3.4.1. SCHEDULE 3.4 contains a list and description of all
material items of Personal Property included in the Assets. The
Personal Property, together with the Assets, Excluded Assets and Real
Property being conveyed to Buyer pursuant to the Real Estate
Agreement, constitutes all personal property necessary to conduct
lawfully the business and operations of the System as now conducted.
Seller owns all of the Personal Property, free and clear of all Liens.
All of the material Personal Property is
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<PAGE> 23
in good working order and repair, ordinary wear and tear excepted and
is suitable and adequate for the uses for which it is being used.
3.5. Franchises, Licenses, and Contracts.
3.5.1. SCHEDULE 3.5 lists all Franchises, Licenses and
Contracts (including a description of all requirements where
compliance would require making capital expenditures other than in the
ordinary course of business), other than: (i) subscription agreements
with individual residential subscribers for the cable services
provided by the System in the ordinary course of business which may be
canceled by the System without penalty on not more than 30 days notice
and (ii) Contracts and Licenses included in Excluded Assets. Seller
has delivered to Buyer true and complete copies of each of the
Franchises, Licenses and Contracts listed on SCHEDULE 3.5, including
any amendments thereto, other than Contracts described in clauses (i)
and (ii) above.
3.5.2. Except as set forth in SCHEDULE 3.5, each of the
Franchises, Licenses and Contracts listed on SCHEDULE 3.5 is valid, in
full force and effect with respect to the Seller and, to the Seller's
Knowledge, with respect to other parties thereto and enforceable in
accordance with its terms against Seller and, to Seller's Knowledge,
the other parties thereto other than Seller, and Seller has fulfilled
when due all of its obligations thereunder. There has not occurred any
default (without regard to lapse of time, the giving of notice, the
election of Seller, or any combination thereof) by Seller nor, to the
Knowledge of Seller, has there occurred any default (without regard to
lapse of time, the giving of notice, the election of Seller or any
combination thereof) by any Person other than Seller under any of such
Franchises, Licenses, or Contracts. Neither Seller nor, to the
Knowledge of Seller, any other Person is in arrears in the performance
or satisfaction of its obligations under any of such Franchises,
Licenses, or Contracts, and no waiver or indulgence has been granted
by any of the parties thereto. Except as set forth in SCHEDULE 3.5,
the Franchises, Licenses and Contracts, together with all of the other
Assets, Excluded Assets and the Real Property being conveyed to Buyer
pursuant to the Real Estate Agreement are sufficient to permit Seller
to operate the System lawfully in the manner in which it is currently
operated.
3.5.3. Except as set forth in SCHEDULE 3.5, to the Seller's
Knowledge the System is the only cable television system presently
serving the areas covered by the Franchises and, to the Seller's
Knowledge, no other cable television system is presently contemplated
by any Person in the area now served by the System. To the Seller's
Knowledge, SCHEDULE 3.5 specifies for each area covered by the
Franchises, the other cable television systems serving such area. To
the Seller's Knowledge, no cable television franchises other than
those listed on SCHEDULE 3.5 have been issued with respect to the
areas served by the System.
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<PAGE> 24
3.5.4. Seller is the sole and exclusive legal and equitable
owner of all right, title and interest in and to the Franchise
Settlement Payments, free and clear of all Liens and without current
right of offset, deduction, withholding or claim from the City of
Huntsville or any other Person. Seller's right, title and interest in
and to the Franchise Fee Payments are freely assignable to Buyer
without the consent or approval of the City of Huntsville or any other
Person, and without any notification to or filing with the City of
Huntsville or any other Person. There are no franchise fees payable by
the franchisee to the City of Huntsville under the City of Huntsville
Franchise described on SCHEDULE 3.5 hereto.
3.6. No Conflicts; Consents. Except as described on SCHEDULE 3.6,
the execution, delivery, and performance by Seller of this Agreement does not
and will not: (i) violate any Legal Requirement or any Judgment to which the
Seller or the Assets is subject; (ii) conflict with or violate any provision of
the organizational documents of Seller; (iii) conflict with, violate, result in
a breach of, constitute a default under (without regard to requirements of
notice, lapse of time, or elections of other Persons, or any combination
thereof), accelerate, or permit the termination, material modification or
acceleration of the performance required by, any Franchise, License or material
Contract listed on Schedule 3.5; (iv) result in the creation or imposition of
any Lien against or upon any of the Assets; or (v) require the Seller to give
any notice to, make any filing with, or obtain any consent, approval, or
authorization of, any Governmental Authority or other Person, except as
required under the HSR Act.
3.7. Litigation and Judgments. As of the date hereof, except as
set forth on SCHEDULE 3.7, there is no Litigation pending or, to Seller's
Knowledge, threatened, against or involving Seller, the Assets or the System
which, in the case of threatened Litigation, individually or in the aggregate
could reasonably be expected to result in any materially adverse change in the
financial condition or operation of the System or the ability of Seller to
consummate the transactions under this Agreement. Except as described on
SCHEDULE 3.7, there are no proceedings pending to which Seller is a party or,
to Seller's Knowledge, threatened, nor have any demands been made by any
Governmental Authority, utility, pole lessor, or other Person, which seeks the
termination, material modification, suspension or material limitation of
Seller's rights or obligations with respect to the Franchises, Licenses, or
Contracts listed on Schedule 3.5. There are no Rate Regulatory Matters pending
or, to Seller's Knowledge, threatened with respect to the System. There is no
outstanding Judgment against Seller requiring Seller to take any action of any
kind with respect to the Assets or the operation of the System, or to which the
System or the Assets are subject or by which they are bound or affected.
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<PAGE> 25
3.8. Employment Matters.
3.8.1. ERISA. Neither any employee benefit plan (as such
term is defined in ERISA) maintained by Seller or to which Seller has
or has had the obligation to contribute in respect of any of Seller's
employees that render services in connection with the System (an
"Employee Benefit Plan"), nor Seller in connection with the
maintenance or operation of any Employee Benefit Plan, is in violation
of the provisions of ERISA, the Code or other applicable Legal
Requirements, except for any violation which would not have a Material
Adverse Effect; no reportable event, within the meaning of Title IV of
ERISA, has occurred and is continuing with respect to any such
Employee Benefit Plan, and, to Seller's Knowledge, no prohibited
transaction, within the meaning of Title I of ERISA, has occurred with
respect to any such Employee Benefit Plan. Each Employee Benefit Plan
is in compliance with its terms, except for any noncompliance which
would not, individually or in the aggregate, have a Material Adverse
Effect. No Employee Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan").
Neither Seller nor any entity required to be aggregated with Seller
(each, a "Commonly Controlled Entity") pursuant to Section 414(b),
(c), (m) or (o) of the Code has completely or partially withdrawn from
any Multiemployer Plan. No termination liability to the Pension
Benefit Guaranty Corporation or withdrawal liability to any
Multiemployer Plan has been or is reasonably expected to be incurred
with respect to any Multiemployer Plan by Seller or any Commonly
Controlled Entity, except for any liability which would not,
individually or in the aggregate, have a Material Adverse Effect.
Neither Seller nor any Commonly Controlled Entity has (or could incur)
any liability under Title IV of ERISA that could become a liability or
obligation of Buyer as a result of the consummation of the
transactions contemplated hereunder.
3.8.2. Collective Bargaining. There are no collective
bargaining agreements applicable to any Persons employed by Seller
that render services in connection with the System, and Seller has no
duty to bargain with any labor organization with respect to any such
Persons. There is not pending any demand for recognition or any other
request or demand from a labor organization for representative status
with respect to any Persons employed by Seller that render services in
connection with the System.
3.8.3. Legal Compliance. SCHEDULE 3.8 contains a true and
complete, in all material respects, list of names, positions and rates
of compensation of all employees of the System as of the date hereof.
With respect to any Persons employed by Seller that render services in
connection with the System, Seller is in compliance with all
applicable Legal Requirements respecting employment conditions and
practices, has withheld all amounts required by any applicable Legal
Requirements or Contracts to be withheld from wages or salaries, and
is not liable for any arrears of wages or any taxes
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<PAGE> 26
or penalties for failure to comply with any of the foregoing. Seller
is not a party to or otherwise bound by any employment or consulting
Contract.
3.8.4. No Unfair Labor Practices. With respect to any
Persons employed by Seller that render services in connection with the
System, (i) Seller has not engaged in any unfair labor practice within
the meaning of the National Labor Relations Act and has not violated
any Legal Requirements prohibiting discrimination on the basis of
race, color, national origin, sex, religion, age, marital status or
handicap in its employment conditions or practices; and (ii) except as
described on SCHEDULE 3.8, there are no pending or, to Seller's
Knowledge, threatened unfair labor practice charges or discrimination
complaints relating to race, color, national origin, sex, religion,
age, marital status or handicap against Seller before any Governmental
Authority nor to Seller's Knowledge does any basis therefor exist.
3.8.5. No Labor Controversies. There are no existing or, to
Seller's Knowledge, threatened, labor strikes, disputes, or grievances
affecting the System or other labor controversies which could
reasonably be expected to have a material and adverse effect on the
financial condition or operations of the System. There are no pending
or, to the knowledge of Seller, threatened arbitration proceedings
under any Contracts respecting Seller's employees nor to Seller's
Knowledge does any basis therefor exist..
3.9. Taxes. Except as described on SCHEDULE 3.9 (i) Seller has
paid in a timely manner all Taxes due and payable for which Seller is liable,
including the Taxes of any other Person other than Seller (a) under Treas. Reg.
Sec. 1.1502-6 (or any similar provision of state, local or foreign law), (b) as
a transferee or successor, (c) by contract or (d) otherwise; (ii) Seller has
received no notice of, nor does Seller have any Knowledge of, any notice of
deficiency or assessment, or of any proposed deficiency or assessment, from any
taxing Governmental Authority with respect to the Assets or the System; (iii)
there are no audits pending with respect to the Assets or the System and there
are no outstanding agreements or waivers by Seller that extend the statutory
period of limitations applicable to any federal, state, local, or foreign tax
returns or Taxes with respect to the System; and (iv) Seller has timely filed
all Tax returns and Tax reports required to be filed by Seller and all such
returns and reports are accurate and complete in all material respects.
3.10. Financial Statements. Seller has delivered to Buyer copies of
the following financial statements, which are in accordance with GAAP (except
for the absence of notes) consistently applied throughout the periods
indicated: (a) unaudited balance sheets and statements of operations and cash
flows as of and for the fiscal years ended September 30, 1996 and 1997, and (b)
the unaudited balance sheet (the "Balance Sheet") and statements of operations
and cash flows of Seller as of and for the eleven-month period ending August
31,
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1998 (the "Balance Sheet Date") (the financial statements described in this
clause (b), the "Interim Financial Statements"). All of the financial
statements described in this Section 3.10 present fairly in all material
respects, as of the respective dates thereof, the financial condition, assets
and liabilities (taken as a whole) and results of operations and cash flows of
Seller, subject, in the case of the Interim Financial Statements, to customary
non-material year-end adjustments. As of the Balance Sheet Date, Seller was the
owner of all the properties and assets set forth in the Balance Sheet. There
are no material liabilities, accrued, absolute, contingent or otherwise, that
are not reflected in the Balance Sheet other than liabilities arising in the
ordinary course of the Seller's business since the Balance Sheet Date. The Pro
Forma Statements have been prepared in good faith by Seller in accordance with
Seller's books and records and in a manner consistent with the Interim
Financial Statements. The Pro Forma Statements present fairly in all material
respects the EBITDA of the System for the month ended September 30, 1998.
3.11. No Adverse Change. Except as described on SCHEDULE 3.11,
there has been no material adverse change in the business, financial condition
or operations of the System since the Balance Sheet Date, other than changes
arising from matters of a general economic nature or matters caused by or
arising from legislation, rulemaking or regulation affecting the cable
television industry in general, and since such date, no material portion of the
movable Personal Property has been removed from the System except in the
ordinary course of business. Since the Balance Sheet Date, Seller has not (a)
incurred loss of, or significant injury to, any of the Seller's material
Assets, whether as the result of any natural disaster, labor trouble, accident,
other casualty, or otherwise; (b) sold, exchanged, transferred or otherwise
disposed of any of the Assets except in the ordinary course of business, or
canceled any debts or claims except in the ordinary course of business; (c)
written down the value of any Assets or written off as uncollectible any
accounts receivable, except write downs and write offs in the ordinary course
of business, none of which, individually or in the aggregate, are material; (d)
entered into any transactions other than in the ordinary course of business;
(e) made any change in any method of accounting or accounting practice; or (f)
made any agreement to do any of the foregoing.
3.12. Compliance with Legal Requirements
3.12.1. No Violation of Legal Requirements. The operation of
the System as currently conducted does not violate or infringe, in any
material respect, any Legal Requirements currently in effect. Seller
has received no notice of any violation by Seller or the System of any
Legal Requirement applicable to the operation of the System as
currently conducted and, to Seller's Knowledge, there is no basis for
the allegation of any such violation. Seller is not, in any material
respect, in default of, or in violation with respect to, any Judgment.
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<PAGE> 28
3.12.2. Licensing. Seller is permitted under all applicable
Franchises, Licenses and FCC rules, regulations and orders to
distribute the transmissions (whether television, satellite, radio or
otherwise) of video programming or other information that the Seller
makes available to subscribers of the System (the "Signals") and to
utilize all carrier frequencies generated by the operations of the
System, and is licensed to operate all the facilities required by
Legal Requirements to be licensed, including without limitation any
business radio and any cable television relay service system being
operated as part of the System. No correspondence has been received by
Seller during the three years preceding the date of this Agreement
from the FCC, the United States Copyright Office or any other Person
challenging or questioning the right of Seller to operate the System
and of any FCC-licensed or registered facility used in conjunction
with Seller's operation of the System. Seller is not utilizing and is
not required to utilize any microwave CARS license issued by the FCC
in connection with the business and operations of the System in
accordance with Legal Requirements.
3.12.3. Cable Act. The System and Seller's operation of the
System are in compliance in all material respects with the FCC's rules
and regulations and the provisions of the Cable Act as such Legal
Requirements apply to Seller and/or the System. Except as described on
SCHEDULE 3.12, Seller is in compliance in all material respects with
the must-carry and retransmission consent provisions of the 1992 Cable
Act as they relate to the System. All of the television broadcast
signals carried by the System are carried either pursuant to the
must-carry requirements or pursuant to executed retransmission consent
agreements. To Seller's Knowledge, the rates charged to subscribers,
effective since September 1, 1993, are or were allowable under the
Cable Act and any authoritative interpretation thereof now or then in
effect, whether or not such rates are or were subject to regulation on
or after that date by any Governmental Authority, including any local
franchising authority and/or the FCC, unless such rates were and are
not subject to regulation pursuant to a specific exemption from rate
regulation contained in the Cable Act other than the failure of any
franchising authority to have been certified to regulate rates. Seller
has delivered to Buyer complete and correct copies of all reports and
filings for the past three years made or filed pursuant to the Cable
Act or FCC rules or regulations with respect to the System, including,
without limitation, FCC Forms 159 (Remittance Advice), 159C, 320, 325,
328, 329, 393, 395A, 854, 1200, 1205, 1210, 1215, 1220, 1225, 1230 and
1240, copies of Seller's material correspondence with any Governmental
Authority relating to rate regulation generally or specific rates
charged to subscribers of the System including, without limitation,
copies of any complaints filed with the FCC with respect to Seller's
rates charged to such subscribers and sufficient documentation
supporting an exemption from the rate regulation provisions of the
Cable Act. Seller is in material compliance with the commercial leased
access provisions of the 1992 Cable Act and has delivered to Buyer
copies of any demands for commercial leased access carriage and
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any correspondence relating to such requests. SCHEDULE 3.12 contains a
list of all Franchise areas that are certified to regulate rates
pursuant to the regulations of the FCC and a list of all Franchise
areas in which a complaint regarding cable programming services has
been filed with the FCC and received by Seller. A request for renewal
has been timely filed under Section 626(a) of the Cable Act with the
proper Governmental Authority with respect to each franchise of the
System expiring within 36 months of the date of this Agreement. To
Seller's Knowledge, Seller has not violated any laws or any duty or
obligation with regard to protecting the privacy rights of any past or
present subscribers of the System.
3.12.4. CLI. Seller has conducted all system and microwave
performance tests and all Cumulative Leakage Index ("CLI") related
tests applicable to the System. Seller has (i) maintained appropriate
log books and other recordkeeping which accurately and completely
reflect in all material respects all results required to be shown
thereon; (ii) to the extent required by the rules and regulations of
the FCC, corrected any radiation leakage of the System required to be
corrected in connection with Seller's monitoring obligations under the
rules and regulations of the FCC; and (iii) otherwise complied in all
material respects with all applicable CLI rules and regulations in
connection with the operation of the System.
3.12.5. FAA Rules and Regulations. The System is being
operated in all material respects in compliance with the Rules and
Regulations of the Federal Aviation Administration ("FAA"). SCHEDULE
3.3 lists all the existing towers utilized in conjunction with the
System. Without limiting the generality of the foregoing, the existing
towers of the System are obstruction marked and lighted in all
material respects in accordance with the Rule and Regulations of the
FAA and FCC if so required. All required authorizations, including but
not limited to, Hazard to Air Navigation determinations, for such
towers have been issued by and pursuant to the Rules and Regulations
of the FAA. Except as set forth in SCHEDULE 3.3, Seller does not lease
space on such towers to any third party.
3.12.6. Copyright. Seller has deposited with the United
States Copyright Office all statements of account and other documents
and: instruments, and paid all royalties, supplemental royalties, fees
and other sums to the United States Copyright Office required under
the Copyright Act with respect to the business and operations of the
System as are required to obtain, hold and maintain the compulsory
copyright license for, cable television systems prescribed in Section
111 of the Copyright Act. Seller is in compliance in all material
respects with the Copyright Act and the rules and regulations of the
Copyright Office with respect to the operation of the System. Seller
is entitled to hold and does hold the compulsory copyright license
described in Section 111 of the Copyright Act, which compulsory
copyright license is in full force
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<PAGE> 30
and effect and has not been revoked, canceled, encumbered or adversely
affected in any manner.
3.13. Environmental Laws and Regulations
3.13.1. In connection with the System, Seller and all Real
Property are currently in material compliance with and have previously
been in compliance with, all Environmental Laws.
3.13.2. In connection with the System, Seller has no material
liability under any Environmental Law, nor does any other Person for
whose conduct Seller is or may be held to be responsible. In
connection with the System, Seller has not, either directly or
indirectly acted or failed to act in a manner or under circumstances
which could reasonably give rise to any material liability under any
Environmental Law. To Seller's Knowledge, no other present or previous
owner, tenant, operator, occupant or user of any Real Property, or any
other Person, has committed or suffered the foregoing. To Seller's
Knowledge, no material Release of Hazardous Substances has entered or
threatens to enter any Real Property.
3.13.3. There are no pending or, to the Knowledge of Seller,
threatened actions, suits, claims, legal proceedings or other
proceedings based on, and neither Seller nor any officer, director or
stockholder thereof has received any notice of any complaint, order,
directive, citation, violation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental
Authority or any other Person or entity, or knows or suspects any
fact(s) which might form the basis for any such actions or notices
arising out of or attributable to: (i) the current or past presence,
Release, or threatened Release of Hazardous Substances at, on, under,
or from any part of the Real Property; (ii) the off-site
transportation, disposal or treatment of Hazardous Substances
originating on or from the Real Property or the businesses or assets
of Seller in connection with the System; or (iii) any violation of
Environmental Laws at any part of the Real Property or arising from
Seller's activities (or the activities of Seller's predecessors in
title) involving Hazardous Substances which would have a Material
Adverse Effect.
3.13.4. No underground storage tanks are located upon any
Real Property. To Seller's Knowledge, no Real Property has been used
at any time as a gasoline service station or any other facility for
storing, pumping, dispensing or producing gasoline or any other
petroleum products or wastes. Neither the Real Property nor any
building or other structure on any Real Property contains (i)
asbestos, asbestos containing materials or materials presumed to be
asbestos containing materials (as defined by EPA or OSHA); (ii) PCBs;
or (iii) any dump or any filled in land which will require
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investigation, sampling, monitoring, operation and maintenance,
treatment, excavation, containment, closure, clean up, removal
actions, remediation, restoration, reclamation, or response actions,
to avoid or mitigate liability under or violation of Environmental
Law.
3.13.5. Seller has provided Buyer with complete, accurate,
and correct copies of: (a) all investigations, studies, audits, tests,
reviews, reports, surveys, or other written materials in Seller's
possession or control relating to the System and Hazardous Substances
or Environmental Laws; and (b) all notices or other materials received
by Seller relating to the System, any Real Property, and Seller or any
predecessor's compliance with or liability under any Environmental
Laws.
3.13.6. Seller has and will maintain through the Closing
Date all Environmental Permits to operate the System in the manner in
which it is currently being operated. Seller has supplied Buyer with a
true and complete list of all Environmental Permits required in order
for buyer to operate the System substantially as presently operated.
None of the Environmental Permits are nontransferable or require
consent, notification, recording, filing, waiting period, approval,
investigation, remediation, approval or other action to remain in full
force and effect following the Closing, and no other consent,
notification, recording, filing, waiting period, investigation,
remediation, approval or other action is required by Seller under any
Environmental Law in order to consummate the transactions contemplated
by this Agreement.
3.13.7. No Real Property currently or formerly owned,
operated or leased by Seller, and no property to which Hazardous
Substances originating on or from such property or in the businesses
or assets Seller in connection with the System has been sent for
treatment or disposal, is listed or proposed to be listed on the
National Priorities List or CERCLIS or on any other governmental
database or list of properties that may or do require investigation or
cleanup under Environmental Laws.
3.13.8. No Encumbrance in favor of any person relating to or
in connection with any claim under any Environmental Law has been
filed or has attached to the property currently owned, operated, or
leased by Seller.
3.14. Real Property
3.14.1. Seller does not hold any fee simple interest in any
Real Property. SCHEDULE 3.14 lists all the Real Property. Seller has
provided to Buyer true and correct copies of all agreements and other
instruments evidencing the material items listed on SCHEDULE 3.14,
including any amendments or modifications to such items. Seller has
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valid leasehold interests, and, in the case of easements, rights of
access, rights-of-way, licenses and other interests included in the
Real Property, such title or other interest as is necessary to permit
the use and enjoyment of such properties substantially in the manner
such properties are now used by Seller. Seller's interest in the Real
Property is free and clear of all Liens, except, in the case of the
Related Real Property, for Permitted Exceptions. The Real Property
listed on SCHEDULE 3.14, including the Real Property being conveyed to
Buyer pursuant to the Real Estate Agreement, includes all real
property interests necessary to operate the System as the System is
presently operated. All Real Property (including the improvements
thereon) (a) is in good condition and repair consistent with its
present use, (b) is available to Seller for immediate use in the
conduct of the business or operations of the System, and (c) complies
in all material respects with all applicable Legal Requirements,
including, without limitation, local zoning and subdivision
ordinances. All leases of real property that are included in the
Assets or the Assumed Liabilities and to which Seller is a party as
either lessor or lessee are valid and binding obligations of the
Seller and, to the Seller's Knowledge, the other parties thereto, are
in full force and effect, there exists no defaults by Seller, or to
Seller's Knowledge, by any other party. Except as set forth on
SCHEDULE 3.14, on the Closing Date, no Personal Property used or
useful in the business and operation of the System will be located on
any real property not included in the Real Property being conveyed to
Buyer at Closing. All buildings, towers, structures, fixtures and
other improvements on the Real Property used in the conduct of
Seller's business are in good repair and condition, and fit for the
uses to which they are currently devoted, and lie entirely within the
boundaries of the Real Property.
3.14.2. Seller has delivered to Buyer true and correct
copies of the following documents and information relating to the
Related Real Property that are either (a) in the possession of Seller
or the Owners or (b) of which Seller has Knowledge and which are
readily available: (i) any and all engineering studies, environmental
reports, soil boring test results, boundary or topographic surveys;
(ii) existing title policies or title reports, along with copies of
exceptions referenced therein; and (iii) any and all existing
proposed, and proffered conditions and agreements accepted and agreed
to by the Owners or any predecessor in title to the Owners as a
condition to development of the Related Real Property.
3.14.3. The Owners are the sole owners of good and
marketable fee simple title to the Related Real Property, free and
clear of all Liens, easements, covenants and restrictions, excepting
the Permitted Exceptions. The Owners are the sole owners of good and
marketable title to all buildings, structures, fixtures and
improvements on the Related Real Property, free and clear of all
Liens, easements, covenants, encumbrances and restrictions excepting
the Permitted Exceptions.
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3.14.4. The Related Real Property is not subject to any
unrecorded Contract or other unrecorded material restriction of any
nature whatsoever preventing or limiting the Owners' right to convey
the Related Real Property to Buyer, or preventing or limiting the
right of Seller or any Owner to use it for the purposes for which it
is currently used.
3.14.5. Seller has not received any notice that any portion
of the Related Real Property or any building, structure, fixture or
improvement thereon is the subject of, or affected by, any
condemnation, eminent domain or inverse condemnation proceeding
currently pending, and Seller has no Knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such
proceeding.
3.14.6. The Related Real Property has direct and
unobstructed access to a public right-of-way and to adequate electric,
gas, water, sewer and telephone lines, all of which are adequate for
the uses to which the Related Real Property is currently devoted. No
structures of any kind encroach onto the Related Real Property.
3.15. Commitments. There are no unfulfilled binding material
commitments for capital improvements which Seller is obligated to make in
connection with the System. To the best of Seller's Knowledge, there are no
complaints by subscribers or other users of Seller's services that,
individually or in the aggregate, could reasonably be expected to materially
and adversely affect the financial condition, operations or business of the
System. Except with respect to the persons listed on SCHEDULE 3.15, there is no
free service liability to subscribers existing with respect to the System.
Except with respect to deposits for converters, encoders, decoders and related
equipment, and any other item which is to be adjusted for pursuant to Section
2.5 hereof, Seller has no obligation or liability for the refund of monies or
for the provision of rebates to its subscribers. Except as set forth in the
Franchises with respect to the System, Seller has not made a commitment to any
franchising authority to maintain a local office in any location. Seller has
not made any commitment to any of the municipalities served by the System to
pay franchise fees to any such municipality in excess of the amounts set forth
in the Franchises.
3.16. Non-Infringement. To the best of Seller's Knowledge, the
operation of the System as currently conducted does not infringe upon, or
otherwise violate, the rights of any person or entity in any copyright, trade
name, trademark right, service mark, service name, patent, patent right,
license or trade secret, and there is not pending or, to Seller's Knowledge,
threatened any action with respect to any such infringement or breach.
3.17. Books and Records. All of the books, records, and accounts of
the System are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements.
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3.18. Accounts Receivable. Seller is the true and lawful sole owner
of the Accounts Receivable and the Advertising Accounts Receivable, free and
clear of all Liens, with the right to transfer Seller's interest therein to
Buyer. Each such Account Receivable and Advertising Account Receivable is in
all material respects, a true and correct statement of the account for
merchandise actually sold and delivered to, or for actual services performed
for, such account debtor.
3.19. Bonds. SCHEDULE 3.19 contains an accurate and complete list
of all bonds (franchise, construction, fidelity, or performance) of Seller
which are required to be obtained by Seller and which relate in any way to the
ownership or use of the Assets or the operation of the System.
3.20. Sufficiency of Assets. Together with the Excluded Assets and
the Real Property being conveyed to Buyer pursuant to the Real Estate Agreement
and except as set forth in SCHEDULE 3.20, the Assets collectively (i)
constitute all assets and rights that relate directly or indirectly to, or are
used in, the operation of the System as a going enterprise and (ii) constitute
all assets and rights necessary to operate the business and operation of the
System as presently operated.
3.21. Disclosure. No representation or warranty by Seller in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading.
3.22. Affiliates. SCHEDULE 3.22 describes the material contracts,
leases, arrangements and transactions between the Seller and any Affiliate of
Seller since October 1, 1997, or existing as of the date hereof (collectively,
the "Affiliate Transactions"). Seller shall take such actions as may be
necessary to terminate no later than Closing any Affiliate Transactions that in
any way adversely affect or could adversely affect any of the Assets or impose
any liabilities or obligations on Buyer, and to pay or otherwise satisfy any
liabilities or obligations arising under such Affiliate Transactions.
4. BUYER'S REPRESENTATIONS. Buyer hereby represents, warrants and
covenants to Seller as follows:
4.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to own and lease the properties and
assets it currently owns and leases and to conduct its activities and to carry
on its business as such activities and business are currently
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conducted. Buyer is duly qualified to do business as a foreign corporation and
is in good standing in the State of Alabama.
4.2. Authorization. Buyer has full corporate power and authority
to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated in this Agreement. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated in this Agreement on the part of Buyer have been duly and validly
authorized and approved by all necessary corporate action on the part of Buyer.
This Agreement has been duly and validly executed and delivered by Buyer, and
is the valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
4.3. No Conflicts; Consents. The execution, delivery, and
performance by Buyer of this Agreement does not and will not: (i) violate any
Legal Requirement or Judgment to which the Buyer or its assets is subject; (ii)
conflict with or violate any provision of the organizational documents of
Buyer; (iii) conflict with, violate, result in a breach of, constitute a
default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof), accelerate, or permit
the termination, modification or acceleration of the performance required by,
any material contract to which Buyer is a party or to which its assets are
subject; or (iv) require the Buyer to give any notice to, make any filing with,
or obtain any consent, approval, or authorization of, any Governmental
Authority or other Person, except as required under the HSR Act.
4.4. Litigation. There is no Litigation pending or, to Buyer's
Knowledge, threatened, against or involving Buyer which could reasonably be
expected to materially adversely affect the ability of Buyer to consummate the
transactions under this Agreement.
4.5. Disclosure. No representation or warranty of Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
in any material respect.
5. COVENANTS.
5.1. Certain Affirmative Covenants of Seller. Seller covenants and
agrees, from and after the execution and delivery of this Agreement until and
including the Closing Date, as follows:
5.1.1. Access. Seller, upon reasonable notice, shall give
Buyer and its representatives full access during normal business hours
to all of the properties, books, and records relating to the Assets
and the System, and furnish Buyer with such information concerning the
Assets and the System as Buyer may reasonably request. Subject to the
provisions of Paragraph 5 of the Real Estate Agreement, Seller shall,
and
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shall cause the Owners to, permit Buyer, its agents, representatives
and employees, to have full access, during normal business hours
throughout the period prior to Closing, to the Related Real Property
and all books, records, Contracts and other documentation and
information relating to the Related Real Property.
5.1.2. Conduct of Business. Seller shall operate the System
in the ordinary and usual course and in accordance with past
practices, which shall include, without limitation, using commercially
reasonable efforts to: (i) maintain appropriate staff and management
personnel at the System, consistent with past practices; (ii) not
delay any of its expenditures incurred in the ordinary course of
business of the System; (iii) maintain and preserve the Seller's
goodwill, business relationships, Licenses and Franchises; (iv) keep
all Assets comprising the System in good working order and repair
(reasonable wear and tear excepted), and keep in effect the casualty
and liability insurance covering the Assets in force on the date of
this Agreement; (v) not sell or dispose of or contract to sell or
dispose of any Assets comprising the System, except in the ordinary
course of business (up to a maximum aggregate amount of $10,000),
consistent with past practice; (vi) continue normal marketing,
advertising and promotional expenditures with respect to the System;
and (vii) comply in all material respects with all applicable Legal
Requirements, perform all of its material obligations under all of the
Franchises, Licenses, and material Contracts, and maintain the books,
records, and accounts relating to the System in the usual, regular,
and ordinary manner on a basis consistent with past practices.
5.1.3. Consents; Efforts; HSR Act. Except as otherwise
provided herein, Seller shall, at Seller's own cost and expense, use
commercially reasonable efforts to obtain as promptly as possible, all
Consents required to be obtained by Seller in order to consummate the
transactions contemplated by this Agreement, including approvals of
the FCC, Governmental Authorities, and other Persons. With respect to
Consents required to be obtained by Seller relating to the transfer of
any Franchise, Seller shall use commercially reasonable efforts to
obtain Consents which contain an affirmation that: (a) such Franchise
is in full force and effect; (b) the quality of Seller's service,
including signal quality, response to consumer complaints and billing
practices has been reasonable in light of community needs; (c) Seller
is in substantial compliance with the terms of the Franchise and other
applicable Legal Requirements; (d) there are no circumstances or
conduct by Seller which would constitute a default by Seller under the
Franchise and no event has occurred or exists which would permit the
Governmental Authority to revoke or terminate the Franchise; (e) Buyer
is permitted to grant a security interest in the Franchise to Buyer's
lender(s) and (f) such other matters as Buyer and/or lenders may
reasonably request. Subsequent to the Closing, Seller shall continue
to use commercially reasonable efforts to obtain in writing any
Consent required to be obtained by it that was not obtained on or
before Closing and with
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respect to which Buyer waived in writing as a closing condition, and
deliver copies of such to Buyer.
5.1.4. No Shopping. Seller hereby agrees that during the
period commencing on the date hereof and ending with the earlier to
occur of the Closing or termination of this Agreement, (a) Buyer shall
have the sole and exclusive right to negotiate with Seller for any
proposed merger, consolidation, sale or acquisition of Seller, the
Assets comprising the System (other than the sale or acquisition of
equipment or inventory in the ordinary course of business) and/or the
stock of Seller (each, a "Business Combination"), and (b) neither
Seller, nor any officer, director, shareholder or employee of Seller,
or any agent or representative thereof, will solicit, favorably
respond to indications of interest from, or enter into negotiations
with, any Person other than the Buyer for any possible Business
Combination.
5.1.5. Financial Information; Audit. Seller shall promptly
deliver to Buyer true and complete copies of all of its monthly
operating reports and any reports with respect to the operation of the
System prepared by or for it at any time from the date of this
Agreement until Closing. Seller shall cause its outside accounting
firm, Deloitte & Touche LLP, to audit the statements of the System
(including a balance sheet, statement of operations and cash flows) as
of and for the eleven-month period ended August 31, 1998 (the "1998
Audited Financial Statements") and as of and for Seller's fiscal year
ended September 30, 1997 (the "1997 Audited Financial Statements";
together with the 1998 Audited Financial Statements, the "Audited
Financial Statements"). Seller shall cause such accounting firm to
complete such audit and deliver an unqualified report with respect to
the Audited Financial Statements as soon as reasonably practicable but
in no event later than December 15, 1998. The Audited Financial
Statements shall be prepared in accordance with GAAP, and the
financial condition, assets and liabilities and results of operations
and cash flows of Seller reflected in the 1998 Audited Financial
Statements shall not be materially adversely different than the
financial condition, assets and liabilities and results of operations
and cash flows of Seller set forth in the Interim Financial
Statements. Upon the reasonable request of Buyer and at the expense of
Buyer, Seller shall provide assistance and such other financial and
other information as shall be necessary or desirable to permit Buyer
to prepare or to cause to be prepared any additional financial
statements or information concerning the System required to comply
with Regulation S-X of the Securities and Exchange Commission,
including, without limitation, providing customary management
representation letters to Buyer's auditors.
5.1.6. Estoppel Certificates. Seller shall use reasonable
efforts to obtain, at or prior to Closing, a certificate, reasonably
satisfactory to Buyer, from the lessor of each Real Property lease to
the effect that such lease is valid, in full force and effect and not
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in default, has been approved, if necessary, for transfer to Buyer,
and any other matters reasonably requested by Buyer (collectively, the
"Landlord Estoppel Certificates"). Seller shall use reasonable efforts
to obtain, at or prior to Closing, a certificate, reasonably
satisfactory to Buyer, from the tenant to each Real Property lease
under which Seller is the landlord to the effect that: (i) such lease
is valid, in full force and effect, (ii) tenant is not in default (or
with the giving of notice or the passage of time will not be in
default) under the lease, (iii) landlord is not in default under the
lease, and tenant has no claim against off-set, credit, defense,
counterclaim or deductions against landlord or any rent or other sums
due or payable under the lease, (iv) tenant has not assigned,
transferred, or hypothecated its interest in the lease or entered into
a sublease or license for all or any portion of the premises covered
by the lease, and (v) any other matters reasonably requested by Buyer
(collectively, the "Tenant Estoppel Certificates").
5.2. Certain Negative Covenants of Seller. Between the date of
this Agreement and the Closing Date Seller shall not:
5.2.1. (i) modify, terminate, renew, suspend, or abrogate
any of the Contracts, except in the ordinary course of business, (ii)
modify, terminate, renew, suspend, or abrogate any of the Franchises
or Licenses, except in the ordinary course of business, (iii)
transfer, convey, or otherwise dispose of any of the Assets (except
that it may use inventory and dispose of damaged or defective
equipment or material in the normal course of business), (iv) take any
action that would result in the creation of a Lien on any of the
Assets, (v) engage in any marketing, subscriber installation, or
collection practices that are inconsistent with its past practices, or
(vi) implement any material increase or decrease in the rates charged
by the System to its subscribers except in the ordinary course or
pursuant to a Legal Requirement or Judgment; or
5.2.2. enter into any transaction with any Affiliate of
Seller, except in the ordinary course of business consistent with past
practices and of the type described in SCHEDULE 3.22, including,
without limitation, any renewal, extension, modification or other
change in, any existing Contract to which an Affiliate of Seller is a
party or any other transaction involving an Affiliate of Seller.
5.3. Certain Affirmative Covenants of Buyer. Buyer covenants and
agrees, from and after the execution and delivery of this Agreement, as
follows:
5.3.1. Buyer hereby agrees that it will use commercially
reasonable efforts to obtain any consents required to be obtained by
Buyer in order for Buyer to consummate the transaction in accordance
with the provisions hereof and that Buyer will cooperate with Seller
in obtaining the Consents, but Buyer will not be required (i) to make
any
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payment to any Person from whom such Consent is sought or (ii) to
accept any material changes in, or the imposition of any adverse
condition to any Assumed Contract, Franchise, or License as a
condition to obtaining any Consent. Buyer agrees to reimburse Seller
at Closing for the amount of capital costs reasonably incurred by
Seller and approved by Buyer in advance in writing in connection with
the wiring of any multiple dwelling unit between the date hereof and
Closing.
5.3.2. Buyer hereby agrees that it will use the trade
names, trademarks and other service marks transferred to the Buyer
pursuant to Section 2.1.8 of this Agreement only in connection with
the provision of data, communications and cable television services.
5.4. HSR Act Compliance. Each of the parties covenants that it has
filed, or will file as promptly as practicable, notification and report forms
and related material that may be required to be filed with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the HSR Act, and will make any further filings pursuant thereto that may
be necessary or advisable in connection therewith.
5.5. Employees of Seller. Without Buyer's prior written consent,
Seller shall make no change in the compensation payable or to become payable by
Seller to any Person employed in connection with the conduct of the business or
operations of any of the System, except in accordance with past practices.
Seller shall be responsible for compliance with the COBRA notice and
continuation coverage requirements under Part 6 of Title I of ERISA, with
respect to all employees of Seller (and their beneficiaries) experiencing a
qualifying event (as defined in Section 603 of ERISA) on account of termination
of employment or reduction of hours by Seller while such employees were employed
by Seller. Buyer shall offer employment to all employees of Seller on
substantially the same terms existing as of the date of this Agreement
(including without limitation wages, benefits and positions); provided, that
Buyer shall not assume, be deemed to assume or be obligated to pay any benefits
under any Benefit Plan of Seller or its Affiliates. At Closing, Seller shall pay
to Buyer an amount equal to the cash value of earned and unused vacation time
under Seller's vacation Benefit Plan as of the Closing Date (the "Vacation Pay
Amount"). Seller shall deliver to Buyer at Closing (a) a copy of Seller's
vacation Benefit Plan, and (b) a detailed statement of the Vacation Pay Amount
for each of Seller's employees, which Benefit Plan and statement shall be
certified by Seller's Chief Financial Officer as being true, accurate and
complete. Such certified statement shall include, for each employee, the amount
of the Vacation Pay Amount foregone for each vacation day taken by such
employee. Buyer agrees to disburse the Vacation Pay Amount to Seller's former
employees promptly following the end of calendar year 1998, or at each
employee's option, permit them to take vacation days during calendar year 1998,
all in accordance with such certified statement and certified Benefit Plan. Such
payments of the Vacation Pay Amount shall be subject to any withholdings
required to be made by Buyer under the Code or any
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provision of state or local tax law. Nothing in this Section 5.5 or in any
other provision of this Agreement is intended to confer upon any employee of
Seller or such employee's legal representative or heirs any rights as a third
party beneficiary or otherwise or any remedies of any kind whatsoever under or
by reason of this Agreement, or the transactions contemplated hereby, including
without limitation any rights to continued employment with Seller or Buyer. All
rights and obligations created by this Agreement are solely between the
parties.
5.6. Employee Retention Program. If requested by Buyer in writing,
the parties shall, at Buyer's expense, develop and implement an employee
retention program, containing terms and conditions acceptable to Seller and
Buyer, to incent current employees to remain employed by Seller through the
Closing.
5.7. Forms 394. Within ten (10) business days after the date of
this Agreement, Seller and Buyer shall, if required, prepare and file properly
prepared Applications for Franchise Authority Consent to Assignment or Transfer
of Control of Cable Television Franchise FCC 394 ("Forms 394") with the local
Governmental Authorities which have issued Franchises to Seller, and shall file
with such Forms 394 all additional information required by such Franchises or
applicable local Legal Requirements or that the Governmental Authorities deem
necessary or appropriate in connection with their consideration of the request
of Seller and Buyer that such Governmental Authorities approve the transfer of
the Franchises to Buyer.
5.8. Programming. Each party shall execute and deliver such
documents and take such action as may reasonably be requested by the other
party to enable such other party to comply with the requirements of its
programming agreements with respect to divestitures and acquisitions of cable
television systems; provided, however, that Buyer shall not be required
hereunder to provide specific programming or channels or to assume any
liability with respect to or under Seller's programming agreements.
5.9. Satisfaction of Closing Conditions. Each of the parties
hereto shall use its commercially reasonable efforts to fulfill, or cause to be
fulfilled, the conditions to Closing in Section 6 and to otherwise cause the
consummation of the transaction contemplated hereby.
5.10. Notice of Developments. Each of Buyer and Seller will give
prior notice to the other of any breach of its own representations and
warranties herein.
5.11. Transitional Services. For a period of up to sixty (60) days
after the Closing Date, Seller agrees to provide to Buyer such accounting and
other office administrative services as Buyer may reasonably request in
connection with the transition of the System from Seller to Buyer. The terms
and conditions of such services requested by Buyer, including the rates of
compensation therefor, shall be subject to the mutual agreement of the parties
which the parties agree to negotiate in good faith.
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5.12. Environmental Audits.
Subject to Paragraph 5 of the Real Estate Agreement, Seller
hereby agrees that Buyer and its consultants, representatives and agents shall
have the right to enter and inspect the Related Real Property and, subject to
the terms of the lease for the Redstone Arsenal Property, the Redstone Arsenal
Property (the Related Real Property and the Redstone Arsenal Property,
collectively, the "Subject Property"). In order to complete such
investigations, Buyer or its designated consultant shall have the right but not
the obligation: (i) to conduct tests of the soil, surface or subsurface waters,
and air quality at, in, on, beneath or about the Subject Property, in a manner
consistent with good engineering practice; (ii) to inspect all records,
reports, permits, applications, monitoring results, studies, correspondence,
data and any other information or documents relevant to Hazardous Substances or
other environmental conditions; and (iii) to inspect all buildings and
equipment at the Subject Property for asbestos-containing materials or other
Hazardous Substances. Buyer agrees to conduct such investigations in a manner
that minimizes the disruption to Seller's business activities, and Seller
agrees, subject to the terms of the lease for the Redstone Arsenal Property, to
permit or cause the Owners to permit, as the case may be, Buyer reasonable
access to all portions of the Subject Property during normal business hours. In
the event that any Phase I audits, Phase II audits or similar investigations of
the Subject Property indicate the presence of Hazardous Substances on or at the
Subject Property which would impair the value of the Subject Property, then
Buyer shall have the unilateral right, in its sole discretion, to terminate its
obligations under this Agreement without penalty on or before the completion of
its investigation of the Subject Property. Buyer agrees to keep and hold
confidential any and all reports, summaries, studies or results that are the
product of its investigations of the Subject Property and not to disclose such
reports without the written consent of Seller or unless required to do so by
applicable Legal Requirements.
5.13. Termination of Leases. Seller shall take such actions as may
be necessary to terminate, effective as of the Closing Date, the real estate
leases described at Items 7 and 8 of SCHEDULE 2.2 hereto.
6. CONDITIONS PRECEDENT.
6.1. Conditions Precedent to Buyer's Obligations. The obligations
of Buyer under this Agreement with respect to the purchase and sale of the
Assets shall be subject to the fulfillment on or prior to the Closing Date of
each of the following conditions, any of which may be waived by Buyer:
6.1.1. Accuracy of Representations; Performance of
Agreements; and Officer's Certificate. All of the representations and
warranties of Seller contained in this
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Agreement (including, without limitation, the representations and
warranties contained in Annex A hereto), and the representations and
warranties of Seller's Parent contained in Seller's Guaranty, shall be
true and correct at and as of the Closing Date in all material
respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for any
representations and warranties that speak as of a specified date,
which shall have been true and correct in all material respects when
made, and provided that any representation or warranty contained
herein that is qualified by a materiality standard shall be true and
correct in all respects). Seller shall have complied with and
performed in all material respects all of the agreements, covenants,
and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing. Seller shall have furnished
Buyer with a certificate of an executive officer of Seller dated as of
the Closing, certifying to the fulfillment of the foregoing
conditions.
6.1.2. Consents. Seller shall have obtained and delivered
to Buyer each of the Consents identified on SCHEDULE 3.6 as material
consents ("Material Consents") with no materially adverse conditions
imposed by such Consents.
6.1.3. No Litigation. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which (i) enjoins, restrains, makes illegal, or
prohibits consummation of the transaction contemplated by this
Agreement or (ii) would prohibit Buyer's ownership or operation of any
portion of the System or the Assets and there shall be no Litigation
pending or threatened that seeks, or which if successful would have
the effect of, any of the foregoing.
6.1.4. Deliveries. Seller shall have made or stand willing
to and able to make all of the deliveries to Buyer set forth in
Section 7.2.
6.1.5. No Adverse Change. Since the Balance Sheet Date,
there shall have been (i) no material adverse change in the fixed
assets of the System or in the financial condition, business or
operations of the System, (ii) no loss, damage, impairment,
confiscation or condemnation of any of the Assets (material in the
aggregate) that has not been repaired or replaced, or (iii) any
pending or threatened Litigation which would have a Material Adverse
Effect.
6.1.6. Legal Matters. All actions, proceedings, instruments
and documents required to carry out this Agreement or incidental
thereto and all related legal matters shall be reasonably satisfactory
to and approved by Buyer's counsel.
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6.1.7. HSR Act. The waiting period applicable to the
consummation of the purchase and sale of the Assets under the HSR Act
shall have expired or been terminated.
6.1.8. Real Estate Closing. The purchase and sale
contemplated by the Real Estate Agreement shall have been consummated
simultaneously with the Closing.
6.1.9. Consulting Agreement. Buyer shall have entered into
a consulting or employment agreement with Mr. William Lewis, on
acceptable terms and conditions, for Mr. Lewis to provide Buyer
support, access, goodwill and related services for an aggregate of no
more than $75,000 for a minimum period of six months following the
Closing.
6.1.10. Audited Financial Statements. Seller shall have
delivered to Buyer the Audited Financial Statements (including the
unqualified auditor's report thereon) required by Section 5.1.5;
provided, however, that Buyer agrees to waive the condition set forth
in this Section 6.1.10 if in Buyer's reasonable judgment the final
Audited Financial Statements (including the unqualified auditor's
report thereon) will be delivered to Buyer by December 15, 1998.
6.1.11. Releases. If the report described in Section 7.2.8
evidences that judgments, financing statements, tax liens, mechanic's,
materialmen's or other statutory liens are on file with respect to any
of the Assets, Seller shall have obtained and delivered to Buyer a
termination statement or other appropriate document signed by the
secured party or lienholder evidencing the release or termination of
such financing statement or such lien and, if applicable, a pay-off
letter from such secured party or lienholder
6.1.12. Title Insurance Commitment. Buyer shall have
received the Title Insurance Commitment and the Survey with respect to
the Related Real Property and the Redstone Arsenal Property, all in
form and substance reasonably satisfactory to Buyer.
6.1.13 Interim Cost of Capital Amount. If the Closing shall
not have occurred on or prior to October 30, 1998, then the parties
shall have agreed upon the new interest rate pursuant to the last
sentence of Section 2.7.2 hereof.
6.2. Conditions Precedent to Seller's Obligations. The obligations
of Seller under this Agreement with respect to the purchase and sale of the
Assets shall be subject to the fulfillment on or prior to the Closing of each
of the following conditions, which may be waived by Seller:
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6.2.1. Accuracy of Representations; Performance of
Agreements; and Officer's Certificate. All of the representations and
warranties of Buyer contained in this Agreement and the
representations and warranties of Buyer's Parent contained in Buyer's
Guaranty shall be true and correct at and as of the Closing Date in
all material respects with the same effect as though such
representations and warranties had been made on and as of the Closing
Date (except for any representations and warranties that speak as of a
specified date, which shall have been true and correct in all material
respects when made, and provided that any representation or warranty
contained herein that is qualified by a materiality standard shall be
true and correct in all respects). Buyer shall have complied with and
performed in all material respects all of the agreements, covenants,
and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing. Buyer shall have furnished
Seller with a certificate of an executive officer of Buyer, dated as
of the Closing, certifying to the fulfillment of the foregoing
conditions.
6.2.2. No Litigation. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transaction contemplated by this
Agreement.
6.2.3. Deliveries. Buyer shall have made or stand willing
and able to make all the deliveries to Seller set forth in Section
7.3.
6.2.4. Legal Matters. All actions, proceedings, instruments
and documents required to carry out this Agreement or incidental
thereto and all related legal matters shall be reasonably satisfactory
to and approved by Seller's counsel.
6.2.5. Real Estate Closing. The purchase and sale
contemplated by the Real Estate Agreement shall have been consummated
simultaneously with the Closing.
6.2.6. HSR Act. The waiting period applicable to the
consummation of the purchase and sale of the Assets under the HSR Act
shall have expired or been terminated.
6.2.7. Interim Cost of Capital Amount. If the Closing shall
not have occurred on or prior to October 30, 1998, then the parties
shall have agreed upon the new interest rate pursuant to the last
sentence of Section 2.7.2 hereof.
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7. CLOSING.
7.1. Time and Place. The consummation of the sale of the Assets to
Buyer and the receipt of the consideration therefore by Seller shall constitute
the "Closing". Unless otherwise mutually agreed to by the parties, the Closing
shall take place by mail and/or by facsimile. The parties agree that a
signature on a document received by the other party via facsimile shall be
deemed valid and binding. The Closing shall occur on the last business day of
the month in which all conditions set forth in Sections 6.1 and 6.2 have been
satisfied or waived or on such other date as Buyer and Seller shall mutually
agree (the "Closing Date"). All allocations provided for hereunder shall be
made as of the Adjustment Time, except as otherwise agreed in writing by the
parties. In no event shall the Closing be held later than December 15, 1998
(the "Outside Closing Date"), unless Buyer and Seller otherwise mutually agree.
7.2. Seller's Deliveries. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
7.2.1. Bill of Sale. An executed Bill of Sale, Assignment
and Assumption Agreement in the form attached hereto as Exhibit D;
7.2.2. Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer;
7.2.3. Officer's Certificates. The Initial Adjustment
Certificate described in Section 2.6.1, the officer's certificate
described in Section 6.1.1 and the certified statement described in
Section 5.5;
7.2.4. Consents. The Consents, Landlord Estoppel
Certificates and Tenant Estoppel Certificates obtained by Seller;
7.2.5. Noncompetition Agreements. The Seller Noncompetition
Agreement and the Dyrek Noncompetition Agreement;
7.2.6. Indemnity Escrow Agreement. An executed counterpart
of the Indemnity Escrow Agreement; and
7.2.7. Opinions of Counsel. Opinions of Cole, Raywid &
Braverman, L.L.P., Seller's communications counsel, and Sirote &
Permutt, P.C., Seller's and Seller's Parent's local Alabama counsel,
each addressed to Buyer and its lender(s) dated the Closing Date, each
in a form reasonably acceptable to Buyer and its counsel and
addressing such matters as are customary in a transaction of this
type, such as, in the
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case of the opinion of local Alabama counsel, organization, good
standing, authorization, execution and delivery, enforceability, no
violations of organizational documents, laws or contracts, litigation
and receipt of all requisite Franchise approvals;
7.2.8. UCC Report. A report dated not more than ten (10)
days prior to the Closing Date of the appropriate filing officers in
the States of Alabama and Arizona with respect to judgments, financing
statements, tax liens, mechanics, materialmen or other statutory liens
on file with respect to the Assets.
7.2.9. Other Documents. Such other documents and
instruments as shall be necessary to effect the intent of this
Agreement and consummate the transaction contemplated by this
Agreement.
7.3. Buyer's Obligations. At the Closing, Buyer shall deliver or
cause to be delivered to Seller the following:
7.3.1. Purchase Price. The Purchase Price, payable as
provided in Section 2.3;
7.3.2. Bill of Sale, Assignment and Assumption Agreement.
An executed Bill of Sale, Assignment and Assumption Agreement in the
form attached hereto as Exhibit D;
7.3.3. Officer's Certificate. The certificate described in
Section 6.2.1;
7.3.4. Indemnity Escrow Agreement. An executed counterpart
of the Indemnity Escrow Agreement; and
7.3.5. Other Documents. Such other documents and
instruments as shall be necessary to effect the intent of this
Agreement and consummate the transaction contemplated by this
Agreement.
8. TERMINATION.
8.1. Termination Events. This Agreement may be terminated and the
transaction contemplated by this Agreement may be abandoned:
8.1.1. at any time, by the mutual agreement of Buyer and
Seller;
8.1.2. by either Buyer or Seller, at any time, if the other
is in material breach or default of its respective covenants,
agreements, or other obligations in this Agreement, or if any of its
representations in this Agreement or any Transaction
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Document are not true and accurate when made or when otherwise
required by this Agreement to be true and accurate in all material
respects (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be
further qualified hereby), provided that such breach or default is
incapable of cure or has not been cured within 20 calendar days after
receipt of written notice of such breach, default or misrepresentation
from the other party;
8.1.3. by Buyer, upon written notice to Seller, if the
Closing shall not have occurred on or before the Outside Closing Date
for any reason other than (a) a breach or default by Buyer of its
covenants, agreements or other obligations hereunder, or (b) any of
Buyer's representations herein not being true and accurate when made
or when otherwise required by this Agreement to be true and accurate
in all material respects;
8.1.4. by Seller, upon written notice to Buyer, if the
Closing shall not have occurred on or before the Outside Closing Date
for any reason other than (a) a breach or default by Seller of its
covenants, agreements or other obligations hereunder, or (b) any of
Seller's representations herein not being true and accurate when made
or when otherwise required by this Agreement to be true and accurate
in all material respects;
8.1.5. as otherwise provided in this Agreement, including,
without limitation, Section 10(b) hereof.
8.2. Effect of Termination.
8.2.1. Costs and Return of Information. Without limiting
any other provision of this Section 8.2, if the transactions
contemplated by this Agreement are terminated and abandoned as
provided herein: (i) each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any
of its officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party for any costs,
expenses or damages except as expressly specified herein; (ii) each
party shall re-deliver all documents, work papers and other materials
of the other party relating to the transaction contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same; (iii) all confidential information received by
either party hereto shall be treated in accordance with Section 11.1
hereof, and (iv) neither party hereto shall have any liability or
further obligation to the other party to this Agreement except (a) as
stated in subparagraphs (ii) and (iii) of this Section 8.2.1, and (b)
to the extent applicable, as set forth in Sections 8.2.2 below.
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8.2.2. Any termination pursuant to Section 8.1.2, 8.1.3,
8.1.4 or 8.1.5 shall not relieve any party of any liability for breach
of its obligations hereunder prior to such termination.
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY.
9.1. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
Closing Date. The representations and warranties contained in this Agreement
shall survive for a period ending on the date which is eighteen (18) months
after the Closing Date, except for representations and warranties set forth in
Section 3.1 (Organizations and Qualification), Section 3.2 (Authorization),
Section 3 with respect to the ownership of the Assets and Section 3.5.4, which
shall survive indefinitely, the representations and warranties set forth in
Section 3.8 (Employment Matters), Section 3.9 (Taxes), Section 3.12 (Legal
Requirements) and Section 3.13 (Environmental Laws and Regulations) which shall
survive for the applicable statute of limitations. Seller's obligations with
respect to all obligations and liabilities not assumed by Buyer, and Buyer's
obligations with respect to the Assumed Liabilities, shall survive until such
obligations and liabilities have been paid, performed or discharged in full,
and the covenants and agreements in this Section 9 shall continue in full force
and effect until fully discharged. Any representation, warranty, covenant or
agreement that is the subject of a claim which is asserted prior to the
expiration of the applicable survival period set forth above shall survive with
respect to such claim or dispute until the final resolution thereof. Following
the Closing, this Section 9 shall be the exclusive remedy of either party
hereto for monetary damages with respect to any representation, warranty or
covenant contained in this Agreement or any Transaction Document; provided,
that the foregoing shall not limit, diminish or affect any rights or remedies
that might be available to either party (a) for declaratory relief in
connection with any claim made by Buyer pursuant to the Indemnification Escrow
Agreement, (b) to have any non-monetary obligations of the other party
specifically performed, or (c) to have any actions or potential actions of the
other party temporarily or permanently enjoined.
9.2. Seller's Indemnity. Notwithstanding the Closing and
regardless of any investigation made at any time by or on behalf of Buyer or
any information Buyer may have, Seller shall indemnify and hold Buyer, its
respective affiliates, officers, directors, employees, agents, and
representatives, and any Person claiming by or through any of them, as the case
may be (each a "Buyer Indemnified Person"), harmless from and against any
Losses arising out of or resulting from any of the following, provided that a
claim for indemnity with respect to such Losses, specifying such claim in
reasonable detail, has been delivered to Seller by Buyer before the date
eighteen months after the Closing Date unless a longer survival period is
specified in Section 9.1, in which case the end of such applicable survival
period:
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(i) all refund liabilities due to subscribers
for periods prior to the Closing that arise in
connection with Rate Regulatory Matters or Rate
Regulatory Reduction Orders;
(ii) the business or operations of the System
prior to the Closing Date (except for Assumed
Liabilities for which an adjustment has been made at
Closing and Permitted Liens), any failure by Seller
to pay, perform or discharge any liabilities or
obligations of Seller or the System not expressly
assumed by Buyer pursuant to Section 2.8.1 hereof,
and all claims and demands made in respect of any of
the foregoing whether or not known or asserted at or
prior to the Closing;
(iii) any misrepresentation, breach of warranty,
or nonfulfillment of any agreement or covenant on
the part of Seller under this Agreement or any
Transaction Document;
(iv) the Litigation described in SCHEDULE 3.7
hereto; and
(v) any claim by the City of Huntsville or any
other Person that, contrary to Paragraph 7 of the
Huntsville Resolution, Buyer or any of its
successors or assigns is required or alleged to be
required to pay any franchise fees to the City of
Huntsville for any period prior to the expiration of
the City of Huntsville Franchise.
provided, however, that the Seller shall not be liable under Section 9.2(iii)
in respect of Losses unless the aggregate of such Losses exceeds Two Hundred
Thousand Dollars ($200,000) in which case the Seller will be liable for all
such Losses up to a maximum aggregate amount of Fifteen Million Dollars
($15,000,000). Seller will be liable, in the aggregate, for all Losses under
this Section 9.2 up to a maximum amount of Sixty Five Million Dollars
($65,000,000); provided, however, that such limitations and qualifications
shall not apply in the case of Losses resulting from or arising out of the
Seller's breach of its obligations under Sections 2.6.2, 2.10 and 2.13, Section
5.5, Section 12 and Section 13.4 hereof.
9.3. Buyer's Indemnity. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of Seller or
any information Seller may have, Buyer shall indemnify and hold Seller, its
affiliates, officers, directors, employees, agents, and representatives, and
any Person claiming by or through any of them, as the case may be, from and
against any Losses arising out of or resulting from any of the following,
provided that a claim for indemnity with respect to such Losses, specifying
such claim in reasonable detail, has been delivered to Seller by Buyer before
the date eighteen months after the Closing Date unless
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a longer survival period is specified in Section 9.1, in which case the end of
such applicable survival period:
9.3.1. the Assumed Liabilities and any failure by Buyer to
pay, perform or discharge the Assumed Liabilities; and
9.3.2. any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Buyer under
this Agreement or any Transaction Document;
provided, however, that the Buyer shall not be liable under Section 9.3.2 in
respect of Losses unless the aggregate of such Losses exceeds Two Hundred
Thousand Dollars ($200,000) in which case the Buyer will be liable for all such
Losses up to a maximum aggregate amount of Fifteen Million Dollars
($15,000,000). Buyer will be liable, in the aggregate, for all Losses under
this Section 9.3 up to a maximum amount of Sixty Five Million Dollars
($65,000,000); provided, however, that such limitations and qualifications
shall not apply in the case of Losses resulting from or arising out of the
Seller's breach of its obligations under Sections 2.6.2, 2.10, 2.11 and 2.12,
Section 12 and Section 13.4 hereof.
9.4. Procedure for Indemnified Third Party Claim. Promptly after
receipt by a party entitled to indemnification under this Agreement (the
"Indemnitee") of written notice of the assertion or the commencement of any
Litigation with respect to any matter referred to in Sections 9.2 and 9.3, the
Indemnitee shall give written notice thereof to the party from whom
indemnification is sought pursuant hereto (the "Indemnitor") and thereafter
shall keep the Indemnitor reasonably informed with respect thereto; provided,
however, that failure of the Indemnitee to give the Indemnitor notice as
provided herein shall not relieve the Indemnitor of its obligations hereunder.
In case any Litigation shall be brought against any Indemnitee, the Indemnitor
shall be entitled to assume the defense thereof with counsel reasonably
satisfactory to the Indemnitee, at the Indemnitor's sole expense. In the event
that within a reasonable time after such notice from the Indemnitee, the
Indemnitor shall fail to undertake to defend such claim, then the Indemnitee
(upon further written notice to the Indemnitor) shall have the right to
undertake the defense, compromise or settlement of such claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Indemnitor. In the event that the Indemnitee undertakes the defense
of a claim for which the Indemnitee is entitled to indemnification hereunder,
the Indemnitor shall pay to the Indemnitee, in addition to the other sums
required to be paid hereunder, the reasonable costs and expenses incurred by
the Indemnitee in connection with such defense, compromise or settlement, as
and when such costs and expenses are so incurred. If the Indemnitor shall
assume the defense of any Litigation, it shall not settle the Litigation unless
the settlement shall include as an unconditional term thereof the giving by the
claimant or the plaintiff of a release of the Indemnitee from all liability
with respect to such Litigation. Anything in this Section 9.4 to
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the contrary notwithstanding, in the event that the Indemnitor undertakes the
defense of any claim pursuant to this Section 9.4, (i) the Indemnitee, at its
own expense, by counsel or other representative of its own choosing, shall have
the right to participate in the defense, compromise or settlement thereof and
each party and its counsel and other representatives shall cooperate with the
other party and its counsel and representatives in connection therewith; and
(ii) the Indemnitor shall have an obligation to keep the Indemnitee informed of
the status of the defense of such claim and furnish the Indemnitee with all
documents, instruments and information that the Indemnitee shall reasonably
request in connection therewith. Notwithstanding the foregoing, in the event a
conflict of interest shall exist between the Indemnitor and the Indemnitee with
respect to any claim, the Indemnitee shall be entitled to undertake the defense
of any claim pursuant to this Section 9.4 and Indemnitor shall pay to the
Indemnitee the reasonable costs and expenses, for which Indemnitee is entitled
to indemnification hereunder, incurred by the Indemnitee in the defense of such
claim.
10. RISK OF LOSS. The risk of loss or damage by fire or other casualty or
cause to the Assets from the date hereof until the Closing Date shall be upon
Seller. In the event any such loss or damage shall not be restored, replaced,
or repaired as of the Closing Date, Buyer shall, at its option, either:
(a) proceed with the Closing and receive at Closing, the
insurance proceeds received by Seller, and all rights of Seller or its
Affiliates to receive insurance proceeds, with respect to such loss or damage,
less any amounts previously spent by Seller in restoring, repairing or
replacing such loss or damage and with respect to which Seller shall have
consulted with Buyer prior to restoring, repairing, or replacing such loss or
damage; or
(b) if such loss or damage has had or would have a Material
Adverse Effect, terminate this Agreement by written notice to Seller.
11. CONFIDENTIALITY AND PRESS RELEASES.
11.1. Confidentiality.
11.1.1. It is understood that Seller desires to maintain the
confidentiality of all documents or other information or data, whether
written or oral, relating to the System and furnished to Buyer or its
employees, agents or consultants in the course of the transaction
contemplated by this Agreement (the "Information"). Unless and until
the Closing occurs, Buyer will hold and will use all reasonable
efforts to cause its officers, directors, employees, lenders,
accountants, representatives, agents, consultants and advisors to hold
in strict confidence all of the Information received by it, and will
not, without the prior written consent of Seller, (i) use the
Information for any purpose other than in connection with the
transactions contemplated by this Agreement; or (ii) release
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or disclose any Information to any other person, except to such
foregoing persons who need to know the Information in connection with
the transactions contemplated by this Agreement, who are informed by
Buyer of the confidential nature of the Information and who agree to
be bound by the terms and conditions hereof. Notwithstanding the
foregoing, the following will not constitute Information for the
purposes of this Agreement: (a) information that the Buyer can show
was known by it, its directors, officers, employees, consultants or by
its affiliates prior to the disclosure thereof by the Seller; (b)
information that is or becomes generally available to the public other
than as a result of a disclosure directly or indirectly by the Buyer
or its directors, officers, employees or consultants in breach of this
Section 11.1 or any other duty of confidentiality; (c) information
that is independently developed by the Buyer, its directors, officers,
employees, consultants or its affiliates; or (d) information that is
or becomes available to the Buyer on a non-confidential basis from a
source other than the Seller or its directors, officers, employees;
provided that such source is not bound by any obligation of
confidentiality in relation thereto.
11.1.2. In the event that Buyer shall provide to Seller any
information or data relating to Buyer or its business and such
information or data would constitute "Information" if provided by
Seller to Buyer, then Seller agrees to hold and use all reasonable
efforts to cause its officers, directors, employees, lenders,
accountants, representatives, agents, consultants and advisors to hold
in strict confidence all of such information or data received by it,
and will not, without the prior written consent of Buyer, (i) use the
Information for any purpose other than in connection with the
transactions contemplated by this Agreement; or (ii) release or
disclose any Information to any other person, except to such foregoing
persons who need to know the Information in connection with the
transactions contemplated by this Agreement, who are informed by
Seller of the confidential nature of the Information and who agree to
be bound by the terms and conditions hereof.
11.2. Press Releases. No press release or public disclosure, either
written or oral, of the existence or terms of this Agreement shall be made by
either Buyer or Seller prior to the Closing without the consent of the other,
and Buyer and Seller shall each furnish to the other advance copies of any
release which it proposes to make public concerning this Agreement or the
transactions contemplated hereby and the date upon which Buyer or Seller, as
the case may be, proposes to make such press release. This provision shall not,
however, be construed to prohibit any party from making any disclosures to any
Governmental Authority which it is required to make under any Legal Requirement
or in connection with obtaining any Consents, or from filing this Agreement
with, or disclosing the terms of this Agreement to, any governmentally
regulated institutional lender to such party.
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12. BROKERAGE FEES. Each party hereto represents and warrants to the other
that it has not incurred any obligations or liabilities, contingent or
otherwise, for brokerage or finder's fees or agent's commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other party hereto will have any liability. Buyer shall
indemnify and hold Seller harmless from and against any Losses incurred by
Seller with respect to any breach by Buyer of the provisions of this Section
12, and Seller shall indemnify and hold Buyer harmless from and against any
Losses incurred by Buyer with respect to any breach by Seller of the provisions
of this Section 12.
13. MISCELLANEOUS.
13.1. Further Assurances. From time to time after the Closing,
Seller shall, if requested by Buyer, make, execute and deliver to Buyer such
additional assignments, bills of sale, deeds and other instruments of transfer,
as may be necessary to transfer to Buyer all of Seller's right, title, and
interest in and to the Assets. Such efforts and assistance shall be without
cost to Buyer.
13.2. Notices. All notices, requests, demands, and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (i) mailed,
registered or certified mail, return receipt requested, postage prepaid, (ii)
delivered by hand, (iii) sent by facsimile transmission, or (iv) delivered by
reputable overnight courier, to the following addresses, or at such other
address as a party may designate by notice given in accordance with this
Section 13.2:
(i) If to Buyer:
c/o Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
Attn: Chad Wachter
Fax No.: (706) 645-0148
With a copy to:
Hogan & Hartson L.L.P.
555 13th Street, N.W.
Washington, D.C. 20004
Attn: Steven M. Kaufman
Fax No.: (202) 637-5910
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(ii) If to Seller:
c/o CableAmerica Corporation
2720 East Camelback Road, Suite, 200
Phoenix, Arizona 85016-4317
Attn: William G. Jackson
Fax No.: (602) 957-2555
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attn: Joel F. Freedman
Fax No.: (617) 951-7050
Notices delivered personally, by overnight courier or by registered or
certified mail shall be effective upon receipt by the intended recipient.
Notices transmitted by facsimile transmission shall be effective when
confirmation of transmission is received.
13.3. Assignment; Binding Effect. Neither party may assign this
Agreement or any interest herein without the prior written consent of the other
party; provided, however, that at any time after Closing, Buyer shall have the
right, upon written notice to Seller, to assign all of its rights and
obligations hereunder to any Person in connection with a sale of all or
substantially all of the assets of the System, provided, however, no such
assignment shall release Buyer of its obligations to pay the Purchase Price to
Seller hereunder.
13.4. Expenses. Except as otherwise expressly provided for in this
Agreement, each party shall bear its own expenses and the fees and expenses of
its legal counsel, accountants, and other experts incurred in connection with
the preparation of this Agreement and the consummation of the transactions
contemplated by this Agreement. Without limiting the foregoing, the Title
Insurance Commitments and Surveys shall be prepared at the sole cost and
expense of Buyer.
13.5. Collection of Accounts. From and after the Closing Date,
Buyer shall have the right and authority, at its expense, to collect for its
account all Accounts Receivable and Advertising Accounts Receivable to which it
is entitled as provided in this Agreement and to endorse with the name of
Seller any checks or drafts received on account of any such items.
13.6. Entire Agreement; Amendments; and Waivers. This Agreement
merges all previous negotiations between the parties hereto, constitutes the
entire agreement and
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understanding between the parties with respect to the subject matter of this
Agreement and supersedes any such other understandings or agreements between
the parties with respect to the subject matter of this Agreement, including
without limitation, the Letter of Intent between the parties hereto dated
August 28, 1998. No alteration, modification or change of this Agreement shall
be valid except by an agreement in writing executed by the parties hereto. No
failure or delay by any party in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power, or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or
other default. No single or partial exercise of any such right, power, or
privilege shall preclude the further or full exercise thereof.
13.7. Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if all of the signatures on such
counterparts appeared on one document. All executed counterparts shall together
constitute one and the same agreement.
13.8. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
13.9. Schedules and Exhibits, Headings. All references herein to
Schedules and Exhibits are to the Schedules and Exhibits attached hereto, which
shall be incorporated in and constitute a part of this Agreement by such
reference. The headings in this Agreement are for purposes of reference only
and shall not limit or otherwise affect the meaning of this Agreement.
13.10. Governing Law. The validity, performance, and enforcement of
this Agreement and all Transaction Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Alabama, without giving
effect to the principles of conflicts of law of such State.
13.11. Third Parties; Joint Ventures. This Agreement constitutes an
agreement solely among the parties hereto for their benefit, and except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person (including but not limited to any employee or
former employee of Seller) other than the parties hereto, and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
-50-
<PAGE> 56
13.12. Construction. This Agreement has been negotiated by Buyer and
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
13.13. Commercially Reasonable Efforts. For the purposes of this
Agreement, "commercially reasonable efforts" will not be deemed to require a
party to undertake extraordinary measures, including the initiation or
prosecution of legal proceedings or the payment of amounts in excess of normal
and usual filing fees and processing fees, if any.
13.14. Specific Performance. Seller acknowledges that the Assets to
be sold and delivered to Buyer pursuant to this Agreement are unique and that
Buyer has no adequate remedy at law if Seller shall fail to perform any of its
obligations hereunder, and Seller therefore confirms and agrees that Buyer's
right to specific performance is essential to protect the right and interests
of Buyer. Accordingly, in addition to any other remedies which Buyer may have
hereunder or at law or in equity or otherwise, Seller hereby agrees that Buyer
shall have the right to have all obligations, undertakings, agreements and
other provisions of this Agreement specifically performed by Seller and that
Buyer shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state or other
political subdivision thereof.
[SEE SIGNATURE PAGE ATTACHED]
-51-
<PAGE> 57
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first written above.
SELLER:
CABLE ALABAMA CORPORATION
an Alabama corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BUYER:
KNOLOGY OF HUNTSVILLE, INC.
a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 58
EXHIBIT A
[FORM OF DYREK NONCOMPETITION AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
A-1
<PAGE> 59
EXHIBIT B
[FORM OF SELLER NONCOMPETITION AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
B-1
<PAGE> 60
EXHIBIT C
[FORM OF INDEMNITY ESCROW AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
C-1
<PAGE> 61
EXHIBIT D
[FORM OF BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT]
D-1
<PAGE> 1
COLUMBUS CONSOLIDATED GOVERNMENT [LOGO]
Georgia's First Consolidated Government
FINANCE DEPARTMENT
OFFICE OF THE DIRECTOR 100 TENTH STREET, P.O. BOX 1340
COLUMBUS, GEORGIA 31902-1340
706-653-4087, FAX 706-653-4086
MARCH 23, 1999
Ms. Marilyn Pittman
Knology, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
Dear Marilyn:
Enclosed please find your copy of the executed Knology Agreement which is
incorporated within the Ordinance No. 99 - 16 passed by Council on March 16,
1999.
Sincerely,
/s/Kay G. Love
Kay G. Love
Finance Director
KGL/jr
Encl.:
<PAGE> 2
AN ORDINANCE
No. 99-16
AN ORDINANCE GRANTING TO KNOLOGY OF COLUMBUS, INC. A CORPORATION DULY ORGANIZED
AND VALIDLY EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, WHOSE PRINCIPAL
PLACE OF BUSINESS IS LOCATED AT POST OFFICE BOX 510, 1241 O.G. SKINNER DRIVE,
WEST POINT, GEORGIA 31833 A NONEXCLUSIVE FRANCHISE TO OCCUPY AND USE THE
STREETS WITHIN THE FRANCHISE AREA IN ORDER TO CONSTRUCT, OPERATE, MAINTAIN,
UPGRADE REPAIR AND REMOVE THE SYSTEM TO PROVIDE CABLE SERVICE THROUGH THE
SYSTEM FOR A PERIOD OF TEN YEARS AND FOR OTHER PURPOSES.
THE COUNCIL OF COLUMBUS, GEORGIA HEREBY ORDAINS AS FOLLOWS:
This AGREEMENT, executed as of the 16th of March, 1999 (the "Effective Date"),
by and between Columbus Consolidated Government (hereinafter referred to as the
"Franchising Authority"), and KNOLOGY of Columbus, Inc. (hereinafter referred
to as the "Company"). For purposes of this Agreement, unless otherwise defined
in this Agreement the capitalized terms, phrases, words, and their derivations
shall have the meanings set forth in Appendix A.
W I T N E S S E T H: In consideration of the covenants and agreements herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby covenant and
agree as follows:
SECTION 1
GRANT OF AUTHORITY
1.1 Grant of Franchise. The Franchising Authority hereby grants under the
Cable Act a nonexclusive franchise (the "Franchise") to occupy and use the
Streets within the Franchise Area in order to construct, operate, maintain,
upgrade, repair and remove the System to provide Services through the System,
subject to the terms and conditions of this Agreement. The Franchise only
authorizes the Company to provide Cable Service and does not authorize any
other services The Company shall obtain a separate franchise or other
authorization required by the Franchising Authority to provide services other
than Cable Services in the Franchise Area, through the Communications System or
otherwise, to the extent such franchise or authorization is required pursuant
to applicable federal, state or local law, regulation or ordinance. Nor shall
such Franchise be construed to authorize the license or lease to any Person or
entity of the right to occupy or use the public rights-of-way for the conduct
of any private business unless such Person or entity has obtained a franchise
or right-of-way agreement from the City for such use.
The Company and Franchising Authority agree that the federal law at the time of
the Effective Date of this Agreement was unclear as to whether Internet service
is a Cable Service under Title VI of the Cable Act or is otherwise subject to
regulation pursuant to Title VI. For purposes of this Agreement, the parties
agree that Internet service shall be deemed a Cable Service, provided, however,
that if subsequent to the Effective Date of this Agreement, a court or a
regulatory authority of competent jurisdiction or a federal law or regulation
concludes that Internet service is not a Cable Service and
<PAGE> 3
is not otherwise subject to Title VI of the Cable Act, such service shall
at such time no longer be considered a Cable Service under this Agreement and
shall not be subject to a Franchise fee pursuant to this Agreement.
Notwithstanding the foregoing, in the event Internet service is determined
after the Effective Date to not be a Cable Service under Title VI of the Cable
Act and not otherwise subject to Title VI, nothing herein shall be deemed as a
waiver by the Franchising Authority of any right to require the Company to
obtain authorization to provide Internet service or otherwise regulate Internet
service, or to collect a franchise fee or other fee on such service, to the
extent permitted by applicable law or regulation.
1.1.1 Certain Actions by the Company Before Execution. Prior to the
execution of this Agreement, the Company has satisfied certain conditions prior
to the Franchising Authority's granting of the renewal of this Agreement by
delivering to the Franchising Authority the following: (a) evidence that it has
deposited with the Clerk of the City a Performance Bond in the amount of
$100,000 which shall serve as security for the faithful performance of all
terms, conditions and obligations under this Agreement and for the purposes of
recovering any costs, losses, or damages incurred by the City as a result of
the Company's failure to perform its obligations pursuant to this Agreement (b)
evidence that the Company has remitted to the Franchising Authority the amount
of $17,600 to reimburse the Franchising Authority in part for the Franchise
Authority's expense incurred in conducting the Franchise renewal process; (C) a
certificate of liability insurance pursuant to Section 10 of this Agreement.
1.2 Term of Franchise. The Franchise shall commence upon the
Effective Date and shall expire on the tenth anniversary of that date unless
the Franchise is renewed or the Franchise is sooner terminated pursuant to this
Agreement by the revocation of the Franchise as provided in Section 9. Upon
termination of the Franchise, all rights of the Company in the Franchise shall
cease, and the rights of the Franchising Authority and the Company to the
System, or any part thereof, shall be determined as provided in Section 9.
1.3 Renewal. Subject to Section 626 of the Cable Act (47 U.S.C.
SS. 546) and such terms and conditions as may be established by the Franchising
Authority, the Franchising Authority reserves the right to grant or deny
renewal of the Franchise.
1.4 Reservation of Authority. Nothing in this Agreement shall (I)
abrogate the right of the Franchising Authority to perform any public works or
public improvements of any description, (ii) be construed as a waiver of any
codes or ordinances of the Franchising Authority or of the Franchising
Authority's right to require the Company or any Person utilizing the System to
secure the appropriate permits or authorizations for such use, or (iii) be
construed as a waiver or release of the rights of the Franchising Authority in
and to the Streets. In the event that all or part of the Streets within the
Franchise Area are eliminated, discontinued and closed, the Franchise shall
cease with respect to such Streets upon the effective date of the final action
of the Franchising Authority with respect thereto.
<PAGE> 4
SECTION 2
THE SYSTEM
2.1 The System and Its Operations
2.1.1 General Obligation. The Company shall construct, operate,
maintain, and upgrade the System as provided in this Agreement. Without
limiting the foregoing, the System shall have, throughout the term of this
Agreement, at least 68 activated downstream video Channels on the Subscriber
Network and the other characteristics set forth in Appendix B.
2.1.2 Testing Procedures; Technical Performance. Throughout the
term of this Agreement, the Company shall operate and maintain the System in
accordance with the testing procedures and the technical performance standards
of the FCC in effect from time to time.
2.1.3 Emergency Override. Throughout the term of the Franchise, the
System shall be installed and operated with an emergency alert system in
compliance with the rules of the Federal Communications Commission, provided,
however, that, notwithstanding any such FCC regulations, the System shall be
configured such that, in the event of a local emergency, as reasonably
determined by the Franchising Authority, the Franchising Authority shall be
able to interrupt, to the extent not prohibited by FCC regulations, audio and
video Signals distributed over the System for the delivery of appropriate
Signals necessitated by such emergency. Interruption for the purpose of local
emergency override of the cable signal shall constitute an emergency
notification tone and a character generated "crawl" across the screen detailing
the emergency. The emergency override system will be operated in accordance
with rules and regulations issued by the Franchising Authority as permitted by
applicable law.
2.2 Requirements With Respect to Work on the System
2.2.1 General Requirements. The Company shall comply with the terms
set forth in Appendix C in connection with all work involved in the
construction, operation, maintenance, repair, upgrade, and removal of the
System, in addition to any other requirements or procedures reasonably
specified by the Franchising Authority. All work involved in the construction,
operation, maintenance, repair, upgrade, and removal of the System shall be
performed in a safe, thorough and reliable manner using materials of good and
durable quality. If, at any time, it is determined by the Franchising Authority
or any other agency or authority of competent jurisdiction that any part of the
System, including, without limitation, any means used to distribute Signals
over or within the System, is harmful to the health or safety of any Person,
then the Company shall, at its own cost and expense, promptly correct all such
conditions.
2.2.2 No Liability to Company or Affiliated Persons. Neither the
Franchising Authority nor its officers, employees, agents, attorneys,
consultants or independent contractors shall have any liability to the Company
or any Affiliated Person for any liability as a result of or in connection with
the protection, breaking through, movement, removal, alteration, or relocation
of any part of the System by or on behalf of the Company or the Franchising
Authority in connection with any emergency, public work, public improvement,
alteration of any municipal structure, any change in the
<PAGE> 5
grade or line of any Street, or the elimination, discontinuation, and closing
of any Street, as provided in this Agreement. The foregoing provision freeing
the Franchising Authority from liability pursuant to this section shall not
apply to damages caused by violation of Chapter 25-9 of the Official Code of
Georgia Annotated, relating to notification prior to excavation near
underground utilities, as now or hereafter amended.
2.2.3 Interconnection. Throughout the term of this Agreement, the
Company shall construct, operate, maintain and upgrade the System such that it
transmits and receives any PEG access Channel signals and Emergency Alert
Signals to and from any other Communications System in the Franchise Area. The
interconnect shall be designed and built such that the transmission of signals
between the Company's System and another Communications System does not result
in any significant deterioration in the signal quality. The Company shall
initiate negotiations with another System or Systems in order that technical
details can be resolved and that any joint and common costs of interconnection
may be shared on an equitable basis. Nothing herein shall be interpreted to
require the Company to share an operator's cost of extending its Communications
System to the interconnection point, or to require an operator to share the
Company's cost of extending its System to such point.
SECTION 3
SERVICE OBLIGATIONS
3.1 Service to All Persons. The parties acknowledge that the Company is
currently providing Cable Service in the Franchise Area. With respect to areas
within the Franchise Area which are not being served by any Communications
System on the date hereof, the Company shall make all Services distributed over
the System available to every dwelling unit within the Franchise area reaching
the minimum density of at least twenty-five (25) dwelling units per mile.
Service shall be offered to all new homes or previously unserved single
dwellings located within 150 feet of Company's feeder cable. Service to new
subdivisions shall be offered when residences meet the above criteria or are
thirty (30) percent inhabited. The Company may elect to offer Services to areas
not meeting the above standards.
3.2 Programming Services. The Company shall offer to all Subscribers a
diversity of video programming Services.
3.3 No Discrimination. Neither the Company nor any Affiliated Person shall
discriminate or permit discrimination between or among any Persons in the
availability of Services. It shall be the right of all Persons to receive
continuously all available Services insofar as their financial and other
obligations to the Company are satisfied.
3.4 Service to Governmental and Institutional Facilities. The Company
shall provide free connection and monthly Basic Service Tier and Cable
Programming Service Tiers, as that term is defined in the Cable Act, but not
pay-per-view, pay-per-Channel programming or the digital tier offered as of the
Effective Date, to all occupied government buildings (one outlet) and any
additional facilities opened during the Franchise term, including the central
office of the Muscogee County School District,
<PAGE> 6
provided said buildings are in an area served by the Company's distribution
system.
3.5 PEG Access.
3.5.1 PEG Access. In accordance with Section 611 of the Cable Act
(47 U.S.C. SS. 531), the Company agrees to provide Channel capacity to be
designated for public, educational or governmental ("PEG") use and related
equipment and facilities, services and/or financial support for the development
and use of PEG access. The capacity and related equipment and facilities,
services and financial support to be provided shall be determined in light of
community needs and interests. The terms and conditions of such PEG access
Channels and related support as agreed upon between the Franchising Authority
and the Company shall be attached to this Agreement in Appendix G. In
accordance with Section 611 of the Cable Act (47 U.S.C. SS. 531), the
Franchising Authority may require rules and procedures for the use of PEG
capacity and shall prescribe rules and procedures to govern the Company's use
of the PEG Channel capacity when it is not in use for PEG access purposes.
SECTION 4
FEES AND CHARGES
4.1 Rates, Fees and Charges To Be Set Forth in Appendix D. All rates,
fees, charges, deposits and associated terms and conditions to be imposed by
the Company or any Affiliated Person for any Service as of the Effective Date
are set forth in Appendix D. Before any new or modified rate, fee, charge,
deposit or associated term or condition may be imposed, the Company must submit
to the Franchising Authority a revised Appendix D reflecting the modification,
and notify affected Subscribers (which may be by any means permitted under
applicable law). Submission of a Company rate card which reflects all current
rates, fees, charges, deposits and associated terms and conditions will satisfy
the requirements of this section.
4.2 Prohibition Against Discrimination in Fees and Charges. Except to the
extent otherwise expressly permitted by applicable law (and after receiving the
Franchising Authority's approval, to the extent such approval may be permitted
under applicable law), neither the Company nor any Affiliated Person shall
discriminate or permit discrimination between or among any Persons in the
rates, terms and conditions for any Service.
4.3 Parental Control Devices. Upon the request of a Subscriber, and in
accordance with applicable law, the Company shall, provide (by sale or lease)
to each Subscriber, a parental control device by which the Subscriber can block
completely the video and audio Signals of a particular Cable Service during
periods selected by that Subscriber. The choice of such device shall be at the
Subscriber's election, to the extent permissible under applicable law, and
shall be delivered in the shortest period permissible under applicable law
after the Subscriber's request.
4.4 Franchising Authority's Regulation of Fees and Charges. The
Franchising Authority reserves the right to regulate the rates, fees, charges,
deposits and associated terms and conditions for any Service provided pursuant
to this Agreement to the fullest extent permitted by applicable law, including
but
<PAGE> 7
not limited to FCC rules regarding effective competition of cable systems
within the same Franchise area, and the Franchising Authority may establish
rules and regulations in connection therewith from time to time. In connection
with such regulation, the Franchising Authority shall comply with FCC rules and
provide the public with an opportunity to comment if such opportunity is
consistent with FCC rules.
SECTION 5
CONSUMER PROTECTION AND CUSTOMER SERVICE; SUBSCRIBER BILLS; AND
PRIVACY PROTECTION
5.1 Customer Service and Consumer Protection Standards
5.1.1 Company To Comply With Standards provided Under FCC Rules.
The Company shall comply in all respects with the requirements set forth in
Appendix E and the customer service requirements established by the FCC
pursuant to Section 632(b) of the Cable Act (47 U.S.C. ss. 552(b)).
5.2 Subscriber Bills
5.2.1 Bill Format Generally. Subscriber bills shall be designed in
such a way as to present the information contained therein clearly and
comprehensibly to Subscribers, and in a way that (I) is not misleading, (ii)
does not omit material information, and (iii) does not mischaracterize any
information. The Company may itemize costs on Subscriber bills, to the extent
permitted by Section 622C of the Cable Act (47 U.S.C. ss. 542(c)) and the FCC's
rules thereunder.
5.3 Privacy Protection
5.3.1 Company To Protect Privacy. The Company shall comply with
applicable law regarding the protection of privacy, including, without
limitation, Section 631 of the Cable Act (47 U.S.C. ss. 551) and regulations
adopted pursuant thereto.
5.3.2 Company To Provide Certain Information To Franchising
Authority. The Company shall cooperate with the Franchising Authority so as to
ensure the Franchising Authority's ability to enforce the terms and conditions
of this Agreement to the maximum extent permitted by applicable law.
SECTION 6
COMPENSATION AND OTHER PAYMENTS
6.1 Compensation to the Franchising Authority. As compensation for the
Franchise, the Company shall pay, or cause to be paid, to the Franchising
Authority the amounts set forth in this Section 6.1.
6.1.1 Franchise Fees -- Amount. The Company shall pay to the
Franchising Authority
<PAGE> 8
Franchise fees in the maximum amount permitted by applicable law, but in no
event for any twelve (12) month period shall the Franchise fee be less than an
amount equal to five percent (5%) of Gross Revenue derived during such period
from the operation of the System to provide Cable Services.
6.1.2 Franchise Fees -- Payment. All such payments of Franchise
fees shall be made on a quarterly basis and shall be remitted simultaneously
with the submission of the Company's quarterly report required pursuant to
Section 6.1.3.
6.1.3 Company To Submit Franchise Fee Report. The Company shall
submit to the Franchising Authority a report, in the form provided in Appendix
F, not later than thirty (30) days after the last day of each March, June,
September, and December throughout the term of this Agreement setting forth the
Gross Revenue for the quarter ending on said last day.
6.1.4 Franchise Fee Payments Subject to Audit; Remedy for
Underpayment. No acceptance of any Franchise fee payment by the Franchising
Authority shall be construed as an accord and satisfaction that the amount paid
is in fact the correct amount or a release of any claim that the Franchising
Authority may have for further or additional sums payable under this Agreement,
and all amounts paid shall be subject to audit and recomputation by the
Franchising Authority.
If, as a result of such audit or any other review, the Franchising Authority
determines that the Company has underpaid its fees in any twelve (12) month
period by ten percent (10%) or more, then, in addition to making full payment
of the relevant obligation, the Company shall reimburse the Franchising
Authority for all of the reasonable costs associated with the audit or review,
including all reasonable out-of-pocket costs for attorneys, accountants, and
other consultants.
6.1.5 Franchise Fee Modification. Notwithstanding the foregoing
Section 6.1.1, in the event that the City, after the Effective Date, amends or
renews any franchise fee provision in any franchise agreement or ordinance
applicable to a Person operating a Cable System in the Franchise Area on the
Effective Date such that (a) such Person pays more or less than five percent of
its gross revenues as franchise fees or (b) such Person pays franchise fees
based on a definition of gross revenue which is more or less favorable than the
Gross Revenue definition under this Agreement (collectively, "Franchise Fee
Formula"), and the City has not granted such Person a more favorable Franchise
Fee Formula than the formula under this Agreement in return for other
compensation or in-kind benefits such that the Franchise Fee Formula and such
compensation or in-kind benefits collectively are, on balance, equivalent to the
payments by the Company under Section 6.1.1, then, upon the request of either
the Franchising Authority or the Company, the Franchising Authority and the
Company shall enter into good faith negotiations to, and shall modify, Section
6.1.1 of this Agreement to impose a franchise fee on the Company which is no
more or less favorable than the Franchise Fee Formula.
6.2 Payments Not To Be Set Off Against Taxes or Vice Versa. The parties
agree that the compensation and other payments to be made pursuant to this
Section 6 and any other provision of this Agreement are not a tax and are not
in the nature of a tax and are in addition to any and all taxes of general
applicability or other fees or charges (including any fees or charges which may
be imposed on the Company for the use of poles, conduits or similar facilities
that may be owned or controlled
<PAGE> 9
by the Franchising Authority) which the Company or any Affiliated Person shall
be required to pay to the Franchising Authority.
6.3 Interest on Late Payments. If any payment required by this Agreement
is not actually received by the Franchising Authority on or before the
applicable date fixed in this Agreement or by the Franchising Authority, the
Company shall pay interest thereon, from the due date to the date paid at a
rate of one percent (1%) per month, compounded daily, for the period of
delinquency.
6.4 Continuing Obligation. In the event the Company continues to operate
all or any part of the System after the term of this Agreement, then the
Company shall continue to comply with all applicable provisions of this
Agreement, including, without limitation, all compensation and other payment
provisions of this Agreement, throughout the period of such continued
operation, provided that any such continued operation shall in no way be
construed as a renewal or other extension of this Agreement or the Franchise.
SECTION 7
OVERSIGHT AND REGULATION
7.1 Franchising Authority's Right of Oversight. The Franchising Authority
shall have the right to oversee, regulate, and periodically inspect the
construction, operation, maintenance and upgrade of the System, and all parts
thereof, in accordance with the provisions of this Agreement and applicable
law, including the Franchising Authority's police power.
7.2 Reports. At the request of the Franchising Authority, the Company
shall promptly submit to the Franchising Authority such information as the
Franchising Authority may request regarding the Company, its compliance with
any term or condition of this Agreement, with respect to the System or its
operation, any Service distributed over the System, or any activity or function
associated with the production or distribution of any Service over the System.
7.3 Company To Maintain Books, Records and Files
7.3.1 Books and Records. Throughout the term of the Agreement, the
Company shall maintain in the Franchise Area, or make available in the
Franchise Area within thirty (30) business days, complete and accurate books of
account and records regarding the Company's ownership and operation of the
System and the provision of Services over the System, in a manner reasonably
acceptable to the Franchising Authority, including without limitation, books of
account and records adequate to enable the Company to demonstrate that it is,
and throughout the term of this Agreement has been, in compliance with this
Agreement. All such documents pertaining to financial matters which may be the
subject of an audit by the Franchising Authority shall be retained by the
Company for a minimum of two (2) years following termination of this Agreement.
7.3.2 File for Public Inspection. Throughout the term of this
Agreement, the Company shall maintain, in a file available for public
inspection during normal business hours, in the Franchise Area, those documents
required pursuant to the FCC's rules and regulations.
<PAGE> 10
7.3.3 Performance Evaluation. Upon the Franchising Authority's
request, but not prior to two years after the Effective Date and not more
frequently than every two years, the Company shall prepare a status
presentation, to provide information to the Franchising Authority regarding
System performance, customer service satisfaction, and future System and
programming planning. If on evaluating the status presentation contents, the
Franchising Authority determines that additional information is needed to
complete the evaluation, the Company shall provide additional relevant data.
Should the Franchise Authority determine that, based on the presentation and
additional information presented, if any, and expressed community concerns,
that Cable Service or customer service do not meet the standards set forth in
this Agreement, then the Franchising Authority may administer the remedies as
provided for in Section 9 of this Agreement.
7.4 Franchising Authority's Rights of Inspection and Audit
7.4.1 Right of Inspection -- General. Upon notice to the Company,
the Franchising Authority or its designated representatives, shall have the
right to examine, in the Franchise Area, all books and records pertaining to
the Company's or any Affiliated Person's ownership or operation of the System
or to the Company's or Affiliated Person's provision of Services over the
System. Further, during normal business hours and upon notice to the Company,
the Franchising Authority or its designated representatives may inspect and
examine any other aspect of the System, including facilities and equipment
thereof.
7.4.2 Treatment of Proprietary Information. Access by the
Franchising Authority to any of the documents, records or other information
covered by this section shall not be denied by the Company on grounds that such
documents, records or information are alleged by the Company to contain
proprietary information, provided that this requirement shall not be deemed to
constitute a waiver of the Company's right to assert that the proprietary
information contained in such documents, records or other information, should
not be disclosed and to withhold such information upon the agreement of the
Franchising Authority. If the Responsible Franchising Official concurs with the
Company's assertion regarding the proprietary nature of such information, the
Franchising Authority will not disclose such information to any Person, unless
required by applicable law or order of governmental authority. If the
Responsible Franchising Official does not concur with such assertion, then the
Company may appeal such decision to the appropriate individuals or bodies
within the Franchising Authority in accordance with applicable laws and
procedures. If the Franchising Authority does not concur with the Company's
assertion, or if the Company does not appeal, then the Company shall promptly
provide such documents, including the alleged proprietary portion thereof, to
the Franchising Authority, provided that the Company shall not be required to
provide the proprietary portion thereof during the pendency of any court
challenge to such provision.
7.4.3 Franchising Authority May Conduct Compliance Audit and
Hearings. The Franchising Authority may conduct a full compliance audit and
hold public hearings at any time during the term of the Franchise, provided it
gives the Company written notice ten (10) days in advance of the commencement
of such audits and associated hearings.
<PAGE> 11
SECTION 8
RESTRICTIONS AGAINST ASSIGNMENTS AND OTHER TRANSFERS
8.1 Transfer of Franchise or Interest Therein. Neither the Company nor any
other Person may transfer the Franchise or any of the Company's rights or
obligations in or regarding the System or the Franchise without the prior
written consent of the Franchising Authority which consent shall not be
unreasonably withheld nor unreasonably delayed. Notwithstanding the foregoing,
the prior consent of the Franchising Authority shall not be required with
respect to solely intra corporate reorganizations between or among entities
wholly owned or wholly Controlled by KNOLOGY Holdings, Inc., provided that
KNOLOGY Holdings Inc., or such entity that acquires Control agrees to be fully
bound by the terms and conditions of this Franchise Agreement and that the
change does not materially affect the management, day to day operations or
financial condition of the Company. The Company shall notify the Franchising
Authority in writing of any such transfer not requiring consent and provide
justification as to why consent is not required at least 30 days prior to such
transfer.
8.2 Transfer of Control. No change in Control of the Company, the System
or the Franchise shall occur after the Effective Date, by act of the Company or
any Affiliated Person, by act of any Person holding Control of the Company, the
System or the Franchise, by operation of law, or otherwise, without the prior
written consent of the Franchising Authority The Franchising Authority's
consent shall not be unreasonably withheld nor unreasonably delayed.
Notwithstanding the foregoing, the prior consent of the Franchising Authority
shall not be required with respect to solely intra corporate reorganizations
between or among entities wholly owned or wholly Controlled by KNOLOGY
Holdings, Inc., provided that KNOLOGY Holdings Inc., or such entity that
acquires Control agrees to be fully bound by the terms and conditions of this
Franchise Agreement and that the change does not materially affect the
management, day to day operations or financial condition of the Company. The
Company shall notify the Franchising Authority in writing of any such transfer
not requiring consent and provide justification as to why consent is not
required at least 30 days prior to such transfer.
8.3 Procedures. Any request for approval shall be handled by the
Franchising Authority in accordance with its customary rules and procedures.
Consistent with Section 617 of the Cable Act and with regulations of the FCC,
in connection with any request for approval, the Franchisee shall submit to the
Franchising Authority a completed FCC Form 394, Application For Franchising
Authority Consent to Assignment or Transfer of Control of Cable Television
Franchise and such other evidence of the proposed transferee's legal, technical
and financial qualifications as may be in accordance with the regulations of
the FCC and such other information as the Franchising Authority may reasonably
request. A Franchising Authority shall have 120 days to act upon any request
for approval of such sale or transfer that contains or is accompanied by such
information as is required in accordance with FCC regulations and any other
information as the Franchising Authority may reasonably request.
8.4 Financing. Notwithstanding the foregoing, the Company may make,
execute or enter into any collateral assignment with a financial institution
for the purpose of creating and perfecting a security
<PAGE> 12
interest in its right, title and interest in and to the System for financing
purposes without prior approval of the Franchising Authority; provided however,
that the secured party under any collateral assignment may not exercise any
right or remedy thereunder (including, without limitation, the remedy of
foreclosure) that would have the effect of selling, transferring, leasing,
assigning or disposing of the System without the prior written consent of the
Franchising Authority obtained pursuant to the foregoing provisions of this
Section 8.
SECTION 9
SPECIFIC RIGHTS AND REMEDIES
9.1 Not Exclusive. The Company agrees that the Franchising Authority shall
have the specific rights and remedies set forth in this Section 9. These rights
and remedies are in addition to any and all other rights or remedies, now or
hereafter available to the Franchising Authority to enforce the provisions of
this Agreement, and will not be deemed waived by the exercise of any other
right or remedy. The exercise of any such right or remedy by the Franchising
Authority shall not release the Company from its obligations or any liability
under this Agreement, except as expressly provided for in this Agreement or as
necessary to avoid duplicative recovery from or payments by the Company.
9.2 Liquidated Damages. Should the Franchising Authority suffer damage
from any substantial or persistent breach by the Company of this Agreement,
which damage may be difficult to quantify, the Franchising Authority and the
Company agree to the following schedule of liquidated damages:
(I) For material failure to provide data, documents,
reports or information in a timely manner as provided by this Agreement,
Company shall pay $200 a day, or part thereof, that each violation occurs or
continues.
(ii) For failure to comply with any other provision of
this Agreement, Company shall pay $200 per day for each day, or part thereof,
that such noncompliance occurs or continues.
9.3 Events of Default
9.3.1 Grounds. The Company agrees that an Event of Default shall
include, but shall not be limited to, any of the following acts or failures to
act by the Company or any Affiliated Person:
(I) Any substantial failure to comply with any material provision of this
Agreement that is not cured within the time period provided for in Section
9.2.2;
(ii) The imminent foreclosure or other similar judicial or nonjudicial sale
of all or any material part of the System;
(iii) The condemnation by a public authority other than the Franchising
Authority, or sale or dedication under threat or in lieu of condemnation, of
all or any part of the System, the effect of which would materially frustrate
or impede the ability of the Company to carry out its obligations,
<PAGE> 13
and the purposes of this Agreement;
(iv) In the event that an Abandonment has occurred;
(v) If there shall occur any denial, forfeiture or revocation by any
federal, state or local governmental authority of any authorization required by
law or the expiration without renewal of any such authorization, and such
events either individually or in the aggregate, materially jeopardize the
System or its operation;
(vi) A persistent failure by the Company, its Affiliated Persons or its
Guarantor(s), as applicable, to comply with any of the provisions, terms or
conditions of this Agreement or with any rules, regulations, orders or other
directives of the Franchising Authority after having received repeated notice
of a failure to comply and an opportunity to cure such noncompliance in
accordance with subsection 9.2.2; or;
(vii) The Company fails to comply with any of the actions described in
Sections 8.1 and 8.2, which require prior express written consent of the
Franchising Authority.
9.3.2 Breach Procedures. The Franchising Authority shall exercise
the rights provided in Section 9.3.3 in accordance with the procedures set
forth below:
(I) The Responsible Franchising Official shall notify the Company, in
writing, of an alleged Event of Default, which notice shall specify the alleged
Event of Default with reasonable particularity. The Company shall, within
thirty (30) days after receipt of such notice or such longer period of time as
the Responsible Franchising Official may specify in such notice, either cure
such alleged Event of Default or, in a written response to the Responsible
Franchising Official, either present facts and arguments in refutation or
excuse of such alleged Event of Default or state that such alleged Event of
Default will be cured and set forth the method and time schedule for
accomplishing such cure.
(ii) The Responsible Franchising Official shall determine (A) whether an
Event of Default has occurred; (B) whether such Event of Default is excusable;
and 8 whether such Event of Default has been cured or will be cured by the
Company. Such determination by the responsible Franchising Official shall be
conveyed to the Company in writing.
(iii) If the Responsible Franchising Official determines that an Event of
Default has occurred and that such Event of Default is not excusable and has
not been or will not be cured by the Company in a manner and in accordance with
a schedule reasonably satisfactory to the Responsible Franchising Official,
which schedule shall be at least 30 days, then the Responsible Franchising
Official shall prepare a written report which may recommend the action to be
taken by the Franchising Authority's governing body. The Franchising Authority
shall provide notice and a copy of such report to the Company. Within fifteen
(15) days after receipt of such report from the Franchising Authority, the
Company may request, in writing, an opportunity to respond to such report
before the Franchising Authority or its agent. Any hearings process associated
therewith that the Franchising Authority may choose to hold shall be commenced
within sixty (60) days of the receipt of the request therefore and the
Franchising Authority shall render a decision within a reasonable time after
the conclusion of any
<PAGE> 14
such hearing.
(iv) In the event that the Franchising Authority's governing body
determines that such Event of Default has not occurred, or that such Event of
Default either has been or will be cured in a manner and in accordance with a
schedule reasonably satisfactory to the Franchising Authority's governing body,
or that such Event of Default is excusable, such determination shall conclude
the investigation.
(v) If the Franchising Authority's governing body determines that such
Event of Default has occurred, and that such Event of Default has not been and
will not be cured in a manner and in accordance with a schedule reasonably
satisfactory to the Franchising Authority's governing body, and that such Event
of Default is not excusable, then the Franchising Authority may take any of the
actions provided in Section 9.3.3. Nothing in this Section 9.3.2, shall be
interpreted to restrict any rights the Company may have to appeal such
determination under applicable law.
9.3.3 Franchising Authority Action Upon Occurrence of Event of
Default. Upon the occurrence of an Event of Default, which has not been cured
pursuant to Section 9.3.2, then, in accordance with the procedures provided in
Section 9.3.3, the Franchising Authority may, at any time during the term of
this Agreement:
(I) Require the Company to take such actions as the Franchising Authority
deems reasonably appropriate in the circumstances; and/or
(ii) Seek money damages from the Company as compensation for such Event of
Default; except that the Company shall not be subject to money damages for an
Event of Default under Section 9.3.1 (iii) or (v) if such Event of Default was
not the result of any act or failure to act by the Company or any Affiliated
Person; and/or
(iii) Revoke the Franchise by termination of this Agreement pursuant to this
Section 9 in a manner affording due process except that such revocation shall
not be a remedy for an Event of Default under Section 9.3.1(vi), if such Event
of Default involves a persistent failure to comply with any of the nonmaterial
provisions, terms or conditions of this Agreement, or with any nonmaterial
rules, regulations, orders or other directives of the Franchising Authority,
provided that nothing herein shall be deemed to prohibit the Franchising
Authority from pursuing any other remedies for such an Event of Default..
(iv) Nothing in this subsection 9.3.3 shall be interpreted to restrict any
rights the Company may have to appeal the Franchising Authority's actions under
applicable law.
9.4 Termination. In the event of any termination of this Agreement,
whether by expiration, revocation or otherwise, the Franchising Authority may:
(I) direct the Company to cooperate with the Franchising Authority or third
party in maintaining continuity in the distribution of Services to Subscribers
over the System for a period of up to three (3) months or (ii) order the
Company to cease all construction and operational activities in a prompt and
workmanlike manner.
9.5 Franchising Authority's Right To Order Removal or To Acquire or Effect
a Transfer of the
<PAGE> 15
System
9.5.1 Removal. In addition to its rights under Section 9.3, upon
any termination, the Franchising Authority may issue a removal order directing
the Company to remove, at the Company's sole cost and expense, all or any
portion of the System from all Streets and other public or nonpublic property
within the Franchise Area, subject to the following:
(I) in removing the System, or any part thereof, the Company shall, at its
own expense, refill and compact any excavation it makes, and shall leave the
Streets and other property, including utility cables, wires and attachments, in
as good condition as that prevailing prior to the Company's removal of the
System;
(ii) the liability insurance and indemnity provisions of this Agreement
shall remain in full force and effect during the period in which the System is
being removed and the associated repairs to the Streets and other property are
being made; and
(iii) if in the reasonable judgment of the Franchising Authority, the
Company fails to substantially complete removal, including repair of the
Streets and other property within twelve (12) months of the Franchising
Authority's issuance of a removal order, the Franchising Authority shall have
the right to: (A) authorize removal of the System, at the Company's cost, by
another Person; and (B) declare that all rights, title and interest to the
System belong to the Franchising Authority, including any portion of the System
not designated for removal, without compensation to the Company. The Company
shall execute and deliver such documents as the Franchising Authority may
request, to evidence such ownership by the Franchising Authority.
Notwithstanding the foregoing, the Company may dispose of any portion of the
System not designated by the Franchising Authority for removal during such
twelve (12) month period, provided, however, that if the Company fails to
complete the removal of the portion(s) of the System designated for removal by
the Franchising Authority within such period, then all such portion(s) of the
System not disposed of and all amounts collected for any portion(s) of the
System disposed of by the Company during such period shall belong to the
Franchising Authority, with no price due to the Company.
9.5.2 Acquisition or Transfer. Upon any termination and as an
alternative to ordering removal of the System, the Franchising Authority may
permit the Company to operate the System on terms and conditions equitable to
the Company and Franchising Authority for a period of nine months in order to
assure the continuation of Cable Services to Subscribers. During the first
three months of such nine month period, the Company agrees that it will pursue,
in good faith, the sale of the System to another cable operator reasonably
acceptable to the Franchising Authority. The Franchising Authority agrees that,
in good faith, it will negotiate a franchise agreement with an operator
reasonably acceptable to it, or consider a request to assign this Agreement to
such operator; provided, however, nothing herein shall be interpreted to
require the Franchising Authority to enter into a franchise agreement with such
operator or to consent to an assignment of this Agreement to the operator. If
at the end of the three month period the Company has not sold the System in
accordance with this Section 9.6.2, the Company shall continue to operate the
System for the
<PAGE> 16
remaining six months of the nine month period, and the Franchising Authority
may acquire ownership of the System or effect a transfer of ownership to a
third party in accordance with Section 627 of the Cable Act (47 U.S.C. Sec.
547), or order removal of the System at the end of the nine month period in
accordance with Section 9.6.1.
9.5.3 Price. The price to be paid to the Company upon an
acquisition or transfer by the Franchising Authority pursuant to Section 9.4.2
shall be pursuant to Section 627 of the Cable Act.
9.6 Company's Obligations. In the event of any acquisition, transfer or
Abandonment pursuant to Section 9.4, the Company shall promptly supply the
Franchising Authority or third Person with all records necessary to reflect the
change in ownership and to operate and maintain the System.
9.7 Performance Bond.
9.7.1 Establishment. To ensure the performance of the Company under
this Agreement, the Company shall arrange for a Performance Bond solely for the
protection of the Franchising Authority, with a corporate surety or trust
company reasonably acceptable to the Franchising Authority. A copy of the
executed Performance Bond shall be delivered to the Franchising Authority prior
to the execution of this Agreement.
9.7.2 Amount. The Performance Bond shall be in the face amount of
not less than One Hundred Thousand Dollars ($100,000). Such bond shall remain
in effect throughout the Term of this Agreement or such later date as provided
in this Agreement.
9.7.3 Withdrawals from the Performance Bond. The Franchising
Authority may make withdrawals from the Performance Bond, in accordance with
the terms and conditions of the Performance Bond: (I) upon the occurrence of an
act of default by Company, as defined in Section 9.3.1 of this Agreement; (ii)
to indemnify the Franchising Authority and serve as security for any
expenditure, damage, loss, or costs incurred by the Franchising Authority as a
result of an act of default by the Company, as defined in Section 9.3.1 of this
Agreement; or (iii) upon the occurrence of an event listed in Section 9.2 of
this Agreement which leads to the imposition of non-performance penalties upon
the Company. Prior to making any withdrawals from the Performance Bond, the
Franchising Authority shall give the Company at least seven (7) days advance
written notice of its intent to make a withdrawal from the Performance Bond.
Withdrawals from the Performance Bond shall not be deemed a cure of any
default(s) that led to the withdrawal. The Franchising Authority may not seek
recourse against the Performance Bond for any costs or damages for which the
Franchising Authority has previously been compensated through a withdrawal from
the Performance Bond or otherwise by the Company.
9.7.4 Notice of Withdrawals. Within one (1) week after a withdrawal
from the Performance Bond, the Franchising Authority shall notify the Company
in writing of the date and amount of the withdrawal. The withdrawal of amounts
from the Performance Bond shall constitute a credit against the amount of the
applicable liability of the Company to the Franchising Authority, but only to
the extent of said withdrawal.
<PAGE> 17
9.7.5 Replenishment. Within thirty (30) days after receipt of
notice from the Franchising Authority that an amount has been withdrawn from
the Performance Bond, the Company shall restore the Performance Bond to the
amount specified in Section 1.1.1 of this Agreement. If the Company fails to
restore the Performance Bond within such thirty (30) day period, interest on
the unrestored amount shall accrue at the rate specified in Section 6.3 of this
Agreement, from the first day after the end of the aforesaid thirty (30) day
period until the Performance Bond is restored. The Franchising Authority may
periodically withdraw such interest from the Performance Bond up to the date on
which the Company makes the required restoration, unless Company has paid such
interest to the Franchising Authority.
9.7.6 Form. The Performance Bond shall be in a form and content
reasonably approved by the Franchising Authority and shall be furnished to the
Franchising Authority on or before the date set forth in Section 1.1.1. The
Performance Bond shall contain the following endorsement: "It is hereby
understood and agreed that this bond may not be canceled or not renewed by the
surety until at least ninety (90) days prior written notice to the Franchising
Authority of surety's intention to cancel or not renew this bond."
9.7.7 Not a Limit on Liability. The obligation to perform and the
liability of the Company pursuant to this Agreement shall not be limited by the
Franchising Authority's acceptance of the Performance Bond required by this
Section 9.
SECTION 10
INSURANCE AND INDEMNITY
10.1 Insurance
10.1.1 Specifications. (a) Liability Insurance. Throughout the term
of this Agreement, the Company shall, at its own cost and expense, maintain a
liability insurance policy or policies that are in an acceptable form to the
Franchising Authority, together with evidence acceptable to the Franchising
Authority demonstrating that the premiums for said policy or policies have been
paid. Such policy or policies shall be issued by companies duly licensed to do
business in the State of Georgia and acceptable to the Franchising Authority.
Such companies must carry a rating by Best of not less than "A". Such policy or
policies shall insure (I) the Company and (ii) the Franchising Authority and
its officers, boards, commissions, councils, elected officials, agents and
employees (through appropriate endorsements if necessary) against each and
every form of liability of the Company referred to in this Agreement in the
minimum combined amount of One Million Dollars ($1,000,000) for bodily injury
and property damage. The foregoing minimum limitation shall not prohibit the
Company from obtaining a liability insurance policy or policies in excess of
such limitations, provided that the Franchising Authority, its officers,
boards, commissions, councils, elected officials, agents and employees shall be
named as additional insureds to the full extent of any limitation contained in
any such policy or policies obtained by the Company.
(b) Workers' Compensation. The Company shall ensure its compliance with
the Georgia Workers'
<PAGE> 18
Compensation Act and in that regard shall secure insurance to cover its
obligations with respect to workers' compensation claims, or take other
appropriate steps, which insurance and steps shall be in form and substance
reasonably satisfactory to the Franchising Authority. The Company shall
indemnify and hold harmless the Franchising Authority from any workers'
compensation claims to which the Company may become subject during the term of
this Agreement.
10.1.2 Maintenance. The liability insurance policies required by
this Section 10.1.1 shall be maintained by the Company throughout the term of
this Agreement and such other period of time during which the Company operates
or is engaged in the removal of the System. Each such liability insurance
policy shall contain the following endorsement: "It is hereby understood and
agreed that this policy may not be canceled nor the intention not to renew be
stated until ninety (90) days after receipt by the Franchising Authority, by
registered mail, of a written notice of such intent to cancel or not to renew."
Within sixty (60) days after receipt by the Franchising Authority of said
notice, and in no event later than thirty (30) days prior to said cancellation,
the Company shall obtain and furnish to the Franchising Authority replacement
insurance policies in a form reasonably acceptable to the Franchising
Authority.
10.1.3 Increased Insurance Coverage. In the event of any changed
circumstances following the Effective Date, if the Franchising Authority wishes
to alter the minimum limitation of the liability insurance policy or policies
required in this Section 10.1, then the Franchising Authority and the Company
shall negotiate such alteration in good faith.
10.1.4 Liability Not Limited. The legal liability of the Company and
any Affiliated Person to the Franchising Authority and any Person for any of
the matters which are the subject of the liability insurance policies required
by this Section 10.1, including, without limitation, the Company's
indemnification obligations set forth in this Agreement, shall not be limited
by such insurance policies nor by the recovery of any amounts thereunder,
except to the extent necessary to avoid duplicative recovery from or payment by
the Company.
10.2 Liability and Indemnity
10.2.1 No Liability for Damages. In accordance with Section 635A of
the Cable Act (47 U.S.C. ss. 555a), the Franchising Authority, its officers,
employees, agents, attorneys, consultants and independent contractors shall
have no liability to the Company, arising from the regulation of Cable Service
or from a decision of approval or disapproval with respect to a grant, renewal,
transfer, or amendment of a franchise. Any relief to the extent such relief is
required by any other provision of Federal, State, or local law, shall be
limited to injunctive relief and declaratory relief.
10.2.2 Indemnification of the Franchising Authority. Except for acts
of willful misconduct by the City, its officers, employees, agents, attorneys,
consultants or independent contractors, the Company and each Affiliated Person
shall: (I) defend, indemnify, and hold harmless the Franchising Authority, its
officers, employees, agents, attorneys, consultants and independent contractors
from and against all liabilities, special, incidental, consequential, punitive,
and all other damage, cost, and expense (including reasonable attorneys' fees)
arising out of or in connection with: (a) the award of this Franchise; (b) the
construction, operation, maintenance, repair, upgrade or removal by the
<PAGE> 19
Company or its contractors, agents or affiliates of, or any other action or
event by the Company or its contractors, agents or affiliates with respect to,
the System or any activity or function associated with the production or
distribution of any Service over the System; or (c) the distribution of any
Service over the System; and (ii) cooperate with the Franchising Authority, by
providing such nonfinancial assistance as may be requested by the Franchising
Authority, in connection with any claim arising out of or in connection with
the selection of franchisees for, or the negotiation or award of, this
Agreement.
SECTION 11
MISCELLANEOUS
11.1 Controlling Authorities. This Agreement is made with the understanding
that its provisions are controlled by the Cable Act, other federal laws, state
laws, and all applicable locals laws, ordinances, and regulations.
11.2 Appendices. The Appendices to this Agreement, attached hereto, and all
portions thereof and exhibits thereto, are, except as otherwise specified in
such Appendices, incorporated herein by reference and expressly made a part of
this Agreement.
11.3. Nonexclusive Franchise. The Franchise is nonexclusive. Nothing in this
Agreement shall affect the right of the Franchising Authority to grant to any
Person, or to itself, a franchise, consent, or right to occupy and use the
Streets, or any part thereof, for the construction, operation, or maintenance
of all or any part of a Communications System within the Franchise Area or for
any other purpose.
11.4 Enforceability of Agreement; No Opposition. By execution of this
Agreement, the Company pledges it will not assert in any manner at any time or
in any forum that the terms and conditions of this Agreement, the Franchise, or
the processes and procedures pursuant to which this Agreement was entered into
and the Franchise was granted are not valid or are not consistent with the
applicable law in existence on the Effective Date. Nothing herein shall be
interpreted as a waiver by the Company of any rights it might have under any
new federal or State law enacted after the Effective Date.
11.5 Entire Agreement. This Agreement, including all Appendices, embodies
the entire understanding and agreement of the Franchising Authority and the
Company with respect to the subject matter hereof and merges and supersedes all
prior representations, agreements, and understandings, whether oral or written,
between the Franchising Authority and the Company with respect to the subject
matter hereof, including, without limitation, all prior drafts of this
Agreement and any Appendix to this Agreement and any and all written or oral
statements or representations by any official, employee, agent, attorney,
consultant or independent contractor of the Franchising Authority or the
Company. All ordinances or parts of ordinances or other agreements between the
Company and the City that are in conflict with the provisions of this Agreement
are hereby declared invalid and superseded.
11.6 Notices. All notices shall be in writing and shall be sufficiently
given and served upon the other party by first class mail, registered or
certified, return receipt requested, postage prepaid, and
<PAGE> 20
addressed as follows:
THE FRANCHISING AUTHORITY:
Columbus Consolidated Government
Office of the City Manager
PO Box 1340
Columbus, Georgia 31902-1340
WITH A COPY TO:
Columbus Consolidated Government
Finance Department
Office of the Finance Director
PO Box 1340
Columbus, Georgia 31902-1340
COMPANY:
KNOLOGY of Columbus, Inc.
PO Box 510
West Point, Georgia 31833
11.7 Additional Representations and Warranties. In addition to the
representations, warranties, and covenants of the Company to the Franchising
Authority set forth elsewhere herein, the Company represents and warrants to
the Franchising Authority and covenants and agrees (which representations,
warranties, covenants and agreements shall not be affected or waived by any
inspection or examination made by or on behalf of the Franchising Authority)
that, as of the Effective Date:
11.7.1 Organization, Standing and Authorization. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly authorized to do business in the
State of Georgia and in the Franchise Area.
11.7.2 Compliance with Law. The Company is in substantial compliance
with all laws, ordinances, decrees and governmental rules and regulations
applicable to the System and has obtained all government licenses, permits, and
authorizations necessary for the operation and maintenance of the System.
11.8 Maintenance of System in Good Working Order. Until the termination of
this Agreement and the satisfaction in full by the Company of its obligations
under this Agreement, in consideration of the Franchise, the Company agrees
that it will maintain all of the material properties, assets and equipment of
the System, and all such items added in connection with any upgrade, in good
repair and proper working order and condition throughout the term of this
Agreement.
11.9 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
transferees and assigns. All of the provisions
<PAGE> 21
of this Agreement apply to the Company, its successors, and assigns.
11.10 No Waiver; Cumulative Remedies. No failure on the part of the
Franchising Authority or the Company to exercise, and no delay in exercising,
any right or remedy hereunder including, without limitation, the rights and
remedies set forth in Section 9 of this Agreement, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or remedy
preclude any other right or remedy, all subject to the conditions and
limitations established in this Agreement. The rights and remedies provided
herein including, without limitation, the rights and remedies set forth in
Section 9 of this Agreement, are cumulative and not exclusive of any remedies
provided by law, and nothing contained in this Agreement shall impair any of
the rights or remedies of the Franchising Authority under applicable law,
subject in each case to the terms and conditions of this Agreement.
11.11 Severability. If any section, subsection, sentence, clause, phrase, or
other portion of this Agreement is, for any reason, declared invalid, in whole
or in part, by any court, agency, commission, legislative body, or other
authority of competent jurisdiction, such portion shall be deemed a separate,
distinct, and independent portion. Such declaration shall not affect the
validity of the remaining portions hereof, which other portions shall continue
in full force and effect.
11.12 No Agency. The Company shall conduct the work to be performed
pursuant to this Agreement as an independent contractor and not as an agent of
the Franchising Authority.
11.13 Governing Law. This Agreement shall be deemed to be executed in the
City of Columbus, State of Georgia, and shall be governed in all respects,
including validity, interpretation and effect, and construed in accordance
with, the laws of the State of Georgia, as applicable to contracts entered into
and to be performed entirely within that State.
11.14 Survival. All representations and warranties contained in this
Agreement shall survive the term of the Agreement.
11.15 Claims Under Agreement. The Franchising Authority and the Company,
agree that, except to the extent inconsistent with Section 635 of the Cable Act
(47 U.S.C. SS. 555), any and all claims asserted by or against the Franchising
Authority arising under this Agreement or related thereto shall be heard and
determined either in a court of the United States ("Federal Court") located in
Georgia or in a court of the State of Georgia of appropriate jurisdiction. To
effectuate this Agreement and intent, the Company agrees that if the
Franchising Authority initiates any action against the Company in Federal Court
or in a Georgia court, service of process may be made on the Company through
registered or certified mail, return receipt requested, delivered to the
Company's agent for service of process as registered with the Georgia Secretary
of State's Office.
11.16 Modification. Except as otherwise provided in this Agreement, any
Appendix to this Agreement, or applicable law, no provision of this Agreement
nor any Appendix to this Agreement, shall be amended or otherwise modified, in
whole or in part, except by an instrument, in writing, duly executed by the
Franchising Authority and the Company, which amendment shall be authorized on
behalf of the Franchising Authority through the adoption of an appropriate
resolution or order by the Franchising Authority, as required by applicable
law.
<PAGE> 22
11.17 Police Power The Franchising Authority expressly reserves the right to
exercise the full scope of its municipal powers, including both its police
power and contracting authority, to promote the public interest and to protect
the health, safety and welfare of the citizens of Columbus Consolidated
Government.
IN WITNESS WHEREOF, the party of the first part, by its City Manager, thereunto
duly authorized by the City Council of said Franchising Authority, has caused
the corporate name of said Franchising Authority to be hereunto signed and the
corporate seal of said Franchising Authority to be hereunto affixed and the
Company, the party of the second part, by its officers thereunto duly
authorized, has caused its name to be hereunto signed and its seal to be
hereunto affixed as of the date and year first above written.
FRANCHISING AUTHORITY:
Columbus Consolidated Government
By /s/ Carmen J. Cavezza
Name: Carmen J. Cavezza
Title: City Manager
(Seal)
Attest: /s/ Tiny B. Washington
CABLE COMPANY:
KNOLOGY of Columbus, Inc.
By /s/ Felix L. Boccucci
Name: Felix L. Boccucci, Jr.
Title: Vice President
(Seal)
Attest: /s/ Dixie B. Noles
<PAGE> 23
APPENDIX A
DEFINED TERMS
For purposes of the Agreement to which this Appendix A is appended, the
following terms, phrases, words, and their derivations shall have the meanings
set forth herein, unless the context clearly indicates that another meaning is
intended.
"Abandonment" means: (I) the cessation, by act or failure to act of the Company
of the provision of all, or substantially all, of the Services then being
provided over the System to Subscribers or the Franchising Authority for
twenty-four (24) or more consecutive hours, except if due to an event beyond
the control of the Company; or (ii) the completion of any action described in
Section 8.1 or 8.2 of the Agreement without the prior written consent of the
Franchising Authority.
"Affiliated Person" means each Person who falls into one or more of the
following categories: (I) each Person having, directly or indirectly, a
Controlling Interest in the Company; (ii) each Person in which the Company has,
directly or indirectly, a Controlling Interest; (iii) each officer, director,
general partner, limited partner holding an interest of twenty-five percent
(25%) or more, joint venturer or joint venture partner, of the Company; and
(iv) each Person, directly or indirectly, Controlling, Controlled by, or under
common Control with, the Company; provided that "Affiliated Person" shall in no
event mean the Franchising Authority, the entity, if any, administering some or
all of the Access Channels, any limited partner holding an interest of less
than twenty-five percent (25%) of the Company, or any creditor of the Company
solely by virtue of its status as a creditor and which is not otherwise an
Affiliated Person by reason of owning a Controlling Interest in, being owned
by, or being under common ownership, common management, or common Control with,
the Company.
"Agreement" means the Agreement to which this Appendix A is appended, together
with all Appendices attached thereto and all amendments or modifications
thereto.
"Basic Service" means any Service tier which includes the retransmission of
local television broadcast signals and any equipment or installation used in
connection with Basic Service.
"Cable Act" means Title VI of the Communications Act of 1934, as amended, 47
U.S.C. (oo) 521 et seq.
"Communications System" means a "cable system" as defined in the Cable Act.
"Cable Service" means: cable service as defined in the Cable Act.
"Channel" means a "channel" or "cable channel" as defined in the Cable Act.
"Company" means KNOLOGY of Columbus a corporation duly organized and validly
existing under the laws of the State of Delaware, whose principal place of
business is located at 1241 O. G. Skinner Drive, West Point, Georgia 31833.
<PAGE> 24
"Control" or "Controlling Interest" means actual working control in whatever
manner exercised, including, without limitation, working control through
ownership, management, debt instruments, or negative control, as the case may
be, of the System, the Franchise or the Company.
"FCC" means the Federal Communications Commission, its designee, or any
successor thereto.
"Franchise Area" means the territory embraced within the total area of Muscogee
County, with the exception of Bibb City and Ft. Benning, as the same may be now
or hereafter fixed and established by law, including any areas annexed by the
Franchising Authority during the term of the Franchise as determined by the
Franchising Authority.
"Franchising Authority" means Columbus Consolidated Government, or the City of
Columbus, Georgia, or, as appropriate in the case of specific provisions of
this Agreement, any board, bureau, authority, agency, commission, department
of, or any other entity of or acting on behalf of, Columbus Consolidated
Government or the City of Columbus, Georgia, or any officer, official,
employee, or agent thereof, any designee of any of the foregoing, or any
successor thereto.
"Gross Revenue" means all revenue, including advertising revenue, which is
received, directly or indirectly, by the Company, by any Affiliated Person, and
any other Person from or in connection with the distribution of any Service on
the System or the provision of any Cable Service related activity in connection
with the System.
"Pay Service" means any Cable Service offered on a per Channel or per program
basis.
"Person" means any natural person or any association, firm, partnership, joint
venture, corporation, or other legally recognized entity, whether for-profit or
not-for-profit, but shall not mean the Franchising Authority.
"Responsible Franchising Official" means the body, organization or official to
whom the applicable rights or obligations have been delegated by the
Franchising Authority pursuant to applicable law.
"Service" means any Cable Service only, including any Basic Service, including
the provision of any equipment and any installation of equipment or facilities
and monthly use thereof, whether originated by the Company or any other Person,
which is offered to any Person in conjunction with, or distributed over, the
System, but does not include services other than Cable Service.
"Signal" means any transmission of radio frequency energy or of optical
information.
"Streets" means the surface of, and the space above and below, any and all
streets, avenues, highways, boulevards, concourses, driveways, bridges,
tunnels, parks, parkways, waterways, docks, bulkheads, wharves, piers, public
grounds and public places or waters within and belonging to the Franchising
Authority and any other property within the Franchise Area to the extent to
which there exist public easements or public rights of way.
"Subscriber" means any Person lawfully receiving any Service provided by the
Company by means
<PAGE> 25
of or in connection with the System, whether or not a fee is paid for such
Service.
"Subscriber Network" means that portion of the System over which Services are
provided primarily to residential Subscribers.
"System" means the Communications System which is to be constructed, operated,
maintained and upgraded, as necessary, by the Company pursuant to this
Agreement, including, without limitation, all real property, all tangible and
intangible personal property, buildings, offices, furniture, Subscriber lists,
cables, amplifiers and all other electronic devices used in connection
therewith and all rights, contracts and understandings with regard to any
matter related thereto.
<PAGE> 26
APPENDIX B
SYSTEM CHARACTERISTICS
The cable System serving Subscribers in the Columbus Consolidated Government
Franchise Area is currently being rebuilt. The completed System capacity is
750MHz. The Company currently provides and shall provide a minimum of 80
activated downstream Channels of programming and will launch over 80 additional
activated downstream Channels by June of 1999. The government access Channel is
presently connected via fiber routed through the Company's hub on 14th street
to the Company's headend. From there it is distributed to all KNOLOGY
Subscribers. During the term of the Agreement, the Company will provide the
Franchising Authority with the capability to override the audio and video
signals on the cable System in the event of a local emergency. (Additional
System details are included in the following 2 pages.)
<PAGE> 27
2
Headend, Hub and Production Facilities Information
The address of the Headend and satellite reception site is:
KNOLOGY of Columbus, Inc.
1701 Boxwood Place
Columbus, Georgia 31906
THE SUBSCRIBER NETWORK USES STANDARD CHANNELIZATON. THE SYSTEM DOES NOT CARRY FM
SIGNALS
PAY-PER-VIEW PROGRAMMING is ordered by the customer via a toll free telephone
call to Telecorp. Telecorp is directly connected to our billing system which is
real-time interfaced to our Scientific Atlanta system Manager 10 addressable
controller. The customer is then authorized for the next event they wish to
view. The same process occurs if the customer calls directly into our office
during business hours.
THERE ARE NO INSTITUTIONAL NETWORK FACILITIES AT THE HEADEND OR HUBS. There is,
however, an active fiber connection for the government access channel presently
in operation. The government facility on 10th avenue is connected via a fiber
route through our hub on 14th street to our headend.
TODAY WE ARE NOT REQUIRED TO PROVIDE EAS. However, in anticipation of a federal
requirement to do so in December, we have ordered an encoder to provide the
required signal to our headend. The encoder, when notified of an emergency will
make a connection to our IRIS video switcher which will over ride all channels
for a prescribed length of time. The length of video and audio over ride will
be preprogrammed by KNOLOGY with instructions to tune to another channel for
more details. This channel could be any designated channel. There are no plans
to over ride the local broadcast channels since this would be redundant, and a
possible interruption of an already existing emergency alert broadcast. The
above statements pertaining to EAS are believed to be consistent with FCC rules
and regulations.
STATUS MONITORING IN THE SYSTEM is accomplished with a DFMS (Digital Fiber
Monitoring System) for the SONET ring and Cornerstone HDT (Host Digital
Terminal). A Network Operation Center, which is manned 24 hours by 7 days
gathers alarms and dispatches appropriate personnel to repair in the event of a
fault. Devices are also being installed at selected customer homes that permit
monitoring to the customer level. These devices will be used for the purpose of
monitoring and identifying potential problems in the system. It has been proven
by KNOLOGY that where these devices have been deployed the reliability of our
network has increased.
Furthermore, the system has been developing monitoring technology with Superior
Electronics which will monitor our node, power supplies, lasers and receivers
in our headend and hubs, as well as other selected components at these
locations. Once this system is operational, we will have protected electronics
switching capabilities for our lasers and receivers. The Nodes already have
these protected electronics in them and we are in the process of installing
them in the hubs. Please refer to the Operation Support System later in this
technical profile.
The Hub addresses are:
Hub 1 1515 49th Street, Columbus, Georgia
Hub 2 3701 Weems Road, Columbus, Georgia
HUB INTERCONNECTIONS ARE VIA FIBER OPTICS. Conventional NTSC analog signals are
routed to the hubs via distributed feedback lasers. The signals, while
presently routed redundantly, will be capable of being automatically switched
in the event of a fiber cut or a laser or receiver failure. Data signal travel
on the SONET ring to the hubs and are currently operating in a self-healing
mode.
THE TOWER IS LOCATED AT THE HEADEND. There is no remote reception site, nor is
reception needed at the hubs. The tower is a 100-foot self-supporting Rohn
tower, which today is used solely for broadcast off air reception of television
signals. There are no lighting requirements due to tower height and distance
from airport.
<PAGE> 28
3
Standby powering for the headend and hubs is accomplished via natural gas Onan
generators. The headend uses a 100KW generator and the hubs utilize 20KW
generators. NORTEL MFA 150's provide UPS power for continuous 48-volt
operation. 12KW 120 volt UPS provide uninteruptable AC protection for the hubs,
and a 40KW unit provides AC protection for the headend.
Fiber Optics is presently in use between the headend, hubs and nodes. The use
of fiber optics is necessary for KNOLOGY to meet its design criteria. The
downstream spectrum is operational pursuant to the frequency spectrum
allocation plan. The upstream spectrum is operational pursuant to the frequency
spectrum allocation plan. In addition to the operation of conventional NTSC
signals, data signals are presently transmitted in approximately 8MHz of
upstream and downstream spectrum.
Local Origination and PEG channels are not required, with the exception of a
public and government access channel in use full time. In addition, a channel
has been set aside for the use of Troy State University. Programming for this
channel is obtained through a direct fiber link to the campus via Phenix City
Cable. Troy State expects to install lasers and receivers in the immediate
future, thereby permitting activation of this channel.
Currently, there are no operating interconnection(s) facilities with other
cable operators. With the exception of the link referenced above.
Distribution System
The KNOLOGY HFC system is approximately 291 plant miles and the acquired coax
system is an additional 200 miles. The number of parallel cables is running at
ratio of approximately 30%. The activated downstream is 50 to 750 MHz in 290
miles of coax plant and 50 to 550 MHz in approximately 200 miles of coax plant.
The number of activated downstream NTSC television channels is 80. No signals
are carried in the FM band. The upstream activated spectrum is 5-40 MHz in
approximately 290 miles of plant. The largest number of trunk amplifiers in
cascade is 12 at it is in the acquired 550 MHz plant. The largest number of
line extenders in cascade is 4 at it is in the acquired 550 MHz plant. The
acquired system represents approximately 200 miles of plant. Cable powering in
the acquired 550 MHz plant is standby 2 and 3 battery units providing about
1 1/2 hours of battery backup. These power supplies are fero-resonant 60-volt
units. The power supplies in the 750 MHz plant are 87 volt unity wave power
supplies which will provide 6 to 8 hour backup in the 1500 watt unit and
provide continuous backup in the 3000 watt version via a natural gas generator.
<PAGE> 29
APPENDIX C
GENERAL REQUIREMENTS FOR WORK ON THE SYSTEM
Licenses and Permits
The Company shall have the sole responsibility for diligently obtaining, at its
own cost and expense, all permits, licenses, or other forms of approval or
authorization necessary to construct, operate, maintain, repair or upgrade the
System, or any part thereof, prior to commencement of any such activity.
New Grades or Lines
If the grades or lines of any Street within the Franchise Area are changed at
any time during the term of the Agreement, then the Company shall, at its own
cost and expense and upon the request of the Franchising Authority, protect or
promptly alter or relocate the System, or any part thereof, so as to conform
with such new grades or lines. In the event that the Company refuses or
neglects to so protect, alter, or relocate all or part of the System, the
Franchising Authority shall have the right to break through, remove, alter, or
relocate all or any part of the System without any liability to the Company and
the Company shall pay to the Franchising Authority the costs incurred in
connection with such breaking through, removal, alteration, or relocation.
Protect Structures
In connection with the construction, operation, maintenance, repair, upgrade,
or removal of the System, the Company shall, at its own cost and expense,
protect any and all existing structures belonging to the Franchising Authority
and all designated landmarks. The Company shall obtain the prior approval of
the Franchising Authority before altering any water main, sewerage or drainage
system, or any other municipal structure in the Streets required because of the
presence of the System in the Streets. Any such alteration shall be made by the
Company, at its sole cost and expense, and in a manner prescribed by the
Franchising Authority. The Company agrees that it shall be liable, at its own
cost and expense, to replace or repair and restore to serviceable condition, in
a manner as may be specified by the Franchising Authority, any Street or any
municipal structure involved in the construction, operation, maintenance,
repair, upgrade or removal of the System that may become disturbed or damaged
as a result of any work thereon by or on behalf of the Company pursuant to the
Agreement.
No Obstruction
In connection with the construction, operation, maintenance, repair, upgrade,
or removal of the System, the Company shall not obstruct the Streets, subways,
railways, passenger travel, river navigation, or other traffic to, from, or
within the Franchise Area without the prior consent of the appropriate
authorities.
Movement of Wires
<PAGE> 30
The Company shall, upon prior written notice by the Franchising Authority or
any Person holding a permit to move any structure, temporarily move its wires
to permit the moving of said structure. The Company may impose a reasonable
charge on any Person other than the Franchising Authority for any such movement
of its wires.
Safety Precautions
The Company shall, at its own cost and expense, undertake all necessary and
appropriate efforts to prevent accidents at its work sites, including the
placing and maintenance of proper guards, fences, barricades, watchmen, and
suitable and sufficient lighting.
Moving Wires
The Franchising Authority may, at any time, in case of fire, disaster, or other
emergency, as determined by the Franchising Authority, in its sole discretion,
cut or move any of the wires, cables, amplifiers, appliances, or other parts of
the System, in which event the Franchising Authority shall not incur any
liability to the Company, any Affiliated Person or any other Person. When
possible, the Company shall be consulted prior to any such cutting or movement
of its wires and be given the opportunity to perform such work itself. All
costs to repair or replace such wires, cables, amplifiers, appliances or other
parts of the System shall be borne by the Company.
<PAGE> 31
APPENDIX D
RATES, TERMS AND CONDITIONS
Basic Service
[to be inserted; could be satisfied by rate card]
Pay Service
[to be inserted; could be satisfied by rate card]
Equipment and Installation
[to be inserted; could be satisfied by rate card]
<PAGE> 32
KNOLOGY OF COLUMBUS
SERVICE AND INSTALLATION PRICES
(EFFECTIVE AUGUST 1, 1998)
<TABLE>
<CAPTION>
BASIC SERVICE
<S> <C>
Basic Service (Channels 322) $ 6.83
Expanded Basic (Channels 2379) $16.78
------
Total Basic $23.61
"MULTICHOICE" PREMIUM CHANNELS
(available with addressable converter only)
If you have HBO you'll be given HBO2 at no additional charge plus HBO3 is free
to all HBO subscribers who have an additional premium channel.
If you have Cinemax you will automatically receive Cinemax 2 at no additional
charge.
PREMIUM SERVICES: A La Carte Rates
HBO $10.95
Cinemax $ 9.95
Showtime $ 6.95
The Movie Channel $ 6.95
STARZ and Encore $ 7.50
Encore $ 1.95
Pay-Per-View (per movie, events vary) $ 3.95
Set Top Converter $ 3.00
OLOVISION DIGITAL TV*
Tier1 $ 3.00
Tier2 $ 3.00
Movies $ 2.95
Adult $ 5.95
Installation $ 9.95
Basic $12.95
Additional Converters $12.95
Spare Remotes $ 3.00
</TABLE>
* All rates shown are monthly rates exclusive of equipment, taxes and franchise
fees
<PAGE> 33
KNOLOGY OF COLUMBUS
SERVICE AND INSTALLATION PRICES
(EFFECTIVE AUGUST 1, 1998)
<TABLE>
<CAPTION>
INSTALLATION RATES
- ------------------
New Installation*
- -----------------
<S> <C>
Initial Outlet $29.95
Additional Outlet (same trip) $ 9.95
Additional Outlet (separate trip) $19.95
Transfer of Service $19.95
Wall Fish (ea) $25.00
Reconnections/Upgrades
- ----------------------
Reconnect Fee $19.95
Activate Existing Outlet $ 9.95
Trip Charge $10.00
Premium Upgrade $ 5.00
Relocate Outlet $19.95
EQUIPMENT CHARGES
- -----------------
Addressable Converter $ 3.00
</TABLE>
*KNOLOGY is currently waving Installation Charges
<PAGE> 34
APPENDIX E
CUSTOMER SERVICE STANDARDS
The Company ("cable operator") shall be subject to the following customer
service standards. Nothing herein shall be interpreted to preclude the Company
from adopting customer service standards that exceed the requirements set forth
below in this Appendix E.
SECTION 1 -- OFFICE HOURS AND TELEPHONE AVAILABILITY
1.0 Cable System Office Hours and Telephone Availability.
1.1 The cable operator will maintain a local, toll-free or collect call
telephone access line which will be available to its Subscribers 24 hours a
day, seven days a week.
(a) Trained Company representatives will be available to respond to
customer telephone inquiries during normal business hours.
(b) After normal business hours, the access line may be answered by a
service or an automated response system, including an answering machine.
Inquiries received after normal business hours must be responded to by a
trained Company representative on the next business day.
1.2 Under normal operating conditions, telephone answer time by a customer
representative, including wait time, shall not exceed thirty (30) seconds when
the connection is made. If the call needs to be transferred, transfer time
shall not exceed thirty (30) seconds. These standards shall be met no less than
ninety (90) percent of the time under normal operating conditions, measured on
a quarterly basis.
1.3 The operator will not be required to acquire equipment or perform
surveys to measure compliance with the telephone answering standards above
unless an historical record of complaints indicates a clear failure to comply.
1.4 Under normal operating conditions, the customer will receive a busy
signal less than (3) percent of the time.
1.5 Customer service center and bill payment locations will be open at
least during normal business hours and will be conveniently located in the
County in which the Franchising Authority is located.
SECTION 2 -- INSTALLATIONS, OUTAGE CORRECTION AND
CUSTOMER SERVICE CALLS
2.0 Installations, Outages and Service Calls. Under normal operating
conditions, each of the
<PAGE> 35
following four standards will be met no less than ninety five (95) percent of
the time measured on a quarterly basis:
2.1 Standard installations will be performed within seven (7) business
days after an order has been placed. "Standard" installations are those that
are located up to 125 feet from the existing distribution System.
2.2 Excluding conditions beyond the control of the operator, the cable
operator will begin working on "Service interruptions" promptly and in no event
later than 24 hours after the interruption becomes known. The cable operator
must begin actions to correct other service problems the next business day
after notification of the service problem.
2.3 The "appointment window" alternatives for installations, service
calls, and other installation activities will be either a specific time or, at
maximum, a four-hour time block during normal business hours. (The operator may
schedule service calls and other installation activities outside of normal
business hours for the express convenience of the customer.)
2.4 An operator may not cancel an appointment with a customer after the
close of business on the business day prior to the scheduled appointment.
2.5 If a cable operator representative is running late for an appointment
with a customer and will not be able to keep the appointment as scheduled, the
customer will be contacted. The appointment will be rescheduled, as necessary,
at a time which is convenient for the customer.
2.6 The cable operator's failure to correct outages or to make repairs
within the stated time periods shall be excused in the following circumstances:
(a) if the cable operator could not obtain access to the customer's
premises; or
(b) if the Franchising Authority, acting reasonably, agrees with the cable
operator that correcting such outages or making such repairs was not reasonably
possible within the allotted time period.
SECTION 3 -- CUSTOMER COMMUNICATIONS, NOTICES AND BILLING
3.0 Communications Between Cable Operators and Cable Subscribers.
3.1 Notifications to Subscribers.
(a) The cable operator shall provide written information on each of the
following areas at the time of installation of Service, at least annually to
all Subscribers, and at any time upon request:
(1) Products and Services offered;
(2) Prices and options for programming Services and conditions of
subscription to programming
<PAGE> 36
and other Services;
(3) Installation and Service maintenance policies;
(4) Instructions on how to use the Cable Service;
(5) Channel positions programming carried on the System; and
(6) Billing and complaint procedures, including the address and telephone
number of the local Franchise Authority's cable office.
(b) Customers will be notified of any changes in rates, programming
Services or Channel positions as soon as possible using any reasonable means at
the Company's sole discretion. Notice must be given to Subscribers a minimum of
thirty (30) days in advance of such changes if the change is within the control
of the cable operator. In addition, the cable operator shall notify Subscribers
thirty (30) days in advance of any significant changes in the other information
required by the preceding paragraph.
3.2 Billing.
(a) Bills will be clear, concise and understandable. Bills must be fully
itemized, with itemizations including, but not limited to, basic and premium
Service charges and equipment charges. Bills will also clearly delineate all
activity during the billing period, including optional charges, rebates and
credits.
(b) In case of a billing dispute, the cable operator must respond to a
written complaint from a Subscriber within 30 days.
3.3 Refunds. Refund checks will be issued promptly, but no later than
either:
(a) The customer's next billing cycle following resolution of the request
or thirty (30) days, whichever is earlier, or
(b) The return of the equipment supplied by the cable operator if Service
is terminated.
3.4 Credits. Credits for Service will be issued no later than the
customer's next billing cycle following the determination that a credit is
warranted.
SECTION 4 -- CUSTOMER COMPLAINTS
4.0 Complaints.
4.1 Complaints for purposes of this Agreement, "complaint" shall mean any
written
<PAGE> 37
communication by a Subscriber or oral communication by a Subscriber reduced to
writing, including to a computer form, expressing dissatisfaction with any
nonprogramming aspect of the cable operator's business or operation of the
System.
4.2 Referral of Complaints from the Franchising Authority to the Company.
(a) If the Franchising Authority is contacted directly about a complaint
concerning the cable operator, the Franchising Authority shall notify the
Company.
(b) Within seven (7) business days after being notified about the
complaint, the Company shall issue to the Franchising Authority a report
detailing the investigation thoroughly, describing the findings, explaining any
corrective steps which are being taken and indicating that the Person who
registered the complaint has been notified of the resolution.
4.3 Complaint Records. The cable operator shall maintain complaint
records, which shall record the date a complaint is received, the name and
address of the affected Subscriber, a description of the complaint, the date of
the resolution, a description of the resolution and an indication of whether
the resolution was appealed
SECTION 5 -- CREDITS
5.0 Grounds. As a result of the cable operator's failure to comply with
these customer service standards, the cable operator shall provide to each
affected Subscriber or potential Subscriber, as applicable, the following
credits:
5.1 for a failure of the cable operator's crew to arrive at the
Subscriber's premises within the promised period for any installation Service
as provided in this Appendix, a credit equal to free installation;
5.2 for a failure of the cable operator to complete installation of
Service within the scheduled time period provided for in this Appendix, unless
otherwise excused, a credit equal to free installation;
5.3 for a "Service interruption" as defined in this Appendix or for any
other Service problem which remains unrepaired for more than forty-eight (48)
hours after either the cable operator receives from the Subscriber a request
for repair service (provided that, to the extent access to the Subscriber's
premises is required to effect such repair, the Subscriber has granted the
cable operator such access) or the cable operator learns of such problem, upon
Subscriber request a minimum credit in an amount equal to one-thirtieth (1/30)
times the total bill for Cable Services of such Subscriber for the preceding
billing period, for each twenty-four (24) hour period during which such
reception problem persists for at least four (4) hours;
5.4 for a failure of the cable operator's crew to arrive to correct any
outage or make any repair during the stated time period, as specified in this
Appendix (except where such failure is excused by
<PAGE> 38
KNOLOGY of Columbus
City of Columbus Georgia
Q4 - 1998 Franchise Computation
<TABLE>
<CAPTION>
October November December Q4
Item of Revenue 1998 1998 1998 Total
- --------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Basic Service 347,162 372,329 372,755 1,092,246
Premium Channels 92,659 103,126 108,822 304,607
Pay-Per-View 8,804 10,488 12,376 31,668
Misc Program Revenue 1,251 3,954 (355) 4,851
Reconnection Charges 136 0 229 365
Lost/Stolen Remotes 75 (19) 737 792
Installation Revenue 3,286 3,616 6,432 13,334
Converter Box Rental 32,238 34,297 35,644 102,178
Late Payment Penalties 20,270 20,770 24,665 65,705
Line Assurance 2,070 1,929 1,897 5,895
Cable Guides 3,517 3,054 3,143 9,714
Lease/Rental of Facilities 10,393 10,420 10,448 31,261
Franchise Fee Revenue 25,361 26,560 26,472 78,392
Programming Rebates 0 19,984 57,408 77,393
Home Shopping Commissions 2,228 502 3,507 6,236
Advertising Revenues 0 0 0 0
Disc. Credit Allow (21,183) (51,352) (34,868) (107,403)
Cable Modem Services 7,994 9,528 14,162 31,684
Modem Rental 1,834 2,231 2,449 6,514
Modem Installation 0 1,489 0 1,489
------------------------------------------------------
Total Revenue 538,094 572,905 645,923 1,756,922
Less: Revenue not subject to Franchise Fees
Installation Revenue 3,286 3,616 6,432 13,334
------------------------------------------------------
Total Revenue not subject to Franchise Fees 3,286 3,616 6,432 13,334
Total Revenue subject to Franchise Fees 534,809 569,289 639,491 1,743,589
Franchise Fee Calc (5% of Total Revenue) 26,740.43 28,464.46 31,974.54 87,179.43
Check Figures:
Net Cable Revenue off Income Stmt 528,267 559,657 629,312 1,717,235
Net Modem Revenue off Income Stmt 9,828 13,248 16,611 39,687
------------------------------------------------------
Total Revenue for Franchise Calc 538,094 572,905 645,923 1,756,922
======================================================
Variance 0 0 0 0
</TABLE>
<PAGE> 39
this Appendix or except where such crew is no longer required due to a repair
effected in a nearby portion of the System, in which case the Subscriber shall
be notified by telephone that a visit to such Subscriber's residence is no
longer necessary), a credit in an amount equal to the total number of days such
Subscriber does not have Service; and
5.5 for the improper termination of Service to a Subscriber, free
reconnection and a credit in an amount equal to all charges billed to such
Subscriber for the period such Subscriber does not have Service.
SECTION 6 -- FAILURE TO COMPLY WITH THESE REQUIREMENTS
6.0 Material Requirements
6.1 Subject to the due process procedures set forth in Section 9 of this
Agreement, the Company agrees that substantial failure to comply with any
material requirement set forth in these customer service standards shall
constitute a failure to comply with a material provision of this Agreement.
6.2 Liability for Contractors'/Subcontractors' Failure to Comply. If the
Company fails to take reasonable steps to ensure that its contractors,
subcontractors or agents abide by these customer service standards, the Company
shall be liable for any breach of these customer service standards committed by
its contractors, subcontractors, or agents just as if the Company itself had
committed the breach.
SECTION 7 -- DEFINITIONS
7.0 Definitions.
7.1 Normal Business Hours. The term "normal business hours" means those
hours during which most similar businesses in the community are open to serve
customers. In all cases, "normal business hours" must include some evening
hours at least one night per week and/or some weekend hours.
7.2 Normal Operating Conditions. The term "normal operating conditions"
means those service conditions which are within the control of the cable
operator. Those conditions which are not within the control of the cable
operator include, but are not limited to, natural disasters, civil
disturbances, power outages, telephone network outages, and severe or unusual
weather conditions. Those conditions which are ordinarily within the control of
the cable operator include, but are not limited to, special promotions,
pay-per-view events, rate increases, regular peak or seasonal demand periods,
and maintenance or upgrade of the Communications System.
7.3 Service Interruption. The term "Service interruption" means the loss
of picture or sound on one or more cable Channels.
<PAGE> 40
APPENDIX F
CABLE REVENUES REPORT
(Please complete with statistics for the most recent franchise fee payment
period available and attach a current company rate card indicating all fees,
charges, rates etc.)
<TABLE>
<S> <C> <C>
Local Government Columbus
----------------------------------------
Period Report Covers 0-4 98
----------------------------------------
Cable Operator KNOLOGY of Columbus, Inc.
----------------------------------------
Number of Subscribers - Total 16,234 Cable 299 Modem
(end of report period) --------------------------
Franchise Fee Percentage 5%
--------------------------------
# residential subscribers 16,136
----------------
# bulk subscribers 98
----------------
# other 299 (Modem)
----------------
</TABLE>
<TABLE>
<CAPTION>
Charge to Amount of
Subscriber per Revenue
Residential Subscribers Month/Transaction Report Period
<S> <C> <C>
Basic Service 6.83 1,089,115 --
--------------- -------------
Expanded Basic Service 16.78 Combined
--------------- -------------
A la carte (# channels _) 0 0 --
--------------- -------------
Premium Channels 1.95 - 10.95 304,607
--------------- -------------
Duplicate Premium Channels 0 0
--------------- -------------
Pay per view 3.95 31,688
--------------- -------------
Pay per view access charge 0 0
--------------- -------------
Converter box rental 3.00 102,178
--------------- -------------
Converter box sale 0 0
--------------- -------------
Home wire maintenance .99 5,895
--------------- -------------
Cable guides 1.95 9,714
--------------- -------------
Remote rental 0 0
--------------- -------------
Remote sale 0 792
--------------- -------------
Additional Outlet (per month) 0 0
--------------- -------------
Downgrade of service fee 0 0
--------------- -------------
Installation charges 19.95* 13,334 --
--------------- -------------
Upgrade fee 5.00 Combined
--------------- -------------
Reconnection charges 19.95 --
--------------- -------------
Collection Activity fee 0 0
--------------- -------------
Advertising revenues N/A 0
--------------- -------------
</TABLE>
* Currently Being Waved
<PAGE> 41
<TABLE>
<S> <C> <C>
Home shopping commissions N/A 6,236
--------------- -------------
Late payment penalties 5.00 65,705
--------------- -------------
FM service 0 0
--------------- -------------
DMX service N/A 0
--------------- -------------
Internet service 29.95 - 49.95 31,684
--------------- -------------
Other Franchise fees N/A 78,392
--------------- -------------
Taxes
--------------- -------------
Returned Check Charge
--------------- -------------
Miscellaneous Program Credits 77,393
--------------- -------------
(specify) Facilities Lease 31,261
--------------- -------------
Modem Rent $12.00 6,514
Modem Install $49.95 1,489
Misc. Rev. 4,851
Bulk Subscribers
# of Bulk Accounts 98
-------------
Amount of Revenue for report period $ 3,131.00
-------------
Total $ 1,743,589
------------
</TABLE>
- --------------------------------------------------------------------------------
Please indicate whether or not the following are deducted from gross receipts
prior to computation of the franchise fee payment.
<TABLE>
<CAPTION>
Amount
Deducted
Report
Period
<S> <C> <C> <C>
Property taxes
---------- ---------- ----------------
Bad debts
---------- ---------- ----------------
Unreturned converters
---------- ---------- ----------------
Unreturned remotes
---------- ---------- ----------------
NSF check payments
---------- ---------- ----------------
Business license taxes
---------- ---------- ----------------
Premium channel
---------- ---------- ----------------
Charges
---------- ---------- ----------------
Installation fees CABLE ONLY (13,334)
---------- ---------- ----------------
Connection fees
---------- ---------- ----------------
Reconnection fees
---------- ---------- ----------------
Deposit fees
------------- ---------- ---------- ----------------
Other
------------- ---------- ---------- ----------------
</TABLE>
<PAGE> 42
------------- ---------- ---------- ----------------
<TABLE>
<CAPTION>
TOTALS:
<S> <C>
Gross Revenue for Report Period $ 1,756,922
-----------
Deduction for Report Period 13,334
-----------
Amount of Franchise fees for Report Period 87,179.43
-----------
</TABLE>
/s/ 3/3/99
- ------------------------------------- -----------------
Signature Company Official Completing Form Date
<PAGE> 43
APPENDIX G
Throughout the Franchise term, the Company shall designate one (1) Channel for
the use of the Franchising Authority for the Government Access Channel and one
(1) Channel for the Educational Access Channel, which Educational Access
Channel shall be allocated to the Muscogee County Board of Education. The
Company shall use its best efforts to assign a Channel number for the
Government and Educational Channels which is consistent with the Channel
numbers assigned to those Channels by other Cable Systems operating in the
Franchise Area.
On sixty (60) day's prior written request to the Franchising Authority, on such
terms and conditions as the Franchising Authority may in its sole discretion
determine and subject to the approval of the Franchising Authority, the Company
shall be permitted to use such designated Channel capacity for the provision of
other Services if such Channel capacity is not being used by either the
Franchising Authority or the Muscogee County Board of Education Such permitted
use shall cease upon sixty (60) day's prior written notice from the Franchising
Authority to the Company.
<PAGE> 44
ATTACHMENT A
KNOLOGY FIBER AGREEMENT
This Agreement is made and entered into as of the 16th day of March,
1999 by and between the Columbus Consolidated Government, a political
subdivision of the State of Georgia (the "City"), and KNOLOGY of Columbus,
Inc., a Delaware corporation ("KNOLOGY").
WHEREAS, KNOLOGY is the "Grantee" of a renewal cable franchise granted
by the City on March 16, 1999 (the "Franchise");
WHEREAS, the City seeks capital support for its public, educational
and governmental access facilities and I-Net;
WHEREAS, pursuant to the Franchise, KNOLOGY operates a Communication
System to provide cable television services in the City (the "System");
WHEREAS, the City desires to obtain the right to use a certain portion
of the System's fiber capacity along several routes ("Routes") as described in
Exhibit A for the purpose of developing an Institutional Network or I-Net
("I-Net");
WHEREAS, the Franchise grants KNOLOGY the right to use the City's
"Streets" as that term is defined in the Franchise;
WHEREAS, KNOLOGY desires the right to utilize certain rights-of-way,
easements and other rights which are owned by the City, in connection with
constructing and installing the I-Net along the Routes;
WHEREAS, KNOLOGY has agreed to make certain payments to the City in
connection with certain proposed operations by the City.
NOW, THEREFORE, for and in consideration of the promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Fiber Transfer. KNOLOGY hereby transfers all right, title and interest
in eight fibers (the "Fibers") to be designated as the City's I-Net, such I-Net
to be installed by KNOLOGY by December 31, 1999, in and along the Routes
identified in Exhibit A attached hereto. The City recognizes and acknowledges
that the City will be responsible for purchasing, leasing, installing,
maintaining and operating any and all equipment and electronics necessary for
the City to use the Fiber. There will be no charge to the City for the
construction or use of the I-Net, or for its installation or maintenance by
KNOLOGY provided however, KNOLOGY shall have no obligation to maintain the
Fiber after the termination of this Agreement or in the event the Agreement is
not renewed. KNOLOGY will be responsible for maintaining and repairing the
I-Net, in accordance with its internal procedures and commercially reasonable
industry standards. The City agrees that it will not perform any maintenance
and repair on the I-Net, without the prior written consent of KNOLOGY. Upon
<PAGE> 45
KNOLOGY's reasonable request, the City agrees to provide reasonable cooperation
and non-financial assistance in KNOLOGY's efforts to deploy and construct the
I-Net. The City agrees that the equipment and electronics utilized by the City
in connection with the I-Net will not interfere with or impair any of the
services or facilities owned, leased or operated by KNOLOGY in connection with
the System deployed along the Routes. The City agrees that KNOLOGY will have no
liability or obligation with respect to the City's use of the I-Net other than
as set forth in this Agreement. KNOLOGY makes no representations or warranties,
express or implied, regarding the I-Net, including, without limitation, any
warranties as to merchantability or fitness for the use intended.
2. Restrictions on Use. The City agrees that its use of the
Fiber shall be restricted to use by the City, its employees or its agents, for
internal communications. The City may not use or permit third parties to use,
the Fibers to transport communications, broadcast or data services to, or on
behalf of, any third party for a fee or other compensation. The restrictions on
the City's use of the Fiber under this paragraph 2 shall continue for a period
of two years after any termination of this Agreement by the City.
3. Grant of Right-of-Way Rights. During the Term, KNOLOGY shall have the
right to use the Streets to install the I-Net on the Routes consistent with the
Franchise. During the term, KNOLOGY shall have the continuing right of access
to such Streets subject to any limitations under the Franchise for the purpose
of constructing operating, inspecting, testing, repairing, maintaining and
upgrading the I-Net. The City will give KNOLOGY at least ninety (90) days prior
written notice before the City loses its underlying rights with respect to any
of the Streets wherein the I-Net is installed. KNOLOGY shall construct and
install the Fiber in the Routes in accordance with the Franchise and applicable
state and local laws and regulations. In the event the Franchise is terminated,
the City agrees that it will not exercise any right under the Franchise to
require KNOLOGY to remove the I-Net, including any fiber optic cable containing
the I-Net Fiber, from the Routes. In the event that part of the Streets along
the Route are eliminated discontinued and closed, Knology shall have no
obligation to install, maintain or repair the Fiber along such portions of the
Streets.
4. Payments to the City. KNOLOGY hereby agrees to make the
following payments to the City:
(a) On or before March 8, 1999, KNOLOGY agrees to pay to the City
the sum of $150,000. These funds are to be designated as a capital grant to be
used in support of the City's public, educational, or government access
facilities.
(b) On or before March 8,1999, KNOLOGY agrees to pay to the City
an additional sum of $150,000. These funds are to be designated as a capital
grant in support of the implementation of the City's I-Net.
5. Indemnification. This Agreement shall be governed by the
liability and indemnity provisions contained in the Franchise.
6. Notices. All notices and communications concerning this
Agreement shall be delivered
<PAGE> 46
in accordance with the terms of the Franchise.
7. Term. The Term of this Agreement shall commence on the date
of this Agreement and shall end upon the termination or expiration of the
Franchise; provided, however, that if the Franchise is renewed, this Agreement
shall be renewed for a term to coincide with the term of the renewed franchise.
8. Restrictions against Assignments and Other Transfers. This
Agreement shall be governed by the provisions of Section 8 of the Franchise in
the event that KNOLOGY seeks a transfer of the Franchise that is subject to
Section 8 of the Franchise.
9. Miscellaneous. The relationship of the parties hereunder
shall always and only be that of independent contractors, and shall not be
construed to be a partnership or joint venture. Neither party shall have the
right to obligate the other party in any manner, by contract or otherwise. Each
party represents that it has the full power and authority to enter into and
perform this Agreement and that the person signing this Agreement on behalf of
such party has been properly authorized and empowered to enter into this
Agreement. In the event any of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the unaffected provisions of this
Agreement shall be unimpaired and remain in full force and effect. The City and
KNOLOGY shall negotiate in good faith to substitute for such invalid, illegal
or enforceable provisions a mutually acceptable provision consistent with the
original intention of the parties hereto. This Agreement and the Franchise
constitutes the entire agreement between the parties with respect to the
subject matter hereof. This Agreement may not be modified except in writing
signed by both parties. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to conflict
of laws and principles.
10. Breach. KNOLOGY agrees that the City shall have the specific
rights and remedies set forth in Section 9 of the Franchise in the event of a
breach by KNOLOGY of this Agreement. In the event of any material breach by the
City of Paragraph 2 or of its obligation under Paragraph 1 to not utilize
equipment and electronics that interfere with or impair any of the services or
facilities used by Knology in connection with the System along the Routes,
which breach is not cured by the City within ninety (90) days after written
notice from Knology, Knology shall have the right to seek injunctive relief
from a court of competent jurisdiction requiring the City to cure any such
breach.
11. Additional Fiber. The City acknowledges that at the time
KNOLOGY installs the Fibers for the I-Net, KNOLOGY may install a Fiber optic
cable that includes the Fiber and additional fiber strands ("Additional
Fiber"). Nothing herein prohibits KNOLOGY from using the Additional Fiber to
provide Services permitted by the Franchise, subject to all terms and
conditions of such Franchise. Such use shall not interfere with the City's use
of the I-Net or the City's Fiber.
12. Technical Requirements. KNOLOGY shall link the City's Fibers
to those locations and buildings shown in Exhibit "B" in the manner as
designated in Exhibit "B".
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement
<PAGE> 47
as of the day and year first above written.
COLUMBUS CONSOLIDATED GOVERNMENT
By: /s/ Carmen J. Cavezzi
---------------------------------
Name: Carmen J. Cavezzi
---------------------------------
Title: City Manager
KNOLOGY OF COLUMBUS, INC.
By: /s/ Felix Boccurri, Jr.
---------------------------------
Name: Felix Boccurri, Jr.
---------------------------------
Title: Vice President
<PAGE> 48
INTRODUCED at a regular meeting of the Council of Columbus, Georgia, held on
the 9th Day of March, 1999; introduced a second time at a regular meeting held
on the 16th Day of March, 1999 and adopted at said meeting by the affirmative
vote of ten members of said Council.
<TABLE>
<S> <C>
Councilor Allen voting YES
---
Councilor Henderson voting YES
---
Councilor Hunter voting YES
---
Councilor McDaniel voting YES
---
Councilor Poydasheff voting YES
---
Councilor Rodgers voting YES
---
Councilor Smith voting YES
---
Councilor Suber voting YES
---
Councilor Turner voting YES
---
Councilor Woodson voting YES
---
</TABLE>
/s/ Tiny B. Washington /s/ Bobby Peters
- ------------------------------ ----------------------
Tiny Washington, Clerk of Council Bobby G. Peters, Mayor
This ordinance submitted to the Mayor for his signature, this 16th day of
March, 1999.
Sec: 3-202 (1)
/s/ Tiny B. Washington
- ----------------------
Clerk of Council
This ordinance received, signed by the Mayor, at 3:40 P.M. on th 17th day of
March 1999, and became law at said time received and became effective at 12:00
noon the following day.
sec: 3-202 (2) /s/ Tiny B. Washington
----------------------
Clerk of Council
<PAGE> 49
EXHIBIT A
THEI I-Net ROUTES
(See attached map)
<PAGE> 50
[MAP - Initial City of Columbus Route Planning map.]
<PAGE> 51
EXHIBIT B
INSTITUTIONAL NETWORK SITES
1011 Cusseta Road
Automotive Shop-Public Services
1140 Cusseta Road
Facilities Maintenance-Public Services
814 Linwood Boulevard
METRA Transit
1905 Third Avenue
Emergency Medical Services
400 Fourth Street
Civic Center
110 Fourth Street
Parks and Recreation Administration
107 41st Street
Comer Auditorium
INSTALLATION: Install inner ducts in existing underground duct running from the
Government Center to the remote locations specified. Pull a continuous pair of
fiber optic cable through the inner duct from the Information Technology
Department 5th Floor of the Government Center to each remote location. Each run
to the remote site must be a pair of fiber optic cables to be used with data
equipment. Terminate the fiber in an appropriate termination block (furnished by
Knology) in an existing enclosure located in the Information Technology Computer
Room. Test fiber optic cables with an OTDR.
A. Multi-mode 62.5 fiber optic cable should be OCC Part number GM950801-01 or
equivalent.
B. Fiber optic connectors must be Type ST. Cable connectors should be Augat
Communication Products part #69203-201G or equivalent.
C. Inner duct should be Duraline Part #G400M10 or equivalent. Inner duct should
be terminated into a wall mounted metallic pull box in the basement of the
Government Center. Inner duct pulled within a building should be Duraline Part
#P400M10 or equivalent suited for use in plenum ceilings. All inner duct ends
should be securely terminated into the mating metallic enclosures.
<PAGE> 1
EXHIBIT 10.30
BUIST, MOORE, SMYTHE & McGEE, P. A.
ATTORNEYS AT LAW
P.O BOX 999
FIVE EXCHANGE STREET
CHARLESTON, S.C. 29402
-------------
843/722-3400
FACSIMILE 843/723-7398
<TABLE>
<S> <C> <C>
HENRY B. SMYTHE ELIZABETH HENRY WARNER HENRY BUIST (1895-1977)
BENJ. ALLSTON MOORE, JR. DAVID H. CRAWFORD B. ALLSTON MOORE (1900-1988)
JOSEPH H. McGEE DAVID S. YANDLE AUGUSTINE T. SMYTHE (1918-1991)
GORDON D. SCHRECK J. MARSHALL ALLEN
HENRY R. SMYTHE JR. SHAWN M. FLANAGAN* ** CABLE "CONFEREES"
SUSAN M. SMYTHE JULIUS H. HINES TELEX 57-6488
W. FOSTER GAILLARD DAVID S. COX
HENRY E. GRIMBALL JONATHAN D. CRUMLY, SR. INTERNET E-MAIL ADDRESS
KENNETH F. SMITH *** DWAYNE M. GREEN [email protected]
DAVID B. McCORMACK *** THOMAS L. HARPER, JR.
C. ALLEN GIBSON, JR. CYNTHIA M. SPIETH
MORRIS A. ELLISON SHANE E. SWANSON
CHARLES P. SUMMERALL, IV **** L. GREGORY C. HORTON
JAMES L. PARRIS* ------------
JAMES D. MYRICK Of Counsel
DOUGLAS M. MULLER DAVID M. COLLINS
</TABLE>
March 11, 1999
* Certified Tax Specialist
** Certified Estate Planning & Probate Law Specialist
*** Certified Employment & Labor Law Specialist
**** Certified Bankruptcy Specialist
Direct Dial
(843) 720-4636
email:[email protected]
BY OVERNIGHT MAIL
Ms. Marilyn Pittman
KNOLOGY Holdings, Inc.
Post Office Box 510
West Point, Georgia 31833
Re: KNOLOGY of Charleston, Inc. - Mt. Pleasant
BMSM File No: 6796.0000
Dear Marilyn:
Enclosed please find the original franchise agreement with
Mount Pleasant, to be executed by Felix. Their attorney has asked that
we expedite this procedure which is why I am sending it to you
overnight. Please overnight it to me as well.
Please call me if you have any questions.
Sincerely yours,
/s/ Thomas L. Harper, Jr.
Thomas L. Harper, Jr.
TLH/dlh
enclosures
<PAGE> 2
ORDINANCE NO. 98054
STATE OF SOUTH CAROLINA ) ORDINANCE GRANTING A NON-EXCLUSIVE
) CABLE TELEVISION FRANCHISE AND
COUNTY OF CHARLESTON ) TELECOMMUNICATIONS FRANCHISE TO
) KNOLOGY OF CHARLESTON, INC. AND
TOWN OF MOUNT PLEASANT ) ACKNOWLEDGING AGREEMENTS
PERTAINING THERETO
WHEREAS, pursuant to the South Carolina Code of Laws and all
applicable federal law, the Town of Mount Pleasant hereby exercises its power
and authority to regulate the operation of any cable television system and
telecommunications system which serves customers within the Town of Mount
Pleasant; and
WHEREAS, KNOLOGY of Charleston, Inc. has heretofore submitted plans and
qualifications, and has requested of Mount Pleasant Town Council the awarding of
a franchise to build and operate a cable television system and
telecommunications system within the Town of Mount Pleasant; and
WHEREAS, following proper notice, the Town of Mount Pleasant held a
public hearing on December 8, 1998 concerning such plans and qualifications, at
which time representatives of the applicant and interested citizens were given
an opportunity to be heard in a full public proceeding affording due process;
and
WHEREAS, it has been found and determined by Mount Pleasant Town
Council that it is in the best interest of the Town that this cable television
franchise in addition to a telecommunications franchise be awarded pursuant to
the terms hereinstated; and
WHEREAS, Mount Pleasant Town Council finds from all the evidence that
KNOLOGY of Charleston, Inc. fully meets all of the legal, financial, and
technical qualifications, as well as all other qualifications, necessary to
assure that the Town will be provided with the best available cable television
system and telecommunications system and that the construction and maintenance
arrangements in existence and proposed by KNOLOGY of Charleston, Inc. are
adequate and feasible;
NOW, THEREFORE, be it ordained by Mount Pleasant Town Council that the
following is hereby adopted as the Knology Cable Franchise Ordinance and
Knology Telecommunications Franchise Ordinance:
SECTION 1. Short Title. This Ordinance shall be known and may be cited as the
"KNOLOGY CABLE FRANCHISE ORDINANCE AND KNOLOGY TELECOMMUNICATIONS FRANCHISE
ORDINANCE."
<PAGE> 3
SECTION 2. Definitions. For the purpose of this Ordinance, the following terms,
phrases, words and their derivations shall have the meaning given herein,
unless the context clearly indicates that another meaning is intended. When not
inconsistent with the context, words used in the present tense include the
future, words in the plural number include the plural number. The word "shall"
is always mandatory and not merely directory.
(1) "Basic Cable Service" shall mean any service tier which
includes the re-transmission of local television broadcast signals as defined by
the Rule and Regulations of the Federal Communications Commission.
(2) "Council" is the Town Council of the Town of Mount Pleasant.
(3) "Cable Service" or "Cable Television Service" means the
one-way transmission to subscribers of video programming and any other
communications or other electronic services which KNOLOGY of Charleston, Inc.
proposes, now or in the future, to provide to its subscribers over its cable
system.
(4) "Cable Television System" or "CATV System" means a facility,
consisting of a set of closed transmission paths and associated signal
generation, reception, and control equipment that is designated to provide
cable service which include video programming and which is provided to multiple
subscribers within a community.
(5) "Company" is KNOLOGY of Charleston, Inc. or any person or
entity who succeeds the same in accordance with the provisions of this
franchise.
(6) "FCC" is the United States federal agency known as the
Federal Communications Commission, or any successor agency created by the laws
of the United States.
(7) "Franchise Area" shall mean that portion of the Town of Mount
pleasant for which a franchise is granted under the authority of this
Ordinance.
(8) "Gross Annual Receipts" means all revenues derived by the
Grantee from regular subscriber service, auxiliary services, per program or per
channel charges, leased channel revenues, advertising revenues, or any other
revenue derived from the operation of the Cable Television System to provide
cable services in the Franchise Area. Gross Revenues shall also include money
collected from subscribers that is ultimately allocated by the Grantee to pay
the Franchise Fee to the Town. The term "Gross Revenues" shall not include
revenue from any refundable subscriber deposits, any taxes, whether the costs
of such taxes are passed on to subscribers or not, and shall not include the
portion of any revenue received by Grantee for pay television services which
Grantee is required by contract to pass on to the provider of the pay
television program service. In addition, the term "Gross Cable Television
System Revenues" shall not include revenue derived from telecommunications,
telephony, internet or other non-cable television services provided by the
Grantee.
Page 2 of 14
(Ord. 98054)
<PAGE> 4
(9) "Municipality" is the Town of Mount Pleasant in Charleston
County in the State of South Carolina.
(10) "Optional Channel(s)" shall mean such other channel or
channels, not included in basic cable service, which may be made available to
subscribers by the Company at an additional charge on an optional basis.
(11) "Person" is any individual, firm, partnership, association,
corporation, company or organization of any kind.
(12) "Premium Channel(s)" shall mean specialized service such as
Home Box Office and/or other premium entertainment services that may be made
available by the Company.
(13) "Town" is the Town of Mount Pleasant, South Carolina.
(14) "Channel" is a band of frequencies 6 megahertz wide in the
electromagnetic spectrum capable of carrying audio-visual television signals
and/or non-video signals.
(15) "Franchise" is an authorization granted by Mount Pleasant
Town Council which permits the construction, operation and maintenance of a
cable television system and telecommunications equipment, cables and facilities
within the Franchise Area under the terms of this Ordinance.
(16) "Grantee" is KNOLOGY of Charleston, Inc., its successors and
assigns.
(17) "Public Street" is the surface of and the space above and
below any public street, avenue, highway, boulevard, concourse, driveway,
bridge, tunnel, alley, right-of-way, public utility easement, and any other
public ground (other than parks or nature trails) or water within or belonging
to the Town.
(18) "Enhanced Local Telecommunications Service Revenues" means
all revenues of any kind generated by Grantee in the Town of Mount Pleasant,
including but not limited to toll and long distance telecommunications revenues
(whether Interlata, Intralata or International service), publications and
advertising.
(19) "Local Telecommunications Service Revenues" means all
revenues derived by the Grantee from local telephone service, Internet service
or other non-cable services. For purposes of this Agreement, Local Service
Revenues shall not include (i) toll and long distance revenues (whether
Interlata, Intralata or international), and (ii) revenues related to Internet
content.
SECTION 3. Grant of Authority. It is hereby granted to KNOLOGY of
Charleston, Inc. ("Company"), a non-exclusive cable television franchise and
telecommunications franchise upon the terms and conditions set forth herein.
The Company is granted the non-exclusive right to operate a cable television
system and telecommunications system which serves customers in the Franchise
Area, and the right, privilege and franchise to have, acquire, construct,
recontract,
Page 3 of 14
(Ord. 98054)
<PAGE> 5
maintain, use and operate a CATV System and Telecommunications System in the
Franchise Area, and to have, acquire, construct, reconstruct, maintain, use and
operate in, over, under and along the present and future streets of the Town as
well as other easements, rights-of-way and other public ways and areas held by
the Town, all necessary or desirable poles, towers, anchors, wires, cables,
electronic conductors, underground conduits and other like equipment and
facilities required for the maintenance and operation of a CATV System and
Telecommunications System in the Franchise Area.
SECTION 4. Term of Franchises. These Franchises/Ordinance shall remain
in full force and effect for a period of fifteen (15) years from the effective
date hereof. Thereafter renewal of the franchise shall be governed by applicable
law.
SECTION 5. Effective Date. The effective date of these Franchises shall
be the date of acceptance by the Grantee. Acceptance shall be made in writing
within thirty (30) days of approval of the Franchises by the Town Council and
the acceptance shall indicate Grantee's agreement to terms and conditions of
these Franchises.
SECTION 6. Franchise Area. The Franchises shall cover all incorporated
areas of the Town, including any areas annexed by the Town after the effective
date of the Franchises.
SECTION 7. Limitations on Franchise.
a) Police Power. The Grantee shall be subject to the lawful
exercise of the Town's police power and regulations thereunder in the same
manner as other persons or businesses. In all other respects, the Town's
authority to regulate Grantee and its operations shall be exercised only as
provided in the Cable Act and other applicable law and in accordance with the
terms of this Franchise.
b) Eminent Domain. Nothing contained herein shall be construed
to impair or affect the Town's right of eminent domain or its power to regulate
traffic and to control the streets and rights-of-way in the Town; provided,
however, that Grantee shall be entitled to due process, just compensation and
other protections of law in the same manner as other persons or businesses,
except as provided in Section 9(d)(4) hereof. Nothing contained herein shall be
construed to give the Town the right or option to purchase or acquire the
Grantee's business or property.
c) Amendment of Franchise and Ordinances. The Town shall
consider an amendment to this Franchise and any related Ordinances at the
request of the Grantee whenever amendment is necessary to enable the Grantee to
utilize new developments in signal transmission or other technological advances
which would improve cable television service in the Franchise Area, or to
conform the Ordinance as required by any changes in the Rules of the FCC or
other Federal law. Grantee shall be subject to the Mount Pleasant Cable
Ordinance and any subsequent amendments and changes thereto.
Page 4 of 14
(Ord. 98054)
<PAGE> 6
d) Other Franchises. Grantee shall not take any action that will
prohibit other franchised cable television service operator from having access
to all public areas or rights-of-way subject to this Franchise.
e) Telecommunications Services. To the extent Grantee obtains
all necessary Federal and State approvals to engage in telecommunications
services, including telephone, internet and other non-cable services, the Town
and Grantee agree that the Town may charge Grantee a separate fee for Grantee's
use of the public rights-of-way for such telecommunications services, such
additional fees to be on a competitively neutral and non-discriminatory basis
and equivalent to that paid by other local telephone service providers
presently set at three (3%) percent of Local Service Revenues. The Town agrees
to postpone the implementation of fees on Grantee on all Enhanced Local
Telecommunications Service Revenues generated in the Town until the later of
(i) January 1, 2000, or (ii) such time as BellSouth agrees in a signed,
approved, written franchise agreement with the Town to pay franchise fees on
Enhanced Local Telecommunications Service Revenues, at which time Grantee
agrees to commence payment of fees on Enhanced Local Telecommunications Service
Revenues at a rate equivalent to that agreed upon by the Town and BellSouth.
Notwithstanding the foregoing, Grantee agrees that with respect to its,
telecommunications services, including telephone, internet and other non-cable
services, it will agree to modify the basis upon which the separate fees for
such telecommunications services are determined if the Town takes action to
modify the basis upon which such fees for other local exchange carriers in
Mount Pleasant are determined.
SECTION 8. Construction Standards.
a) All work performed in the construction, operation,
maintenance and repair of the system shall be performed in a safe, thorough and
reliable manner using materials of good and durable quality. All construction,
including installation, shall conform to all applicable federal and state laws
and regulations, ordinances, local laws and regulations and the National
Electric Safety Code. The Company shall provide to the Municipality, on
request, all maps, plans and specifications as to proposed installations and
shall keep the Municipality informed as to any proposed changes or alterations
in same.
b) Any municipal property damaged or destroyed by Company at
anytime shall be repaired or replaced by Company and restored to serviceable
condition to the reasonable satisfaction of the Municipality.
c) The Company shall be allowed to trim trees upon and
overhanging all streets, alleys, easements, sidewalks and other public places
so as to prevent the branches of such trees from coming into contract with the
facilities of the Company, if deemed necessary and reasonable by the
Municipality. Such work shall not commence without the prior written approval
of the Town.
d) The Company shall, upon 72 hours advance written notice from
any person holding an appropriate permit issued by the Municipality,
temporarily raise or lower its lines to permit the moving of any building or
structure. The actual expense of such temporary removal shall be paid
Page 5 of 14
(Ord. 98054)
<PAGE> 7
by the person requesting the same and the Company shall have the right to
require payment in advance for such temporary removal.
e) All work shall be in accordance with the S.C. Underground
Utility Damage Prevention Act of 1978.
f) Grantee performing work shall obtain an encroachment permit
from the Town for work in public easements and all right-of-ways for any
construction therein.
g) Placement of underground utilities and any work therewith
shall be governed by the terms of the Town encroachment permit.
h) No trenching within 10 feet outside of dripline of all trees
within construction area. All installation within the dripline plus 10 feet
radius will be by directional bore or other approved means.
i) No generators, control panels, transformers and/or fuel/power
systems or other like structures shall be placed within street rights-of-way.
Such structures must be placed in an approved easement and with proper
screening subject to Town requirements and approval. Location and appearance of
power meters shall be approved and permitted by the Town. Permits are required
for all power source equipment.
j) In the event a protected or significant tree as defined by
the Mount Pleasant Zoning Code is removed or is significantly impacted or
pruned as a result of work performed within a right-of-way as determined by the
Town, Grantee will be required to replace said tree in kind or by way of
financial reimbursement. All such issues shall be further governed by the Tree
Protection portion of the Mount Pleasant Zoning Code, including specifically
Section 156.316.
k) Where there is existing conduit, the Grantee is required to
place all lines therein.
1) Any clear cutting of buffers shall require advance permission
from the Town.
m) Restoration within the right-of-way following work therein
shall be subject to the terms of the Town's encroachment permit.
n) Grantee is not exempt from permitting fees of the Town,
including but not limited to the encroachment permit fee.
SECTION 9. Construction Requirements.
a) Authorizations and Permits. Upon acceptance of this
Franchise, Grantee shall promptly file applications from time to time for any
necessary authorizations or street cut construction permits with the Town
Department of Public Service and shall diligently pursue approval of the same
as well as any necessary agreements, easements or other instruments needed for
construction and operation of the cable system.
Page 6 of 14
(Ord. 98054)
<PAGE> 8
b) No Discrimination in Construction. In planning and
undertaking construction, Grantee shall treat all areas and neighborhoods in
the Franchise Area on a substantially equal basis. The times for commencement
and completion of construction may be extended by Town Council upon application
by the Grantee for good and sufficient cause based upon events beyond the
control of the Grantee, or based upon the technical infeasibility of
construction within a specific area of the Town. Such extensions shall not be
unreasonably withheld by the Town Council. All requirements for construction
and line extensions shall be governed by the density requirements contained
herein and the construction schedule attached hereto as Exhibit A.
c) Density Requirement For Construction and Line Extension. The
Grantee agrees to extend the cable system and to provide cable service to all
dwelling units in the Franchise Area, provided, however, that Grantee shall not
be required to extend its system or provide service to any dwelling unit where
there are not, on the average, at least fifty (50) dwelling units per mile of
cable, measured from the dwelling unit to the point on the cable system from
which the necessary extension must be made in order to provide service to the
dwelling unit in question. The fifty (50) homes per mile shall be measured by
the cable mile and not by the linear mile, i.e., for each mile of cable
necessary to provide service to the area, there must be an average of fifty
(50) homes per mile of cable. In addition, Grantee shall not be required to
provide cable service to any dwelling unit where the drop line is 250 feet or
more from the nearest feeder line from which the dwelling unit can be served;
where the drop line is 250 feet or more from the nearest feeder line from which
the dwelling unit can be served, Grantee shall be allowed to make fair and
reasonable installation charges. The "drop line" is the wire or cable used to
connect the individual dwelling unit to the longer lines of the cable system
located in the right-of-way.
For purposes of this Section, "dwelling unit" shall mean units of
residential housing designed for single-family occupancy, including but not
limited to, apartments, condominiums, townhouses and single-family houses.
Residential units in multiple-family developments, such as apartments,
townhouses or condominiums shall not be considered dwelling units for purposes
of this Section if the development is served by a SMATV system or similar
television system.
d) Safety Requirements and Relocation.
1. The Grantee shall at all times employ ordinary care
and shall install, maintain and use commonly accepted methods and
devices for preventing failures and accidents which are likely to
cause damage, injuries, or nuisances to the public.
2. The Grantee shall install and maintain its wires,
cables, fixtures and other equipment in accordance with the
requirements of the National Fire Protection Association for
electrical wiring and apparatus recommended in the National Electrical
Code, in full force and effect in the Town and as hereafter amended,
the laws of the State of South Carolina and the ordinances of the
Town, and in such manner that they will not interfere with any
installations of the Town or of a public utility serving the Town.
Page 7 of 14
(Ord. 98054)
<PAGE> 9
3. All structures and all lines, equipment, and
connections in, over, under, and Upon The Streets, sidewalks, alleys,
and public ways or places of the Town, wherever situated or located,
shall at all times be kept and maintained in a safe, suitable
condition, and in good order and repair.
4. The Grantee shall, at no cost to the Town, relocate
at any time any component of its system which interferes with a Town
installation, an installation or modification of any storm water
drainage system, water or sewer system or other system installed by
the Town or by the Commissioners of Public Works for the Town of Mount
Pleasant.
5. KNOLOGY will promptly remove, replace, modify or
disconnect Grantee's facilities and equipment located in the public
right-of-way or any other Town property in the case of fire, disaster
or other emergency, or when a Town project or activity makes the
removal, replacement, modification or disconnection necessary or less
expensive for the Town. Except during an emergency, the Town shall
provide reasonable notice to Grantee regarding such action.
e) Construction Schedule. In the event construction is not
completed in accordance with the construction schedule marked Exhibit "A" and
incorporated herein by reference, Grantee agrees to pay to the Town as
liquidated damages such sums as are specified in Exhibit "A." Grantee agrees
that the construction schedule is a material requirement of this Agreement.
f) Exemptions. If Grantee determines that it is technically or
economically unfeasible to provide cable services to any dwelling in the Town
of Mount Pleasant, Grantee may petition the Director of the Department of
Public Service of the Town of Mount Pleasant for an exemption or a reasonable
extension of time within which to provide service, and no liquidated damages
shall be assessed during the period of time that any such application may be
pending. Grantee agrees that any decision of the Director of the Department of
Public Service shall be final and binding so long as any such decision by the
said Director is not arbitrary or capricious; provided, however, that Grantee
shall have the right to appeal any such decision to the Town Council of the
Town of Mount Pleasant. Any such appeal shall be noticed within thirty (30)
days of the decision of the Director of the Department of Public Service.
g) Transmission of Data for Non-Commercial Governmental
Purposes. At the Town's request, Grantee shall provide the Town with the use of
fiber capacity for the transmission of data for non-commercial governmental
purposes at a fifty percent (50%) discount off of the retail rate for similar
services (but in no event shall such prices be less than Grantee's cost).
h) Non-Commercial Governmental or Educational Programming. The
Company agrees that it will make available to the Town one channel for
non-commercial governmental or educational programming provided by the Town, at
no charge to the Town. The Town acknowledges that the Company shall have the
right to use any unused time on such channel to meet its governmental or
educational programming obligations to other counties or municipalities in the
Charleston metropolitan area and that the Town's use of such channel is subject
to the
Page 8 of 14
(Ord. 98054)
<PAGE> 10
rights of Charleston County and other counties or municipalities in the
Charleston metropolitan area to use such channel.
SECTION 10. Limited Territory Serviced and Line Extensions
a) Except as covered in (B) and (C) below; it shall be the
obligation of the Company to serve and/or continue to serve the Franchise Area.
b) There shall be no obligation of the Company, however, to
provide service to those areas in the Town where an existing franchise holder
is currently providing service.
c) Line extensions shall be performed as covered above without
regard to the income level of the residents of the local area in which any
group of potential subscribers resides, to the extent that the density of
homes, terrain and other factors render providing service economically
compensatory, practicable and technically feasible.
SECTION 11. Leased Access. The Company shall make available suitable
channel capacity for commercial use by third parties unaffiliated with the
Company to the extent required by present or future federal law or regulations.
The Company shall have sole responsibility for all operating aspects and for
the fixing of rates and conditions for leased access use.
SECTION 12. Indemnification and Insurance.
a) The Company shall at all times defend, indemnify and save
harmless the Town of Mount Pleasant, members of its Town Council and its
officers, employees, and agents from and against any and all actions, suits,
damages, costs, charges and expenses by reason of the location, maintenance and
operation of the cable system in any streets, highways or other public places
of the Town of Mount Pleasant, or by reason of any malicious or willfully
negligent act or omission by the Company in connection with the operation of
its cable system in the Town of Mount Pleasant.
b) The Grantee shall maintain, throughout the term of the
Franchise, liability insurance insuring against all damages, injuries, or
other harm caused by Grantee or its agents, in the minimum amounts of:
1. Workers' compensation insurance as provided by the laws of
the State of South Carolina.
2. $1,000,000.00 for bodily injury or death to any Person; and
3. $1,000,000.00 for property damage resulting from any one
accident.
c) A Certificate for the above required minimum insurance in
form satisfactory to the Town Attorney, shall be submitted to the Town of Mount
Pleasant upon the execution of this Agreement. The policy shall require that
the insurance carrier must give written notice to the Company and the
Municipality thirty (30) days prior to a cancellation of or a material change
in the policy.
Page 9 of 14
(Ord. 98054)
<PAGE> 11
SECTION 13. Franchise Fee
a) The Grantee shall pay the Town a franchise fee in the amount
of Five Percent (5%) of its annual Gross Cable Television System Revenues from
the operation of the cable system in the Franchise Area and a fee equal to
three (3%) percent of its annual Local Telecommunications Service Revenues from
the operation of its telecommunications services, except where any such
revenues are subject to any Town of Mount Pleasant business license fees.
Franchise fee payments shall be made on a quarterly basis and shall be due
within forty-five (45) days after the expiration of each calendar quarter. Any
franchise fees passed through by Grantee to customers in the Town shall be
billed to those customers on a monthly basis. Notwithstanding the foregoing,
the Grantee agrees that with respect to the Cable Television System, it will
agree to increase the franchise fees for such cable television services (up to
any applicable legal limits) if the Town takes action to increase the franchise
fees for other cable television providers who are franchised within the Town.
b) The Grantee shall file with the Town, within forty-five (45)
days after the expiration of the first quarter of the calendar year or portion
thereof during which its Franchise is in force, a statement showing the Gross
Revenues of the Grantee during the preceding calendar year or portion thereof
and the amount of franchise fees due for the period.
c) The Town shall have the right to inspect the Grantee's
records showing the Gross Revenues from which its Franchise payments are
computed. No acceptance of payment shall be construed as a release or as an
accord and satisfaction of any claim the Town may have for further or
additional sums payable under this Franchise; however, any Franchise fee
statement rendered to the Town and to which no exception is made within two (2)
years after receipt by the Town shall be deemed to be accurate and shall not
thereafter be subject to question or made the basis of any claim by the Town
against Grantee.
SECTION 14. Rates and Charges. A schedule of the current rates and
charges currently imposed by the Company shall (i) be on file at all times
during the term of this franchise with the Town Council; (ii) posted at the
Company's local office as set forth herein; and (iii) furnished to each
subscriber upon initial connection to the Company's cable system and as
subsequently requested by each subscriber.
SECTION 15. Technical Requirements - Channel Capacity. The CATV System to
be constructed by Company shall be installed, maintained, and operated at all
times in full compliance with the technical and channel capacity standards of
the Federal Communications Commission. The results of annual performance tests
conducted in accordance with FCC Rules shall be retained for at least 5 years
and available for inspection by the Municipality.
SECTION 16. Safety Requirements. The Company shall, at all times, install
and maintain its wires, cables, fixtures and other equipment in accordance with
the requirements of the Municipality's Building Code and Electrical Safety
Ordinances and all other federal and state
Page 10 of 14
(Ord. 98054)
<PAGE> 12
regulations, and in such manner that they will not interfere with any
installation of the Municipality.
SECTION 17. Service Standards - Business Office - Resolution of
Complaint. Throughout the life of its franchise, the Company shall:
a) Maintain all parts of its system in good condition and in
accordance with standards generally observed by the cable television industry.
Sufficient employees shall be retained to provide safe, adequate and prompt
service for all of its facilities.
b) Maintain a conveniently located business office and service
center to which subscribers may telephone without incurring added message units
or toll charges. This office shall be open during all usual business hours, and
be so operated that complaints and request for repairs or adjustments may be
received by telephone at any time when any television signals are being
broadcast.
c) Dispatch personnel to investigate all service complaints,
equipment malfunctions within 24 hours and strive to resolve such complaint as
promptly as possible. Planned interruption of service shall be only for good
cause. Insofar as possible, planned service interruptions shall be preceded by
notice, be of brief duration, and occur during minimum viewing hours.
d) Maintain a complete list of all complaints received,
including the name of the complaining party, nature of the complaint, and the
measures taken to resolve them in form to be approved by the Municipality. This
list shall be available to the Municipality upon request.
e) Permit the Municipality to inspect and test the system's
technical equipment and facilities upon reasonable (12-24 hours) notice.
f) Responsibility for the administration of any franchise
granted hereunder and for the resolution of all complaints against the Company
regarding the quality of service, equipment malfunctions, and similar matters,
shall rest with the Town Administrator who is empowered, among other things, to
adjust, settle, or compromise any controversy arising from operations of the
Company, either on behalf of the Municipality, the Company, or any subscriber,
in accordance with the best interest of the public; provided that any person
aggrieved by a decision of the Town Administrator may appeal the matter to the
Town Council for hearing and determination. The Town Council may accept,
reject, or modify the decision of the Administrator, and may adjust, settle or
compromise any controversy arising from the operations of the Company under any
franchise granted pursuant to this ordinance. No adjustment, settlement, or
compromise, whether instituted by the Administrator or by the Town Council
shall be contrary to the provisions of this Ordinance, and neither the
Administrator nor the Town Council, in the adjustment, settlement, or
compromise of any controversy shall have the right or authority to add to,
modify, or delete any provision of this Ordinance/Franchise. The Company shall
notify subscribers at the time of initial subscription to the system of the
procedure for reporting and resolving complaints by delivering to each
subscriber a notice in form approved by the Administrator.
Page 11 of 14
(Ord. 98054)
<PAGE> 13
SECTION 18. Conditions on Street Occupancy.
a) Any pavements, sidewalks, curbing or other paved area taken
up or any excavations made by the Company shall be done under the supervision
and direction of the Municipality under permits issued for work by the proper
officials of the Municipality, if permits are required by Town ordinances, and
shall be done in such manner as to give the least inconvenience to the
inhabitants of the Municipality. The Company shall at its own cost and expense,
and in a manner approved by the Municipality, replace and restore any such
pavements, sidewalks, curbing or other paved areas in as good condition as
before the work involving such disturbance was done, and shall also make and
keep full and complete plats, maps and records showing the locations of its
facilities located within the public streets, ways, and easements of the
Municipality. Exactness of location will be subject to reasonableness affording
the Company a reasonable amount of time to so comply (up to 72 hours). These
maps shall be available for inspection at any time during business hours by the
Municipality.
b) The Company shall, at its expense, protect, support,
temporarily disconnect, relocate, or remove, any of its property when required
by the Municipality by reason of traffic conditions, public safety, road
construction, change of street grade, installation of sewers, drains, water
pipers, power lines, signal lines, tracks, or any other type of municipal
improvements; providing, however, that the Company shall, in all such cases,
have the privilege of abandoning any property in place. If the Municipality
requests substantial relocating, it shall compensate the Company in the amount
of its relocation costs.
c) The Company shall, on the request of any person holding a
building moving permit issued by the Municipality, temporarily raise or lower
its wires to permit the moving of buildings. The expense of such temporary
removal or raising or lowering of wires shall be paid by the person requesting
same, and the Company shall have the authority to require such payment in
advance. The Company shall be given not less than 48 hours advance notice to
arrange for such temporary wire changes.
d) The Company shall be allowed to trim the trees upon and
overhanging the public street so as to prevent the branches of such trees from
coming in contact with the wires and cables of the Company if deemed necessary
and reasonable by the Municipality, only upon first obtaining permission from
the Municipality and at the option of the Municipality, such trimming may be
done by it or under its supervision and direction, at the expense of the
Company.
e) In all sections of the Municipality where both electric power
and telephone cables and wires, or other similar facilities of public utilities
are placed underground, the company shall place its cables, wire or other like
facilities underground to the maximum extent that when existing technology and
adequate space reasonably permits the Company to do so.
SECTION 19. Removal of Facilities Upon Request. Upon termination of
service to any subscriber, the Company shall promptly remove all its facilities
and equipment from the premises of such subscriber upon his request at no cost
to the subscriber. Promptness shall be determined by the Municipality.
Page 12 of 14
(Ord. 98054)
<PAGE> 14
SECTION 20. Amendment of Ordinance and Franchises. The Municipality may
amend this Ordinance/Franchise upon its own motion or the application of the
Company whenever amendment is necessary to enable the Company to utilize new
developments in television or radio signal transmission which would improve and
update cable television service in the Franchise Area, or to comply with any
modifications in the Rules of the FCC. No amendment shall be adopted except
after full, open public hearing affording due process and no amendment
substantially amending the existing rights and obligations of the Company shall
be adopted without Company's consent.
SECTION 21. Books and Records.
a) The Municipality reserves the right to inspect all pertinent
books, records, maps, plans, financial statements and other like materials of
the Company which pertain to the cable system, upon reasonable notice and
during regular business hours. Such information shall be treated as
confidential and shall not be disclosed by the Municipality or its agents to
the public or to any third party.
b) The Municipality shall abide by federal laws applicable to
the Company or the cable system governing subscriber privacy with respect to
any personally identifiable subscriber information that comes into its
possession pursuant to its right to inspect the Company's books and records
under the franchise.
SECTION 22. Governing Law. These Franchises/Ordinance are subject to all
applicable provisions of the Communications Act of 1984, as amended, the
Telecommunications Act of 1996, and regulations promulgated by the FCC pursuant
thereto, as well as state laws and regulations governing cable television
operations not inconsistent therewith and the Mount Pleasant Cable Television
Ordinance. Specifically, but without limitation, this Franchise/Ordinance is
subject to the South Carolina Underground Utility Damage Prevention Act, S.C.
Code Ann. SS. 58-35-10 et seq. (1976).
SECTION 23. Severability. If any section, subsection, sentence, clause,
phrase or portion of these Franchise Agreements are for any reason held invalid
by any court or agency of competent jurisdiction, such portion shall be deemed
a separate, distinct and independent provision and such holding shall not
affect the validity of the remaining portions of the Franchise Agreement.
SECTION 24. Successors and Assigns. The rights and privileges and all of
the obligations, duties and liabilities created by these agreements shall pass
to and be binding upon the successors of the Town and the successors,
transferees, representatives and assigns of the Company.
SECTION 25. Mount Pleasant Cable Television Ordinance. The Company agrees
to conduct its business in full compliance with the Town of Mount Pleasant
Cable Television Ordinance dated January 23, 1979, and any subsequent changes
and amendments thereto, and shall remain in compliance with the same.
Page 13 of 14
(Ord. 98054)
<PAGE> 15
FURTHER, BE IT ORDAINED that this Ordinance and the terms herein shall
also serve as Agreements between the parties hereto pertaining to Cable and
Telecommunications.
THIS ORDINANCE SHALL BE EFFECTIVE IMMEDIATELY UPON FINAL READING.
SIGNED, SEALED AND DELIVERED THIS 9th DAY OF MARCH 1999.
/s/ Cheryll N. Woods-Flowers
------------------------------------
Cheryll N. Woods-Flowers, Mayor
Town of Mount Pleasant
ATTEST:
/s/ Carol J. Hunter
- -----------------------------
Carol J. Hunter
Clerk of Council
March 9, 1999 APPROVED AS TO FORM:
Mount Pleasant, SC
/s/ R. Allen Young
--------------------------
Introduced: Dec. 8, 1999 R. Allen Young
Final Reading: Mar. 9, 1999 Town Attorney
Unconditional acceptance is hereby made to fully comply with and abide
by all of the terms, provisions and conditions of this Franchise Ordinance and
Agreement.
KNOLOGY OF CHARLESTON, INC.
3-12-99 By Felix L. Boccucci, Jr.
- ---------------------- -----------------------------
Date Felix L. Boccucci, Jr.
Its: Senior Vice President
Page 14 of 14
(Ord. 98054)
<PAGE> 16
EXHIBIT "A"
CONSTRUCTION SCHEDULE
(Ord.98054)
In the event construction of a cable television system capable of
providing service to twenty (20%) percent of the area within the Town for which
the Company is obligated to provide service is not completed by July 31, 2001,
then the Company agrees to pay to the Town as liquidated damages the sum of
$1,000.00 monthly until construction of a system capable of servicing twenty
(20%) percent of such area is completed and the system is in operation.
In the event construction of a community antenna television system
capable of providing service to fifty (50%) of the area within the Town for
which the Company is obligated to provide service is not completed by July 31,
2003, then the Company agrees to pay to the Town as liquidated damages the sum
of $1,000.00 monthly until construction of a system capable of servicing fifty
(50%) percent of such area is completed and the system is in operation.
In the event construction of a community antenna television system
capable of providing service to eighty (80%) percent of the area within the
Town for which the Company is obligated to provide service is not completed by
July 31, 2004, then the Company agrees to pay to the Town as liquidated damages
the sum of $ 1,000. 00 monthly until construction of a system capable of
servicing eighty (80%) percent of such area is completed and the system is in
operation.
In the event construction of a community antenna television system
capable of providing service to one hundred (100%) percent of the area within
the Town for which the Company is obligated to provide service is not completed
by July 31, 2005, then the Company agrees to pay to the Town as liquidated
damages the sum of $1,000.00 monthly until construction of a system capable of
servicing one hundred (100%) percent of such area is completed and the system
is in operation; provided, however, that with regard to the requirements of
service set forth herein, the times for commencement and completion of
construction may be extended by Town Council upon application by the Company,
for good and sufficient cause based upon events beyond the control of the
Company, or based upon the technical infeasibility of construction within a
specific area of the Town. Such extensions shall not be unreasonably withheld
by the Town Council.
In no event shall the monthly liquidated damages exceed $1,000.00 in
any one (1) month.
Nothing in this Construction Schedule shall be deemed to increase the
Company's obligations to provide CATV service in the Franchise Area as set
forth in its franchise agreement.
<PAGE> 1
EXHIBIT 10.31
[Letterhead BUIST, MOORE, SMYTHE & MCGEE, P.A.]
ATTORNEYS AT LAW
P.O. BOX 999
FIVE EXCHANGE STREET
CHARLESTON, S.C. 29402
----------
843/722-3400
FACSIMILE 843/723-7398
January 9, 1999
Direct Dial
(843) 720-4636
email:[email protected]
Ms. Marilyn Pittman
KNOLOGY Holdings, Inc.
Post Office Box 510
West Point, Georgia 31833
Re: KNOLOGY of Charleston, Inc. - Charleston County
BMSM File No: 6796.0000
Dear Marilyn:
Enclosed please find the original franchise agreement with Charleston
County. I would appreciate your telephoning me to discuss this before you
present it to Felix for execution.
Thanks for your attention to this.
Sincerely yours,
BUIST, MOORE, SMYTHE & McGEE, P.A.
/s/ Thomas L. Harper, Jr.
Thomas L. Harper, Jr.
TLH/dlh
enclosures
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FRANCHISE AGREEMENT
THIS CABLE FRANCHISE AGREEMENT ("Agreement") is entered into effective as of
December 15, 1998, by and between Charleston County, South Carolina ("County"),
KNOLOGY of Charleston, Incorporated (a Delaware Corporation) ("Franchisee").
WHEREAS, the County has conducted a public proceeding concerning Franchisee's
application for a cable franchise within the unincorporated areas of Charleston
County; and
WHEREAS, the County upon consideration of the application for a cable franchise
by Franchisee, has determined that it is in the best interests of, and
consistent with, the health, safety, and welfare of the citizens of Charleston
County to grant the Franchisee's request for a franchise on the terms and
conditions hereinafter set forth; and
WHEREAS, the County has analyzed fully and considered the technical ability,
financial integrity, legal and character qualifications of the Franchisee, and
determined that there are no concerns in those above-referenced areas; and
WHEREAS, the County Council has adopted Findings of Fact with respect to
KNOLOGY's application which describe and note in further detail those reasons
and facts that lead the County Council to the conclusion that there are no
technical, financial, legal, or character deficiencies as they relate to KNOLOGY
and its application for a County-wide cable/telecommunications franchise; and
WHEREAS, the Franchisee has agreed to be bound by the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the grant of authority pursuant to this
Agreement, the Franchisee hereby promises to comply with all the provisions of
this Agreement and, in consideration of the Franchisee's promises, the County
hereby grants to the Franchisee the rights, privileges and authorization set
forth hereinbelow.
SECTION 1. SHORT TITLE.
This Agreement may be known and cited as the KNOLOGY of Charleston,
Incorporated Franchise Agreement for Charleston County, South Carolina.
SECTION 2. APPLICABLE LAW.
This Franchise shall be governed in all respects by the Ordinances and
Resolutions of Charleston County, South Carolina, and the applicable laws of
South Carolina, and the United States, including any applicable rules and
regulations of the Federal Communications Commission (FCC). By execution of this
Agreement, the parties acknowledge the validity of the terms and conditions of
this Agreement under the applicable law in existence as of the date hereof.
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SECTION 3. SEPARABILITY.
If any section, subsection, sentence, clause, phrase, provision, or
portion of this Agreement is for any reason held invalid or unconstitutional by
any court of competent jurisdiction, such section, subsection, sentence, clause,
phrase, provision, or portion shall be deemed a separate, distinct, and
independent provision of such holding, and shall not affect the validity of the
remaining sections, subsections, sentences, clauses, phrases, provisions, or
portions herein.
SECTION 4. CABLE TELEVISION REGULATORY ORDINANCE
For purposes of this Agreement, and unless the context otherwise
requires, the terms used herein shall have the same meaning as defined in the
proposed Cable Television Regulatory Ordinance for Charleston County, South
Carolina (hereinafter sometime referred to as the "Regulatory Ordinance").
Throughout this Agreement there are references to the Regulatory Ordinance. As
of the effective date of this Agreement, the County Council has not adopted the
Regulatory Ordinance. Nevertheless, such references to the Regulatory Ordinance
are meant for the County Cable Television Regulatory Ordinance that will be
adopted by the County Council within the next year.
SECTION 5. GRANT OF NON-EXCLUSIVE FRANCHISE.
A) There is hereby granted by the County to the Franchisee, the right and
privilege to construct, erect, operate, and maintain, in upon, along, across,
above, over, and under any of the public lands of this State, the highways or
public lands of this State, or any of the waters of this State in the
unincorporated areas of the County, such poles, wires, cable, underground
conduits, manholes, and other equipment and fixtures as are necessary for the
installation, construction, maintenance, repair, replacement, and operation
within the County of a cable and telecommunications system, which consists of
voice, video, and data, and other lawful and permitted applications.
B) The right to use and occupy said streets, alleys, public ways, and places for
the purposes herein shall not be exclusive, and the County reserves the right to
grant a similar use of said public lands, highways, public roads, and water to
any person, at any time, during the term of this Franchise.
C) This Franchise granted to the Franchisee is conditioned upon the Franchisee's
compliance with Section 58-12-10 of the South Carolina Code of Laws, which
specifically includes compliance with the following provisions:
1) where possible and practical, the Franchisee shall enter into an
agreement with a telephone company or electric power company (utility) in order
to attach the Franchisee's cable to the poles of the utility or bury the
Franchisee's cable beneath the ground in conduits owned by the utility;
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2) construct in a manner so as not to endanger the safety of
persons or to interfere with the use of public lands,
highways, or public roads, or the navigation of waters;
3) obtaining all necessary State and/or local permits;
4) placing the Franchisee's cable television lines underground
when both electric and telephone facilities in an area are
underground; and
5) locating the Franchisee's cable in a manner so as not to
constitute an interference with the right of ingress or egress
to, or from, land that is subject to an easement or this
Franchise.
SECTION 6. EXTENT OF FRANCHISE.
A) This Franchise shall include all areas within the unincorporated limits of
Charleston County, South Carolina into which the cable/telecommunications system
is extended, including any areas annexed by the County.
B) The County hereby grants to the Franchisee the authority to contract with the
County or any appropriate board or agency thereof of with the holder or owner of
any utility franchise in the County for the use, rental, or lease of its or
their poles, underground conduits, and any other structures and facilities used
for the purpose of extending, carrying, or laying Franchisee's wires, cables,
and other equipment, facilities, and appurtenances necessary or desirable for
the operation of its cable television equipment. The County agrees that any
public utility owning or controlling such poles or underground conduits may,
without amendment to its franchise, allow, and is encouraged to allow, the
Franchisee to make such use thereof pursuant to any agreement reached between
such utility and the Franchisee.
SECTION 7. TERM OF FRANCHISE.
A) Initial Term. This Franchise and the rights, privileges, and authority hereby
granted shall take effect and be in force from and after final passage hereof,
as provided by law, and shall continue in force and effect for a term of fifteen
(15) years, provided that within thirty (30) days after the date of this
Agreement, Franchisee shall file with the Clerk of County Council, Franchisee's
unconditional acceptance of this Franchise and Franchisee's promise to comply
with, and abide by, all the provisions, terms, conditions, and requirements of
this Agreement. Such acceptance and promise shall be in writing, fully executed
and sworn to, by, or on behalf of the Franchisee or its fully authorized
officers before a Notary Public or other officer authorized by law to administer
oaths. Should the Franchisee fail to comply with this Subsection, it shall
acquire no rights, privileges, or authority under this Franchise whatsoever.
B) Renewal Term. This Franchise may be renewed under either the formal or
informal renewal procedures set forth in Section 626 (as amended) of the Cable
Act (codified at 47 United States Code (USC) Section 546). This Franchise may be
renewed for a term not to exceed twenty (20) years in length. If the Franchisee
does not preserve its rights under the formal renewal procedures set forth in
Section 626 of the Cable Act, then the renewal of this Agreement shall be under
either the informal process noted elsewhere in Section 626, or under any
informal process
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mutually agreed to by the County and the Franchisee.
SECTION 8. EFFECT OF A "TECHNICAL" BREACH OR VIOLATION OF THE COUNTY CABLE
TELEVISION REGULATORY ORDINANCE.
A) It is the intent of the County not to subject the Franchisee to penalties,
fines, forfeitures, or revocation of this Agreement for so-called "technical"
breach(es) or violation(s) of the County's pending Cable Television Regulatory
Ordinance, which include the following:
1) in instances, or for matters where a violation of the County's
pending Cable Television Regulatory Ordinance by the Franchisee was a good faith
error that resulted in no or minimal impact on the customers within the County;
or
2) where there existed circumstances reasonably beyond the control of
the Franchisee, and which precipitated a violation of the County's Cable
Television Regulatory Ordinance on the part of the Franchisee, or which were
deemed to have prevented the Franchisee from complying with any term, condition,
provision or requirement of the County's Cable Television Regulatory Ordinance.
B) It is the intent of the County not to subject the Franchisee to penalties,
fines, forfeitures, or revocation of this Agreement for so-called "technical"
breach(es) or violations of this Agreement, which include the following:
1) in instances, or for matters where a violation of this Agreement by
the Franchisee was a good faith error that resulted in no or minimal negative
impact on the customers within the County; or
2) where there existed circumstances reasonably beyond the control of
the Franchisee, and which precipitated a violation of this Agreement on the part
of the Franchisee, or which were deemed to have prevented the Franchisee from
complying with any term, condition, provision, or requirement of this Agreement.
SECTION 9. FORCE MAJEURE.
The Franchisee shall neither be held in default nor in non-compliance
with the terms, conditions, provisions, ore requirements of this Agreement, nor
suffer any enforcement or penalty relating thereto, (including termination,
cancellation or revocation of this Agreement), where such non-compliance or
alleged default occurred and/or was caused by a strike, riot, war, earthquake,
flood, tidal wave, severe rainstorm, hurricane or other act of nature, or other
event that is reasonably beyond the Franchisee's ability to anticipate and
control. Force majeure also cover work delays caused by waiting for utility
providers to service or monitor their own utility poles on which the
Franchisee's cable and/or equipment is attached. However, even in a force
majeure situation, the Franchisee is not relieved of its obligation to refund or
credit subscribers who experience a service outage that exceeds six (6) hours in
duration.
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SECTION 10. FAILURE TO ENFORCE OR GRANT A WAIVER DOES NOT ACT AS ACQUIESCENCE
OR WAIVER FOR A SUBSEQUENT BREACH OR VIOLATION.
A) The County's failure to enforce, one (1) or more of the terms, conditions,
provisions, or requirements of this Agreement for a breach or violation by the
Franchisee, shall not be deemed and/or viewed as an act of acquiescence, waiver,
or, bar on the City pursuing and seeking enforcement in the event one (1) or
more of the terms, conditions, provisions, or requirements of this Agreement is
subsequently breached or violated by the Franchisee.
B) The County's grant of waiver for breach or violations of one (1) or more of
the terms, conditions, provisions, or requirements of this Agreement shall not
be deemed and/or viewed as an act of acquiescence, waiver or bar on the County
pursuing and seeking enforcement in the event that one (1) or more of the same
terms, conditions, provisions, or requirements of this Agreement is subsequently
breached or violated by the Franchisee.
SECTION 11. RELATIONSHIP OF THIS AGREEMENT TO THE COUNTY CABLE TELEVISION
REGULATORY ORDINANCE.
A) The Franchisee is aware that the County is contemplating, considering, and
reviewing a proposed Cable Television Regulatory Ordinance. In that light the
Franchisee agrees to abide by the Charleston County Cable Television Regulatory
Ordinance (to the extent that it has not received exemption, relief,
clarification, or comparable policy substitution) from, and after, the time that
the County Council has adopted such an Ordinance. Moreover, said County Cable
Television Regulatory Ordinance shall control and prevail in any instance where
there is an interpretive question or conflict with respect to this Agreement,
except, where the procedural requirements of subsection (B) of this Section have
been followed. Both the County and the Franchisee reserve all their rights under
the applicable federal and state law, and nothing herein shall be deemed or
constitute a waiver of any such rights granted at law or in equity.
B) In the case where the Franchisee requests an exemption, relief,
clarification, or comparable policy substitution from one (1) or more terms,
conditions, provisions, or requirements of the County Cable Television
Regulatory Ordinance, and where the County Council has granted such exemption,
relief, clarification, or comparable policy substitution, and where this
Agreement has been duly and properly amended to include such exemption, relief,
clarification, or comparable policy substitution, then the term, condition,
provision. or requirement contained in the exemption, relief, clarification, or
comparable policy substitution shall control with respect to the obligations and
duties of the Franchisee.
C) The Franchisee agrees to abide by, and comply with, the subsequently adopted
County Cable Television Regulatory Ordinance, as modified by the exemptions,
relief clarifications, and comparable policies contained in this Agreement. An
amendment or modification of the County Regulatory Ordinance by the County
Council will apply to the Franchisee if the County Council concludes that the
amendment, modification, or revision will materially advance the interests of
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customers when balanced against its impact upon the Franchisee. The County shall
provide the Franchisee with at least ninety (90) days notice before the adoption
of such amendment, modification, or revision, during which notice period the
Franchisee may provide written and oral comment with respect to the amendment,
modification, or revision. The Franchisee will be expected to comply with, and
abide by, any valid present or future ordinance that is either generally
applicable to business within the territorial area or generally applicable to
cable operators within the territorial area. Still, Franchisee does not waive
any claim that it Play have regarding whether the County Council can
unilaterally after or modify the provisions, terms, conditions, or requirements
of this Agreement.
SECTION 12. AMENDMENTS TO THIS AGREEMENT.
Any change, amendment, modification, revision, extension of this
Agreement, or the adoption of a Renewal Agreement shall be in writing and shall
be executed by duly authorized representatives of both the County and the
Franchisee.
SECTION 13. INDEMNITY.
A) TO THE EXTENT PERMITTED by law. the Franchisee shall at all times defend,
indemnify, protect, save harmless, and exempt the County, the County Council,
and all officers, elected and appointed officials, employees, and agents of the
County from any, and all, penalty, damage, or charges arising out of claims,
suits, demands, causes of action, or award of damages whether compensatory or
punitive, or expenses arising therefrom, either at law or in equity, which might
be claimed now or in the future, including any payment required by the State's
Workmen's Compensation law, which may arise out of, or be caused by, the
construction, erection, location, products performance, operation, installation,
maintenance, repair, replacement, removal, and/or restoration of the
cable/telecommunications system within the County, or be caused by a negligent
act or omission of the Franchisee, its agents or employees, contractors,
subcontractors, independent contractors, or implied or authorized
representatives.
B) Reasonable attorneys' fees and reasonable consultant and expert witness fees
are specifically included as a cost which may be recovered by the County from
the Franchisee.
C) The County, the County Council, the County Council Chairperson, the County
Administrator, the County Attorney, and the Deputy County Attorney specifically
reserve the right to retain counsel of their own choice, at their own expense.
D) If the Franchisee obtains counsel for the County, the County Council, the
County Council Chairperson, the County Administrator, the County Attorney, or
the Deputy County Attorney, then any one of them shall have the right to approve
counsel, which approval shall not be unreasonably withheld.
E) With respect to the Franchisee's own defense of such actions noted in this
Section, it is
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understood that the Franchisee reserves the right to select and retain counsel
of Franchisee's choice, at its expense, without the County's, the County
Council's, the County Council Chairperson's, the County Administrator's, the
County Attorney's, or the Deputy County Attorney's approval.
SECTION 14. INSURANCE.
A) The Franchisee shall maintain, and by its acceptance of this Franchise and
Agreement, specifically agrees that it will maintain throughout the duration of
this Franchise. public liability and property damage in at least the following
amount:
$1,600,000.00 in umbrella coverage.
B) The insurance policy shall be issued by an insurance company licensed to do
business in the State of South Carolina.
C) The issued insurance policy shall include the County, the County Council, the
County Council Chairperson, the County Administrator, the County Attorney, and
the Deputy County Attorney as additional insureds, and shall obligate the
insurance company to furnish the County Council with at least thirty (30) days'
written notice in advance of cancellation. Failure to do so shall be considered
a material breach of this Franchise.
D) The Franchisee shall provide the County Council with certificates evidencing
the required insurance within fifteen (15) days after acceptance of this
Franchise, and renewal certificates shall be mailed to the County Council before
the expiration of the insurance policies which such certificates are to renew.
E) At any time that the Franchisee employs an outside plant contractor or
subcontractor, it must require and submit to the County, proof from such
contractor or subcontractor of insurance in, at a minimum, the amount listed
above naming the County, the County Council, the County Council Chairperson, the
County Administrator, the County Attorney, and the Deputy County Attorney as
additional insureds. Such insurance coverage shall remain in effect, and in
force, for as long as the construction, installation, repair, replacement, and
on-going maintenance continues.
SECTION 15. WORKMEN'S COMPENSATION INSURANCE.
A) The Franchisee shall provide and maintain, for the life of this Franchise and
Agreement, Workmen's Compensation Insurance for all full-time, non-exempt
employees, in accordance with the laws of the State of South Carolina. In the
event that such insurance is canceled, revoked, not renewed, or otherwise
terminated, then either the insurance carrier, or the Franchisee shall notify
the County Council in writing, within thirty (30) days of such event.
B) Annually, a certificate shall be filed with tile County Council by either the
insurance carrier or the Franchisee, showing such insurance to be in force at
all times.
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SECTION 16. PERFORMANCE AND CONSTRUCTION BONDS.
A) Not later than February 1, 1999, the Franchisee shall file with the County, a
performance bond in the amount of $100,000.00. The purpose of the bond is to
make certain that the County will not suffer should the Franchisee not perform
all its obligations detailed in this Agreement with the exception of
construction which is covered elsewhere in this Section.
B) Should the Franchisee comply with the terms, provisions, conditions, and
requirements of the County's Cable Television Regulatory Ordinance, and this
Franchise Agreement, then the Franchisee may request that County Council approve
a reduction in the amount of such bond according to the reduction schedule
provided herein, which approval by Council shall not be unreasonably withheld:
1 ) On or after February 1, 2000, the Franchisee may reduce the
performance bond by $50,000.00, so that the Franchisee may have a $50,000.00
performance bond;
2) On or after February 1, 2001, the Franchisee may reduce the
performance bond by an additional $30,000.00, so that the Franchisee may have a
$20,000.00 performance bond;
3) On or after February 1, 2002, the Franchise may reduce the
performance bond by an additional $10,000.00, so that the Franchise may have a
$10,000.00 performance bond.
C) At no time shall the Franchisee's performance bond be less than $10,000.00.
D) If the County draws on the performance bond as a result of the Franchisee's
failure to timely discharge its obligations, then the Franchisee shall be
required to replenish (within thirty (30) days) the performance bond to the
$50,000.00 level, subject to, that within one hundred eighty (180) days
thereafter, the County and the Franchisee shall enter into a new reduction
schedule for the performance bond.
E) The Franchisee shall maintain a construction bond in the amount of $100,000
for the duration of the initial construction project, or March 15, 2001
whichever comes sooner.
F) For purposes of this Section, construction includes construction,
installation, repair, replacement, on-going maintenance, rebuild and/or repair.
SECTION 17. RECORDS AND REPORTS.
A) The Franchisee shall submit the following reports to the County Council at
the times indicated (unless exemption, relief, clarification, or a comparable
policy substitution has been granted elsewhere in this Agreement):
1) Copies of all reports which the Franchisee is required or requested
to file with the FCC, the Securities and Exchange Commission, and any State
cable or securities regulatory agency
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with respect to its Charleston County cable system, and upon specific written
request from the County Council or its designee, other identified reports to
Federal or State agencies, shall be submitted within thirty (30) days after
their filing with said agencies;
2) Copies of all facilities applications and petitions for special
relief filed with the FCC by the Franchisee with respect to its Charleston
County cable system shall be submitted within ten (10) days after their filing;
3) A detailed financial statement in the frequency, form, and format
that satisfies the requirements noted in the County's Cable Television
Regulatory Ordinance;
4) A preventive maintenance report in the frequency, form, and format
that satisfies the requirements noted in the County's Cable Television
Regulatory Ordinance;
5) Any other reports, statements, or data in the frequency, form, and
format that satisfies the requirements noted in any other Section of County's
Cable Television Regulatory Ordinance;
6) Copies of the Franchisee's FCC 394 Forms (concerning sales,
transfers, assignments, and mergers), shall be submitted simultaneously with the
Franchisee's filing of such reports; and
7) Copies of the Franchisee's FCC-mandated 395-A Forms (concerning
Equal Employment Opportunity (EEO) and fair contracting policy).
B) The Franchisee shall retain copies of the following reports, and such reports
shall be submitted to the County upon seven (7) days written request:
1) any, and/or all, contents of the FCC-mandated public inspection
file;
2) any, and/or all, FCC Proof-of-Performance Tests conducted within
three (3) years prior to the written request; and
3) any, and/or all, FCC CLI (cumulative leakage index) tests conducted
within three (3) years prior to the written request.
SECTION 18. CUSTOMER SERVICE REQUIREMENTS.
The Franchisee shall comply with all customer service provisions,
terms, conditions, and requirements (for which it has not received an exemption,
relief, clarification, or comparable policy substitution) that are noted and
contained within the County's Cable Television Regulatory Ordinance.
SECTION 19. PREVENTIVE MAINTENANCE.
The Franchisee shall comply with the terms, provisions, conditions, and
requirements related to periodic and/or on-going preventive maintenance (for
which it has not received an exemption, relief, clarification, or comparable
policy substitution) that will be in the County's proposed and subsequently
adopted Cable Television Regulatory Ordinance.
SECTION 20. RATES.
A) To the extent that, and for as long as, Federal and/or State law permit or
authorize the County
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Council (as franchising authority) to regulate rates for basic cable service,
then the County Council may regulate such rates for basic cable service, so long
as it complies with, and abides by, any, and all, applicable rules of the FCC.
B) If at any time during the term of this Franchise, Federal and/or State law
preempts the County Council (as franchising authority) from regulating the rates
for basic cable service, then during such time, the County Council shall be
prohibited from adopting any rates for basic cable service, including rates
associated with the installation of basic cable services, and any equipment
necessary for provision of basic cable services.
C) If subsequent to Federal or State pre-emption of County Council regulation of
basic cable rates, the preempting Federal or State body reinstitutes and/or
permits such local rate regulatory AUTHORITY, FOR BASIC, EXPANDED BASIC,
premium, pay-per-view or other types of cable and/or TELECOMMUNICATIONS
SERVICES, THE COUNTY Council may regulate any permitted rates, so long as the
County Council complies with, and abides by. any, and all, applicable State and
Federal rules and regulations, including any applicable rules and regulations of
the FCC.
SECTION 21. SERVICE TO COUNTY GOVERNMENT FACILITIES.
A) The Franchisee will connect cable to and provide ancillary equipment
necessary to make its service available for County buildings at no
charge. In addition, the Franchisee will provide continuing extended
basic cable service to each facility requested by the County to receive
such service, also at no charge. The County may connect as many
television sets and monitors to the system within each building as it
deems necessary, with continuing notice to the Franchisee as to the
number of set sets, monitors, and/or other equipment. With regards to
cabling and wiring, the Franchisee will be responsible only for
extending its connection to one (1) point on each building, from which
the County may make interior connections. The County will be
responsible for interior wiring and maintenance, unless otherwise
agreed.
B) In order to meet the objective set forth above, the Franchisee will
connect to County buildings at the time that build out of the system
carries its lines near to each such building. To effectuate this
intent, the Franchisee agrees that it will not artificially or without
good cause change the path of any lines in order to exclude the
installation of cable to any County building, it being the intent of
the parties that all County buildings will be able to receive cable
service hereunder.
C) Notwithstanding subsection (A), and subsection (B) of this Section, the
Franchisee and the County agree that the number of connections to
television sets or other equipment in the total of all County buildings
shall not exceed two hundred (200).
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SECTION 22. SERVICE AREA.
The Franchisee's initial service area in the unincorporated area of the
County is reflected on a map attached as Exhibit "A" and incorporated as part of
this Agreement (the "Initial Service Area"). Within five years, the Franchisee
will offer service to all residents in the Initial Service Area as shown on the
map attached as Exhibit "A"; In addition, Franchisee shall not be required to
provide cable service to any dwelling unit where the drop line is 150 feet or
more from the nearest feeder line from which the dwelling unit can be served.
Thereafter, the Franchisee may extend its service in the County outside the
Initial Service Area in a manner that is reflective of its operational and
financial plans, so long as once the Franchisee extends its service into other
areas of the unincorporated County, it offers service to all potential
subscribers within the Franchisee's expanded and/or extended service area.
SECTION 23. RESERVATION OF EDUCATIONAL AND GOVERNMENTAL CHANNELS.
A) Within twenty-four (24) months after the effective date of this
Agreement, the Franchisee shall make sufficient channel capacity, and
the available electronics to provide one (1) twenty-four (24) hour
channel for the County's own governmental use to be located on the most
basic tier of service offered to subscribers. This channel is not
subject to non-repetitive use restrictions. Prior to the Franchisee
having to activate this channel, the County Council shall give at least
one hundred eighty (180) days advance notice of the County's intent to
use such channel.
B) Within thirty-six (36) months after the effective date of this
Agreement, the Franchisee shall make sufficient channel capacity, and
available electronics to provide one (1) twenty-four (24) hour channel
for educational use. Prior to the Franchisee having to activate this
channel, the County Council shall give at least one hundred eighty
(180) days advance notice of an educational institution's intent to use
such channel.
C) If at any time, the additional governmental or the additional
educational channel is consistently used five (5) days a week (Monday
through Friday) for a period of six (6) months, then the Franchisee
shall make available one (1) additional channel for governmental access
or one (1) additional channel for educational access. For purposes of
this Agreement "consistently used" means that governmental channel or
the educational channel is cablecasting non-repetitive programming at
least eighteen (18) hours per day. Nothing in this Section shall
obligate Franchisee to reserve more than three (3) channels for use by
the County, nor any more channel capacity than is required by
applicable federal or state law.
D) Upon activation of either the additional governmental or the additional
educational access channel, designated representatives of the County
and the Franchisee shall review after every six (6) months the
percentage of use of the governmental or educational access channels.
If, after any six (6) month period, the percentage of use for any
required governmental or
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educational channel drops below twenty-five percent (25%) of the total
time allocated, then the required number of hours shall be reduced to a
number that most closely approximates the average number of hours of
use per day. If the average number of hours of use per day for either
the governmental or educational access channel is less than four (4)
hours per day, then the County or its designated representative shall
determine that the requirement for that channel's availability shall
cease thirty (30) days from that determination, and the Franchisee may
thereafter use such a channel for any lawful purpose.
E) Notwithstanding the foregoing, the Franchisee has the right to use all
unused programming capacity on the educational channel described in
Paragraph (B) above, or the additional governmental or educational
channel described in Paragraph (D) above, for any purpose including but
not limited to PEG programming for other municipalities or counties.
Programming capacity for purposes of this Paragraph shall be any
capacity on which the County does not cablecast non-repetitive
programming.
SECTION 24. INITIAL AND ON-GOING FUNDING FOR AN EDUCATIONAL AND, GOVERNMENTAL
ACCESS.
A) In order to ensure the initial funding for the governmental and educational
access facilities and equipment, the Franchisee will deliver on or before
January 15, 2000, a one-time grant to compensate the County for its purchase of
equipment or services necessary to fulfill the parties' obligations under
Section 23. This one-time grant will not exceed $42,000.
SECTION 25. TECHNICAL AND PERFORMANCE STANDARDS.
The Franchisee shall comply with the most current FCC technical
standards, and with all applicable standards related to performance including
the most current standards concerning the cumulative leakage index (CLI), and
Proof-of-Performance Tests.
SECTION 26. EMERGENCY ALERT.
A) The Franchisee shall comply with all applicable Emergency Alert System (EAS)
rules, regulations, and standards of the FCC. Franchisee shall comply with the
County's Cable Television Regulatory Ordinance provisions regarding an emergency
override system as permitted by applicable law.
B) For the duration of the Franchise, the Franchisee shall provide
interconnection with the designated County Emergency building, which is
currently located at 3801 Rivers Avenue. When the County's new Public Services
Building is constructed on Bridge View Drive in North Charleston, the Franchisee
shall ensure that the Public Services Building will be interconnected to
Franchisee's network. The County shall notify the Franchisee at least six (6)
months prior to a move or relocation of the designate County Emergency building.
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<PAGE> 14
SECTION 27. NOTICES.
A) Every direction, notice, order. filing, report, record, document, written
communication, or other type of correspondence to be submitted and/or delivered
to the Franchisee shall be sent to [insert name and/or position.
mailing address and an E-mail address (if Franchisee has one)].
B) Every direction, notice, order, filing, report, record, document, written
communications, or other type of correspondence to be submitted and/or delivered
to the County shall be sent to [insert name and/or position, mailing address and
an E-mail address (if the County has one)].
C) All notices, orders, and official directions shall be delivered to each
party's contact by either:
1) certified mail, return receipt requested;
2) personal service with a signed receipt of delivery; or
3) overnight delivery with receipt verification.
D) All other filings, reports, records, documents, and other correspondence may
be delivered by any permissible means including, but not limited to, E-mail,
facsimile (fax) transmission, personal service, overnight mail, or package
delivery via cable. The delivery of all notices, reports, records, and other
correspondence shall be deemed to have occurred at the time of receipt (unless
otherwise designated by State law).
SECTION 28. ASSIGNMENT, TRANSFER, OR SALE OF FRANCHISE.
A) There shall no be assignment of the Franchise in whole, or in part by
the Franchise without the prior written approval of the County Council.
Transfer or any change in the ownership or control (whether managerial
or operational) of the Franchise, or the cable system, shall constitute
an assignment of the franchise requiring such prior approval.
B) If written approval of the County Council is required, any assignment,
transfer, or sale without such prior written approval shall constitute
a default of such Franchise, and may subject the Franchise to
revocation pursuant to Section 29 and the Regulatory Ordinance.
C) If the approval of the County Council is required, the Franchisee shall
petition in writing for the County Council's written consent and
approval for such a proposed assignment, transfer, or sale of the
Franchise at least one hundred twenty (120) days before such a proposed
assignment, transfer or sale of the Franchise is scheduled to become
effective. The Franchisee shall also file with the County an FCC Form
394 (or successor). The County Council may waive the requirements in
this Paragraph for good cause shown by Franchisee.
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<PAGE> 15
D) The County Council will not unreasonably withhold its consent and
approval to such an assignment. However, in making such a
determination, the County Council may consider all relevant facts
including the following:
1) experience of the proposed vendee, transferee, lessee,
assignee, or buyer (including conducting an investigation of
the proposed vendee's tranferee's assignee's, or buyer's
service record in other communities);
2) qualifications of the proposed vendee, transferee, lessee,
assignee, or buyer;
3) legal integrity of the proposed vendee, transferee, lessee,
assignee, or buyer;
4) financial stability of the proposed vendee, transferee,
lessee, assignee, or buyer;
5) if requested by the County, submittals from the proposed
vendee, transferee, lessee, assignee, or buyer, on what, if
any, changes it intends to make in the operation of the cable
television system, including whether the proposed vendee,
transferee, lessee, assignee, or buyer intends to request any
immediate relief (within the first twelve (12) months after
the proposed approval) in the existing Franchise Agreement;
6) the corporate connection, if any, between the Franchisee, and
the proposed vendee, transferee, lessee, assignee, or buyer;
and/or
7) any other aspect of the proposed vendee's transferee's
lessee's or assignee's background which would affect the
health, safety, and welfare of the citizenry of the County as
it relates to the operation of the cable television system.
E) At the time the Franchisee submits it written petition, it shall also
submit a copy of the completed sales agreement, or a functionally
equivalent instrument, between the Franchisee, and the proposed vendee,
transferee, lessee, assignee, or buyer, so that the County Council may
discover the assumption of obligations by the Franchisee and the
proposed vendee, transferee, lessee, assignee, or buyer with respect to
the cable television system. In lieu of the sales agreement, the County
Council may accept an attested summary of obligations assumed by the
above-referenced parties. The County may request additional
information, other than that which is expressly prohibited by law.
F) Before an assignment is approved by the County Council, the proposed
vendee, transferee, lessee, assignee, or buyer shall execute an
affidavit, acknowledging that it has read, understood, and will abide
by both the County Cable Television Regulatory Ordinance, and the
applicable Franchise Agreement.
G) In the event any approved assignment, the vendee, transferee, lessee,
assignee, or buyer shall assume all obligations and liabilities of the
former Franchisee.
H) Notwithstanding any other term, condition, provision, or requirement
contained in this Section, the Franchisee may, without prior County
Council written approval, make, execute, or enter into any security
agreement, collateral assignment, financing statement or other
agreement or instrument for the purposed of creating and perfecting a
security interest in its right, title and interest in and to the
franchise for financing purposes; provided however, that
14
<PAGE> 16
the secured party under any such security agreement, collateral
assignment, financing statement or other agreement or instrument may
not exercise any right or remedy thereunder (including, without
limitation, the remedy of foreclosure) that would have the effect of
selling, transferring, leasing, assigning, disposing of the franchise,
or changing the managerial or operational control of the Franchisee,
without the prior written consent and approval of the County Council.
I) Notwithstanding any other term, condition, provision, or requirement
contained in this Section, the Franchisee may, without prior County
Council written approval, sell, transfer, lease, assign or dispose of
all, but not less than all, of the Franchise or the cable system to a
parent, sister, or subsidiary corporation of the Franchisee, so long LS
there is no change in the operational or managerial control of the
Franchisee.
J) For situations covered by subsection (H), and subsection (1) of this
Section, the Franchisee must nonetheless provide written notification
to the County Council of the reason and/or rationale for asserting that
prior written County Council approval is not required. Such written
notification shall include any documentation necessary to support the
Franchisee's assertion that prior written County Council approval is
not required.
K) Upon request by the County, the Franchisee, and any parent company of
the Franchisee shall provide the County with a list of
owners/shareholders of such Franchisee or such parent company having an
ownership interest equal to, or exceeding, five percent (5%).
SECTION 29. DEFAULT OF FRANCHISE, TERMINATION, CANCELLATION, OR NON-RENEWAL.
If necessary and/or warranted, the default and termination,
cancellation or non-renewal of the Franchise and this Agreement shall follow the
provisions and procedures concerning such that are detailed in the County's
Cable Television Regulatory Ordinance.
SECTION 30. RENEWAL OF FRANCHISE.
A) Should the Franchisee choose to preserve its formal franchise renewal fights
under the Cable Act, then it must follow, comply with, and abide by, those
terms, provisions, conditions, and requirements contained in Section 626 of the
Cable Act (presently codified at 47 USC 546, or its successor). Moreover, to the
extent that such do not expressly conflict with the Cable Act, then the
Franchisee must also follow any terms, provisions, conditions, and requirements
contained in the County's Cable Television Regulatory Ordinance.
B) At any time, the Franchisee and the County may engage in informal franchise
renewal proceedings. To the extent that such proceedings do not expressly
conflict with the Cable Act, then the Franchisee may follow and develop rules,
and/or procedures for conducting the franchise renewal
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<PAGE> 17
process. Such rules and/or procedures may expressly include both the County and
Franchisee executing a Scope of Renewal Agreement which sets forth the scope and
parameters of the renewal process, including the length of the renewal process
itself, as well as noting threshold and non-material issues. The Scope of
Renewal Agreement may also set forth the procedure for handling any community
needs assessment and/or ascertainments studies or meetings.
SECTION 31. FRANCHISE ADMINISTRATION.
As one means to assist in the administration of this Agreement, the
County Council (or its designated official or representative) and the Franchisee
shall make reasonable efforts to schedule at least two (2) conferences every
year in order to discuss matters related to the enforcement and administration
of this Agreement. Such conferences may focus on franchise administration
business matters including, but not limited to: a) information supplied pursuant
to scheduled and periodic preventive maintenance inspections; b) franchise fees;
c) response times, billing practices or other customer service items; d)
construction-related concerns; e) resolving or addressing the concerns,
questions or disputes with respect to multiple operators serving or attempting
to serve the same subscriber or geographic area, (including cutting of cable
and/or damage to other facilities and equipment); and f) the potential and/or
actual impact high definition television (HDTV) will have on the provision of
cable service to customers within the County.
SECTION 32. EXEMPTIONS FROM THE ORDINANCE FOR THIS FRANCHISEE AND THIS
FRANCHISE ONLY.
A) The County and the Franchisee agree that this Franchisee shall be exempted
from the following Sections of the County's proposed Cable Television Regulatory
Ordinance, with such exemptions extending only to this Franchisee:
[No exemptions]
B) The County and the Franchisee agree that this Agreement shall grant relief to
the Grantee for the following Sections of the County's proposed Cable Television
Regulatory Ordinance, with such relief extending only to this Franchisee:
1) Section 25. Liability insurance: For purposes of the County's Cable
Television Regulatory Ordinance, the Franchisee's existing liability insurance
coverage totaling $1,600,000.00 in umbrella coverage will be accepted.
2) Section 26. Performance and construction/completion bond: For
purposes of the County's Cable Television Regulatory Ordinance, the provisions
of Section 16 contained in this Agreement WILL be accepted.
C) The County and the Franchisee agree that this Agreement shall grant a
comparable policy
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<PAGE> 18
substitution to the Franchisee for the following Sections of the County's Cable
Television Regulatory Ordinance, with such comparable policy substitutions
extending only to this Franchisee:
1) Franchisee's Sterling Service Training and Certification Program
(attached hereto as Exhibit "B") is deemed comparable to, and in some cases,
exceeding the terms, conditions, provisions, and requirements contained in
Section 32 of the County's proposed and subsequently adopted Cable Television
Regulatory Ordinance which relates to certification standards for customer
service representatives and service technicians;
2) Franchisee's corporate preventive maintenance policy (attached
hereto as an Exhibit "C") is deemed comparable to, and in some cases, exceeding
the terms, conditions, provisions, and requirements contained in Section 62 of
the County's proposed Cable Television Regulatory Ordinance, with the following
exceptions:
a) with respect to Section 3.7 of the Franchisee's Preventive
Maintenance Policy, Retention of Documents, Franchisee will retain all daily
weekly, monthly, quarterly, semi-annually, and yearly tests/checks for a minimum
of three (3) years;
b) with respect to Section 4.1.10 of the Franchisee's Preventive
Maintenance Policy, Head-end/Hub Equipment, Franchisee will conduct tests of the
tower, and/or antennas every six (6) months; and
c) with respect to Section 4.6.8 (c) of the Franchisee's Preventive
Maintenance Policy, RF Distribution Plant, Franchisee will conduct and/or
perform FCC standard Proof-of-Performance Tests at least twice a year.
d) The County and the Franchisee agree that the Agreement will
clarify the following Section of the County's Cable Television Regulatory
Ordinance, with such clarifications extending only to this Franchisee;
D) Section 5 Definition #74 is clarified to the extent that the definition does
not include a service disruption or interruption that affects less than four (4)
persons.
SECTION 32. TIME IS OF THE ESSENCE.
Whenever this Agreement shall set the time or date for any act to be
performed by or on behalf of the City or Grantee, such time or date shall be
deemed to be of the essence.
IN WITNESS WHEREOF, the parties hereto have set their respective hands and seals
of the day first written above.
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<PAGE> 19
COUNTY OF CHARLESTON,
SOUTH CAROLINA
By: /s/
-----------------------------------
/s/
- ---------------------------------
Witness
/s/
- ---------------------------------
Witness
KNOLOGY OF CHARLESTON,
INC.
By: /s/
-----------------------------------
1-12-99
/s/
- ---------------------------------
Witness 1-12-99
/s/
- ---------------------------------
Witness 1-12-99
18
<PAGE> 1
EXHIBIT 10.32
AN ORDINANCE
AUTHORIZING THE GRANT, AWARD, AND ISSUANCE OF A CABLE TELEVISION/
TELECOMMUNICATIONS FRANCHISE TO KNOLOGY OF CHARLESTON, INCORPORATED, AND THE
SUBSEQUENT EXECUTION OF A FRANCHISE AGREEMENT BETWEEN THE CITY OF NORTH
CHARLESTON, SOUTH CAROLINA, AND KNOLOGY OF CHARLESTON, INCORPORATED, FOR A
PERIOD OF FIFTEEN YEARS, UNDER THE TERMS AND CONDITIONS OF THE ATTACHED CABLE
TELEVISION AGREEMENT, AND THE CITY'S TELECOMMUNICATIONS AND CABLE CODE.
WHEREAS, KNOLOGY of Charleston, Incorporated, has submitted a franchise for a
City-wide cable/telecommunications franchise; and
WHEREAS, the application of KNOLOGY of Charleston, Incorporated, for a City-wide
cable/telecommunications franchise (herein attached as Exhibit #1) has been
reviewed and evaluated by the City Council for the City of North Charleston,
South Carolina, and its consultant; and
WHEREAS, the City Council for the City of North Charleston, South Carolina, has
conducted a public hearing to consider and gather public input concerning the
application of KNOLOGY of Charleston, Incorporated, for a City-wide
cable/telecommunications franchise; and
WHEREAS, the City Council for the City of North Charleston, South Carolina, has
determined that the application of KNOLOGY of North Charleston, South Carolina
meets the requirements set forth in Section 10.5-66 of the City's
Telecommunications and Cable Code; and
WHEREAS, the City Council for the City of North Charleston, South Carolina, has
determined (more fully noted in attached Exhibit #2), pursuant to Section
10.5-60 of the City's Telecommunications and Cable Code that a third cable
and/or telecommunications franchise is feasible for the City of North
Charleston, South Carolina; and
WHEREAS, the City Council for the City of North Charleston, South Carolina, has
made a finding (more fully noted in attached Exhibit #2), pursuant to Section
10.5-66 of the City's Telecommunications and Cable Code; and
WHEREAS, the City Council for the City of North Charleston, South Carolina, has
determined that KNOLOGY of Charleston, Incorporated possesses sufficient
technical,
<PAGE> 2
legal, financial, and character qualifications to construct, operate, and
maintain a cable/telecommunications system with the City of North Charleston;
BE IT ORDAINED by the City Council for the City of North Charleston, South
Carolina that
1) KNOLOGY of Charleston, Incorporated is granted a
cable/telecommunications franchise for a period of fifteen (15) years;
2) The precise duration of the renewed cable franchise shall be from
May 28, 1998 through, and including May 28, 2013;
3) The Mayor of the City of North Charleston is authorized to execute a
Franchise Agreement with KNOLOGY of Charleston, Incorporated;
4) The within Ordinance to become effective immediately upon its
ratification by the City Council and its acceptance by KNOLOGY of Charleston,
Incorporated, by its authorized officers in compliance with Section 6A of the
Cable Television/Telecommunications Franchise Agreement.
THE WITHIN ORDINANCE TO BECOME EFFECTIVE IMMEDIATELY UPON ITS RATIFICATION BY
CITY COUNCIL.
Ordained in City Council this 28 day of May
1998, in the Year of Our Lord, 1998, and in
the 221st year of the independence of the
United States of America
/s/ R. Keith Summey
R. Keith Summey
Mayor
ATTEST:
/s/ Dianne Greer
Dianne Greer, CMC
Approved as to form: Municipal Clerk
/s/
- --------------------------
Legal Counsel
<PAGE> 3
FRANCHISE AGREEMENT
THIS CABLE FRANCHISE AGREEMENT ("Agreement") is entered into effective as of May
28, 1998 ("Effective Date"), by and between the City of North Charleston, South
Carolina ("City"), and KNOLOGY of Charleston, Incorporated ("Grantee"), a South
Carolina Corporation.
WHEREAS, the City, upon consideration of the application for a cable franchise
by Grantee, has determined that it is in the best interests of, and consistent
with the health, safety, and welfare of the citizens of the City of North
Charleston to grant the Grantee's request for a franchise on the terms and
conditions hereinafter set forth; and
WHEREAS, the City has analyzed fully and considered the technical ability,
financial condition, legal and character qualifications of the Grantee, and
determined that there are no concerns in those above-referenced areas; and
WHEREAS, the Grantee has agreed to be bound by the conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the grant of authority pursuant to this
Agreement, the Grantee hereby promises to comply with the provisions of this
Agreement and, in consideration of the Grantee's promises, the City hereby
grants to the Grantee the rights, privileges and authorizations set forth
hereinbelow.
SECTION 1. SHORT TITLE.
This Agreement may be known and cited as the City of North Charleston
Cable Television/Telecommunications Franchise Agreement with KNOLOGY of
Charleston, Incorporated.
SECTION 2. APPLICABLE LAW.
This Franchise shall be governed in all respects by the laws of the
City of North Charleston South Carolina, and the applicable laws of the United
States, the State of South Carolina, and the rules and regulations of the
Federal Communications Commission (FCC).
SECTION 3. SEPARABILITY.
If any section, subsection, sentence, clause, phrase, or portion of
this Agreement is for any reason held invalid or unconstitutional by any court
or competent jurisdiction such portion shall be deemed a separate, distinct and
independent provision of such holding and shall not affect the validity of the
remaining portions herein.
SECTION 4. DEFINITIONS.
<PAGE> 4
For purposes of this Agreement, and unless the Context otherwise
requires, the terms used herein shall have the same meaning as defined in the
Telecommunications and Cable Ordinance of the City of North Charleston, South
Carolina (hereinafter sometimes referred to as the "Code").
SECTION 5. GRANT OF NON-EXCLUSIVE FRANCHISE.
a. There is hereby granted by the City to the Grantee the right and
privilege to construct, erect, operate, and maintain, in upon along, across,
above, over, and under the streets, alleys, public ways, and public places now
laid out or dedicated, and all extensions thereof, and additions thereto, in the
City, poles, wires, cables, underground conduits, manholes, and other equipment
and fixtures necessary for the installation, construction, maintenance, repair,
replacement, and operation within the City of a telecommunications system, which
consists of voice, video, and data, and other lawful and permitted applications.
b. The right to use and occupy said streets, alleys, public ways, and
places for the purposes herein shall not be exclusive, and the City reserves the
right to grant a similar use of said streets, alleys, public ways, and places,
to any person at any time during the period of this Franchise.
SECTION 6. EXTENT OF FRANCHISE.
a. This Franchise shall include all areas within the incorporated
limits of the City of North Charleston into which the telecommunications system
is extended, including any areas annexed by the City.
b. The City hereby grants to the Grantee the authority to contract with
the City or any appropriate board or agency thereof of with the holder or owner
of any utility franchise in the City for the use, rental, or lease of its or
their poles, underground conduits, and any other structures and facilities for
the purpose of extending, carrying, or laying Grantee's wires, cables, and other
equipment, facilities, and appurtenances necessary or desirable for the
operation of its cable television/telecommunications system. The City agrees
that any public utility owning or controlling such poles or underground conduits
may, without amendment to its franchise, allow, and is encouraged to allow,
Grantee to make such use thereof pursuant to any agreement reached between such
utility and the Grantee.
SECTION 7. TERM OF FRANCHISE.
a. Initial Term. This Franchise and the rights, privileges, and
authority hereby granted shall take effect and be in force from and after final
passage hereof, as provided by law, and shall continue in force and effect for a
term of fifteen (15) years, provided that within thirty (30) days after the date
of this Agreement, Grantee shall file with the Clerk of Council, Grantee's
unconditional acceptance of this Franchise and promise to comply with, and abide
by, all its provisions, terms, conditions, and
<PAGE> 5
requirements. Such acceptance and promise shall be in writing fully executed and
sworn to, by or on behalf of the Grantee or its fully authorized officers before
a Notary Public or other officer authorized by law to administer oaths. Should
the Grantee fail to comply with this Subsection, it shall acquire no rights,
privileges, or authority under this Franchise whatsoever.
b. Renewal Term. This Franchise may be renewed under either the formal
or informal renewal procedures set forth in Section 626 (as amended) of the
Cable Act (codified at 47 United States Code (USC) Section 546). This Franchise
may be renewed for term not to exceed fifteen (15) years in length. If the
Grantee does not preserve its rights under the formal renewal procedures set
forth in Section 626 of the Cable Act, then the renewal of this Agreement shall
be under either the informal process noted elsewhere in Section 626, or under
any informal process mutually agreed to by the City and the Grantee.
SECTION 8. EFFECT OF A "TECHNICAL" BREACH OR VIOLATION OF THE CITY
TELECOMMUNICATIONS AND CABLE CODE OR THIS AGREEMENT.
a. It is the intent of the City not to subject the Grantee to
penalties, fines, forfeitures, or revocation of this Agreement for
so-called "technical" breach(es) or violation(s) of the City's
Telecommunications and Cable Code, which include the following:
1) in instances, or for matters where a violation of the City's
Telecommunications and Cable Code by the Grantee was a good faith error that
resulted in no or minimal impact on the customers within the City; or
2) where there existed circumstances reasonably beyond the control
of the Grantee, and which precipitated a violation of the City's
Telecommunications and Cable Code on the part of the Grantee, or which were
deemed to have prevented the Grantee from complying with any term, condition,
provision, or requirement of the City's Telecommunications and Cable Code.
b. It is the intent of the City not to subject the Grantee to penalties
fines, forfeitures or revocation of this Agreement for so-called
"technical" breach(es) or violation(s) of this Agreement, which include
the following:
1) in instances, or for matters where a violation of this Agreement
by the Grantee was a good faith error that resulted in no or minimal negative
impact on the customers within the City; or
2) where there existed circumstances reasonably beyond the control
of the Grantee, and which precipitated a violation of this Agreement on the part
of the Grantee, or which were deemed to have prevented the Grantee from
complying with any term, condition, provision, or requirement of this Agreement.
SECTION 9. FORCE MAJEURE.
The Grantee shall neither be held in default or non-compliance with the
terms,
<PAGE> 6
conditions, provisions, or requirements of this Agreement, nor suffer any
enforcement or penalty relating thereto (including termination, cancellation or
revocation of this Agreement), where such non-compliance or alleged default
occurred and/or was caused by a strike, riot, war, earthquake, flood, tidal
wave, severe rainstorm, hurricane or other act of nature, or other event that is
reasonably beyond the Grantee's ability to anticipate and control. Force majeure
also covers work delays caused by waiting for utility providers to service or
monitor their own utility poles on which the Grantee's cable and/or equipment is
attached.
SECTION 10. FAILURE TO ENFORCE OR GRANT A WAIVER DOES NOT ACT AS ACQUIESCENCE OR
WAIVER FOR A SUBSEQUENT BREACH OR VIOLATION.
a. The City's failure to enforce one (1) or more terms, conditions,
provisions, or requirements of this Agreement for a breach or violation
by the Grantee, shall not be deemed and/or viewed as an act of
acquiescence, waiver, or bar on the City pursuing and seeking
enforcement in the event one (1) or more of the terms, conditions,
provisions, or requirements of this Agreement is subsequently breached
or violated by the Grantee.
b. The City's grant of waiver for breach or violations of one (1) or
more terms, conditions, provisions, or requirements of this Agreement
shall not be deemed and/or viewed as an act of acquiescence, waiver, or
bar on the City pursuing and seeking enforcement in the event that one
(1) or more of the same terms, conditions, provisions, or requirements
of this Agreement is subsequently breached or violated by the Grantee.
SECTION 11. RELATIONSHIP OF THIS AGREEMENT TO THE CITY TELECOMMUNICATIONS AND
CABLE CODE AND FEDERAL LAW.
a. Except as noted elsewhere in this Section, the North Charleston
Telecommunications and Cable Code in effect on the Effective Date of
this Agreement shall control and prevail.
b. Notwithstanding subsection (a) of this Section, and in light of the
fact that as of May 28, 1998, the Grantee is aware that the City is
contemplating, considering, and/or reviewing a number of proposed revisions to
the existing City Telecommunications and Cable Code, the Grantee agrees to abide
by, and comply with, such proposed revisions to the existing City
Telecommunications and Cable Code, immediately upon their approval (if such
approval is within six (6) months of May 29, 1998).
c. Notwithstanding subsections (a) and (b) of this Section, and in the
case where this Agreement, as may be amended by the parties, contains
an exemption, relief, clarification, or comparable policy substitution
from one (1) or more terms, conditions, provisions, or requirements of
the City's Telecommunications and Cable Code, and where such exemption,
relief, clarification or comparable policy substitution is contained in
the Franchise Agreement, then the specifically noted
<PAGE> 7
exemption, relief, clarification, or comparable policy substitution
contained in this Franchise Agreement controls, but only in those
specific circumstances.
d. Subject to the express proviso contained in subsection (b) of this
Section, the Grantee agrees to abide by, and comply with, the City's
Telecommunications and Cable Code that is in effect on the Effective Date of
this Agreement (including proposed revisions noted as of May 28, 1998), and as
modified by the exemptions, relief, clarifications, and comparable policies
contained in this Agreement. A subsequent amendment or modification of the City
Telecommunications and Cable Code by the City Council will apply to the Grantee
if the City Council concludes that the amendment, modification, or revision will
materially advance the interests of customers when balanced against its material
impact upon the Grantee. The City shall provide the Grantee with at least one
hundred eighty (180) days notice before adoption of such amendment,
modification, or revision, during which notice period the Grantee may provide
written and oral comment with respect to the amendment, modification, or
revision. Notwithstanding the above, the Grantee will be expected to comply
with, and abide by, any valid present or future ordinance that is generally
applicable to businesses within the territorial area. Still, Grantee does not
waive any claim that it may have regarding whether the City can unilaterally
alter or modify the provisions, terms, conditions, or requirements of this
Agreement.
SECTION 12. AMENDMENTS TO THIS AGREEMENT.
Any change, amendment, modification, revision, extension, of this
Agreement, or the adoption of a Renewal Agreement shall be in writing and shall
be executed by duly authorized representatives of both the City and the Grantee.
SECTION 13. INDEMNITY.
a. To the extent permitted by law, the Grantee shall at all times
defend, indemnify, protect, save harmless, and exempt the City, the Mayor, the
Council, the City Attorney, and other employees of the City from any, and all,
penalty, damage, or charges arising out of claims, suits, demands, causes of
action or award of damages whether compensatory or punitive, or expenses arising
therefrom, either at law or in equity, which might be claimed now or in the
future, including any payments required by the State's Workmen's Compensation
law, which may arise out of, or be caused by, the construction, erection,
location, products performance, operation, installation, maintenance, repair,
replacement, removal and/or restoration of the cable/telecommunications system
within the City by a negligent act or omission of the Grantee, its agents or
employees, contractors, subcontractors, independent contractors, or implied or
authorized representatives.
b. Reasonable attorneys' fees and reasonable consultant and expert
witness fees are specifically included as a cost which may be recovered by the
City from the Grantee.
c. The City, the Mayor, the Council, and the City Attorney specifically
<PAGE> 8
reserve the right to retain counsel of their own choice, at their own expense.
d. If the Grantee obtains counsel for the City, the Mayor, the Council,
or the City Attorney, then any one of them shall have the right to approve
counsel, which approval shall not be unreasonably withheld.
e. With respect to the Grantee's own defense of such actions, noted in
this Section, it is understood that the Grantee reserves the right to select and
retain, without the City's, Mayor's, Council's, or City Attorney's approval,
counsel of Grantee's choice, at its own expense.
SECTION 14. INSURANCE.
a. The Grantee shall maintain, and by its acceptance of this Franchise
and Agreement specifically agrees that it will maintain throughout the term of
this Franchise, public liability and property damage in at least the following
amounts:
$1,600,000.00 in umbrella coverage.
b. The insurance policy shall be issued by an insurance company
licensed to do business in the State of South Carolina and which has one of the
three highest or best ratings from the Alfred M. Best Company, and which shall
include the City, Mayor, City Council, and City Attorney, as additional
insureds, and shall obligate the insurance company to furnish the City Council
with at least thirty (30) days' written notice in advance of cancellation.
c. The Grantee shall provide the City Council with certificates
evidencing the required insurance within fifteen (15) days after acceptance of
this Franchise, and renewal certificates shall be mailed to the City Council
before expiration of the insurance policies which such certificates are to
renew.
d. At any time the Grantee employs an outside plant contractor or
subcontractor, it must require and submit to the City, proof from such
contractor or subcontractor or insurance in the amounts listed above, naming the
City, Mayor, City Council, and City Attorney, as additional insureds. Such
insurance coverage shall remain in effect for as long as the construction,
installation, repair, replacement, and on-going maintenance continues.
SECTION 15. WORKMEN'S COMPENSATION INSURANCE.
a. The Grantee shall provide and maintain, for the life of this
Franchise and Agreement, Workmen's Compensation Insurance for all full-time
non-exempt employees, in accordance with the laws of the State of South
Carolina. In the event that such insurance is cancelled, revoked, not renewed,
or otherwise terminated, then either the insurance carrier, or the Grantee shall
notify the City Council in writing, within thirty (30) days of such event.
<PAGE> 9
b. Annually, a certificate shall be filed with the City Council by
either the insurance carrier or the Grantee, showing such insurance to be in
force at all times.
SECTION 16. PERFORMANCE AND CONSTRUCTION BONDS.
a. Not later than July 1, 1998, the Grantee shall file with the City, a
performance bond in the amount of $100,000.00. The purpose of the bond is to
make certain that the City will not suffer should the Grantee not perform all
its obligations detailed in this Agreement with the exception of construction
which is covered elsewhere in this Section.
b. Should the Grantee comply with the terms, provisions, conditions,
and requirements of the City's Telecommunications , and this
Franchise and Agreement, then the City agrees to schedule:
1) On or after July 1, 2001, the Grantee may reduce the performance
bond by $50,000.00, so that the Grantee may have a $50,000.00 performance bond;
2) On or after July 1, 2001, the Grantee may reduce the performance
bond by an additional $30,000.00, so that the Grantee may have a $20,000.00
performance bond;
3) On or after July 1, 2001, the Grantee may reduce the performance
bond by an additional $10,000.00, so that the Grantee may have a $10,000.00
performance bond.
c. At no time shall the Grantee's performance bond be less than
$10,000.00.
d. If the City draws on the performance bond as a result of the
Grantee's failure to timely discharge its obligations, then the Grantee shall be
required to replenish (within thirty (30) days) the performance bond to the
$100,000.00 level, subject to, that within one hundred eighty (180) days
thereafter, the City and the Grantee shall enter into a new reduction schedule
for the performance bond.
e. Grantee shall maintain a construction bond in the amount of
$100,000.00 for the duration on the initial construction project, or January 15,
2000, whichever comes sooner.
SECTION 17. RECORDS AND REPORTS.
a. The Grantee shall submit the following reports to the City Council
at the times indicated:
1. copies of all facilities applications and petitions for special
relief filed with the FCC by the Grantee with respect to its North Charleston
cable/telecommunications system shall be submitted within ten (10) days after
their filing;
2. a detailed financial statement in the frequency, form, and format
that satisfies the requirements noted in the City's Telecommunications and Cable
Code;
3. a preventive maintenance report in the frequency, form, and
format
<PAGE> 10
that satisfies the requirements noted in the City's Telecommunications and Cable
Code;
4. any other reports, statements, or data in the frequency, form,
and format that satisfies the requirements noted in any other Section of the
City's Telecommunications and Cable Code;
5. copies of the Grantee's FCC-mandated 395-A Forms, shall be
submitted simultaneously with the Grantee's filing to the FCC of such reports;
and
6. copies of the Grantee's FCC 394 Forms, shall be submitted
simultaneously with the Grantee's filing to the FCC of such reports.
b. The Grantee shall retain copies of the following reports, and such
reports shall be submitted to the City upon seven (7) days written request:
1) FCC-mandated public inspection file;
2) FCC Proof-of-Performance tests;
3) any, and all, FCC CLI (cumulative leakage index) tests and
results;
4) any, and all, reports, data, and filings submitted to the
Securities and Exchange Commission, concerning the operation of all, or a part,
of the North Charleston, South Carolina cable/telecommunications system (to the
extent that such reports, data, and filings are not protected and/or
privileged); and
5) any, and all, reports, data, and filings submitted to State
agencies (excepting tax reports, and/or filings) concerning the operation of
all, or a part, of the North Charleston, South Carolina,
cable/telecommunications system (to the extent that such reports, data, and
filings are not protected and/or privileged).
SECTION 18. CUSTOMER SERVICE REQUIREMENTS.
The Grantee shall comply with all customer service provisions, terms,
conditions, and requirements (for which it has not received an exemption,
relief, or clarification) that are noted and contained within the City's
Telecommunications and Cable Code.
SECTION 19. PREVENTIVE MAINTENANCE.
The Grantee shall comply with the terms, provisions, conditions, and
requirements related to preventive maintenance which are attached as an Exhibit
to this Agreement, to the extent that such terms, provisions, conditions, and
requirements have not been modified by Section 27(c)(2) of this Agreement.
SECTION 20. FRANCHISE FEE.
The Grantee shall pay a franchise fee in the amounted noted in, and in
the frequency directed by the City's Telecommunications and Cable Code.
SECTION 21. NONDISCRIMINATORY EMPLOYMENT AND PROCUREMENT PRACTICES.
The Grantee shall at all times comply with all applicable State and
Federal laws,
<PAGE> 11
and with the FCC's rules governing nondiscriminatory employment and procurement
practices, and it shall maintain and place in its public inspection file a
written program describing the procedures by which it ensures such compliance.
Moreover, the Grantee shall provide the City annually (and simultaneously with
Grantee's submittal to the FCC) a copy of FCC Form 395-A, or any subsequently
developed equivalent.
SECTION 22. ASSIGNMENT, TRANSFER, OR SALE OF FRANCHISE.
The Grantee shall comply with the timeframes and procedures detailed in
the City's Telecommunications and Cable Code should the Grantee wish to assign
or transfer its franchise and/or sell its cable television and/or
telecommunications system.
SECTION 23. DEFAULT OF FRANCHISE; TERMINATION, CANCELLATION OR NON-RENEWAL.
If necessary and/or warranted, the default and termination,
cancellation or non-renewal of the Franchise and this Agreement shall follow the
provisions and procedures concerning such that are detailed in the City's
Telecommunications and Cable Code.
SECTION 24. RENEWAL OF FRANCHISE.
a. Should the Grantee choose to preserve its formal renewal rights
under the Cable Act, then it must follow, comply with, and abide by, those
terms, provisions, conditions, and requirements contained in Section 626 of the
Cable Act (or its successor which is presently codified at 47 USC 546).
Moreover, to the extent that such do not expressly conflict with the Cable Act,
then Grantee must also follow any terms, provisions, conditions and requirements
contained in the City's Telecommunications and Cable Code.
b. At any time, the Grantee and City may engage in informal renewal
proceedings. To the extent that such proceedings do not expressly conflict with
the Cable Act, then the Grantee and City may develop and follow rules and/or
procedures for conducting the renewal process. Such rules and/or procedures may
expressly include both the City and Grantee executing a Scope of Renewal
Agreement which sets forth the scope and parameters of the renewal process
including length of the renewal process itself, as well as, noting threshold and
non-material issues. The Scope of Renewal Agreement may also set forth the
procedure for handling any community needs assessments studies or meetings.
SECTION 25. FRANCHISE ADMINISTRATION.
As one means to assist in the administration of this Agreement, the
City Council (or its designated official or representative) and the Grantee
shall make reasonable efforts to schedule at least two conferences every year in
order to discuss matters relating to the enforcement and administration of this
Agreement. Such conferences may focus on franchise administration business
matters including, but not limited to: a) information supplied pursuant to
scheduled and periodic preventive maintenance inspections; b) franchise fees; c)
response times, billing practices and other customer service items; d)
<PAGE> 12
construction-related concerns; e) resolving or addressing the concerns,
questions or disputes with respect to multiple operators serving or attempting
to serve the same subscriber or geographic area (including cutting of cable
and/or damage to other facilities and equipment); and f) the potential and/or
actual impact high definition television (HDTV) will have on the provision of
cable service to customers within the City.
SECTION 26. TECHNICAL AND PERFORMANCE STANDARDS.
The Grantee shall comply with the most current FCC technical standards,
and with all applicable standards related to performance including the most
current standards concerning cumulative signal leakage (CLI). Moreover, the
Grantee shall Proof-of-Performance tests, in the manner prescribed by the FCC,
at least twice a year.
SECTION 27. EXEMPTIONS FROM THE CODE FOR THIS GRANTEE AND THIS FRANCHISE ONLY.
a. The City and the Grantee agree that this Agreement shall be exempted
from the following Sections of the City's Telecommunications and Cable Code, the
respects of which shall extend only to this Grantee:
[There are currently no exemptions]
b. The City and the Grantee agree that this Agreement shall grant
relief to the Grantee for the following Sections of the City's
Telecommunications and Cable Code, the relief of which shall extend only to this
Grantee:
1) Section 10.5-63 Term of franchise: Notwithstanding any contrary
provision contained in Section 10.5-3 which is in existence at the time this
Agreement becomes effects, the term of Grantee's initial franchise shall be for
a duration of fifteen (15) years, effective from the time noted in Section 7 of
this Agreement.
2) Section 10.5-68 Liability insurance: For purposes of the City's
Telecommunications and Cable Code and this Agreement, the Grantee's existing
liability insurance coverage totalling $1,600,000.00 in umbrella coverage will
be accepted;
c. The City and the Grantee agree that this Agreement shall grant a
comparable policy substitution to the Grantee for the following Sections of the
City's Telecommunications and Cable Code, the relief of which shall extend only
to this Grantee:
1) Grantee's Sterling Service Training and Certification Program
(attached hereto as an Exhibit) is deemed comparable to, and in some cases,
exceeding the terms, conditions, provisions, and requirements contained in
Section 10.5-83 Certification standards for customer service representatives and
service technicians of the City's Telecommunications and Cable Code.
2) Grantee's corporate preventive maintenance policy (attached
hereto as an Exhibit) is deemed comparable to, and in some cases exceeding the
terms, conditions, provisions, and requirements contained in Section 10.5-94
Implementation of
<PAGE> 13
a preventive maintenance program of the City's Telecommunications and Cable
Code, with the following exceptions:
A) with respect to Section 3.7 of the Grantee's Preventive
Maintenance Policy, Retention of Documents, Grantee will retain all daily,
weekly, monthly, quarterly, semiannually, and yearly tests/checks for a minimum
of three (3) years;
B) with respect to Section 4.1.10, of the Grantee's Preventive
Maintenance Policy, Head-end/Hub Equipment, Grantee will conduct tests of the
tower, and/or antennas every six (6) months; and
C) with respect to Section 4.6.8(c) of the Grantee Preventive
Maintenance Policy, RF Distribution Plant, Grantee will conduct and/or perform
FCC standard Proof-of-Performance Tests at least twice a year.
d. The City and the Grantee agree that this Agreement will clarify the
following Sections of the City's Telecommunications and Cable Code, the
clarifications of which shall extend only to this Grantee:
1) Section 10.5-53 Definition #63 Service outage is clarified to the
extent that service outage does not include a service disruption or interruption
that affects less than four (4) persons;
2) Section 10.5-77(b)(14) is clarified to the extent to note that
Grantee's provision and/or use of preview and/or video information channel which
lists current and upcoming programs will suffice for purposes of Grantee having
to provide a comprehensive programming guide.
SECTION 27. TIME IS OF THE ESSENCE.
Whenever this Agreement shall set the time or date for any act to be
performed by or on behalf of the City or Grantee, such time or date shall be
deemed to be of the essence.
IN WITNESS WHEREOF, the parties hereto have set their respective hands and seals
on the day first written above.
CITY OF NORTH CHARLESTON,
SOUTH CAROLINA
By /s/
-------------------------------------
/s/
- ---------------------------------------
Witness
Subscribed and sworn to before me this 28th day of May 1998.
/s/
- ---------------------------------------
Notary Public, County of Charleston, SC
My Commission Expires 5-10-2003
<PAGE> 14
My Commission Expires _____________________
KNOLOGY OF
CHARLESTON, INC.
By /s/
-------------------------------------
Subscribed and sworn to before me this 12th day of June 1998.
/s/
- ---------------------------------------
Notary Public, County of Troup,
West Point, GA
My Commission Expires March 23, 2002
<PAGE> 1
EXHIBIT 10.33
AN ORDINANCE
Ratification
Number 1998-77
ORDINANCE GRANTING A NON-EXCLUSIVE FRANCHISE TO KNOLOGY OF CHARLESTON, INC. TO
USE THE PUBLIC RIGHTS-OF-WAY WITHIN THE CITY OF CHARLESTON TO ERECT, CONSTRUCT,
INSTALL, MAINTAIN AND OPERATE ITS FIBER OPTIC CABLES, EQUIPMENT AND FACILITIES
WITHIN THE CITY OF CHARLESTON; SETTING FORTH CONDITIONS ACCOMPANYING THE GRANT
OF SAID FRANCHISE; PROVIDING A FRANCHISE TERM OF FIFTEEN (15) YEARS; APPROVING
THE AGREEMENT FOR INSTALLATION OF CABLE TELEVISION AND TELECOMMUNICATIONS CABLES
AND EQUIPMENT; AND AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH AGREEMENT.
BE IT ORDAINED BY THE MAYOR AND COUNCIL MEMBERS OF CHARLESTON, IN COUNCIL
ASSEMBLED:
Section 1. Grant of Franchise. The City of Charleston, South Carolina
(the "City") hereby grants to Knology of Charleston, Inc. (the "Grantee"), and
its successors and assigns, a non-exclusive cable television franchise upon the
terms and conditions set forth herein.
1.1 Authority Granted. There is hereby granted to the Grantee the right
to construct, maintain and operate a cable television system in the Franchise
Area (as hereinafter defined), and the non-exclusive right, privilege, easement
and franchise to construct and operate in, over, under and along streets, roads,
alleys, easements, rights-of-way and other public ways and areas in the City,
all necessary or desirable poles, towers, wires, cables and other equipment and
facilities of the cable television system authorized herein.
1.2 Term of Franchise. The Franchise granted herein shall be for an
initial term of fifteen (15) years from the effective date and may be renewed in
accordance with applicable law.
1.3 Effective Date. The effective date of this Franchise shall be the
date of acceptance by the Grantee. Acceptance shall be made in writing within
thirty (30) days of
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approval of the Franchise by the City Council and the acceptance shall indicate
Grantee's agreement to terms and conditions of this Franchise.
1.4 Non-Exclusive Franchise. The Franchise and the rights granted
herein shall be non-exclusive. The City shall have the right to grant to other
persons or entities rights similar to those granted herein.
1.5 Franchise Area. The Franchise shall cover all areas of the City,
excluding, however, the area generally known as Johns Island and the area within
the City east of the Cooper River. Notwithstanding anything contained herein,
Grantee shall not be required to extend cable service or lines except as
provided in Section 5.3.
Section 2. Definitions. For the purpose of this Ordinance, the
following terms, phrases, words and their derivations shall have the meaning
given herein, unless the context clearly indicates that another meaning is
intended. When not inconsistent with the content, words used in the present
tense include the future, words in the plural number include singular number,
and words in the singular number include the plural number. The word "shall" is
always mandatory and not merely directly.
(a) "Cable Television System" is any facility, consisting of a
set of closed transmission paths and associated signal generation,
reception and control equipment that is designated to provide cable
service, including video programming, by wire or cable to subscribing
members of the public who pay for such service.
(b) "Channel" is a band of frequencies 6 megahertz wide in the
electromagnetic spectrum capable of carrying audio-visual television
signals and/or non-video signals.
(c) "City" means City of Charleston.
(d) "Enhanced Local Telecommunications Service Revenues" means
all revenues of any kind generated by Grantee in the City of
Charleston, including but not limited to toll and long distance
telecommunications revenues (whether Interlata, Intralata or
International service), publications and advertising.
(e) "Federal Communications Commission" or "FCC" is the
present federal agency of that name as constituted by the
Communications Act of 1934, or any successor agency created by the laws
of the United States.
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<PAGE> 3
(f) "Franchise" is an authorization granted by the Charleston
City Council which permits the construction, operation and maintenance
of a cable television system and telecommunications equipment, cables
and facilities within the Franchise Area under the terms of this
Ordinance.
(g) "Franchise Area" means that portion of the City for which
a franchise is granted under the authority of this Ordinance. The
Franchise Area shall include all the incorporated areas of the City of
Charleston, including any areas annexed by the City after the effective
date of the Franchise, save and excepting Johns Island and the areas
within the City east of the Cooper River.
(h) "Grantee" is Knology of Charleston, Inc., its successors
and assigns.
(i) "Gross Cable Television System Revenues" means all
revenues derived by the Grantee from regular subscriber service,
auxiliary services, per program or per channel charges, leased channel
revenues, advertising revenues, or any other revenue derived from the
operation of the Cable Television System to provide cable services in
the Franchise Area. Gross Revenues shall also include money collected
from subscribers that is ultimately allocated by the Grantee to pay the
Franchise Fee to the City. The term "Gross Revenues" shall not include
revenue from any refundable subscriber deposits, any taxes, whether the
costs of such taxes are passed on to subscribers or not, and shall not
include the portion of any revenue received by Grantee for pay
television services which Grantee is required by contract to pass on to
the provider of the pay television program service. In addition, the
term "Gross Cable Television System Revenues" shall not include revenue
derived from telecommunications, telephony, internet or other non-cable
television services provided by the Grantee.
(j) "Local Telecommunications Service Revenues" means all
revenues derived by the Grantee from local telephone service, Internet
service or other non-cable services. For purposes of this Agreement,
Local Service Revenues shall not include (i) toll and long distance
revenues (whether Interlata, Intralata or international), and (ii)
revenues related to Internet content.
(k) "Persons" are any people, firms, corporation,
associations, or other legally recognized entities.
(l) "Public Street" is the surface of and the space above and
below any public street, avenue, highway, boulevard, concourse,
driveway, bridge, tunnel, alley,
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right-of-way, public utility easement, and any other public ground
(other than parks or nature trails) or water within or belonging to
the City.
(m) "Regular Subscriber Service" is that cable service
regularly provided to all subscribers.
(n) "Subscriber" means any person who pays the applicable rate
to receive cable service or other communications service from Grantee's
cable television system.
Section 3. Limitations on Franchise.
3.1 Police Power. The Grantee shall be subject to the lawful exercise
of the City's police power and regulations thereunder in the same manner as
other persons or businesses. In all other respects, the City's authority to
regulate Grantee and its operations shall be exercised only as provided in the
Cable Act and other applicable law and in accordance with the terms of this
Franchise.
3.2 Eminent Domain. Nothing contained herein shall be construed to
impair or affect the City's right of eminent domain or its power to regulate
traffic and to control the streets and rights-of-way in the City; provided,
however, that Grantee shall be entitled to due process, just compensation and
other protections of law in the same manner as other persons or businesses,
except as provided in Section 5.4(d) hereof. Nothing contained herein shall be
construed to give the City the right or option to purchase or acquire the
Grantee's business or property.
3.3 Amendment of Franchise and Ordinances. The City shall amend this
Franchise and any related Ordinances at the request of the Grantee whenever
amendment is necessary to enable the Grantee to utilize new developments in
signal transmission or other technological advances which would improve cable
television service in the Franchise Area, or to conform the Ordinance as
required by any changes in the Rules of the FCC or other Federal law. No
amendment substantially altering the existing rights and obligations of the
Grantee shall be adopted without Grantee's consent.
3.4 Other Franchises. Grantee shall not take any action that will
prohibit other franchised cable television service operator from having access
to all public areas or rights-of-way subject to this Franchise.
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<PAGE> 5
3.5 Telecommunications Services. To the extent Grantee obtains all
necessary Federal and State approvals to engage in telecommunications services,
including telephone, internet and other non-cable services, the City and Grantee
agree that the City may charge Grantee a separate fee for Grantee's use of the
public rights-of-way for such telecommunications services, such additional fees
to be on a competitively neutral and nondiscriminatory basis and equivalent to
that paid by other local telephone service providers presently set at three (3%)
percent of Local Service Revenues. The City agrees to postpone the
implementation of fees on Grantee on all Enhanced Local Telecommunications
Service Revenues generated in the City until the later of (i) January 1, 2000,
or (ii) until such time as BellSouth agrees in a signed, approved, written
franchise agreement with the City to pay franchise fees on Enhanced Local
Telecommunications Service Revenues, at which time Grantee agrees to commence
payment of fees on Enhanced Local Telecommunications Service Revenues at a rate
equivalent to that agreed upon by the City and BellSouth. Notwithstanding the
foregoing, Grantee agrees that with respect to its telecommunications services,
including telephone, internet and other non-cable services, it will agree to
modify the basis upon which the separate fees for such telecommunications
services are determined if the City takes action to modify the basis upon which
such fees for other local exchange carriers in Charleston are determined.
Section 4. Franchise Fees.
4.1 The Grantee shall pay the City a franchise fee in the amount of
Five Percent (5%) of its annual Gross Cable Television System Revenues from the
operation of the cable system in the Franchise Area and a fee equal to three
(3%) percent if its annual Local Telecommunications Service Revenues from the
operation of its telecommunications services, except where any such revenues are
subject to any City of Charleston business license fees. Franchise fee payments
shall be made on a quarterly basis and shall be due within forty-five (45) days
after the expiration of each calendar quarter. Any franchise fees passed through
by Grantee to customers in the City shall be billed to those customers on a
monthly basis. Notwithstanding the foregoing, the Grantee agrees that with
respect to the Cable Television System, it will agree to increase the franchise
fees for such cable television services (up to any applicable legal limits) if
the City takes action to increase the franchise fees for other cable television
providers who are franchised within the City.
4.2 The Grantee shall file with the City, within forty-five (45) days
after the expiration of the first quarter of the calendar year or portion
thereof during which its Franchise is in force, a statement showing the Gross
Revenues of the Grantee during the preceding calendar year or portion thereof
and the amount of franchise fees due for the period.
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<PAGE> 6
4.3 The City shall have the right to inspect the Grantee's records
showing the Gross Revenues from which its Franchise payments are computed. No
acceptance of payment shall be construed as a release or as an accord and
satisfaction of any claim the City may have for further or additional sums
payable under this Franchise; however, any Franchise fee statement rendered to
the City and to which no exception is made within two (2) years after receipt by
the City shall be deemed to be accurate and shall not thereafter be subject to
question or made the basis of any claim by the City against Grantee.
Section 5. Construction Requirements.
5.1 Authorizations and Permits. Upon acceptance of the Franchise,
Grantee shall promptly file applications from time to time for any necessary
authorizations or street cut construction permits with the City Department of
Public Service and shall diligently pursue approval of the same as well as any
necessary agreements, easements or other instruments needed for construction and
operation of the cable system.
5.2 No Discrimination in Construction. In planning and undertaking
construction, Grantee shall treat all areas and neighborhoods in the Franchise
Area on a substantially equal basis, and Grantee agrees that it will commence
construction in the peninsula City north of Calhoun Street at substantially the
same time as construction commences in the area west of the Ashley River. The
times for commencement and completion of construction may be extended by City
Council upon application by the Grantee for good and sufficient cause based upon
events beyond the control of the Grantee, or based upon the technical
infeasibility of construction within a specific area of the City. Such
extensions shall not be unreasonably withheld by the City Council. All
requirements for construction and line extensions shall be governed by the
density requirements contained in Section 5.3 and the construction schedule
attached hereto as Exhibit A.
5.3 Density Requirement For Construction and Line Extension. The
Grantee agrees to extend the cable system and to provide cable service to all
dwelling units in the Franchise Area, provided, however, that only in those
areas of the Franchise Area outside the peninsula area of the City of
Charleston, Grantee shall not be required to extend its system or provide
service to any dwelling unit where there are not, on the average, at least
twenty-five (25) dwelling units per mile of cable, measured from the dwelling
unit to the point on the cable system from which the necessary extension must be
made in order to provide service to the dwelling unit in question. The
twenty-five (25) homes per mile shall be measured by the cable mile and not by
the linear mile, i.e., for each mile of cable necessary to provide service to
the area, there must be an average of twenty-five (25) homes
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<PAGE> 7
per mile of cable. In addition, Grantee shall not be required to provide cable
service to any dwelling unit where the drop line is 250 feet or more from the
nearest feeder line from which the dwelling unit can be served; where the drop
line is 250 feet or more from the nearest feeder line from which the dwelling
unit can be served, Grantee shall be allowed to make fair and reasonable
installation charges. The "drop line" is the wire or cable used to connect the
individual dwelling unit to the longer lines of the cable system located in the
right-of-way.
For purposes of this Section, "dwelling unit" shall mean units of
residential housing designed for single-family occupancy, including but not
limited to, apartments, condominiums, townhouses and single-family houses.
Residential units in multiple-family developments, such as apartments,
townhouses or condominiums shall not be considered dwelling units for purposes
of this Section if the development is served by a SMATV system or similar
television system.
The Grantee shall not be obligated to extend the cable system or to
provide cable service to any business located in the Franchise Area unless all
of the following conditions are met:
(a) There shall be at least fifty occupied buildings per mile
of cable, measured from the business to the point on the cable system
from which the necessary extension must be made in order to provide
service to the business in question. Fifty drops per mile shall be
measured by the cable mile and not by the linear mile, i.e., for each
mile of cable necessary to provide service to the area, there must be
an average of fifty drops per mile of cable;
(b) Grantee shall not be required to provide cable service to
any business where the drop line is 250 feet or more from the nearest
feeder line from which the business can be served; where the drop line
is 250 feet or more from the nearest feeder line from which the
business can be served, Grantee shall be allowed to make commercially
fair and reasonable installation charges. All business installation
charges, including charges for wiring from the public right-of-way to
the business in question, and internal building wiring, shall be paid
by such business but only as to that portion of installation charges
exceeding the cost of a typical residential installation;
(c) Grantee shall obtain, at no expense to Grantee, all
necessary private easements from the owner or owners of the real
property on which such business is situated, such easements being for
the installation, maintenance, repair and replacement of cable lines
and facilities; and
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(d) The cost of extending service to said business or
businesses shall be technically and economically feasible and shall
result in no financial loss to Grantee.
"Drop," for purposes of the provisions herein dealing with cable service to
businesses, and for no other purpose, shall mean separate occupied buildings,
whether residential or business.
For purposes for this Section only, if Grantee determines that it is technically
or economically unfeasible to provide cable services to any business in the
City, Grantee may petition the Director of the Department of Public Service of
the City for an exemption from the obligation to provide service or a reasonable
extension of time within which to provide service, and no damages shall be
accessed during the period of time within which any such application may be
pending. Grantee agrees that any decision of the Director of the Department of
Public Service shall be final and binding so long as any such decision by said
Director is not arbitrary or capricious; provided, however, that Grantee shall
have the right to appeal any such decision to the City Council of the City. Any
such appeal shall be noticed within thirty (30) days of the decision of the
Director of the Department of Public Service.
Nothing contained herein shall be deemed to alter or modify the minimum density
requirements set forth in this Section with respect to dwelling units in those
areas of the Franchise Area outside the peninsular City.
5.4 Safety Requirements and Relocation.
(a) The Grantee shall at all times employ ordinary care and
shall install, maintain and use commonly accepted methods and devices
for preventing failures and accidents which are likely to cause damage,
injuries, or nuisances to the public.
(b) The Grantee shall install and maintain its wires, cables,
fixtures and other equipment in accordance with the requirements of the
National Fire Protection Association for electrical wiring and
apparatus recommended in the National Electrical Code, in full force
and effect in the City and as hereafter amended, the laws of the State
of South Carolina and the ordinances of the City, and in such manner
that they will not interfere with any installations of the City or of a
public utility serving the City.
(c) All structures and all lines, equipment, and connections
in, over, under, and upon the streets, sidewalks, alleys, and public
ways or places of the City, wherever situated or located, shall at all
times be kept and maintained in a safe, suitable condition, and in good
order and repair.
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(d) The Grantee shall, at no cost to the City, relocate at any
time any component of its system which interferes with a City
installation, an installation or modification of any storm water
drainage system, water or sewer system or other system installed by the
City or by the Commissioners of Public Works for the City of
Charleston.
(e) Knology will promptly remove, replace, modify or
disconnect Grantee's facilities and equipment located in the public
right-of-way or any other City property in the case of fire, disaster
or other emergency, or when a City project or activity makes the
removal, replacement, modification or disconnection necessary or less
expensive for the City. Except during an emergency, the City shall
provide reasonable notice to Grantee regarding such action.
5.5 Construction Schedule. In the event construction is not completed
in accordance with the construction schedule marked Exhibit "A" and incorporated
herein by reference, Grantee agrees to pay to the City as liquidated damages
such sums as are specified in Exhibit "A". Grantee agrees that the construction
schedule is a material requirement of this Agreement.
5.6 Exemptions. If Grantee determines that it is technically or
economically unfeasible to provide cable services to any dwelling in the City of
Charleston, Grantee may petition the Director of the Department of Public
Service of the City of Charleston for an exemption or a reasonable extension of
time within which to provide service, and no liquidated damages shall be
assessed during the period of time that any such application may be pending.
Grantee agrees that any decision of the Director of the Department of Public
Service shall be final and binding so long as an such decision by the said
Director is not arbitrary or capricious; provided, however, that Grantee shall
have the right to appeal any such decision to the City Council of the City of
Charleston. Any such appeal shall be noticed within thirty (30) days of the
decision of the Director of the Department of Public Service.
5.7 Transmission of Data for Non-Commercial Governmental Purposes. At
the City's request, Grantee shall provide the City with the use of fiber
capacity for the transmission of data for non-commercial governmental purposes
at a fifty percent (50%) discount off of the retail rate for similar services
(but in no event shall such prices be less than Grantee's cost).
5.8 Non-Commercial Governmental or Educational Programming. The Grantee
agrees that it will make available to the City one channel for non-commercial
governmental
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or educational programming provided by the City, at no charge to the City. The
Grantee shall have the right, from time to time, to use any unused time on such
channel.
Section 6. Insurance Requirements. The Grantee shall maintain,
throughout the term of the Franchise, liability insurance insuring against all
damages, injuries, or other harm caused by Grantee or its agents, in the minimum
amounts of:
(a) Workers' compensation insurance as provided by the
laws of the State of South Carolina;
(b) $1,000,000.00 for bodily injury or death to any
Person; and
(c) $500,000.00 for property damage resulting from any
one accident.
The City shall be named an additional insured under such liability policy or
policies, but only to the extent such additional coverage is commercially
available and at a commercially reasonable price.
Section 7. Conditions on Street Occupancy.
(a) All transmission and distribution facilities, lines and
equipment erected by the Grantee within the City shall be so located as
to cause minimum interference with the rights and reasonable
convenience of property owners whose property adjoins any of the
streets, alleys, or other public ways and places where the system is
located.
(b) In case of the excavation or disturbance of any street,
sidewalk, alley, public way, or paved area, the Grantee shall, at its
own cost and expense, replace and restore such street, sidewalk, alley,
public way, or paved area in as good a condition as before the work was
done.
(c) If at any time during the period of this Franchise the
City shall lawfully elect to alter or change the grade of any street,
sidewalk, alley, or other public way, or close any portion of same, the
Grantee, upon reasonable notice by the City, shall remove, and relocate
its poles, wires, cables, underground conduits, manholes, and other
fixtures as its own expense.
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(d) Any poles or other fixtures placed in any public way by
the Grantee shall be placed in such manner as not to interfere with the
usual travel on such public way.
(e) The Grantee shall, on the request of any person holding a
building moving permit issued by the City, temporarily raise or lower
its wires to permit the moving of buildings to the extent possible
under reasonable engineering standards. The expense of such temporary
removal of raising or lowering of wires shall be paid by the person
requesting the same, and the Grantee shall have the authority to
require such payment in advance. The Grantee shall be given not less
than forty-eight (48) hours' advance notice to arrange for such
temporary wire changes and advance payment.
(f) In all sections of the City where the cables, wires or
other like facilities of public utilities are placed underground, the
Grantee shall place its cables, wires or other like facilities
underground. Any exceptions to the requirement of underground wiring
must be granted in writing by the Director, Department of Public
Services of the City.
7.1 Authority to Trim Trees. The Grantee shall have the authority to
trim trees upon and overhanging streets, alleys, sidewalks, and public ways and
places of the City so as to prevent the branches of such trees from coming in
contact with the wires and cables of the Grantee, subject, however, to the terms
and provisions of the City of Charleston Tree Protection Ordinance. For purposes
of the City of Charleston Tree Protection Ordinance, Grantee shall be deemed a
"Utility Company" as described in Section 54-326(g) of the Ordinances of the
City of Charleston; provided, however, that Grantee executes a separate
agreement with the City as described in Section 54-326(g).
Section 8. Technical Service Requirements and Channel Capacity. The
cable system to be constructed by Grantee shall be installed, maintained, and
operated at all times in full compliance with the technical standards of the
Federal Communications Commission. In accordance with the Franchise proposal
submitted to the City, the Grantee shall construct, maintain and operate a cable
television system. Although the Grantee shall enjoy the editorial discretion to
select, drop and rearrange the programming to be offered, the initial level of
service shall be substantially the same as the sixty-two (62) channels proposed
by the Grantee in its Franchise proposal.
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Section 9. Revocation of Franchise.
The City may revoke the Franchise in the event Grantee shall refuse, or
neglect, to comply substantially with the material requirements or limitations
contained in this Franchise, but only after Grantee has been given written
notice of and a reasonable opportunity to cure the failure or default.
9.1 Should the City determine that Grantee is not in compliance with
this Franchise, it shall so notify Grantee in writing, and Grantee shall, within
thirty (30) days, bring the system into compliance, reporting corrective action
taken to the City, or in the event that a longer period is needed, Grantee shall
notify the City in writing within the thirty (30) day period of its estimate of
the time and actions necessary to bring the system into compliance.
9.2 If the City is not satisfied that compliance has been achieved, or
that good faith progress is being made toward compliance, it may schedule a
public hearing to determine whether the Franchise should be revoked. The Grantee
and the public shall be given at least thirty (30) days notice of such a
hearing, and all interested parties shall be heard in open hearing. At such
hearing, the City shall be required to present evidence establishing Grantee's
breach of its obligation sunder the Franchise and Grantee shall have the right
to examine witnesses and present evidence on its behalf. At the conclusion of
the public hearing, the City shall determine whether the Franchise should be
revoked and shall set forth in writing, the facts and reasons upon which its
decision is based.
Section 10. Termination of Franchise.
10.1 In the event the Franchise is terminated, whether by revocation,
expiration, or otherwise, the Grantee may continue to operate the cable system
pursuant to the terms and conditions of the terminated Franchise, until the
happening of one of the following, whichever occurs first:
(a) the Grantee has acquiesced in such a decision of
revocation, or denial of renewal or extension (an "Agreed Termination
Event"); or
(b) In the case of a revocation, or a denial of renewal or
extension, a final adjudication has been made, including any appeal,
and has resulted in a finding or order that the Grantee is not entitled
to a reinstatement, renewal or extension of the Franchise and is not
otherwise entitled by law to continue operation of the cable system (a
"Litigation Termination Event").
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10.2 In the event the Franchise is terminated, whether by revocation,
expiration, or otherwise, Grantee shall be afforded a period of twelve (12)
months from the effective date of an Agreed Termination Event or the final order
in a Litigation Termination Event denying renewal, including any appeal
therefrom, whichever event occurs first, within which to either (i) remove, at
its own expense, all or any portions of the facilities and personal property of
the Cable Television System owned by Grantee from all Public Streets within the
City, or (ii) sell, transfer or convey all or any portion of the facilities and
personal property of the Cable Television System owned by Grantee located within
Public Rights-of-Way to a qualified purchaser approved by the City. In the event
Grantee shall not remove, sell, transfer or assign the said facilities and
personal property as provided in the preceding sentence within the time period
specified, the Grantee shall immediately transfer to the City possession and
title to all such facilities and personal property then located in the Public
Streets (provided, however, any of Grantee's facilities and personal property
not located in said Public Streets and Grantee's real property shall be
specifically excluded from any such transfer and the Grantee shall at all times
be and remain the full and complete owner of all such facilities and property,
real or personal) of the Cable Television System, free from any and all liens
and encumbrances not agreed to be assumed by the City; and the Grantee shall
execute such Bills of Sale and other instruments of conveyance to the City as
shall be necessary for this purpose. Notwithstanding anything contained in this
Franchise, and except as specifically provided for in this Section 10.2, the
Grantee shall at all times be and remain the full and complete owner of all said
facilities and property, real and personal.
Section 11. Transfer of Franchise.
11.1 The Franchise shall not be sold, transferred, leased, assigned, or
disposed of, in whole or in part, either by sale, merger, consolidation or
otherwise, without the prior written consent of the City expressed by Resolution
or Ordinance. Any such sale, transfer, lease, assignment or disposal, as allowed
hereunder, shall not be effective unless and until any such vendee, transferee,
lessee, assignor or transferee has filed in the Office of the City Clerk an
instrument, in writing, reciting the facts of such sale, transfer, lease or
assignment, accepting the terms of this Franchise, and agreeing to perform all
the obligations and conditions of the Franchise, and the City has approved such
transfer or assignment. Consent of the City to a sale, transfer, lease,
assignment or disposal of the Franchise shall not be unreasonably withheld or
refused. The granting, giving, or waiving of any one or more such consents shall
not render unnecessary any subsequent consent or consents. In making a
determination of whether to allow any such sale, transfer, lease, assignment or
disposal, the City may consider the following factors:
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(a) Experience of the proposed vendee, transferee, lessee, or
assignee (including conducting an investigation of the proposed
vendee's, transferee's, lessee's, or assignee's service record in other
communities);
(b) Qualifications of the proposed vendee, transferee, lessee,
or assignee;
(c) Legal integrity of the proposed vendee, transferee,
lessee, or assignee;
(d) Financial ability and stability of the proposed vendee,
transferee, lessee, or assignee;
(e) If requested by the City, submittals from the proposed
vendee, transferee, lessee, or assignee, on what, if any, changes it
intends to make in the operation and maintenance of the Cable
Television System;
(f) The corporate connection, if any, between the Grantee, and
the proposed vendee, transferee, lessee, or assignee; and/or
(g) Any other aspect of the proposed vendee's, transferee's,
lessee's, or assignee's background which would affect the health,
safety, and welfare of the citizenry of the City as it relates to the
operation of the Cable Television System.
A copy of the completed sale, transfer, lease or assignment agreement
or a functionally equivalent instrument between the franchisee and the proposed
vendee, transferee, lessee, or assignee shall be provided to the City, so that
the City may discover the assumption of obligations by the franchisee and
proposed vendee, transferee, lessee, or assignee with respect to the Cable
Television System.
11.2 Notwithstanding the foregoing, the Grantee may make, execute, or
enter into any security agreement, collateral assignment, financing statement or
other agreement or instrument for the purpose of creating and perfecting a
security interest in its right, title and interest in and to the Franchise for
financing purposes or otherwise without prior approval of the City; provided,
however, that the secured party under any such security agreement, collateral
assignment, financing statement or other agreement or instrument may not
exercise any right or remedy thereunder (including, without limitation, the
remedy of foreclosure) that would have the effect of selling, transferring,
leasing, assigning or disposing of the Franchise without the prior written
consent of the City obtained pursuant to the foregoing provisions of this
Section 11. Any such consent may be executed by the Mayor of the City of
Charleston without the prior approval of City Council.
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11.3 Nothing in this Section 11 shall be deemed to prohibit a sale,
transfer, lease, assignment or disposal by the Grantee of all, but not less than
all, of the Franchise to a parent, sister or subsidiary corporation of a
corporate Grantee.
11.4 Upon request by the City, the Grantee and any parent company of
Grantee shall provide the City with a list of owners/shareholders of such
Grantee or parent Company having an ownership interest equal to or exceeding
five (5%) percent.
Section 12. Transaction Affecting Ownership of the Facilities.
12.1 The Grantee may make, execute, or enter into any deed of trust,
mortgage, security agreement, or lease concerning any of the facilities and
property, real or personal, of the Cable Television System for financing
purposes or otherwise without prior approval of the City; provided, however,
that the Franchise may not be sold, transferred, leased, assigned or disposed of
except in compliance with Section 11 hereof and ownership or control of more
than fifty (50%) percent of the right of control of a corporate Grantee may not
be transferred except in compliance with Section 13 hereof. The Mayor of the
City is hereby authorized to make, execute, and enter into any estoppel and/or
nondisturbance agreements requested by the Grantee in connection with any such
matters as the Mayor shall deem fit and proper.
12.2 Except as provided in Sections 12.1 and 12.3 herein, the Grantee
shall not sell, transfer, lease, assign or dispose of any of the facilities and
property, real or personal, of the Cable Television System without prior
approval of the City upon its determination that the transaction proposed by the
Grantee will not be inimical to the rights of the city under this Franchise. In
making a determination of whether to allow any such sale, transfer, lease,
assignment or disposal, the City may consider the following factors:
(a) Experience of the proposed vendee, transferee, lessee, or
assignee (including conducting an investigation of the proposed
vendee's, transferee's, lessee's, or assignee's service record in other
communities);
(b) Qualifications of the proposed vendee, transferee, lessee,
or assignee;
(c) Legal integrity of the proposed vendee, transferee,
lessee, or assignee;
(d) Financial ability and stability of the proposed vendee,
transferee, lessee, or assignee;
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(e) If requested by the City, submittals from the proposed
vendee, transferee, lessee, or assignee, on what, if any, changes it
intends to make in the operation and maintenance of the Cable
Television System;
(f) The corporate connection, if any, between the Grantee, and
the proposed vendee, transferee, lessee, or assignee; and/or
(g) Any other aspect of the proposed vendee's, transferee's
lessee's, or assignee's background which would affect the health,
safety, and welfare of the citizenry of the City as it relates to the
operation of the Cable Television System.
A copy of the completed sale, transfer, lease or assignment agreement
or a functionally equivalent instrument between the franchisee and the proposed
vendee, transferee, lessee, or assignee shall be provided to the City, so that
the City may discover the assumption of obligations by the franchisee and
proposed vendee, transferee, lessee, or assignee with respect to the Cable
Television System.
12.3 Nothing in this Section 12 shall be deemed to prohibit the
following:
(a) The sale, transfer, lease, assignment or disposal of the
facilities and property, real or personal, of all, but not less than
all, of the Cable Television System to a parent, sister or subsidiary
corporation of a corporate Grantee; provided, however, this Franchise
has been sold, transferred, leased, assigned or disposed to such
parent, sister or subsidiary corporation; or
(b) Grantee's. removal of the facilities and personal property
of the Cable Television System, or Grantee's sale, transfer or
conveyance of such facilities and property, real and/or personal, of
the Cable Television System to a qualified purchaser as provided in
Section 10.2 herein; or
(c) A disposition of worn out or obsolete facilities or
personal property in the normal course of carrying on the cable
television business.
Section 13. Change of Control of Grantee. Prior approval of the City
shall be required where ownership or control of more than fifty (50%) percent of
the right of control of a corporate Grantee is acquired by a Person or group of
Persons acting in concert. Consent of the City to such acquisition of control
shall not be unreasonably withheld or refused. By its acceptance of this
Franchise, the Grantee specifically agrees that any such
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acquisition occurring without prior approval of the City shall constitute a
violation of this Ordinance by the Grantee. Notwithstanding the foregoing, the
owner of the Grantee may make, execute, or enter into any pledge agreement,
security agreement or financing statement for the purpose of creating and
perfecting a security interest in its right, title and interest in and to the
stock of the Grantee for financing purposes or otherwise without prior approval
of the City; provided however that the secured party under any such pledge
agreement, security agreement or financing statement may not exercise any right
or remedy thereunder (including, without limitation, the remedy of foreclosure)
that would have the effect of transferring ownership or control of more than
fifty (50%) percent of the right of control of the Grantee without the prior
written consent of the City obtained pursuant to the foregoing provisions of
this Section 13. Any such consent may be executed by the Mayor of the City of
Charleston without the prior approval of City Council.
Section 14. Trade Names. Notwithstanding anything contained herein to
the contrary, Grantee shall be authorized to conduct its affairs and business
under a trade name other than "Knology of Charleston, Inc."; provided, however,
that Grantee notifies the City in writing of such name.
Section 15. Renewal of Franchise. The Franchise may be renewed or
extended at any time upon such terms and conditions as are agreed to by the City
and the Grantee, after affording the public adequate notice and opportunity for
comment. In all other respects, the Franchise shall be subject to renewal in
accordance with the standards and procedures set forth in applicable Federal,
State, or City laws, Statutes and Ordinances.
Section 16. Emergency Use of Facilities. Grantee shall make its
facilities available to the city upon request during the course of any emergency
or disaster and will cooperate with the City in planning for response to such
requests.
Section 17. Compliance with Applicable Laws and Ordinances. The
Grantee shall, at all times during the term of this Franchise (including any
renewals or extensions thereof), be subject to all lawful exercise of the police
power by the City and to such reasonable regulation (including, without
limitation, the reasonable regulation of Subscriber rates) as the City may now
or hereafter provide.
Section 18. Invalidity: Waiver. If any part, term or provision of this
Franchise is held by the courts to be illegal or in conflict with any law of the
State of south Carolina or the United States of America, the validity of the
remaining portions or provisions shall not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Franchise
did not contain the particular illegal or conflicting term, part or provision
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held to be invalid, provided that the City and the Grantee agree that the
Franchise is valid pursuant to local, state, agency, commission, legislative
body, or other authority with jurisdiction declares this Franchise invalid in
any regard, then the City and the Grantee will comply with this Franchise to the
maximum extent permitted by law, and, to the extent possible, Grantee will waive
any discretionary rights that it might be given by a court, agency, commission,
legislative body, or other authority with jurisdiction that might render the
Franchise invalid, or give the Grantee the right to forego the payments that it
is agreeing to.
Section 19. Rates. While federal law does not presently allow
regulation of cable system rates which are subject to effective competition, in
the event of a subsequent change in federal law to require or permit the
regulation of cable system rates, the City shall be authorized to regulate cable
rates charged by Grantee, provided, however, that such regulation is applied
uniformly to any other cable operators within the City.
Section 20. Customer Service. The Grantee shall meet or exceed any
customer service standards adopted by the Federal Communications Commission.
Nothing in this Agreement limits any rights the City or Grantee may have under
the Telecommunications Act of 1996.
Section 21. Effect of Change in Law. In the event that state or federal
laws, rules, or regulations preempt a provision or limit the enforceability of a
provision of this Agreement, then the provision shall be read to be preempted to
the extent and for the time, but only to the extent and for the time, required
by law. In the event such state or federal law, rule, or regulation is
subsequently repealed, rescinded, amended, voided, or otherwise changed, so that
the provision hereof that had been preempted is no longer preempted, such
provision shall thereupon return to full force and effect and shall thereafter
be binding on the parties hereto, without the requirement of further action on
the part of either party.
Section 22. Indemnity. To the extent permitted by law, and except for
matters arising out of the City's negligence, Grantee shall, at its sole cost
and expense, indemnify, hold harmless, and defend the City, and its officers,
boards, council, commissions, agents and employees against any and all claims,
including but not limited to, third party claims, suits, causes of action,
proceedings, and judgments for damages or equitable relief arising out of the
construction, operation or repair of its Cable Television System or telephonic
system, or in any way arising out of the Grantee's enjoyment or exercise of its
Franchise, regardless of whether the act or omission complained of is
authorized, allowed, or prohibited by law or this Agreement.
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Section 23. Remedies. The remedies provided for in this Agreement are
cumulative and not exclusive; the exercise of one remedy shall not prevent the
exercise of another, or any rights of the City or Grantee at law or equity,
provided however, cumulative remedies may not exceed the total wrong involved.
Section 24. Road Closings. If, at any time, the City vacates or closes
any City rights-of-way covered by this Agreement, the City shall not be held
liable for any damages or loss to the Grantee by reason of such vacation or
closing.
Section 25. No Third Party Rights. Nothing in this Agreement shall be
construed as creating any third party rights, and all rights of enforcement of
this Agreement are reserved unto the City and Grantee.
Section 26. Notices. All notices, demands and requests given or
required to be given by either party hereto to the other party shall be in
writing and shall be delivered in person, or by a commercial carrier having a
verifiable means of receipt, or mailed by certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to the City:
City of Charleston
Attn: Director, Dept. of Administrative Services
P.O. Box 304
Charleston, SC 29402-0304
with a copy to:
City of Charleston
Attn: Corporation Counsel
P.O. Box 304
Charleston, SC 29402-0304
If to the Grantee:
Knology of Charleston, Inc.
Attn: Felix L. Boccucci, Jr.
Assistant Secretary
Post Office Box 510
West Point, Georgia 31811
or such other address as either party shall furnish to the other in writing.
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Section 27. Section titles are for identification purposes only and are
to be given no further meaning.
Section 28. Ordinances. All Ordinances and parts of Ordinances in
conflict herewith are hereby repealed.
Ratified in City Council this 28th day of
April, 1998
By: /s/ Joseph P. Riley, Jr.
------------------------------
Joseph P. Riley, Jr.
Mayor, City of Charleston
Attest: /s/ Vanessa Turner-Maybank
---------------------------
Vanessa Turner-Maybank
Clerk of Council
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ACCEPTANCE BY
KNOLOGY OF CHARLESTON, INC. OF
CABLE TELEVISION FRANCHISE
Knology of Charleston, Inc. does hereby accept the cable television
franchise granted by the, City of Charleston, South Carolina, by Ordinance
Granting Franchise to Knology of Charleston, Inc. to Provide Cable Television
Services in the City of Charleston dated April 28, 1998 and does hereby agree to
the terms and conditions of the franchise set forth in the Ordinance.
KNOLOGY OF CHARLESTON, INC.
By: /s/
------------------------------------
Its Assistant Secretary
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EXHIBIT "A"
CONSTRUCTION SCHEDULE
In the event construction of a community antenna television system
capable of providing service to twenty (20%) percent of the area within the city
limits of Charleston is not completed by March 31, 2000, then the Grantee agrees
to pay to the City as liquidated damages the sum of $1,000.00 monthly until
construction of a system capable of servicing twenty (20%) percent of the area
within the city limits of Charleston is completed and the system is in
operation.
In the event construction of a community antenna television system
capable of providing service to fifty (50%) percent of the area within the city
limits of Charleston is not completed by March 31, 2002, then the Grantee agrees
to pay to the City as liquidated damages the sum of $1,000.00 monthly until
construction of a system capable of servicing fifty (50%) percent of the area
within the city limits of Charleston is completed and the system is in
operation.
In the event construction of a community antenna television system
capable of providing service to eighty (80%) percent of the area within the City
limits of Charleston is not completed by March 31, 2003, then the Grantee agrees
to pay to the city as liquidated damages the sum of $1,000.00 monthly until
construction of a system capable of servicing eighty (80%) percent of the area
within the city limits of Charleston is completed and the system is in
operation.
In the event construction of a community antenna television system
capable of providing service to one hundred (100%) percent of the area within
the City limits of Charleston is not completed by March 31, 2004, then the
Grantee agrees to pay to the city as liquidated damages the sum of $1,000.00
monthly until construction of a system capable of servicing one hundred (100%)
percent of the area within the city limits of Charleston is completed and the
system is in operation; provided, however, that with regard to the requirements
of service set forth herein, the times for commencement and completion of
construction may be extended by City Council upon application by the Grantee,
for good and sufficient cause based upon events beyond the control of the
Grantee, or based upon the technical infeasibility of construction within a
specific area of the City. Such extensions shall not be unreasonably withheld by
the City Council.
Nothing contained herein shall be deemed a change or modification of
the density requirements for construction and line extension set forth in
Section 5.3 hereof.
In no event shall the monthly liquidated damages exceed $1,000.00 in
any one (1) month.
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EXHIBIT 10.34
ORDINANCE 98-5
ORDINANCE TO AMEND SECTION 5 OF ORDINANCE 98-4
DEALING WITH COMMUNITY ANTENNA TELEVISION SYSTEMS
IN THE UNINCORPORATED AREAS OF COLUMBIA COUNTY
THIS ORDINANCE adopted by the Board of Commissioners of Columbia County,
Georgia.
WHEREAS, the Board of Commissioners of Columbia County, Georgia did on
March 26, 1998, adopt Ordinance 98-4 amending Chapter 2-10.2 (codified as
Chapter 2-5.5 in the Code of Ordinances of Columbia County, Georgia); and
WHEREAS, The Board of Commissioners of Columbia County, Georgia desires
to amend Section 5 of Ordinance 98-4 in order to extend the deadline for
Knology of Augusta, Inc. to file with the Clerk of the Board of Commissioners
its unconditional acceptance of the franchise;
NOW, THEREFORE, be it ordained by the Board of Commissioners of Columbia
County and it is hereby ordained by authority of same as follows:
Section 1. Section 5 of Ordinance 98-4 amending subsection 2-5.5-15(a) of
the Code of Ordinances of Columbia County, Georgia is amended by changing the
date of "June 15, 1998" as appears therein to "July 31, 1998" so that the
sentence in question shall now read
"The franchise hereby granted to the Grantee, Knology of Augusta, Inc.,
to operate a CATV System in the unincorporated area of the County
shall take effect upon the date of the adoption of this ordinance and
be enforced up to and including November 1, 2009 in those parts of the
unincorporated area of the County which are not also subject to the
franchise of Charter Communications II, L.P. and October 30, 2003 in
those parts of the unincorporated area of the County which are also
subject to the franchise of Charter Communications II, L.P., provided
that on or before July 31, 1998, Knology of Augusta, Inc. shall file
with
1
<PAGE> 2
the Clerk of the Board of Commissioners its unconditional acceptance
of this franchise and commit to comply with and abide by the terms of
same."
Section 2. Repeal of Conflicting Provisions of Ordinances. Any ordinances
or parts of ordinances of Columbia County in conflict with this ordinance are
to the extent necessary to eliminate such conflict hereby repealed.
Section 3. Effective Date. This ordinance shall take effect immediately
upon its adoption.
Adopted August 18th, 1998.
BOARD OF COMMISSIONERS OF
COLUMBIA COUNTY, GEORGIA
By: /s/ James B. Whitehead Sr.
------------------------------
Its Chairman
Attest: /s/ Linda B. Lindley
--------------------------
Its Deputy Clerk
[COUNTY SEAL]
2
<PAGE> 3
CLERK'S CERTIFICATE
I, Phebe Dent, Clerk of the Board of Commissioners of Columbia County,
Georgia, (the "Board") DO HEREBY CERTIFY that the foregoing pages of
typewritten matter constitute a true and correct copy of an ordinance, passed
by the Board of Commissioners at a regular meeting of the Board of
Commissioners duly held on August 18th, 1998 at 6:30 p.m., open to the public
and in which a quorum was present and acting throughout, and that the original
of said ordinance appears of record in the Minute Book of the Board, which is
in my custody and control.
Given under my hand and seal of the Board, this 18th day of August, 1998.
Linda B. Lindley, Deputy Clerk
------------------------------
CLERK, BOARD OF COMMISSIONERS
OF COLUMBIA COUNTY, GEORGIA
3
<PAGE> 1
EXHIBIT 10.35
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted
are marked with brackets ("[ ]"). The omitted material has been filed
separately with the Securities and Exchange Commission.
LEASE AGREEMENT
This Agreement is entered as of the 1st day of May 1998 by and between
Interstate Telephone Company (Lessor) and Knology Holding, Inc. (Lessee). This
Agreement is based upon the following terms and conditions and the rates set
forth in Attachment A.
DESCRIPTION OF SERVICE:
SWITCHING
Switching capacity and services for Knology's Montgomery and Columbus
exchanges are provided from Interstate Telephone's West Point, Georgia central
office. Switching will be leased as follows: For each line side port leased, a
flat rate will be charged for the port and an additional per minute charge will
be supplied for each equipment minute of use. If lessee provides its own ports
through its own local switch, then charges will be limited to the per minute
charge on all originating and terminating traffic. Service activation (moves,
adds, and service changes) are provided on a "ready to serve" basis, without
regard to the number of transactions per line per month and will be assessed on
a monthly per line basis. This "ready to serve" charge is fully billable for any
line in service for any duration of the monthly billing period. For the initial
period of the lease, until measurement of all jurisdictions of calls is
available at West Point by line and lessor exercises its option to bill actual
usage, the entire lease expense will be expressed on a per minute basis and will
by for an assumed 800 originating minutes of use per line.
INTERCONNECTION SERVICES
Interstate Telephone Company will provide TR303 switch interface
service to support DS1 ports to connect lessee's Host Digital Terminals (HDT's).
Each Knology HDT requires, at a minimum, two T-1 level terminations (one
incoming and one outgoing). In addition, Interstate Telephone will provide local
tandem access and interexchange carrier trunk termination services.
FORECASTS
It is the responsibility of both parties to mutually plan and forecast
network and facility requirements. Forecasts, together with lessor and lessee
installation dates and commitments are to be prepared annually and updated each
90 days. The initial term forecasts and commitments are provided in Attachment
B.
Page - 1
<PAGE> 2
Terms and Conditions:
1. Lessee may not use the facilities described in Attachment A in any
manner which will cause harm to Lessor's network. The Lessee shall not, at any
time, alter in any way the leased services and facilities without the written
consent of the Lessor.
2. Service Charges. Lessee shall pay Lessor at the rate and fees as
noted in Attachment "A". Services are billable in advance and billings will be
rendered by the tenth day of the month. Payment terms are net 30 days (i.e.
April's billing is due no later than May 10).
3. Late Payment Charge. Lessor may impose a late-payment charge if any
portion of a payment due to Lessor under Section 2 is received after the payment
date. The late-payment charge shall be the portion of the payment not received
by the payment date times a late factor. The late factor shall be .015% per
month or the highest interest rate (in decimal value) which may be lawfully
imposed for commercial transactions in Georgia (whichever is less) compounded
daily for the number of days from the payment date to and including the date
that Lessee actually makes the payment to the Lessor.
4. Term. Lessee's obligation to make the monthly payments described in
Section 2 above shall commence on May 1, 1997. This Agreement shall terminate
ten years after the date this Agreement is executed. If proper notice as
required in paragraph 9 is not received by the Lessor 90 days prior to the
termination date that Lessee wishes to terminate the Agreement, this Agreement
will automatically renew for a period of one year, and renew annually
thereafter, until such termination notice is given. Lessor reserves the right,
upon 90 days advance written notice, to change any rates and fees commensurate
with the beginning of any automatic renewal period. In the event Lessor does
change the rate and fees, Lessee shall have the right to cancel this contract by
giving Lessor written notice thereof within 90 days of Lessee's notice of the
rate change.
Upon notice from Lessor that Lessee has failed to comply with any of
the conditions hereof, or that the use of plant facilities is forbidden by
regulatory authorities, the lease shall immediately terminate for the said
facilities or services, and Lessee shall forthwith discontinue the use of those
facilities. Upon Lessee's failure to discontinue such use, Lessor reserves the
right to cause such discontinuance at the expense of Lessee, and no liability
shall inure to Lessor on account of such discontinuance.
5. Additional Markets. Additional markets to be switched by Interstate
Telephone, are provided in Attachment C, "Additional Knology Cities". Each
attachment shows the new market, initial forecast estimates and key service
effecting dates.
Page - 2
<PAGE> 3
[ ] - CONFIDENTIAL TREATMENT REQUESTED
6. System Maintenance. Lessee covenants and agrees that it will
maintain its equipment and facilities according to generally accepted standards,
in good working order at all times, and will repair promptly any malfunction or
breakdown in its equipment and facilities which could impair the function of the
Lessor's Facilities.
7. Outages. Lessor shall not be liable to Lessee for any damages
resulting to Lessee from the outage or malfunction of the Lessor's Facilities.
Restoration of service resulting from service outages or malfunctions due to
equipment failure, human error, fire, natural disaster, acts of God or similar
occurrences shall be accomplished as expeditiously as practicable. Lessor's
liability in the event of such an outage or malfunction shall be limited to a
credit for outage time. No credit shall be allowed for an interruption of less
than two hours during any given month. The credit shall be a pro rata share of
the Lessee's monthly charge, not to exceed the Lessee's total monthly charge.
Any claim for such a credit must be made within five (5) days following such
outage or malfunction.
8. Inspection and Testing. Lessee shall have the right, upon reasonable
notice, to inspect Lessor's Facilities. Lessor will aid in the provision of
end-to-end testing as necessary.
9. Software License Fees. Lessee agrees to reimburse lessor for any
software license fees incurred as a result of the business arrangement herein
described. Software license fees are payable in advance in one hundred telephone
number block increments as ordered by lessee. License fees vary according to
services as listed below:
<TABLE>
<CAPTION>
Service Offerings Per 100 Lines
----------------- -------------
<S> <C>
a. Centrex $[ ]
b. Calling number and calling name ID $[ ]
c. Voice Mail $[ ]
d. Primary rate ISDN $[ ]/line
e. Basic rate ISDN $[ ]/line
</TABLE>
10. Property Rights. Neither the provision of any facilities or
services by Lessor or Lessee, nor the payment by Lessee for such facilities or
services, shall create or vest in Lessee any easement or other ownership and
property rights of any nature in the Lessor's facilities or related systems
and/or equipment of the Lessor.
11. Notices. Except where otherwise provided in this Agreement, notices
required to be given pursuant to this Agreement shall be effective when
received, and shall be sufficient if given in writing, hand delivered, or United
States mail, postage prepaid, addressed to the appropriate
Page - 3
<PAGE> 4
party at the address set forth below. At any time by giving written notice to
the other party, either party may change the name and address to whom all
notices or other documents required under this Agreement must be sent.
<TABLE>
<CAPTION>
Lessor Lessee
------ ------
<S> <C>
Interstate Telephone Company Knology Holding, Inc.
910 First Avenue 312 W. 8th Street
P. O. Box 510 P.O. Box 510
West Point, Georgia 31833 West Point, Georgia 31833
</TABLE>
12. Assignment. Neither party shall assign or transfer all or any part
of its rights or interest hereunder without first obtaining the written consent
of the other party to such an assignment or transfer, such consent not to be
unreasonably withheld; provided, however, that an assignment by either party to
an affiliate of that party shall not require prior approval. In the event of any
assignment of this Agreement, the assignee shall assume all rights and
obligations under the terms and conditions of this Agreement, as then in force,
from the assigning party. Notwithstanding the above, Lessee shall not transfer,
sublet or permit any other entity to cohabit any of the facilities or services
described in this Agreement without the written consent of Lessor.
13. Regulatory Approval. This Agreement may be subject to the
regulatory approval prior to the installation of the service. Should such
regulatory approval be denied, this Agreement shall be null, void, and of no
effect.
14. Independent Contractor. Each of the parties shall perform its
obligations hereunder as an independent contractor and not as the agent,
employee or servant of the other party.
15. Liability Insurance. Lessor and Lessee shall furnish to each other,
on an annual basis, a certificate of liability insurance covering the facilities
and services described under this Agreement.
16. Force Majeure. Neither party shall be held liable for any delay or
failure in performance of any obligation under this Agreement when such delay or
failure results from any cause beyond its control, such as acts of God, acts of
civil or military authority, governmental regulations, war, terrorist acts,
insurrections, explosions, fires, earthquakes, nuclear accidents, floods,
strikes, power blackouts, other major environment or weather conditions, or
inability to secure equipment.
Page - 4
<PAGE> 5
17. Limitations of Liability. Neither lessor nor lessee shall be liable
to the other for any indirect, incidental, or consequential damages (including
but not limited to loss of profits, damage to business reputation, lost
opportunity, or other remote items of damage) arising from any errors in, use
of, inability to use, or other defects in the equipment or services provided
hereunder, or based on breach of warranty or contract, negligence, or any other
legal theory, whether or not lessor or lessee has been advised of the
possibility of such damages. Lessor's liability for damages suffered by the
other or third parties using or unable to use the equipment or services covered
under this agreement shall be limited to a credit for outage or malfunction as
provided for in paragraph 6 hereof.
18. Indemnification. Lessee agrees to hold harmless and indemnify
Lessor from and against all claims, liability, loss and damage, including
reasonable attorney's fees, for injury or death to persons or damage to property
arising out of or in connection with this Agreement and the provision of
services by Lessor to Lessee pursuant to this Agreement.
19. Confidentiality of Agreement. The parties of this Agreement will
treat this Agreement, its notices, and any amendments, and their terms and
conditions as strictly confidential. Neither party will disclose the foregoing
(a) to any officer, employee, or agent of a party to this Agreement who has no
authority to have access to the data and materials or who has no business need
to know same or (b) to any person who is not a party to this Agreement. If a
court with proper jurisdiction or another governmental agency with proper
jurisdiction orders a party to disclose or to provide any data or any document
relating to this Agreement, that party will immediately notify the other party
of the order. Such notification shall be by both telephone and by mail. The
parties, thereafter, shall mutually agree as to whether they should jointly make
a reasonable effort to secure an agreement of confidentiality from such court or
agency before responding thereto. If only one party desires to seek such an
agreement of confidentiality, that party may proceed at its own expense;
provided, further, that the non-agreeing party shall not take any action that
would interfere with such action.
20. Non-Exclusivity. Lessor and Lessee recognize and expressly agree
that nothing in this Agreement shall create an exclusive relationship between
the parties.
21. No Waiver. No failure of a party to enforce a provision of this
Agreement will be construed as a general or a specific waiver of that provision,
a party's right to enforce that provision, or a party's right to enforce any
other provision of this Agreement.
22. Severability. If any provision of this Agreement is held invalid,
unenforceable or void, the remainder of the Agreement shall remain in force and
effect.
Page - 5
<PAGE> 6
23. Entire Agreement/Amendments. This Agreement embodies the entire
Agreement and understanding between the parties hereto pertaining to the subject
matter hereof. No provision of this Agreement may be altered, amended, canceled,
changed, discharged, modified, terminated or waived except by written Agreement
signed by both parties.
24. Governing Law. This Agreement shall be governed by, construed in
accordance with, the law of the State of Georgia.
25. Headings. The headings in this Agreement are for convenience only
and are not part of this Agreement nor should they be construed as such.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.
LESSOR: Interstate Telephone Company
910 First Avenue/P. O. Box 510
West Point, Georgia 31833
WITNESS: BY: /s/ ROBERT W. NYS[??????????]
--------------------- -----------------------------------
TITLE: CFO
--------------------------------
DATE: 9/14/98
---------------------------------
LESSEE: Knology Holdings, Inc.
312 W. 8th Street/P.O. Box 510
West Point, Georgia 31833
WITNESS: BY: /s/ [????????????]
--------------------- -----------------------------------
TITLE: VP - Business Dev.
--------------------------------
DATE: 9/15/98
---------------------------------
Page - 6
<PAGE> 7
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT "A"
RATES AND CHARGES
A. SWITCHING SERVICES PROVIDED:
This lease is for switching capacity and services from the West Point,
Georgia central office. Switching will be leased as follows: For each line side
port leased, a flat rate will be charged for the port and an additional per
minute charge will be supplied for each equipment minute of use. If lessee
provides its own ports through its own local switch, then charges will be
limited to the per minute charge on all originating and terminating traffic.
Service activation (moves, adds, and service changes) are provided on a "ready
to serve" basis, without regard to the number of transactions per line per month
and will be assessed on a monthly per line basis. This "ready to serve" charge
is fully billable for any line in service for any duration of the monthly
billing period. Service activation and support charges are not pro ratable.
Lessor reserves the right, upon 120 day advance notice, to bill service
activation (moves, adds and service changes) at $[ ] per transaction in lieu of
the monthly per line charge of $[ ].
1. LEASE RATES:
For Originating and Terminating Switching Capacity at the West Point
Central Office
INITIAL LEASE PERIOD:
<TABLE>
<CAPTION>
One-Year Term Ten-Year Term
ITEM MONTHLY RATE MONTHLY RATE
---- ------------- -------------
<S> <C> <C>
Line side Port $[ ] per port $[ ]
Switching Capacity [ ] per equipment minute $[ ]
Service Activation $[ ] per line $[ ]
</TABLE>
2. ASSUMED MINUTES:
Lessor agrees to use assumed minutes as an interim basis for
billing but reserves the right to convert to actual use at its sole
discretion upon sixty days advance notice. Unless other notified, it is
assumed that each line in service generates a total of [ ] total
minutes of use (originating and terminating traffic) each month.
Billings will be rendered in arrears on a calendar month basis. First
month's and last month's billings will be prorated at 1/2 of the full
monthly charge (i.e. $[ ] per line for switching and $[ ] per line for
service activation).
3. SUMMARY OF MONTHLY CHARGES PER LINE:
<TABLE>
<CAPTION>
One-Year Term Ten-Year Term
------------- -------------
<S> <C> <C>
Switching services $[ ] $[ ]
Service Activation $[ ] $[ ]
------ ------
Total per line charge $[ ] $[ ]
</TABLE>
Page - 7
<PAGE> 8
[ ] - CONFIDENTIAL TREATMENT REQUESTED
B. INTERCONNECTION SERVICES PROVIDED
Interstate Telephone Company will provide TR303 switch interface
service to support DS1 ports to connect lessee's Host Digital Terminals (HDT's).
Each Knology HDT requires, at a minimum, two T-1 level terminations (one
incoming and one outgoing). In addition, Interstate Telephone will provide local
access tandem and interexchange carrier trunk termination services.
1. Interconnection fees are set forth in the table below:
<TABLE>
<CAPTION>
Basis For Monthly
Charge Recurring Installation
------ --------- ------------
<S> <C> <C> <C>
TR303 Interface T-1 $[ ] $[ ]
DS1 Local Channel T-1 $[ ] --
(co-located)
DS1 Digital Trunk T-1 $[ ] $[ ]
Termination
Network Access (DS1) Channel $[ ] --
NNX Administration NNX -- $[ ]
</TABLE>
2. First month's and last month's billings will be prorated at
one half (1/2) of the full monthly charge.
3. Installation and other non-recurring charges may be waived at
Lessor's option.
C. SOFTWARE LICENSE FEES
One-time software license fees are payable in advance in one hundred
block increments as ordered by lessee. License fees vary according to services
as listed below:
<TABLE>
<CAPTION>
Service Offerings Per 100 Lines
----------------- -------------
<S> <C> <C>
a. Centrex $[ ]
b. Calling number and calling name ID $[ ]
c. Voice Mail $[ ]
d. Primary rate ISDN $[ ]/line
e. Basic rate ISDN $[ ]/line
</TABLE>
BY: /s/ ROBERT W. NYS[???????????] BY: /s/ [????????????]
------------------------------------- ---------------------------------
Interstate Telephone Company Knology Holding, Inc.
TITLE: CFO TITLE: VP - Business Development
---------------------------------- ------------------------------
DATE: Sept. 14, 1998 DATE: 9/15/98
---------------------------------- -------------------------------
Page - 8
<PAGE> 9
[ ] -- CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT "B"
KNOLOGY FORECASTS
KNOLOGY LINE FORECAST FOR 1997
<TABLE>
<CAPTION>
HDT'S TELE LINES 12/31/97
----- -------------------
<S> <C> <C> <C>
Montgomery Nodes [ ] [ ]
Headend [ ] [ ]
[ ]
Columbus Nodes [ ] [ ]
Headend [ ] [ ]
[ ] [ ]
TOTAL TELEPHONE LINES @ 12/31/97 [ ]
</TABLE>
TR303, LOCAL AND IXC REQUIREMENTS FOR 1997
<TABLE>
<CAPTION>
ESTIMATED LOCAL &
TR303 TR303 T's IXC T-1's
HDT'S T'S/HDT @ 12/31/97 @12/31/97
----- ------- ---------- ---------
<S> <C> <C> <C> <C>
TR303 T-1 Interconnections - Minimum for each [ ] [ ] [ ]
HDT of 2
Local Interconnection-T-1's [ ]
Toll Interconnection - T-1's [ ]
</TABLE>
Notes: Minimum TR303 T's per HDT is two regardless of customers per HDT.
Assumes bus:res does not exceed a [ ] split
Additional TR303 T's may be required depending on traffic patterns and
customers per HDT node. HDT roll-out schedule for live telephone to be
provided by Knology
HDT REQUIREMENTS:
<TABLE>
<CAPTION>
Location NNX Number In Service Date
-------- --- ------ ---------------
<S> <C> <C> <C>
[ ]
[ ]
</TABLE>
Page-9
<PAGE> 10
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT C
KNOLOGY/IVT SWITCH AGREEMENT
PLANNING INFORMATION
COLUMBUS
<TABLE>
<CAPTION>
INITIAL ORDER TR303
FACILITIES QUANTITY CONNECTIONS
- ---------- ------------- -----------
<S> <C> <C>
HDTs [ ] [ ]
Interconnect Ts to Bell [ ] -
Interconnect Ts from Bell [ ] -
911 and wireless (2 way) [ ] -
Two Way Supergroup [ ]
</TABLE>
Additions:
[ ] 1st Quarter 1999 - [ ] links
[ ] [ ] November, 1998
In the Headend - [ ] = [ ] links in service September, 1998
In Hub [ ] links in service September, 1998, [ ] additional
December, 1998
In Hub[ ] links in service October, 1998, [ ] additional
links January, 1999
Page 1 of 5
<PAGE> 11
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT C
KNOLOGY/IVT SWITCH AGREEMENT
PLANNING INFORMATION
MONTGOMERY
<TABLE>
<CAPTION>
INITIAL ORDER TR303
FACILITIES QUANTITY CONNECTIONS
- ---------- ------------- -----------
<S> <C> <C>
HDTs [ ] [ ]
Interconnect Ts to Bell [ ] -
Interconnect Ts from Bell [ ] -
911 and wireless (2 way) [ ] -
Two Way Supergroup [ ]
</TABLE>
Additions:
Hub A - [ ] links in service December, 1998 - [ ] links February, 1999
Hub B - [ ] links in service November, 1998 - [ ] links February, 1999
Hub C - [ ] links in service November, 1998 - [ ] links February, 1999
Hub D - [ ] links in service September, 1998 - [ ] links January, 1999
Hub G - [ ] links in service September, 1998 - [ ] links November, 1998
- [ ] links February, 1999
- [ ] links June, 1999
Hub H - [ ] links in Service September, 1998
= [ ] links in Service November, 1998
= [ ] links in Service February, 1999
Prattville - [ ] links in Service November, 1998
- [ ] links in Service February, 1999
Page 2 of 5
<PAGE> 12
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT C
KNOLOGY/IVT SWITCH AGREEMENT
PLANNING INFORMATION
PANAMA CITY
<TABLE>
<CAPTION>
INITIAL ORDER TR303
FACILITIES QUANTITY CONNECTIONS
- ---------- ------------- -----------
<S> <C> <C>
HDTs [ ] -
Interconnect Ts to Bell [ ] -
Interconnect Ts from Bell [ ] -
911 and wireless (2 way) [ ] -
</TABLE>
Additions:
In the Headend - [ ] links in service September, 1998
- [ ] links in service December, 1998
In Hub B - [ ] links in service September, 1998, [ ] links in December,
1998
In Hub A - [ ] links in service October, 1998, [ ] additional link
December, 1998
[ ] to Bell - [ ] in November, 1998
[ ] to Bell - [ ] in December, 1998
Page 3 of 5
<PAGE> 13
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT C
KNOLOGY/IVT SWITCH AGREEMENT
PLANNING INFORMATION
CHARLESTON
<TABLE>
<CAPTION>
INITIAL ORDER TR303
FACILITIES QUANTITY CONNECTIONS
- ---------- ------------- -----------
<S> <C> <C>
HDTs [ ] [ ]
Interconnect Ts to Bell [ ] -
Interconnect Ts from Bell [ ] -
911 and wireless (2 way) [ ] -
Two Way Supergroup [ ]
</TABLE>
Additions:
In the Headend - [ ] links in service September, 1998
- [ ] links January, 1999
- [ ] links May, 1999
Hub A - [ ] links in service January, 1999
Hub B - [ ] links in service January, 1999
Hub C - [ ] links in service January, 1999
Hub D - [ ] links in service January, 1999
Hub E - [ ] links in service December, 1998
Hub F - [ ] links in service November, 1998
Hub G - [ ] links in service October, 1998
Page 4 of 5
<PAGE> 14
[ ] - CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT C
KNOLOGY/IVT SWITCH AGREEMENT
PLANNING INFORMATION
AUGUSTA
<TABLE>
<CAPTION>
INITIAL ORDER TR303
FACILITIES QUANTITY CONNECTIONS
- ---------- ------------- -----------
<S> <C> <C>
HDTs [ ] [ ]
Interconnect Ts to Bell [ ] -
Interconnect Ts from Bell [ ] -
911 and wireless (2 way) [ ] -
Two Way Supergroup [ ]
</TABLE>
Additions:
In the Headend - [ ] links in service September, 1998
- [ ] links January, 1999
Hub A - [ ] links in service November, 1998, [ ] links in February, 1999
Hub B - [ ] links in service November, 1998, [ ] links in February, 1999
Hub D - [ ] links in service January, 1999, [ ] links in May, 1999
Page 5 of 5
<PAGE> 1
EXHIBIT 10.36
STATE OF SOUTH CAROLINA )
} NETWORK ACCESS AGREEMENT
COUNTY OF CHARLESTON }
NETWORK ACCESS AGREEMENT ("Agreement") entered into the 1st day of July, 1998,
by and between SCANA Communications, Inc. ("SCI"), f/k/a MPX Systems, Inc., and
KNOLOGY Holdings, Inc.
1. RECITALS
(a) SCI maintains telecommunications equipment located at
One Charlotte Street, Charleston, South Carolina
(referred to hereinafter as the "POP"). SCI connects
to a larger telecommunications network ("Network")
via its telecommunications equipment located at the
POP.
(b) SCI and KNOLOGY are entering into this Agreement in
which SCI will allow KNOLOGY to access the Network
and to house its communications equipment ("Network
Access Equipment") at the POP described above.
2. MASTER LEASE Pursuant to a "Commercial Lease" dated January 13, 1997
(the "Master Lease") by and between South Carolina Electric & Gas
Company ("SCE&G"), as lessor, and SCI, as lessee, attached hereto as
Exhibit A, SCE&G has granted to SCI the right to utilize the premises
that include the POP. SCI shall use reasonable efforts to comply with
its obligations pursuant to the terms of the Master Lease and shall
deliver to KNOLOGY copies of every notice of default, nonrenewal and
nonperformance received from SCE&G immediately upon receipt thereof,
and KNOLOGY shall have the right, but not the obligation, to cure any
such defaults of SCI under the Master Lease, assuming that SCI is
either unwilling or unable to cure such defaults itself. SCI covenants
that it will not amend the terms of the Master Lease if any said
amendment would materially adversely affect KNOLOGY's rights or duties
pursuant to this Agreement. SCI represents that (a) SCI has the right
under the Master Lease to enter
<PAGE> 2
into and to perform this agreement and (b) neither SCI nor SCE&G are in
default or breach under the Master Lease.
3. USE Subject to the provisions and conditions and for the term set
forth herein, SCI authorizes KNOLOGY to locate KNOLOGY's Network Access
Equipment at the POP for the purposes of providing communications
services and accessing the Network. KNOLOGY's Network Access Equipment
is more fully described in Exhibit B, which is attached hereto and
incorporated herein by reference. The POP shall be used by KNOLOGY only
for the location, operation and maintenance of KNOLOGY's Network Access
Equipment described in Exhibit B pursuant to the terms of this
Agreement. KNOLOGY agrees to install equipment of a type that will not
cause interference with or in any way harm or damage existing,
providers of communications services (both wireless and wireline)
and/or their equipment present at the POP at the time of KNOLOGY's
installation. The exact location of KNOLOGY's Network Access Equipment
at the POP shall be determined mutually by SCI and KNOLOGY at the time
or times of actual installation. The parties agree to work in good
faith to determine a mutually convenient location(s) for KNOLOGY's
Network Access Equipment. In the event the parties cannot agree on a
location(s), this Agreement may be terminated by either party upon ten
(10) days written notice to the other party. Space required will
initially be that for five (5) 19" x 8'0" communications relay racks.
Floor space occupied will be 19" wide x 26" deep with 24" access space
needed front and rear. KNOLOGY may request additional space for
additional relay racks. SCI may, but shall not be obligated to, make
such additional space available to KNOLOGY. If such space is made
available by SCI to KNOLOGY, SCI and KNOLOGY shall negotiate the terms
and conditions of such additional space at that time.
4. TERM
(a) INITIAL TERM The Initial Term of this Agreement
commenced on July 1, 1998 and shall expire on July 1,
1999 One (1) Year.
(b) EXTENSION OF TERM At the end of the Initial Term,
this Agreement shall automatically be extended for
twenty (20) one (1) year periods (collectively, the
"Extension Terms"
<PAGE> 3
and, individually, the "Extension Term") until one
party provides written notice to the other not less
than ninety (90) days prior to the end of the
then-existing Initial Term or Extension Term, as the
case may be, of its desire not to extend the term;
provided however, that each such Extension Term shall
automatically terminate upon the termination of the
Master Lease for causes other than SCI's default
thereunder. Except as provided in this Section, all
terms and conditions of this Agreement shall remain
in full force and effect during the Extension Terms.
If KNOLOGY should remain in possession of the POP
after the termination of the Initial Term and the
Extension Term(s), then KNOLOGY shall be deemed to be
occupying the POP on a month-to-month basis (the
"Holdover Term"), subject to all of the covenants and
conditions of this Agreement and at a monthly rental
of one and one-quarter (1.25) times the per month
charge payable immediately prior thereto.
Notwithstanding the foregoing, SCI has no obligation
to allow KNOLOGY to remain in possession of the POP
during the Holdover Term and may evict KNOLOGY at any
time, without advance notice, during such Holdover
Term. The Initial Term, the properly exercised
Extension Term(s) and the Holdover Term are
collectively referred to as the "Term."
5. CHARGES
(a) KNOLOGY shall pay to SCI an annual Network Access
Charge to be paid in equal monthly installments on
the first day of each month during the Term of this
Agreement. During the Initial Term, the annual
Network Access Charge shall be Twelve Thousand
Dollars ($12,000).
(b) During the first Extension Term, the annual Network
Access Charge shall be Twelve Thousand three hundred
sixty Dollars ($12,360). During every subsequent
Extension Term, the amount of the annual Network
Access Charge shall be increased by three
<PAGE> 4
percent (3%) over the amount of the Network Access
Charge during the preceding Extension Term.
(c) KNOLOGY hereby covenants and agrees to pay when due
all Network Access Charges due to SCI hereunder at
SCI's principal office at 440 Knox Abbott Drive,
Suite 240, Cayce, South Carolina, 29033.
6. SERVICES SCI shall arrange for heat, air-conditioning and ventilation
to the enclosed areas of the POP in which KNOLOGY's Network Access
Equipment is located on the same basis as is provided to SCI's
facilities located in the same area. Air conditioning will be required
to dissipate approximately 30,000 BTU/hour. Any additional or
supplementary heating and cooling systems required or desired by
KNOLOGY and approved by SCI shall be installed at KNOLOGY's cost.
Electric power for operation of KNOLOGY's Network Access Equipment
shall also be arranged for by SCI. Power required will be 7200 watts on
five 30A 48V circuits. The furnishing of heat and air-conditioning
shall be subject to any statute, ordinance, rule, regulation,
resolution or recommendation for energy conservation which may be
promulgated by any governmental agency or organization which SCI shall
be required to abide by or which it may in good faith elect to abide
by.
7. ACCESS. KNOLOGY and its employees shall have access to its Network
Access Equipment 24 hours a day, 365 days a year, subject to compliance
with such reasonable security measures as shall be in effect from time
to time for the POP in general. No party shall have access to KNOLOGY's
Network Access Equipment except in the presence of a KNOLOGY
representative after reasonable notice to KNOLOGY. SCI shall have
access to its equipment located at the POP at all times to enable it to
inspect or examine the same and to make repairs, additions and
alterations as SCI may deem advisable to preserve the integrity, good
order and safety of the POP.
<PAGE> 5
8. CONDITION OF PREMISES Except as otherwise provided herein, KNOLOGY
shall at its own cost keep the portion of the POP it occupies and
KNOLOGY's Network Access Equipment in safe and good condition, except
for such structural repairs as are SCI's obligations hereunder.
9. SURRENDER At the termination of this Agreement for any reason, KNOLOGY
shall remove its Network Access Equipment and any other of KNOLOGY's
goods and effects, and quit and deliver up the space that it occupies
at the POP to SCI peaceably and in as good order and condition as at
the commencement of this Agreement (or as thereafter improved),
reasonable wear and tear and damage by fire or other casualty or
repairs which are SCI's obligation hereunder excepted. If KNOLOGY's
Network Access Equipment and other goods and effects are not removed by
KNOLOGY within 30 days after termination, SCI may remove and store same
as it desires, any cost of removal and storage to be chargeable to
KNOLOGY.
10. REPAIRS SCI shall be responsible only for making structural repairs to
the POP and for making repairs to facilities and equipment located
outside of but furnishing service to the POP.
11. LIMITATION REGARDING SERVICES SCI reserves the right, without any
liability to KNOLOGY and without being in breach of any covenant of
this Agreement, to interrupt or suspend service of any of the heating,
ventilating, air-conditioning, electric or other systems serving the
POP, or the rendition of any of the other services required of SCI
under this Agreement, whenever and for so long as may be necessary by
reason of accidents, emergencies, strikes or the making of the repairs
or changes which SCI is required by this Agreement or by law to make or
in good faith deems advisable or by reason of difficulty in securing
proper supplies of fuel, steam, water, electricity, labor or supplies,
or by reason of any other cause beyond SCI's reasonable control,
including without limitation, mechanical failure and governmental
restrictions on the use of materials or the use of any of the POP
systems.
<PAGE> 6
12. GOVERNMENTAL REQUIREMENTS AND APPROVALS KNOLOGY shall at all times
comply with any and all Federal, State and local statutes, regulations,
ordinances and other requirements of any of the constituted public
authorities and of all insurance underwriters, relating to its use and
occupancy of the POP. Further, SCI shall cooperate with KNOLOGY and
KNOLOGY's efforts to obtain and maintain in effect all certificates,
permits, licenses and other approvals required by governmental
authorities for KNOLOGY's use of the POP. The obligations of SCI as set
forth herein shall continue throughout the term of this Agreement.
13. SIGNS KNOLOGY shall not place signs on the exterior or interior of the
POP except with the approval of SCI.
14. CARE; INSURANCE KNOLOGY shall not overload, damage or deface the POP
or do any act which might make void or voidable any insurance on the
POP or which may render an increased or extra premium payable for
insurance (and without prejudice to any right or remedy of SCI
regarding this paragraph, SCI shall have the right to collect from
KNOLOGY, upon demand, any such increase or extra premium).
15. ALTERATIONS; ADDITIONS KNOLOGY shall not make alterations of or
additions to the POP without the prior written approval of SCI. Said
approval shall not be unreasonably withheld for nonstructural
alterations, provided reasonably detailed plans and specifications for
the work are furnished to SCI.
16. SYSTEM CHANGES KNOLOGY shall not exceed the capacity of any of the
electrical conductors and equipment in the POP and shall not install
any equipment of any kind or nature whatsoever which would or might
necessitate any changes, replacements or additions to (or which might
cause damage to) the plumbing system, the heating system,
air-conditioning system, electrical system or any other system serving
the POP without the prior written consent of SCI.
<PAGE> 7
17. ASSIGNMENT; DELEGATION This Agreement may not be sold, assigned,
transferred or delegated by KNOLOGY without the written consent of SCI.
No consent shall be required for assignment to any company controlling,
controlled by or under common control of KNOLOGY or for the collateral
assignment of this Agreement in favor of KNOLOGY's lender.
18. FIRE OR OTHER CASUALTY In the event of damage to the POP or those
portions of the POP providing access or essential services thereto, by
fire or other casualty, SCI shall at its expense cause the damage to be
repaired to a condition as nearly as practicable to that existing prior
to the damage, with reasonable speed and diligence. SCI shall not,
however, be obligated to restore or rebuild the POP to a condition in
excess of the condition of the POP at the time of the commencement of
this Agreement, nor in any event to repair, restore or rebuild any of
KNOLOGY's Network Access Equipment, or any alterations or additions
made by KNOLOGY after commencement of the term of this Agreement. To
the extent and for the time that the POP is rendered uninhabitable, the
Network Access Charges set forth above shall proportionately abate. In
the event the damage shall be so extensive that SCI in its sole
discretion shall decide not to repair or rebuild the POP, this
Agreement shall, at the option of either party, exercisable by written
notice to the other party given within sixty (60) days thereof, be
terminated as of a date specified in such notice (which shall not be
more than thirty (30) days thereafter) and the Network Access Charges
(taking into account any abatement as aforesaid) shall be prorated to
the termination date and KNOLOGY shall thereupon promptly vacate the
POP.
19. INDEMNIFICATION
(a) KNOLOGY agrees to compensate SCI for damages and to
indemnify and hold SCI harmless from all claims
(including attorneys' fees, costs and expenses of
defending against such claims) arising from the acts
or omissions or KNOLOGY or KNOLOGY's agents,
employees, engineers, contractors, subcontractors,
licensees, or invitees in or about the POP or arising
from KNOLOGY's default pursuant to this Agreement.
KNOLOGY specifically agrees to compensate SCI for
damages and to indemnify and
<PAGE> 8
hold SCI harmless from all claims (including
attorneys' fees, costs and expenses of defending
against such claims) imposed by regulatory agencies,
including the Federal Communications Commission (the
"FCC"), as a result of the acts or omissions of
KNOLOGY. Except as otherwise specifically provided
herein to the contrary, it is understood and agreed
that all property kept, installed, stored, or
maintained in or upon the POP by KNOLOGY shall be so
installed, kept, stored, or maintained at the risk of
KNOLOGY. SCI shall not be responsible for any loss or
damage to equipment owned by KNOLOGY which might
result from tornadoes, lightning, wind storms, or
other Acts of God; provided, however, SCI agrees to
compensate KNOLOGY for damages and to indemnify and
hold KNOLOGY harmless from all claims (including
attorneys', fees, costs and expenses of defending
against such claims) arising from the acts or
omissions of SCI or SCI's agents, employees,
engineers, contractors, subcontractors, licensees, or
invitees in or about the POP or arising from SCI's
default pursuant to this Agreement. The indemnities
described in this Section shall survive termination
of this Agreement.
(b) The parties understand that SCI would not enter into
this Agreement except that it is clearly understood
that the parties agree that this Agreement does not
give rise, and is not intended to give rise, to any
third-party claims, as there are no intended
third-party beneficiary to this Agreement. Based on
the foregoing, the parties intend that SCI shall not
be liable: (i) to any third party due to any
provision of this Agreement, or (ii) notwithstanding
the provisions of Section 19.a, to KNOLOGY on account
of any interruption of the business of KNOLOGY,
unless such interruption is caused by the gross
negligence or intentional misconduct of SCI or SCI's
agents, employees, engineers, contractors,
subcontractors, licensees, or invitees in or about
the POP. In the event of any interruption of the
business of KNOLOGY which interruption is not caused
by the gross negligence or intentional misconduct of
SCI or SCI's agents, employees, engineers,
contractors, subcontractors, licensees, or invitees
in or about the
<PAGE> 9
POP, KNOLOGY shall be entitled to terminate this
Agreement, receive a prorated refund of any advance
rental, and/or abate rent until the interruption
ceases, as its sole remedies against SCI for said
interruption of its business. The provisions of this
Section 19.b shall survive termination of this
Agreement.
(c) THE PARTIES UNDERSTAND THAT SCI WOULD NOT ENTER INTO
THIS AGREEMENT EXCEPT THAT IT IS CLEARLY UNDERSTOOD
THAT SCI SHALL NOT BE LIABLE TO KNOLOGY OR ANY OTHER
PERSON OR ENTITY FOR ANY CONSEQUENTIAL DAMAGES
ARISING FROM ANY CAUSE WHATSOEVER. In the event that
any third party seeks to hold SCI responsible for any
consequential damages, then in that event, KNOLOGY
agrees to indemnify and hold harmless SCI from all
damages and costs, including attorneys' fees
associated with such claim.
20. INSOLVENCY. (a) The appointment of a receiver or trustee to take
possession of all or a substantial portion of the assets of KNOLOGY, or
(b) an assignment by KNOLOGY for the benefit of creditors, or (c) the
institution by or against KNOLOGY of any proceedings for bankruptcy or
reorganization under any state or federal law (unless, in the case of
involuntary proceedings, the same shall be dismissed within sixty (60)
days after institution), or (d) any execution issued against a
significant portion of the assets of KNOLOGY or against KNOLOGY's
interest hereunder which has not stayed or discharged at least twenty
(20) days prior to a scheduled execution sale, shall constitute a
breach of this Agreement by KNOLOGY. In the event of such a breach, SCI
shall have, without need of further notice to KNOLOGY, the rights
enumerated in Section 21 herein.
21. DEFAULT
(a) EVENTS OF DEFAULT If KNOLOGY shall fail to pay
Network Access Charges as set forth above or any
other sum payable to SCI hereunder or shall fail to
perform or observe any of the other covenants, terms
or conditions contained in this Agreement within
<PAGE> 10
thirty (30) days (or such longer period as is
reasonably required to correct any such default, but
not more than ninety (90) days, provided KNOLOGY
promptly commences and diligently continues to
effectuate a cure) after written notice thereof by
SCI, or if any of the events specified in Paragraph
20 hereof occur, or if KNOLOGY vacates or abandons
the POP in contradiction of this Agreement during the
term hereof or removes or manifests an intention to
remove any substantial portion of KNOLOGY's goods or
property therefrom other than in the ordinary and
usual course of KNOLOGY's business, then, and in any
of said cases (notwithstanding any former breach of
covenant or waiver thereof in a former instance),
SCI, in addition to all other rights and remedies
available to it by law or equity or by any other
provisions hereof, may at any time thereafter,
terminate this Agreement on at least five (5) days'
notice to KNOLOGY and, on the date specified in said
notice, this Agreement and the term hereby demised
and all rights, but not obligations, of KNOLOGY
hereunder shall expire and terminate and KNOLOGY
shall thereupon quit and surrender possession of the
POP to SCI in the condition elsewhere herein required
and KNOLOGY shall remain liable to SCI as provided in
this Agreement. KNOLOGY shall not be in default of
this Agreement if any past due payment is made within
15 days of notice thereof. It is further provided
that SCI shall not be required to provide the notice
called for in this proviso more than twice in any
calendar year.
(b) OVERDUE PAYMENTS. If Network Access Charges or any
other sum due from KNOLOGY to SCI shall be overdue
for more than fifteen (15) days after written notice
from SCI, it shall thereafter bear interest at the
rate of eighteen (18%) percent per annum (or, if
lower, the highest legal rate) until paid.
22. DISCLAIMER OF WARRANTIES SCI has provided no warranties of any type to
KNOLOGY regarding the POP, the Network, or any structure or improvement
thereon, or the ability or suitability of them to accommodate KNOLOGY's
needs and objectives. KNOLOGY has been provided with the opportunity to
<PAGE> 11
inspect the POP and the Network and to assess the condition of each.
SCI HEREBY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
23. NOTICES All statements, notices or other communications with the
exception of bills given hereunder shall be deemed sufficiently given
or rendered only if in writing and sent by registered mail or certified
mail, postage prepaid as follows:
If to KNOLOGY:
Dixie Noles
1241 O.G. Skinner Dr.
West Point, GA 31833
With a copy, which shall not constitute notice, to:
Ancel Hamilton
1241 O.G. Skinner Dr.
West Point, GA 31833
If to SCI:
SCANA Communications, Inc.
Knox Abbott Drive
Suite 240
Cayce, SC 29033
With a copy, which shall not constitute notice, to:
Mitchell Willoughby, Esquire
Willoughby & Hoefer, P.A.
Box 8416
Columbia, SC 29202-8416
or to such other person or place as a party may designate by
notice as aforesaid.
24. PRIOR AGREEMENTS; AMENDMENTS This Agreement constitutes the entire
agreement between the parties relating to the subject matter contained
herein. Any previous agreement(s) between the parties pertaining to the
same subject matter, if any, is hereby terminated. Neither party hereto
has made any representations or promises except as contained herein and
the parties agree that this Agreement constitutes the full and
exclusive agreement of the parties with regard to the subject matter
contained herein.
<PAGE> 12
25. CAPTIONS The captions of the paragraphs in this Agreement are inserted
and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof.
26. MECHANIC'S LIEN KNOLOGY shall, within twenty (20) days after notice
from SCI, discharge or bond against any mechanic's lien for material or
labor claimed to have been furnished to the POP on KNOLOGY's behalf
(except for work contracted for by SCI) and shall indemnify, defend and
hold harmless SCI from any loss incurred in connection therewith.
27. SCI'S RIGHT TO CURE SCI may (but shall not be obligated), on fifteen
(15) days' notice to KNOLOGY (except that no notice need be given in
case of emergency), cure on behalf of, and without liability to,
KNOLOGY any default hereunder by KNOLOGY, and the cost of such cure
(including any attorneys' fees incurred) shall be deemed immediately
due to SCI and payable upon demand.
28. QUIET ENJOYMENT KNOLOGY, upon payment of the fees and performance of
all obligations imposed under this Agreement, shall have the peaceful
and quiet enjoyment of the space to be occupied hereunder for the
purposes described above without hindrance or disturbance by SCI or
those claiming by, through or under SCI, subject, however, to the terms
of the Agreement, and to any mortgage or lease which is superior to
this Agreement.
29. TAXES KNOLOGY shall be responsible for making any necessary returns
for and paying any and all taxes separately levied or assessed against
its improvements to 1426 Main Street and/or the POP. KNOLOGY shall
reimburse SCI for any increase in real estate taxes levied against 1426
Main Street and/or the POP which are directly attributable to the
improvements constructed by KNOLOGY and are not separately levied or
assessed against KNOLOGY's improvements by the taxing authorities.
30. CONDEMNATION If the whole of the real property which includes the POP,
or such portions thereof as will make the real property which includes
the POP unusable for the purposes herein described, are
<PAGE> 13
condemned by any legally constituted public authority, then this
Agreement and the terms hereby granted shall cease from the time when
possession thereof is taken by the public authority, and Network Access
Charges shall be accounted for as between KNOLOGY and SCI as of that
date. Any lesser condemnation shall in no way affect the respective
rights and obligations of the parties hereunder. However, nothing in
this paragraph shall be construed to limit or adversely affect
KNOLOGY's right to an award of compensation from any condemnation
proceeding.
31. MISCELLANEOUS
(a) NONWAIVER The failure of either party to insist in
any one or more instances upon the strict performance
of any one or more of the agreements, terms,
covenants, conditions, or obligations of this
Agreement, or to exercise any right, remedy or
election herein contained, shall not be construed as
a waiver or relinquishment in the future of such
performance or exercise, but the same shall continue
and remain in fall force and effect with respect to
any subsequent breach, act or omission.
(b) PARTIAL INVALIDITY If any of the provisions of this
Agreement, or the application thereof to any person
or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or
the application of such provision or provisions to
persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall
not be affected thereby, and every provision of this
Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(c) CONSTRUCTION This Agreement shall be governed in all
respects by the laws of the State of South Carolina.
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives the day and year first
above written.
WITNESSES: KNOLOGY HOLDINGS, INC.
/s/ By: /s/ Bret T. McCants
- --------------------------- ------------------------------------
[print name] Bret T. McCants
---------------------------
/s/ Its: VP-Construction
- --------------------------- -----------------------------------
SCANA COMMUNICATIONS, INC.
/s/ By: /s/
- --------------------------- ------------------------------------
[print name]
---------------------------
Its: President
- --------------------------- -----------------------------------
<PAGE> 15
STATE OF SOUTH CAROLINA )
) ADDENDUM
COUNTY OF CHARLESTON )
This ADDENDUM is entered into this 1st day of August, 1998 by and between SCANA
Communications, Inc. (hereinafter "SCI") and Knology Holdings Inc. (hereinafter
"Knology").
WHEREAS, the parties previously entered into a "Network Access Agreement" dated
July 1, 1998;
WHEREAS, Knology now wishes to lease a timing port from the SCI Stratum Clock;
WHEREAS, the parties agree to increase the amount payable under the Agreement to
account for the timing port;
NOW, THEREFORE, for and in consideration of the mutual premises and
consideration set forth herein, the parties agree as follows:
1. MODIFICATION OF CHARGES. The parties hereby modify Article 5 of the
Agreement by deleting it in its entirety and replacing it with the
following language:
a. Knology shall pay to SCI an annual Network Access Charge to be
paid in equal monthly installments on the first day of each
month during the Term of this Agreement. During the Initial
Term, the annual Network Access Charge shall be calculated as
follows:
<TABLE>
<S> <C>
Relay Rack Charges ($2,400 x 5 racks) $12,000
Timing Port Fee $1,375
-------
($1,500 annual fee x 11/12 - Pro Rata charge
for 8/1/98 thru 7/1/99)
Total Initial Term Annual Charge $13,375
</TABLE>
b. During the first Extension Term, the annual Network Access
Charge shall be Thirteen Thousand Nine Hundred Five Dollars
<PAGE> 16
($13,905). During every subsequent Extension Term, the amount
of the Annual Network Access Charge shall be increased by
three percent (3%) over the amount of the Network Access
Charge during the preceding Extension Term.
c. Knology hereby covenants and agrees to pay when due all
Network Access Charges due to SCI hereunder at SCI's principal
office at 440 Knox Abbott Drive, Suite 240, Cayce, South
Carolina 29033.
2. NO OTHER CHANGES. Except as set forth herein, there are no other
changes to the Agreement.
Witnesses: Knology Holdings, Inc.
/s/ Donna Hicks By: /s/ Andy Sivell
- ----------------------------- --------------------------------
(print name) Andy Sivell
------------------------
/s/ Its:
- ----------------------------- --------------------------------
SCANA Communications, Inc.
/s/ By: /s/ George J. Bullwinkel, Jr.
- ----------------------------- --------------------------------
George J. Bullwinkel, Jr.
President
/s/
- -----------------------------
<PAGE> 1
ITC DELTACOM LETTERHEAD
1. CUSTOMER BUSINESS/CONTRACT CONTACT ("BILL TO"):
Organization/Division: KNOLOGY Holding, Inc.
Name/Title: Rickey Luke - Chief Technology Officer
Street/PO Box: 1241 OG Skinner Dr.
City: West Point County: State: GA Zip: 31833
Telephone Number: (706) 645-3995 Fax Number: (706) 645-0148
2. SERVICE TERM COMMITMENT: (PLEASE CHECK THE SERVICE TERM YOU REQUIRE BELOW)
<TABLE>
<CAPTION>
TERM
SERVICE 1 YEAR/2 YEAR/3 YEAR MONTHLY PRICE INSTALLATION INITIALS
- ------ -------------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
3 Mbps Sustained Usage
6 Mbps Sustained Usage 3 years 5,100.00 -0-
9 Mbps Sustained Usage
12 Mbps Sustained Usage
15 Mbps Sustained Usage
20 Mbps Sustained Usage
45 Mbps Sustained Usage
</TABLE>
[ ] New Loop [ ] Internet Service only
[ ] Existing Loop [ ] Internet & other service (LD, Local, FR, ATM)
[ ] Channel Assignment for Internet (if known):
------------
After circuits are successfully turned up we will Discontinue the TI's from
Montgomery and Columbus.
<PAGE> 2
ITC DELTACOM INTERNET ACCESS CONTRACT
This contract (the "Agreement"), by and between ITC DeltaCom Communications,
Inc. (ITC DeltaCom) with its office at 306 Alabama Street, Auburn, AL 36832 and
Customer (as above) for the provision by ITC DeltaCom or its subcontractors of
certain switched computer network connectivity services (the "Internet Access")
for use by Customer.
1. COMPLIANCE WITH LAW AND POLICY.
Any content or transmission through the Service in violation of any local,
state, Federal or inter-national laws, regulations or treaties or accepted
Internet policy is prohibited. Any such violations may be grounds for
termination of the Service.
2. CUSTOMER EQUIPMENT AND NETWORK. ITC DeltaCom provides no user access security
with respect to any of Customer's facilities or facilities of others. Customer
shall be responsible for user/access security and network access. ITC DeltaCom
will assist in network security breach detection or identification at
ITC DeltaCom standard rate, but shall not be liable for any inability, failure,
or mistake in doing so.
3. CUSTOMER IDENTITY. Use of the Service will involve listing Customer's
participation in relevant directories. ITC DeltaCom will occasionally require
new registration and account information by customer to continue this Service.
In addition, Customer shall notify ITC DeltaCom in writing of any changes in the
account information, such as address, company name, or contact.
4. OTHER NETWORKS ON THE INTERNET.
A. USAGE. If Customer provides services through other networks, ITC DeltaCom
accepts no responsibility for their authorization on such networks. Use of other
networks may require approval of the respective network authorities and use will
be subject to any acceptable usage policies such networks establish.
B. PERFORMANCE. ITC DeltaCom does not own or control networks outside of
ITC DeltaCom, nor is responsible for performance (or non-performance) within
them or within non-ITC DeltaCom-operated interconnection points between
ITC DeltaCom and other networks.
5. ITC DELTACOM CUSTOMER SUPPORT. ITC DeltaCom shall provide to Customer, in
accordance with the written ITC DeltaCom policies, technical consultation and
instruction regarding network hardware, software, access techniques and commands
at ITC DeltaCom's Standard Rates. ITC DeltaCom is not responsible to Customer
for the cost or expense of administrative, technical, emergency, or support
personnel at Customer's location necessary for dealing with ITC DeltaCom and for
providing and maintaining Customer's own computer equipment, or ITC DeltaCom or
other network access.
6. DOMAIN NAME.
A. QUANTITY. ITC DeltaCom shall apply for on behalf of Customer and/or route
into ITC DeltaCom one (1) registered domain name as part of the Service.
Additional domain names may be routed through the Service at additional monthly
service fees per domain name. Please use ITC DeltaCom's "Change of Service
Contract" to add additional domain names.
7. NETWORK POLLING AND MONITORING.
THE CUSTOMER AGREES TO GIVE ITC DELTACOM POLLING RIGHTS TO THEIR ROUTER FOR THE
DURATION OF THIS AGREEMENT. THIS INFORMATION WILL BE KEPT IN CONFIDENCE AND USED
FOR NETWORK PLANNING AND CUSTOMER CONFORMATION.
8. SERVICE FEES.
A. INITIAL COMMITMENT. Customer shall commit through its purchasing document
the one-time registration fee, initial term Service fees (selected on page 1 of
this Agreement) and the InterNIC Domain Name fee. The Domain Name registration
fee is nonrefundable. The Service fees guarantees the purchased bandwidth
regardless of usage or non-usage of purchased bandwidth or system access by
legitimate users at Customer's location. If Customer commits to an extended term
of Service by initialing the appropriate section on the first page of this
Agreement, listed discounts will apply to the monthly Service fees, but not the
registration fee or InterNIC Domain Name fee.
<PAGE> 3
B. PURCHASE ORDERS. Customers may submit a purchase order for the initial
term costs. In the case of international, federal, state, or local government
orders, Customer purchase order must contain the following language,
"Notwithstanding any provisions to the contrary on the face of this purchase
order or on any attachments to this purchase order, this purchase order is being
used for administrative purposes only, and this order is placed under and
subject solely to the terms and conditions of the ITC DeltaCom Internet Access
Contract executed between Customer and ITC DeltaCom.
C. INVOICING. ITC DeltaCom's initial invoice to Customer shall be the
onetime start-up fee, the InterNIC Domain Name fees, and the first monthly
Service fee. Subsequent Service fees shall be invoiced by ITC DeltaCom and are
payable to ITC DeltaCom within twenty (20) days of the invoicing date.
9. ANNIVERSARY DATE. The "Anniversary Date" refers to the initial day in
which packets of data can be sent to the Customer's site from ITC DeltaCom.
NOTWITHSTANDING THE ABOVE, THE ANNIVERSARY DATE SHALL BE NO LATER THAN 90 DAYS
FROM THE DATE THE SERVICE ORDER WAS PROCESSED BY ITC DELTACOM'S SALES
ADMINISTRATION. AFTER 90 DAYS, CUSTOMER MAY TERMINATE THE SERVICE FOR INACTIVITY
WITH NO PENALTY BEYOND THE AMOUNT OF THE INITIAL REGISTRATION FEE.
10. TERM/EXTENSION/TERMINATION. This Agreement shall extend from the date this
Agreement is signed until the end of the initial non-cancelable term of Service
is selected on Page 1 of this Agreement. This Agreement shall be subject to such
extensions as determined by either Customer's new purchasing document OR
continuing use of the Service. Upon completion of the term of the initial
service contract, the continued use of ITC DeltaCom's Internet Access by the
customer will constitute a renewal of the initial service contract for another
term. This Agreement may be terminated by ITC DeltaCom, or by Customer after
expiration of the initial term, UPON THIRTY (30) DAYS PRIOR WRITTEN NOTICE
without penalty; however, termination by Customer shall not create the right to
a refund of any Service fees previously paid or payable, except in the event ITC
DeltaCom is unable to connect Customer to ITC DeltaCom due to ITC DeltaCom's
negligence. Customer cannot terminate the Service during the initial term.
11. SERVICE ADJUSTMENTS. If a ITC DeltaCom point-of-presence fails due to its
equipment or circuit(s) between POPs failing (except in the case of fire, flood
or other act of God), and this failure results in the disruption of the Service,
then the following adjustments will be made: IF A DISRUPTION OF SERVICE HAS NOT
BEEN RESOLVED WITHIN TWELVE HOURS, ITC DELTACOM WILL PROVIDE ADDITIONAL SERVICE
DAYS TO CUSTOMER BEYOND THE SERVICE TERM FOR ANY CALENDAR DAY (OR PORTION
THEREOF) OF THE SERVICE DISRUPTION. ONLY ONE ADDITIONAL SERVICE DAY CAN BE
GRANTED FOR SERVICE OUTAGES PER CALENDAR DAY OR (PORTION THEREOF). The
foregoing represents the sole remedy available to Customer for Service
disruptions.
12. LIMITED WARRANTY. ITC DeltaCom warrants that the Service will pass data
packets from Customers' Router to the Internet ITC DeltaCom is not responsible
for the customers' Local Networks, Wide Area Networks, Computers, and/or other
hardware. ITC DELTACOM IS NOT RESPONSIBLE FOR the reliability of equipment which
ITC DeltaCom did not install or configure. Customer is responsible for assessing
its own computer and transmission network needs, and is solely responsible for
the results obtained therefrom. ITC DELTACOM MAKES NO OTHER WARRANTIES OF ANY
KIND, WHETHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Use of any
information obtained through the Service is at Customer's risk. ITC DeltaCom
specifically denies any responsibility for the accuracy or quality of
information obtained through the Service.
13. LIMITATION OF LIABILITY. In no event shall either party be liable for
direct damages greater than the sum total of payments made by Customer to ITC
DeltaCom during the Three (3) months immediately preceding the event for which
damages are claimed. In no event shall either party be liable for any indirect,
incidental, demonstrative, punitive, or other consequential damages (including,
without limitation, lost profits) arising out of or in relation to this
Agreement.
14. ASSIGNMENT. Customer may not sell, transfer, or assign this Agreement
without the prior written consent of ITC DeltaCom. Any act of derogation of the
foregoing shall be null and void. Any such assignment shall not relieve the
assigning party of tis obligations hereunder.
<PAGE> 4
15. DEFAULT. Should the Customer fail to pay any invoiced item within 30 days
of the date of invoice, ITC DeltaCom reserves the right to cease providing the
services invoiced until such time as the invoice is paid. Such interruption of
service shall not be a breach of the agreement, and shall not afford the
Customer any relief outlined in Section 11, above. If, after 10 days written
notice to the Customer, the invoice shall remain unpaid, ITC DeltaCom, as its
election, may declare the Customer in default of the agreement. If Customer
defaults, all amounts remaining to be paid under the Initial Term shall
immediately become due and payable. A defaulting Customer shall be responsible
for all fees and expenses of collection, including attorney fees. Customer
waives all state, federal, and constitutional rights to exemption in the
collection of any debt.
16. GENERAL TERMS. The waiver or failure of ITC DeltaCom to exercise in any
respect any right provided for in this Agreement shall not be deemed a waiver of
that right or any other right under this Agreement. If any provision of this
Agreement is held by a court of competent jurisdiction to be contrary to law,
the remaining provisions of the Agreement will remain in full force and effect.
This Agreement represents the complete agreement and understanding of the
parties with respect to the subject matter herein, and supersedes any other
Agreement or understanding, written, or oral. In the event of any conflict
arising between Customer's purchase order terms and this Agreement, the terms of
this Agreement shall take precedence. This Agreement may be modified only in
writing signed by both parties. The law of the State of Alabama shall govern
this Agreement, and any action seeking to enforce or litigate any aspect of this
Agreement must be brought in the courts of Lee County, Alabama.
Both parties represent and warrant that they have full corporate power and
authority to execute and deliver this Agreement and to perform their obligations
hereunder, and that the person whose signature appears below is duly authorized
to enter into this Agreement on behalf of the party.
IN WITNESS WHEREOF, THE PARTIES HAVE ENTERED INTO THIS AGREEMENT AS OF THE DATE
SET FORTH:
RICKEY LUKE--Chief Technology Officer
- ----------------------------------------- --------------------------------------
Authorized Customer Representative/Title Authorized ITC DeltaCom Representative
(PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT)
/S/ RICKEY LUKE September 1, 1998
- ----------------------------------------- --------------------------------------
Customer Signature Date ITC DeltaCom Representative Signature
Date
<PAGE> 1
EXHIBIT 10.38
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted are marked
with ("[ ]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
INTERSTATE FIBERNET, INC.
COLLOCATION AGREEMENT
FOR MULTIPLE SITES
THIS COLLOCATION AGREEMENT ("Agreement") is made and dated as of the
____ day of June, 1998, by and between Interstate FiberNet, Inc., ("IFN") a
Delaware Corporation, for itself and on behalf of its subsidiary, ITC DeltaCom
Communications, Inc., and KNOLOGY HOLDINGS, Inc., a Delaware
corporation, ("Customer"). IFN and Customer hereinafter collectively referred to
as the "Parties".
WHEREAS, IFN owns, leases or manages certain locations, or Points of
Presence ("POP") sites, in a number of cities and/or rural areas for the purpose
of maintaining its telecommunication network equipment; and
WHEREAS, Customer desires to install and maintain, or collocate,
certain of Customer's telecommunication network equipment in multiple IFN POP
sites.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties covenant and agree as
provided herein:
I. GRANT OF LICENSE. IFN hereby grants a non-exclusive license
("License") to Customer for access and use, pursuant to the terms and conditions
of this Agreement, of the space in IFN's POP sites ("POP Space") identified on
Exhibit "A", which may be amended by mutual agreement of the Parties from time
to time during the term of this Agreement. IFN shall identify each POP Space in
a site Exhibits, attached hereto and are incorporated herein by reference, "Site
Exhibit #". Site Exhibits may be added, amended or modified from time to time
during the term of this Agreement upon mutual agreement of the Parties. All
access requirements and limitations for each POP must be set forth in the Site
Exhibit for each POP
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<PAGE> 2
Space. Customer must consent to any access requirements or limitations for each
POP space and show its consent by signing the applicable Site Exhibit before
Customer is bound to any such requirement or limitation. However, Customer
hereby agrees to comply with all rules and regulations regarding the use, access
and conduct of the POP space as established and modified from time to time in
the future by the Lessor of any POP Space leased by Interstate FiberNet.
Customer acknowledges and agrees that IFN cannot grant Customer any lesser
access requirements or limitations than those access requirements and
limitations to which IFN must comply under IFN's rights and the terms of its
occupancy in the POP Space from time to time in the future and that IFN is not
responsible for services or other obligations required to be provided by the
Lessor of any POP Space leased by IFN.
IFN hereby gives the Customer the exclusive use of, and access to, the
Rack Spaces, as defined below, within each POP Space as specified on the
specific Site Exhibit for each specific POP Space. For purposes of this
Agreement, a "Rack Space" is defined as a standard 23" relay rack footprint to
house standard telecommunications facilities, with general dimensions of 15"x 23
1/2" x 7'. Within the Rack Spaces, Customer may install, operate, maintain and
repair equipment to be used in connection with the provision of communications,
data, and cable networks.
This license is subject and subordinate to all restrictions, covenants
and encumbrances, if any, to which IFN, its successors or assigns, may be
subject pursuant to IFN's rights of occupancy of the POP Space with respect to
each respective POP Space to the extent such restrictions, covenants and
encumbrances have set forth in the applicable Site Exhibit and agreed by the
Customer. In addition, the license granted hereby to Customer is not and shall
not be deemed nor construed to be a license with any more expansive rights than
the rights held by IFN
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<PAGE> 3
to access and use the POP Space by the terms of its occupancy thereof. In the
event IFN's rights to occupy any POP site or POP Space cease or terminate for
any reason, Customer shall have 90 days to remove its equipment from the POP
Space(s), unless the Parties otherwise agree. The license granted hereunder by
IFN to Customer shall cease or terminate simultaneously with IFN's rights to
occupy the particular POP site or POP Space with either party having no further
obligations to the other party beyond the payment of accrued charges or other
obligations accrued through the date of cessation or termination.
II. TERM. The term ("Term") of this Agreement shall be for an initial
period of thirty-six (36) months, beginning on the Agreement date first written
above and ending thirty-six (36) months later on the month and day corresponding
to such date. In any event, either party may terminate the license hereby
granted for any particular POP Space or Site described in a Site Exhibit hereto
by providing the other Party with written notice of said termination no less
than 90 days prior to the effective termination date. In the event of
termination of this Agreement or the license for any POP Space, Customer shall
have 90 days to remove its equipment from the POP Space(s), unless the Parties
otherwise agree.
III. LIMITATIONS ON USE OF POP SPACE. The license granted herein to
Customer shall be limited to the access and use of the POP Space only for the
purpose of installing, operating, repairing, maintaining, replacing and removing
Customer's equipment ("Equipment"). Customer shall not install, operate, repair,
maintain, replace and/or remove any equipment owned or operated by a third party
in the POP Space. In addition, in no event shall Customer permit a third party
to access and/or use the POP Space without prior notification and consent of
IFN. All decisions concerning location of the Equipment and the installation,
connectivity and maintenance of the Equipment will be at the discretion of IFN
in accordance with IFN's Operations Manual. If Customer desires to locate
additional equipment within a
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<PAGE> 4
[ ] - CONFIDENTIAL TREATMENT REQUESTED
particular POP Space that requires floorspace and/or power requirements
exceeding those identified in Site Exhibits, Customer must obtain prior written
approval of IFN's Engineering Department
IV. RENTAL. This Agreement is made for and in consideration of the
covenant herein contained in this Agreement and in consideration of a monthly
rental fee for each rack Space located in the POP Space(s) as follows: $[ ] for
first rack space, $[ ] for each additional rack space.
The customer will be billed in advance, on the first day of each month
of the term of this Agreement, pro rated for any partial month. The rental
amounts shall be paid without offset or deduction of any nature. The bill will
be due within thirty (30) days of receipt by customer. In addition to any other
rights and remedies available to IFN, Customer shall pay a late fee on any
delinquent amounts equal to the lesser of one and one-half (1 1/2) percent of
the unpaid balance per month or the maximum lawful rate under state law, from
the due date until the date paid.
V. INSTALLATION CHARGE. If Customer requests IFN's assistance with
installation of Customer's Equipment in a POP Space or for an IFN escort to a
POP Space or Site, Customer will pay IFN a labor charge computed in accordance
with Exhibit B hereto.
VI. OBLIGATIONS OF CUSTOMER.
The Equipment and any subsequent modifications thereto that interconnect with
IFN facilities, shall comply with the technical interface specifications as
outlined in the BellCore Publication TR INS 000342 (High Capacity Digital
Special Access Services). IFN reserves the right to refuse use of customer's
equipment or customer designated termination equipment which does not meet
network reliability standards and fire and safety codes.
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<PAGE> 5
1. At its expense and with prior notice to IFN, Customer shall be
responsible for the installation of all of its Equipment within the POP Space.
IFN has the right to provide a representative to observe and inspect the
installation of the Equipment with no charge to Customer unless said
representative is requested by Customer to be present.
2. Customer shall be responsible for the proper maintenance, repair and
operation of the Equipment, including without limitation any maintenance or
repair, which IFN determines, is necessary to eliminate any potentially
unlawful, unsafe, hazardous condition, or equipment which interferes with the
operation of other equipment collocated at the site. If Customer fails to
rectify the condition to IFN's satisfaction within ten (10) days after receipt
of written notification, or sooner if in the event of an emergency under the
particular circumstances, IFN may undertake or arrange for the required
maintenance and/or repair. Customer shall reimburse IFN for all costs relating
to such maintenance or repair, including the costs of all labor and materials.
Such maintenance and repair costs shall be in accordance with the rates set
forth in Exhibit B attached to this Agreement, plus the actual cost incurred by
IFN for third party vendors for such maintenance and repairs.
3. During this Agreement, Customer shall, at its own expense, maintain
in effect insurance coverage with limits not less than those set forth herein:
a) Worker's compensation insurance with statutory limits as
required by the laws and regulations applicable to the employees and agents of
Customer or its contractors who are engaged in the performance of this
Agreement;
b) Employer's liability Insurance, for employee bodily
injuries and deaths, with limits of $500,000 per occurrence;
5
<PAGE> 6
c) Commercial general liability insurance, covering claims for
bodily injury, death and property damage, including comprehensive form, premises
and operations, independent contractors, products and completed operations,
personal injury, contractual, and broad form property damage liability coverage,
with limits of $1,000,000 per occurrence and general aggregate of $5,000,000 or
an equivalent limit provided by an "umbrella" insurance policy;
d) Comprehensive automobile liability insurance, covering
owned, non-owned, hired and other vehicles, with combined single limits of
$1,000,000. All such policies of insurance shall provide that the same shall not
be canceled nor the coverage modified nor the limits change without first giving
thirty (30) days prior written notice thereof to IFN. No such cancellation,
modification or change shall affect Customer's obligation to maintain the
insurance coverage required by this Agreement. All liability insurance policies
shall be written on an "occurrence" policy form and shall name Customer and IFN,
its successors and/or assigns, as additional insured as their interest may
appear. Customer shall be responsible for payment of any and all deductibles
from insured claims under its policies. Upon reasonable request, Customer shall
furnish to IFN a certificate of insurance as evidence of compliance with the
aforementioned requirements.
4. Customer shall surrender the POP Space upon the expiration or
termination of this Agreement in as good a condition as received, subject to
normal wear and tear.
5. Upon sixty (60) days prior written notice or, in the event of an
emergency, such notice as may be reasonable, IFN may require Customer to
relocate the Equipment; provided, however, the site of relocation shall afford
comparable environmental conditions for
6
<PAGE> 7
the Equipment and comparable accessibility to the Equipment. Customer shall not
be required to pay for the cost of improving the POP Space to which the
Equipment may be relocated. However, notwithstanding the foregoing, Customer
shall be responsible for all costs associated with the relocation of Customer's
Equipment in the event said relocation is required (1) by the owner or
management of the building in which the POP Space is located, (2) due to
structural damage to the POP Space, (3) due to power or HVAC requirements
exceeding Customer's original allocation, or (4) due to expansion of Customer's
service requirements.
VII. OBLIGATIONS OF IFN.
1. IFN agrees to provide Customer or its designated
representatives with reasonable escorted access to the POP Space and Customer's
Equipment on a 24-hour a day, seven day a week basis, for the operation,
maintenance or repair of Customer's Equipment; provided, however, in those
locations where IFN has restricted access by the terms of its occupancy, then
IFN is not required to grant Customer any less restricted access than it
receives itself. Any access restrictions or limitations will not bind or
restrict Customer unless Interstate FiberNet sets forth all such access
restrictions and limitations in the applicable Site Exhibit. Customer must
consent to any access requirements or limitations for each POP Space and show
its consent by signing the applicable Site Exhibit before Customer is bound to
any such requirement or limitation. Customer acknowledges and agrees that IFN
can not grant Customer any lesser access requirements or limitations than those
access requirements and limitations to which IFN must comply under IFN's rights
and the terms of its occupancy in the POP Space from time to time in the future.
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<PAGE> 8
2. During such access, IFN personnel shall have the right to be present
at all times with no charge to Customer, for sites not requiring dispatch of IFN
personnel. If Customer requests the assistance of IFN personnel or an IFN escort
without requirement of twenty-four (24) or seventy-two (72) hour notice outlined
in Site Exhibits, Customer shall reimburse IFN for all costs relating to such
access, including labor associated with non-business day access, according to
the rates set forth in Exhibit B attached hereto. Any access requirement outside
of business day hours for a manned IFN site (reflected as Overtime and Premium
time in EXHIBIT B), will incur escort fee to Customer. For sites that are
unmanned by IFN personnel, escort fees will apply to the Customer (reflected as
Standard time in EXHIBIT B). IFN will provide Customer with electrical power,
set forth in the Site Exhibit(s) attached hereto, as required for Equipment at
each POP site. Based upon anticipated power consumption, Customer must reimburse
IFN the actual cost of any electrical power required for Customer's Equipment on
a per POP Space basis in excess of the anticipated power consumption described
in the Site Exhibit(s).
3. IFN will use reasonable efforts to ensure that the POP Space will be
free of interruptions of services provided by the Lessor of the site from whom
IFN is leasing; provided, however, that IFN does not warrant that the use of the
POP Space will be free from such interruptions.
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<PAGE> 9
VIII. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY OR ANY OTHER PERSON, FIRM OR ENTITY FOR CONSEQUENTIAL,
SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES, OR FOR ANY LOSS OF PROFITS OR LOSS OF
REVENUES OF ANY KIND OR NATURE WHATSOEVER, ARISING OUT OF, OR IN ANY WAY RELATED
TO, THIS AGREEMENT OR THE COLLOCATION OF THE EQUIPMENT AT OR IN THE POP SPACE OR
SITE. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, IFN MAKES NO WARRANTIES AS TO
SUITABILITY OF USE OR FITNESS FOR ANY PURPOSE OF THE SERVICES CONTEMPLATED UNDER
THIS AGREEMENT OR AS TO ANY OTHER MATTER, ALL OF WHICH WARRANTIES BY IFN ARE
HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED. For the purposes of this paragraph,
"IFN" shall include IFN's parents, subsidiaries, or affiliates assisting IFN in
the fulfillment of its obligations under this Agreement.
IX. INDEMNIFICATION. Each Party shall indemnify, defend and hold the
other Party harmless against any claims, damages, actions or causes of action
(including without limitation, reasonable attorneys fees) arising out of any act
or omission by the indemnifying Party and any of its directors, officers,
agents, subsidiaries, affiliates, employees, and/or customers related to this
Agreement or provision of services thereunder, including without limitation any
damage to equipment or personal injury.
X. DEFAULT. The Customer shall be considered in default of this
Agreement if:
(1) Customer shall fail to deliver any rental payment to IFN on or
before thirty (30) days net with ten (10) day grace period after the due date;
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<PAGE> 10
(2) Customer violates or fails to perform or fulfill any other
covenant or provision of this Agreement, or fails to perform or cause any repair
or modification to the Equipment required by IFN, within ten (10) days following
notification; or
(3) Customer undergoes bankruptcy; dissolution; assignment for the
benefit of creditors; financial failure or insolvency; receivership; or sale or
merger with another person, corporation or other legal entity unless approved in
writing in advance by IFN.
In the event of Customer's default of this Agreement (and in addition
to all other remedies available to IFN), the entire rent due to IFN for the
unexpired term of this Agreement shall become immediately due, payable and
demanded, together with all reasonable costs, attorney's fees, expenses, and
damages which may have been suffered or incurred by IFN in enforcing its rights
under this Agreement. IFN may also terminate this Agreement and evict Customer
and its Equipment from the POP Space and site should Customer fail to cure the
default within ten (10) days after receipt of written notice sent by IFN setting
forth the method of default. IFN reserves the right to proceed one or more times
against Customer for past due installments of rent and such installments as
shall become due before Customer is evicted, together with all reasonable costs,
fees, attorney's fees, expenses and damages incurred or suffered by IFN.
Customer expressly waives all legal notice to vacate the premises after
expiration of cure period.
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<PAGE> 11
XI. CONFIDENTIALITY. During the term of this Agreement and for a period
of two (2) years therefrom, IFN and Customer shall use their best efforts to
keep the terms and conditions, including rental rates and other charges,
contained in this Agreement and all other confidential information obtained from
the other, and shall not disclose such information to competitors, the public or
others who may gain benefit from such knowledge, unless required by law,
including state and federal securities laws, to divulge such information to
regulatory or governmental authorities, unless authorized in writing to reveal
such information, or unless required to do so in connection with enforcing that
Party's rights hereunder.
XII. SUCCESSORS AND ASSIGNS. The rights and obligations of Customer and
IFN under this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of Customer and IFN. Neither party shall delegate its
obligations and responsibilities or assign its benefits hereunder without
written consent of the other, which consent will not be unreasonably withheld;
provided, that, without the consent of the other Party, (i) the Parties may
assign their rights and obligations under this Agreement to any controlling
parent corporation; (ii) the Parties may assign their rights and obligations
under this Agreement to any wholly owned or partially owned affiliate or
subsidiary, or any entity under common control with the Party; (iii) the Parties
may assign their rights and obligations to a purchaser of all or substantially
all of the assets or business of the Party; and (iv) the Parties may assign this
Agreement as security for indebtedness. The Parties will permit the addition of
a wholly owned or partially owned subsidiary or affiliate of either Party.
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<PAGE> 12
XIII. GOVERNING LAW. The validity, construction, interpretation and
enforceability of this Agreement shall be governed by the laws of the State of
Georgia and all legal proceedings involving this Agreement or otherwise relating
to the transactions described herein shall be brought in Troup County, Georgia.
XIV. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between Customer and IFN and there are no representations, inducements or other
provisions other than those expressed herein. No modifications, waiver or
discharge of any provision or breach of the Agreement shall be effective unless
Customer and IFN execute it in writing.
XV. GENERAL.
1. Neither this Agreement nor any actions in the fulfillment of
this Agreement or provision of services hereunder will create a partnership or
joint venture between the Customer and IFN. Neither Party shall have the right
to bind the other with respect to third parties.
2. In the event the POP space is owned by a third party and leased
to IFN, no provision of this Agreement shall operate to violate the agreement
between IFN and the said third party, and Customer shall be required to observe
any and all requirements of the agreement between IFN and the third party, as if
those requirements were set forth herein.
3. No subsequent agreement between IFN and Customer concerning the
services contemplated under this Agreement shall be effective or binding unless
it is made in writing by authorized representative of the Parties hereto, and no
representation, promise, inducement or statement of intention has been made by
either Party which is not embodied herein.
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4. Customer acknowledges that it has been granted only a license
to occupy a portion of the Site and that it has not been granted any real
property interests in the Site.
5. All improvements made to the Site are the property of IFN and
shall remain IFN's property upon expiration or termination of this Agreement.
6. Any signage Customer wishes to place on the Site shall be
subject to IFN's prior written approval.
XVI. NOTICE. Notice under this Agreement shall be in writing and
delivered to the persons whose names and business addresses appear below, or as
otherwise provided to the other Party by proper notice hereunder, and the
effective date of any notice under this Agreement shall be the date of delivery
or refusal of such notice and not the date of mailing.
If to IFN: Interstate FiberNet, Inc.
Attn: Frank Wilcox
206 West 9th Street
P.O. Box 510
West Point, Georgia 31833
Fax: (706) 645-3869
with copy to, which shall not constitute notice:
ITC DeltaCom Communications, Inc.
Attn: Assistant General Counsel
700 Boulevard South, Suite 101
Huntsville, AL 35802
Fax: (256) 650-3936
IF to Customer: Knology Holdings, Inc.
Attn: Director of BroadBand Carrier Services
1241 OG Skinner Drive
West Point, GA 31833
with copy to, which shall not constitute notice:
Knology Holdings, Inc.
Attn: General Counsel
1241 OG Skinner Drive
West Point, GA 31833
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<PAGE> 14
XVII. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date set forth at the beginning of this Agreement.
ACCEPTED BY: ACCEPTED BY:
(Customer)
Knology Holdings, Inc. Interstate FiberNet, Inc.
By: /s/ Peggy Warner By: /s/ Steven D. Moses
--------------------------- -------------------------------------
Name: Peggy Warner Name: Steven D. Moses
--------------------------- -------------------------------------
Title: VP Sales & Marketing Title: Sr. Vice President, Network Services
--------------------------- -------------------------------------
Date: 9-30-98 Date: 10/5/98
-------------------------- -------------------------------------
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<PAGE> 15
EXHIBIT A
KNOLOGY / IFN COLLOCATION AGREEMENT FOR MULTIPLE SITES
MULTIPLE, IFN POP SPACE LOCATIONS
1. Panama City, FL 2332 North Highway 321, 32402
2.
3.
4.
5.
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<PAGE> 16
[ ] -- CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B-1
KNOLOGY/IFN COLLOCATION AGREEMENT FOR MULTIPLE SITES
IFN LABOR RATES
1. STANDARD RATE $[ ] PER HOUR BEGINNING UPON ARRIVAL
Monday through Friday
8:00 AM to 5:00 PM
2. OVERTIME RATES $[ ] PER HOUR BEGINNING UPON NOTIFICATION
Monday through Friday
Prior to 8:00 AM and after 5:00 PM
3. PREMIUM TIME $[ ] PER HOUR BEGINNING UPON NOTIFICATION
All other times
CHARGES WILL BE BILLED IN HALF (1/2) HOUR INCREMENTS FOR:
ESCORT WITHOUT NOTICE
TWO HOUR MINIMUM APPLIES TO OVERTIME AND PREMIUM TIME.
24 HOUR IFN CONTACT: 800-374-2350
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<PAGE> 17
[ ] -- CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B-2
KNOLOGY/IFN COLLOCATION AGREEMENT FOR MULTIPLE SITES
SCHEDULE OF RATES AND CHARGES
<TABLE>
<CAPTION>
RATE ELEMENT DESCRIPTION TYPE OF CHARGE CHARGE
- ------------------------ -------------- ------
<S> <C> <C>
Application Fee NRC (per Arrangement, per C.O.) $[ ]
Subsequent Application Fee (Note 1) NRC (per Arrangement, per C.O.) $[ ]
Space Preparation Fee (Note 2) NRC (per Arrangement, per C.O.) (Note 3)
Cable Installation NRC (per entrance cable) $[ ]
Floor Space RC (per first rack space) $[ ]
RC (per each additional rack space) $[ ]
Power (Note 4) RC (per amp) $[ ]
Cable Support structure RC (per entrance cable) $[ ]
</TABLE>
NOTE
NRC: Non-recurring Charge - one-time charge
RC: Recurring Charge - charged monthly
ICB: Individual Case Basis - one-time charge
(1) Subsequent Application Fee. IFN requires the submission of an
Application Fee for modifications to an existing arrangement. However,
when the modifications do not require IFN to expend capital (e.g.,
additional space or power requirements, BST termination/cross-connect
equipment, etc.), IFN will assess the Subsequent Application Fee in
lieu of the Application Fee.
(2) Space Preparation Fee. The Space Preparation Fee is a one-time fee,
assessed per arrangement, per location. It recovers costs associated
with collocation area within a POP site, which include survey,
engineering, design and building modification costs. Fees include cable
support structures and space for cable connectivity inside collocation
building and between transport equipment and DSX terminations.
(3) The charge amount is to be specified in Site Exhibit.
(4) Power. Monthly Recurring Costs for power will be assessed per ampere,
supplied in protected (A&B) feeds.
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<PAGE> 18
SITE EXHIBIT
1.0
KNOLOGY/IFN COLLOCATION AGREEMENT FOR MULTIPLE SITES
Panama City, Florida
1. ADDRESS: Interstate FiberNet, Inc.
2332 North Highway 231
Panama City, FL 32402
II. EQUIPMENT: QUANTITY TYPE
One (1) each ADC DS3,DS1 DSX Cross-connect panel
One (1) each Nortel BIP and OC-3 Terminal
111. SPACE FOOTPRINT: FIVE (5) 23" width x 20" depth x 7' high central office
racks.
IV. POWER REQUIREMENTS: Total of 60 Amps (dual with A&B feeds)
V. ACCESS REQUIREMENTS: All Access will be escorted. If a technician requires
dispatch, contact the IFN NOC by dialing 800-374-2350. Response time to the POP
site will depend on location of Technician dispatched, which should be within
two (2) hours.
VI. NOTICE REQUIREMENTS: IFN requests notice from Customer twenty-four (24)
hours in advance of entering the POP site and seventy-two (72) hours in advance
prior to installing equipment (to eliminate escort fee during business hours).
Customer will use it best efforts to comply with IFN's request. In the event of
an emergency, Customer shall notify IFN at the time that Customer dispatches a
technician to the POP site. Notice hereunder shall be to IFN's Network Control
Center via telephone. Knology requests that IFN provide a tracking ticket for
the dispatch.
VII. TEMPORARY ALLOCATION: IFN will permit escorted access to Knology for
temporarily use of one (1) rack and a 30 amp breaker assignment at 1799 Industry
Drive, Panama City, FL 32401; provided, however, Knology shall remove said rack
within 6 months after replacement rack space is available for use at Highland
Substation, 2332 N. Highway 231, Panama City, FL 32402.
/s/ Peggy Warner 10-9-98 /s/ Steve D. Moses 10/16/98
- --------------------- ------- ------------------------ --------
Customer Date IFN Date
18
<PAGE> 1
EXHIBIT 10.39
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted are marked with
brackets ("[ ]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
FILE NO. 71567.93303
STATE OF GEORGIA
FULTON COUNTY
LEASE AGREEMENT
(Commercial Lease)
THIS LEASE AGREEMENT ("Lease") is made and entered into this 12th day
of October, 1998, between SOUTHERN COMPANY SERVICES, INC., an Alabama
corporation, on its own behalf and as agent for Georgia Power Company with an
office located at 64 Perimeter Center East, Atlanta, Fulton County, Georgia
30346 (hereinafter referred to as "Lessor"), and KNOLOGY HOLDINGS, INC., a
Delaware corporation with offices at 1241 O.G. Skinner, West Point, GA 31833
(hereinafter referred to as "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor either owns or has the authority to lease that certain
tract of land, more particularly described on Exhibit "A" attached hereto and
by reference made a part hereof ("Land"), together with the improvements located
thereon, being known as the Augusta 15th Street Substation; and
WHEREAS, Lessee desires to lease a portion of the Land to install,
maintain and operate a communications building and to use certain conduits/fiber
connector ducts for communications cables, all as more particularly shown on
Exhibit "B" attached hereto and by reference made a part hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
obligations, agreements, representations, warranties and covenants, the parties
agree as follows:
1. Leased Premises. Lessor hereby leases and rents to Lessee, and
Lessee hereby leases and rents from Lessor the "Leased Premises." "Leased
Premises" shall mean that certain portion of the Land depicted as the
crosshatched area on Exhibit "B", together with (i) a non-exclusive right to
install and use certain conduits and fiber connector ducts; (ii) a non-exclusive
right to attach to certain existing poles; (iii) a non-exclusive right of
vehicular and pedestrian access to and from the Leased Premises to a public
right-of-way, on a route designated by Lessor in Lessor's sole discretion over
and across Lessor's driveways and parking areas as they may be located and
relocated from time to time at Lessor's sole discretion; and (iv) nonexclusive
easements over and across a portion of the Land for purposes of providing
electricity and other utilities to the Leased Premises (the easements and rights
set forth in (i) - (iv) being at locations identified on Exhibit "B").
<PAGE> 2
[ ] -- CONFIDENTIAL TREATMENT REQUESTED
2. Term. (a) The initial term of this Lease shall be for twenty
(20) years ("Original Term"), commencing on November 1, 1998 and ending on
October 30, 2018, at 11:59 PM, subject, however, to termination by Lessor or by
Lessee, as hereinafter provided.
(b) Lessor hereby grants to Lessee the right and option to extend
the Original Term for two (2) additional periods (each such additional period
being an "Extended Term") of ten (10) years each by giving Lessor written notice
thereof at least six (6) months prior to the expiration of the Original Term or
the then applicable Extended Term. Lessee shall have the right to exercise these
options to extend the Original Term provided that on the date of such exercise
there exists no uncured default by Lessee with respect to which Lessor has given
written notice to Lessee pursuant to the provisions of this Lease.
(c) Each Extended Term shall be on the terms, covenants and
conditions of this Lease then applicable, except that after the exercise of the
option for the first Extended Term, Lessee shall have only one (1) option to
extend, and after the exercise of the option for the second Extended Term,
Lessee shall have no further options to extend the term.
3. Rent. As rental for the Leased Premises for the entire term,
Lessee has paid Lessor the sum of [ ] Dollars. In addition, Lessor may
from time to time send written notice to Lessee setting forth any and all actual
costs incurred by Lessor (and not previously reimbursed by Lessee) relating to
the Lease, including, but not limited to: (i) survey costs, (ii) design and
construction costs, (iii) maintenance costs, and (iv) legal fees in preparing
and implementing this Lease. Lessee shall pay to Lessor the costs specified in
such notice within ten (10) days of receipt thereof.
4. Use. The Leased Premises shall be used by Lessee for any
lawful telecommunications purposes, so long as such use does not interfere with
or in any way prevent the everyday operation and use of the Land for Lessor's
business purposes, including specifically, but without limitation, the
generation, transmission and distribution of electricity. Lessee agrees that the
Leased Premises may or may not be suitable for the use Lessee desires to make of
the Leased Premises and that the Leased Premises may not be in a safe or proper
condition for such use. LESSEE AGREES THAT LESSEE IS LEASING, AND ACCEPTS, THE
LEASED PREMISES "AS IS", "WHERE IS", "WITH ALL FAULTS" AND LESSOR MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO FITNESS, MERCHANTABILITY, USE OR
CONDITION OF THE LEASED PREMISES.
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<PAGE> 3
5. Lessee's Improvements. (a) Subject to the provisions of this
Lease, Lessee shall have the right to construct, install, operate and maintain
on the Leased Premises those improvements more particularly shown on Exhibit "B"
hereto and including a one-story equipment building with dimensions of
approximately 60 feet by 24 feet ("Equipment Building"), an aboveground
generator and aboveground fuel storage tank, certain conduits, ducts and
communications fibers and cables ("Lessee's Improvements"), as Lessee's
Improvements are more particularly described on Exhibit "B-1" attached hereto
and by reference made a part hereof. In the event Lessee installs a generator,
(i) Lessee shall indemnify and hold Lessor harmless from and against all losses,
costs, claims, damages, suits, actions, liabilities, demands, and expenses,
including, without limitation, attorney's fees and other professional fees and
costs, arising out of or in any manner connected with the installation,
maintenance, use or operation of such generator or fuel storage tank, including,
without limitation, fuel storage and use, and (ii) Lessee shall be solely
responsible for complying with, and waives and releases, and indemnifies and
holds harmless, Lessor, Lessor's agents, employees, officers, directors and
stockholders of and from any and all claims (including without limitation strict
liability), demands, liabilities and obligations of whatsoever kind or nature,
direct or indirect, and whether contingent, conditional or otherwise, known or
unknown, arising under, pursuant to, from or by reason of or in connection with,
any and all federal, state and local laws (including but not limited to
decisional law), statutes, ordinances, rules, regulations, permits, or
standards, including but not limited to those relating to the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of any pollutant, contaminant, toxic, hazardous or
regulated substance, material or waste, including, without limitation, oil or
petroleum products or their derivatives, solvents, polychlorinated biphenyls,
asbestos, asbestos containing materials, radioactive materials or waste, and any
other toxic, ignitable, reactive, or corrosive materials which are now or in the
future subject to governmental regulation (individually, a "Hazardous Substance"
and collectively "Hazardous Substances"), and arising out of or in any manner
connected with the use, operation, installation, maintenance, repair,
replacement or removal of the generator or fuel storage tank, and (iii) if
Lessee installs and utilizes an aboveground fuel storage tank, Lessee shall
comply with all federal, state and local environmental laws, including, but not
limited to, the Oil Pollution Act of 1990 (OPA) and OPA's regulations, and
Lessee shall prepare and implement a Spill Prevention Control and
Countermeasures Plan which meets all applicable requirements of OPA. The
sentence immediately preceding this sentence shall survive the termination or
expiration of the term of this Lease.
- 3 -
<PAGE> 4
(b) Except for Lessee's Improvements, Lessee shall not
any construct any improvements on the Leased Premises or make any alterations,
modifications or additions to Lessee's Improvements or make any changes to the
Leased Premises (collectively referred to as "Alterations") without first
obtaining Lessor's prior written consent. All Alterations shall be performed at
the sole expense of Lessee and by Lessor's employees, or, in Lessor's sole
discretion, by Lessor's approved contractors. All Lessee's Improvements and all
Alterations must be aesthetically and structurally compatible with the
surrounding improvements on the Land and be constructed in a good and
workmanlike manner and in compliance with all applicable laws.
6. Assignment and Subletting. Neither this Lease nor the interest
of Lessee in this Lease or in the Leased Premises (including without limitation
Lessee's Improvements), or any part thereof, shall be sold, assigned, sublet or
otherwise transferred by Lessee, in whole or in part, whether by operation of
law or otherwise, without the prior written consent of Lessor, and any such
assignment or sublease without said consent shall be null and void. A change in
the controlling ownership of Lessee, directly or indirectly, shall be deemed to
be an assignment of this Lease. In the event that (a) Lessee shall sell the
business that Lessee is conducting (if such business is permitted under the
terms of this Lease) on the Leased Premises, and (b) Lessee is not then in
default under this Lease, then Lessor agrees to allow Lessee to assign this
Lease to the new owner of such business upon such owner assuming all of the
obligations of Lessee under this Lease, but the transferring Lessee shall not be
released from liability under this Lease.
7. Lessee Compliance. Lessee, at Lessee's sole cost and expense,
shall obtain any and all municipal, county and state permits required for
Lessee's business on the Leased Premises and shall at all times use, occupy and
operate the Leased Premises in compliance with all applicable city, county,
state, federal and local laws, ordinances, statutes, rules and regulations now
in effect or hereafter enacted. Lessee hereby covenants that Lessee and its
agents, employees and contractors will not generate, store, use, treat or
dispose of any "Hazardous Substances" (as hereinafter defined) in, on or at the
Leased Premises, except for Hazardous Substances as are commonly legally used or
stored (and in such amounts as are commonly legally used or stored) as a
consequence of using the Leased Premises for the permitted purposes set forth in
this Lease, but only so long as the quantities thereof do not pose a threat to
public health or to the environment or would necessitate a "response action",
as that term is defined in CERCLA (as hereinafter defined), and so long as
Lessee strictly complies or causes compliance with all laws,
- 4 -
<PAGE> 5
statues, rules, orders, regulations, ordinances and decrees concerning the use
or storage of such Hazardous Substances. Lessee further covenants that the
Leased Premises shall not be used by Lessee or its agents, contractors or
employees as a dump site or storage site (whether permanent or temporary) for
any Hazardous Substances during the term to this Lease.
Lessee hereby agrees to indemnify Lessor and hold Lessor harmless from
and against any and all losses, liabilities, including strict liability,
damages, injuries, expenses, including reasonable attorneys' fees actually
incurred, costs of any settlement or judgment and claims of any and every kind
whatsoever paid, incurred or suffered by, or asserted against, Lessor by any
person or entity or governmental agency for, with respect to, or as a direct or
indirect result of, the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or release on or from, the Leased
Premises or Lessee's Improvements of any Hazardous Substance [including, without
limitation, any losses, liabilities, including without limitation strict
liability, damages, injuries, expenses, including without limitation reasonable
attorneys' fees actually incurred, costs of any settlement or judgment or claims
asserted or arising under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), any so called federal, state or local "Superfund"
or "Superlien" laws, or any federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to or imposing
liability, including strict liability, or standards of conduct concerning any
Hazardous Substance]; provided, however, that the foregoing indemnity is limited
to matters arising solely from the violation of the covenants and agreements of
Lessee contained in the preceding paragraph and (i) excludes matters caused by
Lessor and (ii) does not extend to Hazardous Substances on the Leased Premises
as of the date Lessee first goes onto the Leased Premises to exercise rights
pursuant to this Lease.
For purposes of this Lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the lists of
hazardous substances or wastes now or hereafter adopted by the United States
Environmental Protection Agency (the "EPA") or the lists of toxic pollutants
designated now or hereafter by Congress or the EPA or which are defined as
hazardous, toxic, pollutant, infectious or radioactive by CERCLA or any
Superfund law or any Superlien law or any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability or standards of conduct concerning, any hazardous, toxic
or dangerous waste, substance or material, as now or at any time hereafter in
effect.
- 5 -
<PAGE> 6
Lessor shall have the right but not the obligation, and without
limitation of Lessor's rights under this Lease, to enter onto the Leased
Premises or to take such other actions as it deems necessary or advisable to
clean up, remove, resolve or minimize the impact of, or otherwise deal with, any
Hazardous Substance following receipt of any notice from any person or entity
(including without limitation the EPA) asserting the existence of any Hazardous
Substance in, on or at the Leased Premises or any part thereof which, if true,
could result in an order, suit or other action against Lessee and/or Lessor;
provided, however, Lessor agrees that, except in the case of an emergency,
Lessor will take such action only after written notice to Lessee of the alleged
existence of Hazardous Substances and the failure by Lessee within a reasonable
period of time following receipt of such notice to commence, or the failure by
Lessee to thereafter diligently pursue to completion, the appropriate action to
clean-up, remove, resolve or minimize the impact of such Hazardous Substances.
All reasonable costs and expenses incurred by Lessor in the exercise of any such
rights, which costs and expenses result from the violation of the covenants and
agreements of Lessee contained in this paragraph, shall be deemed additional
Rent under this Lease and shall be payable by Lessee upon demand.
Lessee hereby indemnifies Lessor from any and all loss, cost, damage or expense
ever incurred by Lessor as a result of Lessee's breach of the foregoing
covenants and agreements of Lessee, and such indemnification shall survive the
termination or expiration of the term of this Lease.
8. Lessee Maintenance. (a) Lessee, at Lessee's sole cost and
expense, shall maintain and keep in good order and repair the Leased Premises
and Lessee's Improvements. Lessor shall be under no obligation to inspect the
Leased Premises. Lessor shall not be required to make any repairs or
improvements to the Leased Premises.
(b) All maintenance work relating to the Leased Premises and
Lessee's Improvements, except for such work inside the Equipment Building, shall
be performed, at Lessee's sole cost and expense, by Lessor's employees or, in
the sole discretion of Lessor, by Lessor's approved contractors.
9. Utilities and Liens. Lessee shall pay all utility bills
relating to the Leased Premises including, but not limited to, telephone,
electricity and fuel. If Lessee fails to pay any of said utility bills, Lessor
may pay the same and Lessee shall immediately reimburse Lessor for all such
payments. Lessee shall not create or permit to be created or to remain, and,
shall promptly discharge, at its sole cost and expense, any lien,
- 6 -
<PAGE> 7
encumbrance or charge upon the Land or Leased Premises, or any part thereof or
upon Lessee's rights under this Lease that arises from the use or occupancy of
the Leased Premises by Lessee or by reason of any labor, service or material
furnished or claimed to have been furnished to or for the benefit of Lessee or
by reason of any construction, repairs or demolition by or at the direction of
Lessee.
10. Lessor's Access to Leased Premises. (a) Lessor shall at all
times throughout the term of this Lease have access to the Leased Premises for
the performance of Lessor's obligations. In the exercise of such rights, Lessor
shall not be liable for damages to any improvements or personal property which
Lessee may place on the Leased Premises or for interference with or interruption
of any activities which Lessee may conduct on the Leased Premises.
(b) Lessor may enter the Leased Premises at reasonable
hours to exhibit same to prospective purchasers. Lessor shall further have
access to the Leased Premises at all reasonable times to make repairs required
of Lessor under the terms hereof and to otherwise inspect the Leased Premises.
11. Casualty. If fifty percent (50%) or more of the floor area of
Lessee's Equipment Building is destroyed or rendered wholly untenantable by
storm, fire, lightning, earthquake or other casualty or cause whatsoever
("Casualty"), Lessee shall have the option to rebuild the Equipment Building or
terminate this Lease, subject to the conditions set forth in this Lease. Lessee
shall have thirty (30) days from the date of the Casualty within which to notify
Lessor in writing that it is exercising its option to terminate the Lease and if
Lessee fails to notify Lessor of such termination within such thirty (30) day
period, then this Lease shall not be terminated and Lessee, at Lessee's sole
cost and expense, shall restore the Equipment Building to substantially the same
condition as before the Casualty as soon as practicable. If less than fifty
percent (50%) of the floor area of Lessee's Equipment Building is destroyed or
rendered wholly untenantable by Casualty, Lessee, at Lessee's sole cost and
expense, shall restore the Equipment Building to substantially the same
condition as before the Casualty as soon as practicable.
12. Insurance. (a) Lessee agrees to acquire and maintain during
the term of this Lease, at Lessee's sole cost and expense, commercial general
liability insurance covering the liability of Lessor and Lessee for bodily
injury or death of persons and for damage to or destruction of property
occurring on the Leased Premises and arising out of the use or occupation of the
Leased Premises with a Combined Single Limit per occurrence for bodily
- 7 -
<PAGE> 8
injury liability and property damage liability of not less than $2,000,000.00.
Lessee shall have Lessor named as an additional insured under such insurance
policy.
(b) All insurance policies procured and maintained by Lessee
pursuant to this Section 12 shall be carried with an insurance company licensed
to do business in the State of Georgia having a rating from Best's Insurance
Reports of not less than A-/VII, and shall be endorsed to cover the liability
assumed by Lessee under the provisions of this Lease. The endorsement shall be
worded substantially as follows:
"During the effective period of the policies referenced herein, it is
agreed that this insurance specifically covers liability assumed by the
insured under the provisions of a certain agreement entered into by the
insured and Southern Company Services, Inc., dated*."
(c) Lessee shall further carry, at Lessee's sole cost and expense,
all-risk hazard insurance for the full replacement value of all improvements
located on the Leased Premises. Such insurance shall be in the name of Lessor
and Lessee as their interests may appear.
(d) Each of the above required insurance policies shall be
endorsed with a provision whereby the insurance company shall notify Lessor at
least ten (10) days prior to the effective date of cancellation or material
change in any of the said policies. As evidence of this insurance and prior to
Lessee's occupancy of the Leased Premises, Lessee shall submit to Lessor a
certificate providing the above coverage which certifies that the said policies
have been properly endorsed to meet all requirements set forth herein. Renewals
of such policies shall be delivered to Lessor at least thirty (30) days prior to
the expiration of each respective policy term. Proof of payment of the premium
therefor shall be delivered to Lessor from time to time upon written request.
To the extent of the insurance required to be maintained by Lessee (but in no
event in excess of the fullest extent permitted under O.C.G.A. Section 13-8-2),
Lessee hereby releases Lessor, its agents and employees from any liability for
damage to property or injury to persons, regardless of the cause of such damage
or injury. Except as provided in the sentence immediately preceding this
sentence, the provisions of Paragraph 11 and the waivers and indemnities in this
Lease shall not apply to damages arising out of bodily injury to persons or
damage to property caused by or resulting from the sole negligence of Lessor,
its agents or employees to the extent O.C.G.A. Section 13-8-2 is applicable
thereto. In no event shall the insurance requirements
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<PAGE> 9
of this paragraph be deemed to limit the liability or responsibility of Lessee
in any manner.
13. Indemnification. Lessee shall, and does hereby agree to,
indemnify, save harmless and defend Lessor (its agents and employees) from any
and all loss, cost, claim, suit, damage or expense [including but not limited to
the payment of any sum or sums of money to any person whomsoever (including but
not limited to third persons, subcontractors, Lessee, Lessor, and agents and
employees of them)] arising from or due to injuries to persons (including but
not limited to death) or damage to property (including but not limited to
property of Lessor) in any way attributable to or arising out of the use or
occupancy of the Leased Premises [including but not limited to any and all loss,
cost, claim, suit, damage or expense arising from the claimed or actual, sole or
joint, negligence of Lessee (Lessee's agents, employees, sub-contractors,
invitees and guests) or negligence of Lessor (its agents, employees or
sub-contractors) or any combination of these including (but without limiting the
generality of the foregoing) all claims for injuries to persons or damage to
property, liens, garnishments, attachments, claims, suits, costs, attorneys
fees, cost of investigation and of defense]. Lessee shall be responsible for the
payment of any and all loss, cost, claim, suit, damage or expense of any nature
and character in any way related to the Leased Premises or attributable to or
asserted against Lessor or Lessee (or both).
14. Default and Remedies. In the event Lessee shall default in the
performance of any of its covenants or obligations contained in this Lease and
such default shall continue for five (5) days after written notice thereof has
been given by Lessor to Lessee, then in such event, at Lessor's option:
(i) Lessor may terminate this Lease by written notice to
Lessee, in which event Lessee shall immediately surrender the Leased
Premises, and if Lessee fails to do so, Lessor may, without prejudice
to any other right or remedy which Lessor may have, enter upon and take
possession of the Leased Premises (by force, summary proceedings,
ejectment or otherwise) and remove Lessee without being liable for
prosecution or any claim for damages therefor, and Lessee hereby waives
its rights to any legal proceedings in connection with such reentry.
(ii) Lessor may enter upon and take possession of the
Leased Premises, without termination of this Lease, and remove Lessee
by force, summary proceedings, ejectment or otherwise, without being
liable for prosecution or any claim for damages therefor, and Lessee
hereby waives its rights to any legal proceedings in connection with
such reentry. If
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<PAGE> 10
Lessor elects, Lessor may take such action as is necessary to relet the
Leased Premises and may so relet the Leased Premises at such rent and
upon such terms and conditions as Lessor may deem advisable and receive
the rent therefor. Upon such reletting, all rentals received by Lessor
from such reletting shall be applied first to the payment of any
expenses of such reletting, including but not limited to brokerage fees
and attorneys' fees and the costs of alterations and repairs, second to
the payment of any charges due and unpaid hereunder, and the residue,
if any, shall be held by Lessor and applied against future charges
under this Lease.
15. Taxes. Lessee agrees to assume and pay any additional taxes or
license fees that may be assessed against the Leased Premises as a result of the
use thereof by Lessee.
16. Termination. Either party shall have the right to terminate
this Lease for any cause whatsoever, or without cause, at any time upon giving
the other party one hundred and eighty (180) days' notice in writing of such
termination.
17. Notices. Lessee hereby appoints as Lessee's agent to receive
service of all dispossessory or distraint proceedings and notices hereunder the
person in charge of the Leased Premises at the time or occupying the Leased
Premises, and if no person is in charge of or occupying the Leased Premises,
then such service or notice may be made by attaching the same on the main
entrance of the Equipment Building. A copy of all notices under this Lease shall
be sent to the parties at the following addresses:
LESSEE: Knology Holdings, Inc.
1241 O.G. Skinner
West Point, GA 31833
Attn: Chad Wachter
General Council
LESSOR: Georgia Power Company
Land Department
15th Floor
BIN 10151
Attn: Kay Sutton
241 Ralph McGill Boulevard
Atlanta, Georgia 30308-3374
or at such other address or to the attention of such other person as the parties
shall notify pursuant to this paragraph. Wherever this Lease provides for the
giving of notice by the parties, the same shall be deemed received by the other
party upon the date
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<PAGE> 11
said notice shall have been duly mailed, postage prepaid, through the United
States mail.
18. Subordination. Lessee's rights hereunder shall be subject to
any mortgage, indenture or deed to secure debt which is now, or may hereafter
be, placed upon the Leased Premises by Lessor.
19. Surrender of Leased Premises. (a) Upon the termination or
expiration of the term of this Lease, Lessee shall vacate the Leased Premises
and surrender the Leased Premises to Lessor in as good order and condition as on
the date hereof, reasonable wear and tear excepted.
(b) Upon termination or expiration of the term of this
Lease, provided that Lessee is not in default under this Lease, Lessee may
remove all trade fixtures and personal property which it owns and has placed in
or on the Leased Premises; provided, however, that Lessee repairs all damage to
the Leased Premises caused by such removal, thereby restoring the Leased
Premises to as good order and condition as on the date hereof, reasonable wear
and tear excepted. Any improvements made by Lessee in or on the Leased Premises
(including without limitation Lessee's Improvements) shall become the sole
property of Lessor and absolute beneficial ownership of such improvements shall
pass to Lessor. All property of Lessee remaining in or on the Leased Premises
after expiration of the term or earlier termination of this Lease (including
without limitation Lessee's Improvements) shall be deemed conclusively abandoned
and may be removed by Lessor and disposed of by Lessor or, at Lessor's option,
retained by Lessor for Lessor's own account, without compensation to Lessee, and
Lessee shall reimburse Lessor for the actual cost of removing and disposing of
the same.
20. High Voltage Safety Act. Lessee hereby agrees and covenants
not to use, and will prohibit agents, employees and contractors of Lessee from
using, any tools, equipment or machinery within ten (10) feet of Lessor's
overhead conductors located on or in the vicinity of the Leased Premises. Lessee
agrees to comply with Official Code of Georgia Section 46-3-30 et seq. (HIGH
VOLTAGE SAFETY ACT), and the Rules and Regulations of the State of Georgia
Section 300-3-7.01 et seq. Lessee further agrees to notify any contractors that
may be employed by Lessee of the existence of said code sections and
regulations, and to require that all work be performed in compliance with said
code sections and regulations by including same as a requirement in any contract
let as a result of said bid. Lessee further agrees and covenants to warn all
persons whom Lessee knows or should reasonably anticipate for any reason may
conduct any activity whatsoever on or in the vicinity of the Leased Premises of
the
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<PAGE> 12
fact that such conductors are (a) electrical conductors, (b) energized, (c)
uninsulated, and (d) dangerous.
21. Condemnation. If the whole of the Leased Premises, or such
portion thereof as will make the Leased Premises unusable for the purposes
herein leased, is condemned by any legally constituted authority, or conveyed to
such authority in lieu of such condemnation, then in either of said events, the
term of this Lease shall end on the date when possession thereof is taken by the
condemning authority. In the event any portion of the Leased Premises is taken
by condemnation or a conveyance in lieu thereof (other than as set forth in the
preceding sentence), at Lessor's option, Lessor may (i) terminate this Lease, or
(ii) if the Leased Premises may still be used for Lessee's intended use
therefor, elect to continue this Lease and Lessee shall promptly restore the
remaining portion of Lessee's Improvements. In the event of any such taking of
all or any portion of the Leased Premises or conveyance in lieu thereof, Lessor
shall be entitled to all compensation which may be paid or made in connection
therewith, and Lessee shall have no claim for the value of the unexpired
leasehold, and hereby assigns to Lessor any right Lessee may have to participate
in any award paid on account of any such taking. Lessee shall, however, be
permitted to pursue a claim for improvements placed on the Leased Premises at
Lessee's sole cost and expense, provided that such claim shall not reduce or
diminish Lessor's award.
22. Signage. With the exception of signs already in place, Lessee
shall place no signs upon the outside walls or roof of the Equipment Building or
on the Leased Premises except with the prior written consent of Lessor. Any and
all signs placed on the Leased Premises by Lessee shall be maintained in
compliance with the applicable local, city, county, state or federal statutes,
ordinances, laws, rules and regulations governing such signs. Lessee shall be
responsible to Lessor for any damage caused by the installation, use or
maintenance of said signs, and Lessee agrees upon removal of said signs to
repair all damage incident to such removal.
23. Holdover. In the event Lessee remains in possession of the
Leased Premises after termination or expiration of the term of this Lease,
without any express agreement of the parties, Lessee shall be a tenant at
sufferance, at a daily rental rate equal to one hundred dollars ($100.00).
24. Lessor's Reserved Easements. Lessor hereby retains unto
itself, its successors and assigns, for the benefit of Lessor, its successors,
assigns and such others (such as but not limited to Lessor's agents,
contractors, subcontractors, licensees and permittees) as Lessor shall from time
to time
- 12 -
<PAGE> 13
designate, the rights, interests and easements from time to time and at any
time, upon, over, across and under the Leased Premises (i) to construct,
install, use, patrol, obtain access to, operate, maintain, repair, inspect,
renew, rebuild, reconstruct, replace, improve, upgrade, enhance and add onto
overhead and underground electric transmission and distribution lines, poles,
towers, frames, manholes, conduits, fixtures, appliances, wires, cables and
equipment, and protective wires and devices, and communications lines, cables
and equipment (including, without limitation, "Communications Facilities" as
hereinafter defined); and (ii) to construct, install, use, patrol, obtain access
to, operate, maintain, repair, inspect, renew, rebuild, reconstruct, replace,
improve, upgrade, enhance and add onto additional transmission, distribution,
and communications lines, poles, towers, frames, manholes, conduits, fixtures,
appliances, wires, cables and equipment, and protective wires and devices,
including, without limitation, Communications Facilities ["Communications
Facilities" shall mean (x) equipment, systems or facilities used for or in
connection with communications by radio, including without limitation, microwave
towers, mobile base radio towers, radio base repeater towers, telemeter
transmitters, multiple address system radios or power line carrier equipment,
and any permits, licenses or leases relating to any one or more of the
foregoing, and (y) equipment, systems or facilities used for or in connection
with light wave communications over optical fibers, including without
limitation, optical fibers, optronic or photo-optronic equipment, repeaters,
junctions, splice enclosures or equipment for the conversion of light signals to
or from radio or electronic signals, and any permits, licenses or leases
relating to any one or more of the foregoing], and, in addition to and not in
limitation of the foregoing, the terms and provisions of the form of Easement
for Right-of-Way attached hereto as Exhibit "D" and by reference made a part
hereof shall apply to such easements as if "Lessor" referred to Lessor and "the
Undersigned" referred to Lessee, and with such changes as may be necessary to
reflect that such easements were reserved by Lessor rather than granted by
Lessee.
25. Relocation. Upon prior notice to Lessee, Lessor reserves the
right at any time to relocate the Leased Premises or any portion of the Leased
Premises (including without limitation Lessee's Improvements); provided,
however, that Lessor agrees to use good faith efforts to relocate the Leased
Premises, or such portion thereof, as soon as practicable to another location on
the Land. Lessee shall at its sole expense pay for all costs incurred by Lessor
or Lessee relating to said relocation.
26. No Estate. This Lease shall create a landlord-tenant
relationship between the parties hereto and no estate shall pass out of Lessor.
Lessee has only a usufruct, not subject to levy
- 13 -
<PAGE> 14
and sale, and not assignable by Lessee except with Lessor's prior written
consent.
27. Waiver. No failure of Lessor to exercise any power given to
Lessor hereunder, or to insist upon strict compliance by Lessee with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof, shall constitute a waiver of Lessor's right to demand exact
compliance with the terms hereof.
28. Severability. In the event any one or more of the provisions
contained in this Lease shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof and this Lease shall be continued as
if such invalid, illegal, or unenforceable provisions had never been contained
herein.
29. Entire Agreement. This Lease contains the entire agreement of
the parties hereto and no representations, inducements, promises or agreements,
oral or otherwise, between the parties not embodied herein shall be of any force
or effect. This Lease may not be modified except by an amendment signed by both
Lessor and Lessee.
30. Time is of the Essence; Georgia Law. Time is of the essence in
this Lease. This Lease shall be governed by the laws of the State of Georgia. No
remedy conferred upon or reserved to Lessor in this Lease, at law or in equity
is intended to be exclusive of any other available remedies, but each and every
remedy shall be cumulative and shall be in addition to every other remedy given
in this Lease or now or hereafter existing in law or in equity.
31. Counterparts. This Lease may be simultaneously executed in
several counterparts, and all such counterparts shall constitute but one and the
same instrument.
32. Parties. "Lessor" as used in this Lease shall include Lessor,
its representatives, assigns, and successors in title to the Leased Premises.
"Lessee" shall include Lessee, its representatives, and if this Lease shall be
validly assigned in accordance with the provisions of this Lease, shall include
also Lessee's assigns or successors under this Lease. "Lessor" and "Lessee"
include male and female, singular and plural, corporation, partnership or
individual, as may fit the particular parties.
33. Confidentiality. It is agreed by all the parties hereto that,
absent a bona fide dispute between the parties to
- 14 -
<PAGE> 15
this Lease as to the terms of this Lease, the terms of this Lease shall not be
disclosed to any individual, entity or organization other than the parties
hereto and their counsel without the written consent of all parties to this
Lease.
Nothing in this provision, however, shall in any way be construed to
limit the ability of any party to this Lease upon specific written request from
any of the entities listed herein below, to divulge any aspect of this Lease,
including this Lease in its entirety and all other documents relating to the
transactions contemplated hereby, to:
1. Any state, federal or local governmental authority,
department, board, commission, court, officer or agency,
including, but not limited to, the Internal Revenue Service
and the Revenue Department of the State of Georgia;
2. Any attorney, accountant, auditor or other licensed
professional consultant to the parties hereto;
3. Any partner in any party hereto; or
4. Any lender to a party hereto;
provided that disclosure of this Lease is material to the business of the party
and disclosure of this Lease serves a significant and valid business purpose in
the party's dealings with the entity to whom this Lease is disclosed. In
addition, nothing in this provision shall in any way be construed to limit the
ability of any party to this Lease to divulge or disclose any aspect of this
Lease, including the Lease in its entirety and all other documents relating to
the transactions contemplated hereby, if, in the discretion of such party or its
tax advisors, such disclosure or divulgence is necessary to maintain such
party's tax position in response to inquiries from, or is necessary to sustain
such party's tax position upon scrutiny by, the Internal Revenue Service or the
Revenue Department of the State of Georgia.
No party hereto shall be under any obligation to obtain a covenant of
nondisclosure from any party to which it discloses any information under the
exceptions listed above.
34. Additional Terms and Conditions. In addition to the terms and
conditions set forth in the body of this Lease, this Lease and Lessee's rights
hereunder shall be subject to the Additional Terms and Conditions set forth in
Exhibit "C" attached hereto and by reference made a part hereof. In the event of
a conflict between a term, condition or provision set forth in the
- 15 -
<PAGE> 16
body of this Lease and a term, condition or provision set forth in Exhibit "C",
the term, condition or provision set forth in the body of this Lease shall
prevail except to the extent that Exhibit "C" expressly provides by specific
reference that the term, condition or provision set forth therein is in lieu of
the specific term, condition or provision set forth in the body of this Lease
with which it conflicts.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals, the day and year first above written.
LESSEE:
Signed, sealed and KNOLOGY HOLDINGS, INC.,
delivered in the a Delaware corporation
presence of:
/s/ Cathy Turner By: /s/ Bret T. McCants
- ------------------------------ ------------------------------------
Witness Name: Bret T. McCants
----------------------------------
Title: VP - Construction
/s/ Cathy Turner --------------------------------
- ------------------------------
Notary Public Date: 10/5/98
-----------------------------------
My Commission Expires:
July 21, 2002
- ------------------------------
(NOTARIAL SEAL)
LESSOR:
Signed, sealed and SOUTHERN COMPANY SERVICES, INC., an
delivered in the Alabama corporation
presence of:
By:
- ------------------------------ ------------------------------------
Witness Name:
----------------------------------
Title:
--------------------------------
- ------------------------------
Notary Public Date:
-----------------------------------
My Commission Expires:
- ------------------------------
(NOTARIAL SEAL)
- 16 -
<PAGE> 17
Exhibit "A"
[Legal Description of Land]
<PAGE> 18
Exhibit "B-1"
(Lessee's Improvements)
KNOLOGY Holdings, Inc. improvements include the following:
- One 25 foot by 50 foot prefabricated concrete building
- One 125 kW auxiliary generator
- Four fiber pull boxes
- Four inch PVC conduit for ingress and egress and connecting
KNOLOGY's building to the Georgia Power POP building
- Aerial and buried communications cable for ingress and egress
and connecting KNOLOGY's building to the Georgia Power POP
building
<PAGE> 19
Exhibit "C"
[Additional Terms and Conditions]
<PAGE> 20
Exhibit "D"
FORM TRANSMISSION EASEMENT
Acct No.______________________Draft No.__________________R.C. No._______________
EASEMENT FOR RIGHT-OF-WAY
STATE OF GEORGIA,
_________________COUNTY.
For and in consideration of the sum of ______________________________
($________) Dollars, in hand paid by GEORGIA POWER COMPANY, a Georgia
corporation (hereinafter referred to as "Georgia Power," which term shall
include successors and assigns), the receipt and sufficiency of which is hereby
acknowledged, ______________________________ (hereinafter referred to as "the
Undersigned," which term shall include heirs, successors and assigns), whose
Post Office address is ______________________________ does hereby grant to
Georgia Power the rights to, from time to time, construct, operate, maintain,
renew and rebuild overhead and underground electric transmission, distribution
and communication lines, together with necessary or convenient towers, frames,
poles, wires, manholes, conduits, fixtures, appliances, and protective wires and
devices in connection therewith (all being hereinafter referred to as "the
Facilities") upon or under a tract of land being more fully located and
described below (hereinafter referred to as "the Leased Premises"), together
with the right of Georgia Power to grant, or permit the exercise of, the same
rights, either in whole or in part, to others, and said rights are granted to
Georgia Power together with all rights, privileges and easements necessary or
convenient for the full enjoyment and use of the Leased Premises for the
purposes above described, including the right of ingress and egress to and from
the Leased Premises over lands of the Undersigned and the right to cut away and
keep clear, remove and dispose of all trees and undergrowth and to remove and
dispose of all obstructions now on the Leased Premises or that may hereafter be
placed on the Leased Premises by the Undersigned or any other person. Further,
Georgia Power shall have the right to cut, remove and dispose of dead, diseased,
weak or leaning tree (hereinafter referred to as "danger trees") on lands of the
Undersigned adjacent to the Leased Premises which may now or hereafter strike,
injure, endanger or interfere with the maintenance and operation of any of the
Facilities located on the Leased Premises, provided that on future cutting of
such danger trees Georgia Power shall pay to the Undersigned the fair market
value of the merchantable timber so cut, timber so cut to become the property of
Georgia Power. The Undersigned shall notify Georgia Power of any party with whom
it contracts, and who owns as a result thereof, any danger trees to be cut as
set forth above. Georgia Power shall also have, and is hereby granted, the right
to install, maintain and use anchors or guy wires on lands of the Undersigned
adjacent to the Leased Premises, and the right, when required by law or
government regulations, to conduct scientific or other studies, including but
not limited to environmental and archaeological studies, on or below the ground
surface of the Leased Premises.
The Leased Premises are shown on a plat made by or for Georgia Power,
and on file in Georgia Power's Land Department, and are as described as
follows:
Georgia Power shall pay or tender to the Undersigned or owner thereof a
fair market value for any growing crops, fruit trees or fences cut, damaged or
destroyed on the Leased Premises by employees of Georgia Power and its agents,
in the construction, reconstruction, operation and maintenance of the
Facilities, except those crops, fruit trees and fences which are an obstruction
to the use of the Leased Premises as herein provided or which interfere with or
may be likely to interfere with or endanger the Facilities or their proper
maintenance and operation, provided the Undersigned shall give Georgia Power
written notice of the alleged damage within thirty (30) days after the alleged
damage shall have been done. The Undersigned shall notify Georgia Power of any
party with whom the Undersigned contracts and who owns, as a result thereof, any
growing crops, fruit trees or fences; and the Undersigned shall inform said
party of the notification provision set forth herein. Any growing crops, fruit
trees or fences so cut or damaged on the Leased Premises in the construction,
reconstruction, operation and maintenance of the Facilities are to remain the
property of the owner thereof.
It is agreed that part of the within named consideration is in full
payment for all timber cut or to be cut in the initial clearing and construction
of the Facilities and that timber so cut is to become the property of Georgia
Power. The Undersigned will notify Georgia Power in the event the Undersigned
has contracted with another party who owns as a result thereof the timber to be
so cut.
The Undersigned has the right to use the Leased Premises for
agricultural or any other purposes not inconsistent with the rights hereby
granted, provided such use shall not injure or interfere with the proper
operation, maintenance, repair of, extensions or additions to the Facilities;
and provided further that no buildings or structures other than fences (which
shall not exceed eight (8) feet in height and shall neither obstruct nor
otherwise interfere with any of the rights granted to Georgia Power hereby) may
be erected upon the Leased Premises.
The Undersigned expressly grants to Georgia Power the right to take any
action, whether at law or in equity, and whether by injunction, ejectment or
other means, to prevent the construction, or after erection thereof to cause the
removal, of any building or other structure(s) located on the Leased Premises
(other than fences as provided for herein), regardless of whether the offending
party is the Undersigned or not. The undersigned will notify Georgia Power in
the event the Undersigned contracts with a third party who owns, as a result
thereof, any buildings or other such structures. The Undersigned acknowledges
and agrees that said rights are necessary for the safe and proper exercise and
use of the rights, privileges, easements and interests herein granted to
Georgia Power.
Georgia Power shall not be liable for or bound by any statement,
agreement or understanding not expressed herein.
TO HAVE AND TO HOLD forever unto Georgia Power the rights, privileges.
easements, powers, and interests granted herein, which shall be a covenant
running with the title to the Leased Premises.
The Undersigned warrants and will forever defend the title to the
rights, privileges an easements granted herein to Georgia Power against the
claims of all persons whatsoever.
IN WITNESS WHEREOF, the Undersigned ____________ hereunto set ________
_____________ hand(s) and seal(s), this ___________________ day of
__________________, 19 __.
Signed, sealed and delivered in the presence of:
(SEAL)
- -------------------------------- ------------------------------------
Witness
(SEAL)
- -------------------------------- ------------------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.40
FACILITIES TRANSFER AGREEMENT
THIS AGREEMENT between SOUTH CAROLINA ELECTRIC AND GAS COMPANY, herein
referred to as SCE&G and KNOLOGY Holdings, Inc. dba KNOLOGY of Charleston herein
referred to as the "Licensee" is for the purpose of transferring and attaching
Licensee's cables to replacement or additional poles at such time as SCE&G
transfers and/or attaches its facilities subject to the following terms and
conditions.
1. Licensee agrees that SCE&G will transfer the Licensee's attachments
on SCE&G owned poles where Licensee's straight line cable attachments and/or
service drops exist, at SCE&G's sole discretion and at such time as SCE&G
replaces its existing pole(s). SCE&G will have the option of transferring other
types of attachments including but not limited to dead ends and down guys. Also
at SCE&G's option, existing cables may be attached to intermediate mid-span
poles at such time as SCE&G's facilities are attached.
2. SCE&G will transfer facilities only if splicing can be avoided.
Service drops which can be moved off the pole will be relocated onto the strand
wire with appropriate clamps. All attachments on a given pole will be
transferred. (No partial transfers will be done).
3. The SCE&G crew supervisor, using local management approved
guidelines, will have the sole authority to determine whether SCE&G will
transfer any Licensee attachment. If the attachment can not be transferred by
SCE&G, then SCE&G shall provide written notification to the Licensee immediately
upon completion of all necessary transfer work of SCE&G facilities that the
Licensee's attachments have not been transferred. The Licensee will have thirty
(30) days, after date of written notification by SCE&G, to transfer its
attachments to the new poles. If the Licensee does not perform all necessary
transfer work within the thirty (30) day period, SCE&G may at its option and at
the sole expense of the Licensee, do whatever is necessary, including hiring of
a contractor, to make the necessary transfers of all existing Licensee
attachments to the new pole so that the replaced pole can be removed within a
reasonable time.
4. SCE&G engineering departments will review, in the field, all
transfers to insure compliance with the recommendations and requirements of the
latest edition of the "National Electric Safety Code", as approved by the South
Carolina Public Service Commission and lawful rulings of State or other
governmental authorities having jurisdiction that make such recommendations and
requirements and in conformance with the latest SCE&G specifications and
requirements. Failure to do so, however, shall in no way relieve Licensee of its
responsibility to comply fully with such requirements for all transfer made by
it. Work instructions will be noted on the appropriate form for transfers made
by SCE&G, the Licensee shall have the right to inspect and shall have ten (10)
working days from the date of notice of work completion to either approve the
transfer and/or notify SCE&G of any corrections required for approval. SCE&G
shall have twenty (20) working days from the receipt of written notification to
correct any unsatisfactory transfer work. If said transfer work is not corrected
to the Licensee's satisfaction, the Licensee shall have the right to reject said
transfer work, and shall not be responsible for payment of the transfer fee.
5. The Licensee shall pay SCE&G upon completion and acceptance of any
Licensee transfer work performed by SCE&G, a transfer fee based primarily on the
estimated direct and indirect costs associated with performing the transfers.
The transfer fee shall be $50.00 per pole. It is expected that normally only
one main cable attachment per pole will be involved. All service drops and other
facilities transferred will be included in this price. Future adjustments in the
transfer fee may be mutually agreed upon.
<PAGE> 2
6. All billing is to be done through South Carolina Electric and Gas
Company's Northern Division Operations Services, on a monthly basis. A location
drawing, and form(s) showing work completed, will be furnished to the Licensee
along with the invoice. The Licensee shall initiate payment within thirty (30)
days of receipt of the invoice.
7. Material required to perform transfers, will be made available by
the Licensee at no cost to SCE&G. SCE&G agrees to reuse all existing material
wherever practical.
8. The Licensee is responsible to provide training to SCE&G personnel
when requested by SCE&G's local Line Supervisors or Associate Managers.
9. All other matters relating to the rights and obligations of the
parties arising out of Licensee's attachments to SCE&G's poles and not
specifically and fully addressed herein, continue to be governed by the Pole
Attachment Agreement(s) between the parties.
10. This agreement may be terminated by either party, by giving to the
other party at least thirty (30) days written notice.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective representatives, being duly authorized, on the
dates indicated below.
Dated this 11th day of February, 1998.
SOUTH CAROLINA ELECTRIC & GAS COMPANY
WITNESS:
/s/ By /s/
- -------------------------- ---------------------------------------------
Its: Vice President of Electric Service
In The Presence of KNOLOGY Holdings, Inc. dba KNOLOGY of Charleston
------------------------------------------------
Licensee
WITNESS:
/s/ Dixie B. Noles By: /s/ Bret T. McCants
- -------------------------- --------------------------------------------
Bret T. McCants
Its: VP - Construction
-------------------------------------------
<PAGE> 1
EXHIBIT 10.41
(BELLSOUTH LETTERHEAD)
March 3, 1998
Mr. Bret McCants
KNOLOGY Holdings, Inc.
P.O. Box 5lO
West Point, GA 31833
Attached is the executed license agreement between BellSouth Telecommunications,
Inc. and KNOLOGY Holdings, Inc. for the BellSouth region states. This license
agreement provides for the attachment to and/or occupancy of BellSouth poles,
conduit, and rights of way.
Appropriate agreement requirements must be fulfilled prior to attaching to
BellSouth poles and/or occupying BellSouth conduit. Prior to any work being
performed, KNOLOGY Holdings, Inc. must submit for approval the appropriate
license agreement forms (previously provided). After approval has been granted
and make-ready charges paid, if applicable, KNOLOGY Holdings, Inc. can then
proceed with pole attachments and/or conduit occupancy. The appropriate forms
are to be submitted through my office at the address provided above.
If I can be of any further assistance, call me at (205) 977-2631.
/s/ John T. Chaucer
- --------------------
John T. Chaucer
attachment
<PAGE> 2
LICENSE AGREEMENT
for
RIGHTS OF WAY (ROW), CONDUITS, AND POLE ATTACHMENTS
Dated: March 3, 1998
Between
BELLSOUTH TELECOMMUNICATIONS, INC.
(Licensor)
And
KNOLOGY Holdings, Inc.
(Licensee)
Licensee desires to conduct business in the following area(s):
__AL __KY __LA __MS __TN __FL __GA __NC __SC
or
X BellSouth Region
- ---
BELLSOUTH License Agreement Number - BSIC981002
<PAGE> 3
CONTENTS
SECTION PAGE
1 Definitions 1
2 Scope of Agreement 5
3 Requirements and Specifications 9
4 Additional Legal Requirements 16
5 Facilities and Licenses 17
6 Make-Ready Work 18
7 Application Forms and Fees 19
8 Processing of Applications 22
9 Issuance of Licenses 23
10 Construction of Licensee's Facilities 24
11 Use and Routine Maintenance of Licensee's Facilities 26
12 Modification and Replacement of Licensee's Facilities 28
13 Rearrangement of Facilities at request of Another 28
14 Emergency Repairs and Pole Replacements 30
15 Inspection by BellSouth of Licensee's Facilities 30
16 Notice of Noncompliance 31
17 Unauthorized Occupancy or Utilization of BellSouth's Facilities 32
18 Removal of Licensee's Facilities 33
19 Fees, Charges, and Billing 33
20 Advance Payment and Imputation 34
21 Assurance of Payment 34
22 Insurance 35
23 Authorization Not Exclusive 35
24 Assignment of Rights 36
25 Failure to Enforce 36
26 Term of Agreement 36
27 Supersedure of Agreement(s) 37
APPENDICES
I Schedule of Fees, Charges, and Attachment Transfer Rate Schedule
II Records Maintenance Centers
EXHIBITS
I Administrative Forms and Notices
<PAGE> 4
RIGHTS OF WAY (ROW), CONDUITS AND POLE ATTACHMENTS
This Agreement sets forth the terms and conditions under which BellSouth shall
afford to Licensee access to BellSouth's poles, ducts, conduits and
rights-of-way, pursuant to the Act.
1. DEFINITIONS
Definitions in General. Except as the context otherwise requires, the
terms defined in this Section shall, as used herein, have the meanings
set forth in 1.1 through 1.29.
1.1 Anchor. The term "anchor" refers to a device, structure, or assembly
which stabilizes a pole and holds it in place. An anchor assembly may
consist of a rod and fixed object or plate, typically embedded in the
ground, which is attached to a guy strand or guy wire, which, in turn,
is attached to the pole. The term "anchor" does not include the guy
strand which connects the anchor to the pole and includes only those
anchors which are owned by BellSouth, as distinguished from anchors
which are owned and controlled by other persons or entities.
1.2 Anchor/guy strand. The term "anchor/guy strand" refers to supporting
wires, typically stranded together, or other devices attached to a pole
and connecting that pole to an anchor or to another pole for the
purpose of increasing pole stability. The term "anchor/guy strand"
includes, but is not limited to, strands sometimes referred to as
"anchor strands," "down guys," "guy strands," and "pole-to-pole guys."
1.3 Communications Act of 1934. The terms "Communications Act of 1934" and
"Communications Act" refer to the Communications Act of June 19, 1934,
48 Stat. 1064, as amended, including the provisions codified as 47
U.S.C. Sections 151 et seq. The Communications Act includes the Pole
Attachment Act of 1978, as defined in 1.23 following.
1.4 Assigned. The term "assigned", when used with respect to conduit or
duct space or pole attachment space, refers to any space in such
conduit or duct or on such pole that is occupied by a
telecommunications service provider or a municipal or other
governmental authority. To ensure the judicious use of poles and
conduits, space "assigned" to a telecommunications service provider
must be physically occupied by the service provider, be it BellSouth or
a new entrant, within twelve (12) months of the space being "assigned".
1.5 Available. The term "available", when used with respect to conduit or
duct space or pole attachment space, refers to any usable space in such
conduit or duct or on such pole not assigned to a specific provider at
the applicable time.
1.6 Conduit occupancy. The terms "conduit occupancy" and "occupancy" refer
to the presence of wire, cable, optical conductors, or other facilities
within any portion of BellSouth's conduit system.
1
<PAGE> 5
1.7 Conduit system. The term "conduit system" refers to any combination of
ducts, conduits, manholes, and handholes joined to form an integrated
whole. In this Agreement, the term refers to conduit systems owned or
controlled by BellSouth.
1.8 Cost. The term "cost" as used herein refers to charges made by
BellSouth to Licensee for specific work performed, and shall be (a) the
actual charges made by subcontractors to BellSouth for work and/or, (b)
if the work was performed by BellSouth employees, the rates set forth
in the Price Schedule of the General Terms and Conditions of BellSouth.
1.9 Duct. The term "duct" refers to a single enclosed tube, pipe, or
channel for enclosing and carrying cables, wires, and other facilities.
As used in this Agreement, the term "duct" includes "inner ducts"
created by subdividing a duct into smaller channels.
1.10 Facilities. The terms "facility" and "facilities" refer to any property
or equipment utilized in the provision of telecommunication services.
1.11 The acronym "FCC" refers to the Federal Communications Commission.
1.12 Inner-Duct. The term "inner-duct" refers to a pathway created by
subdividing a duct into smaller channels.
1.13 Joint User. The term "joint user" refers to a utility which has entered
into an agreement with BellSouth providing reciprocal rights of
attachment of facilities owned by each party to the poles, ducts,
conduits and rights-of-way owned by the other party.
1.14 Licensee. The term "licensee" refers to a person or entity which has
entered or may enter into an agreement or arrangement with BellSouth
permitting such person or entity to place its facilities in BellSouth's
conduit system or attach its facilities to BellSouth's poles or
anchors.
1.15 Lashing. The term "lashing" refers to the attachment of a
licensee's sheath or inner-duct to a supporting strand.
1.16 License. The term "license" refers to any license issued pursuant to
this Agreement and may, if the context requires, refer to conduit
occupancy or pole attachment licenses issued by BellSouth prior to the
date of this Agreement.
2
<PAGE> 6
1.17 Make-Ready work. The term "make-ready work" refers to all work
performed or to be performed to prepare BellSouth's conduit systems,
poles or anchors and related facilities for the requested occupancy or
attachment of Licensee's facilities. "Make-Ready work" includes, but is
not limited to, clearing obstructions (e.g., by "rodding" ducts to
ensure clear passage), the rearrangement, transfer, replacement, and
removal of existing facilities on a pole or in a conduit system where
such work is required solely to accommodate Licensee's facilities and
not to meet BellSouth's business needs or convenience. "Make-Ready
work" may require "dig-ups" of existing facilities and may include the
repair, enlargement or modification of BellSouth's facilities
(including, but not limited to, conduits, ducts, handholes and
manholes) or the performance of other work required to make a pole,
anchor, conduit or duct usable for the initial placement of Licensee's
facilities.
1.18 Manhole. The term "manhole" refers to an enclosure, usually below
ground level and entered through a hole on the surface covered with a
cast iron or concrete manhole cover, which personnel may enter and use
for the purpose of installing, operating, and maintaining facilities in
a conduit.
1.19 Occupancy. The term "occupancy" shall refer to the physical presence of
telecommunication facilities in a duct, on a pole, or within a
Right-of-way.
1.20 Person acting on Licensee's behalf. The terms "person acting on
Licensee's behalf," "personnel performing work on Licensee's behalf,"
and similar terms include both natural persons and firms and ventures
of every type, including, but not limited to, corporations,
partnerships, limited liability companies, sole proprietorships, and
joint ventures. The terms "person acting on Licensee's behalf,"
"personnel performing work on Licensee's behalf," and similar terms
specifically include, but are not limited to, Licensee, its officers,
directors, employees, agents, representatives, attorneys, contractors,
subcontractors, and other persons or entities performing services at
the request of or as directed by Licensee and their respective
officers, directors, employees, agents and representatives.
1.21 Person acting on BellSouth's behalf. The terms "person acting on
BellSouth's behalf," "personnel performing work on BellSouth's behalf,"
and similar terms include both natural persons and firms and ventures
of every type, including but not limited to corporations, partnerships,
limited liability companies, sole proprietorships, and joint ventures.
The terms "person acting on BellSouth's behalf," "personnel performing
work on BellSouth's behalf," and similar terms specifically include,
but are not limited to, BellSouth, its officers, directors, employees,
agents, representatives, attorneys, contractors, subcontractors, and
other persons or entities performing services at the request or on
behalf of BellSouth and their respective officers, directors,
employees, agents, and representatives.
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1.22 Pole. The term "pole" refers to both utility poles and anchors but only
to those utility poles and anchors owned or controlled by BellSouth,
and does not include utility poles or anchors with respect to which
BellSouth has no legal authority to permit attachments by other persons
or entities.
1.23 Pole Attachment Act. The terms "Pole Attachment Act" and "Pole
Attachment Act of 1978" refer to those provisions of the Communications
Act of 1934, as amended, now codified as 47 U.S.C. ss. 224.
1.24 Prelicense survey. The term "prelicense survey" refers to all work and
activities performed or to be performed to determine whether there is
adequate capacity on a pole or in a conduit or conduit system
(including manholes and handholes) to accommodate Licensee's facilities
and to determine what make-ready work, if any, is required to prepare
the pole, conduit or conduit system to accommodate Licensee's
facilities.
1.25 Right of Way (ROW). The term "right of way" refers to the right to use
the land or other property of another party to place poles, conduits,
cables, other structures and equipment, or to provide passage to access
such structures and equipment. A Right of Way may run under, on, or
above public or private property (including air space above public or
private property) and may include the right to use discrete space in
buildings, building complexes, or other locations.
1.26 Sheath. The term "sheath" refers to a single outer covering containing
communications wires, fibers, or other communications media.
1.27 Spare Capacity. The term "spare capacity" refers to any pole attachment
space, conduit, duct or inner-duct not currently assigned or subject to
a pending application for attachment/occupancy. Spare capacity does not
include an inner duct (not to exceed one inner-duct per party) reserved
by BellSouth, Licensee, or a third party for maintenance, repair, or
emergency restoration.
1.28 State. When capitalized, the term "State" (as used in terms such as
"this State") refers to the State of Georgia.
1.29 Third Party. The terms "third party" and "third parties" refer to
persons and entities other than Licensee and BellSouth. Use of the term
"third party" does not signify that any such person or entity is a
party to this Agreement or has any contractual rights hereunder.
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2. SCOPE OF AGREEMENT
2.1 Undertaking of BellSouth. BellSouth shall provide Licensee with equal
and nondiscriminatory access to pole space, conduits, ducts, and
rights-of-way on terms and conditions equal to those provided by
BellSouth to itself or to any other telecommunications service
provider. Further, BellSouth shall not withhold or delay assignment of
such facilities to Licensee because of the potential or forecasted
needs of itself or other parties.
2.2 Attachments and Occupancies Authorized by this Agreement. BellSouth
shall issue one or more licenses to Licensee authorizing Licensee to
attach facilities to BellSouth's owned or controlled poles and to place
facilities within BellSouth's owned or controlled conduits, ducts or
rights-of-way under the terms and conditions set forth in this Section
and the Telecommunications Act of 1996.
2.2.1 Unless otherwise provided herein, authority to attach facilities to
BellSouth's owned or controlled poles, to place facilities within
BellSouth's owned or controlled conduits, ducts or rights-of-way shall
be granted only in individual licenses granted under this Agreement and
the placement or use of such facilities shall be determined in
accordance with such licenses and procedures established in this
Agreement.
2.2.2 Licensee agrees that its attachment of facilities to BellSouth's owned
or controlled poles, occupancy of BellSouth's owned or controlled
conduits, ducts or rights-of-way shall take place pursuant to the
licensing procedures set forth herein, and BellSouth agrees that it
shall not unreasonably withhold or delay issuance of such licenses.
2.3 Licenses. Subject to the terms and conditions set forth in this
Agreement, BellSouth shall issue to Licensee one or more licenses
authorizing Licensee to place or attach facilities in or to specified
poles, conduits, ducts or rights-of-way owned or controlled by
BellSouth located within this state on a first come, first served
basis. BellSouth may deny a license application if BellSouth
determines that the pole, conduit or duct space specifically requested
by Licensee is necessary to meet BellSouth's present needs, or is
licensed by BellSouth to another licensee, or is otherwise unavailable
based on engineering concerns. BellSouth shall provide written notice
to Licensee within a reasonable time specifying in detail the reasons
for denying Licensee's request. BellSouth shall have the right to
designate the particular duct(s) to be occupied, the location and
manner in which Licensee's facilities will enter and exit BellSouth's
conduit system and the specific location and manner of installation for
any associated equipment which is permitted by BellSouth to occupy the
conduit system.
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2.4 Access and Use of Rights-of-Way. BellSouth acknowledges that it is
required by the Telecommunications Act of 1996 to afford Licensee
access to and use of all associated rights-of-way to any sites where
BellSouth's owned or controlled poles, manholes, conduits, ducts or
other parts of BellSouth's owned or controlled conduit systems are
located.
2.4.1 BellSouth shall provide Licensee with access to and use of such
rights-of-way to the same extent and for the same purposes that
BellSouth may access or use such rights-of-way, including but not
limited to access for ingress, egress or other access and to construct,
utilize, maintain, modify, and remove facilities for which pole
attachment, conduit occupancy, or ROW use licenses have been issued,
provided that any agreement with a third party under which BellSouth
holds such rights expressly or impliedly grants BellSouth the right to
provide such rights to others.
2.4.2 Where BellSouth notifies Licensee that BellSouth's agreement with a
third party does not expressly or impliedly grant BellSouth the ability
to provide such access and use rights to others, upon Licensee's
request, BellSouth will use its best efforts to obtain the owner's
consent and to otherwise secure such rights for Licensee. Licensee
agrees to reimburse BellSouth for the reasonable and demonstrable
costs incurred by BellSouth in obtaining such rights for Licensee.
2.4.3 In cases where a third party agreement does not grant BellSouth the
right to provide access and use rights to others as contemplated in
2.4.1 and BellSouth, despite its best efforts, is unable to secure such
access and use rights for Licensee in accordance with 2.4.2, or, in the
case where Licensee elects not to invoke its rights under 2.4.1 or
2.4.2, Licensee shall be responsible for obtaining such permission to
access and use such rights-of-way. BellSouth shall cooperate with
Licensee in obtaining such permission and shall not prevent or delay
any third party assignment of ROW's to Licensee.
2.4.4 Where BellSouth has any ownership or rights-of-way to buildings or
building complexes, or within buildings or building complexes,
BellSouth shall offer to Licensee through a license or other
attachment:
2.4.4.1 The right to use any available space owned or controlled by BellSouth
in the building or building complex to install Licensee equipment and
facilities; and
2.4.4.2 Ingress and egress to such space.
2.4.5 Except to the extent necessary to meet the requirements of the
Telecommunications Act of 1996, neither this Agreement nor any license
granted hereunder shall constitute a conveyance or assignment of any of
either party's rights to use any public or private rights-of-way, and
nothing contained in this Agreement or in any license granted hereunder
shall be construed as conferring on one party any right to interfere
with the other party's access to any such public or private
rights-of-way.
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2.5 No Effect on BellSouth's Right to Convey Property. Nothing
contained in this Agreement or in any license issued hereunder
shall in any way affect the right of BellSouth to convey to any
other person or entity any interest in real or personal property,
including any poles, conduit or ducts to or in which Licensee has
attached or placed facilities pursuant to licenses issued under
this Agreement provided however that BellSouth shall give Licensee
reasonable advance written notice of such intent to convey.
2.6 No Effect on BellSouth's Rights to Manage its Own Facilities. This
Agreement shall not be construed as limiting or interfering with
BellSouth's rights set forth below, except to the extent expressly
provided by the provisions of this Agreement or licenses issued
hereunder or by the Telecommunications Act of 1996 or other
applicable laws, rules or regulations:
2.6.1 To locate, relocate, move, replace, modify, maintain, and operate
BellSouth's own facilities within BellSouth's conduits, ducts or
rights-of way or any of BellSouth's facilities attached to
BellSouth's poles at any time and in any reasonable manner which
BellSouth deems appropriate to serve its customers, avail itself
of new business opportunities, or otherwise meet its business
needs; or
2.6.2 To enter into new agreements or arrangements with other persons or
entities permitting them to attach or place their facilities to or
in BellSouth's poles, conduits or ducts; provided, however, that
such relocations, moves, replacements, modifications, maintenance
and operations or new agreements or arrangements shall not
substantially interfere with Licensee's pole attachment, conduit
occupancy or ROW use, rights provided by licenses Issued pursuant
to this Agreement.
2.7 No Effect on Licensee's Rights to Manage its Own Facilities. This
Agreement shall not be construed as limiting or interfering with
Licensee's rights set forth below, except to the extent expressly
provided by the provisions of this Agreement or licenses issued
hereunder or by the Telecommunications Act of 1996 or other
applicable laws, rules or regulations:
2.7.1 To locate, relocate, move, replace, modify, maintain, and operate
its own facilities within BellSouth's conduits, ducts or
rights-of-way or its facilities attached to BellSouth's poles at
any time and in any reasonable manner which Licensee deems
appropriate to serve its customers, avail itself of new business
opportunities, or otherwise meet its business needs; or
2.7.2 To enter into new agreements or arrangements with other persons
or entities permitting Licensee to attach or place its facilities
to or in such other persons' or entities' poles, conduits or
ducts, or rights-of-way; provided, however, that such relocations,
moves, replacements, modifications, maintenance and operations or
new agreements or arrangements shall not conflict with Licensee's
obligations under licenses issued pursuant to this Agreement.
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2.8 No Right to Interfere with Facilities of Others. The provisions of
this Agreement or any license issued hereunder shall not be construed
as authorizing either party to this Agreement to rearrange or
interfere in any way with any of the other party's facilities, with
the facilities of other persons or entities, or with the use of or
access to such facilities by such other party or such other persons or
entities, except to the extent expressly provided by the provisions of
this Agreement or any license issued hereunder or by the
Telecommunications Act of 1996 or other applicable laws, rules or
regulations.
2.8.1 Licensee acknowledges that the facilities of persons or entities other
than BellSouth and Licensee may be attached to or occupy BellSouth's
poles, conduits, ducts and rights-of-way.
2.8.2 BellSouth shall not attach, or give permission to any third parties to
attach facilities to, existing Licensee facilities without Licensee's
prior written consent. If BellSouth becomes aware of any such
unauthorized attachment to Licensee facilities, BellSouth shall use
its best efforts to rectify the situation as soon as practicable.
2.8.3 With respect to facilities occupied by Licensee or the subject of an
application for attachment by Licensee, BellSouth will give to
Licensee 60 days' written notice for conduit extensions or
reinforcements, 60 days' written notice for pole line extensions, 60
days' written notice, for pole replacements, and 60 days' written
notice of BellSouth's intention to construct, reconstruct, expand or
place such facilities or of BellSouth's intention not to maintain or
use any existing facility and, in the case of an existing facility
which BellSouth elects not to maintain or use, BellSouth will grant to
Licensee a right to maintain and use such facility. If an emergency or
provisions of an applicable joint use agreement require BellSouth to
construct, reconstruct, expand or replace poles, conduits or ducts
occupied by Licensee or the subject of an application for attachment
by Licensee, BellSouth will notify Licensee as soon as reasonably
practicable of such proposed construction, reconstruction, expansion
or replacement to enable Licensee, if it so desires, to request that a
pole, conduit or duct of greater height or capacity be utilized to
accommodate an anticipated facility need of Licensee.
2.8.4 At Licensee's expense, BellSouth shall remove any retired cable from
conduit systems to allow for the efficient use of conduit space within
a reasonable period of time.
2.9 Assignment of Space. Assignment of space on poles, in conduits or
ducts and within ROW's will be made pursuant to licenses granted by
BellSouth on an equal basis to BellSouth, Licensee and other
telecommunication service providers.
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3. REQUIREMENTS AND SPECIFICATIONS
3.1 Published Standards Incorporated in this Section by Reference.
Licensee agrees that its facilities shall be placed, constructed,
maintained, repaired, and removed in accordance with current (as of
the date when such work is performed) editions of the following
publications, each of which is incorporated by reference as part of
this Section:
3.1.1 The Blue Book Manual of Construction Procedures, Special Report
SR-TAP-001421, published by Bell Communications Research, Inc.
("BellCore"), and sometimes referred to as the "Blue Book";
3.1.2 The National Electrical Code (NEC); and
3.1.3 The National Electrical Safety Code (NESC).
3.2 Changes in Published Standards. Licensee agrees to rearrange its
facilities in accordance with changes in the standards published in
the publications specified in Article 3.1 of this Agreement if
required by law to do so or upon the mutual agreement of the parties.
3.3 Additional Electrical Design Specifications. Licensee agrees that, in
addition to specifications and requirements referred to in Article 3.1
above, Licensee's facilities placed in BellSouth's conduit system
shall meet all of the following electrical design specifications:
3.3.1 No facility shall be placed in BellSouth's conduit system in violation
of FCC regulations.
3.3.2 Licensee's facilities placed in BellSouth's conduit system shall not
be designed to use the earth as the sole conductor for any part of
Licensee's circuits.
3.3.3 Licensee's facilities carrying more than 50 volts AC (rms) to ground
or 135 volts DC to ground shall be enclosed in an effectively grounded
sheath or shield.
3.3.4 No coaxial cable of Licensee shall occupy a conduit system containing
BellSouth's cable unless such cable of Licensee meets the voltage
limitations of Article 820 of the National Electrical Code.
3.3.5 Licensee's coaxial cable may carry continuous DC voltages up to 1800
volts to ground where the conductor current will not exceed one-half
amperes and where such cable has two separate grounded metal sheaths
or shields and a suitable insulating jacket over the outer sheath or
shield. The power supply shall be so designed and maintained that the
total current carried over the outer sheath shall not exceed 200 micro
amperes under normal conditions. Conditions which would increase the
current over this level shall be cleared promptly.
3.3.6 Neither party shall circumvent the other party's corrosion mitigation
measures. Each party's new facilities shall be compatible with the
other party's facilities so as not to damage any facilities of the
other party by corrosion or other chemical reaction.
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3.4 Additional Physical Design Specifications. Licensee's facilities
placed in BellSouth's conduit system must meet all of the following
physical design specifications:
3.4.1 Cables bound or wrapped with cloth or having any kind of fibrous
coverings or impregnated with an adhesive material shall not be
placed in BellSouth's conduit or ducts.
3.4.2 The integrity of BellSouth's conduit system and overall safety of
BellSouth's personnel and other personnel working in BellSouth's
conduit system requires that "dielectric cable" be required when
Licensee's cable facility utilizes an alternative duct or route
that is shared in the same trench by any current carrying facility
of a power utility.
3.4.3 New construction splices in Licensee's fiber optic and twisted
pair cables shall be located in manholes, pull boxes or handholes.
3.5 Additional Specifications Applicable to Connections. The following
specifications apply to connections of Licensee's conduit to
BellSouth's conduit system:
3.5.1 Licensee will be permitted to connect its conduit or duct only at
the point of a BellSouth manhole. No attachment will be made by
entering or breaking into conduit between manholes. All necessary
work to install Licensee facilities will be performed by Licensee
or its contractor at Licensee's expense. In no event shall Licensee
or its contractor "core bore" or make any other modification to
BellSouth manhole(s) without the prior written approval of
BellSouth, which approval will not be unreasonably delayed or
withheld.
3.5.2 BellSouth may monitor, at Licensee's expense, the entrance and
exit of Licensee's facilities into BellSouth's manholes and the
placement of Licensee's facilities in BellSouth's manholes.
3.5.3 If Licensee constructs or utilizes a duct connected to
BellSouth's manhole, the duct and all connections between that duct
and BellSouth's manhole shall be sealed, to the extent practicable,
to prevent the entry of gases or liquids into BellSouth's conduit
system. If Licensee's duct enters a building, it shall also be
sealed where it enters the building and at all other locations
necessary to prevent the entry of gases and liquids from the
building into BellSouth's conduit system.
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3.6 Requirements Relating to Personnel, Equipment, Material, and
Construction Procedures Generally. Duct clearing, rodding or
modifications required to grant Licensee access to BellSouth's conduit
systems may be performed by BellSouth at Licensee's expense at charges
which represent BellSouth's actual costs. Alternatively (at Licensee's
option) such work may be performed by a contractor who demonstrates
compliance with BellSouth certification requirements, which
certification requirements shall be consistent with F.C.C. rules. The
parties acknowledge that Licensee, its contractors, and other persons
acting on Licensee's behalf will perform work for Licensee (e.g.,
splicing Licensee's facilities) within BellSouth's conduit system.
Licensee represents and warrants that neither Licensee nor any person
acting on Licensee's behalf shall permit any person to climb or work on
or in any of BellSouth's poles or to enter BellSouth's manholes or work
within BellSouth's conduit system unless such person has the training,
skill, and experience required to recognize potentially dangerous
conditions relating to pole or the conduit systems and to perform the
work safely.
3.6.1 Licensee's facilities within BellSouth's conduit system shall be
constructed, placed, rearranged, modified, and removed upon receipt of
license specified in 5. 1. However, no such license will be required
for the inspection, maintenance, repair or non-physical modifications
of Licensee's facilities.
3.6.2 "Rodding" or clearing of ducts in BellSouth's conduit system shall be
done only when specific authorization for such work has been obtained
in advance from BellSouth, which authorization shall not be
unreasonably delayed or withheld by BellSouth. The parties agree that
such rodding or clearing shall be performed according to existing
industry standards and practices. Licensee may contract with BellSouth
for performance of such work or (at Licensee's option) with a
contractor who demonstrates compliance with BellSouth certification
requirements.
3.6.3 Personnel performing work on BellSouth's or Licensee's behalf in
BellSouth's conduit system shall not climb on, step on, or otherwise
disturb the other party's or any third party's cables, air pipes,
equipment, or other facilities located in any manhole or other part of
BellSouth's conduit system.
3.6.4 Personnel performing work on BellSouth's or Licensee's behalf within
BellSouth's conduit system (including any manhole) shall, upon
completing their work, make reasonable efforts to remove all tools,
unused materials, wire clippings, cable sheathing and other materials
brought by them to the work site.
3.6.5 All of Licensee's facilities shall be firmly secured and supported in
accordance with BellCore and industry standards.
3.6.6 Licensee's facilities shall be plainly identified with Licensee's name
in each manhole with a firmly affixed permanent tag that meets
standards set by BellSouth for its own facilities.
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3.6.7 Manhole pumping and purging required in order to allow Licensee's work
operations to proceed shall be performed by a vendor approved by
BellSouth in compliance with BellSouth Practice Sec. 620-145-011BT,
"Manhole Contaminants, Water, Sediment or Debris Removal and Reporting
Procedures," and any amendments, revisions or supplements thereto and
in compliance with all regulations and standards established by the
United States Environmental Protection Agency and by any applicable
state or local environmental regulators.
3.6.8 Planks or other types of platforms shall not be installed using
cables, pipes or other equipment as a means of support. Platforms
shall be supported only by cable racks.
3.6.9 Any leak detection liquid or device used by Licensee or personnel
performing work on Licensee's facilities within BellSouth's conduit
system shall be of a type approved by BellSouth or BellCore.
3.6.10 When Licensee or personnel performing work on Licensee's behalf are
working within or in the vicinity of any part of BellSouth's poles or
conduit system which is located within, under, over, or adjacent to
streets, highways, alleys or other traveled rights-of-way, Licensee
and all personnel performing work on Licensee's behalf shall follow
procedures which Licensee deems appropriate for the protection of
persons and property. Licensee shall be responsible, at all times, for
determining and implementing the specific steps required to protect
persons and property at the site. Licensee will provide all traffic
control and warning devices required to protect pedestrian and
vehicular traffic, workers and property from danger. Licensee has sole
responsibility for the safety of all personnel performing work on
Licensee's behalf, for the safety of bystanders, and for insuring that
all operations conform to current OSHA regulations and all other
governmental rules, ordinances or statutes. BellSouth reserves the
right to suspend Licensee's activities on, in or in the vicinity of
BellSouth's poles or conduit system if, in BellSouth's reasonable
judgment, any hazardous condition arises due to the activity
(including both acts and omissions) of Licensee or any personnel
performing work on Licensee's behalf, which suspension shall cease
when the condition has been rectified.
3.6.11 Except for protective screens, no temporary cover shall be placed by
Licensee or personnel performing work on Licensee's behalf over an
open manhole unless it is at least four feet above the surface level
of the manhole opening.
3.6.12 Smoking or the use of any open flame is prohibited in BellSouth's
manholes, in any other portion of BellSouth's conduit system, or
within 10 feet of any open manhole entrance; provided that this
provision will not prohibit the use of spark producing tools such as
electric drills, fusion splicers, etc.
3.6.13 Artificial lighting, when required, will be provided by Licensee. Only
explosion-proof lighting fixtures shall be used.
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3.6.14 Neither Licensee nor personnel performing work on Licensee's behalf
shall allow any combustible gas, vapor, liquid, or material to
accumulate in BellSouth's conduit system (including any manhole)
during work operations performed within or in the vicinity of
BellSouth's conduit system.
3.6.15 Licensee will abide by any laws, regulations or ordinances regarding
the use of spark producing tools, equipment or devices in BellSouth's
manholes, in any other portions of BellSouth's conduit system, or
within 10 feet of any open manhole opening. This includes, but is not
limited to, such tools as electric drills and hammers, meggers,
breakdown sets, induction sets, and the like.
3.7 Opening of Manholes. The following requirements apply to the opening
of BellSouth's manholes and the authority of BellSouth personnel
present when work on Licensee's behalf is being performed within or in
the vicinity of BellSouth's conduit system.
3.7.1 BellSouth's manholes shall be opened only as permitted by BellSouth's
authorized employees or agents, which permission shall not be
unreasonably denied or delayed.
3.7.2 Licensee shall notify BellSouth forty-eight (48) hours in advance of
any routine work operation requiring entry into any of BellSouth's
manholes.
3.7.3 Licensee shall be responsible for obtaining any necessary
authorization from appropriate authorities to open manholes for
conduit work operations therein.
3.7.4 BellSouth's authorized employee or agent shall not direct or control
the conduct of Licensee's work at the work site. The presence of
BellSouth's authorized employee or agent at the work site shall not
relieve Licensee or personnel performing work on Licensee's behalf of
their responsibility to conduct all work operations within BellSouth's
conduit system in a safe and workmanlike manner.
3.7.5 Although BellSouth's authorized employee or agent shall not direct or
control the conduct of Licensee's work at the work site, BellSouth's
employee or agent shall have the authority to suspend Licensee's work
operations within BellSouth's conduit system if, in the reasonable
discretion of such BellSouth employee or agent, it appears that any
hazardous conditions arise or any unsafe practices are being followed
by Licensee or personnel performing work on Licensee's behalf.
3.8 OSHA Compliance: Notice to BellSouth of Unsafe Conditions. Licensee
agrees that:
3.8.1 Its facilities shall be constructed, placed, maintained, repaired, and
removed in accordance with the Occupational Safety and Health Act
(OSHA) and all rules and regulations promulgated thereunder;
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3.8.2 All persons acting on Licensee's behalf, including but not limited to
Licensee's employees, agents, contractors, and subcontractors shall,
when working on or within BellSouth's poles or conduit system, comply
with OSHA and all rules and regulations thereunder;
3.8.3 Licensee shall establish appropriate procedures and controls to assure
compliance with all requirements of this section; and
3.8.4 Licensee (and any person acting on Licensee's behalf) may report
unsafe conditions on, in or in the vicinity of BellSouth's poles or
conduit system to BellSouth.
3.9 Compliance with Environmental Laws and Regulations. Licensee
acknowledges that, from time to time, environmental contaminants may
enter BellSouth's conduit system and accumulate in manholes or other
conduit facilities and that certain conduits (transite) are
constructed with asbestos-containing materials. If BellSouth has
knowledge of the presence of such contaminants in a conduit for which
Licensee has applied for or holds a license, BellSouth will promptly
notify Licensee of such fact.
Notwithstanding any of BellSouth's notification requirements in this
Attachment, Licensee acknowledges that some of BellSouth's conduit is
fabricated from asbestos-containing materials. Such conduit is
generally marked with a designation of "C Fiber Cement Conduit,"
"Transite," or "Johns-Manville." Until proven otherwise, Licensee will
presume that all conduit not fabricated of plastic, tile, or wood is
asbestos-containing and will handle it pursuant to all applicable
regulations relating to worker safety and protection of the
environment. BellSouth makes no representations to Licensee or
personnel performing work on Licensee's behalf that BellSouth's
conduit system or any specific portions thereof will be free from
environmental contaminants at any particular time. The acknowledgments
and representations set forth in the two preceding sentences are not
intended to relieve BellSouth of any liability which it would
otherwise have under applicable law for the presence of environmental
contaminants in its conduit facilities. Licensee agrees to comply with
the following provisions relating to compliance with environmental
laws and regulations:
3.9.1 Licensee's facilities shall be constructed, placed, maintained,
repaired, and removed in accordance with all applicable federal,
state, and local environmental statutes, ordinances, rules,
regulations, and other laws, including but not limited to the Resource
Conservation and Recovery Act (42 U.S.C.ss.ss.9601 et. seq.), the
Toxic Substance Control Act (15 U.S.C.ss.ss.2601-2629), the Clean
Water Act (33 U.S.C.ss.ss.1251 et. seq.), and the Safe Drinking Water
Act (42 U.S.C.ss.ss. 300f- 00j).
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3.9.2 All persons acting on Licensee's behalf, including but not limited to
Licensee's employees, agents, contractors, and subcontractors, shall,
when working on, within or in the vicinity of BellSouth's poles or
conduit system, comply with all applicable federal, state, and local
environmental laws, including but not limited to all environmental
statutes, ordinances, rules, and regulations.
3.9.3 Licensee shall establish appropriate procedures and controls to assure
compliance with all requirements of this section. BellSouth will be
afforded a reasonable opportunity to review such procedures and
controls and provide comments that will be reasonably considered in
advance of their implementation. Review and comment by BellSouth
pursuant to this section will be provided in a timely manner.
3.9.4 Licensee and all personnel performing work on Licensee's behalf shall
comply with such standards and practices as BellSouth and Licensee may
from time to time mutually agree to adopt to comply with environmental
laws and regulations including, without limitation, BellSouth Practice
Sec. 620-145-011 BT, "Manhole Contaminants, Water, Sediment or Debris
Removal and Reporting Procedures". Pursuant to this practice, neither
Licensee nor BellSouth nor personnel performing work on either party's
behalf shall discharge water or any other substance from any BellSouth
manhole or other conduit facility onto public or private property,
including any storm water drainage system, without first testing such
water or substance for contaminants in accordance with mutually agreed
standards and practices and determining that such discharge would not
violate any environmental law, create any environmental risk or
hazard, or damage the property of any person. No such waste material
shall be deposited on BellSouth premises for storage or disposal.
3.10 Compliance with Other Governmental Requirements. Licensee agrees that
its facilities attached to BellSouth's facilities shall be
constructed, placed, maintained, and removed in accordance with the
ordinances, rules, and regulations of any governing body having
jurisdiction of the subject matter. Licensee shall comply with all
statutes, ordinances, rules, regulations and other laws requiring the
marking and lighting of aerial wires, cables and other structures to
ensure that such wires, cables and structures are not a hazard to
aeronautical navigation. Licensee shall establish appropriate
procedures and controls to assure such compliance by all persons
acting on Licensee's behalf, including but not limited to, Licensee's
employees, agents, contractors, and subcontractors.
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3.11 Differences in Standards or Specifications. To the extent that
there may be differences in any applicable standards or
specifications referred to in this Article 3, the most stringent
standard or specification shall apply.
3.12 Licensee Solely Responsible for the Condition of Its Facilities.
Licensee shall be responsible at all times for the condition of
its facilities and its compliance with the requirements,
specifications, rules, regulations, ordinances, and laws specified
above. In this regard, BellSouth shall have no duty to Licensee to
inspect or monitor the condition of Licensee's facilities
(including but not limited to splices and other facilities
connections) located within BellSouth's conduit and ducts or any
attachment of Licensee's facilities to BellSouth's poles, anchors,
anchor/guy strands or other pole facilities. BellSouth may,
however, conduct such inspections and audits of its poles and
conduit system as BellSouth determines reasonable or necessary.
Such inspection and audits shall be conducted at BellSouth's
expense with the exception of (1) follow-up inspection to confirm
remedial action after an observed Licensee violation of the
requirements of this Agreement; and (2) inspection of Licensee
facilities in compliance with a specific mandate of appropriate
governmental authority for which inspections the cost shall be
borne by Licensee. Either party may audit the other party's
compliance with the terms of this Section. Observed safety hazards
or imminent facility failure conditions of another party shall be
reported to the affected party where such party can be readily
identified.
3.13 Efficient use of Conduit. BellSouth will install inner-ducts to
increase duct space in existing conduit as facilities permit. The
full complement of inner-ducts will be installed which can be
accommodated under sound engineering principles. The number of
inner-ducts which can reasonably be installed will be determined
by BellSouth.
4. ADDITIONAL LEGAL REQUIREMENTS
4.1 Third Party Property Owners. Licenses granted under this Section
authorize Licensee to place facilities in, or attach facilities
to, poles, conduits and ducts owned or controlled by BellSouth but
do not affect the rights of landowners to control terms and
conditions of access to their property.
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4.1.1 Licensee agrees that neither Licensee nor any persons acting on
Licensee's behalf, including but not limited to Licensee's employees,
agents, contractors, and subcontractors, shall engage in any conduct
which damages public or private property in the vicinity of
BellSouth's poles or conduit system, interferes in any way with the
use or enjoyment of public or private property except as expressly
permitted by the owner of such property, or creates a hazard or
nuisance on such property (including, but not limited to, a hazard or
nuisance resulting from any abandonment or failure to remove
Licensee's facilities or any construction debris from the property,
failure to erect warning signs or barricades as may be necessary to
give notice to others of unsafe conditions on the premises while work
performed on Licensee's behalf is in progress, or failure to restore
the property to a safe condition after such work has been completed).
4.2 Required Permits, Certificates and Licenses. Licensee shall be
responsible for obtaining any building permits or certificates from
governmental authorities necessary to construct, operate, maintain and
remove its facilities on public or private property.
4.2.1 Licensee shall not attach or place its facilities to or in BellSouth's
poles, conduit or duct located on any property for which it or
BellSouth has not first obtained all required authorizations.
4.2.2 BellSouth shall have the right to request evidence that all
appropriate authorizations have been obtained. However, such request
shall not delay BellSouth's prelicense survey work.
4.3 Lawful Purposes. All facilities placed by Licensee in BellSouth's
conduit and ducts or on BellSouth's poles, anchors or anchor/guy
strands must serve a lawful purpose and the uses made of Licensee's
facilities must comply with all applicable federal, state, and local
laws and with all federal, state, and local regulatory rules,
regulations, and requirements. In this regard, Licensee shall not
utilize any facilities occupying or attached to BellSouth's conduits,
ducts or poles for the purpose of providing any services which it is
not authorized by law to provide or for the purpose of enabling any
other person or entity to provide any such services.
5. FACILITIES AND LICENSES
5.1 Licenses Required. Before placing any facilities in BellSouth's
conduits or ducts or attaching any facilities to BellSouth's poles,
anchors or anchor/guy strands, Licensee must first apply for and
receive a written license from BellSouth. BellSouth shall not
unreasonably deny or delay issuance of any license.
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5.2 Provision of Records and Information to Licensee. In order to obtain
information regarding facilities, Licensee shall make a written
request to BellSouth, identifying with reasonable specificity the
geographic area for which facilities are required, the types and
quantities of the required facilities and the required in-service
date. In response to such request, BellSouth shall provide Licensee
with information regarding the types, quantity and location (which may
be provided by provision of route maps) and availability of BellSouth
poles, conduit and right-of way located within the geographic area
specified by Licensee. Provision of information under the terms of
this section shall include the right of Licensee employees or agents
to inspect and copy engineering records or drawings which pertain to
those facilities within the geographic area identified in Licensee's
request. Such inspection and copying shall be done at a time and place
mutually agreed upon by the parties. See Appendix II for records
location centers.
5.3 No Warranty of Record Information. Licensee acknowledges that records
and information provided by BellSouth pursuant to paragraph 5.2 may
not reflect field conditions and that physical inspection is necessary
to verify presence and condition of outside plant facilities and right
of way. In providing such records and information, BellSouth assumes
no liability to Licensee or any third party for errors/omissions
contained therein.
5.4 Determination of Availability. BellSouth shall provide pole, conduit
and right-of way availability information in response to a request
from Licensee which identifies with reasonable specificity the
facilities for which such information is desired. Licensee may elect
to be present at any field based survey of facilities identified
pursuant to this paragraph and BellSouth shall provide Licensee at
least forty-eight (48) hours notice prior to initiating such field
survey. Licensee employees or agents shall be permitted to enter
BellSouth manholes and inspect such structures to confirm usability
and/or evaluate condition of the structure(s) with at least
forty-eight (48) hours notice to BellSouth, with a BellSouth
representative present and at Licensee's expense.
6. MAKE-READY WORK
6.1 Work Performed by BellSouth. If performed by BellSouth, make-ready
work to accommodate Licensee's facilities shall be included in the
normal work load schedule of BellSouth with construction
responsibilities in the geographic areas where the relevant poles or
conduit systems are located and shall not be entitled to priority,
advancement, or preference over other work to be performed by
BellSouth in the ordinary course of BellSouth's business.
6.1.1 If Licensee desires make-ready work to be performed on an expedited
basis and BellSouth agrees to perform the work on such a basis,
BellSouth shall recalculate the estimated make-ready charges. If
Licensee accepts BellSouth's offer, Licensee shall pay such additional
charges.
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6.2 All charges for make-ready work performed by BellSouth are payable in
advance, with the amount of any such advance payment to be due within
sixty (60) days after receipt of an invoice from BellSouth.
6.3 Work Performed by Certified Contractor. In lieu of obtaining
performance of make-ready work by BellSouth, Licensee at its option may
arrange for the performance of such work by a contractor certified by
BellSouth to work on or in its facilities. Certification shall be
granted based upon reasonable and customary criteria employed by
BellSouth in the selection of its own contract labor. Notwithstanding
any other provisions of this Section, Licensee may not employ a
contractor to accomplish make-read work if BellSouth is likewise
precluded from contractor selection under the terms of an applicable
joint use agreement. In accordance with section 3.6.7, all manhole
pumping and purging shall be performed by a vendor approved by
BellSouth.
6.4 Completion of Make-Ready Work. BellSouth will issue a license to
Licensee at the time all make-ready work necessary to Licensee's
attachment or occupancy has been completed.
7. APPLICATION FORM AND FEES
7.1 Application Process. To apply for a license under this Section,
Licensee shall submit to BellSouth two signed copies of an Application
and Conduit Occupancy License form or an Application and Pole
Attachment License form. BellSouth will process license applications in
the order in which they are received; provided, however, that when
Licensee has multiple applications on file with BellSouth, Licensee may
designate its desired priority of completion of prelicense surveys and
make-ready work with respect to all such applications.
7.1.1 Each application for a license under this Section shall specify the
proposed route of Licensee's facilities and identify the conduits and
ducts or poles and pole facilities along the proposed route in which
Licensee desires to place or attach its facilities, and describe the
physical size, weight and jacket material of the cable which Licensee
desires to place in each conduit or duct or the number and type of
cables, apparatus enclosures and other facilities which Licensee
desires to attach to each pole.
7.1.2 Each application for a license under this Section shall be accompanied
by a proposed (or estimated) construction schedule containing the
information specified below in 10. 1 of this Agreement, and an
indication of whether Licensee will, at its option, perform its own
make-ready work.
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7.2 Multiple Cables, Multiple Services, Lashing or Placing Additional
Cables, and Replacement of Facilities. Licensee may include multiple cables in a
single license application and multiple services (e.g., CATV and non-CATV
services) may be provided by Licensee in the same cable sheath. Licensee's
lashing additional cable to existing facilities and placing additional cables in
conduits or ducts already occupied by Licensee's facilities shall be permitted,
and no additional fees will be applied; provided, however, that if Licensee
desires to lash additional cable to existing facilities of a third party
Licensee shall provide BellSouth with reasonable notice, and shall obtain
written permission from the owner of the existing facilities. If BellSouth
determines that the requested lashing would violate safety or engineering
requirements, BellSouth shall provide written notice to Licensee within a
reasonable time specifying in detail BellSouth's findings. If Licensee desires
to place additional cables in conduits or ducts which are already occupied, or
to replace existing facilities with new facilities substantially different from
those described in licenses in effect, Licensee must apply for and acquire a new
license specifically describing the physical size, weight and jacket material of
the cable to be placed in BellSouth's conduits and ducts or the physical size,
weight, and jacket type of cables and the size and weight of apparatus
enclosures and other facilities to be attached to BellSouth poles.
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7.3 Each party hereby designates the employees named below as their
single point of contact for any and all purposes of this Section, including, but
not limited to, processing licenses and applications and providing records and
information. Each party may at any time designate a new point of contact by
giving written notice of such change.
<TABLE>
<CAPTION>
Notices Billing Address
------- ---------------
<S> <C> <C>
To Licensee as follows:
Contact Ancel Hamilton Sheila Champion
Title VP Operations Attention: Accounts Payable
Company KNOLOGY Holdings, Inc. KNOLOGY Holdings, Inc.
Address 1241 O.G. Skinner Drive 1241 O.G. Skinner Drive
Address
City, State, and Zip Code West Point, GA. 31833 West Point, GA. 31833
Telephone (706) 645-3954 (706) 645-3917
Facsimile (706) 645-1446
with a copy to: Donna Skies
(706) 645-3991
and to Licensor as follows:
Contact John T. Chaucer
Title Specialist
Company BellSouth Telecommunications, Inc.
Address North W3D2
Address 3535 Colonnade Parkway
City, State, and Zip Code Birmingham, AL 35243
Telephone (205) 977-2631
Facsimile (205) 977-7997
</TABLE>
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8. PROCESSING OF APPLICATIONS (INCLUDING PRELICENSE SURVEYS AND FIELD
INSPECTIONS)
8.1 Licensee's Priorities. When Licensee has multiple applications on
file with BellSouth, Licensee shall designate its desired priority
of completion of prelicense surveys and make-ready work with
respect to all such applications.
8.2 Prelicense Survey. After Licensee has submitted its written
application for a license, a prelicense survey (including a field
inspection) will be performed by either party, in the company of a
representative of the other party as mutually agreed, to determine
whether BellSouth's poles, anchors and anchor/guy strands, or
conduit system, in their present condition, can accommodate
Licensee's facilities, without substantially interfering with the
ability of BellSouth or any other authorized person or entity to
use or access the pole, anchor or anchor/guy strand or any portion
of BellSouth's conduit system or facilities attached to BellSouth's
pole or placed within or connected to BellSouth's conduit system.
If Licensee gives its prior written consent in writing, the
determination of duct availability may include the "rodding" of
ducts at Licensee's expense.
8.2.1 The purpose of the prelicense survey is to determine whether
Licensee's proposed attachments to BellSouth's poles or occupancy
of BellSouth's conduit and ducts will substantially interfere with
use of BellSouth's facilities by BellSouth and others with
facilities occupying, connected or attached to BellSouth's pole or
conduit system; and to provide information to Licensee for its
determination of whether the pole, anchor, anchor/guy strand,
conduit, duct, or right-of-way is suitable for its use.
8.2.2 Based on information provided by BellSouth, Licensee shall
determine whether BellSouth's pole, anchor, anchor/guy strand,
conduit and duct facilities are suitable to meet Licensee's needs.
8.2.3 BellSouth may not unreasonably refuse to continue to process an
application based on BellSouth's determination that Licensee's
proposed use of BellSouth' s facilities will not be in compliance
with applicable requirements, specifications, rules, regulations,
ordinances, and laws. Licensee shall be responsible for making its
own, independent determination that its use of such facilities will
be in compliance with such requirements, specifications, rules,
regulations, ordinances and laws. Licensee acknowledges that
BellSouth is not explicitly or implicitly warranting to Licensee
that Licensee's proposed use of BellSouth's facilities will be in
compliance with applicable requirements, specifications, rules,
regulations, ordinances, and laws.
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8.3 Administrative Processing. The administrative processing portion
of the prelicense survey (which includes without limitation processing
the application, preparing make-ready work orders, notifying joint
users and other persons and entities of work requirements and
schedules, coordinating the relocation/rearrangement of BellSouth
and/or other licensed facilities) will be performed by BellSouth at
Licensee's expense. Anything to the contrary herein notwithstanding,
BellSouth shall bear no responsibility for the relocation,
rearrangement or removal of facilities used for the transmission or
distribution of electric power.
9. ISSUANCE OF LICENSES
9.1 Obligation to Issue Licenses. BellSouth shall issue a license to
Licensee pursuant to this Article 9. BellSouth and Licensee
acknowledge that each application for a license shall be evaluated on
an individual basis. Nothing contained in this section shall be
construed as abridging any independent pole attachment rights or
conduit or duct access rights which Licensee may have under the
provisions of any applicable federal or state laws or regulations
governing access to BellSouth's poles, conduits and ducts, to the
extent the same are not inconsistent with-the Telecommunications Act
of 1996. Each license issued hereunder shall be for an indefinite
term, subject to Licensee's compliance with the provisions applicable
to such license and further subject to Licensee's right to terminate
such license at any time for any reason upon at least thirty (30)
days' prior written notice.
9.2 Multiple Applications. Licensee acknowledges that multiple parties
including BellSouth may seek to place their facilities in BellSouth's
conduit and ducts at or about the same time, that the make-ready work
required to prepare BellSouth's facilities to accommodate multiple
applicants may differ from the make-ready work required to accommodate
a single applicant, that issues relating to the proper apportionment
of costs arise in multi-applicant situations that do not arise in
single-applicant situations, and that cooperation and negotiations
between all applicants and BellSouth may be necessary to resolve
disputes involving multiple applications for permission to place
facilities in/on the same pole, conduit, duct, or right-of-way.
9.2.1 All applications will be processed on a first-come, first-served
basis.
9.3 Agreement to Pay for All Make-Ready Work Completed. Licensee's
submission of written authorization for make-ready work shall also
constitute Licensee's agreement to pay additional cost-based charges,
if any, for completed make-ready work.
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<PAGE> 27
9.4 Payments to Others for Expenses Incurred in Transferring or Arranging
Their Facilities. Licensee shall make arrangements with the owners of
other facilities located in or connected to BellSouth's conduit system
or attached to BellSouth's poles, anchors or anchor/guy strands
regarding reimbursement for any expenses incurred by them in
transferring or rearranging their facilities to accommodate the
placement or attachment of Licensee's facilities in or to BellSouth's
structures.
9.5 Make-Ready Work on an Expedited Basis. If Licensee is willing to
authorize BellSouth to perform make-ready work on an expedited basis,
and if BellSouth agrees to perform the work on such a basis, BellSouth
shall recalculate the estimated make-ready charges. If Licensee accepts
BellSouth's offer, Licensee shall pay such additional charges, if any.
9.6 License. When Licensee's application for a pole attachment or conduit
occupancy license is approved, and all required make-ready work
completed, BellSouth will execute and return a signed authorization to
Licensee, as appropriate, authorizing Licensee to attach or place the
specified facilities on BellSouth's poles or in BellSouth's conduit or
ducts.
9.6.1 Each license issued under this Section shall authorize Licensee to
attach to BellSouth's poles or place or maintain in BellSouth's conduit
or ducts only those facilities specifically described in the license,
and no others.
9.6.2 Except as expressly stated to the contrary in individual licenses
issued hereunder, each license issued pursuant to this Section shall
incorporate all terms and conditions of this Section whether or not
such terms or conditions are expressly incorporated by reference on the
face of the license itself.
10. CONSTRUCTION OF LICENSEE'S FACILITIES
10.1 Construction Schedule. Licensee shall submit with Licensee's license
application a proposed or estimated construction schedule. Promptly
after the issuance of a license permitting Licensee to attach
facilities to BellSouth's poles or place facilities in BellSouth's
conduit or ducts, Licensee shall provide BellSouth with an updated
construction schedule and shall thereafter keep BellSouth informed of
significant anticipated changes in the construction schedule.
Construction schedules required by this Section shall include, at a
minimum, the following information:
10.1.1 The name, title, business address, and business telephone number of the
manager responsible for construction of the facilities;
10.1.2 The names of each contractor and subcontractor which will be involved
in the construction activities;
10.1.3 The estimated dates when construction will begin and end; and
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<PAGE> 28
10.1.4 The approximate dates when Licensee or persons acting on Licensee's
behalf will be performing construction work in connection with the
placement of Licensee's facilities in BellSouth's conduit or ducts.
10.2 Additional Pre-construction Procedures for Facilities Placed in Conduit
System. The following procedures shall apply before Licensee places
facilities in BellSouth's conduit system:
10.2.1 Licensee shall give written notice of the type of facilities which are
to be placed; and
10.2.2 BellSouth shall designate the particular duct or ducts or inner ducts
(if available) to be occupied by Licensee's facilities, the location
and manner in which Licensee's facilities will enter and exit
BellSouth's conduit system, and the specific location and manner of
installation of any associated equipment which is permitted by
BellSouth to occupy the conduit system. Licensee may not occupy a duct
other than the specified duct without the express written consent of
BellSouth. BellSouth shall provide to Licensee space in manholes for
racking and storage of up to fifty (50) feet of cable, provided space
is available.
10.3 BellSouth Not Responsible for Constructing or Placing Facilities.
BellSouth shall have no obligation to construct any facilities for
Licensee or to attach Licensee's facilities to, or place Licensee's
facilities in, BellSouth's poles or conduit system, except as may be
necessary to facilitate the interconnection of unbundled network
elements or except to the extent expressly provided in this Section ,
any license issued hereunder, or by the Telecommunications Act of 1996
or any other applicable law.
10.4 Licensee Responsible for Constructing, Attaching and Placing
Facilities. Except where otherwise mutually agreed by Licensee and
BellSouth, Licensee shall be responsible for constructing its own
facilities and attaching those facilities to, or placing them in
BellSouth's poles, conduit or ducts at Licensee's sole cost and
expense. Licensee shall be solely responsible for paying all persons
and entities who provide materials, labor, access to real or personal
property, or other goods or services in connection with the
construction and placement of Licensee's facilities and for directing
the activities of all persons acting on Licensee's behalf while they
are physically present on BellSouth's pole, in any part of BellSouth's
conduit system or in the vicinity of BellSouth's poles or conduit
system.
10.5 Compliance with Applicable Standards, Health and Safety Requirements,
and Other Legal Requirements. Licensee shall construct its facilities
in accordance with the provisions of this Section and all licenses
issued hereunder.
10.5.1 Licensee shall construct, attach and place its facilities in compliance
with all Requirements and Specifications set forth above in this
Agreement.
10.5.2 Licensee shall satisfy all Legal Requirements set forth above in this
Agreement.
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<PAGE> 29
10.5.3 Licensee shall not permit any person acting on Licensee's behalf to
perform any work on BellSouth's poles or within BellSouth's conduit
system without first verifying, to the extent practicable, on each date
when such work is to be performed, that the condition of the pole or
conduit system is suitable for the work to be performed. If Licensee or
any person working on Licensee's behalf determines that the condition
of the pole or conduit system is not suitable for the work to be
performed, Licensee shall notify BellSouth of the condition of the pole
or conduit system in question and shall not proceed with construction
activities until Licensee is satisfied that the work can be safely
performed.
10.6 Construction Notices. If requested to do so, Licensee shall provide
BellSouth with information to reasonably assure BellSouth that
construction has been performed in accordance with all applicable
standards and requirements.
10.7 Points for Attachment. BellSouth shall specify, using the same
selection criteria it uses for its own operating company, the point of
attachment of each pole or anchor to be occupied by Licensee's
facilities. When the facilities of more than one applicant are
involved, BellSouth will attempt, to the extent practicable, to
designate the same relative position on each pole or anchor for each
applicant's facilities.
10.8 Manhole and Conduit Break-Outs. Licensee shall be permitted to add
conduit ports to BellSouth manholes when existing conduits do not
provide the pathway connectivity needed by Licensee; provided the
structural integrity of the manhole is maintained, and sound
engineering judgment is employed.
11. USE AND ROUTINE MAINTENANCE OF LICENSEE'S FACILITIES
11.1 Use of Licensee's Facilities. Each license granted under this Section
authorizes Licensee to have access to Licensee's facilities on or in
BellSouth's poles, conduits and ducts as needed for the purpose of
serving Licensee's customers, including, but not limited to, powering
electronics, monitoring facilities, or transporting signaling.
11.2 Routine Maintenance of Licensee's Facilities. Each license granted
under this Section authorizes Licensee to engage in routine maintenance
of Licensee's facilities located on or in BellSouth's poles, conduits,
ducts and ROW pursuant to such license. Licensee shall give reasonable
notice to the affected public authority or private landowner as
appropriate before commencing the construction or installation of its
attachments or making any material alterations thereto. Licensee shall
give reasonable notice to BellSouth before performing any work, whether
or not of a routine nature, in BellSouth's conduit system.
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<PAGE> 30
11.3 Licensee Responsible for Maintenance of Licensee's Facilities.
Licensee shall maintain its facilities in accordance with the
provisions of this Section (including but not limited to all
requirements set forth above in this Agreement) and all licenses issued
hereunder. Licensee shall be solely responsible for paying all persons
and entities who provide materials, labor, access to real or personal
property, or other goods or services in connection with the maintenance
of Licensee's facilities and for directing the activities of all
persons acting on Licensee's behalf while they are physically present
on BellSouth's poles, within BellSouth's conduit system or in the
immediate vicinity of such poles or conduit system.
11.4 BellSouth Not Responsible for Maintaining Licensee's Facilities.
BellSouth shall have no obligation to maintain any facilities which
Licensee has attached or connected to, or placed in, BellSouth's poles,
conduits, ducts or any portion of BellSouth's conduit system, except to
the extent expressly provided by the provisions of this Section or any
license issued hereunder, or by the Telecommunications Act of 1996 or
other applicable laws, rules or regulations.
11.5 Information Concerning the Maintenance of Licensee's Facilities.
Promptly after the issuance of a license permitting Licensee to attach
facilities to, or place facilities in BellSouth's poles, conduits or
ducts, Licensee shall provide BellSouth with the name, title, business
address, and business telephone number of the manager responsible for
routine maintenance of Licensee's facilities, and shall thereafter
notify BellSouth of changes to such information. The manager
responsible for routine maintenance of Licensee's facilities shall, on
BellSouth's request, identify any contractor, subcontractor, or other
person performing maintenance activities on Licensee's behalf at a
specified site and shall, on BellSouth's request, provide such
additional documentation relating to the maintenance of Licensee's
facilities as reasonably necessary to demonstrate that Licensee and all
persons acting on Licensee's behalf are complying with the requirements
of this Section and licenses issued hereunder.
11.6 Identification of Personnel Authorized to Have Access to
Licensee's Facilities. All personnel authorized to have access to
Licensee's facilities shall, while working on BellSouth's poles, in its
conduit system or ducts or in the vicinity of such poles, ducts or
conduit systems, carry with them suitable identification and shall,
upon the request of any BellSouth employee, produce such
identification.
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12. MODIFICATION AND REPLACEMENT OF LICENSEE'S FACILITIES
12.1 Notification of Planned Modification or Replacement of Facilities.
Licensee shall, when practicable, notify BellSouth in writing at least
60 days before adding to, relocating, replacing or otherwise modifying
its facilities attached to a BellSouth pole, anchor or anchor/guy
strand or located in any BellSouth conduit or duct. The notice shall
contain sufficient information to enable BellSouth to determine whether
the proposed addition, relocation, replacement, or modification is
permitted under Licensee's present license or requires a new or amended
license.
12.2 New or Amended License Required. A new or amended license will be
required if the proposed addition, relocation, replacement, or
modification:
12.2.1 Requires that Licensee use additional space on BellSouth's poles or in
its conduits or ducts (including but not limited to any additional
ducts, inner ducts, or substantial space in any handhole or manhole) on
either a temporary or permanent basis; or
12.2.2 Results in the size or location of Licensee's facilities on BellSouth's
poles or in its conduit or ducts being appreciably different from those
described and authorized in Licensee's present license (e.g. different
duct or size increase causing a need to re-calculate storm loadings,
guying, or pole class).
13. REARRANGEMENT OF FACILITIES AT THE REQUEST OF ANOTHER
13.1 Make-Ready Work at the Request of Licensee. If, prior to the issuance
of a license, Licensee determines that any pole, anchor, anchor/guy
strand, conduit or duct is inadequate to accommodate Licensee's
proposed pole attachment or conduit occupancy or that it will be
necessary or desirable for BellSouth or any other person or entity to
rearrange existing facilities or structures to accommodate Licensee,
Licensee shall promptly advise BellSouth of the make-ready work it
believes necessary to enable the accommodation of Licensee's
facilities.
13.1.1 BellSouth shall determine, in the exercise of sound engineering
judgment, whether or what make-ready work is necessary or possible. In
determining whether make-ready work is necessary or what make-ready
work is necessary, BellSouth shall endeavor to minimize its costs to
Licensee. If it is determined that such make-ready work is required,
BellSouth shall provide Licensee with the estimated costs for
make-ready work and a Make Ready Due Date.
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13.1.2 Licensee shall be solely responsible for negotiating with
persons or entities other than BellSouth for the rearrangement of
such persons' or entities' facilities or structures and, except
where such rearrangement is for the benefit of BellSouth and/or
other licensees as well as Licensee, shall be solely responsible
for paying all charges attributable to the rearrangement of such
facilities; provided, however, that if facilities rearrangements
require new licenses from BellSouth, BellSouth shall issue such
licenses in conjunction with the issuance of the applied-for
license to Licensee.
13.2 Rearrangement of Licensee's Facilities at BellSouth's Request.
Licensee acknowledges that, from time to time, it may be necessary
or desirable for BellSouth to change out poles, relocate,
reconstruct, or modify portions of its conduit system or rearrange
facilities contained therein or connected thereto and that such
changes may be necessitated by BellSouth's business needs or
authorized application of another entity seeking access to
BellSouth's poles or conduit systems. Licensee agrees that
Licensee will, upon BellSouth's request, and at BellSouth's
expense, but at no cost to Licensee, participate with BellSouth
(and other licensees) in the relocation, reconstruction, or
modification of BellSouth's conduit system or facilities
rearrangement. Licensee acknowledges that, from time to time, it
may be necessary or desirable for BellSouth to change out poles,
relocate, reconstruct, or modify portions of its conduit system or
rearrange facilities contained therein or connected thereto as a
result of an order by a municipality or other governmental
authority. Licensee shall, upon BellSouth's request, participate
with BellSouth (and other licensees) in the relocation,
reconstruction, or modification of BellSouth's conduit system or
facilities rearrangement and pay its proportionate share of any
costs of such relocation, reconstruction, or modification that are
not reimbursed by such municipality or governmental authority.
13.2.1 Licensee shall make all rearrangements of its facilities within
such period of time as is jointly deemed reasonable by the
parties based on the amount of rearrangements necessary and a
desire to minimize chances for service interruption or
facility-based service denial to a Licensee customer.
13.2.2 If Licensee fails to make the required rearrangements within the
time prescribed or within such extended periods of time as may be
granted by BellSouth in writing, BellSouth may perform such
rearrangements with written notice to Licensee, and Licensee shall
reimburse BellSouth for actual costs and expenses incurred by
BellSouth in connection with the rearrangement of Licensee's
facilities; provided, however, that nothing contained in this
Section or any license issued hereunder shall be construed as
requiring Licensee to bear any expenses which, under the
Telecommunications Act of 1996 or other applicable federal or
state laws or regulations, are to be allocated to persons or
entities other than Licensee; and provided further, however, that
Licensee shall have no responsibility for rearrangement costs and
expenses relating to rearrangements performed for the purpose of
meeting BellSouth's business needs.
29
<PAGE> 33
14. EMERGENCY REPAIRS AND POLE REPLACEMENTS
14.1 Licensee Responsible for Emergency Repairs to its Own Facilities. In
general, Licensee shall be responsible for making emergency repairs to
its own facilities and for formulating appropriate plans and practices
which will enable it to make such emergency repairs. BellSouth shall be
under no obligation to perform any repair or service restoration work
of any kind with respect to Licensee's facilities.
15. INSPECTION BY BELLSOUTH OF LICENSEE'S FACILITIES
15.1 BellSouth's Right to Make Periodic or Spot Inspections. BellSouth
shall have the right to make periodic or spot inspections at any time
of any part of Licensee's facilities attached to BellSouth's poles,
anchors or anchor/guy strands or occupying any BellSouth conduit or
duct for the limited purpose of determining whether Licensee's
facilities are in compliance with the terms of this Section and
licenses hereunder; provided that such inspections must be non-invasive
(e.g., no splice cases may be opened).
15.1.1 BellSouth will give Licensee advance written notice of such
inspections, and Licensee shall have the right to have a representative
attend such inspections, except in those instances where safety
considerations justify the need for such inspection without the delay
of waiting until written notice has been forwarded to Licensee.
15.1.2 Such inspections shall be conducted at BellSouth's expense;
provided, however, that Licensee shall bear the cost of inspections as
delineated in 3.12.
15.2 No Duty to Licensee. Neither the act of inspection by BellSouth of
Licensee's facilities nor any failure to inspect such facilities shall
operate to impose on BellSouth any liability of any kind whatsoever or
to relieve Licensee of any responsibility, obligations or liability
under this Section or otherwise existing.
30
<PAGE> 34
16. NOTICE OF NONCOMPLIANCE
16.1 Notice of Noncompliance. If, at any time, BellSouth determines that
Licensee's facilities or any part thereof have not been placed or
maintained or are not being used in accordance with the requirements of
this Agreement, BellSouth may send written notice to Licensee
specifying the alleged noncompliance. Licensee agrees to acknowledge
receipt of the notice as soon as practicable. If Licensee does not
dispute BellSouth's assertion that such facilities are not in
compliance, Licensee agrees to provide BellSouth with a schedule for
bringing such facilities into compliance, to bring the facilities into
compliance within a reasonable time, and to notify BellSouth in writing
when the facilities have been brought into compliance.
16.2 Disputes over Alleged Noncompliance. If Licensee disputes BellSouth's
assertion that Licensee's facilities are not in compliance, Licensee
shall notify BellSouth in writing of the basis for Licensee's assertion
that its facilities are in compliance.
16.3 Failure to Bring Facilities into Compliance. If Licensee has not
brought the facilities into compliance within a reasonable time or
provided BellSouth with proof sufficient to persuade BellSouth that
BellSouth erred in asserting that the facilities were not in
compliance, and if BellSouth determines in good faith that the alleged
noncompliance causes or is likely to cause material damage to
BellSouth's facilities or those of other users, BellSouth may, at its
option and Licensee's expense, take such non-service affecting steps as
may be required to bring Licensee's facilities into compliance,
including but not limited to correcting any conditions which do not
meet the specifications of this Agreement.
16.4 Correction of Conditions by BellSouth. If BellSouth elects to bring
Licensee's facilities into compliance, the provisions of this Section
shall apply.
16.4.1 BellSouth will, whenever practicable, notify Licensee in writing before
performing such work. The written notice shall describe the nature of
the work to be performed and BellSouth's schedule for performing the
work.
16.4.2 If Licensee's facilities have become detached or partially detached
from supporting racks or wall supports located within a BellSouth
manhole, BellSouth may, at Licensee's expense, reattach them but shall
not be obligated to do so. If BellSouth does not reattach Licensee's
facilities, BellSouth shall endeavor to arrange with Licensee for the
reattachment of any facilities affected.
16.4.3 BellSouth shall, as soon as practicable after performing the work,
advise Licensee in writing of the work performed or action taken. Upon
receiving such notice, Licensee shall inspect the facilities and take
such steps as Licensee may deem necessary to insure that the facilities
meet Licensee's performance requirements.
31
<PAGE> 35
16.5 Licensee to Bear Expenses. Licensee shall bear all expenses arising out
of or in connection with any work performed to bring Licensee's
facilities into compliance with this Section; provided, however that
nothing contained in this Section or any license issued hereunder shall
be construed as requiring Licensee to bear any expenses which, under
applicable federal or state laws or regulations, must be borne by
persons or entities other than Licensee.
17. UNAUTHORIZED OCCUPANCY OR UTILIZATION OF BELLSOUTH'S FACILITIES
17.1 Licensing or Removal of Unauthorized Attachments. If any of Licensee's
attachments shall be found attached to pole(s) or occupying conduit
systems for which no license is outstanding, BellSouth, without
prejudice to its other rights or remedies under this Agreement,
including termination of licenses, may impose a charge and require
Licensee to submit in writing, within thirty (30) days after receipt of
written notification from BellSouth of the unauthorized attachment or
conduit occupancy, a pole attachment or conduit occupancy license
application. If such application is not received by BellSouth within
the specified time period, Licensee may be required at BellSouth's
option to remove its unauthorized attachment or occupancy within sixty
(60) days of the final date for submitting the required application, or
BellSouth may at BellSouth's option remove Licensee's facilities
without liability, and the expense of such removal shall be borne by
Licensee. Charges for any such unauthorized occupancy shall be equal to
the applicable license fees and charges which would have been payable
from and after the date such facilities were first placed on
BellSouth's poles or in BellSouth's conduit system, if Licensee
provides reasonable documentation of such placement. If Licensee is
unable to provide such reasonable documentation, then Licensee will pay
two years worth of the applicable charges.
17.1.1 Nothing contained in the Agreement or any license issued hereunder
shall be construed as requiring Licensee to bear any expenses which,
under applicable federal or state laws or regulations, must be borne by
persons or entities other than Licensee.
17.2 Prompt Payment of Applicable Fees and Charges. Fees and charges for
pole attachments and conduit system occupancies, as specified herein
and as modified from time to time, shall be due and payable immediately
whether or not Licensee is permitted to continue the pole attachment or
conduit occupancy. See Appendix I for applicable annual rental fees.
32
<PAGE> 36
17.3 No Implied Waiver or Ratification of Unauthorized Use. No act or
failure to act by BellSouth with regard to said unlicensed use shall be
deemed as a ratification of the unlicensed use; and if any license
should be subsequently issued, said license shall not operate
retroactively or constitute a waiver by BellSouth of any of its rights
or privileges under this Agreement or otherwise; provided, however,
that Licensee shall be, subject to all liabilities, obligations and
responsibilities of this Agreement in regard to said unauthorized use
from its inception.
18. REMOVAL OF LICENSEE'S FACILITIES
18.1 Pole Attachments. Licensee, at its expense, will remove its attachments
from any of BellSouth's poles within thirty (30) days after termination
of the license covering such attachments. If Licensee fails to remove
its attachments within such thirty (30) day period, BellSouth shall
have the right to remove such attachments at Licensee's expense and
without any liability on the part of BellSouth for damage or injury to
Licensee's attachments unless caused by the negligence or intentional
misconduct of BellSouth.
18.2 Conduit Occupancy. Licensee, at its expense, will remove its
communications facilities from a conduit system within sixty (60)
days after:
18.2.1 Termination of the license covering such conduit occupancy; or 18.2.2
The date Licensee replaces its existing facilities in one duct with
substitute facilities in another duct.
18.2.3 If Licensee fails to remove its facilities within the specified period,
BellSouth shall have the right to remove such facilities at Licensee's
expense and without any liability on the part of BellSouth for damage
or injury to such facilities unless caused by the negligence or
intentional misconduct of BellSouth.
18.3 Continuing Responsibility for Fees and Charges. Licensee shall remain
liable for and pay to BellSouth all fees and charges pursuant to
provisions of this Agreement until all of Licensee's facilities are
physically removed from BellSouth's poles or conduit system.
19. FEES, CHARGES, AND BILLING
19.1 License Charges. License charges commence on the first day of the
calendar month following the date a license is issued. Such charges
cease as of the final day of the calendar month preceding the month
in which the attachment or occupancy is physically removed or the
utilization is discontinued. A one-month minimum charge is applicable
to all licenses.
33
<PAGE> 37
19.2 Notice of Rate and Computation of Charges. On or about November 1 of
each year, BellSouth will notify Licensee by certified mail, return
receipt requested, of the rental rate and pole transfer rate to be
applied in the subsequent calendar year. The letter of notification
shall be incorporated in, and governed by, the terms and conditions of
this Agreement. Attachment and occupancy rates shall be applied to the
number of pole(s) and duct feet of conduit for which licenses have
been issued before December 1 of each calendar year. Charges for
attachment(s) and occupancy which commenced during the preceding
twelve (12) month period will be prorated accordingly.
20. ADVANCE PAYMENT AND IMPUTATION
20.1 Attachment and Occupancy Fees. Fees for pole attachment and conduit
occupancy shall be based on the facilities for which licenses have
been issued as of the date of billing by BellSouth, shall be computed
as set forth herein.
20.1.1 Charges associated with newly licensed attachments or occupancies and
other attachments or occupancies of less than the entire annual
billing period shall be prorated.
20.1.2 Charges shall be prorated retroactively in the event of the removal of
Licensee's facilities.
20.1.3 The amount of any advance payment required shall be due within sixty
(60) days after receipt of an invoice from BellSouth.
20.2 Imputation. BellSouth shall impute to its costs of providing
telecommunications services (and charge any affiliate, subsidiary, or
associate company engaged in the provision of such services) an equal
amount to the charges set forth in this Section for all of the
conduits, ducts, and poles it occupies and uses.
21. ASSURANCE OF PAYMENT
21.1 Necessity and Level of Security. In the event Licensee fails to
demonstrate credit worthiness, Licensee may be required to furnish a
bond, letter of credit or other evidence of financial security having
a minimum face amount of $10,000.00 per state or $50,000.00 per
region. Such bond, letter of credit or other security shall be in a
form satisfactory to BellSouth and may be increased from time to time
as reasonably required by BellSouth to guarantee the performance of
all obligations of Licensee hereunder. The amount of the bond, letter
of credit or other security shall not operate as a limitation upon the
obligations of Licensee hereunder.
34
<PAGE> 38
22. INSURANCE
22.1 Licensee shall obtain and maintain insurance (or provide written
evidence of being self-insured), including endorsements insuring
the contractual liability and indemnification provisions of this
Agreement, issued by an insurance carrier reasonably satisfactory
to Licensor to protect the Licensor, other authorized Licensees,
and Joint User(s) from and against all claims demands, causes of
action, judgments, costs, including reasonable attorneys' fees,
expenses and liabilities of every kind and nature which may arise
or result, directly or indirectly from or by reason of such loss,
injury or damage as covered in this Agreement including Article
XIV preceding.
22.2 Licensee shall maintain the following amounts of insurance in
compliance with (22.1) above:
22.2.1 Commercial General Liability Insurance with limits of not less
than $1,000,000 per occurrence and $1,000,000 annual aggregate.
22.2.2 Umbrella or Excess Liability Insurance with limits of not less
than $10,000,000 per occurrence and in the aggregate.
22.3 Licensee shall submit to Licensor certificates by each company
insuring Licensee with respect to any insurance required
hereunder, such certificate(s) to specify the coverage provided
and that such company will not cancel or change any such policy of
insurance issued to Licensee except after sixty (60) days written
notice to Licensor.
22.4 Licensee shall also carry such insurance as will protect it from
all claims under any Worker's Compensation Law in effect that may
be applicable to it as a result of work performed pursuant to this
Agreement.
22.5 All insurance required in accordance with 22.2) and 22.3)
preceding must be effective before Licensor will authorize
attachment to a Pole and/or Anchor, or occupancy of a Conduit
System and shall remain in force until such Licensee's facilities
have been removed from all such Pole(s), Anchor(s), Conduit
System, or Right of Way. In the event that the Licensee shall fail
to maintain the required insurance coverage, Licensor may pay any
premium thereon falling due, and the Licensee shall forthwith
reimburse the Licensor for any such premium paid.
22.6 Licensee may self-insure any or all of the insurance coverages
required in the Agreement.
35
<PAGE> 39
23. AUTHORIZATION NOT EXCLUSIVE
23.1 Nothing herein contained shall be construed as a grant of any
exclusive authorization, right or privilege to Licensee. BellSouth
shall have the right to grant, renew and extend rights and
privileges to others not parties to this Agreement, by contract or
otherwise, to use any Pole, Anchor, or Conduit System covered by
this Agreement and Licensee's rights hereunder.
36
<PAGE> 40
24. ASSIGNMENT OF RIGHTS
24.1 Licensee shall not assign or transfer this Agreement or any
license or any authorization granted under this Agreement, and
this Agreement shall not inure to the benefit of Licensee's
successors or assigns, without the prior written consent of
BellSouth. BellSouth shall not unreasonably withhold such consent.
24.2 Not withstanding the above, BellSouth hereby consents to
assignment by Licensee of this Agreement any license and
authorization granted under this agreement to any entity
controlling, controlled by or under common control with the
Licensee.
24.3 In the event such consent or consents are granted by BellSouth,
then the provisions of this Agreement shall apply to and bind the
successors and assigns of the Licensee. Form NT-13 shall be used
for this purpose.
25. FAILURE TO ENFORCE
25.1 Failure of BellSouth to enforce or insist upon compliance with any
of the terms or conditions of this Agreement or to give notice or
declare this Agreement or any authorization granted hereunder
terminated shall not constitute a general waiver or relinquishment
of any term or condition of this Agreement, but the same shall be
and remain at all times in full force and effect.
26. TERM OF AGREEMENT
Unless sooner terminated as herein provided, this Agreement shall
continue in effect for a term of one (1) year from the date hereof
and thereafter from year to year until either party hereto
terminates this Agreement by giving the other party at least
ninety (90) days prior written notice thereof. Such ninety (90)
days notice of termination may be given to take effect at the end
of the original one (1) year period or any time thereafter.
26.1 Termination of this Agreement or any licenses issued hereunder
shall not affect Licensee's liabilities and obligations incurred
hereunder prior to the effective date of such termination.
37
<PAGE> 41
27. SUPERSEDURE OF PREVIOUS AGREEMENT(S)
27.1 This Agreement supersedes all previous agreements, whether written
or oral, between BellSouth and Licensee for attachment and
maintenance of Licensee's Communications Facilities on Pole(s),
Anchor(s), and in Conduit Systems within the geographical area
covered by this Agreement; and there are no other provisions,
terms or conditions to this Agreement except as expressed herein.
All currently effective licenses heretofore granted pursuant to
such previous agreements shall be subject to the terms and
conditions of this Agreement. IN WITNESS WHEREOF, the parties
hereto have executed this Agreement in duplicate on the day and
year written below.
KNOLOGY Holdings, Inc. BellSouth Telecommunications, Inc.
Name of Licensee Name of Licensor
By: /s/ Bret T, McCants By: /s/ William Smith
-------------------- -------------------------------
Signature Signature
Bret T, McCants William Smith
- ------------------------ ----------------------------------
Printed Name Printed Name
V.P. Construction Vice President NSP&S
- ------------------------ ----------------------------------
Printed Title Printed Title
2/20/98 2/27/98
- ------------------------ ----------------------------------
Date Date
38
<PAGE> 42
APPENDIX 1
1998 FCC Formula Supported Fees
(Re-calculated annually)
Licensee shall pay to Licensor the following fees:
State Poles Anchors Conduit
(ea. / yr.) (ea./ yr.) ($ / ft. / yr.)
Alabama $3.46 $4.89 $0.40
Kentucky# 0.70
2-user 9.45 $12.90
3-user 5.35 8.60
Louisiana 8.30 .64
Mississippi 4.89 2.50*
Tennessee 5.13 .59
Florida 4.26 .80
Miami River crossing 17.13
Georgia* 4.20 .56
North Carolina 4.16 .59
South Carolina 3.31 .48
All rates in Kentucky are by tariff
Tariff rate in Mississippi
** Per Docket 7061 -U; differs from FCC supported rates
i) For the purpose of determining the Duct feet chargeable, the Duct
considered occupied shall be measured from the center to center of adjacent
Manhole(s), or from the center of a Manhole to the end of a Duct not terminated
in a Manhole.
ii) The above rates are not applicable for crossings of any navigable
waterway. Rates for navigable waterway crossings will be calculated on an
individual case basis.
Pole Attachment Transfer Rate
Per pole (throughout BellSouth region) $41.00
<PAGE> 43
Appendix 11
Records Maintenance Centers
For ALABAMA plant and right of way records:
Records Maintenance Center
S04
1876 Data Drive
Birmingham, AL 35244
For KENTUCKY plant and right of way records:
Records Maintenance Center
Room 2-SW
601 W. Chestnut Street
Louisville, KY 40203
For LOUISIANA plant and right of way records:
Records Maintenance Center
2nd Floor North
6767 Bundy Road
New Orleans, LA 70140
For MISSISSIPPI plant and right of way records:
Records Maintenance Center
5723 Hwy. 18 S
Jackson, MS 39209
For TENNESSEE plant and right of way records:
Records Maintenance Center
Room 9 B 15
333 Commerce Street
Nashville, TN 37201
For GEORGIA, FLORIDA, NORTH CAROLINA, AND SOUTH CAROLINA:
Plant Records Right of Way Records
- ------------- --------------------
Records Maintenance Center Regional Landbase Admin. Center
5228 Central Avenue Attn.: Right of Way Records
Charlotte, NC 28212 16 GG 1 BST
301 W. Bay Street
Jacksonville, FL 32201
<PAGE> 1
GPC Contract No.____
EXHIBIT 10.44
GEORGIA POWER COMPANY
STANDARD POLE ATTACHMENT AGREEMENT
By signing below, Georgia Power Company ("Georgia Power") hereby grants
to below-named Licensee a non-exclusive, revocable license to attach and to
retain previously attached aerial cables, wires and associated appliances owned
by Licensee and used in the provision of telecommunications or cable television
services (collectively, "Equipment") to poles owned by Georgia Power which are
located in public and private rights-of-way and which are used to support power
lines and other equipment used in the distribution of electricity, and Licensee
hereby accepts such license, on and subject to the terms and conditions set on
the following pages of this Agreement, which each party acknowledges having
read, understood and accepted prior to signing below.
<TABLE>
<S> <C>
Knology Holdings Inc. For Itself and on Behalf of GEORGIA POWER COMPANY
Its Current and Future Subsidiaries
312 West Eigth Street 241 Ralph McGill Blvd
West Point. Georgia Atlanta, Georgia 30308
Tel No. (706) 645-3935 Tel No.
------------------------------------------ ------------------------------------------
Fax No. (706) 645-3985 Fax No.
------------------------------------------ ------------------------------------------
Email Address: Email Address:
----------------------------------- -----------------------------------
By: /s/ Bret T. McCants By: /s/ R.P. Bowling
---------------------------------------------- ----------------------------------------------
Name: Bret T. McCants Name: R.P. Bowling
-------------------------------------------- --------------------------------------------
Title: VP Construction Title: General Manager of Distribution
------------------------------------------- -------------------------------------------
Date: 2/18/98 Date: 2/23/98
-------------------------------------------- --------------------------------------------
</TABLE>
<PAGE> 2
GPC Contract No.____
1. LICENSE.
1.1 LICENSED POLES. Before attaching Equipment to any pole, Licensee shall
request Georgia Power's permission to attach Equipment to such pole and
shall set forth in such request the Equipment to be attached to such pole.
Georgia Power shall grant or deny such request in a notice to Licensee
within thirty (30) days after Georgia Power's receipt thereof, and each
pole for which Georgia Power grants such permission shall be hereinafter
referred to as a "Licensed Pole." Subject to any contrary requirements set
forth in 47 U.S.C.ss.224 and the regulations promulgated thereunder,
Georgia Power shall be entitled to deny Licensee permission to use any pole
if there is insufficient capacity on such pole or for reasons of public
safety, reliability or generally applicable engineering purposes. Georgia
Power's records of Licensed Poles shall constitute prima facie evidence of
which poles are Licensed Poles in any dispute between Georgia Power and
Licensee.
1.2 ACCESS. No permission granted to Licensee to attach Equipment to a pole
pursuant to Section 1.1 hereof shall constitute a guarantee or
representation that adequate space exists on such pole for the attachment
of Equipment, nor shall any such permission authorize Licensee to attach
Equipment to such pole in a manner prohibited by the National Electrical
Safety Code, as revised ("NESC"), any successor code designated by Georgia
Power, or any applicable law or regulation.
2. ATTACHMENT AND MAINTENANCE OF EQUIPMENT.
2.1 COSTS. Licensee has been and shall continue to be solely responsible for
all costs associated with the attachment and maintenance of Equipment on
all Licensed Poles. Licensee has installed and shall continue to install
any anchors, guys or other equipment required to accommodate the
installation of any Equipment at Licensee's expense and to the reasonable
satisfaction of Georgia Power.
2.2 MAINTENANCE. Licensee attached and maintained and shall attach and maintain
all Equipment in accordance with the requirements of NESC and all laws and
regulations now in effect or that hereafter may be issued by any authority
having jurisdiction over the Licensed Poles. Licensee has at all times
attached, maintained, kept rearranged, transferred or removed and shall at
all times attach, maintain, keep, rearrange, transfer and remove Equipment
in a safe condition and in a manner reasonably satisfactory to Georgia
Power. Subject to Section 3 hereof, Licensee shall notify Georgia Power at
least two (2) weeks before attaching Equipment on any pole including, but
not limited to, overlashing existing strand and utilizing pole space
greater than twelve inches (12"), in a writing setting forth the date
Licensee intends to commence attaching, except that no notice shall be
required for attaching a drop line to a customer's premises from a pole
with an existing attachment. Licensee shall, at its own expense, cut and
trim all trees and brush in order to preserve adequate clearance around
Equipment.
2.3 NO INTERFERENCE. Subject to Section 3.4 hereof, Licensee shall attach,
maintain, rearrange, transfer and remove all Equipment so as not to
interfere with the use of the Licensed Poles by Georgia Power or other
licensees thereof.
2.4 INFORMED CONSENT. Before any individual has performed or will perform any
work by, through or for the Licensee on or near any facilities of Georgia
Power, Licensee has adequately warned and shall continue to adequately warn
such employee of the danger inherent in making contact with the electrical
conductors of Georgia Power and of coming closer to such conductors than is
permitted by NESC or by regulations of the Occupational Safety and Health
Administration. Licensee has not permitted nor shall it permit in the
future any such individual to work on any pole or Equipment attached
thereto unless such individual has executed a general release in a form
approved by Georgia Power. Licensee shall maintain such releases at
Licensee's offices and, upon request, deliver the same to Georgia Power.
2.5 IDENTIFICATION OF EQUIPMENT. Using markers unique to Licensee in color and
shape and approved in advance by Georgia Power, Licensee shall (i) mark all
Equipment attached to a Licensed Pole; and (ii) mark each strand which
comprises part of the Equipment at every first, fifth and last mainline
pole attachment, including the first Licensed Pole in all lateral lines and
at all crossover points. Licensee shall mark all Equipment which was
attached to Licensed Poles before the date hereof upon the sooner of
Licensee performance of any maintenance or repairs of such Equipment, or
three (3) months after the Effective Date. Georgia Power may remove
unmarked or improperly marked Equipment without notice.
3. ALTERATIONS OF EQUIPMENT AND POLES.
3.1 NOTICE. Georgia Power hereby notifies Licensee that any Licensed Pole or
Equipment shall be subject to removal, relocation, repair or other work (an
"Alteration"). Georgia Power may make an Alteration to ten (10) or fewer
contiguous Licensed Poles and to any number of Licensed Poles for emergency
service without giving any further notice. In all other cases, Georgia Power
will notify Licensee at least thirty (30) days prior to the Alteration. The
parties hereby stipulate that this Section 3.1 satisfies the notice requirements
of 47 U.S.C.ss.224(h). If
<PAGE> 3
Licensee intends to upgrade its Equipment contemporaneously with such
Alteration, then Licensee shall notify Georgia Power so that the parties
may coordinate such upgrade.
3.2 PERFORMANCE. Upon receiving notice that Georgia Power requires Licensee to
perform work in connection with an Alteration, Licensee shall complete such
work in accordance with reasonable terms set forth in such notice. Georgia
Power may perform an Alteration and shall promptly notify Licensee that it
has done so if Licensee does not timely perform such work or in an
emergency. If Georgia Power removes and does not reattach any Equipment,
then Georgia Power shall notify Licensee, but shall be under no obligation
to perform such reattachment. If Licensee does not timely perform any work
required under this Section 3.2 in connection with a proposed relocation to
a new pole, and Georgia Power does not perform such work, then, at the
election of Georgia Power in writing, such pole shall become the property
of Licensee and Licensee shall pay to Georgia Power an amount equal to the
then-current value of such abandoned pole.
3.3 COSTS. Unless and until the limitations on Licensee's costs set forth in 47
U.S.C.ss.224 are repealed, overruled or modified by a final and
unappealable order of the FCC or any governing body or court of competent
jurisdiction, Licensee shall not be required to bear the cost of
rearranging or transferring Equipment attached to a Licensed Pole if
required for an additional attachment, or modification of an existing
attachment, by a cable television system or provider of telecommunications
service other than Licensee. In all other cases, Licensee shall be
responsible for its individual costs plus its proportionate share of all
joint costs associated with work performed in accordance with Section 3.2.
Licensee shall reimburse Georgia Power for any reasonable costs incurred in
performing such work based upon Georgia Power's standard charges for such
services. Licensee's payments to Georgia Power under this Section 3.3 shall
be made within thirty (30) days of demand.
4. UNAUTHORIZED ATTACHMENTS. If Licensee attaches any Equipment to any pole
without first obtaining appropriate permission, as required by Section 1
hereof, or if Georgia Power determines that the use of any Licensed Pole by
Licensee is prohibited by public authorities, judicial decree or relevant
property owners, (an "Unauthorized Attachment"), then:
4.1 REMOVAL. Georgia Power may require Licensee to remove the unauthorized
attachment(s) within thirty (30) days of notifying Licensee or such shorter
period as may be required by court order and, if Licensee fails to remove
such attachment within such period, then Georgia Power may remove such
attachment at Licensee's sole cost and expense, without any liability to
Licensee.
4.2 COSTS. If Licensee has made any Unauthorized Attachments, then it shall pay
to Georgia Power, within thirty (30) days of demand, the applicable unpaid
fees for each such attachment. For purposes of such computation, Georgia
Power may assume that each Unauthorized Attachment was made on the day
following the last pole inspection conducted before discovery of the
Unauthorized Attachments. In addition to the fees set forth above, Licensee
shall pay to Georgia Power, within thirty (30) days of demand, (A) an
administrative fee equal to ten percent (10%) of the unpaid fees, (B)
interest on the unpaid fees from the date of attachment until the date of
payment at the rate announced by NationsBank, N.A. (South), from time to
time, as its Prime Rate, plus eight (8) percentage points; and (C) any and
all out-of-pocket expenses incurred by Georgia Power as a result of such
Unauthorized Attachment including, without limitation, legal fees.
5. INSPECTIONS AND SURVEYS; POLE COUNTS. Georgia Power may inspect all
Equipment attached to any pole as it deems appropriate. Licensee shall
reimburse Georgia Power for its costs for regular periodic inspections of
such Equipment, occurring no more than every twelve (12) months or, if more
frequently, the minimum interval recommended or required by NESC or any
other industry standard or applicable law. Licensee shall reimburse Georgia
Power for its costs for special, non-periodic inspections of such Equipment
which Georgia Power conducts if Georgia Power has discovered any violation
of this Agreement in its most recent periodic inspection of any Equipment.
Licensee shall reimburse to Georgia Power a pro rata amount of any costs
incurred by Georgia Power in conducting pole counts or similar surveys,
based on the average number of licensees with attachments to each pole
surveyed or counted. Licensee shall make its personnel available on a
reasonable basis to assist in surveys and pole counts at the request of
Georgia Power.
6. EASEMENTS AND RIGHTS-OF-WAY. Licensee has acquired and shall continue to
acquire in its own name and at its expense any and all easements,
franchises or other rights in land necessary to permit the presence of any
Equipment on any Licensed Pole. This Agreement does not give Licensee any
right to use Georgia Power's rights-of-way which must be separately agreed
upon for further consideration.
3
<PAGE> 4
7. LICENSE FEES; BILLING AND PAYMENT.
7.1 FEES. Licensee shall estimate in advance the total monthly license fee for
all attachments of Equipment to Licensed Poles (the number of all
attachments of Equipment multiplied by the estimated rate for each
attachment specified by Georgia Power for such calendar year divided by
twelve), and pay such estimated monthly license fee by the fifth (5th) day
of the month for which such fee shall accrue. Licensee shall submit a
reconciliation report to Georgia Power by February 15th of the following
calendar year that will reconcile all of Licensee's payments from and
expenses accrued (using the actual rate for each attachment which shall be
provided to Licensee by January 15th of such year) during the previous
calendar year. Licensee shall pay any deficiency at such time. Georgia
Power shall credit Licensee's account for any overpayments. Licensee shall
maintain and provide Georgia Power access to, from time to time, such
records relating to Licensee's payment of license fees (for any prior year
of this Agreement) as Georgia Power determines necessary to audit such
payment of license fees.
7.2 ADDITIONAL EXPENSES. Licensee shall reimburse Georgia Power for all costs
associated with modifications to any Licensed Pole or other make-ready
work necessary to properly affix Licensee's attachments to the Licensed
Pole and all amounts expended to bring any pole into compliance with NESC
standards as a result of Licensee's intended use of such Licensed Pole.
8. INDEMNIFICATION; LIMITATION OF LIABILITY.
8.1 INDEMNIFICATION BY LICENSEE. Licensee shall indemnify and hereby releases
and holds harmless Georgia Power, its affiliates, agents and contractors
and each of its and their respective officers, directors, trustees,
employees, advisers, agents or other personnel (each an "Indemnitee") from
and against any liability, loss, damage, claim or cause of action of any
kind or nature (including, without limitation, damage to property and
injury to or death of persons), whether actual or alleged by any third
party but excluding any third-party claims to the extent arising from an
Indemnitee's sole or gross negligence or willful misconduct, or payment to
any person and amounts paid in compromise or settlement, whether or not
liability has been shown or can be known, and any expenses connected
therewith (including, without limitation, reasonable litigation expenses
and reasonable attorneys' fees, and expenses incurred in enforcing this
indemnity together with interest) arising out of or in connection with the
following events, whether occurring prior to the execution of this
Agreement or during the Term:
8.1.1 third-party claims which are caused in whole or in part by the presence
of any Equipment on any pole or the performance of any services on or near
any pole by Licensee, its affiliates, agents and contractors and each of
its and their respective offices, directors, trustees, employees, advisors,
agents or other personnel;
8.1.2 any personal injury to or damage to any property of an Indemnitee to
the extent such claims do not arise from Georgia Power's sole or gross
negligence or willful misconduct;
8.1.3 electrical contact with any Equipment attached to any pole;
8.1.4 penalties, fines or for feitures imposed by a government authority
arising out of any failure or refusal by Licensee or any person acting by,
through or for Licensee to comply with any law, statute, regulation, rule,
ordinance, order, injunction, writ, decree or award of any government
agency, authority, commission, department or instrumentality thereof, or
any court, tribunal or arbitrator, applicable to the attachment of
Equipment to any pole or the furnishing or use of Licensee's services; and
8.1.5 repairing or replacing cables, wires or other facilities damaged as a
result of the negligence of Licensee.
8.2 TIME TO BRING CLAIMS. Licensee shall assert in writing any claim which it
may have against Georgia Power within six (6) months of the sooner of the
date on which Licensee becomes aware, or should have become aware of the
existence of such claim. Failure to assert such claim within such period
constitutes a waiver of such claim.
8.3 LIMITATION OF LIABILITY.
8.3.1 Georgia Power shall not be liable to Licensee for any interruption of
Licensee's service or for interference with Licensee's cables, wires or
related appliances unless caused by Georgia Power's gross negligence or
willful misconduct, or for incidental, special or consequential damages,
including, but not limited to, lost profits, lost savings or loss of use,
even if Licensee has been advised as to the possibility of such damages.
8.3.2 Georgia Power shall not be liable to Licensee for an amount greater than
the aggregate amount Licensee has paid to Georgia Power under this
Agreement as of the date such liability occurs.
8.4 SETTLEMENT AND DEFENSE OF CLAIMS. If any Claim arises or is made for which
Licensee is or may be liable under this Agreement, then Georgia Power shall
promptly notify Licensee in writing of such Claim and Georgia Power shall
be entitled to control the conduct of the defense of such Claim. Georgia
Power shall be entitled to settle such Claim on such terms as it deems
appropriate, and Licensee shall promptly reimburse Georgia Power for the
amount of all expenses, legal and otherwise, incurred by Georgia Power in
connection with the defense and settlement of any such Claim. If no
settlement of a Claim is
4
<PAGE> 5
made, then Licensee shall satisfy any judgment rendered with respect to
such Claim before Georgia Power is required to do so, and shall pay all
expenses, legal or otherwise, incurred by Georgia Power in the defense of
such Claim. Licensee shall not have the right to settle any Claim without
the prior written approval of Georgia Power. The parties hereto shall treat
any settlement of a Claim and the terms thereof as confidential information
in accordance with the terms of Section 12 hereof.
8.5 INSURANCE. Throughout the term of this Agreement, Licensee shall maintain
insurance coverage which is sufficient to protect against any claims of
Georgia Power hereunder. Licensee shall make Georgia Power the named
beneficiary with rights of notice before cancellation and immediately
deliver such certificate to Georgia Power. Without limiting the foregoing,
Licensee shall maintain in force and effect one or more general liability
insurance policies providing minimum coverage (including, without
limitation, coverage for liabilities contractually assumed) of two-million
dollars ($2,000,000) per occurrence and in the aggregate for bodily injury,
one-million dollars ($1,000,000) per occurrence for property damage, and
excess liability umbrella coverage of three-million dollars ($3,000,000)
bringing total coverage to five million dollars ($5,000,000). All insurance
coverage obtained by Licensee pursuant to this Section 8.5 shall include
coverage for liabilities contractually assumed and contain a waiver of
subrogation in favor of Georgia Power or name Georgia Power an additional
insured. Licensee and its employees shall comply with all requirements of
the Workers' Compensation Laws of the State of Georgia.
9. SECURITY. To secure the prompt and full payment by Licensee of all amounts
owing to Georgia Power hereunder:
9.1 SECURITY BOND. Licensee shall furnish Georgia Power with a bond in the
amount corresponding to Licensee's designated position on Georgia Power's
Pole Count and Creditworthiness Matrix. For purposes hereof, the "Pole
Count and Creditworthiness Matrix" determines the amount of bond to be
posted by Licensee as a function of Licensee's creditworthiness and the
number of attachments such Licensee will maintain. Such initial bond amount
may be increased on January 1st of each year to ensure sufficient coverage
as required under this Section 9.1.
9.2 DETERMINATION OF CREDITWORTHINESS. Licensee shall provide Georgia Power,
from time to time, reasonable access to such financial records as Georgia
Power determines necessary to categorize Licensee's creditworthiness at the
time of such access. If Licensee chooses not to provide such access to
Georgia Power, then Georgia Power will be entitled to assume that Licensee
falls within the lowest creditworthiness category for purposes of this
Section 9. Licensee hereby grants Georgia Power full authority to inquire
into Licensee's credit history through any credit reporting agency.
9.3 RIGHT TO SECURITY INTEREST. Notwithstanding anything to the contrary
contained herein, if Licensee fails to meet sufficient creditworthiness
standards as set forth in the Pole Count and Creditworthiness Matrix, then
Georgia Power may require additional security in the form of a security
interest in the Equipment (under the terms and conditions of Section 9.4
hereof.) Any waiver of an initial security interest shall not preclude
Georgia Power from later requiring the Security Interest should Licensee's
creditworthiness fall below the creditworthiness standards set forth in the
Pole Count and Creditworthiness Matrix.
9.4 TYPE OF SECURITY INTEREST. If a security interest is required under Section
9.3, then, at such time, Licensee shall execute any security agreements,
financing statements and all other instruments, assignments or documents
and shall take such other action as may be reasonably requested by Georgia
Power to perfect or to continue the perfection of Georgia Power's security
interest in the Equipment.
10. TERMINATION OR MODIFICATION.
10.1 TERMINATION UPON DEFAULT. If Licensee materially fails to comply with
this Agreement and such default continues for more than thirty (30) days
after Georgia Power provides written notice to Licensee of such default,
then Georgia Power may immediately terminate Licensee's rights hereunder
including, without limitation, Licensee's right to attach Equipment to
Georgia Power's poles. However, if a default by Licensee cannot (other than
a failure to make timely payments) reasonably be cured within a thirty (30)
day period and Licensee uses its best efforts to cure such default within
such period, then the time for curing shall be extended as long as
reasonably necessary to complete such cure.
10.2 TERMINATION OR MODIFICATION UPON A CHANGE OF LAW. If, in a final and
unappealable order, the Federal Communications Commission (the "FCC") or
any governing body or court with appropriate jurisdiction repeals,
overrules or modifies 47 U.S.C. ss. 224:
10.2.1 insofar as it requires Georgia Power to provide pole access to
Licensee, then Georgia Power shall be entitled to terminate Licensee's
rights hereunder, including, without limitation, Licensee's right to attach
Equipment to Georgia Power's poles, immediately or after such period of
notice as may be required by law; or
5
<PAGE> 6
10.2.2 insofar as it sets a maximum license fee that Georgia Power may
charge Licensee, then Georgia Power may modify the license fees set forth
in Section 7.1 hereof to the fullest extent then permitted by law.
10.3 REMOVAL OF EQUIPMENT. Licensee shall remove all Equipment from all poles
no later than thirty (30) days after this Agreement is terminated. If
Licensee does not immediately so remove such Equipment, then Georgia Power
shall be entitled to remove such Equipment at Licensee's sole cost and
expense and without any liability therefor.
10.4 WAITING PERIOD. If Georgia Power terminates Licensee's right to attach
Equipment to any of Georgia Power's poles pursuant to Section 10.1 hereof,
then Licensee may not request that Georgia Power enter into a new pole
attachment agreement with Licensee for a period of one (1) year following
the date of such termination. In its application for such new agreement,
Licensee shall provide Georgia Power with evidence satisfactory to Georgia
Power that Licensee is not likely to default in any of its obligations
under such new agreement and such other satisfactory information, including
documentation sufficient to show creditworthiness, as Georgia Power shall
reasonably require. Georgia Power shall not be obligated to enter into any
such new agreement until it is satisfied, in its sole discretion, with such
evidence and information provided by Licensee.
11. VOLUNTARY REMOVAL OF EQUIPMENT BY LICENSEE.
11.1 NOTICE. Subject to Section 2.2 hereof, Licensee may remove any Equipment
from any Licensed Pole and shall provide Georgia Power with notice of such
removal prior to or within ten (10) days following such removal, stating
whether Licensee intends to replace the removed Equipment. If Licensee so
indicating that it does not intend to replace such Equipment, then its
license to use the Licensed Pole from which the Equipment is removed shall
terminate upon Georgia Power's receipt of such notice. If Licensee fails to
provide such notice within the period set forth above, then Licensee's
license to use all Licensed Poles from which Equipment has been removed
shall expire on the thirtieth (30th) day after such removal unless Licensee
replaces such Equipment within such period. Licensee will continue to
accrue license fees for Licensed Poles from which Equipment has been
removed until its license to use such License Poles terminates in
accordance with this Section 11.
11.2 CONTINUED USE OF POLES. If Licensee notifies Georgia Power in accordance
with Section 11.1 hereof that it intends to replace Equipment removed from
a Licensed Pole, then Licensee's license to use such pole, and its
obligation to pay all license fees therefor, shall extend for sixty (60)
days (the "Extended Period") from the date such notice is delivered to
Georgia Power. If Licensee has not replaced Equipment removed from a
Licensed Pole before the expiration of the Extended Period, then Licensee's
license to use such pole shall expire at the end of the Extended Period.
12. CONFIDENTIALITY. Each party, its affiliates, agents, contractors and
subsidiaries and its and their officers, directors, employees and agents
receiving information from a disclosing party that is clearly indicated to
be proprietary and confidential by a label, legend or other notice shall
keep such information in confidence and shall not copy or disclose or
permit others to copy or disclose such information to unauthorized persons
for a period of three (3) years from the date such information is provided
to the receiving party, unless such information constitutes a "trade
secret" under applicable law, in which case the receiving party shall
comply with the foregoing restrictions for as long as such information
constitutes a trade secret. Such information shall at all times remain the
exclusive property of the disclosing party and shall be used by the
receiving party solely for the purpose of performing its obligations under
this Agreement. This Section 12 shall not prohibit any disclosure required
by any court or regulatory authority of competent jurisdiction.
13. NO PROPERTY RIGHT. Licensee's rights in the Licensed Poles has been and
remains merely a license and, except as provided in Section 3.3 hereof,
Licensee has not nor shall it acquire any ownership or property rights in
any poles or upgrades thereto by virtue of any attachments of Equipment
thereto, the passage of time, or the payment by Licensee for any upgrades
thereto.
14. CUMULATIVE REMEDIES. All rights and remedies herein or otherwise shall be
cumulative, and the exercise of any right or remedy shall not be construed
as an election of remedies and preclude the right to exercise any other
right or remedy.
15. FORCE MAJEURE. Georgia Power shall not be liable for any damages, costs,
expenses or other consequences incurred by Licensee or by any other person
or entity as a result of, and Licensee shall remain liable for all amounts
owed to Georgia Power hereunder notwithstanding any delay in or inability
to provide usable space to Licensee due to circumstances or events beyond
the reasonable control of Georgia Power, including, without limitation,
acts of God, hurricanes, tornadoes, rain, tidal wave, wind, hail,
lightning, earthquakes, snow or ice, extreme high or low temperatures,
change in
6
<PAGE> 7
the language or in the interpretation of any law or regulation, strikes,
sink holes, lockouts or other labor problems, transportation delays,
unavailability of supplies or materials, fire or explosion, riot, military
action or usurped power, or actions or failures to act on the part of a
governmental authority.
16. MISCELLANEOUS.
16.1 ASSIGNMENT. Georgia Power may assign its rights and executory
obligations under this Agreement with respect to any pole which is
transferred by Georgia Power to another person or entity upon providing
written notice to Licensee. Licensee shall not assign any right or
obligation under this Agreement, except with the prior written consent of
Georgia Power, which consent shall not be unreasonably withheld or delayed.
16.2 AMENDMENT. Except as provided in Section 10 hereof, no change, amendment
or modification of this Agreement shall be binding upon the parties unless
such change, amendment or modification shall be in writing and duly
executed by both parties.
16.3 WAIVER. No party shall be deemed to have waived any provision of this
Agreement unless such waiver is made explicit in writing and signed by the
party waiving such provision. No waiver shall be deemed to be a continuing
waiver unless so stated in writing.
16.4 JUDICIAL INTERPRETATION. If this Agreement requires judicial
interpretation, then the parties hereby stipulate that the court should not
construe the terms of this Agreement more strictly against the party
preparing this Agreement, it being acknowledged that the parties have
sought and received advice of counsel to the extent that each deems
necessary for full understanding of all the consequences hereof.
16.5 SEVERABILITY. If any provision of this Agreement is found to be illegal
or otherwise invalid, then the validity of the remaining provisions shall
not be impaired. The parties shall attempt to replace such invalid
provision with a valid provision having substantially the same commercial
effect as such invalid provision and shall be deemed effective
retroactively to the Effective Date.
16.6 PAYMENT OF EXPENSES. Licensee shall pay all reasonable costs and
expenses of Georgia Power in the enforcement of this agreement. In the
event that Georgia Power is requested to perform administrative services
not otherwise required to be performed by Georgia Power under this
agreement, including, without limitation, services related to credit
facilities or consents, Licensee agrees to pay the fees or disbursements of
Georgia Power (including outside counsel and allocated costs of inside
counsel) incurred in connection with any of the foregoing.
16.7 HEADINGS. The headings in this Agreement have been inserted for
convenience of reference and shall not affect, expand or restrict the terms
or conditions hereof.
16.8 NOTICE. All notices regarding the attachment, maintenance or removal of
Equipment shall be sent electronically using the National Joint Utilities
Notification System. All other notices or communications required or
permitted hereunder shall be sent by internet email (using simple mail
transfer protocol), facsimile or in writing delivered either personally or
by mail, courier, or similar reliable means of dispatch, addressed as set
forth at the head of this Agreement. Each party may designate by notice in
writing a new address for itself to which any notice or other communication
may thereafter be so given, served or sent. Notices or other communications
delivered personally shall be effective for all purposes upon delivery and
notices or other communications delivered by any other means shall be
effective for all purposes upon their receipt by the party to whom they are
addressed.
16.9 TIME IS OF THE ESSENCE. Time is of the essence hereof.
16.10 JURISDICTION AND GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with Georgia law. Licensee submits to the
jurisdiction of the Georgia courts and shall maintain an agent for service
of process within the state of Georgia throughout the term of this
Agreement. Neither party will bring any action against the other party
arising out of or relating to this Agreement in any forum except as
follows: (i) federal, state or county courts in Fulton County, Atlanta,
Georgia; (ii) the Georgia Public Service Commission; or (iii) the FCC.
Licensee irrevocably waives any objection it may have to such venue for any
such legal action and irrevocably waives the right to bring any legal
action in any other jurisdiction. The parties waive any right to a jury
trial for the adjudication of any disputes arising from the performance or
non-performance of the obligations under this Agreement.
7
<PAGE> 1
EXHIBIT 10.46
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the 4th day of
March, 1998 by and between Gulf Power Company, hereinafter called Licensor and
Knology of Panama City, Inc., hereinafter called Licensee.
WITNESSETH:
WHEREAS, Licensor has previously entered into pole attachment
agreements with Beach Cable, Inc.
WHEREAS, Beach Cable desires to assign its rights and obligations under
the pole attachment agreements to Licensee; and
WHEREAS, Licensor desires to consent to such assignment under the terms
and conditions herein stated.
NOW, THEREFORE, for and in consideration of the mutual convenants and
agreements herein contained, Licensor and Licensee hereby agree as follows:
1. Licensor hereby consents to the assignment to Licensee of the
following pole attachment agreement with the following entities:
Beach Cable, Inc. - pole attachment agreement dated 01/01/98
2. Licensee does hereby convenant and agree to do and perform each of
the convenants and undertakings of the aforesaid agreements, to pay each sum of
money required to be paid under each agreement to the full extent as if such
agreements had been originally made with Licensee.
3. Licensor and Licensee agree that the terms and conditions of the
aforesaid agreements shall continue in fall force and effect and no modification
to such terms and conditions shall be made during the term of such agreements,
except modifications which may be required for safety, operational or other
related reasons.
<PAGE> 2
4. Licensee covenants and agrees to indemnify, protect and hold
Licensor harmless from and against any and all claims, damages and other costs
(including attorney's fees) relating to the obligations of Beach Cable under the
agreements.
5. Licensee shall pay all outstanding debts owed to Licensor by Beach
Cable currently due or that may come due in the future under the aforesaid
agreements.
6. Nothing contained in this Assignment Agreement shall serve to
discharge Beach Cable, or the respective sureties of Beach Cable, from any
liability accrued or accruing under the aforesaid agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be duly executed by their respective corporate officers thereunto
duly authorized as the day, month and year first written above.
ATTEST: LICENSOR:
GULF POWER COMPANY
/s/ Linda G. Malone BY: /s/
- -------------------- ---------------------------
ASST. SECRETARY VICE PRESIDENT - POWER
DELIVERY AND CUSTOMER
OPERATIONS
ATTEST: LICENSEE:
KNOLOGY OF PANAMA CITY, INC.
/s/ Donna Sikes BY: /s/ Ancel A. Hamilton, Jr.
- -------------------- --------------------------
Ancel A. Hamilton, Jr.
VP Operations
<PAGE> 3
EXHIBIT A
DESCRIPTION OF SERVICE AREA
Name of Company Knology of Panama City, Inc.
-----------------------------------------------------
For Agreement Dated January 1, 1998
-----------------------------------------------------
A description of the geographical boundaries of the Agreement by
Township, Range and Section:
1. The City of Panama City Beach, Florida.
2. The City of Panama City, Florida.
3. The City of Lynn Haven, Florida.
4. The City of Springfield, Florida.
5. The City of Cedar Grove, Florida.
6. The City of Parker, Florida.
7. The City of Callaway, Florida.
8. The unincorporated areas of Bay County.
WITNESS: Knology of Panama City, Inc.
BY: /s/ Donna Sikes By: /s/ Ancel A. Hamilton, Jr.
---------------- --------------------------
Ancel A. Hamilton, Jr.
Title: VP Operations
-----------------------
ATTEST: Gulf Power Company
By: /s/ Linda G. Malone By: /s/
--------------------- --------------------------
ASST. SECRETARY Vice President - Power Delivery and
Customer Operations
<PAGE> 1
(BELLSOUTH LOGO)
Exhibit 10.47
BellSouth Telecommunications, Inc.
Room 34S91 BellSouth Center
675 West Peachtree Street, N.E.
Atlanta, Georgia 30375
March 5, 1999
Mr. Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, GA 31833
Dear Mr. Wachter:
Enclosed for your files are the copies of the Adoption agreements between
BellSouth Telecommunications, Inc. and Knology Holdings, Inc., executed by Jerry
Hendrix. BellSouth will file these documents with the appropriate Public Service
Commissions for approval.
If you have any questions, please call Stuart Hudnall at (404) 927-7859.
Sincerely,
/s/ Kelly Forrest
- --------------------------
Kelly Forrest
Manager - Interconnection Services/Pricing
Attachment
<PAGE> 2
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Alabama"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Alabama has requested that BellSouth make available
the interconnection agreement in its entirety executed between BellSouth and
MCImetro Access Transmission Services, Inc. dated December 23, 1997, for the
state of Alabama ("MCIm Interconnection Agreement - Alabama");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Alabama and BellSouth hereby agree as
follows:
1 . Knology - Alabama and BellSouth shall adopt in its entirety the
MCIm Interconnection Agreement dated December 23, 1997 and any and all
amendments to said agreement executed and approved by the appropriate state
regulatory commission as of the date of the execution of this Agreement. The
MCIm Interconnection Agreement and all amendments are attached hereto as Exhibit
1 and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 3
Page 2
3. BellSouth and Knology - Alabama shall accept and incorporate into
this Agreement any amendments to the MCIm Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall
have designated by written notice to the other Party. Where specifically
required, notices shall be by certified or registered mail. Unless otherwise
provided in this Agreement, notice by mail shall be effective on the date it is
officially recorded as delivered by return receipt or equivalent, and in the
absence of such record of delivery, it shall be presumed to have been delivered
the fifth day, or next business day after the fifth day, after it was deposited
in the mails.
<PAGE> 4
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
Alabama, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 5
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - ALABAMA
<PAGE> 6
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Georgia"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Georgia has requested that BellSouth make available
the interconnection agreement in its entirety executed between BellSouth and
MCImetro Access Transmission Services, Inc. dated April 9, 1997, for the state
of Georgia ("MCIm Interconnection Agreement - Georgia");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Georgia and BellSouth hereby agree as
follows:
1 . Knology - Georgia and BellSouth shall adopt in its entirety the
MCIM Interconnection Agreement dated April 9, 1997 and any and all amendments to
said agreement executed and approved by the appropriate state regulatory
commission as of the date of the execution of this Agreement. The MCIm
Interconnection Agreement and all amendments are attached hereto as Exhibit 1
and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 7
Page 2
3. BellSouth and Knology - Georgia shall accept and incorporate into
this Agreement any amendments to the MCIm Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 8
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
Georgia, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 9
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - GEORGIA
<PAGE> 10
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Florida"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Florida has requested that BellSouth make available
the interconnection agreement in its entirety executed between BellSouth and
MCimetro Access Transmission Services, Inc. dated June 19, 1997, for the state
of Florida ("MCIm Interconnection Agreement -Florida");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Florida and BellSouth hereby agree as
follows:
1 . Knology - Florida and BellSouth shall adopt in its entirety the
MCIm Interconnection Agreement dated June 19, 1997 and any and all amendments to
said agreement executed and approved by the appropriate state regulatory
commission as of the date of the execution of this Agreement. The MCIm
Interconnection Agreement and all amendments are attached hereto as Exhibit 1
and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 11
Page 2
3. BellSouth and Knology - Florida shall accept and incorporate into
this Agreement any amendments to the MCIm Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall
have designated by written notice to the other Party. Where specifically
required, notices shall be by certified or registered mail. Unless otherwise
provided in this Agreement, notice by mail shall be effective on the date it is
officially recorded as delivered by return receipt or equivalent, and in the
absence of such record of delivery, it shall be presumed to have been delivered
the fifth day, or next business day after the fifth day, after it was deposited
in the mails.
<PAGE> 12
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
Florida, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 13
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - FLORIDA
<PAGE> 14
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Kentucky"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Kentucky has requested that BellSouth make available
the interconnection agreement in its entirety executed between BellSouth and
MCImetro Access Transmission Services, Inc. dated August 21, 1997, for the state
of Kentucky ("MCIm Interconnection Agreement -Kentucky");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Kentucky and BellSouth hereby agree
as follows:
1 . Knology - Kentucky and BellSouth shall adopt in its entirety the
MCIM Interconnection Agreement dated August 21, 1997 and any and all amendments
to said agreement executed and approved by the appropriate state regulatory
commission as of the date of the execution of this Agreement. The MCIm
Interconnection Agreement and all amendments are attached hereto as Exhibit 1
and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 15
Page 2
3. BellSouth and Knology - Kentucky shall accept and incorporate into
this Agreement any amendments to the MCIm Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Wait Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall
have designated by written notice to the other Party. Where specifically
required, notices shall be by certified or registered mail. Unless otherwise
provided in this Agreement, notice by mail shall be effective on the date it is
officially recorded as delivered by return receipt or equivalent, and in the
absence of such record of delivery, it shall be presumed to have been delivered
the fifth day, or next business day after the fifth day, after it was deposited
in the mails.
<PAGE> 16
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
<PAGE> 17
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - KENTUCKY
<PAGE> 18
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Louisiana"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act') was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Louisiana has requested that BellSouth make
available the Interconnection agreement in its entirety executed between
BellSouth and MCImetro Access Transmission Services, Inc. dated August 7, 1997,
for the state of Louisiana ("MCIm Interconnection Agreement -Louisiana");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Louisiana and BellSouth hereby agree
as follows:
1 . Knology - Louisiana and BellSouth shall adopt in its entirety the
MCIm Interconnection Agreement dated August 7, 1997 and any and all amendments
to said agreement executed and approved by the appropriate state regulatory
commission as of the date of the execution of this Agreement. The MCIm
Interconnection Agreement and all amendments are attached hereto as Exhibit 1
and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 19
Page 2
3. BellSouth and Knology - Louisiana shall accept and incorporate into
this Agreement any amendments to the MCIm Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 20
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccoucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
Louisiana, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 21
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - LOUISIANA
<PAGE> 22
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Mississippi"), on behalf of itself and its successors and assigns,
having an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Mississippi has requested that BellSouth make
available the interconnection agreement in its entirety executed between
BellSouth and MCImetro Access Transmission Services, Inc. dated September 24,
1997, for the state of Mississippi ("MCIm Interconnection Agreement -
Mississippi");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology -Mississippi and BellSouth hereby agree
as follows:
1 . Knology - Mississippi and BellSouth shall adopt in its entirety the
MCIm Interconnection Agreement dated September 24, 1997 and any and all
amendments to said agreement executed and approved by the appropriate state
regulatory commission as of the date of the execution of this Agreement. The
MCIm Interconnection Agreement and all amendments are attached hereto as Exhibit
1 and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 23
Page 2
3. BellSouth and Knology - Mississippi shall accept and incorporate
into this Agreement any amendments to the MCIm Interconnection Agreement
executed by the parties thereto as a result of any final judicial, regulatory,
or legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 24
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccocci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccocci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
<PAGE> 25
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - MISSISSIPPI
<PAGE> 26
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-North Carolina"), on behalf of itself and its successors and assigns,
having an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology -,North Carolina has requested that BellSouth make
available the interconnection agreement in its entirety executed between
BellSouth and MCImetro Access Transmission Services, Inc. dated April 28, 1997,
for the state of North Carolina ("MCIm Interconnection Agreement - North
Carolina");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - North Carolina and BellSouth hereby
agree as follows:
1 . Knology - North Carolina and BellSouth shall adopt in its entirety
the MCIm Interconnection Agreement dated April 28, 1997 and any and all
amendments to said agreement executed and approved by the appropriate state
regulatory commission as of the date of the execution of this Agreement. The
MCIm Interconnection Agreement and all amendments are attached hereto as Exhibit
1 and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 27
Page 2
3. BellSouth and Knology - North Carolina shall accept and incorporate
into this Agreement any amendments to the MCIm Interconnection Agreement
executed by the parties thereto as a result of any final judicial, regulatory,
or legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 28
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
<PAGE> 29
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - NORTH CAROLINA
<PAGE> 30
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-South Carolina"), on behalf of itself and its successors and assigns,
having an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - South Carolina has requested that BellSouth make
available the interconnection agreement in its entirety executed between
BellSouth and MCImetro Access Transmission Services, Inc. dated September 18,
1997, for the state of South Carolina ("MCIm Interconnection Agreement - South
Carolina");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - South Carolina and BellSouth hereby
agree as follows:
1 . Knology - South Carolina and BellSouth shall adopt in its entirety
the MCIm Interconnection Agreement dated September 18, 1997 and any and all
amendments to said agreement executed and approved by the appropriate state
regulatory commission as of the date of the execution of this Agreement. The
MCIm Interconnection Agreement and all amendments are attached hereto as Exhibit
1 and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 31
Page 2
3. BellSouth and Knology - South Carolina shall accept and incorporate
into this Agreement any amendments to the MCim Interconnection Agreement
executed by the parties thereto as a result of any final judicial, regulatory,
or legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 32
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
South Carolina, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 33
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - SOUTH CAROLINA
<PAGE> 34
Page 1
INTERCONNECTION AGREEMENT
This Agreement, which shall become effective as of the 1st day of
March, 1999, is entered into by and between Knology Holdings, Inc., a Delaware
corporation, together with its affiliate(s) signatory hereto, (collectively
"Knology-Tennessee"), on behalf of itself and its successors and assigns, having
an office at 1241 O.G. Skinner Drive, West Point, Georgia, and BellSouth
Telecommunications, Inc., ("BellSouth"), a Georgia corporation, having an office
at 675 W. Peachtree Street, Atlanta, Georgia, 30375, on behalf of itself and its
successors and assigns.
WHEREAS, the Telecommunications Act of 1996 (the "Act") was signed into
law on February 8, 1996; and
WHEREAS, section 252(i) of the Act and as required by the FCC rules and
regulations requires BellSouth to make available any interconnection, service,
or network element provided under an agreement approved by the appropriate state
regulatory body to any other requesting telecommunications carrier upon the same
terms and conditions as those provided in the agreement; and
WHEREAS, Knology - Tennessee has requested that BellSouth make
available the interconnection agreement in its entirety executed between
BellSouth and MCImetro Access Transmission Services, Inc. dated April 4, 1997,
for the state of Tennessee ("MCIm Interconnection Agreement - Tennessee");
NOW, THEREFORE, in consideration of the promises and mutual covenants
of this Agreement and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Knology - Tennessee and BellSouth hereby agree
as follows:
1 . Knology - Tennessee and BellSouth shall adopt in its entirety the
MCIm Interconnection Agreement dated April 4, 1997 and any and all amendments to
said agreement executed and approved by the appropriate state regulatory
commission as of the date of the execution of this Agreement. The MCIm
Interconnection Agreement and all amendments are attached hereto as Exhibit 1
and incorporated herein by this reference.
2. The term of this Agreement shall be from the effective date as set
forth above and shall expire as set forth in section 3 of the MCIm
Interconnection Agreement.
<PAGE> 35
Page 2
3. BellSouth and Knology - Tennessee shall accept and incorporate into
this Agreement any amendments to the MCim Interconnection Agreement executed by
the parties thereto as a result of any final judicial, regulatory, or
legislative action.
4. Every notice, consent, approval, or other communications required or
contemplated by this Agreement shall be in writing and shall be delivered in
person or given by postage prepaid mail, address to:
BellSouth Telecommunications, Inc.
CLEC Account Team
9th Floor
600 North 19th Street
Birmingham, Alabama 35203
and
General Attorney - COU
Suite 4300
675 W. Peachtree St.
Atlanta, GA 30375
Knology Holdings, Inc.
Chad Wachter, Esq
Vice President and General Counsel
Knology Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
and
Walt Sapronov, Esq.
Gerry, Friend & Sapronov, LLP
Three Ravinia Drive, Suite 1450
Atlanta, Georgia 30346-2131
or at such other address as the intended recipient previously shall have
designated by written notice to the other Party. Where specifically required,
notices shall be by certified or registered mail. Unless otherwise provided in
this Agreement, notice by mail shall be effective on the date it is officially
recorded as delivered by return receipt or equivalent, and in the absence of
such record of delivery, it shall be presumed to have been delivered the fifth
day, or next business day after the fifth day, after it was deposited in the
mails.
<PAGE> 36
Page 3
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
through their duly authorized representatives.
BellSouth Telecommunications, Inc. Knology Holdings Inc.
/s/ Jerry D. Hendrix /s/ Felix L. Boccucci
- ------------------------------ -------------------------
Signature Signature
Jerry D. Hendrix Felix L. Boccucci
- ------------------------------ -------------------------
Name Name
3/5/99 March 3, 1999
- ------------------------------ -------------------------
Date Date
Knology of
Tennessee, Inc. ("Affiliate")
/s/ Felix L. Boccucci
-------------------------
Signature
Felix L. Boccucci
-------------------------
Name
March 3, 1999
-------------------------
Date
<PAGE> 37
Page 4
EXHIBIT "1"
MCI INTERCONNECTION AGREEMENT - TENNESSEE
<PAGE> 1
EXHIBIT 10.48
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted are marked with
brackets ("[ ]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
SOUTH CAROLINA NET
CARRIER TERMINATION RATES
for
[SCN LOGO] TTE
Dedicated Carrier Termination Rates
Two Year Term Agreement
SCNet will rate for September 1, 1997 Traffic and new rates will appear on
October 10, 199 provided term agreement is signed with SCNet by TTE no later
than August 15, 1997.
Credit will be given based on manual adjustment retro to June 1, 1997.
This offer supersedes all previous offers from SCNet.
Domestic Outbound - 6 Second Minimum/6 Second Increments
<TABLE>
<CAPTION>
RBOC RBOC
Interstate Interstate
Intrastate On-Net Off-Net
Monthly Monthly (SC) Monthly Monthly Monthly
Minutes Minutes Rate/ Rate/ Rate/
Minimum Maximum Minute Minute Minute
- --------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
1,000,001 2,000,000 $ [ ] $ [ ] $ [ ]
2,000,001 3,000,000 $ [ ] $ [ ] $ [ ]
3,000,001 4,000,000 $ [ ] $ [ ] $ [ ]
4,000,001 5,000,000 $ [ ] $ [ ] $ [ ]
5,000,001 + $ [ ] $ [ ] $ [ ]
</TABLE>
<PAGE> 2
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
SCNET ON-NET CITIES
<S> <C> <C>
420 Asheville North Carolina
422 Charlotte North Carolina
424 Greensboro North Carolina
426 Raleigh North Carolina
428 Wilmington North Carolina
430 Greenville South Carolina
432 Florence South Carolina
434 Columbia South Carolina
436 Charleston South Carolina
438 Atlanta Georgia
440 Savannah Georgia
442 Augusta Georgia
949 Fayetteville North Carolina
951 Rocky Mount North Carolina
</TABLE>
If traffic terminated in Independent LEC territories exceed 20% of total
minutes in any month, TTE shall pay a per minute surcharge of $[ ] for
terminating traffic to SCNet.
<PAGE> 3
[ ] - CONFIDENTIAL TREATMENT REQUESTED
DEDICATED CARRIER TERMINATION RATES
TWO YEAR TERM AGREEMENT
Domestic Inbound - 6 Second Minimum/6 Second Increments
<TABLE>
<CAPTION>
Intrastate (SC) Interstate
Monthly Monthly Monthly Monthly
Minutes Minutes Rate/ Rate/
Minimum Maximum Minute Minute
------- ------- --------------- ----------
<S> <C> <C> <C>
1,000,001 2,000,000 [ ] [ ]
2,000,001 3,000,000 [ ] [ ]
3,000,001 4,000,000 [ ] [ ]
4,000,001 5,000,000 [ ] [ ]
5,000,001 + [ ] [ ]
</TABLE>
<PAGE> 4
[ ] - CONFIDENTIAL TREATMENT REQUESTED
SWITCHLESS RATES
TWO YEAR TERM AGREEMENT
DOMESTIC OUTBOUND - 6 SECOND MINIMUM/6 SECOND INCREMENTS
<TABLE>
<CAPTION>
MONTHLY
RATE
SWITCHLESS SWITCHED MINUTE
- ------------------- -------
<S> <C>
Intrastate(807) $[ ]
Intrastate WAL (807) $[ ]
Interstate (807) $[ ]
Interstate (807) $[ ]
DOMESTIC INBOUND - 6 SECOND MINIMUM/6 SECOND INCREMENTS
SWITCHLESS SWITCHED
- -------------------
<S> <C>
Intrastate(807) $[ ]
Intrastate WAL (807) $[ ]
Interstate (807) $[ ]
Interstate (807) $[ ]
SWITCHLESS DEDICATED (OUTBOUND AND INBOUND) $[ ]
</TABLE>
EXTENDED CALL COVERAGE (OFF-SHORE)- 18 SECOND MINIMUM/6 SECOND INCREMENTS
ALASKA, HAWAII, PUERTO RICO AND THE US VIRGIN ISLANDS
<TABLE>
<CAPTION>
MONTHLY
RATE
MINUTE
---------
<S> <C>
Outbound $[ ]
800 Service $[ ]
Directory Assistance-USA COST/CALL
Interstate/Call $[ ]
</TABLE>
<PAGE> 5
[ ] - CONFIDENTIAL TREATMENT REQUESTED
International, Canada and Mexico
CANADIAN OUTBOUND - 30 SECOND MINIMUM/6 SECOND INCREMENTS
<TABLE>
<CAPTION>
PEAK OFF-PEAK
COUNTRY RATE/MIN RATE/MIN
- ------- -------- --------
<S> <C> <C>
Canada 1 $[ ] $[ ]
Canada 19 $[ ] $[ ]
Canada 81 $[ ] $[ ]
Canada 141 $[ ] $[ ]
Canada 221 $[ ] $[ ]
Canada 346 $[ ] $[ ]
Canada 631 $[ ] $[ ]
Canada 1201 $[ ] $[ ]
Canada 1610 $[ ] $[ ]
CANADIAN 800 COST/MIN
All Bands $[ ]
</TABLE>
MEXICO-60 SECOND MINIMUM/60 SECOND INCREMENTS
<TABLE>
<CAPTION>
PEAK OFF-PEAK
COUNTRY RATE/MIN RATE/MIN
- ------- -------- --------
<S> <C> <C>
Mexico 1 $[ ] $[ ]
Mexico 2 $[ ] $[ ]
Mexico 3 $[ ] $[ ]
Mexico 4 $[ ] $[ ]
Mexico 5 $[ ] $[ ]
Mexico 6 $[ ] $[ ]
Mexico 7 $[ ] $[ ]
Mexico 8 $[ ] $[ ]
INTERNATIONAL (OFF-SHORE)- 30 SECOND MINIMUM/6 SECOND INCREMENTS
COUNTRY CODE RATE/MIN
- ------- ---- --------
ALBANIA 355 [ ]
AMERICAN SOMOA 684 [ ]
ANDORRA 33 [ ]
ANGOLA 244 [ ]
ANGUILLA 809 [ ]
</TABLE>
<PAGE> 6
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COUNTRY CODE RATE/MIN
- ------- ---- --------
<S> <C> <C>
ANARTICA/Casey 672 $[ ]
ANTARTICA/SCT 672 $[ ]
ANTIGUA 809 $[ ]
ARGENTINA 54 $[ ]
ARMENIA 374 $[ ]
ARUBA 297 $[ ]
ASCENSION ISLE 247 $[ ]
AUSTRALIA 61 $[ ]
AUSTRIA 43 $[ ]
AZERBAIJAN 994 $[ ]
BAHAMAS 809 $[ ]
BAHRAIN 973 $[ ]
BANGLADESH 880 $[ ]
BARBADOS 809 $[ ]
BELARUS 375 $[ ]
BELGIUM 32 $[ ]
BELIZE 501 $[ ]
BENIN 229 $[ ]
BERMUDA 809 $[ ]
BHUTAN 975 $[ ]
BOLIVIA 591 $[ ]
BOSNIA-HERZ 387 $[ ]
BOTSWANA 267 $[ ]
BRAZIL 55 $[ ]
BRIT.V.I. 809 $[ ]
BRUNEI 673 $[ ]
BULGARIA 359 $[ ]
BURUNDI 257 $[ ]
CAMBODIA 855 $[ ]
CAMEROON 237 $[ ]
CAPE VERDE ISL 238 $[ ]
CAYMAN ISLE 809 $[ ]
CEN. AFR REP 236 $[ ]
CHAD 235 $[ ]
CHILE 56 $[ ]
CHINA 86 $[ ]
CHRISTMAS 672 $[ ]
COCO 672 $[ ]
COLOMBIA 57 $[ ]
CONGO 242 $[ ]
COOK ISLE 682 $[ ]
COSTA RICA 506 $[ ]
CROATIA 385 $[ ]
CYPRUS 357 $[ ]
CZECH REP 42 $[ ]
DENMARK 45 $[ ]
</TABLE>
<PAGE> 7
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COUNTRY CODE RATE/MIN
- ------- ---- --------
<S> <C> <C>
DIEGO GARCIA 246 $[ ]
DJIBOUTI 253 $[ ]
DOMINICA 809 $[ ]
DOMINICAN REP 809 $[ ]
ECUADOR 593 $[ ]
EGYPT 20 $[ ]
EL SALVADOR 503 $[ ]
EQUI GUINEA 240 $[ ]
ERITREA 291 $[ ]
ESTONIA 372 $[ ]
ETHIOPIA 251 $[ ]
FAEROE ISL 298 $[ ]
FALKLAND ISL 500 $[ ]
FIJI ISLES 679 $[ ]
FINLAND 358 $[ ]
FR ANTILLES 596 $[ ]
FR GUIANA 594 $[ ]
FR POLYNISIA 689 $[ ]
FRANCE 33 $[ ]
GABON 241 $[ ]
GAMBIA 220 $[ ]
GEORGIA 995 $[ ]
GERMANY 49 $[ ]
GHANA 233 $[ ]
GIBRALTAR 350 $[ ]
GREECE 30 $[ ]
GREENLAND 299 $[ ]
GRENADA 809 $[ ]
GUADELOUPE 590 $[ ]
GUAM 671 $[ ]
GUANTANAMO BAY 539 $[ ]
GUATEMALA 502 $[ ]
GUINEA 224 $[ ]
GUINEA BISSAU 245 $[ ]
GUYANA 592 $[ ]
HAITI 509 $[ ]
HONDURAS 504 $[ ]
HONG KONG 852 $[ ]
HUNGARY 36 $[ ]
ICELAND 354 $[ ]
INDIA 91 $[ ]
INDONESIA 62 $[ ]
IRAN 98 $[ ]
IRAQ 964 $[ ]
IRELAND 353 $[ ]
ISRAEL 972 $[ ]
</TABLE>
<PAGE> 8
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COUNTRY CODE RATE/MIN
- ------------- ---- --------
<S> <C> <C>
ITALY 39 $[ ]
IVORY COAST 225 $[ ]
JAMAICA 809 $[ ]
JAPAN 81 $[ ]
JORDAN 962 $[ ]
KAZAKHSTAN 732 $[ ]
KENYA 254 $[ ]
KIRIBATI 686 $[ ]
KOREA 82 $[ ]
KUWAIT 965 $[ ]
LAOS 856 $[ ]
LATVIA 371 $[ ]
LEBANON 961 $[ ]
LESOTHO 266 $[ ]
LIBERIA 231 $[ ]
LIBYA 218 $[ ]
LITHUANIA 370 $[ ]
LUXEMBOURG 352 $[ ]
MACAO 853 $[ ]
MACEDONIA 389 $[ ]
MADAGASCAR 261 $[ ]
MALAWI 265 $[ ]
MALAYSIA 60 $[ ]
MALDIVES 960 $[ ]
MALI REP 223 $[ ]
MARSHALL ISLE 692 $[ ]
MAURITANIA 222 $[ ]
MAURITIUS 230 $[ ]
MAYOTTE ISLE 269 $[ ]
MICRONESIA 691 $[ ]
MOLDOVA 373 $[ ]
MONACO 33 $[ ]
MONGOLIA 976 $[ ]
MONTSERRAT 809 $[ ]
MOROCCO 212 $[ ]
MOZAMBIQUE 258 $[ ]
MYANMAR 95 $[ ]
NAMBIA 264 $[ ]
NAURU 674 $[ ]
NEPAL 977 $[ ]
NETH ANTILLES 599 $[ ]
NETHERLANDS 31 $[ ]
NEVIS 809 $[ ]
NEW CALEDONIA 687 $[ ]
NEW ZEALAND 64 $[ ]
NICARAGUA 505 $[ ]
</TABLE>
<PAGE> 9
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COUNTRY CODE RATE/MIN
- --------------------- ---- --------
<S> <C> <C>
NIGER 227 $[ ]
NIGERIA 234 $[ ]
NORWAY 47 $[ ]
OMAN 968 $[ ]
PAKISTAN 92 $[ ]
PALAU 680 $[ ]
PANAMA 507 $[ ]
PAPUA N. GUINEA 675 $[ ]
PARAGUAY 595 $[ ]
PERU 51 $[ ]
PHILIPPINES 63 $[ ]
POLAND 48 $[ ]
PORTUGAL 351 $[ ]
QATAR 974 $[ ]
REUNION ISLE 262 $[ ]
ROMANIA 40 $[ ]
RUSSIA 7 $[ ]
RWANDA 250 $[ ]
SAIPAN 670 $[ ]
SAN MARINO 39 $[ ]
SAO TOME 239 $[ ]
SAUDI ARABIA 966 $[ ]
SENEGAL 221 $[ ]
SEYCHELLES ISLE 248 $[ ]
SIERRA LEONE 232 $[ ]
SINGAPORE 65 $[ ]
SLOVAKIA 42 $[ ]
SLOVENIA 386 $[ ]
SOLOMON ISLE 677 $[ ]
SOUTH AFRICA 27 $[ ]
SPAIN 34 $[ ]
SRI LANKA 94 $[ ]
ST HELENA 290 $[ ]
ST KITTS 809 $[ ]
ST LUCIA 809 $[ ]
ST PIERRE 508 $[ ]
ST VINCENT 809 $[ ]
SUDAN 249 $[ ]
SURINAME 597 $[ ]
SWAZILAND 268 $[ ]
SWEDEN 46 $[ ]
SWITZERLAND 41 $[ ]
SYRIA 963 $[ ]
TADJIKISTAN 7 $[ ]
TAIWAN 886 $[ ]
TANZANIA 255 $[ ]
</TABLE>
<PAGE> 10
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
Country Code Rate/Min
- ------- ---- --------
<S> <C> <C>
THAILAND 66 $[ ]
TOGO 228 $[ ]
TONGA 676 $[ ]
TRINIDAD 809 $[ ]
TUNISIA 216 $[ ]
TURKEY 90 $[ ]
TURKMENISTAN 7 $[ ]
TURKS/CAICOS 809 $[ ]
TUVALU 688 $[ ]
UAE 971 $[ ]
UGANDA 256 $[ ]
UKRAINE 285 $[ ]
UNITED KINGDOM 44 $[ ]
URUGUAY 598 $[ ]
UZBEKISTAN 7 $[ ]
VANUATU 678 $[ ]
VATICAN CITY 39 $[ ]
VENEZUELA 58 $[ ]
VIETNAM 84 $[ ]
WALLIS/FUT 681 $[ ]
WEST SOMOA 685 $[ ]
YEMEN 967 $[ ]
ZAIRE 243 $[ ]
ZAMBIA 260 $[ ]
ZIMBABWE 263 $[ ]
</TABLE>
<PAGE> 1
EXHIBIT 10.50
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted are marked
with brackets ("[ ]"). The omitted material has been filed separately with
the Securities and Exchange Commission.
[BTI TELECOMMUNICATIONS SERVICES LOGO]
CARRIER SERVICES AGREEMENT
This Agreement, dated SEPTEMBER, 9TH, 1998, is between BUSINESS TELECOM, INC., a
North Carolina corporation with its principal office at 4300 Six Forks Road,
Raleigh, North Carolina 27609, hereinafter called "BTI" and KNOLOGY HOLDINGS,
INC. hereinafter called "CUSTOMER" located at 1241 O.G. Skinner Drive, West
Point, GA. 31833.
WITNESSED:
BTI agrees to provide telecommunications services, attached hereto and
incorporated herein, to Customer on the following terms and conditions, and
Customer hereby agrees to accept such services pursuant to this Agreement.
1. Entire Agreement. This Agreement covers the entire understanding of the
parties and any oral representations or agreements are hereby merged in
this Agreement upon its execution.
2. Agreement Modifications. This Agreement may be modified only by mutual
consent and in writing, with notice to BTI sent to:
BTI
PRESIDENT & CHIEF OPERATING OFFICER
4300 SIX FORKS ROAD, SUITE 900
RALEIGH, NORTH CAROLINA 27609
and notice to Customer sent to:
KNOLOGY HOLDINGS, INC.
ATTN: GENERAL COUNSEL
O.G. SKINNER DRIVE
WEST POINT, GA 31833
3. Scope of Agreement. BTI agrees to provide Customer with
telecommunications services to include, but not limited to:
A. Domestic Termination and Directory Assistance Services, as per
Exhibit B
B. 800 Transport and RespOrg Services, as per Exhibit C
C. International Services, as per Exhibit D
D. Payphone Owner Compensation, as per Exhibit E
4. Nondisclosure. Either party shall not disclose to any third party
during the service term any of the terms and conditions set forth in
this Agreement unless such disclosure is lawfully required by any
federal governmental agency or is otherwise required to be disclosed by
law or is necessary in any proceeding establishing rights and
obligations under this Agreement. Either party reserves the right to
terminate this Agreement immediately upon delivering written notice to
Customer of any unpermitted third party disclosure thereunder.
5. No-Waiver. No term or provision of this Agreement shall be deemed
waived and no breach or default shall be deemed excused unless such
waiver or consent shall be in writing and signed by
1
<PAGE> 2
[ ] - CONFIDENTIAL TREATMENT REQUESTED
the party claimed to have waived or consented. No consent by any party
to, or waiver of, a breach or default by the other, whether expressed
or implied, shall constitute a consent to, waiver of, or excuse for any
different or subsequent breach or default.
6. Term. The term of this Agreement shall be effective, and its
obligations shall commence, upon the date of execution by the parties.
This Agreement shall be effective for a period of one (1) year from the
date of commencement of services hereof, notwithstanding violation of
nondisclosure clause of Agreement. This Agreement will be automatically
renewed for a six (6) month period after the expiration of the initial
or subsequent term. If either party desires to cancel this Agreement
after the initial or subsequent terms, it shall give the other party
notice of its intent to cancel at least ninety (90) days prior to the
expiration of the term. This Agreement shall continue and remain in
full force and effect until canceled by either party under the
provisions for due notice contained herein.
7. Payment. Customer hereby acknowledges that billings are done on a
monthly basis for service at the rates described in the aforementioned
Exhibits and must be paid within thirty (30) days of date of bill by
Customer. If payment is not received by BTI within thirty (30) days,
Customer agrees to pay BTI a one and one-half percent (1.5%) late
charge on all outstanding balances. Furthermore, if payment of services
is past due, BTI also reserves the right to terminate service upon five
(5) days prior written notice to Customer. This termination does not
relieve Customer of payment performance for the period of time in which
service was actually provided (i.e., prior to termination).
8. Billing Disputes. Notwithstanding the foregoing, Customer may deduct
from BTI Service billings for amounts reasonably disputed by customer,
provided Customer: (i) pays all undisputed charges on or before the Due
Date, (ii) presents a written statement of any billing discrepancies to
BTI in reasonable detail on or before the Due Date of the invoice in
question, and (iii) negotiates in good faith with BTI for the purpose
of resolving such dispute. In the event such dispute is resolved in
favor of BTI, Customer agrees to pay BTI the disputed amounts together
with any late fees within fifteen (15) days of the resolution. In the
event the dispute cannot be resolved within a period of sixty (60) days
following the Due Date of the invoice in question (unless BTI has
agreed in writing to extend such period) the dispute will forwarded to
the Executive Offices of both BTI and the Customer. In the event the
dispute has not been resolved within fifteen (15) days following the
forwarding to Executive Management, either party may seek legal
remedies as defined in SECTION 14 of this agreement. BTI shall not be
obligated to consider any Customer notice of billing discrepancies
which are received by BTI more than sixty (60) days following the Due
Date of the invoice in question. In the event that Customer fails to
pay an invoice in full because of a billing dispute, BTI shall have the
right to suspend all or any portion of the Service to Customer until
such time as the dispute is resolved.
9. Technical Standards and Requirements for Interconnection.
a. Access Facilities; Minimum Loading. BTI shall, to the extent
available and subject to BTI's standard terms and conditions,
provide space at its POP for interconnection of Customer
facilities. Customer shall use only DS-1 access facilities to
connect to BTI's POP facilities. Commencing on the first full
calendar month of service after installation of each DS-1,
Customer shall be required to maintain a [ ] minute per
month minimum loading requirement. Should Customer's usage
fall below the minimum loading requirement, Customer agrees to
pay BTI a shortfall penalty equal to the shortfall minutes
multiplied by a rate of $[ ] per minute. Furthermore, if
Customer does not maintain the minimum loading requirements
BTI reserves the right to disconnect the access facilities.
b. Facility Installation. Customer must supply a Traffic Forecast and pay
a nonrecurring charge of $[ ] per DS-1 requested.
10. General Network Charges. Customer shall compensate BTI for the general
network services associated with the BTI Services as follows:
2
<PAGE> 3
[ ] - CONFIDENTIAL TREATMENT REQUESTED
a. Point-of-Presence Interconnects. Customer shall be responsible
for all costs and expenses, nonrecurring, recurring or
otherwise, associated with obtaining interconnection,
including cross connections if applicable, into the meet
points identified in EXHIBIT A.
b. Expedite Charges. Should Customer request expeditious service
and/or changes to orders, BTI will pass through the charges
assessed by any supplying parties involved at the same rate to
Customer.
11. Warranty. BTI will use its best efforts to maintain overall network
quality. The quality of the services provided hereunder shall be
consistent with other common carrier industry standards, government
regulations and sound business practices.
12. Indemnification. In no event will either party hereto be liable to the
other party for any indirect, special, incidental or consequential
losses or damages, including without limitation, loss of revenue, loss
of customers or clients, loss of goodwill or loss of profits arising in
any manner from this Agreement and the performance or nonperformance of
obligations hereunder.
13. Execution. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original. It shall not be necessary in
making proof of the Agreement to produce or account for more than one
of such counterparts.
14. Choice of Law/Forum. This Agreement is executed at Raleigh, North
Carolina, and shall be governed by the laws of the state of Delaware,
with venue at Raleigh, NC.
15. Partial Invalidity.
a. If any term or provision of this Agreement shall be found to
be illegal or unenforceable, then, notwithstanding such
illegality or unenforceability, this Agreement shall remain in
full force and effect and such term or provision shall be
deemed to be deleted.
b. In addition to the foregoing, this Agreement shall be
terminated upon a determination by a governmental entity
having jurisdiction over the services provided under this
Agreement and the relationship of the parties and/or services
provided hereunder are contrary to then existing law.
16. Cumulative Remedies. Except as otherwise provided herein, the remedies
provided for in this Agreement are in addition to any other remedies
available at law or otherwise.
17. Independent Telco Surcharge. An 80/20 rule applies to all traffic
terminating to or originating from Independent Telcos (Non-RBOC). If
traffic, originating from, or terminating to, Independent Telcos
exceeds 20% of all originating or terminating traffic, a $[ ] per
minute surcharge will apply to all minutes terminating or originating
to the Independent Telcos.
18. Rate Adjustments. BTI reserves the right to change either the rates
disclosed in this Agreement or any amendment to this Agreement upon
fifteen (15) days prior notification for Domestic Termination Services.
Customer may elect to terminate this Agreement upon written
notification of rate changes for Domestic Termination Services,
provided Customer gives notification of such election at least five (5)
days prior to effective date of such changes. BTI reserves the right to
change either the rates disclosed in this Agreement or any amendment to
this Agreement upon five (5) days prior notification for International
Termination Services.
19. Credit Limit. BTI reserves the right to establish a credit limit for
Customer to include but not be limited to all fees, charges and usage
(billed and/or unbilled). Customer's credit limit will be reviewed on a
monthly basis by the BTI Credit department and is subject to adjustment
at any time. When Customer has reached or exceeded the preset credit
limit, Customer will be notified via a phone call to the authorized
contact person, and phone number, as stated on the credit application.
The Customer will then have forty-eight (48) hours to cure the balance
via wire transfer. BTI reserves the right to disconnect facilities when
Customer has reached or exceeded
3
<PAGE> 4
the preset credit limit if Customer has not shown good faith to cure
the existing balance or if evidence of funding is not available.
20. Universal Service Fund. The Federal Communications Commission (FCC)
mandates all telecommunications carriers who provide interstate,
intrastate, and international telecommunications services to contribute
to various universal service support funds. Carriers are required to
complete a worksheet detailing gross billed revenues for submission to
the FCC on a semi-annual basis. Revenues from services provided to
Resellers are excluded from the funding base for determining Universal
Service Contributions of the underlying contributor. A reseller is
defined as a telecommunications service provider that:
(1) Incorporates the purchased telecommunications services into
its own offerings; and
(2) Can reasonably be expected to contribute to support Universal
Service based on revenues from these offerings.
BTI will not be reporting revenues received from Customer in its
funding base for determining Universal Service Contributions. As a
Reseller, Customer is responsible for remitting universal service
support payments directly to the Universal Service Fund Administrator.
21. Assignment. Not withstanding the foregoing, Customer may assign or
delegate its obligations hereunder to any affiliate or subsidiary of
Customer without the prior written consent of BTI, but upon reasonable
written notice to BTI. Such assignment shall not relieve Customer of
any obligations or liabilities hereunder. This Agreement shall be
binding upon and inure to the benefit of Customer and its successors
and assigns.
22. Length of Offer; Entire Agreement. This offer shall remain open and be
capable of being accepted by Customer until September 30, 1998. Any and
all prior agreements made with Customer, whether written or oral, shall
be superseded by this offer. Exclusive of any rates modifications
initiated by BTI, once this Agreement has been executed, any amendments
hereto must be made in writing and signed by both parties.
In witness whereof the parties hereto have executed this Agreement as of the day
and year first above written.
BTI Knology Holdings, Inc.
By: /s/ R. Michael Newkirk By: /s/
---------------------------- ----------------------------
R. Michael Newkirk
Title: President & Chief Operating Officer Title: General Counsel
-------------------------
Date: 9/25/98 Date: 9-15-98
---------------------------- --------------------------
4
<PAGE> 5
EXHIBIT A
INTERCONNECT FACILITIES
MEET POINT: BTI Atlanta and BTI Raleigh Switches.
Customer will provision and pay for facilities into the defined POP sites to
include local loops and all associated costs.
<TABLE>
<S> <C> <C>
X BTI Raleigh Switch 2111-103 Harrod Street, Raleigh, NC., 27604
- -----
X BTI Atlanta Switch 55 Park Place, Suite 360, Atlanta, GA., 30303
- -----
BTI Orlando Switch 201 S. Orange Avenue, Orlando, FL., 32801
- -----
BTI Dallas Switch 1201 Main Street, Dallas, TX., 75202
- -----
BTI New York Switch 60 Hudson Street, Suite 1010, New York, NY., 10013
- -----
</TABLE>
BTI Initial: /s/ Knology Holdings, Inc. Initial: /s/
------- -------
Date: 9/25/98 Date: 9-15-98
---------- ----------
5
<PAGE> 6
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
------------------------------------------------------------------
[BTI LOGO] EXHIBIT B - DOMESTIC TERMINATION RATES
------------------------------------------------------------------
BTI CARRIER TERMINATION PRICING SCHEDULE
------------------------------------------------------------------
Atlanta Dallas New York Orlando Raleigh
Lata Description State Meet Point Meet Point Meet Point Meet Point Meet Point
- ---- ----------- ----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
120 MAINE ME [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
122 NEW HAMPSHIRE NH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
124 VERMONT VT [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
126 W.MASS MA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
128 E.MASS (BOSTON) MA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
130 RHODE ISLAND RI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
132 NEW YORK METRO NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
133 POUGHKEEPSIE NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
134 ALBANY NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
136 SYRACUSE NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
138 BINGHAMPTON NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
140 BUFFALO NY [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
220 ATLANTIC COASTAL NJ [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
222 DELAWARE VALLEY NJ [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
224 NORTH JERSEY NJ [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
226 CAPITAL PA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
228 PHILADELPHIA PA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
230 ALTOONA PA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
232 NORTHEAST PA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
234 PITTSBURGH PA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
236 WASHINGTON DC [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
238 BALTIMORE MD [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
240 HAGERSTOWN MD [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
242 SALISBURY MD [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
244 ROANOKE VA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
246 CULPEPPER VA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
248 RICHMOND VA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
250 LYNCHBURG VA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
252 NORFOLK VA [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
254 CHARLESTON WV [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
256 CLARKSBURG WV [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
320 CLEVELAND OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
322 YOUNGSTOWN OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
324 COLUMBUS OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
325 AKRON OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
326 TOLEDO OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
328 DAYTON OH [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
330 EVANSVILLE IN [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
332 SOUTH BEND IN [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
334 AUBURN IN [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
336 INDIANAPOLIS IN [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
338 BLOOMINGTON IN [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
340 DETROIT MI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
342 UPPER PENINSULA MI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
344 SAGINAW MI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
346 LANSING MI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
348 GRAND RAPIDS MI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
350 NE/GREEN BAY WI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
352 NW/HOULTON WI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
354 SW/MADISON WI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
356 SE/MILWAUKEE WI [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
358 CHICAGO IL [ ] [ ] [ ] [ ] [ ]
-----------------------------------------------------------------
360 ROCKFORD IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
362 CAIRO IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
364 STERLING IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
366 FORREST IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
368 PEORIA IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
370 CHAMPAIGN IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
374 SPRINGFIELD IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
376 QUINCY IL [ ] [ ] [ ] [ ] [ ]
------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
[BTI LOGO] EXHIBIT B - DOMESTIC TERMINATION RATES
---------------------------------------------------------------------------
BTI CARRIER TERMINATION PRICING SCHEDULE
---------------------------------------------------------------------------
Atlanta Dallas New York Orlanda Raleigh
Lata Description State Meet Point Meet Point Meet Point Meet Point Meet Point
- ---- ----------- ----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
420 ASHEVILLE NC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
422 CHARLOTTE NC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
424 GREENSBORO NC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
426 RALEIGH NC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
428 WILMINGTON NC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
430 GREENVILLE SC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
432 FLORENCE SC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
434 COLUMBIA SC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
436 CHARLESTON SC [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
438 ATLANTA GA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
440 SAVANNAH GA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
442 AUGUSTA GA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
444 ALBANY GA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
446 MACON GA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
448 PENSACOLA FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
450 PANAMA CITY FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
452 JACKSONVILLE FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
454 GAINESVILLE FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
456 DAYTONA BEACH FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
458 ORLANDO FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
460 MIAMI FL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
462 LOUISVILLE KY [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
464 OWENSBORO KY [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
466 WINCHESTER KY [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
468 MEMPHIS TN [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
470 NASHVILLE TN [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
472 CHATTANOOGA TN [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
474 KNOXVILLE TN [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
476 BIRMINGHAM AL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
477 HUNTSVILLE AL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
478 MONTGOMERY AL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
480 MOBILE AL [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
482 JACKSON MS [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
484 BILOXI MS [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
486 SHREVEPORT LA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
488 LAFAYETTE LA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
490 NEW ORLEANS LA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
492 BATON ROUGE LA [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
520 ST LOUIS MO [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
521 WESTPHALIA MO [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
522 SPRINGFIELD MO [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
524 KANSAS CITY MO [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
526 FORT SMITH AR [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
528 LITTLE ROCK AR [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
530 PINE BLUFF AR [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
532 WICHITA KS [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
534 TOPEKA KS [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
536 OKLAHOMA CITY OK [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
538 TUSLA OK [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
540 EL PASO TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
542 MIDLAND TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
544 LUBBOCK TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
546 AMARILLO TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
548 WICHITA FALLS TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
550 ABILENE TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
552 DALLAS TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
554 LONGVIEW TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
556 WACO TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
558 AUSTIN TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
560 HOUSTON TX [ ] [ ] [ ] [ ] [ ]
---------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
----------------------------------------------------------------------
[BTI LOGO] EXHIBIT B - DOMESTIC TERMINATION RATES
----------------------------------------------------------------------
BTI CARRIER TERMINATION PRICING SCHEDULE
----------------------------------------------------------------------
Atlanta Dallas New York Orlando Raleigh
Lata Description State Meet Point Meet Point Meet Point Meet Point Meet Point
- ---- ----------- ----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
562 BEAUMONT TX [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
564 CORPUS CHRISTI TX [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
566 SAN ANTONIO TX [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
568 BROWNSVILLE TX [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
570 HEARNE TX [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
620 ROCHESTER MN [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
624 DULUTH MN [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
626 ST. CLOUD MN [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
628 MINNEAPOLIS MN [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
630 SIOUX CITY IA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
632 DES MOINES IA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
634 DAVENPORT IA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
635 CEDAR RAPIDS IA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
636 FARGO ND [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
638 BISMARK ND [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
640 SOUTH DAKOTA SD [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
644 OMAHA NE [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
646 GRAND ISLAND NE [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
648 GREAT FALLS MT [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
650 BILLINGS MT [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
652 IDAHO IO [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
654 WYOMING WY [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
656 DENVER CO [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
658 COLORADO SPRINGS CO [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
660 UTAH UT [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
664 NEW MEXICO NM [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
666 PHOENIX AZ [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
668 TUCSON AZ [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
670 EUGENE OR [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
672 PORTLAND OR [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
674 SEATTLE WA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
676 SPOKANE WA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
720 RENO NV [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
721 LAS VEGAS NV [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
722 SAN FRANCISCO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
724 CHICO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
726 SACREMENTO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
728 FRESNO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
730 LOS ANGELES CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
732 SAN DIEGO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
734 BAKERSFIELD CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
736 MONTERREY CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
738 STOCKTON CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
740 SAN LOUIS OBISPO CA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
820 PUERTO RICO US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
822 US VIRGIN ISLANDS US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
832 ALASKA US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
834 HAWAII US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
836 MIDWAY/WAKE US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
871 GUAM US [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
920 CONNECTICUT CT [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
921 FISHERS ISLAND [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
922 CINCINNATI OH [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
923 MANSFIELD OH [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
924 ERIE PA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
927 HARRISONBURG VA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
928 CHARLOTTESVILLE VA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
929 EDINBURG VA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
930 EPPS FORK VA [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
932 BLUEFIELD WV [ ] [ ] [ ] [ ] [ ]
----------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
[ ] - CONFIDENTIAL TREATMENT REQUESTED
[BTI LOGO]
<TABLE>
<CAPTION>
Lata Description State
---- ----------- -----
<S> <C> <C>
937 RICHMOND IN
938 TERRE HAUTE IN
939 FORT MYERS FL
949 FATETTEVILLE NC
951 ROCKY MOUNT NC
952 TAMPA FL
953 TALLAHASSEE FL
956 BRISTOL TN
958 LINCOLN NE
960 COEUR D'ALENE ID
961 SAN ANGELO TX
963 KALISPELL MT
973 PALM SPRINGS CA
974 ROCHESTER NY
976 MATTOON IL
977 GALESBURG IL
978 OLNEY IL
980 NAVAJO AZ
INTRASTATE US
</TABLE>
EXHIBIT B -- DOMESTIC TERMINATION RATES
<TABLE>
<CAPTION>
BTI CARRIER TERMINATION PRICING SCHEDULE
Atlanta Dallas New York Orlando Raleigh
Meet Point Meet Point Meet Point Meet Point Meet Point
<S> <C> <C> <C> <C>
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
[ ] [ ] [ ] [ ] [ ]
</TABLE>
BTI Knology Communications, Inc.
INITIAL _____ INITIAL____
DATE 9/25/98 DATE 9-15-98
-------- -------
9
<PAGE> 10
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
DIRECTORY ASSISTANCE RATES
<TABLE>
------------------------------------------
<S> <C>
Pennsylvania $[ ]
New York $[ ]
New Jersey $[ ]
Delaware $[ ]
Maryland $[ ]
Virginia $[ ]
North Carolina $[ ]
South Carolina $[ ]
Tennessee $[ ]
Georgia $[ ]
Florida $[ ]
Alabama $[ ]
Mississippi $[ ]
Louisiana $[ ]
Kentucky $[ ]
Texas $[ ]
D.C. $[ ]
Continental US $[ ]
AL, HI, PR, US VI $[ ]
Guam, Midway/WK $[ ]
------------------------------------------
</TABLE>
BTI Knology Holdings, Inc.
Initial: /s/ Initial: /s/
------ ------
Date: 9/25/98 Date: 9-15-98
--------- ---------
10
<PAGE> 11
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
800/888 TRANSPORT AND RESPORG SERVICES
<TABLE>
<CAPTION>
SERVICES RATE
- -------- ----
<S> <C>
800/888 On-Net Domestic Switched $[ ] per minute
800/888 Off-Net Domestic Switched $[ ] per minute
800/888 (AK, U.S. V.I., HI) $[ ] per minute
800/888 Canadian Switched $[ ] per minute
</TABLE>
800/888 services are billed in six (6) second increments with an eighteen (18)
second minimum.
<TABLE>
<CAPTION>
RESPORG CHARGES
- ---------------
<S> <C>
Monthly Fee $[ ] per number
</TABLE>
PAYPHONE SURCHARGES
- -------------------
PURSUANT TO SECTION 276 OF THE TELECOMMUNICATIONS ACT OF 1996, THE FEDERAL
COMMUNICATIONS COMMISSION HAS PRESCRIBED REGULATIONS THAT ESTABLISH A PER CALL
COMPENSATION PLAN TO ENSURE THAT ALL PAYPHONE SERVICE PROVIDERS ARE COMPENSATED
FOR COMPLETED INTRASTATE AND INTERSTATE CALLS. IF BTI IS REQUIRED TO PAY ANY
COMPENSATION TO PAYPHONE SERVICE PROVIDERS PURSUANT TO SECTION 276 OR SUCH
REGULATIONS WITH RESPECT TO THE SERVICES PURCHASED BY CUSTOMER UNDER THIS
AGREEMENT, BTI RESERVES THE RIGHT TO PASS-THROUGH TO CUSTOMER ALL OR A PORTION
OF SUCH CHARGES.
BTI Knology Holdings, Inc.
Initial: /s/ Initial: /s/
------ ------
Date: 9/25/98 Date: 9-15-98
--------- ---------
11
<PAGE> 12
EXHIBIT C
BTI 800/888 ON-NET LATAS
<TABLE>
<CAPTION>
LATA DESCRIPTION
---- -----------
<S> <C>
128 E. Mass, MA
132 New York, NY
134 Albany, NY
136 Syracuse, NY
224 North Jersey, NJ
228 Philadelphia, PA
230 Altoona, PA
234 Pittsburgh, PA
236 Washington, DC
238 Baltimore, MD
242 Salisbury, MD
244 Roanoke, VA
248 Richmond, VA
250 Lynchburg, VA
252 Norfolk, VA
320 Cleveland, OH
324 Columbus, OH
340 Detroit, MI
420 Asheville, NC
422 Charlotte, NC
424 Greensboro, NC
426 Raleigh, NC
428 Wilmington, NC
430 Greenville, NC
432 Florence, SC
434 Columbia, SC
436 Charleston, SC
438 Atlanta, GA
440 Savannah, GA
442 Augusta, GA
444 Albany, GA
446 Macon, GA
448 Pensacola, FL
452 Jacksonville, FL
454 Gainesville, FL
456 Daytona Beach, FL
458 Orlando, FL
460 Miami, FL
468 Memphis, TN
470 Nashville, TN
472 Chattanooga, TN
474 Knoxville, TN
476 Birmingham, AL
477 Huntsville, AL
478 Montgomery, AL
552 Dallas, TX
554 Longview, TX
556 Waco, TX
558 Austin, TX
560 Houston, TX
566 San Antonio, TX
666 Phoenix, AZ
668 Tucson, AZ
920 Hartford, CT
922 Cincinnati, OH
928 Charlottesville, VA
939 Fort Myers, FL
949 Fayetteville, NC
951 Rocky Mount, NC
952 Tampa, FL
953 Tallahassee, FL
956 Bristol, TN
</TABLE>
12
<PAGE> 13
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT D
DEDICATED INTERNATIONAL RATES
<TABLE>
<CAPTION>
COUNTRY COUNTRY CODE RATE/MINUTE COUNTRY COUNTRY CODE RATE/MINUTE
- ------- ------------ ----------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- ---------------------------------------------------------
AFGHANISTAN 93 $[ ] CENTRAL AFRICAN REP 236 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ALBANIA 355 $[ ] CHAD 235 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ALGERIA 21 $[ ] CHILE 56 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
AMERICAN SAMOA 684 $[ ] CHINA 86 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ANDORRA 376 $[ ] COLOMBIA 57 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ANGOLA 244 $[ ] COMOROS (MAYOTTE IS.) 269 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ANGUILLA 264 $[ ] CONGO 242 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ANTARTIC 672 $[ ] COOK ISLAND 682 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ANTIGUA 809 $[ ] COSTA RICA 506 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ARGENTINA 54 $[ ] CROATIA 385 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ARMENIA 374 $[ ] CUBA 53 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ARUBA 297 $[ ] CYPRUS 357 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ASCENSION ISLAND 247 $[ ] CZECHOSLOVAKIA 42 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
AUSTRALIA 61 $[ ] DENMARK 45 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
AUSTRIA 43 $[ ] DIEGO GARCIA 246 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
AZERBAIJAN 994 $[ ] DJIBOUTI 253 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BAHAMAS 242 $[ ] DOMINICA 767 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BAHRAIN 973 $[ ] DOMINICAN REPUBLIC 809 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BANGLADESH 880 $[ ] ECUADOR 593 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BARBADOS 246 $[ ] EGYPT 20 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BELARUS 375 $[ ] EL SALVADOR 503 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BELGIUM 32 $[ ] EQUATORIAL GUINEA 240 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BELIZE 501 $[ ] ERITREA 291 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BENIN 229 $[ ] ESTONIA 372 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BERMUDA 809 & 441 $[ ] ETHOPIA 251 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BHUTAN 975 $[ ] FAEROE ISLANDS 298 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BOLIVIA 591 $[ ] FALKLANDS 500 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BOSNIA & HERZEGOVINA 387 $[ ] FIJI ISLANDS 679 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BOTSWANA 267 $[ ] FINLAND 358 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BRAZIL 55 $[ ] FRANCE 33 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BRITISH VIRGIN IS. 284 $[ ] FRENCH ANT (MARTINIQUE) 596 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BRUNEI 673 $[ ] FRENCH GUIANA 594 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BULGARIA 359 $[ ] FRENCH POLYNESIA 689 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BURKINA FASO 226 $[ ] GABON REP. 241 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BURMA 95 $[ ] GAMBIA 220 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
BURUNDI 257 $[ ] GEORGIA, REP OF 995 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
CAMBODIA 855 $[ ] GERMANY 49 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
CAMEROON 237 $[ ] GHANA 233 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
CAPE VERDE ISLANDS 238 $[ ] GIBRALTAR 350 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
CAYMAN ISLANDS 345 $[ ] GREECE 30 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
</TABLE>
13
<PAGE> 14
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- ---------------------------------------------------------
GREENLAND 299 $[ ] MACAU 853 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GRENADA 473 $[ ] MACEDONIA 389 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUADELOUPE 590 $[ ] MADAGASCAR 261 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUAM 671 $[ ] MALAWI 265 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUANTANAMO BAY 53 $[ ] MALAYSIA 60 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUATEMALA 502 $[ ] MALDIVES 960 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUINEA 224 $[ ] MALI 223 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUINEA BISSAU 245 $[ ] MALTA 356 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
GUYANA 592 $[ ] MARSHALL ISLANDS 692 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
HAITI 509 $[ ] MAURITANIA 222 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
HONDURAS 504 $[ ] MAURITIUS 230 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
HONG KONG 852 $[ ] MICRONESIA 691 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
HUNGARY 36 $[ ] MOLDAVIA 373 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ICELAND 354 $[ ] MONACO 377 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INDIA 91 $[ ] MONGOLIA 976 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INDONESIA 62 $[ ] MONTSERRAT 664 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INMARISAT/ATL(EAST) 871 $[ ] MOROCCO 21 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INMARISAT/ATL(WEST) 874 $[ ] MOZAMBIQUE 258 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INMARISAT/INDIAN OCEAN 873 $[ ] NAMIBIA 264 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
INMARISAT/PACIFIC 872 $[ ] NAURU 674 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
IRAN 98 $[ ] NEPAL 977 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
IRAQ 964 $[ ] NETHERLANDS 31 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
IRELAND 353 $[ ] NETHERLANDS ANTIL 599 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ISRAEL 972 $[ ] NEVIS 1 (830) $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ITALY 39 $[ ] NEW CALENDONIA 687 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
IVORY COAST 225 $[ ] NEW ZEALAND 64 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
JAMAICA 876 $[ ] NICARAGUA 505 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
JAPAN 81 $[ ] NIGER REPUBLIC 227 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
JORDAN 962 $[ ] NIGERIA 234 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KAZAKHSTAN 732 $[ ] NIUE ISLAND 683 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KENYA 254 $[ ] NORWAY 47 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KIRIBATI 686 $[ ] OMAN 968 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KOREA, NORTH 850 $[ ] PAKISTAN 92 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KOREA, SOUTH 82 $[ ] PALAU 680 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KUWAIT 965 $[ ] PANAMA 507 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
KYRGYZSTAN 733 $[ ] PAPUA NEW GUINEA 675 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LAOS 856 $[ ] PARAGUAY 595 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LATVIA 371 $[ ] PERU 51 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LEBANON 961 $[ ] PHILIPPINES 63 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LESOTHO 266 $[ ] POLAND 48 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LIBERIA 231 $[ ] PORTUGAL 351 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LIBYAN ARAB PEOPLE 21 $[ ] QATAR 974 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LIECHTENSTEIN 41 $[ ] REUNION ISLAND 262 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LITHUANIA 370 $[ ] ROMANIA 40 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
LUXEMBOURG 352 $[ ] RUSSIAN FED (MOSCOW) 7 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
</TABLE>
14
<PAGE> 15
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- ---------------------------------------------------------
RWANDA 250 $[ ] UZBEKISTAN 736 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SAIPAN (MARIANA IS.) 670 $[ ] VANUATU 678 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SAN MARINO 378 $[ ] VATICAN CITY 379 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SAO TOME 239 $[ ] VENEZUELA 58 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SAUDI ARABIA 966 $[ ] VIETNAM 84 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SENEGAL REP. 221 $[ ] WALLIS & FORTUNA 681 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SEYCHELLES ISLAND 248 $[ ] WESTERN SAMOA 685 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SIERRA LEONE 232 $[ ] YEMEN ARAB REP. 967 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SINGAPORE 65 $[ ] YUGOSLAVIA 381 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SLOVAKIA 42 $[ ] ZAIRE 243 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SLOVENIA 386 $[ ] ZAMBIA 260 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SOLOMON ISLAND 677 $[ ] ZIMBABWE 263 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SOMALIA 252 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SOUTH AFRICA 27 $[ ] CANADA $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SPAIN 34 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SRI LANKA 94 $[ ] MEXICO Band 1 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ST. HELENA 290 $[ ] Band 2 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ST. KITTS 869 $[ ] Band 3 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ST. LUCIA 758 $[ ] Band 4 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ST. PIERRE/MIQUELON 508 $[ ] Band 5 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
ST. VINCENT/GRENADINES 784 $[ ] Band 6 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SUDAN 249 $[ ] Band 7 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SURINAME 597 $[ ] Band 8 $[ ]
- ---------------------------------------------------------- ---------------------------------------------------------
SWAZILAND 268 $[ ]
- ----------------------------------------------------------
SWEDEN 46 $[ ]
- ----------------------------------------------------------
SWITZERLAND 41 $[ ]
- ----------------------------------------------------------
SYRIAN ARAB 963 $[ ] All international traffic is billed in six (6) second
- ---------------------------------------------------------- increments with a thirty (30) second minimum.
TAIWAN 886 $[ ]
- ----------------------------------------------------------
TAJIKISTAN 7 $[ ]
- ----------------------------------------------------------
TANZANIA 255 $[ ] All Mexico traffic is billed in
- ---------------------------------------------------------- one (1) minute increments.
THAILAND 66 $[ ]
- ----------------------------------------------------------
TOGO 228 $[ ]
- ----------------------------------------------------------
TOKELAU 690 $[ ]
- ----------------------------------------------------------
TONGA 676 $[ ]
- ----------------------------------------------------------
TRINIDAD & TOBAGO 868 $[ ]
- ----------------------------------------------------------
TUNISIA 21 $[ ]
- ----------------------------------------------------------
TURKEY 90 $[ ]
- ----------------------------------------------------------
TURKMENISTAN 993 $[ ]
- ----------------------------------------------------------
TURKS & CAICOS IS. 649 $[ ]
- ----------------------------------------------------------
TUVALU 688 $[ ]
- ----------------------------------------------------------
UGANDA 256 $[ ] BTI Knology
- ----------------------------------------------------------
UKRAINE 380 $[ ] ----------------------------------------------------------
UNITED ARAB EMIRA 971 $[ ] Initial: /s/ Initial: /s/
- ---------------------------------------------------------- ----- -----
UNITED KINGDOM 44 $[ ]
- ----------------------------------------------------------
URUGUAY 598 $[ ] Date: 9/25/98 Date: 9-15-98
- ---------------------------------------------------------- -------- --------
</TABLE>
15
<PAGE> 16
EXHIBIT E
PAYPHONE OWNER COMPENSATION UNDERTAKING
The undersigned entity ("Customer") and Business Telecom, Inc., ("BTI")
have heretofore entered into an agreement ("Agreement") pursuant to which
Customer shall purchase telecommunications and related services from BTI ("BTI
Services"). Pursuant to 47 C.F.R. 64.1300 et. seq. and the Federal
Communications Commission ("FCC") Orders in CC Docket 96-128 ("Payphone
Orders"), facilities-based carriers are required to pay compensation to payphone
owners for each completed payphone call routed to the carrier ("payphone
charges"). Customer is providing this undertaking to BTI, or any successor in
interest, pursuant to 47 C.F.R. 64.1300 et. seq. and the FCC's Payphone Orders,
confirming that Customer is responsible for payment of payphone charges routed
to any of its switches.
Customer hereby certifies, represents, warrants and undertakes the
following:
1. Customer maintains its own switching capability and, thus, is
a facilities-bases carrier pursuant to 47 C.F.R. 64.1300 et. seq. and the FCC's
Payphone Orders.
2. As a facilities-based carrier, pursuant to 47 C.F.R. 64.1300
et. seq. and the FCC's Payphone Orders, Customer is responsible for accurately
tracking and computing compensation for every completed payphone originated call
routed to any switch maintained by Customer.
3. Customer will, in accordance with 47 C.F.R. 64.1300 et. seq.
and the FCC's Payphone Orders, track and pay compensation to the appropriate
payphone owner for each and every completed payphone originated call routed to
any of the switches it maintains.
4. Customer understands that because it is a facilities-based
carrier, BTI is not responsible for payment of any payphone charges arising from
payphone originated calls routed to any of Customer's switches and BTI and
Customer have no agreement that BTI will track and/or pay any payphone charges
on behalf of Customer.
5. Customer hereby agrees to indemnify, defend and hold harmless
BTI, its shareholders, affiliates, subsidiaries, successors and assigns
("indemnified parties") from any claims, losses, liabilities, fines, penalties,
charges and expenses (including reasonable attorneys fees) arising out of or
related to payphone charges that may be imposed upon such indemnified parties as
a result of: (1) any calls originated by Customer's end users at a payphone; or
(2) any payphone originated calls routed to any of Customer's switches.
6. Customer has received good and valid consideration for its
execution and delivery of this undertaking. This undertaking will be effective
as of the date BTI Services are provided to Customer.
IN WITNESS WHEREOF, the undersigned, as a duly authorized officer of
the Customer, does hereby execute and deliver this undertaking on behalf of the
Customer.
BTI Knology Holdings, Inc.
By: /s/ R. MICHAEL NEWKIRK By: /s/
---------------------- -------------------
R. Michael Newkirk
Date: 9/25/98 Date: 9-15-98
------------------ ------------------
16
<PAGE> 1
EXHIBIT 10.51
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted and marked
with brackets ("[ ]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
RESELLER SERVICES AGREEMENT
This AGREEMENT, dated September 9th, 1998, is between BUSINESS TELECOM,
INC.("BTI"), a North Carolina corporation with its principal offices at 4300 Six
Forks Road, Suite 500, Raleigh, NC 27609 and, KNOLOGY HOLDINGS, INC.,
("CUSTOMER") a long distance corporation with its principal offices at 1241 O.G.
Skinner Drive, West Point, GA. 31833.
RECITALS
BTI is in the business of providing long distance telecommunication services to
commercial and residential customers; and
CUSTOMER is in the business of purchasing long distance telecommunication
services and reselling the same to commercial and residential customers; and
THE PARTIES desire to enter into a business arrangement whereby BTI provides its
long distance services to Customer for Customer's resale in accordance with the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and obligations contained
herein the parties hereto agree as follows:
1. SERVICE AVAILABILITY.
1.1 Commencing on such dates (after the date first set forth above) as
may be mutually agreed upon by the parties hereto, BTI shall make certain
telecommunication services (which are defined in Section 2 below and which
collectively are called the "Services") available to Customer and/or customers
of Customer (such customers of Customer hereinafter referred to as "End-Users"),
in those areas where BTI, in its sole discretion, determines the Services to be
available.
1.2 The Customer understands and agrees that the Services may include
value added services that BTI makes available to its customer base, but that BTI
is not obligated to provide Customer or End-Users with any value added services.
2. SERVICE DEFINITIONS.
2.1 "Dedicated Services" consists of switched long distance traffic
delivered by Customer to a BTI Point of Presence ("POP") via dedicated
facilities and terminated by BTI over the BTI network. If Customer elects to
subscribe to the Dedicated Services, Customer shall be subject to the
requirements set forth herein, including Section 7.
2.2 "Switched Services" consists of switched long distance traffic
generated by End-Users that originates and terminates over the BTI Network.
End-Users of Switched Services are not connected to Customer's facilities and
have had their telephone lines presubscribed to BTI or to Customer's carrier
identification code. Customer understands and agrees that End-Users whose
telephone lines are presubscribed to BTI may be requested to call 1-700-555-XXXX
to confirm their long distance carrier and that they will hear a recording
identifying BTI as their long distance carrier. If requested by Customer on the
initial Subscription Checklist (defined at Subsection 5.1) submitted by
Customer, BTI shall provide Customer with an available 700 number
(1-700-555-XXXX) and the recorded message selected by Customer on said
Subscription Checklist that identifies Customer to its End-Users. BTI shall make
the 700 number available for Customer's use within fifteen business days after
receipt of said Subscription Checklist. BTI shall charge Customer a monthly
recurring charge as defined in EXHIBIT E.4.
2.3 "International Services" consists of International traffic
generated via the Dedicated or Switched Services and rated per EXHIBIT H.
2.4 "Directory Assistance Services" consists of directory assistance
traffic generated via the Dedicated and Switched Services at rates defined in
EXHIBIT E.1.
2.5 "Switched 800/888 Services" consists of inbound 800/888 traffic
generated via 800/888 telephone numbers assigned by BTI to Customer that
originates and terminates over the BTI network. All 800/888 traffic will be
rated at On-Net rates.
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<PAGE> 2
[ ] - CONFIDENTIAL TREATMENT REQUESTED
2.6 "Dedicated 800/888 Services" consists of inbound 800/888 traffic
generated via 800/888 telephone numbers assigned by BTI to Customer that
originates on the BTI network and is terminated by BTI onto an End-User's
dedicated facilities.
2.7 BTI shall provide "Enhanced 800/888 Services" as defined in EXHIBIT
D.2.
2.8 "Calling Card Services" consists of traffic generated via calling
card authorization codes assigned by BTI to Customer at rates defined in EXHIBIT
E.2.
2.9 The Switched 800/888 and Dedicated 800/888 Services are
collectively referred to as the "Inbound Services". If Customer elects to
subscribe to the Inbound Services, Customer shall be subject to the requirements
set forth herein, including Section 6.
2.10 BTI shall provide "Conference Calling Services" as defined in
EXHIBIT E.7.
2.11 BTI shall provide "Internet Access Services" as defined in EXHIBIT
E.8.
2.12 BTI shall provide "Voice Mail Services" as defined in EXHIBIT E.3.
2.13 For purposes of this Agreement, "month" shall equal the BTI
billing cycle described in Subsection 4.2 a.
2.14 "RBOC" shall mean Regional Bell Operating Company. The RBOC's are
defined as Bell South, Southwestern Bell, Ameritech, Pac Bell, US WEST, Nynex,
and Bell Atlantic.
2.15 "Independent Telco" shall mean any telephone company other than
RBOC's.
2.16 "On-Net Domestic Switched" refers to all states as defined in
EXHIBIT B.3.
2.17 "Off-Net Domestic Switched" refers to all states not listed on
EXHIBIT B.3 and excludes Alaska, Hawaii, Puerto Rico, and the Virgin Islands.
2.18 BTI shall provide "Project Codes" as defined in EXHIBIT E.5.
3. OPERATOR AND INTRALATA SERVICES.
3.1 Operator Services and 700/900 network calls which are made
available to End-Users by BTI shall be billed at standard BTI charges directly
by BTI either on the bill an End-Users receives from its local exchange carrier
(the "LEC") or from a BTI Billing agent. BTI shall not bill Customer for any
Operator Services provided to, or the 900 network calls made by, End-Users and
any revenues for such services and call received by BTI shall be retained solely
by BTI. Operator Services are defined as calls made via 00, 0- or 0+ calling
that require the assistance of an operator to complete, such as but not limited
to collect calls and bill-to-a-third-number calls. 700/900 network calls are
those calls made to various information providers utilizing telephone numbers
with 700 or 900 dialing sequences. BTI reserves the right to revise its rates
for Operator Services and 700/900 network calls at any time. Operator Services
and 700/800/888/900 network calls shall not be available with the Dedicated
Services.
3.2 In areas where Intralata service is permitted, BTI shall pass
through to Customer any State or Regulatory Compensation Settlement(s) and or
surcharge(s) which may be imposed by the state regulatory agency.
4. RATES AND CALL DETAIL RECORDS.
4.1 Customer shall purchase and pay for the "On-Net RBOC Domestic
Switched Services" as defined in EXHIBIT B.1, and/or "Domestic Dedicated
Services" as defined in EXHIBIT C.1, and/or "Additional Services" as defined in
EXHIBIT E, unless otherwise noted, which is made part hereof. "Off-Net RBOC
Domestic Switched Services" will be provided at the rates defined in EXHIBIT
B.1, unless otherwise noted. For independent ANI's, Customer shall pay a $[ ]
per minute surcharge when Customer's usage originating in Independent areas
exceeds twenty percent (20%) of Customer's total usage of the Service. BTI
reserves the right to revise the surcharges on a quarterly basis.
4.2 Customer shall have the option of receiving call detail records
("CDR") for usage of the Services on (i) a monthly basis, (ii) a pre-bill run
basis (one day a week), or (iii) no CDR at all. Customer may also elect both
options (i) and (ii), which are detailed below.
A. If Customer elects option (i), then within ten business
days following the end of the monthly BTI billing cycle to which Customer's
account has been assigned, BTI shall deposit with an overnight delivery service
for delivery to Customer a magnetic tape containing CDR for the Services (the
"CDR Tape"). Each CDR Tape shall represent "monthly" usage (approximately thirty
days of usage) of the Services. The CDR Tapes will rate the Services at the
standard BTI Rates in effect at the time the Services were provided. Customer
shall pay applicable CDR charges as defined in EXHIBIT E.3.
2
<PAGE> 3
B. If Customer elects option (ii), then BTI shall deliver the
CDR by electronic data exchange ("Electronic Exchange") to either Customer's
designated mainframe computer or dedicated personal computer for each pre-bill
computer run performed by BTI (generally pre-bill runs are performed by BTI one
day a week). The CDR transfers via Electronic Exchange are initiated by BTI and
generally run during the evening or early morning hours. Customer shall pay
Electronic Transfer charges as defined in EXHIBIT G.1. In addition, Customer
shall subscribe to a BTI 800/888 number for CDR transfers via Electronic
Exchange. Customer shall be billed the applicable Inbound Services rates set
forth in EXHIBIT B.1 for said 800/888 number. Further, Customer shall be
responsible for the cost of hardware and software necessary at its location,
which hardware and software shall comply with the formats and technical
specifications that BTI may promulgate from time to time. If customer elects
both options (i) and (ii) the individual set up charges and the monthly
recurring charges for both options shall be applicable.
C. Customer shall select the applicable option or options at
the time it submits its first Subscription Checklist to BTI. Applicable set up
fees shall be billed to Customer, at the sole option of BTI, either along with
the initial pre-payment or on a later Customer Invoice. Customer may cancel an
option at any time on thirty days written notice. Customer may change an
existing option or select a new option at any time upon written notice and
payment to BTI of the applicable set up charge. Changes or new selections shall
not be effective any earlier than the second billing cycle following the date of
the receipt of payment for the applicable set up charge.
4.3 Customer acknowledges and agrees that the BTI billing system inputs
and outputs including, but without limitation to, the CDR and answer
supervision, are mutually acceptable, and meet common carrier industry
standards. BTI represents that the aforesaid billing system inputs and outputs
used for the Services will be substantially the same as those used by BTI for
its other customers utilizing services similar to those provided to Customer
hereunder. Customer further agrees that, except with respect to the Dedicated
Services, it shall not charge End-Users utilizing any of the Services for more
minutes of Services' usage than is contained in the CDR provided by BTI to
Customer.
5. ORDER PROCESSING.
5.1 Customer shall not be obligated to subscribe to all of the Services
being made available by BTI hereunder. At the time Customer requests
subscription to any of the Services, BTI shall supply Customer with a
subscription checklist and information sheet that must be completed by Customer
prior to implementation of the requested Services. The Subscription Checklist
shall require Customer to provide traffic information deemed necessary by BTI
for it to determine estimated usage volumes for the selected Services.
5.2 At the time Customer submits its first Subscription Checklist to
BTI, Customer shall select one of the options set forth below as the media by
which it will transmit to BTI (i) orders for the issuance of 800/888 Numbers,
(ii) orders for turn-up of End-User ANIs, and (iii) the End-User Information.
The media options are:
A. Facsimile transmission. If this option is selected the BTI
facsimile number and contact person is defined in Exhibit H.1. BTI may change
its facsimile number or contact person upon prior written notice to Customer.
If, during any month this option is in use, the number of 800/888 Numbers or
ANIs ordered by Customer exceed 100, then upon written notice BTI may, in its
sole discretion, require Customer to select one of the options set forth in
Section 5.2 b or c. Upon receipt of such written notice, Customer shall have
thirty days to make such selection. If Customer fails to timely make such
selection, BTI shall not be obligated to accept any further orders from Customer
until such selection has been made.
B. Magnetic tape.
C. Electronic Exchange, as per EXHIBIT G.2
D. Notwithstanding the foregoing options, if Customer has
elected Electronic Exchange for receiving call detail records pursuant to
Subsection 4.2 B, then Customer shall be deemed to have selected the same for
the purposes of this Subsection 5.2.
5.3 At the time Customer orders (i) the assignment of an 800/888
Number, or (ii) the turn up of an End-User ANI, Customer shall furnish BTI, via
the media selected by Customer pursuant to Subsection 5.2, with the name,
billing and service addresses and ANI, of each applicable End-User (the
"End-User Information"). Notwithstanding the preceding sentence, the End-User
Information shall not be required for End-Users utilizing the Dedicated
Services. The End-User Information is required for LEC account set-up, normal
call processing, and handling NXX level customer service. The End-User
Information shall be deemed to be Customer's Proprietary Information in
accordance with Section 14.
5.4 BTI shall activate use of 800/888 telephone numbers (the "800/888
Numbers") and End-User telephone numbers ("ANIs") presubscribed to BTI in
accordance with the following time frames:
A. For 800/888 Numbers, within fifteen business days of
receipt by BTI of complete and accurate End-User Information. If the End-User
Information submitted by Customer is not complete and accurate, BTI shall return
the same to Customer for correction and resubmission.
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B. Customer understands and agrees that activation of End-User
ANIs is subject to the End-User Information associated with such ANIs complying
with LEC established criteria. Assuming receipt of End-User Information that
complies with said LEC established criteria, End-User ANIs shall be activated
within ten business days of receipt by BTI of such End-User Information. If the
End-User Information does not comply with said LEC criteria, BTI shall attempt
to correct non-complying End-User Information to the extent BTI is able based on
any additional information that Customer may have submitted to BTI with respect
to the End-User ("Error Correction"). If BTI is unable to perform Error
Correction within a reasonable period of time not to exceed ten business days
after receipt of the LEC rejection notice, it shall resubmit the non-complying
End-User Information to Customer for Customer's correction and resubmission.
C. Subject to the provisions of subparagraph d below, once
each month BTI shall provide Customer with a written report detailing moves,
adds and termination for End-User ANIs presubscribed to BTI ("ANI Information").
If Customer has elected to receive the CDR via Electronic Exchange, then the ANI
Information shall be transmitted via Electronic Exchange rather than by a
written report.
D. If 15% or more of the End-User Information for End-User
ANIs submitted by Customer in any month fails to comply with the aforesaid LEC
criteria, BTI shall have the right in its sole discretion to (i) cease providing
Error Correction and ANI Information and require Customer to perform both
functions, and/or (ii) require Customer to provide a BTI training session
covering compliance with LEC criteria to appropriate Customer personnel. Such
training shall be at a location designated by Customer and Customer shall pay
BTI training fees as defined in EXHIBIT I.2.
5.5 In the event the volume of End-User ANIs or 800/888 Numbers
requested to be added to the BTI network by Customer is such that BTI
determines, in its sole discretion, that a delay in processing such requests is
required, BTI shall notify Customer of the delay of such processing.
6. 800/888 NUMBER REQUIREMENTS.
6.1 Upon receipt by BTI of Customer's order and the End-User
Information sent via the media selected by Customer pursuant to Subsection 5.2,
for the assignment of 800/888 Numbers to Customer for issuance to an End-User,
BTI shall assign the 800/888 Numbers to Customer in accordance with the
following. Customer agrees to pay applicable RespOrg, Directory Assistance and
installation fees with respect to Customer's requested 800/888 numbers as
defined in EXHIBIT D.1. Customer's order shall include the specific End-User ANI
to which an 800/888 Number will be translated. Customer understands and agrees
that due to the limited availability of 800/888 Numbers, BTI reserves the right,
in its sole discretion, to limit the quantity of 800/888 Numbers it assigns to
Customer. BTI does not guarantee the availability of any particular 800/888
Number requested by Customer. Customer agrees that it shall be subject to and
shall abide by the terms and conditions set forth in the BTI 800/888 Service
Order Form as the same may be modified by BTI from time to time. A copy of the
current form is attached hereto as EXHIBIT D.3 and made a part hereof. Customer
further agrees that it shall be responsible for (i) all pass through LEC fees
associated with 800/888 number record and administrative fees (ii) all charges
associated with the usage of the 800/888 Numbers assigned to Customer hereunder
including, but without limitation to, charges for Call Abuse, and (iii) all
claims by third parties, including End-Users, associated with the 800/888
Numbers assigned to Customer hereunder, regardless of whether or not Customer
issues such 800/888 Numbers to End-Users.
6.2 If usage of an 800/888 Number assigned to Customer impacts the BTI
network in such a manner that the unbillable calls for such 800/888 Number in
any month are greater than 5% of the billable calls for such 800/888 Number in
that month, Customer shall reduce the percentage to less than 5% within thirty
(30) days of written notice from BTI to do so. If Customer has not made such
reduction during such thirty (30) day period, BTI may, in its sole discretion,
commence charging Customer rates as defined in EXHIBIT D.1B.
6.3 Pursuant to Section 276 of the Telecommunications Act of 1996, the
Federal Communications Commission has prescribed regulations that establish a
per call compensation plan to ensure that all Payphone Service providers are
compensated for completed Intrastate and Interstate calls. If BTI is required to
pay any compensation to Payphone Service providers pursuant to Section 276 or
such regulations with respect to the services purchased by Customer under this
agreement, BTI reserves the right to pass-through to Customer all, or a portion
of such charges.
7. DEDICATED SERVICES REQUIREMENTS.
7.1 Prior to BTI being obligated to provide the Dedicated Services,
Customer shall provide BTI with a three month forecast for its estimated usage
of the Dedicated Services setting forth (i) the traffic distribution by lata for
call termination, and (ii) the number of minutes of peak traffic for call
termination. Customer shall provide BTI with a quarterly update of such
forecast. BTI shall supply Customer with appropriate forecasting forms. At its
discretion, BTI may accept a Subscription Checklist in lieu of said forecast.
7.2 Commencing in the third full month after the first Customer
dedicated circuit is connected to a BTI Switch sites as defined in EXHIBIT C.1.,
Customer shall be responsible for a minimum of minutes as defined in EXHIBIT
C.1, in the aggregate of domestic and international Dedicated Services' usage
each month (averaged) for each dedicated circuit connected. If such minimum
usage is not attained in any
4
<PAGE> 5
month, BTI shall give Customer thirty days notice prior to invoking a shortfall
charge to the Customer Invoice for that month in an amount equal to the number
of minutes of shortfall times a rate per minute as defined in EXHIBIT C.1.
7.3 Customer is responsible, at its sole expense, for all ordering of,
and charges for, dedicated facilities and equipment required to maintain access,
interconnection and interface with BTI equipment and the BTI network. Technical
specifications for such interconnection and interface are set forth in the
Terms.
8. SERVICE BLOCKAGE AND CANCELLATION.
8.1 Upon Customer's request sent via the media selected by Customer
pursuant to Subsection 5.2, BTI shall use reasonable efforts to immediately
block or cancel the Services to a specific End-User ANI, Authcode, or 800/888
Number, but in no event later than twenty-four hours after receipt of said
request. Except in instances of its willful misconduct, BTI shall not be liable
to Customer or End-Users for any damages, costs or charges with respect to the
failure of BTI to block or cancel the Services in accordance with Customer's
request. Customer shall be solely responsible for and shall hold BTI harmless
from any claims by End-Users and other third parties related to the blocking of,
or cancellation of the Services to an End-User ANI, Authcode, or 800/888 Number
by BTI at the request of Customer.
8.2 If an 800/888 Number assigned to Customer is blocked or canceled in
accordance with the terms of this Agreement, then after such blockage or
cancellation, BTI shall at Customer's option and expense, (i) re-translate such
800/888 Number to Customer's customer service telephone number, (ii) retranslate
such 800/888 Number to a BTI voice mail box order by Customer or (iii)
disconnect the 800/888 Number from the network. BTI shall provide Customer with
written notice of the re-translation or disconnect. Customer shall inform BTI in
writing as to which of the above re-translation or disconnect options Customer
selects. If Customer does not make such selection within ten calendar days of
the date of said written notice from BTI, Customer shall be deemed to have
selected option (iii).
9. CALL ABUSE MONITORING.
9.1 BTI monitors its network in an attempt to detect unauthorized usage
("Call Abuse") of an ANI, Authcode, or 800/888 Number ("Standard Monitoring").
Customer authorizes BTI to apply Standard Monitoring to End-User ANIs,
Authcodes, and 800/888 Numbers assigned to Customer. Customer understands and
agrees that BTI shall not be obligated to provide any type of Call Abuse
monitoring for the Dedicated Services. If, pursuant to its Standard Monitoring,
BTI determines that Call Abuse is or may be occurring, BTI shall have the right,
but not the obligation, to block usage of the Services from any ANI, Authcode,
or 800/888 Number associated with the suspected Call Abuse. If BTI elects to
block the Services it shall use reasonable efforts to immediately notify
Customer of such blockage via facsimile, but in no event later than twenty-four
hours after blockage. BTI shall remove a blockage within twenty-four hours of
Customer's written request. In lieu of blocking the Services, BTI may at its
sole option, contact Customer by facsimile and request Customer to substantiate
authorization for the suspected Call Abuse. Within twenty-four hours from its
receipt of the BTI facsimile, Customer shall inform BTI by facsimile as to what
action it wishes BTI to take regarding such suspected Call Abuse.
9.2 Except in instances of its willful misconduct, BTI shall not be
liable to Customer or an End-User for damages, costs or charges, including
charges for Call Abuse, arising from acts or omissions of BTI in applying or
failing to adhere to its Standard Monitoring practices. Customer shall be solely
responsible for and shall hold BTI harmless from all expenses, charges and costs
for usage attributable to End-User ANIs, Authcodes, and 800/888 Numbers assigned
to Customer, including all charges for Call Abuse.
9.3 The BTI facsimile numbers and contact persons to be used for the
purposes set forth in this Section 9 are defined in EXHIBIT I.3. Either party
may change its respective facsimile number or contact person upon prior written
notice to the other party.
10. ADDITIONAL CUSTOMER OBLIGATIONS.
10.1 Customer hereby represents and warrants that (i) it has been
assigned a carrier identification code by BellCore; and (ii) that it is
certified to do business and, if required, certified by the proper regulatory
agencies to provide interstate, intrastate and international long distance
services to End-Users in those states where such services are to be provided by
Customer.
10.2 BTI reserves the right to require submission of LOAs for ANIs.
Customer shall be ultimately responsible for LEC Primary Interexchange Carrier
change charges ("PIC Charges") that may be imposed on BTI as a result of
End-Users moving onto or off of the BTI network or as a result of Customer's
inability or refusal to provide original End-User LOAs to BTI or a LEC. Any such
PIC Charges shall be billed to Customer periodically on a Customer Invoice.
Customer understands and agrees that if an End-User presubscribed to BTI is
subject to any PIC Charges that the BTI name will appear on such End-User's LEC
bill as the long distance carrier selected by the End-User.
10.3 Customer shall comply with Section 64.1100 of the FCC's Rules and
Regulations, as well as other applicable law or regulation pertaining to the
sale and delivery of telecommunications service(s) to Customer's End-User. BTI
shall not be liable to Customer's End-User for any claim, liability or expense
asserted by those End-Users in connection with Customer's sale of delivery of
such services(s), including
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the unauthorized conversion of an End-User's Primary Interexchange Carrier
("PIC") designation to Customer's Carrier Identification Code ("CIC"). In
addition, Customer shall indemnify and hold BTI harmless from any actions,
claims, suits or damages arising out of Customer's violation of any FCC or other
applicable law or state regulation, and Customer shall pay all reasonable
attorney fees and costs incurred by BTI in connection with such actions, claims,
suits or damages.
10.4 Customer shall be responsible for all customer service functions
for the End-Users and shall supply BTI with a toll-free telephone number to
which BTI can refer End-Users that call BTI with customer service issues. A list
of the BTI network recordings that either identify BTI as an end-user's carrier
or that reference the BTI customer service telephone number are set forth in
EXHIBIT L attached hereto and made a part hereof. Customer understands and
agrees that BTI shall not be obligated to change said recordings to identify
Customer as the carrier or to reference Customer's customer service telephone
number.
10.5 Customer shall be responsible for and pay all expenses in
connection with its business and its performance of this Agreement. To the
extent Customer makes any statements or representations to third parties
(including End-Users) with regard to BTI, the Services, or the terms of this
Agreement, such statements or representations shall be true, accurate and not
misleading and shall conform to and be consistent with the terms of this
Agreement.
11. PAYMENT TERMS AND OBLIGATIONS.
11.1 A. BTI shall invoice Customer via facsimile or overnight mail on
or about the fifth day after the close of each of Customer's monthly billing
cycles for the Services provided by BTI during such monthly billing cycle and
for any other sums due BTI hereunder the ("Customer Invoice"). Each Customer
Invoice will rate the Services at the then current BTI contracted rates, less
any applicable discount credits for which Customer may be eligible pursuant to
EXHIBITS B, C, D, E, & G.
B. Each Customer Invoice shall be paid by Customer via wire
transfer of immediately available funds to the account designated by BTI or by
other means acceptable by BTI, within twenty- five days (25) calendar days from
the date of the Customer Invoice.
C. The Customer facsimile number and contact person for
purposes of this Subsection 11.1 are defined in EXHIBIT I.4A. Customer may
change said facsimile number and contact person upon written notice to BTI.
11.2 A. Customer agrees to pay BTI set-up fees as defined in EXHIBIT A.
B. CREDIT LIMIT. BTI reserves the right to establish a credit
limit for Customer to include but not be limited to all fees, charges and usage
(billed and/or unbilled). Customer's credit limit will be reviewed on a monthly
basis by the BTI Credit department and is subject to adjustment at any time.
When Customer has reached or exceeded the preset credit limit, Customer will be
notified via a phone call to the authorized contact person, and phone number, as
stated on the credit application. The Customer will then have forty-eight (48)
hours to cure the balance via wire transfer. BTI reserves the right to
disconnect facilities when Customer has reached or exceeded the preset credit
limit if Customer has not shown good faith to cure the existing balance or if
evidence of funding is not available.
C. BTI shall waive the standing Letter of Credit for Customer
until such time as Customer's monthly billing reaches an amount per month as
defined in EXHIBIT J. At the time Customer's billing reaches the amount per
month as defined in EXHIBIT J, BTI and Customer agree to negotiate a standing
Letter of Credit based upon the review of Customer's monthly billing and prior
payment history. Should a standing Letter of Credit be requested, Customer shall
provide, an irrevocable, standing Letter of Credit, without conditions, to
secure Customer's payment obligation hereunder. The Letter of Credit shall be
from a financial institution acceptable to BTI in an amount equal to a minimum
of two (2) months billing. BTI shall not be obligated to provide the Services
until such time as it receives such a satisfactory Letter of Credit. Customer
shall be responsible for all fees and expenses in obtaining the Letter of Credit
and any amendments or supplements thereto or replacements thereof. Customer
shall at all times during the term of this Agreement maintain the Letter of
Credit in full force and effect in accordance with the terms herein.
D. Customer agrees that from time to time, at the written
request of BTI, Customer shall have the Letter of Credit amended or supplemented
or a new letter of credit issued, to increase the amount of the Letter of Credit
to equal two times the amount of the Customer's most recent Customer Invoice.
Customer further agrees that in the event BTI is required to draw on the Letter
of Credit to pay any Customer Invoices, Customer shall upon the written request
of BTI replace the drawn on Letter of Credit with a new letter of credit in
form, content and amount satisfactory to BTI. In the event Customer fails to
maintain the Letter of Credit in full force and effect or fails to have the
Letter of Credit amended, supplemented or replaced within ten business days of
written request from BTI, then BTI shall have the right to immediately proceed
with its remedies under Subsection 11.3.
E. Customer may deduct from BTI invoice billings for amounts
reasonably disputed by Customer, provided Customer (i) pays all undisputed
charges on or before the Due Date, (ii) presents a written statement of any
billing discrepancies to BTI in reasonable detail on or before the Due Date of
the invoice in question, and (iii) negotiates in good faith with BTI for the
purpose of resolving such dispute. In the event such dispute is resolved in
favor of BTI, Customer agrees to pay BTI the disputed amounts together with any
applicable late fees within fifteen (15) days of the resolution. In the event
the dispute
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<PAGE> 7
[ ] - CONFIDENTIAL TREATMENT REQUESTED
cannot be resolved within a period of sixty (60) days following the Due Date of
the invoice in question (unless BTI has agreed in writing to extend such
period), the dispute will forwarded to the Executive Offices of both BTI and the
Customer. In the event the dispute has not been resolved within fifteen (15)
days following the forwarding to Executive Management, either party may seek
legal remedies as defined in SECTION 16.8 of this agreement. BTI shall not be
obligated to consider any Customer notice of billing discrepancies which are
received by BTI more than sixty (60) days following the Due Date of the invoice
in question. In the event Customer fails to pay an invoice in full because of a
billing dispute, BTI shall have the right, after giving Customer five (5) days
prior notice, to suspend all or any portion of the service to Customer until
such time as the dispute is resolved.
F. In the event Customer fails to timely pay a Customer
Invoice in full, BTI shall have the right to draw on the Letter of Credit for
the full face amount. BTI shall apply the funds from the Letter of Credit to any
outstanding Customer Invoice and credit any excess funds to Customer's account.
11.3 In the event Customer fails to timely pay any Customer Invoice in
full or timely provide any new, amended or supplemented Letter of Credit,
Customer shall be in incurable breach hereunder. In the event of such incurable
breach, or if Customer otherwise breaches this Agreement (and any such breach
remains uncured beyond any available cure period herein), BTI shall have the
right to (i) withhold delivery of the CDR Tapes or cease Electronic Exchange
whichever is applicable; (ii) draw on any Letter of Credit; and/or (iii)
terminate this Agreement without liability, including cancellation of the
Services to Customer and/or End-Users and enforce any contract minimums
throughout the term of the Agreement.
11.4 Customer acknowledges and agrees that time is of the essence with
respect to the payment of any Customer Invoices and the provision of the Letter
of Credit (including any amendments, supplements or replacements) and that it
shall have no opportunity to cure any breach by it with respect to the payment
of Customer Invoices and the provision of said Letter of Credit. Customer
further acknowledges and agrees to the following with respect to termination of
this Agreement by BTI for Customer's non-payment or failure to supply said
Letter of Credit:
A. That Customer shall not seek legal or equitable remedies
including, but without limitation to, injunctive relief, that would require BTI
to continue providing the Services to Customer and/or End-Users while any
Customer Invoices remain unpaid or a satisfactory Letter of Credit has not been
delivered to BTI.
B. That upon termination of this Agreement, BTI has the right
to cancel or block the Services to End-Users; that such cancellation or blockage
may have an adverse impact on an End-User's business; and that Customer shall be
solely responsible for all claims asserted by End-Users or other third parties
associated with such blocking or cancellation of the Services by BTI.
C. That cancellation or blockage of the Services to Customer
and/or End-Users will have a negative impact on Customer's business for which
BTI shall have no liability.
11.5 Customer shall be responsible for payment of, or reimbursement to
BTI for, Universal Service Fund and Lifeline Assistance Charges (monthly
presubscribed line charges) as set forth in the National Exchange Carrier
Association (NECA) Tariff FCC #5, sections 8.5.1, 8.5.2 and 17.1.4 (A) & (B), as
the same may be amended from time to time or any successor tariffs or sections,
unless Customer is exempt from USF charges based on FCC Certified Carrier
status. Customer shall also be responsible for payment of, or reimbursement to
BTI for any FCC imposed fees to include, but not limited to, Presubscribed
Interexchange Carrier Charges (PICCs) as defined in the Accesss Charge Reform
Docket No. 96-262, and Payphone Owner Compensation as set forth in the FCC
Report and Order in CC Docket No. 96-128. Said charges shall be included on
Customer Invoices and shall be calculated based on the number of End-User
telephone lines presubscribed to BTI.
A. UNIVERSAL SERVICE FUND (USF)- The Universal Service Fund is
a mandated FCC fee that supports the availability of basic telephone service at
reasonable rates to rural communities, rural health care facilities and
libraries. A pass thourgh charge of [ ]% of the total Interstate and
Intrastate usage by Customer of BTI's Reseller Services will be billed to
Customer unless Customer is exempt from USF charges based on Customer's FCC
Certified Carrier status. This charge is calculated and billed on a monthly
basis.
B. PRESUBSCRIBED INTEREXCHANGE CARRIER CHARGE (PICC) - The FCC
has permitted Local Exchange Carriers (LECs) to charge long distance companies
for access to their local networks with a fee for every presubscribed line. BTI
will charge Customer a fee of $[ ] for each presubsribed line PICed to BTI.
This fee is billed on a monthly basis for each presubscribed line.
C. PAYPHONE OWNER COMPENSATION - The FCC has mandated Payphone
Owner Compensation for calls originated on a Long Distance Carriers network via
authorization code, CIC 10XXX, and or toll-free number (800/888). In compliance
with this ruling, BTI will be passing through a $[ ] surcharge to Customer on
each call completed by authorization code, CIC 10XXX and/or toll-free (800/888).
11.6 Within ten days after the effective date of this Agreement,
Customer shall furnish to BTI, and keep current during the term of this
Agreement, appropriate tax exemption certificates for all applicable
jurisdictions (federal, state and local) in which it performs the End-User
billing. Customer shall be responsible for properly taxing the End-Users and for
the proper and timely reporting and payment of applicable taxes to the taxing
authorities and shall hold BTI harmless from payment and reporting of all
applicable federal, state and local taxes, including but not limited to, gross
receipts taxes, surcharges,
7
<PAGE> 8
franchise fees, occupational, excise and other taxes (and penalties and interest
thereon), relating to the Services. Such indemnification shall include costs and
expenses (including reasonable attorney's fees) incurred by BTI in defending or
appealing any actions brought against it relating to said taxes. In the event
Customer fails to provide and maintain the required certificates, BTI shall have
the right, but not the obligation, to add applicable taxes to the Customer
Invoices.
11.7 Customer hereby acknowledges that billings are done on a monthly
basis for service at the rates described in the aforementioned Exhibits and must
be paid within thirty (30) days of date of bill by Customer (Due Date). If
payment is not received by BTI within thirty (30) days, Customer agrees to pay
BTI a one and one-half percent (1.5%) late charge on all outstanding balances.
Furthermore, if payment of services is greater than fifteen (15) days past due,
BTI also reserves the right to terminate service upon five (5) days prior
written notice to Customer. This termination does not relieve Customer of
payment performance for the period of time in which service was actually
provided (i.e., prior to termination).
11.8 In the event Customer fails to pay BTI invoiced amounts as
required and BTI notifies Customer that Customer's End-User's service will be
terminated for non-payment, Customer agrees to notify, jointly with BTI, the
Customer's End-Users of the potential disruption of service, by the mailing of a
letter, signed by Customer, to each End-User, containing the language defined in
EXHIBIT M. The mailing of the letter applies only where: (i) the End-User is
still Customer's End-User and BTI is the underlying carrier; (ii) Customer is
reselling to End-User any of the BTI services in Section 2 of this Agreement.
12. TERM AND TERMINATION.
12.1 Subject to any early termination provisions provided herein, this
Agreement shall be for the term of one year from and after the effective date of
this Agreement (the "Initial Term"). Unless either party provides the other
party with at least ninety (90) days written notice prior to expiration of the
Initial Term of its intent to discontinue this Agreement upon expiration of the
Initial Term, then upon such expiration this Agreement shall automatically
continue until the earlier to occur of (i) termination as provided elsewhere
herein, or (ii) termination by a party upon ninety days written notice.
12.2 Upon written notice to Customer, this Agreement may be immediately
terminated by BTI, without liability, (i) where provided for in this Agreement,
(ii) in accordance with its rights to cancel service as set forth in the Terms,
or (iii) after the occurrence of any of the following events:
A. Upon the insolvency or dissolution of the Customer;
B. The making by the Customer of any general assignment or
arrangement for the benefit of creditors; the filing by or against the Customer
of a petition to have it adjudged a bankrupt or for a reorganization or
arrangement under any federal state bankruptcy or insolvency laws, unless any
such petition shall be dismissed or discharged within thirty days of its filing;
the appointment of a trustee or receiver to take possession of all or
substantially all the Customer's assets, where such fiduciary is not dismissed
within thirty days of its appointment; the attachment, execution, or other levy
or seizure of all or substantially all of the Customer's assets, where such
event is not discharged within thirty days of its initiation;
C. Pursuant to any order by the FCC or a state Public Utility
of Service Commission denying Customer certification or authorization to provide
long distance services as contemplated herein.
D. If Customer fails to abide by the requirement in paragraph
10.3 as it relates to unauthorized conversion of an End-User's PIC, the
following shall apply:
Upon the second (2nd) finding by a court, the FCC or state commission of an
unauthorized conversion of Customer's End-User's PIC, such finding shall be
regarded as a material breach of the Agreement and BTI may terminate the
Agreement upon five (5) days written notice to Customer. In such case, BTI will
provide Customer up to six (6) months to convert such traffic to another vendor;
provided that however, during the six (6) month period, upon a third (3rd)
finding by a court, the FCC or state commission of an unauthorized conversion of
a Customer's End-User's PIC, BTI may terminate the Agreement on five (5)
business days written notice for such Customer.
12.3 In the event of a breach of any material term or condition of this
Agreement, (except for payment of funds due BTI which is covered by Subsection
11.3 or other breaches the remedy for which is covered elsewhere herein) by a
party, the other party may terminate this Agreement upon thirty days written
notice to the breaching party, subsequent to a sixty (60) day cure period,
unless the breaching party cures the breach, or takes prompt steps to cure the
breach that cannot be reasonably cured during said period, prior to expiration
of said thirty day period. The aforementioned conditions include BTI's failure
to provide service and or quality which meets industry standards. Customer's
right to cancel service under the Terms is superseded by its termination rights
under this Agreement.
12.4 Upon termination or expiration of this Agreement, each party shall
(i) immediately discontinue the use, if any, of all trade names, service marks,
trademarks, Proprietary Information, and other materials provided to it by the
other party, and (ii) each party shall promptly deliver to the other all
Proprietary Information furnished to it, including all copies thereof.
13. MONTHLY COMMITMENT.
8
<PAGE> 9
13.1 Customer's monthly usage shall equal or exceed amounts as defined
in EXHIBIT A.
13.2 BTI will rate Customer's usage at pricing schedule as per EXHIBITS
B, C, E, F & H.
14. TRADE SECRETS AND CONFIDENTIALITY.
14.1 Each party agrees that all information furnished to it and
identified by the other party as being confidential or proprietary information
or trade secrets (collectively referred to as "Proprietary Information"), is,
and shall continuously remain, the sole and exclusive property of the party
furnishing the same (the party furnishing the Proprietary Information
hereinafter referred to as the "Disclosing Party" and the other party
hereinafter referred to as the "Receiving Party"). Each party shall treat the
Proprietary Information and the contents of this Agreement in a confidential
manner and, except to the extent necessary in connection with the performance of
its obligations under this Agreement, neither party shall directly or indirectly
disclose the same to any third party without the written consent of the
Disclosing Party.
14.2 The Proprietary Information is to be used by the Receiving Party
only for the purposes contemplated herein and the Receiving Party shall not
disclose the same to any one other than its employees who have a need to know
and who agree to be bound by the terms of this Section 14. The Proprietary
Information shall not be copied or retained by the Receiving Party in written
form and all originals and any copies or summaries thereof shall be returned to
the Disclosing Party upon request.
14.3 Each party acknowledges that its breach or threatened breach of
this section may cause the Disclosing Party irreparable harm which would not be
adequately compensated by monetary damages. Accordingly, in the event of any
such breach or threatened breach, the Receiving Party agrees that equitable
relief, including temporary restraining orders or preliminary or permanent
injunctions, shall be an available remedy in addition to any other legal
remedies to which the Disclosing Party may be entitled.
14.4 Neither party shall use the name, trade name, service marks,
trademarks, or printed materials of the other party, in any promotional or
advertising material, statement, document, press release or broadcast without
the written consent of the other party.
14.5 The parties acknowledge the existence of a highly competitive long
distance marketplace and understand and agree that either party may offer to
provide long distance services to customers of the other party, including
End-Users, in accordance with such rates and terms as a party and the customer
may agree upon, provided however, that a party shall not at any time use
Proprietary Information of the other party in soliciting customers for long
distance services. Provided further, Customer shall not, in any marketing
activities to existing BTI customers, use the fact that BTI is the Customer's
underlying carriers, as an inducement for such customers to switch their long
distance service to Customer.
15. LIMITATION OF LIABILITY AND INDEMNIFICATION.
15.1 PROVISIONS RELATING TO THE LIMITATION OF BTI LIABILITIES AND ITS
DISCLAIMER OF WARRANTIES ARE SET FORTH IN THE TERMS. IN ADDITION TO SAID
PROVISIONS, BTI SHALL NOT BE LIABLE FOR INDIRECT, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR
REVENUES, CREDITS FOR SERVICE OUTAGES OR LOST TRAFFIC AND SUBSCRIBER CREDITS.
15.2 It being the express intent of the parties that Customer be solely
responsible for all claims of End-Users relating to the Services, Customer
agrees that it shall be solely responsible for any credits or adjustments that
may be issued or required to be issued to End-Users and that it shall not be
entitled to any credits or adjustments from BTI on a Customer Invoice or
otherwise for credits or adjustments given to End-Users. Further and in addition
to its indemnification obligations set forth in the Terms, Customer shall be
responsible for and shall save, defend, indemnify, and hold BTI and its
directors, officers, employees and agents free and harmless from any and all
claims (including any and all claims of End-Users and regulatory agencies),
taxes, expenses, damages, lawsuits, or other liabilities (including without
limitation, reasonable attorneys' fees and court costs) relating to or arising
out of (i) the operation of Customer's business; (ii) Customer's activities
hereunder; and (iii) Customer's breach of any of the terms or provisions of this
Agreement.
15.3 In no event will either party hereto be liable to the other party
for any indirect, special, incidental or consequential losses or damages,
including without limitation, loss of revenue, loss of customers or clients,
loss of goodwill or loss of profits arising in any manner from this Agreement
and the performance or nonperformance of obligations hereunder.
15.4 The statute of limitations applicable to all claims arising under
this Agreement shall be one year from the date the claim accrues.
16. MISCELLANEOUS.
16.1 RELATIONSHIP OF PARTIES. BTI and Customer acknowledge and agree
that the relationship between them is solely that of independent contractors,
and nothing herein shall be construed to constitute the parties as
employer/employee, partners, joint ventures, co-owners, or otherwise as
participants in a joint or common undertaking. Neither party, nor their
respective employees, agents or representatives,
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<PAGE> 10
shall have any right, power or authority to act or create any obligation,
express or implied, on behalf of the other.
16.2 LIMITATION ON ASSIGNMENT. Not withstanding the foregoing, Customer
may assign or delegate its obligations hereunder to any affiliate or subsidiary
of Customer without the prior written consent of BTI, but upon reasonable
written notice to BTI. Such assignment shall not relieve Customer of any
obligations or liabilities hereunder. This Agreement shall be binding upon and
inure to the benefit of Customer and its successors and assigns.
16.3 ENTIRE AGREEMENT. This Agreement, the Terms and any Exhibits
attached hereto contain the entire agreement between BTI and Customer concerning
the subject matter hereof, and any representations or agreements, oral or
otherwise, not embodied herein, are superseded by the terms hereof and shall be
of no force or effect. Neither this Agreement, nor its execution, have been
induced by any reliance, representation, stipulation, warranty, agreement or
understanding of any kind other than those herein expressed. No change or
modification of this Agreement shall be valid unless the same be in writing and
signed by the parties.
16.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The individuals signing
this Agreement by their signatures below represent and warrant that they are
authorized to bind and do so bind the party on behalf of which they are
executing this Agreement.
16.5 COMPLIANCE WITH LAWS. During the term of this Agreement, the
parties hereto shall comply with all local, state and federal laws and
regulations applicable to this Agreement or to their respective businesses;
further, the parties shall obtain, file and maintain any tariffs, permits,
certifications, authorizations, licenses or similar documentation as may be
required by the Federal Communications Commission, a state Public Utility or
Service Commission, or any other governmental body or agency having jurisdiction
over their respective businesses. Upon request, each party shall supply the
other with copies of such tariffs, permits, certifications, etc.
16.6 THIRD PARTIES. The provisions of this Agreement and the rights and
obligations created hereunder are intended for the sole benefit of BTI and
Customer, and shall not create any right, claim or benefit on the part of any
person not a party to this Agreement, including End-Users.
16.7 SURVIVAL OF PROVISIONS. Any obligations of the parties relating to
moneys owed, as well as those provision relating to confidentiality, limitations
on liability and actions and indemnification, shall survive termination or
expiration of this Agreement.
16.8 GOVERNING LAW. Except as otherwise required by tariff or federal
law, this Agreement shall be governed by Delaware law with exclusive
jurisdiction in the federal courts for the Eastern District of North Carolina.
Customer (i) agrees that the Courts of the State of North Carolina (including
the United States District Court for the Eastern District of North Carolina)
shall have exclusive jurisdiction and be the venue for any action arising under
this Agreement; and (ii) submits itself to the exclusive jurisdiction of said
Courts for purposes of any such action.
16.9 RATE ADJUSTMENTS. BTI reserves the right to change the rates
disclosed in this Agreement upon fifteen(15) days prior written notification to
Customer. In such case, Customer may elect to terminate this agreement provided
the Customer gives written notification of such election at least five (5) days
prior to effective date of such change.
16.10 BTI APPROVAL. This Agreement is subject to final approval by BTI
and Customer and shall not be binding unless executed by BTI and Customer. In
order to be binding, any modifications to this Agreement must be in writing and
signed by an officer of BTI and Customer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective on the date first set forth above.
BTI KNOLOGY HOLDINGS, INC.
BY: /s/ BY: /s/
------------------------------- ---------------------------------
TITLE: PRESIDENT & COO TITLE: General Counsel-Vice President
DATE: 9/25/98 DATE: 9/15/8
------------------------------ ---------------------------------
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[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
SET-UP FEES & MONTHLY COMMITMENT CHARGES
SET-UP FEES
Customer agrees to pay BTI a one time fee of $[ ] at the time of
subscription. Said fee is refundable at such time as Customer's monthly billing
exceeds $[ ].
MONTHLY COMMITMENT
Customer's monthly usage shall equal or exceed [ ] Dollars
($[ ]) per month ("Monthly Commitment") for months three (3) through
twelve(12) and [ ] Dollars ($[ ]) per month "Monthly
Commitment" for months thirteen (13) through eighteen (18). Should Customer's
usage fall below the "Monthly Commitment", Customer agrees to pay BTI an amount
equal to the "Monthly Commitment".
BTI KNOLOGY HOLDINGS, INC.
INITIAL: INITIAL:
----------- -----------
DATE: 9/25/98 DATE: 9/15/98
--------------- --------------
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<PAGE> 12
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
TIER A - DOMESTIC SWITCHED SERVICES
<TABLE>
<CAPTION>
INTERSTATE
USAGE PER MONTH RATE
--------------- ----
<S> <C> <C>
$ 0 - $ 75,000 $[ ]
$ 75,001 - $ 250,000 $[ ]
$ 250,001 AND OVER $[ ]
INTRASTATE
STATE RATE
----- ----
ALABAMA [ ]
ARIZONA [ ]
CALIFORNIA [ ]
COLORADO [ ]
CONNECTICUT [ ]
DELAWARE [ ]
DISTRICT OF COLUMBIA N/A
FLORIDA [ ]
GEORGIA [ ]
ILLINOIS [ ]
INDIANA [ ]
KANSAS [ ]
MARYLAND [ ]
MICHIGAN [ ]
MINNESOTA [ ]
MISSOURI [ ]
MONTANA [ ]
NEBRASKA [ ]
N. CAROLINA [ ]
NEW JERSEY [ ]
NEW YORK [ ]
OHIO [ ]
OKLAHOMA [ ]
PENNSYLVANIA [ ]
SOUTH CAROLINA [ ]
SOUTH DAKOTA [ ]
TENNESSEE [ ]
TEXAS [ ]
UTAH [ ]
VIRGINIA [ ]
TIER B - DOMESTIC SWITCHED SERVICES
INTERSTATE
USAGE PER MONTH RATE
--------------- ----
$ 0 - $ 75,000 $ [ ]
$ 75,001 - $ 250,000 $ [ ]
$ 250,001 AND OVER $ [ ]
</TABLE>
12
<PAGE> 13
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
TIER B - INTRASTATE
STATE RATE
<S> <C>
ARKANSAS [ ]
IDAHO [ ]
IOWA [ ]
KENTUCKY [ ]
LOUISIANA [ ]
MAINE [ ]
MASSACHUSETTS [ ]
MISSISSIPPI [ ]
NEVADA [ ]
NEW HAMPSHIRE [ ]
NEW MEXICO [ ]
NORTH DAKOTA [ ]
OREGON [ ]
RHODE ISLAND [ ]
VERMONT [ ]
WASHINGTON [ ]
WEST VIRGINIA [ ]
WISCONSIN [ ]
WYOMING [ ]
</TABLE>
OFF-SHORE SWITCHED RATES
INTERSTATE/INTRASTATE (AK,HI,PR,USVI, CANADIAN)
<TABLE>
<CAPTION>
USAGE PER MONTH RATE
--------------- ----
<S> <C>
$ 0 - $ 75,000 $[ ]
$ 75,001 - $ 250,000 $[ ]
$ 250,001 AND OVER $[ ]
800/888 SERVICES
DOMESTIC
USAGE PER MONTH RATE
--------------- ----
$ 0 - $ 75,000 $[ ]
$ 75,001 - $ 250,000 $[ ]
$ 250,001 AND OVER $[ ]
OFF-SHORE (HI,AK,PR,USVI, CANDIAN)
USAGE PER MONTH RATE
--------------- ----
$ 0 - $ 75,000 $[ ]
$ 75,001 - $ 250,000 $[ ]
$ 250,001 AND OVER $[ ]
</TABLE>
** CUSTOMER WILL BE BILLED RATES AT THE $75,001 - $250,000 VOLUME LEVEL MONTHS
ONE (1) THROUGH THREE (3). COMMENCING IN MONTH FOUR (4), CUSTOMER WILL BE BILLED
RATES BASED ON ACTUAL USAGE.
NOTES: ALL DOMESTIC 1+ TRAFFIC SHALL BE BILLED IN SIX (6) SECOND INCREMENTS. ALL
800/888 TRAFFIC WILL BE BILLED IN SIX (6) SECOND INCREMENTS WITH A EIGHTEEN (18)
SECOND MINIMUM.
BTI KNOLOGY HOLDINGS, INC.
INITIAL: ________ INITIAL: _________
DATE: __________ DATE: __________
13
<PAGE> 14
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
C.1 DEDICATED INTERSTATE, INTRASTATE AND NATIONWIDE 800/888 RATES
<TABLE>
<CAPTION>
DOMESTIC DEDICATED SERVICES
- ---------------------------
<S> <C> <C> <C>
USAGE PER MONTH INTERSTATE RATE INTRASTATE RATE
$ 0 - $ 75,000 $[ ] $[ ]
$ 75,001 - $ 250,000 $[ ] $[ ]
$ 250,001 AND OVER $[ ] $[ ]
OFF-SHORE DEDICATED SERVICES
- ----------------------------
ALASKA, HAWAII, PUERTO RICO, U.S. VIRGIN ISLANDS
USAGE PER MONTH RATE
$ 0 - $ 75,000 $ [ ]
$ 75,001 - $ 250,000 $ [ ]
$250,001 AND OVER $ [ ]
</TABLE>
Note: All dedicated Services are F.O.B. BTI Switch Sites (Raleigh NC, Orlando
FL, Atlanta GA, New York NY, and Dallas TX). Customer is responsible
for Local Loop and Backhaul charges.
MINIMUM REQUIRED MINUTES
Customer shall be responsible for a minimum of [ ] minutes in the
aggregate of domestic and international Dedicated Services' usage each
month (averaged) for each dedicated circuit connected.
SHORTFALL CHARGES
BTI shall give Customer thirty days notice prior to invoking a
shortfall charge to the Customer Invoice for that month in an amount
equal to the number of minutes of shortfall times $[ ] per minute.
BTI KNOLOGY HOLDINGS, INC.
INITIAL: _________ INITIAL: _________
DATE: 9/25/98 DATE: 9/15/98
14
<PAGE> 15
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT D
800/888 SERVICES
D.1 800/888 INSTALLATION FEES
Customer agrees to pay a monthly fee of $[ ] per active 800/888 number for
which BTI is the RespOrg. BTI will provide 800/888 Directory Assistance for
Customer at a monthly fee of $[ ] per 800/888 number, with an installation
charge of $[ ] per 800/888 number.
D.1A 800/888 NASC FEES
Customer agrees to pay a BTI a pass through fee of $[ ] per 800/888 for the
NASC fees associated with the release of 800/888 numbers held in the SMS
database.
D.1B UNBILLABLE CALL CHARGES
BTI may, in its sole discretion, commence charging Customer $[ ] for each
unbillable call for each subsequent month in which unbillable calls are greater
than 5% of the billable calls.
D.2 ENHANCED 800/888 SERVICE RATES
<TABLE>
<CAPTION>
SERVICE INSTALL CHANGE MONTHLY
<S> <C> <C> <C>
NPA Restriction $ [ ] $ [ ] $ [ ]
NPA Blocking $ [ ] $ [ ] $ [ ]
Time of Day Routing $ [ ] $ [ ] $ [ ]
Day of Week Routing $ [ ] $ [ ] $ [ ]
Holiday Routing $ [ ] $ [ ] $ [ ]
Area Code Routing $ [ ] $ [ ] $ [ ]
Percentage Call Allocation $ [ ] $ [ ] $ [ ]
Dialed Number ID Services (DNIS) $ [ ] $ [ ] $ [ ]
Uniform Call Distribution (UCD) $ [ ] $ [ ] $ [ ]
Route Advance $ [ ] $ [ ] $ [ ]
Intercept 800/888 $ [ ] $ [ ] $ [ ]
($[ ] per call over 500 calls)
</TABLE>
BTI KNOLOGY HOLDINGS, INC.
INITIAL: ________ INITIAL: _________
DATE: __________ DATE: __________
15
<PAGE> 16
EXHIBIT D
D.3 800/888 PORTABILITY REQUEST FORM
This information will be provided in the New Customer Information Package.
D.4 800/888 NUMBER RESPONSIBLE ORGANIZATION CHANGE AUTHORIZATION
This information will be provided in the New Customer Information Package.
D.4A RESPONSIBLE ORGANIZATION CHANGE FORM
This information will be provided in the New Customer Information Package.
16
<PAGE> 17
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT E
ADDITIONAL SERVICES
E.1 DIRECTORY ASSISTANCE CHARGES
"Directory Assistance Services" consists of directory assistance traffic
generated via the Dedicated and Switched Services rated at $[ ] per call.
E.2 CALLING CARD SERVICES
USAGE PER MONTH DOMESTIC RATE
$ 0 - $ 75,000 $ [ ]
$ 75,001 - $ 250,000 $ [ ]
$ 250,001 AND OVER $ [ ]
SURCHARGES
Domestic Surcharge $[ ] per call
International Surcharge $[ ] per call
International Rates for Calling Cards Services are defined in EXHIBIT H
E.3 VOICE MAIL
MONTHLY RATE PER BOX $[ ]
800 SERVICE $[ ]
TELEMAIL OUTDIAL $[ ]
ENHANCEMENT PACKAGE $[ ]
(Includes; future delivery, message delivery, internal messaging,
notification of non-delivery)
E.4 CALL DETAIL RECORD CHARGES
Customer shall pay a one-time CDR Tape set up charge of $[ ], plus $[ ] per
each CDR Tape delivered by BTI. Software modifications to the CDR Tape format
requested by Customer are subject to BTI approval and will be invoiced to
Customer at $[ ] per hour, per programmer.
E.5 700 SERVICE CHARGES
BTI shall charge Customer a monthly recurring charge of $[ ] for the use of
the 700 number. This service available in BTI on-net areas as defined in EXHIBIT
B.3.
E.6 PROJECT CODES
This information will be provided in the New Customer
Information Package
BTI KNOLOGY HOLDINGS, INC.
INITIAL: ________ INITIAL: _________
DATE: __________ DATE: __________
17
<PAGE> 18
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT E
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
E.7 CONFERENCE CALLING
DOMESTIC US: RATE/MINUTE PER LEG
OPER HANDLED/800 DIRECT DIAL
-------------------------------------
<S> <C> <C> <C>
WEEKDAY (12:00 AM Monday - 11:59 PM Friday) $[ ] $[ ]
WEEKEND (12:00 AM Saturday - 11:59 PM Sunday) $[ ] $[ ]
CALL SETUP: $[ ] PER LEG (ALL CALLS)
BTI CONFERENCE CALL FEATURES:
-----------------------------
Valet/Pre Call Notification (per leg) $[ ]
Tape Recording (per 90min. tape) $[ ]
Sub-Conferencing $[ ]
Transcription (per hour) $[ ]
Participant Lists $[ ]
Customized Greeting $[ ]
Question & Answer $[ ]
Cancellation of Call in Progress $[ ]
Tape Re-broadcast (per minute) $[ ]
E.8 BTI INTERNET
SERVICE SPEED MONTHLY FEE SETUP/INSTALLATION
------- ----- ----------- ------------------
DIAL UP ACCESS: $[ ] $[ ]
DEDICATED ACCESS:
56K $[ ] $[ ]
128K $[ ] $[ ]
256K $[ ] $[ ]
384K $[ ] $[ ]
512K $[ ] $[ ]
T-1 $[ ] $[ ]
BTI KNOLOGY HOLDINGS, INC
INITIAL:_____ INITIAL:_______
DATE:________ DATE:__________
</TABLE>
18
<PAGE> 19
EXHIBIT F
PRIVATE LINE SERVICES
(NOT APPLICABLE)
19
<PAGE> 20
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT G
F.1 ELECTRONIC DATA TRANSFER CHARGES
Customer shall pay a one-time Electronic Exchange set up charge on a time and
materials basis of $[ ] per hour, per programmer, plus a monthly recurring
charge of $[ ].
F.2 ELECTRONIC DATA TRANSFER PROTOCOL
This information will be provided in the New Customer Information Package
BTI KNOLOGY HOLDINGS, INC.
INITIAL: ________ INITIAL: _________
DATE: __________ DATE: __________
20
<PAGE> 21
[ ] - Confidential Treatment Requested
EXHIBIT H
SWITCHLESS INTERNATIONAL RATES
<TABLE>
<CAPTION>
COUNTRY COUNTRY CODE RATE/MINUTE COUNTRY COUNTRY CODE RATE/MINUTE
- ------- ------------ ----------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------- ---------------------------------------------------------
AFGHANISTAN 93 $[ ] CENTRAL AFRICAN REP 236 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ALBANIA 355 $[ ] CHAD 235 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ALGERIA 21 $[ ] CHILE 56 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
AMERICAN SAMOA 684 $[ ] CHINA 86 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ANDORRA 376 $[ ] COLOMBIA 57 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ANGOLA 244 $[ ] COMOROS (MAYOTTE IS.) 269 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ANGUILLA 264 $[ ] CONGO 242 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ANTARTIC 672 $[ ] COOK ISLAND 682 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ANTIGUA 809 $[ ] COSTA RICA 506 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ARGENTINA 54 $[ ] CROATIA 385 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ARMENIA 374 $[ ] CUBA 53 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ARUBA 297 $[ ] CYPRUS 357 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ASCENSION ISLAND 247 $[ ] CZECHOSLOVAKIA 42 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
AUSTRALIA 61 $[ ] DENMARK 45 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
AUSTRIA 43 $[ ] DIEGO GARCIA 246 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
AZERBAIJAN 994 $[ ] DJIBOUTI 253 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BAHAMAS 242 $[ ] DOMINICA 767 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BAHRAIN 973 $[ ] DOMINICAN REPUBLIC 809 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BANGLADESH 880 $[ ] ECUADOR 593 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BARBADOS 246 $[ ] EGYPT 20 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BELARUS 375 $[ ] EL SALVADOR 503 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BELGIUM 32 $[ ] EQUATORIAL GUINEA 240 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BELIZE 501 $[ ] ERITREA 291 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BENIN 229 $[ ] ESTONIA 372 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BERMUDA 809 & 441 $[ ] ETHOPIA 251 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BHUTAN 975 $[ ] FAEROE ISLANDS 298 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BOLIVIA 591 $[ ] FALKLANDS 500 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BOSNIA & HERZEGOVINA 387 $[ ] FIJI ISLANDS 679 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BOTSWANA 267 $[ ] FINLAND 358 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BRAZIL 55 $[ ] FRANCE 33 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BRITISH VIRGIN IS. 284 $[ ] FRENCH ANT (MARTINIQUE) 596 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BRUNEI 673 $[ ] FRENCH GUIANA 594 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BULGARIA 359 $[ ] FRENCH POLYNESIA 689 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BURKINA FASO 226 $[ ] GABON REP. 241 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BURMA 95 $[ ] GAMBIA 220 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
BURUNDI 257 $[ ] GEORGIA, REP OF 995 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
CAMBODIA 855 $[ ] GERMANY 49 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
CAMEROON 237 $[ ] GHANA 233 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
CAPE VERDE ISLANDS 238 $[ ] GIBRALTAR 350 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
CAYMAN ISLANDS 345 $[ ] GREECE 30 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
</TABLE>
21
<PAGE> 22
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------- ---------------------------------------------------------
GREENLAND 299 $[ ] MACAU 853 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GRENADA 473 $[ ] MACEDONIA 389 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUADELOUPE 590 $[ ] MADAGASCAR 261 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUAM 671 $[ ] MALAWI 265 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUANTANAMO BAY 53 $[ ] MALAYSIA 60 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUATEMALA 502 $[ ] MALDIVES 960 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUINEA 224 $[ ] MALI 223 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUINEA BISSAU 245 $[ ] MALTA 356 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
GUYANA 592 $[ ] MARSHALL ISLANDS 692 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
HAITI 509 $[ ] MAURITANIA 222 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
HONDURAS 504 $[ ] MAURITIUS 230 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
HONG KONG 852 $[ ] MICRONESIA 691 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
HUNGARY 36 $[ ] MOLDAVIA 373 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ICELAND 354 $[ ] MONACO 377 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INDIA 91 $[ ] MONGOLIA 976 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INDONESIA 62 $[ ] MONTSERRAT 664 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INMARISAT/ATL(EAST) 871 $[ ] MOROCCO 21 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INMARISAT/ATL(WEST) 874 $[ ] MOZAMBIQUE 258 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INMARISAT/INDIAN OCEAN 873 $[ ] NAMIBIA 264 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
INMARISAT/PACIFIC 872 $[ ] NAURU 674 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
IRAN 98 $[ ] NEPAL 977 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
IRAQ 964 $[ ] NETHERLANDS 31 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
IRELAND 353 $[ ] NETHERLANDS ANTIL 599 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ISRAEL 972 $[ ] NEVIS 1 (830) $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ITALY 39 $[ ] NEW CALENDONIA 687 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
IVORY COAST 225 $[ ] NEW ZEALAND 64 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
JAMAICA 876 $[ ] NICARAGUA 505 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
JAPAN 81 $[ ] NIGER REPUBLIC 227 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
JORDAN 962 $[ ] NIGERIA 234 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KAZAKHSTAN 732 $[ ] NIUE ISLAND 683 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KENYA 254 $[ ] NORWAY 47 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KIRIBATI 686 $[ ] OMAN 968 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KOREA, NORTH 850 $[ ] PAKISTAN 92 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KOREA, SOUTH 82 $[ ] PALAU 680 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KUWAIT 965 $[ ] PANAMA 507 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
KYRGYZSTAN 733 $[ ] PAPUA NEW GUINEA 675 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LAOS 856 $[ ] PARAGUAY 595 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LATVIA 371 $[ ] PERU 51 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LEBANON 961 $[ ] PHILIPPINES 63 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LESOTHO 266 $[ ] POLAND 48 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LIBERIA 231 $[ ] PORTUGAL 351 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LIBYAN ARAB PEOPLE 21 $[ ] QATAR 974 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LIECHTENSTEIN 41 $[ ] REUNION ISLAND 262 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LITHUANIA 370 $[ ] ROMANIA 40 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
LUXEMBOURG 352 $[ ] RUSSIAN FED (MOSCOW) 7 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
</TABLE>
22
<PAGE> 23
[ ] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------- ---------------------------------------------------------
RWANDA 250 $[ ] UZBEKISTAN 736 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SAIPAN (MARIANA IS.) 670 $[ ] VANUATU 678 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SAN MARINO 378 $[ ] VATICAN CITY 379 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SAO TOME 239 $[ ] VENEZUELA 58 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SAUDI ARABIA 966 $[ ] VIETNAM 84 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SENEGAL REP. 221 $[ ] WALLIS & FORTUNA 681 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SEYCHELLES ISLAND 248 $[ ] WESTERN SAMOA 685 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SIERRA LEONE 232 $[ ] YEMEN ARAB REP. 967 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SINGAPORE 65 $[ ] YUGOSLAVIA 381 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SLOVAKIA 42 $[ ] ZAIRE 243 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SLOVENIA 386 $[ ] ZAMBIA 260 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SOLOMON ISLAND 677 $[ ] ZIMBABWE 263 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SOMALIA 252 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SOUTH AFRICA 27 $[ ] CANADA $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SPAIN 34 $[ ] MEXICO Band 1 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SRI LANKA 94 $[ ] Band 2 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ST. HELENA 290 $[ ] Band 3 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ST. KITTS 869 $[ ] Band 4 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ST. LUCIA 758 $[ ] Band 5 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ST. PIERRE/MIQUELON 508 $[ ] Band 6 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
ST. VINCENT/GRENADINES 784 $[ ] Band 7 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SUDAN 249 $[ ] Band 8 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SURINAME 597 $[ ]
- --------------------------------------------------------- ---------------------------------------------------------
SWAZILAND 268 $[ ]
- ---------------------------------------------------------
SWEDEN 46 $[ ] ALL INTERNATIONAL TRAFFIC IS BILLED IN SIX (6) SECOND INCREMENTS
- --------------------------------------------------------- WITH THIRTY (30) SECOND MINIMUM.
SWITZERLAND 41 $[ ] ALL MEXICO TRAFFIC IS BILLED IN ONE (1)
- --------------------------------------------------------- MINUTE INCREMENTS.
SYRIAN ARAB 963 $[ ]
- ---------------------------------------------------------
TADJIKISTAN 7 $[ ]
- ---------------------------------------------------------
TAIWAN 886 $[ ]
- ---------------------------------------------------------
TANZANIA 255 $[ ]
- ---------------------------------------------------------
THAILAND 66 $[ ]
- ---------------------------------------------------------
TOGO 228 $[ ]
- ---------------------------------------------------------
TOKELAU 690 $[ ]
- ---------------------------------------------------------
TONGA 676 $[ ]
- ---------------------------------------------------------
TRINIDAD & TOBAGO 868 $[ ]
- ---------------------------------------------------------
TUNISIA 21 $[ ]
- ---------------------------------------------------------
TURKEY 90 $[ ]
- ---------------------------------------------------------
TURKMENISTAN 993 $[ ]
- ---------------------------------------------------------
TURKS & CAICOS IS. 649 $[ ]
- ---------------------------------------------------------
TUVALU 688 $[ ]
- ---------------------------------------------------------
UGANDA 256 $[ ] BTI KNOLOGY HOLDINGS, INC.
- ---------------------------------------------------------
UKRAINE 380 $[ ]
- ---------------------------------------------------------
UNITED ARAB EMIRA 971 $[ ] INITIAL: ______ INITIAL: _____
- ---------------------------------------------------------
UNITED KINGDOM 44 $[ ]
- ---------------------------------------------------------
URUGUAY 598 $[ ] DATE: ______ DATE: ______
- ---------------------------------------------------------
</TABLE>
23
<PAGE> 24
[ ] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT I
GENERAL INFORMATION
I.1 FACSIMILE TRANSMISSION
If this option is selected for orders, the BTI facsimile number and contact
person to be used shall be (919) 510 7302, Attention: Carrier Services
_______________.
I.2 TRAINING FEES
BTI shall have the right to require training sessions which shall be at
a location designated by Customer and Customer shall pay BTI a training fee of
$[ ] per hour for the trainer, plus the trainer's travel and ancillary
expenses.
I.3 FACSIMILE TRANSMISSION
The BTI facsimile number and contact person to be used for the purposes set
forth in this Section 9 shall be (919)_510 7302, Attention: Carrier Services.
The Customer facsimile number and contact person to be used for said purposes
shall be (____)_________________, Attention: ___________________.
I.4 PAYMENT TERM AND OBLIGATIONS
The Customer facsimile number and contact person for purposes of this Subsection
11.1 shall be (____)_______________________, Attention: _______________________.
Customer may change said facsimile number and contact person upon written notice
to BTI.
24
<PAGE> 25
EXHIBIT J
CREDIT INFORMATION
LETTER OF CREDIT: NOT APPLICABLE
25
<PAGE> 26
EXHIBIT K
LETTER OF AGENCY
NOT APPLICABLE
26
<PAGE> 27
EXHIBIT L
BTI NETWORK RECORDINGS
SWITCH SITE IDS FUTURE SITE IDS
- --------------- ---------------
111 = Atlanta 411 = New York
211 = Orlando 511 = Chicago
311 = Dallas 611 = Los Angeles
711 = Raleigh
NETWORK RECORDINGS
- ------------------
1. x11 01 We're sorry your call can not be completed as dialed.
Please check the number, and try your call again. (8 seconds)
2. x11The Identification code you have dialed is invalid, please check the
code, or call customer service for assistance. (8 seconds)
3. x11 The 800 number you have dialed is not in service there is no
further information available at this time. (8 seconds)
4. x11 Travel service is not active with the identification code you have
dialed, for assistance please call customer service (8 seconds)
5. x11 05 We're sorry your call can not be completed as dialed. Please
check the number, and try your call again. (8 seconds)
6. x11 06 We're sorry your call can not be completed as dialed . Please
check the number, and try your call again. (8 seconds)
7. x11 We're sorry the project code you have dialed is invalid, for
assistance please call customer service. (8 seconds)
8. x11 We're sorry the 800 number you have dialed is not available from
your area code. (8 seconds)
9. x11 We're sorry you must first dial a 1 or 0 to complete this call. (8
seconds)
10. x11 The number you are calling from is not on the Long Distance
carrier's network, for assistance please call customer service (8
seconds)
11. x11 We're sorry you must enter your project code to complete this call.
(seconds)
27
<PAGE> 28
EXHIBIT M
CUSTOMER TERMINATION LETTER
NOT APPLICABLE
28
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
Confidential portions of this Agreement which have been redacted are marked with
brackets ("[ ]"). The omitted material has been filed separately with the
Securities and Exchange Commission.
EXHIBIT 10.52
BTI TELECOMMUNICATIONS SERVICES
PRIVATE LINE SERVICES AGREEMENT
This Private Line Services Agreement is entered into as of September 10th, 1998
(the "Effective Date"), by and between BTI Communications Corporation, a Raleigh
corporation ("BTI"), and Knology Holdings, Inc., acting on its own behalf and on
behalf of the company identified on "Schedule 1" hereto ("Company"). Upon
obtaining the written consent of BTI, which consent shall not be unreasonably
withheld, new company of Knology Holdings, Inc., may become Company for purposes
of this Agreement by executing a copy of Schedule 1 hereto in counterparts and
delivering such originally executed schedule to BTI.
Given that the Company desires to obtain private line Facilities (as described
below) from BTI, and BTI is willing to provide Facilities pursuant to the terms
and conditions set forth herein;
Knology Holdings, Inc., ("Company") and BTI hereby mutually agree as follows:
1. INCORPORATION OF DOCUMENTS AND CONTROLLING PROVISIONS:
1.1 This Agreement, together with (a) Service Orders (as defined in Section
2.1 of this Agreement) accepted by BTI pursuant to the terms hereof,
and (b) schedules and exhibits incorporated herein by reference
("EXHIBITS") shall be referred to collectively herein as this
"AGREEMENT." In the event of any conflict between the provisions of
this Agreement and the terms of any Service Order(s) and/or Exhibit(s),
the conflict shall be resolved by reference to said documents in the
following order of priority of interpretation (except as is otherwise
specifically provided in this Agreement or in any Exhibits): (a) any
Service Order(s); any Exhibit(s) with reference to the same in order of
attachment to this Agreement; and (c) this Agreement. Notwithstanding
the foregoing, no provision or term of any Service Order or Exhibit
shall be a part of this Agreement or binding on BTI unless and until
such Service Order or document has been executed by an authorized
representative of BTI.
1.2 If any provision of this Agreement conflicts with any statute, rule or
order of any governmental unit or regulatory body, or tariff filed by
BTI, then if required by law, this Agreement shall remain in effect but
shall be automatically modified by such conflicting law, statute, rule,
order or tariff, subject to the termination rights granted herein.
2. SERVICES TO BE PROVIDED BY BTI:
2.1 Telecommunications capacity, and related ancillary services (the
"FACILITY" or "FACILITIES") available from BTI are identified in the
Service and Pricing Exhibit attached hereto as "EXHIBIT A", which is
incorporated by this reference (the "SERVICE AND PRICING EXHIBIT").
Facilities requested by the Company shall be requested on BTI's service
order forms in effect from time to time (hereafter, any such order is a
"SERVICE ORDER(S)"). Each Service Order shall reference this Agreement
by Agreement Number and shall become a part of this Agreement when
executed by a duly authorized representative of BTI. BTI reserves the
right to reject any Service Order.
2.2 Upon acceptance by BTI of a duty executed Service Order during the Term
(as defined in Section 4.3 of this Agreement) of this Agreement, BTI
shall provide to the Company those Facilities identified in the Service
Order.
3. OBLIGATIONS OF COMPANY:
3.1 The Company shall perform those duties outlined in the Service and
Pricing Exhibit in addition to those described herein and in any
Service Order(s).
1
<PAGE> 2
3.2 Company shall have sole responsibility for installation, testing and
operation of the Interconnection Facilities (as defined in Section 1.4
of the Service and Pricing Exhibit), and any services and equipment
other than those Facilities specifically provided by BTI under this
Agreement.
3.3 Company shall fully comply with all laws, regulations and authorities
including, but not limited to, those outlined in Section 9 of this
Agreement.
4. TERM:
4.1 This Agreement shall be effective between the parties as of the date
first written hereon. The initial term (the "INITIAL TERM") of this
Agreement shall expire on the later of: (A) one (1) year from the date
of execution hereof, or (B) as it relates to the Company's continuing
commitment, the expiration of the Facility Minimum Service Term (as
defined in Section 4.2 of the Service and Pricing Exhibit) of any
outstanding Service Order of that Company; unless either party earlier
terminates this Agreement in the manner provided herein.
4.2 Upon the expiration of the Initial Term, if the Company is then in
default hereunder, the Term of this Agreement shall be renewed
automatically on a month-to-month basis (hereafter, the "RENEWAL TERM")
unless and until an Amendment is executed by both parties extending the
Renewal Term, or either party terminates this Agreement in the manner
provided herein.
4.3 The Initial Term and Renewal Term are sometimes referred to together
herein as the "TERM".
4.4 Notwithstanding anything to the contrary in this Section 4, if the
Facility Minimum Service Term (as set forth in Section 4.3 of the
Service and Pricing Exhibit) for a Facility or Facilities extends
beyond the expiration of the Term of this Agreement, then this
Agreement shall continue in effect until the expiration or termination
of the applicable Facility Minimum Service Term, but only as to the
Facility or Facilities so affected, and subject to the termination
rights of BTI and Knology under Section 8 of this Agreement.
5. CHARGES AND PAYMENT:
5.1 Charges for the Facilities shall be determined according to the Service
and Pricing Exhibit except as is otherwise specifically provided in
this Agreement.
5.2 Charges will be calculated and invoiced for the Company. Recurring
charges shall be invoiced by BTI on a monthly basis in advance and
non-recurring charges shall be invoiced in arrears. If the Start of
Service Date (as defined in Section 2.1 of the Service and Pricing
Exhibit) for any Facility falls on other than the first day of any
month, the first invoice to the Company shall consist of: (1) the pro
rata portion of the applicable monthly charge covering the period from
the Start of the Service Date to the first day of the subsequent month,
and (2) the monthly charge for the following month. BTI may, in its
sole discretion, prior to delivering the first invoice to the Company,
elect to require that the Company make a security deposit amount equal
to one (1) month's recurring charges for the Facility or Facilities. If
a deposit is made, it shall be held by BTI until termination of this
Agreement, at which time BTI may apply the deposit, at its option,
either against the last month of charges due hereunder prior to
termination of this Agreement, or against any other amounts owing to
BTI under this Agreement.
5.3 The Company shall make all payments due hereunder within thirty (30)
days after the date of BTI's invoice. If any amount due under this
Agreement is not received by the due date, in addition to its other
remedies available hereunder, BTI may in its sole discretion: (A)
impose upon the delinquent Company a late payment charge of the lower
of 1.5% per month or the highest rate legally permissible (such late
charge shall be payable upon demand by BTI); and/or (B) require the
prepayment of up to two (2) months of recurring charges as a condition
of the continued availability of the Facilities, which prepayment shall
be held and applied against the last two (2) months of charges for the
hereunder prior to termination of this Agreement. Notwithstanding
2
<PAGE> 3
anything in this Agreement to the contrary, no payment due hereunder is
subject to reduction, set-off or adjustment of any nature by the
Company, except as is specifically provided in Section 5 of the Service
and Pricing Exhibit regarding Outage Credits. In no event shall the
malfunction or non-operation of the Company's Interconnection
Facilities (including local access when a Company is responsible
therefore) relieve that Company of its obligation to pay for the
Facilities.
5.4 All disputes or requests for billing adjustments must be submitted in
writing and submitted with payment of undisputed amounts due. Any
amounts which are determined by BTI to be in error or not in compliance
with this Agreement shall be adjusted on the next month's invoice. Any
disputed amounts which are deemed by BTI to be correct as billed and in
compliance with this Agreement, shall be due and payable by the
disputing Company, upon notification and demand by BTI, along with any
late payment charges which BTI may impose pursuant to Section 5.3
above. Disputes shall not be cause for any Company to delay payment of
the undisputed balance to BTI according to the terms outlined in
Section 5.3 above.
5.5 Invoices submitted to the Company by BTI shall conform to BTI's
standard billing format and content, as modified by BTI from time to
time.
5.6 Any applicable federal, state, or local taxes, and all use, sales,
commercial, gross receipts, privilege or other similar taxes or license
fees, whether charged to or against BTI or the Company, with respect to
the Facilities provided by BTI, as well as any other imposition by any
governmental authority which has the effect of increasing BTI's cost of
providing the Facilities, shall be payable by the Company in addition
to the other charges set forth in this Agreement.
6. EVENTS OF DEFAULT:
6.1 A) A default on the part of Knology shall occur in the event of its
dissolution at any time during the Term of this Agreement ("Company
Default").
B) A default on the part of a Company shall occur if: (I) the Company
fails to make any payment required to be made by it under this
Agreement and any such failure remains uncorrected for ten (10)
business days after the date such payment was due; (II) the Company
fails to perform or observe any material term or obligation (other than
making payment) contained in this Agreement, and any such failure
remains uncorrected for thirty (30) calendar days after written notice
from BTI informing the Company of such failure (except for a default by
the Company under Section 9.2 of this Agreement, which shall require no
advance written notice); (III) the Company breaches its obligations to
BTI in any other agreement, including but not limited to, agreements
for switched access services or any collocation agreements; or (IV)
there is an Adverse Material Change (as defined in Section 6.2 of this
Agreement) in the Company's creditworthiness (collectively, "COMPANY
DEFAULT").
C) A Default on the part of BTI shall occur if BTI fails to perform or
observe any material term or obligation contained in this Agreement,
and any such failure remains uncorrected for thirty (30) calendar days
after written notice from Knology or, as it relates to BTI's
relationship with the Company, written notice from that Company
informing BTI of such failure ("BTI DEFAULT").
6.2 For purposes of Section 6.1 of this Agreement, an Adverse Material
Change in the Company's creditworthiness shall include, but not be
limited to: (A) failure of the Company to make full payment of
undisputed charges due hereunder on or before the date due on three (3)
or more occasions during any period of twelve months, or the Company's
failure to make such payment on undisputed amounts on or before the
date due in any two (2) consecutive months; (B) acquisition of the
Company (whether in whole or by majority or controlling interest) by an
entity which is insolvent, which is subject to bankruptcy or insolvency
proceedings, which owes past due amounts to BTI or any entity
affiliated with BTI, or (C) the Company's being subject to or having
filed for bankruptcy or insolvency proceedings, or the legal insolvency
of the Company.
3
<PAGE> 4
6.3 Notwithstanding Section 6.1 of this Agreement, the failure of any
particular circuit or number of circuits to comply with the
Specifications (as that term is defined in Section 2.1 of the Service
and Pricing Exhibit) shall not be deemed a BTI Default, but may
obligate BTI to provide the affected Company with Outage Credits, as
provided in Section 5 of the Service and Pricing Exhibit.
7. REMEDIES FOLLOWING DEFAULT:
7.1 A) If a company Default occurs, the terms and conditions of this
Agreement shall remain in effect as they relate to BTI's relationship
with each individual Company, subject to the Facility Minimum Service
Term of each Company's Facilities.
B) If a Company Default occurs, BTI may, in addition to any other
remedies it has under this Agreement or under the law: (I) suspend its
performance with defaulting Company under this Agreement without the
requirement of any further notice to the Company, until the Company has
remedied all breaches of this Agreement and paid in full all charges
then due, including any late fees specified herein plus, at BTI's
option, the prepayment of up to two (2) months recurring charges, as is
specified in Section 5.3 of this Agreement; (II)condition provision of
Facilities or acceptance of a Service Order on the Company's assurance
of payment and compliance with this Agreement, which may be in the form
of a deposit or such other means as is required by BTI to establish
assurance of payment and compliance, or (III) terminate all Facilities
ordered by the Company under this Agreement by providing written notice
to the Company in the manner provided in Section 8.2 of this Agreement.
7.2 If BTI is in Default, the affected Company may, in addition to any
other remedies it has under this Agreement or under the law, terminate
the Company's relationship with BTI under this Agreement in the manner
provided for in Section 8.1 of this Agreement, but may not withhold or
suspend its own performance.
8. TERMINATION:
8.1 A)Knology may terminate this Agreement effective upon written notice to
BTI if BTI is in Default (as provided in Section 6.1c of this
Agreement).
B) The Company may terminate its Facilities under this Agreement: (I)
effective upon written notice to BTI, if BTI is in Default (as provided
in Section 7.2 of this Agreement); (II) effective upon thirty (30)
calendar days prior written notice, if any material rate or term
contained herein and relevant to the affected Facilities is materially
changed by order of the highest court of competent jurisdiction to
which the matter is appealed, the Federal Communications Commission, or
other local, state or federal government authority, or (III) effective
upon thirty calendar days prior written notice, with or without cause,
following the expiration of the Initial Term.
8.2 A) Either party may terminate this Agreement in whole or in part,
effective immediately and without any advance written notice, if BTI
does not maintain or loses any required regulatory or other
governmental authorizations to provide the Facilities, as described in
Section 9.l of this Agreement; following an Knology Default under
Section 9.2 of this Agreement, or if Knology makes an unauthorized
Transfer under Section 12.1 of this Agreement.
B) BTI may terminate the Company's Facilities provided under this
Agreement:
I) effective upon written notice to the Company, if the
Company is in Default (as provided in Section 7.1 of this
Agreement);
II) effective upon thirty (30) days prior written notice, with
or without cause, following the expiration of the Initial
Term; or
4
<PAGE> 5
(III) effective immediately and without any advance written
notice, if BTI does not maintain or loses any required
regulatory or other governmental authorizations to provide the
Company's Facilities, as described in Section 9.1 of this
Agreement; following a Company Default under Section 9.2 of
this Agreement; or if the Company makes an unauthorized
Transfer under Section 12.1 of this Agreement.
8.3 The Company may terminate the affected portion or portions of a Service
Order or Service Orders: (A) upon ten (10) calendar days prior written
notice following failure of performance, in the manner and subject to
Section 10.2 of this Agreement or Section 1.2 of the Service and
Pricing Exhibit; or (B) following thirty (30) calendar days prior
written notice, following an increase in prices by BTI as to a
particular Facility or Facilities, in the manner and subject to Section
3.2 of the Service and Pricing Exhibit. Any termination of a Service
Order of Service Orders shall not affect any remaining Service Orders,
and shall not constitute a termination of this Agreement in whole or in
part as it relates to the Company terminating the Service order or
Service Orders.
9. GOVERNMENTAL AUTHORITY:
9.1 The Company acknowledges that the obligation of BTI to provide the
Facilities to the Company is subject to the receipt by BTI of any
required regulatory or other governmental authorizations. BTI reserves
the right to terminate this Agreement pursuant to Section 8.2 of this
Agreement if at any time BTI does not have or loses the required
regulatory or other governmental authorizations to provide the
Facilities.
9.2 BTI, and the Company represents and warrants that: (A) it has received
all necessary permits, licenses, approvals, grants, and charters of
whatsoever kind necessary to carry out the business in which it is
engaged; and (B) it has complied and does comply with all laws,
regulations, orders, and statutes which may be applicable to it,
whether local, State or Federal. From the date of this Agreement until
the termination hereof, the Company agrees to operate in accordance
with and to maintain current all such certifications, permits,
licenses, approvals, grants, charters, and to comply with all
applicable laws, regulations, orders and statutes, whether local, State
or Federal. A breach by a Company of any of the representations,
warranties or covenants of this Section 9.2 shall be deemed a Company
Default hereunder, and shall allow BTI to terminate the Company's
Facilities in the manner described in Section 8.2 of this Agreement. A
breach by either party of any of the representations, warranties or
covenants of this Section 9.2 shall be deemed a Default hereunder, and
shall allow either party to terminate this Agreement in its entirety in
the manner described in Section 8.2 of this Agreement.
10. FORCE MAJEURE:
10.1 Except as is provided in Section 10.2 below, BTI shall not be liable
for any failure of performance hereunder due to causes beyond its
reasonable control, including, but not limited to: acts of God, fire,
explosion, vandalism, fiber optic cable cut, storm, extreme
temperatures or other similar catastrophes; any law, order, regulation,
direction, action or request of the United States government, or of any
other government, including state and local governments having
jurisdiction over either of the parties, or of any department, agency,
commission, court, bureau, corporation or other instrumentality of any
one or more said governments, or of any civil or military authority;
national emergencies, insurrections, riots, wars, or strikes,
lock-outs, work stoppages or other labor difficulties; actions or
inactions of a third party provider or operator of facilities employed
in provision of the Facilities; or any other conditions or
circumstances beyond the reasonable control of BTI which impede or
affect the Facilities or the transmission of telecommunications
services.
10.2 If any failure of performance on the part of BTI described in Section
10.1 of this Agreement shall be: (A) for thirty (30) calendar days or
less, then this Agreement shall remain in effect, but affected Company
shall be relieved of their obligation to pay for that portion of the
Facilities affected for the period of such failure of performance; or
(B) for more than thirty (30) days, then the affected
5
<PAGE> 6
Company may terminate only that portion of any Service Order or Service
Orders related to the Facilities so affected, by written notice to BTI,
in accordance with Section 8.3 of this Agreement.
10.3 If the Facilities are unavailable to the Company as a result of any
events described in Section 10.1, the affected Company may be entitled
to an Outage Credit under Section 5 of the Service and Pricing Exhibit.
11. INDEMNIFICATION:
11.1 The Company shall severally indemnify and hold harmless BTI (and BTI's
affiliates, officers, directors and employees; hereafter, "BTI'S
AFFILIATES"), and any third party provider or operator of services
employed by BTI and/or BTI's Affiliates in the provision of the
Facilities, from and against, and shall reimburse BTI and/or BTI's
Affiliates for, any and all losses, liabilities, deficiencies, claims
and expenses (including, but not limited to, costs of defense and
reasonable attorneys' fees) incurred by BTI and/or BTI's Affiliates and
arising from or in connection with: (A) any breach of any covenant or
agreement of such Company contained in this Agreement; (B)any
misrepresentation or breach of any of the representations and
warranties of such Company contained in this Agreement; or (C) any
claims which may be asserted by parties other than such Company who
have use of or access to the Facilities through such Company.
11.2 In no event will either party hereto be liable to the other party for
any indirect, special, incidental or consequential losses or damages,
including without limitation, loss of revenue, loss of customers or
clients, loss of goodwill or loss of profits arising in any manner from
this Agreement and the performance or nonperformance of obligations
hereunder.
12. ASSIGNMENT:
12.1 Not withstanding the foregoing, Customer may assign or delegate its
obligations hereunder to any affiliate or subsidiary of Customer
without the prior written consent of BTI, but upon reasonable written
notice to BTI. Such assignment shall not relieve Customer of any
obligations or liabilities hereunder. This Agreement shall be binding
upon and inure to the benefit of Customer and its successors and
assigns.
13. TITLE:
13.1 The Company expressly disclaims any right, title, perpetual right of
use or any other interest in or to any equipment or property used or
supplied by BTI under this Agreement.
14. WARRANTIES AND LIMITATION OF LIABILITY:
14.1 BTI warrants that the Facilities shall be provided to the Company and
shall operate in accordance with prevailing telecommunications industry
standards (hereinafter the "TECHNICAL STANDARDS"). If BTI determines
that the Facilities are not being provided in accordance with the
Technical Standards (hereinafter, a "DEFECT" or "DEFECTS"), BTI shall
use reasonable efforts under the circumstances to conform the
Facilities to the Technical Standards.
14.2 THE WARRANTIES CONTAINED IN SECTION 14.1 OF THIS AGREEMENT ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED
OR STATUTORY, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BTI HEREBY
SPECIFICALLY DISCLAIMS ANY LIABILITY TO THE COMPANY FOR INTERRUPTIONS
AFFECTING THE FACILITIES FURNISHED HEREUNDER WHICH ARE ATTRIBUTABLE TO
ANY COMPANY INTERCONNECTION FACILITIES ( AS DEFINED IN SECTION 1.4 OF
THE SERVICE AND PRICING EXHIBIT) OR TO ANY COMPANY EQUIPMENT FAILURES,
OR TO ANY COMPANY BREACH OF THIS AGREEMENT.
6
<PAGE> 7
14.3 IN NO EVENT SHALL BTI OR ANY OF ITS AFFILIATES BE LIABLE TO THE
COMPANY, OR ANY OF THEIR AFFILIATES OR EMPLOYEES OR TO ANY THIRD PARTY
FOR: (a) ANY LOSS OF PROFIT OR REVENUE, OR FOR ANY INDIRECT,
CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SIMILAR OR ADDITIONAL DAMAGES,
WHETHER INCURRED OR SUFFERED AS A RESULT OF UNAVAILABILITY OF
FACILITIES, PERFORMANCE, NON-PERFORMANCE, TERMINATION, BREACH OR OTHER
ACTION OR INACTION UNDER THIS AGREEMENT, OR FOR ANY OTHER REASON, EVEN
IF THE COMPANY ADVISES BTI OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE;
OR (b) FOR ANY OUTAGE OR INCORRECT OR DEFECTIVE TRANSMISSIONS, OR ANY
DIRECT OR INDIRECT CONSEQUENCES THEREOF, EXCEPT AS IS SPECIFICALLY
PROVIDED IN SECTION 5 OF THE SERVICE AND PRICING EXHIBIT REGARDING
OUTAGE CREDITS.
14.4 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY: (a) THE
COMPANY AGREES THAT THEIR SOLE REMEDY IN THE EVENT OF ANY BREACH OF THE
WARRANTIES DESCRIBED IN SECTION 14.1 OF THIS AGREEMENT SHALL BE THE
OUTAGE CREDITS DESCRIBED IN SECTION 5 OF THE SERVICE AND PRICING
EXHIBIT; AND, (b) IN NO EVENT SHALL THE CUMULATIVE LIABILITY OF BTI TO
ANY COMPANY UNDER THIS AGREEMENT, INCLUDING ANY OUTAGE CREDITS, EXCEED
THE TOTAL PAYMENTS PAID BY THE COMPANY TO BTI HEREUNDER.
14.5 The Company acknowledges that BTI has no ability to independently test
or maintain Facilities between two off net cities. Consequently, if BTI
provides such Facilities, then notwithstanding anything in this
Agreement to the contrary, BTI's entire duty with respect to such
Facilities shall be to use its best efforts to test and maintain such
Facilities in accordance with BTI's Specifications.
15. NON-DISCLOSURE AND PUBLICITY:
15.1 The Company shall not disclose to any third party the terms and
conditions of this Agreement without the prior written consent of BTI.
Nor shall the Company use BTI's name in publicity or press releases
without obtaining BTI's prior written approval, which shall not be
unreasonably withheld.
16. USE OF FACILITIES:
16.1 BTI's obligation to provide the Facilities specified herein is
conditioned upon the Company not allowing the Facilities to be used for
any unlawful purpose; or in violation of any governmental regulations
or authorizations as outlined in Section 8 of this Agreement.
17. MISCELLANEOUS:
17.1 The Company shall execute such other documents, provide such
information and cooperate with BTI, all as may be reasonably required
by BTI in connection with providing the Facilities.
17.2 Neither this Agreement, nor the provision of Facilities hereunder,
shall create a partnership or joint venture between BTI, on the one
hand, and the Company on the other hand, or result in a joint
communications service offering to any third parties.
17.3 The failure of either party to give notice of default or to enforce or
insist upon compliance with any of the terms or conditions of this
Agreement shall not constitute a waiver of any term or condition of
this Agreement.
17.4 Subject to Section 16 of this Agreement, in the event suit is brought
or an attorney is retained by either party to enforce the terms of this
Agreement or to collect any moneys due hereunder or to collect money
damages for breach hereof, the prevailing party shall be entitled to
recover, in addition to any other remedy, reimbursement for reasonable
attorneys' fees, court costs, costs of investigation and other related
expenses incurred in connection therewith.
7
<PAGE> 8
17.5 The Company acknowledges that at least part of the Facilities are or
will be provided through a BTI "NETWORK MANAGEMENT CENTER" located in
Raleigh, North Carolina. Accordingly, this Agreement shall be governed
by the laws of the State of Delaware, with venue at Raleigh, NC.
17.6 No subsequent agreement concerning the Facilities or modification to
this Agreement shall be binding upon the parties unless it is made in
writing by an authorized representative of the Company, and an
authorized Representative of BTI Communications at its headquarters in
Raleigh, North Carolina.
17.7 If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, said part shall be ineffective to
the extent of such invalidity only, without in any way affecting the
remaining parts of said provision or the remaining provisions of this
Agreement, the Company and BTI agrees to negotiate with respect to any
such invalid or unenforceable part to the extent necessary to render
such part valid and enforceable.
17.8 The terms and provisions contained in this Agreement that by their
sense and context are intended to survive the performance thereof by
the parties hereto shall survive the completion of performance and
termination of this Agreement, including, without limitation, the
making of any and all payments due hereunder.
17.9 Words having well-known technical or trade meanings shall be so
construed.
17.10 A) All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be given by: (I) hand
delivery; (II) first-class registered or certified mail with postage
prepaid; (III) overnight receipted courier service; or (IV)
telephonically confirmed facsimile transmission.
B) Such notice, when given, is to be addressed (I) if to BTI, then to
the party at the address below, and (II) if to the Company, then to the
person whose name and business address appears on Schedule 1 of this
lease, and (III) to such other address as may hereafter be designated
in writing by either party.
C) This Agreement requires BTI to give such notice to the Company. BTI
will promptly give such notice with a copy of BTI's notice to the
Company. Notices given in accordance with this Section 18.10 shall be
effective upon receipt or when receipt is refused.
<TABLE>
<S> <C>
All notices to BTI shall be addressed to: BTI Telecommunications Services
4300 Six Forks Road
Raleigh, North Carolina 27609
Facsimile: (919) 510-7120 Phone: (800) 372-3450
Attn: Carrier Contracts Admin.
All notices to the Company shall be addressed to:
Knology Holdings Inc.
1241 O.G. Skinner Drive
Facsimile:706-645-3921
Phone: 706-645-8567
Attn: General Counsel
</TABLE>
The addresses set forth may be changed by appropriate notice to the
other party.
17.11 For the purposes of this Agreement, the term "party" shall be deemed to
include the Company, on the one hand, and BTI, on the other hand. The
Company shall be severally, and not jointly, liable for all of the
obligations under this Agreement of the said Company, as the case may
be.
8
<PAGE> 9
17.12 In order to facilitate execution, this Agreement (and Schedule 1
hereto) may be executed in as many counterparts as may be required. It
shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the
signature of or on behalf of each party appears on one or more of the
counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in any proof of this Agreement to
produce or account for more than a number of counterparts containing
the respective signatures of or on behalf of all of the parties.
17.13 This Agreement comprises the complete and exclusive statement of the
agreement of the parties concerning the subject matter hereof, and
supersedes all previous statements, representations, and agreements
concerning the subject matter hereof, except that, to the extent that
the Company is already leasing Facilities from BTI, or has orders
pending with BTI pursuant to the terms of a previously executed
agreement with BTI, the Rates and Facility Minimum Service Term of such
Facilities shall remain in effect as previously negotiated.
DATED as of the first date above written.
------------------------------------------------
(on behalf of itself and the Members set forth on Schedule 1)
By: /s/ Chad S. Wachter
---------------------------------
Name: Chad S. Wachter
-------------------------------
Title: V.P. General Counsel
------------------------------
Date: 9-15-98
-------------------------------
BTI TELECOMMUNICATIONS SERVICES
By: /s/ R. Michael Newkirk
---------------------------------
Name: R. Michael Newkirk
Title: President and COO
Date: 9/25/98
-------------------------------
9
<PAGE> 10
EXHIBITS
Exhibit A: Service and Pricing Exhibit to BTI Private Line Services
Agreement, consisting of seven (7) pages dated August 27th, l998 as well as the
following Schedules attached thereto:
<TABLE>
<CAPTION>
Schedules to Exhibit A Pages
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
"A-1" Circuit Listing 1
"A-2" Interval Guidelines 1
"A-3" Technical Specifications 4
"A-4" Ancillary Charges
</TABLE>
10
<PAGE> 11
EXHIBIT A
T0
BTI TELECOMMUNICATIONS SERVICES
PRIVATE LINE SERVICES AGREEMENT
SERVICE AND PRICING EXHIBIT
This Service and Pricing Exhibit (this "SERVICE AND PRICING EXHIBIT") is made as
of August 27th,1998 by and between BTI, a North Carolina corporation ("BTI"),
and Knology Holdings Inc. ("the Company") acting on its own behalf, as
identified on Schedule 1 of the Agreement.
1. BTI SERVICES:
1.1 During the Term of the Agreement, BTI will provide to the Company the
Facility or Facilities requested by that Company in a Service Order
accepted by BTI.
1.2 Upon acceptance of a Service Order, BTI shall notify the Company of its
target date for the delivery of each Facility (the "ESTIMATED
AVAILABILITY DATE"). Any Estimated Availability Date given by BTI to
the Company shall be subject to BTI's standard and expedited interval
guidelines, as amended by BTI from time to time (the "INTERVAL
GUIDELINES"). A copy of BTI's current Interval Guidelines are attached
hereto as EXHIBIT A-2. BTI shall use reasonable efforts to install each
such Facility on or before the Estimated Availability Date, but the
inability of BTI to deliver a Facility by such date shall not be a
Default under this Agreement. If BTI fails to make any Facility
available within ninety (90) days after acceptance by BTI of the
Service Order with respect to such Facility (or such greater time as is
set forth in the Interval Guidelines), Company's sole remedy shall be
to cancel the Service Order which pertains to such Facility by ten (l0)
calendar days prior written notice to BTI, as is set forth in Section
8.3 of the Agreement.
1.3 At each end of the city pairs (the "City Pairs") on which the Company
orders Facilities, BTI shall provide appropriate equipment in its
terminal locations necessary to connect the Facilities to the Company's
Interconnection Facilities (as defined in Section 1.4 of this Service
and Pricing Exhibit). If the Company desires to install its own
equipment in one or more of BTI's terminals, and BTI, in its sole
discretion, agrees to such installation, the parties shall execute the
Collocation Agreement.
1.4 EACH COMPANY AGREES THAT ITS INTERCONNECTION FACILITIES SHALL CONNECT
TO THE FACILITIES PROVIDED BY BTI hereunder at the network interface
points located in the BTI terminals and defined in the Specifications
(as defined in Section 2.1 of this Service and Pricing Exhibit). As
used herein, the term "INTERCONNECTION FACILITIES" shall mean
transmission capacity provided by the Company or its third party
supplier to extend the Facilities provided by BTI from a BTI terminal
to any other location (e.g., a local access telephone service provided
by a local telephone company).
1.5 BTI shall use reasonable efforts to order Interconnection Facilities on
behalf of the Company from the Company's designated supplier, provided
that the Company furnishes BTI with an acceptable letter of agency. The
Company shall be billed directly by the supplier of such
Interconnection Facilities, and shall hold harmless and indemnify BTI
from any loss or liability incurred by BTI as a result of BTI's
ordering Interconnection Facilities from any third party. The Company
may, at its election, but subject to BTI's prior written approval,
order its own Interconnection Facilities. If any party other than BTI
provides Interconnection Facilities, then under availability,
incompatibility, delay in installation, or other impairment of
Interconnection Facilities shall not excuse the Company's obligation to
pay BTI all Rates or charges applicable to the Facilities, whether or
not such Facilities are useable by the Company.
2. START OF SERVICES:
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<PAGE> 12
[ ] - CONFIDENTIAL TREATMENT REQUESTED
2.1 Start of service for each Facility (the "START OF SERVICE DATE") shall
begin on the date on which the Company accepts delivery of such
Facility. If the Company fails to give written notice that the Facility
is in material non-compliance with the applicable standard BTI network
specifications, as modified from time to time by BTI (the
"SPECIFICATIONS") within five (5) business days after notification to
the Company by BTI that the Facility is available. The Company shall be
deemed to have accepted such Facility, and the Start of Service Date
shall commence as of the fifth day following such notification by BTI.
Following notice by the Company of material non-compliance as set forth
above, BTI shall promptly take such reasonable action as is necessary
to correct any such non-compliance in the Facility and shall, upon
correction, notify the Company of a new Start of Service Date.
2.2 Notwithstanding anything in Section 2.1 of this Service and Pricing
Exhibit to the contrary, the Company may delay the Start of Service
Date for any Facility for up to thirty (30) days from BTI's Estimated
Availability Date by written notice to BTI at least seventy-two (72)
hours prior to any applicable Estimated Availability Date.
3. RATES:
3.1 BTI shall provide the Facilities at the rates (the "RATES") set forth
in this Section 3 (exclusive of all sales, use, commercial or other
taxes or license fees) and as shown on the CIRCUIT LISTING ATTACHED AS
SCHEDULE A-1 to this Service and Pricing Exhibit. The Rates for each
Facility also include certain Monthly Recurring and Non-Recurring
charges, all as defined in this Section 3. Finally, the Rates vary
depending on whether the Facilities are DS-1 or DS-3 or OC. The Rates
are as follows:
(A) DS-1 FACILITIES RATES FOR IXC:
(I) BASE IXC RATES: To be determined by BTI on a case-by-case
basis, subject to availability from BTI.
(B) DS-3 FACILITIES RATES FOR IXC:
(I) BASE IXC RATES: To be determined by BTI on a case-by-case
basis, subject to availability from BTI.
(II) DS-1 MONTHLY RECURRING CHARGES: Minimum charge per DS-1
per month: $[ ]
(C) OC FACILITIES RATES FOR IXC:
(I) BASE IXC RATES: To be determined by BTI on a case-by-case
basis, subject to availability from BTI.
(II) OC MONTHLY RECURRING CHARGES: Minimum charges per OC per
month:
<TABLE>
<CAPTION>
FACILITY MINIMUM MRC
<S> <C>
OC-3 $[ ]
OC-12 $[ ]
OC-48 $[ ]
</TABLE>
(III) OC NON-RECURRING CHARGES:
Installation charge per OC for all services and equipment:
<TABLE>
<CAPTION>
FACILITY MINIMUM MRC
<S> <C>
OC-3 $[ ]
OC-12 $[ ]
OC-48 $[ ]
</TABLE>
12
<PAGE> 13
[ ] - CONFIDENTIAL TREATMENT REQUESTED
(D) OTHER CHARGES: In addition to the foregoing Facilities Rates
for DS-1, DS-3 and OC Facilities for IXC, the Company shall
pay to BTI the following additional charges, applicable,
including any and all recurring charges imposed on BTI for the
handling of calls under this agreement:
(I) OTHER MONTHLY RECURRING CHARGES:
<TABLE>
<S> <C>
- Channel Bank:......................................each $[ ] per month
- DS-1 cross-connect charges:........................each $[ ] per month plus pass-through
charges
- DS-3 cross-connect charges:........................each $[ ]
- Cross-connect charges:.............................to another CAPS provider $[ ] each
- LTR charges:.......................................Charges incurred by LECs will be passed
through
</TABLE>
(II) OTHER NON-RECURRING CHARGES:
<TABLE>
<S> <C>
- Expedited Order Charges:...........................$[ ] each
- DACs rearrangements:...............................each $[ ] per DS-1
- Channel Bank:......................................each $[ ] installation
- DS-1 cross-connect charges:........................each $[ ] installation plus any pass-
through charges
- Change of order cross-connect charges:.............$[ ] each DS-3, $[ ] each DS-1
- Pre-engineering cancellation cross-connect:........$[ ] each DS-3, $[ ] each DS-1
- Post-engineering cancellation of cross-connect:....$[ ] each DS-3, $[ ] each DS-1
</TABLE>
3.2 BTI reserves the right, upon thirty (30) days prior written notice to
the Company, to modify any of Rates or charges described in this
Service and Pricing Exhibit applicable to any Facility or Facilities,
except that the Rates charged for Service Orders under contract prior
to the effective date of the Rate change will remain fixed for the
duration of the Facility Minimum Service Term (as defined below) for
each such Facility. Upon receipt of written notice of such election,
the Company may terminate the portion or portions of any pending
Service Orders affected by the increase, or the portion or portions of
any Service Order or Service Orders which pertain to an existing
Facility or Facilities for which the Facility Minimum Service Term has
expired, by delivering written notice of termination to BTI within ten
(10) days of the date of the written notice increase. If written notice
of termination from the Company is not received within such ten (10)
day period, the Company will be deemed to have consented to the
increase.
4. FACILITY MINIMUM SERVICE TERM:
4.1 The Company acknowledges that the Rates and charges described in
Section 3 of this Service and Pricing Exhibit are based on the
commitment of the Company to utilize the Facilities that it orders for
a specified minimum period of time. Therefore, notwithstanding anything
in this Agreement to the contrary, The Company shall be severally
liable for and shall pay to BTI all Rates, fees and charges which
accrue under this Agreement for each Facility that it orders for the
entire Facility Minimum Service Term (as defined in Section 4.2 of this
Service and Pricing Exhibit) applicable to each such Facility,
regardless of whether or not the Company utilizes all or any part of
such Facility during all or any part of the Facility Minimum Service
Term applicable to such Facility, except as is set forth in Section 4.3
of this Service and Pricing Exhibit.
4.2 THE "FACILITY MINIMUM SERVICE TERM" for each Facility, is defined as
follows:
13
<PAGE> 14
[ ] - CONFIDENTIAL TREATMENT REQUESTED
(a) Twelve (12) months from Start of Service Date for DS-1 Facilities.
(b) Twelve (12) months from Start of Service Date for DS-3 Facilities.
(c) Thirty-six (36) months from Start of Service Date for OC-3 and
above Facilities.
4.3 Notwithstanding anything in this Agreement to the contrary, the
Company's obligation to pay all Rates, fees and charges which accrue
under this Agreement for each Facility for the entire Facility Minimum
Service Term applicable to each such Facility shall terminate, as each
such Facility, if this Agreement is terminated during the Minimum
Service Term which pertains to each such Facility: (a) by the Company,
pursuant to Sections 8.1(b)(i) or 8.1 (b)(ii) of the Agreement,
following a BTI Default or an increase in prices; or (b) by BTI,
pursuant to Section 8.2(b)(ii) of the Agreement, if termination by BTI
during the Minimum Service Term as to the Facility occurs other than
because of a Company Default, or 8.2(c) of the Agreement, if BTI
terminates this Agreement because BTI loses any required permits. UPON
TERMINATION OF A COMPANY'S FACILITIES FOR ANY OTHER REASON, THE TOTAL
OF ALL CHARGES REFERRED TO IN THIS SECTION 4 SHALL BE AT ONCE DUE AND
PAYABLE, REGARDLESS OF WHETHER OR NOT ALL OF THE FACILITIES' MINIMUM
SERVICE TERMS HAVE EXPIRED, AND MAY BE COLLECTED BY BTI FROM THE
COMPANY AS A SINGLE AMOUNT.
5. OUTAGE CREDITS:
5.1 The Company acknowledges the possibilities of an unscheduled,
continuous and/or interrupted period of time when a Facility or
Facilities are "UNAVAILABLE" (as defined in the Specifications)
(hereafter an "Outage"). In the event of an Outage, the affected
Company shall be entitled to a credit (the "OUTAGE CREDIT") determined
according to the following formula:
OUTAGE CREDIT = HOURS OF OUTAGE - [ ] X [
------------------------- ]
[ ] HOURS
5.2 The Outage Credit shall apply to the charges for the total mileage
between end terminals of any Facility affected by an Outage; provided,
however, that if any portion of the affected Facility remains
beneficially used or useable by the affected Company between any
intermediate terminals (where the Company has installed drop and insert
capability) or end terminals, the Outage Credit shall not apply to that
pro-rata portion of the mileage. The length of each Outage shall be
calculated in hours and shall include fractional portions thereof An
Outage shall be deemed to have commenced upon verifiable notification
thereof by the Company to BTI, or, when indicated by network control
information actually known to BTI network personnel, whichever is
earlier. Each Outage shall be deemed to terminate upon restoration of
the affected Facility as evidenced by appropriate network tests by BTI.
BTI shall give notice to the Company of any scheduled outage as early
as is practicable, and a scheduled outage shall under no circumstance
be viewed as an Outage hereunder.
5.3 Outage Credits shall not be granted if the malfunction of any
end-to-end circuit is due to an Outage or other Defect occurring in the
Company's Interconnection Facilities.
5.4 All Outage Credits shall be credited on the next monthly invoice for
the affected Facility after receipt of a Company's request for credit.
The total of all Outage Credits applicable to or accruing in any given
month shall not exceed the amount payable by the Company to BTI for
that same month for such Facility.
5.5 The Outage Credit described in this Section 5 of this Service and
Pricing Exhibit shall be the sole and exclusive remedy of the Company
in the event of any Outage, and under no circumstance shall an outage
be deemed a BTI Default under this Agreement.
14
<PAGE> 15
6. TERMINATION CHARGES
6.1 Termination charges will apply once circuit has been accepted by
customer.
6.2 In the event of termination before the end of this Schedule, Purchaser
is responsible for full payment of the contract commitment within
thirty (30) days of termination unless otherwise provided in the Master
Agreement for Optical Fiber Transmission Capacity dated August 27th,
1998 between the parties.
DATED as of the first date above written.
-----------------------------------------------
(on behalf of itself and the Company set forth on Schedule 1)
By: /s/ Chad S. Wachter
------------------------------------
Name: Chad S. Wachter
----------------------------------
Title: V.P. General Counsel
---------------------------------
Date: 9-15-98
----------------------------------
BTI TELECOMMUNICATIONS SERVICES:
By: /s/ R. Michael Newkirk
------------------------------------
Name: R. Michael Newkirk
Title: President, COO
Date: 9/25/98
----------------------------------
15
<PAGE> 16
[ ] - CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE A-1
KEY PRICING TERMS:
Subject to the restrictions stated below*, BTI will provide Private Line
Facilities to Knology (the Company) as follows:
DS-1:
On-Net DS-1 Facilities will be provided at $[ ] per DS-O Mile.
Off-Net DS-1 Facilities will be provided at $[ ] per DS-O Mile.
DS-3 FACILITIES:
On-Net DS-3 Facilities will be provided at $[ ] per DS-O Mile.
Off-Net DS-3 Facilities will be provided at $[ ] per DS-O Mile.
OC-3 FACILITIES AND ABOVE:
OC-3 Facilities and above will be priced and provided on an Individual Case
Basis ("ICB").
*RESTRICTIONS:
- - All price quotes are for Facilities provided on the BTI Owned Fiber Optic
Network only ("On-Net" Facilities).
- - Buyer must order its own local access facilities.
- - All orders are subject to BTI network availability.
- - Orders not conforming to these terms will be considered on an ICB only, and
may not be filled at the prices quoted in these proposal.
ON-NET CITY PAIRS:
NEW YORK, NY GREENVILLE, SC
NEWARK, NJ COLUMBIA, SC
PHILADELPHIA, PA NASHVILLE, TN
WASHINGTON, DC ATLANTA, GA
RICHMOND, VA FT. LAUDERDALE, FL
NORFOLK, VA JACKSONVILLE, NC
GREENVILLE, NC LAKE CITY, FL
ROCKY MOUNT, NC MIAMI, FL
RALEIGH, NC ORLANDO, FL
GREENSBORO, NC TAMPA, FL
CHARLOTTE, NC
16
<PAGE> 17
SCHEDULE A-2 EXHIBIT A
STANDARD & EXPEDITE INTERVAL GUIDELINES
These are the standard order intervals for domestic services on BTI owned Fiber
Optic Network ("On-Net" services). If you have any questions regarding the
interval process, please contact your Sales Director.
<TABLE>
<CAPTION>
TOTAL SERVICE INTERVAL IN
CALENDAR DAYS
SERVICE TYPE STANDARD EXPEDITE
- ------------ -------- --------
<S> <C> <C>
OPTICAL:
POP TO POP (OC-3) 28 ICB
POP TO POP (ALL OTHERS) ICB ICB
LOA PROVIDER ICB ICB
LEC TO LEC ICB ICB
CAP TO CAP ICB ICB
CAP TO LEC ICB ICB
CROSS CONNECTS ICB ICB
DS-3
POP TO POP 15 ICB
LOA PROVIDED 15 ICB
LEC TO LEC 22 ICB
CAP TO CAP 22 ICB
CAP TO LEC 22 ICB
CROSS CONNECTS 8 ICB
DS-1
POP TO POP 12 ICB
LOA PROVIDED 12 ICB
LEC TO LEC 20 ICB
CAP TO CAP 20 ICB
CAP TO LEC 20 ICB
CROSS CONNECTS 8 ICB
</TABLE>
All intervals are subject to network capacity and LEC facility availability.
Should Off-Net capacity be required, intervals will be determined on an ICB
basis. BTI does not guarantee Off-Net capacity and performance.
"ICB" means "Individual Case Basis"
"POP TO POP" means BTI controls CFA
17
<PAGE> 18
[ ] - CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE A-3 TO EXHIBIT A
TO
BTI COMMUNICATIONS PRIVATE LINE SERVICE AGREEMENT
TECHNICAL SPECIFICATIONS
1. INTERCONNECT SPECIFICATIONS:
1.1 The customer interconnection point of DS-1 & DS-3 signals at the BTI
(SPT) location will be at an industry standard (DSX-1) & (DSX-3)
digital cross-connect panels and will be referred to as BTI Network
Interface in this document.
1.2 The DS-1 & DS-3 signals terminating at the BTI digital cross-connect
panels will meet the electrical specifications as defined in AT&T
Compatibility Bulletin (CB) No. 119, Issue 3, October, 1979.
1.3 The BTI Digital Network will be compatible with the Bell System
hierarchical clock synchronization methods and stratum levels as
described in Bellcore Technical Advisory (GR436-Core).
1.4 The Company equipment must also meet the interconnect specifications
listed above and shall comply with jitter requirements of AT&T
Technical Reference PUB 63411.
2. PERFORMANCE OBJECTIVES:
2.1 DS-1, DS-3, OC-3, OC-12, OC-48, OC-3c, OC-12c, and OC-48c circuit
performance will be measured using two parameters: Availability and
Error-Free Seconds.
The following assumptions apply to the derived data:
- The circuits originate and terminate on the SONET OC-48 backbone
- High speed protection switching: 1 for N, where N=2
- MTTR for SONET equipment: [ ] hours
- MTTR for fiber optic cable: [ ] hours
- Cable cut rate: [ ]/year/1,000 sheath miles (Bellcore Standard)
2.2 Availability is a measure of the relative amount of time during which
the circuit is available for use. According to CCITT and ANSI
definitions, unavailability begins when the Bit Error Ratio (BER) in
each second is worse than [ ] for a period of 10 consecutive
seconds.
Inter Office Channel (IOC) : An Inter Office Channel refers to the BTI
Communications network between the points of presence (POP).
OPTICAL CARRIER LEVEL 1 (OC-1): The optical signal that results from an
optical conversion of an electrical STS-1 signal (51.840 Mb/s). This
signal forms the basis of the interface.
OC-3: Optical Carrier level 3 signal operation at [ ] Mb/s.
OC-12: Optical Carrier level 12 signal transmitting at [ ] Mb/s.
OC-48: Optical Carrier level 48 signal transmitting at [ ] Mb/s.
18
<PAGE> 19
[ ] - CONFIDENTIAL TREATMENT REQUESTED
POINT OF PRESENCE (POP): A physical location where a long distance
carrier terminates lines before connecting to the local exchange
carrier, another carrier, or directly to a customer.
2.3 The availability objective for all circuits between BTI Network
Interface points specified above is to provide performance levels over
a 12 month period as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------
V&H MILES DS1, DS3, OC-3, OC-12, OC-48, O-3C,
OC-12C, AND OC-48C
--------------------------------------------------------------
<S> <C>
0-2500 [ ]%
--------------------------------------------------------------
2501-4000 [ ]%
--------------------------------------------------------------
</TABLE>
This excludes any customer provided access links to the BTI digital
network.
2.4 Outages attributable to incidental damage to or severage of outside
fiber optic cable plant, scheduled maintenance is excluded from the
performance objective stated above.
2.5 Error-Free Seconds (EFS) and Error Seconds (ES) are the primary measure
of error performance. An Error-Free Second is defined as any second in
which no bit errors are received. Conversely, an Error Second is any
second in which one or more bit errors are received.
3. SONET: Synchronous Optical Network is a family of optical transmission
rates and interface standards allowing internetworking of products from
different vendors. Base optical rate is Mb/s. Higher rates are direct
multiples.
SONET TRANSPORT: Facilities associated with carrying OC-1 or higher
level signals.
SYNCHRONOUS TRANSPORT SIGNAL LEVEL 1 (STS-1): The basic logical
building block electrical signal
SYNCHRONOUS TRANSPORT SIGNAL LEVEL N (STS-N): This electrical signal is
obtained by byte interleaving N STS-1 signals together. The rate of the
STS-N is N times 51.840 Mb/s.
TERMINATING MULTIPLEX (TM): Provides the multiplex functions for
multiplexing and demultiplexing between the DS1 or higher signal level
and the SONET OC-N level.
ACCEPTANCE CRITERIA: The acceptance criteria for DS-1 circuits between
BTI Network Interface points is to provide the performance levels shown
below during a 24 hour test period. The acceptance criteria for DS-3
circuits and above between BTI Network Interface points is to provide
the performance levels shown below during a 72 hour test period. The
test period may be modified with the affected Company's consent if
necessary. Access connections to customer location will be tested in
accordance with Bell Publication 62508.
- The tables below are based on BTI owned fiber optic
network only and on the Bellcore Specifications of the
SONET delivery of DS-1, DS-3, OC-3, OC-12, OC-48, OC-3c,
OC-12c, and OC-48c directly off the SONET Backbone.
- If the DS-1, DS-3, OC-3, OC-12, OC-48, OC-3c, OC-12c, and
OC-48c service is delivered at the STS1 level then the
general performance objectives fall into the industry
standard.
19
<PAGE> 20
[ ] - CONFIDENTIAL TREATMENT REQUESTED
DS-1, DS-3
The table below defines the general performance objectives for DS1 service
operating at 1.544 Mb/s, and the general performance objectives for DS-1 service
operating at 1.544 Mb/s, and the general performance objectives for DS-3 service
operating at 45 Mb/s.
<TABLE>
<CAPTION>
--------------------------------------------------------
V&H MILES EFS BER
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C>
0-250 [ ]% [ ]
--------------------------------------------------------
251-500 [ ]% [ ]
--------------------------------------------------------
01-1000 [ ]% [ ]
--------------------------------------------------------
001-1500 [ ]% [ ]
--------------------------------------------------------
1501-2000 [ ]% [ ]
--------------------------------------------------------
2001-2500 [ ]% [ ]
--------------------------------------------------------
2501-3000 [ ]% [ ]
--------------------------------------------------------
3001-3500 [ ]% [ ]
--------------------------------------------------------
3501-4000 [ ]% [ ]
--------------------------------------------------------
</TABLE>
OC-3, 12, 48; OC-3C, 12C, 48C
The table below defines the general performance objectives for OC-3, 12, 48,
OC-3c, 12c, 48c.
<TABLE>
<CAPTION>
--------------------------------------------------------
V&H MILES EFS BER
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C>
0-250 [ ]% [ ]
--------------------------------------------------------
251-500 [ ]% [ ]
--------------------------------------------------------
501-1000 [ ]% [ ]
--------------------------------------------------------
1001-1500 [ ]% [ ]
--------------------------------------------------------
1501-2000 [ ]% [ ]
--------------------------------------------------------
2001-2500 [ ]% [ ]
--------------------------------------------------------
2501-3000 [ ]% [ ]
--------------------------------------------------------
3001-3500 [ ]% [ ]
--------------------------------------------------------
3501-4000 [ ]% [ ]
--------------------------------------------------------
</TABLE>
20
<PAGE> 1
EXHIBIT 10.53
================================================================================
CREDIT AGREEMENT
dated as of December 22, 1998,
by and among
KNOLOGY HOLDINGS, INC.,
as Guarantor,
certain Subsidiaries of the Guarantor
and any Additional Borrower Party hereto
as Borrowers,
the Lenders referred to herein,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS.........................................................................................1
SECTION 1.1 Definitions...................................................................................1
SECTION 1.2 General......................................................................................17
SECTION 1.3 Other Definitions and Provisions.............................................................17
ARTICLE II CREDIT FACILITY....................................................................................17
SECTION 2.1 Loans........................................................................................17
SECTION 2.2 Procedure for Advances of Loans..............................................................18
SECTION 2.3 Repayment of Loans...........................................................................19
SECTION 2.4 Notes........................................................................................19
SECTION 2.5 Permanent Reduction of the Aggregate Commitment..............................................19
SECTION 2.6 Termination of Credit Facility...............................................................20
SECTION 2.7 Increase in Commitments......................................................................21
SECTION 2.8 Use of Proceeds..............................................................................21
SECTION 2.9 Security.....................................................................................21
ARTICLE III LETTER OF CREDIT FACILITY..........................................................................21
SECTION 3.1 L/C Commitment...............................................................................22
SECTION 3.2 Procedure for Issuance of Letters of Credit..................................................22
SECTION 3.3 Commissions and Other Charges................................................................22
SECTION 3.4 L/C Participations...........................................................................23
SECTION 3.5 Reimbursement Obligation of the Borrowers....................................................24
SECTION 3.6 Obligations Absolute.........................................................................24
SECTION 3.7 Effect of Application........................................................................25
ARTICLE IV GENERAL LOAN PROVISIONS............................................................................25
SECTION 4.1 Interest.....................................................................................25
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans.....................................27
SECTION 4.3 Fees.........................................................................................28
SECTION 4.4 Manner of Payment............................................................................29
SECTION 4.5 Crediting of Payments and Proceeds...........................................................29
SECTION 4.6 Adjustments..................................................................................29
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption
by the Administrative Agent..................................................................30
SECTION 4.8 Changed Circumstances........................................................................31
SECTION 4.9 Indemnity....................................................................................32
SECTION 4.10 Capital Requirements.........................................................................33
SECTION 4.11 Taxes........................................................................................33
SECTION 4.12 Change in Lending Office.....................................................................35
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING.......................................................35
SECTION 5.1 Closing......................................................................................35
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit.......................................35
SECTION 5.3 Conditions to Initial Loan...................................................................40
SECTION 5.4 Conditions to All Extensions of Credit.......................................................40
ARTICLE VI REPRESENTATIONS AND WARRANTIES.....................................................................41
SECTION 6.1 Representations and Warranties...............................................................41
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 6.2 Representations and Warranties of the Guarantor..............................................50
SECTION 6.3 Survival of Representations and Warranties, Etc..............................................50
ARTICLE VII FINANCIAL INFORMATION AND NOTICES..................................................................50
SECTION 7.1 Financial Statements and Projections.........................................................51
SECTION 7.2 Officer's Compliance Certificate.............................................................51
SECTION 7.3 Accountants' Certificate.....................................................................52
SECTION 7.4 Other Reports................................................................................52
SECTION 7.5 Notice of Litigation and Other Matters.......................................................52
SECTION 7.6 Accuracy of Information......................................................................53
ARTICLE VIII AFFIRMATIVE COVENANTS..............................................................................53
SECTION 8.1 Preservation of Corporate Existence and Related Matters......................................53
SECTION 8.2 Maintenance of Property......................................................................54
SECTION 8.3 Insurance....................................................................................54
SECTION 8.4 Accounting Methods and Financial Records.....................................................54
SECTION 8.5 Payment and Performance of Obligations.......................................................54
SECTION 8.6 Compliance With Laws and Approvals...........................................................54
SECTION 8.7 Environmental Laws...........................................................................54
SECTION 8.8 Compliance with ERISA........................................................................55
SECTION 8.9 Compliance With Agreements...................................................................55
SECTION 8.10 Conduct of Business..........................................................................55
SECTION 8.11 Visits and Inspections.......................................................................55
SECTION 8.12 Additional Subsidiaries; Additional Collateral; New Equity...................................55
SECTION 8.13 KNOLOGY of Georgia...........................................................................57
SECTION 8.14 Year 2000 Compatibility......................................................................57
SECTION 8.15 Further Assurances...........................................................................58
ARTICLE IX FINANCIAL COVENANTS................................................................................58
SECTION 9.1 Maximum Consolidated Senior Funded Debt to Consolidated Adjusted Cash
Flow Ratio...................................................................................58
SECTION 9.2 Minimum Consolidated Adjusted Cash Flow to Cash Interest Expense Ratio.......................58
SECTION 9.3 Maximum Consolidated Senior Funded Debt to Contributed Capital Ratio.........................58
SECTION 9.4 Borrower Performance Tests...................................................................58
ARTICLE X NEGATIVE COVENANTS.................................................................................59
SECTION 10.1 Limitations on Debt..........................................................................60
SECTION 10.2 Limitations on Guaranty Obligations..........................................................61
SECTION 10.3 Limitations on Liens.........................................................................61
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions.................................63
SECTION 10.5 Limitations on Mergers and Liquidation.......................................................65
SECTION 10.6 Limitations on Sale of Assets................................................................65
SECTION 10.7 Limitations on Dividends and Distributions...................................................66
SECTION 10.8 Limitations on Guarantor.....................................................................67
SECTION 10.9 Limitations on Exchange and Issuance of Capital Stock........................................68
SECTION 10.10 Transactions with Affiliates other than Loan Parties.........................................68
SECTION 10.11 Certain Accounting Changes...................................................................68
SECTION 10.12 Amendments; Payments and Prepayments of Subordinated Debt or Senior
Discount Notes...............................................................................68
SECTION 10.13 Restrictive Agreements.......................................................................69
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <S> <C>
ARTICLE XI UNCONDITIONAL GUARANTY.............................................................................69
SECTION 11.1 Guaranty of Obligations......................................................................69
SECTION 11.2 Nature of Guaranty...........................................................................69
SECTION 11.3 Demand by the Administrative Agent...........................................................70
SECTION 11.4 Waivers......................................................................................70
SECTION 11.5 Modification of Loan Documents etc...........................................................71
SECTION 11.6 Reinstatement................................................................................71
SECTION 11.7 No Subrogation...............................................................................72
ARTICLE XII DEFAULT AND REMEDIES...............................................................................72
SECTION 12.1 Events of Default............................................................................72
SECTION 12.2 Remedies.....................................................................................75
SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc..............................................76
ARTICLE XIII THE ADMINISTRATIVE AGENT...........................................................................76
SECTION 13.1 Appointment..................................................................................76
SECTION 13.2 Delegation of Duties.........................................................................76
SECTION 13.3 Exculpatory Provisions.......................................................................77
SECTION 13.4 Reliance by the Administrative Agent.........................................................77
SECTION 13.5 Notice of Default............................................................................77
SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders...................................78
SECTION 13.7 Indemnification..............................................................................78
SECTION 13.8 The Administrative Agent in Its Individual Capacity..........................................79
SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent......................79
ARTICLE XIV MISCELLANEOUS......................................................................................79
SECTION 14.1 Notices......................................................................................79
SECTION 14.2 Expenses; Indemnity..........................................................................81
SECTION 14.3 Set-off......................................................................................81
SECTION 14.4 Governing Law................................................................................82
SECTION 14.5 Consent to Jurisdiction......................................................................82
SECTION 14.6 Binding Arbitration; Waiver of Jury Trial....................................................82
SECTION 14.7 Reversal of Payments.........................................................................83
SECTION 14.8 Injunctive Relief; Punitive Damages..........................................................83
SECTION 14.9 Accounting Matters...........................................................................84
SECTION 14.10 Successors and Assigns; Participations.......................................................84
SECTION 14.11 Amendments, Waivers and Consents.............................................................87
SECTION 14.12 Performance of Duties........................................................................88
SECTION 14.13 All Powers Coupled with Interest.............................................................88
SECTION 14.14 Survival of Indemnities......................................................................88
SECTION 14.15 Titles and Captions..........................................................................88
SECTION 14.16 Severability of Provisions...................................................................88
SECTION 14.17 Counterparts.................................................................................88
SECTION 14.18 Guarantor as Agent for Borrowers.............................................................88
SECTION 14.19 Term of Agreement............................................................................88
SECTION 14.20 Inconsistencies with Other Documents; Independent Effect of Covenants........................89
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Prepayment
Exhibit D - Form of Notice of Conversion/Continuation
Exhibit E - Form of Officer's Compliance Certificate
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Notice of Account Designation
Exhibit H - Form of Collateral Assignment
Exhibit I - Form of Pledge Agreement
Exhibit J - Form of Security Agreement
Exhibit K-1 - Form of Commitment Increase Supplement
Exhibit K-2 - Form of New Lender Supplement
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Designated Borrowers
Schedule 2.5(b) - Affiliated Parties
Schedule 5.2(d) - Required Consents
Schedule 6.1(a) - Jurisdictions of Organization and
Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(e) - Compliance with Laws;
Governmental Approvals
Schedule 6.1(h) - Environmental Reports
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(r) - Real Property Matters
Schedule 6.1(t) - Debt and Guaranty Obligations; Subordinated Debt
Schedule 6.1(u) - Litigation
Schedule 6.1(w)(i) - Interactive Broadband Networks
Schedule 6.1(w)(ii) - CATV Franchises
Schedule 6.1(w)(iii) - Local Service Communications Licenses/PUC Authorizations
Schedule 6.1(w)(iv) - Long Distance Service Communications Licenses/PUC
Authorizations
Schedule 6.1(w)(v) - Other Communications Licenses/PUC Authorizations
Schedule 6.1(w)(vi) - Network Agreements
Schedule 6.1(w)(x) - Notices of Rate Regulation
Schedule 10.3 - Existing Liens
Schedule 10.4 - Existing Loans, Advances and Investments
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT, dated as of the 22nd day of December, 1998, by and
among KNOLOGY HOLDINGS, INC., a Delaware corporation, as guarantor (the
"Guarantor"), certain Subsidiaries of the Guarantor identified on the signature
pages hereto (excluding KNOLOGY of Georgia, Inc.), as borrowers (collectively,
the "Initial Borrowers") and any Additional Borrowers who may become party to
this Agreement, collectively with the Initial Borrowers, the "Borrowers"),
KNOLOGY of Georgia, Inc., the Lenders who are or may become a party to this
Agreement, and FIRST UNION NATIONAL BANK, as Administrative Agent for the
Lenders.
STATEMENT OF PURPOSE
The Borrowers have requested, and the Lenders have agreed, to extend
certain credit facilities to the Borrowers on the terms and conditions of this
Agreement. The Guarantor, as either direct or indirect owner of one hundred
percent (100%) of each of the Borrowers, will benefit directly and indirectly
from the extension of such credit facilities to the Borrowers. As a condition
to making any extensions of credit hereunder, the Lenders have required, and
the Guarantor has agreed, to execute this Agreement as Guarantor.
The parties hereto acknowledge that although this Credit Agreement is
entered into pursuant to a commitment letter dated as of October 16, 1998 (the
"Commitment Letter") between the Guarantor, First Union and First Union Capital
Markets, a division of Wheat First Securities, Inc., this is the Credit
Agreement contemplated by the expired commitment letters dated as of September
29, 1997 between the same entities, which such letters expired prior to and
were superseded and replaced by the Commitment Letter.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Additional Borrower" means each Subsidiary of the Guarantor (as
defined below) which hereafter becomes a Borrower pursuant to Section 8.12(a).
"Affiliate" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
power to vote five percent (5%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
<PAGE> 7
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 13.9.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
14.1.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. On the Closing Date, the
Aggregate Commitment shall be Fifty Million Dollars ($50,000,000).
"Agreement" means this Credit Agreement, as amended, restated or
otherwise modified from time to time.
"Applicable Law" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
4.1(c).
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 14.10(b)(iii).
"Available Commitment" means, as to any Lender at any time, an amount
equal to (a) such Lender's Commitment less (b) such Lender's Extensions of
Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or
(b) the Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall
take effect simultaneously with the corresponding change or changes in the
Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 4.1(a).
"Benefited Lender" shall have the meaning assigned thereto in Section
4.6.
"Borrowers" means the collective reference to the Initial Borrowers
and any other party joining this Agreement pursuant to Section 8.12(a), each in
its capacity as borrower hereunder; "Borrower" means any such Borrower.
"Broadband Services" means all broadband communication services,
including without limitation Broadband Carrier Services, cable television,
telephone, other telecommunications and high-speed internet access service,
provided by any Person to residential, business or other customers.
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"Broadband Carrier Services" means collectively the provision of
certain wholesale telecommunication transport services over the broadband
hybrid-fiber coax network ("Broadband Network"), primarily to Interexchange
Carriers ("IXC"), Internet Service Providers ("ISP") and large multi-location
commercial enterprises desiring high capacity connectivity within a
Metropolitan Service Area ("MSA"). These services are termed (a) Internal Local
Transport ("ILT") by which ISP's are connected from their point-of-presence
("POP") to end-users at wholesale transport revenue rates per customer, (as
distinguished from the provision of high-speed Internet access at retail
revenue rates using the Olobahn brand name), (b) Local Exchange Transport
("LET") by which IXC's are connected to end-users, Local Exchange Carriers
("LEC") or other IXC's via the Broadband Network and/or twisted pair cabling,
(c) Private Line Services by which carriers or commercial businesses operating
in multiple locations within the MSA are interconnected via point-to-point
facilities owned or leased by any Loan Party and (d) Special Access Services by
which corporate locations or central offices are directly connected to an IXC
point-of-presence.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day, other than a Saturday, Sunday or legal holiday, on
which banks in Charlotte, North Carolina are open for the conduct of their
commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.
"Cable Act" means the Cable Television Communications Policy Act of
1984, as amended by the Consumer Protection and Competition Act of 1992, and
the Telecommunications Act of 1996, and as further amended or supplemented from
time to time.
"Capital Asset" means, with respect to the Loan Parties and their
Subsidiaries, any asset that should, in accordance with GAAP, be classified and
accounted for as a capital asset on a Consolidated balance sheet of the Loan
Parties and their Subsidiaries.
"Capital Expenditures" means, with respect to the Loan Parties and
their Subsidiaries for any period, the aggregate cost of all Capital Assets
acquired by any such Loan Party or such Subsidiary during such period,
determined in accordance with GAAP.
"Capital Lease" means, with respect to the Loan Parties and their
Subsidiaries, any lease of any property that should, in accordance with GAAP,
be classified and accounted for as a capital lease on a Consolidated balance
sheet of the Loan Parties and their Subsidiaries.
"Cash Interest Expense" means, with respect to the Loan Parties and
their Subsidiaries, for any period of two (2) consecutive fiscal quarters,
total interest expense paid in cash (including, without limitation, interest
expense attributable to Capital Leases) determined on a Consolidated basis,
without duplication, in accordance with GAAP, multiplied by two (2).
"CATV Franchise" means, with respect to the Loan Parties and their
Subsidiaries, (a) any franchise, license, permit, wire agreement or easement
granted by any local Governmental
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<PAGE> 9
Authority, including any local franchising authority, pursuant to which any
such Loan Party or such Subsidiary has the right or license to provide
Broadband Services or to operate any cable distribution system for the purpose
of receiving and distributing audio, video, digital, other broadcast signals or
information or telecommunications by cable, optical, antenna, microwave or
satellite transmission and (b) any law, regulation, ordinance, agreement or
other instrument or document expressly setting forth all or any part of the
terms of any franchise, license, permit, wire agreement or easement described
in clause (a) of this definition (excluding any law, regulation, ordinance,
agreement, instrument or document which relates to, but does not expressly set
forth any terms of any such franchise, license, permit, wire agreement or
easement).
"Change in Control" shall have the meaning assigned thereto in Section
12.1(i).
"Closing Date" means the date of this Agreement or such later Business
Day upon which each condition described in Section 5.2 shall be satisfied or
waived in all respects in a manner reasonably acceptable to the Administrative
Agent, in its sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Collateral" means any assets purported to be pledged by any Loan
Party or Subsidiary thereof, whether pursuant to a Security Document or
otherwise, to the Lenders or the Administrative Agent for the ratable benefit
of the Administrative Agent and the Lenders in order to secure the Obligations
or any portion thereof.
"Collateral Assignments" means the collective reference to all
collateral assignments of leases, easements and/or agreements executed by any
Loan Party in favor of the Administrative Agent for the ratable benefit of
itself and the Lenders in substantially the form of Exhibit H hereto, as
amended, restated or otherwise modified; "Collateral Assignment" means any of
such Collateral Assignments.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to the Borrowers hereunder and to issue or participate in Letters of
Credit issued for the account of the Borrowers hereunder in an aggregate
principal or face amount at any time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule 1.1(a) hereto, as the same may be
reduced or modified at any time or from time to time pursuant to the terms
hereof.
"Commitment Percentage" means, as to any Lender at any time, the ratio
of (a) the amount of the Commitment of such Lender to (b) the Aggregate
Commitment of all of the Lenders.
"Communications Law" means the Communications Act of 1934, as amended,
and all rules and regulations thereunder, or any successor statute or statutes
thereto (including, without limitation, the Telecommunications Act of 1996) and
all rules and regulations issued by the FCC thereunder, as amended or
supplemented from time to time.
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<PAGE> 10
"Communications License" means any local telecommunications, long
distance telecommunications, or other license, permit, consent, certificate of
compliance, franchise, approval, waiver or authorization granted or issued by
the FCC or other applicable federal Governmental Authority pertaining to the
provision of Broadband Services, including, without limitation, any of the
foregoing authorizing or permitting the acquisition, construction or operation
of any Interactive Broadband Network.
"Connections" means the sum of (a) the aggregate number of Service
Connections minus (b) the aggregate number of Exclusions.
"Consolidated" means, when used with reference to financial statements
or financial statement items of any Loan Party or any of their respective
Subsidiaries, such statements or items on a consolidated basis in accordance
with applicable principles of consolidation under GAAP.
"Consolidated Adjusted Cash Flow" means, for any period of two (2)
consecutive fiscal quarters, the sum of the following multiplied by two (2) and
determined on a Consolidated basis, without duplication, for the Designated
Borrowers, in accordance with GAAP: (a) net income for such period (including,
if applicable, the sum of (x) net income of KNOLOGY of Georgia, Inc., to the
extent actually received by a Designated Borrower in the form of a cash
distribution during such period less (y) the amount of any distributions
(excluding any host digital terminals) to KNOLOGY of Georgia, Inc. from any
Loan Party during such period) plus (b) the sum of the following to the extent
deducted in determining net income: (i) income and franchise taxes and real,
personal, and intangible property taxes, (ii) interest expense, (iii) corporate
overhead and (iv) amortization, depreciation and other non-cash charges less
(c) interest income and any extraordinary gains.
"Consolidated Cash Flow" means, for any Loan Party, for any period of
two (2) consecutive fiscal quarters, the sum of the following multiplied by two
(2) and determined on a Consolidated basis, without duplication, for such Loan
Party and its Subsidiaries in accordance with GAAP: (a) net income for such
period (including, if applicable, the sum of (x) net income of KNOLOGY of
Georgia, Inc., to the extent actually received by such Loan Party (other than
KNOLOGY of Georgia, Inc.) or its Subsidiaries in the form of a cash
distribution during such period less (y) the amount of any distributions
(excluding any host digital terminals) to KNOLOGY of Georgia, Inc. from any
Loan Party during such period) plus (b) the sum of the following to the extent
deducted in determining net income: (i) income and franchise taxes and real,
personal, and intangible property taxes, (ii) interest expense, and (iii)
amortization, depreciation and other non-cash charges less (c) interest income
and any extraordinary gains.
"Consolidated Senior Funded Debt" means the sum of (a) Consolidated
Total Funded Debt less (b) the sum of (i) the outstanding aggregate accreted
principal amount and accrued interest of the Senior Discount Notes plus (ii)
the outstanding aggregate principal amount of any other Subordinated Debt.
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<PAGE> 11
"Consolidated Total Funded Debt" means, with respect to the Loan
Parties and their Subsidiaries at any date of determination and without
duplication, all Debt of the Loan Parties and their Subsidiaries on a
Consolidated basis.
"Contributed Capital" means, with respect to the Loan Parties and
their Subsidiaries at any date, the sum of the following determined on a
Consolidated basis, without duplication: (a) the gross cash proceeds received
by the Loan Parties and their Subsidiaries from any equity issuance plus (b)
Consolidated Total Funded Debt.
"Corporate Cash Management" means the periodic collection,
concentration and transfer of funds consisting of excess cash flow of any
Borrower to the Guarantor for the purpose of (a) temporarily investing such
funds in a corporate cash management program reasonably acceptable to the
Administrative Agent in the ordinary course of business or (b) investments
permitted pursuant to Section 10.4(b)(i).
"Credit Facility" means the collective reference to the Revolving
Credit Facility and the L/C Facility.
"Debt" means, with respect to the Loan Parties and their Subsidiaries
at any date and without duplication, the sum of the following calculated in
accordance with GAAP: (a) all liabilities, obligations and indebtedness for
borrowed money including, but not limited to obligations evidenced by bonds
including any accrued interest arising as a result of interest deferrals,
debentures, notes or other similar instruments of any such Loan Party or
Subsidiary, (b) all obligations to pay the deferred purchase price of property
or services of any such Loan Party or Subsidiary, including, but not limited
to, all obligations under non-competition agreements, except trade payables
arising in the ordinary course of business not more than ninety (90) days past
due (excluding such trade payables which are being contested in good faith and
for which adequate reserves are maintained to the extent required by GAAP), (c)
all obligations of any such Loan Party or Subsidiary as lessee under Capital
Leases, (d) all Debt of any other Person secured by a Lien on any asset of any
such Loan Party or Subsidiary, (e) all Guaranty Obligations of any such Loan
Party or Subsidiary, (f) all obligations, contingent or otherwise, of any such
Loan Party or Subsidiary relative to the face amount of letters of credit,
whether or not drawn, including without limitation any Reimbursement
Obligation, and banker's acceptances issued for the account of any such Loan
Party or Subsidiary, (g) all obligations to redeem, repurchase, exchange,
defease or otherwise make payments in respect of capital stock or other
securities of such Loan Party or Subsidiary and (h) all termination payments
due and payable by such Loan Party or Subsidiary pursuant to any Hedging
Agreement.
"Default" means any of the events specified in Section 12.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Designated Borrowers" means those Borrowers designated in writing by
the Guarantor for inclusion in the calculation of Consolidated Adjusted Cash
Flow, prior to any measuring date thereof; provided, that each such Borrower
must have a minimum Consolidated Cash Flow of at least one Dollar ($1.00) and
once so designated, each such Borrower shall remain a Designated Borrower. As
of the Closing Date, the Designated Borrowers are set forth on Schedule 1.1(b).
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<PAGE> 12
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a finance company, insurance company or other
financial institution which in the ordinary course of business extends credit
of the type extended hereunder and that has total assets in excess of
$1,000,000,000, (c) already a Lender hereunder (whether as an original party to
this Agreement or as the assignee of another Lender), (d) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially
all of the commercial lending business of the assigning Lender, or (e) any
other Person that has been approved in writing as an Eligible Assignee by the
Borrowers and the Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of any
Loan Party or any of their respective Subsidiaries or any ERISA Affiliate or
(b) has at any time within the preceding six years been maintained for the
employees of any Loan Party or any of their respective Subsidiaries or any
current or former ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"Equivalent Basic Unit Connections" means, with respect to any market
served by the Loan Parties, the amount equal to the quotient of (a) the gross
revenue received by any Loan Party from the provision of cable service on a
wholesale or bulk basis to multiple dwelling units in such market divided by
(b) the basic monthly price charged by such Loan Party to the individual
consumers of such services on a non-bulk basis in such market. For example, if
the gross revenue received by the Loan Parties from a 1,000 room hotel was
$10,000 per month and basic monthly price charged to individual consumers on a
non-bulk basis was $20 per month, the Equivalent Basic Units Connections
attributable to the 1,000 room hotel would be 500.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with any Loan Party or
any Subsidiary of a Loan Party is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.
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"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve
requirement (including without limitation any basic, supplemental or emergency
reserves) in respect of Eurocurrency liabilities or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section 12.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Exclusions" means the sum of all Service Connections for (a)
Broadband Carrier Services plus (b) premium video and digital video services
plus (c) second residential telephone lines which are not billed at full rates,
in residences where a Loan Party provides at least one other residential
telephone line which is billed at full rates.
"Existing Stockholders" means ITC Holding Company, Inc., a Delaware
corporation, Campbell B. Lanier, III, J. Smith Lanier and SCANA Corporation and
their Affiliates, and in the case of the foregoing individuals, his spouse and
any one or more of his lineal descendants and their spouses; provided, that any
such person shall only be deemed to be an "Existing Stockholder" to the extent
such Person's capital stock of the Guarantor was received, directly or
indirectly, from Campbell B. Lanier, III, J. Smith Lanier or one or more of
such spouses or lineal descendents.
"Extensions of Credit" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Loans made by
such Lender then outstanding and (b) such Lender's Commitment Percentage of the
L/C Obligations then outstanding.
"FCC" means the Federal Communications Commission or any successor
Governmental Authority.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate" shall mean a
daily rate which is determined, in the reasonable opinion of the Administrative
Agent, to be the rate at which federal funds are being offered for sale in the
national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends
or holidays shall be the same as the rate for the most immediate preceding
Business Day.
"First Union" means First Union National Bank, a national banking
association, and its successors.
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<PAGE> 14
"Fiscal Year" means the fiscal year of the Loan Parties and their
Subsidiaries, ending on December 31.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Loan Parties and their Subsidiaries throughout the period
indicated and consistent with the prior financial practice of the Loan Parties
and their Subsidiaries.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantor" means KNOLOGY Holdings, Inc., in its capacity as guarantor
hereunder.
"Guaranty" means the unconditional guaranty agreement of the Guarantor
set forth in Article XI.
"Guaranty Obligation" means, with respect to the Loan Parties and
their Subsidiaries, without duplication, any obligation, contingent or
otherwise, of any such Loan Party or Subsidiary pursuant to which such Loan
Party or Subsidiary has directly or indirectly guaranteed any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of any
such Loan Party or Subsidiary (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement condition or otherwise) or (b) entered into for the purpose
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, that the term Guaranty Obligation shall not
include endorsements for collection or deposit in the ordinary course of
business.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release
of which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which pose a health or safety hazard to persons or
neighboring properties, (f) which are materials consisting of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
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<PAGE> 15
substance, or (g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of any Loan Party or any Subsidiary of
a Loan Party, and any confirming letter executed pursuant to such hedging
agreement, all as amended, restated or otherwise modified.
"Indenture" shall mean the Indenture dated as of October 22, 1997
between the Guarantor and United States Trust Company of New York, as trustee,
pursuant to which the Guarantor issued the Senior Discount Notes, as the same
may be restated, extended, renewed, amended or otherwise modified and in effect
from time to time.
"Initial Funding Date" means the date upon which each condition
described in Section 5.3 shall be satisfied or would in all respects in a
manner reasonably acceptable to the Administrative Agent and the Lenders, each
in their sole discretion.
"Interactive Broadband Network" means any two-way, interactive,
high-capacity hybrid fiber-coaxial networks (including networks being
constructed or to be converted or upgraded to meet such criteria) owned or
leased or operated by any Loan Party or any Subsidiary of a Loan Party pursuant
to an agreement with any Person and which provides Broadband Services.
"Intercompany Debt" means Debt owed by any Loan Party or any
Subsidiary of any Loan Party to another Loan Party.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Issuing Lender" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C Commitment" means the lesser of (a) Ten Million Dollars
($10,000,000) and (b) the Aggregate Commitment.
"L/C Facility" means the letter of credit facility established
pursuant to Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
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<PAGE> 16
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 14.10(b).
"Lending Office" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section
3.1.
"Leverage Ratio" means, at any fiscal quarter end, the ratio of (a)
Consolidated Total Funded Debt to (b) Consolidated Cash Flow.
"LIBOR" means the rate of interest per annum determined on the basis
of the rate for deposits in Dollars in minimum amounts of at least $5,000,000
for a period equal to the applicable Interest Period which appears on the
Telerate Page 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. If, for any
reason, such rate does not appear on Telerate Page 3750, then "LIBOR" shall be
determined by the Administrative Agent to be the arithmetic average (rounded
upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)) of
the rate per annum at which deposits in Dollars would be offered by first class
banks in the London interbank market to the Administrative Agent approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest Period and in an
amount substantially equal to the amount of the applicable Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
----------------------------------
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Applications, any Hedging Agreement executed by any Lender and each other
document, instrument and agreement executed and delivered by any Loan Party,
any Subsidiary of a Loan Party in connection with this Agreement or otherwise
referred to herein or contemplated hereby, all as may be amended, restated or
otherwise modified.
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"Loan Parties" means the collective reference to the Guarantor, the
Borrowers and each Subsidiary thereof which becomes a party hereto pursuant to
Section 8.12(a) and KNOLOGY of Georgia, Inc.
"Loans" means any revolving loan made to the Borrower pursuant to
Section 2.1, and all such revolving loans collectively as the context requires.
"Majority Lenders" means, at any date, any combination of holders of
at least fifty-one percent (51%) of the aggregate unpaid principal amount of
the Notes, or if no amounts are outstanding under the Notes, any combination of
Lenders whose Commitment Percentages aggregate at least fifty-one percent
(51%).
"Material Adverse Effect" means, with respect to the Loan Parties and
their Subsidiaries, a material adverse effect on the properties, business,
prospects, operations or condition (financial or otherwise) of the Loan Parties
and their Subsidiaries, taken as a whole, or the ability of the Loan Parties
and their Subsidiaries, taken as a whole to perform their obligations under the
Loan Documents or Material Contracts.
"Material Contract" means (a) any contract or other agreement, written
or oral, of any Loan Party or any Subsidiary of a Loan Party involving monetary
liability of or to any such Person in an amount in excess of $1,000,000 per
annum or (b) any other contract or agreement, written or oral, of any Loan
Party or any Subsidiary of a Loan Party, the failure to comply with which could
reasonably be expected to have a Material Adverse Effect.
"Mortgages" means the mortgages, deeds of trust, deeds to secure debt
or other similar instrument executed by any Borrower with regard to the real
property owned thereby, in favor of the Administrative Agent, for the ratable
benefit of itself and the Lenders, in substance and form reasonably acceptable
to the Administrative Agent as amended, restated or otherwise modified.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Loan Party, any Subsidiary of a Loan
Party or any ERISA Affiliate is making, or is accruing an obligation to make,
contributions within the preceding six years.
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale
of assets, the gross cash proceeds received by any Loan Party or any Subsidiary
of a Loan Party from such sale less the sum of (i) all legal, title, recording,
transfer and income tax expenses, commissions and similar fees and expenses
incurred, and all other federal, state, local and foreign taxes assessed in
connection therewith and (ii) the aggregate outstanding principal amount of,
premium, if any, and interest on any Debt secured by a Lien on the asset (or a
portion thereof) sold, which Debt is required to be repaid in connection with
such sale of assets, (b) with respect to any offering of debt or equity
securities, the gross cash proceeds received by any Loan Party or any
Subsidiary of a Loan Party therefrom less all legal, underwriting and similar
fees and expenses incurred in connection therewith and (c) with respect to any
payment under an insurance policy, the amount of cash proceeds received by any
Loan Party or any Subsidiary of a Loan Party from the related insurance company
less reasonable expenses of obtaining such proceeds.
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"Network Agreement" means any document or agreement entered into by
any Loan Party or any Subsidiary of a Loan Party regarding the use, operation
or maintenance of, or otherwise concerning, any Interactive Broadband Network.
"Notes" means the collective reference to the Notes made by the
Borrower payable to the order of each Lender, substantially in the form of
Exhibit A hereto, evidencing the Revolving Credit Facility, and any amendments
and modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extensions thereof, in whole or in part; "Note" means
any of such Notes.
"Notice of Account Designation" shall have the meaning assigned
thereto in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in
Section 2.3(c).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
the L/C Obligations, (c) all payment and other obligations owing by any Loan
Party or any Subsidiary of a Loan Party to any Lender or the Administrative
Agent under any Hedging Agreement to which a Lender is a party, if any, and (c)
all other fees and commissions (including attorneys' fees), charges,
indebtedness, loans, liabilities, financial accommodations, obligations,
covenants and duties owing by any Loan Party or any Subsidiary of a Loan Party
to the Lenders or the Administrative Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money in each case
under or in respect of this Agreement, any Note, any Letter of Credit or any of
the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Other Taxes" shall have the meaning assigned thereto in Section
4.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of any Loan
Party, any Subsidiary of a Loan Party or any ERISA Affiliate or (b) has at any
time within the preceding six years been maintained for the employees of any
Loan Party, any Subsidiary of a Loan Party or any current or former ERISA
Affiliate.
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"Person" means an individual, corporation, partnership, limited
liability company, association, trust, business trust, joint venture, joint
stock company, pool, syndicate, sole proprietorship, unincorporated
organization, Governmental Authority or any other form of entity or group
thereof.
"Pledge Agreement" means any pledge agreement executed by any Loan
Party or any Subsidiary of a Loan Party in favor of the Administrative Agent
for the ratable benefit of the Administrative Agent and the other Lenders,
substantially in the form of Exhibit I, as amended, restated or otherwise
modified.
"Pole Agreement" means any pole attachment agreement or underground
conduit use agreement entered into in connection with the operation of any
Interactive Broadband Network.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on
the day such change in the Prime Rate occurs. The parties hereto acknowledge
that the rate announced publicly by First Union as its Prime Rate is an index
or base rate and shall not necessarily be its lowest or best rate charged to
its customers or other banks.
"Programming Agreements" means any agreement between any Loan Party or
any Subsidiary of a Loan Party and another person pursuant to which such person
agrees to provide programming to such Loan Party or such Subsidiary for
distribution on any Interactive Broadband Network.
"Public Market" means any time period after (a) an underwritten
primary public offering of shares of common stock of the Guarantor pursuant to
an effective registration statement under the Securities Act has been
consummated and (ii) at least fifteen percent (15%) of the total issued and
outstanding shares of common stock of the Guarantor has been distributed by
means of an effective registration statement under the Securities Act or sales
pursuant to Rule 144 under the Securities Act.
"PUC" means any state, provincial or other regulatory agency or body
that exercises jurisdiction over (a) the rates, services or provision of
Broadband Services or (b) the ownership, construction or operation of any
Interactive Broadband Network or long distance telecommunications system or (c)
over Persons who own, construct or operate any Interactive Broadband Network or
long distance telecommunications systems, in each case by reason of the nature
or type of the business subject to regulation and not pursuant to laws and
regulations of general applicability to Persons conducting business in any such
jurisdiction.
"PUC Authorization" means any registration with, and any written
validation, exemption, franchise, waiver, approval, order or authorization,
consent, license, certificate and permit, regarding the provision of Broadband
Services, issued to any Loan Party from any PUC.
"Register" shall have the meaning assigned thereto in Section
14.10(d).
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"Reimbursement Obligation" means the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
the Letters of Credit.
"Required Lenders" means, at any date, any combination of holders of
at least sixty-six and two-thirds percent (66-2/3%) of the aggregate unpaid
principal amount of the Notes, or if no amounts are outstanding under the
Notes, any combination of Lenders whose Commitment Percentages aggregate at
least sixty-six and two-thirds percent (66-2/3%).
"Responsible Officer" means the chief executive officer or chief
financial officer of any Loan Party or any Subsidiary of a Loan Party, as
applicable, or any other officer of any Loan Party or Subsidiary of a Loan
Party, as applicable, reasonably acceptable to the Administrative Agent.
"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"Securities Act" means the Securities Act of 1933, as amended or any
similar federal statute and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect from time to
time.
"Security Agreement" means the Security Agreement executed by the Loan
Parties in favor of the Administrative Agent for the ratable benefit of the
Administrative Agent and the Lenders, substantially in the form of Exhibit J
hereto, as amended, restated or otherwise modified.
"Security Documents" means the collective reference to the Security
Agreement, the Pledge Agreement, the Mortgages, the Collateral Assignments and
each other agreement or writing pursuant to which any Loan Party or any
Subsidiary of a Loan Party purports to pledge or grant a security interest in
any property or assets securing the Obligations or any such Loan Party or such
Subsidiary guaranties the payment and/or performance of the Obligations.
"Senior Discount Notes" means the collective reference to the 11-7/8%
Senior Discount Notes due 2007 issued by the Guarantor pursuant to the
Indenture, as the same may be restated, extended, renewed, amended or otherwise
modified and in effect from time to time.
"Service Connections" means the sum of (a) the number of cable modem
units utilizing internet access provided by any Loan Party, (b) the number of
residences and businesses that receive cable service from the Loan Parties on a
non-bulk service basis, (c) the number of Equivalent Basic Unit Connections and
(d) the number of separate telephone lines providing local and long distance
services provided by the Loan Parties.
"Solvent" means, with regard to the Loan Parties and their
Subsidiaries, taken as a whole, that such entities (a) on any date of
determination have capital sufficient to carry on their business and
transactions and all business and transactions in which they are about to
engage and are able to pay their Debts as they mature, (b) on any date of
determination own property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required
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to pay their probable liabilities (including contingencies), and (c) on any
date of determination do not believe that they will incur Debts or liabilities
beyond their ability to pay such Debts or liabilities as they mature.
"Subordinated Debt" means the collective reference to Debt on Schedule
6.1(t) hereof designated as Subordinated Debt and any other Debt of any Loan
Party or any Subsidiary of a Loan Party contractually subordinated in right and
time of payment to the Obligations on terms and conditions and in amounts
reasonably satisfactory to the Administrative Agent and Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by
such Person (irrespective of whether, at the time, capital stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency).
"Substantially Similar Business" means the development, ownership or
operation of one or more cable television, telephone, telecommunications or
information systems or the provision of telephony, telecommunications or
information services (including, without limitation, any voice, video
transmission, data or internet services) and any related, ancillary or
complementary business.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
"Termination Date" means the earliest of the dates referred to in
Section 2.6.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA, or (b) the withdrawal of any Loan Party, Subsidiary of a
Loan Party or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (c) the termination of a Pension Plan, the filing of a notice of
intent to terminate a Pension Plan or the treatment of a Pension Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC, or (e) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, or (f) the
partial or complete withdrawal of any Loan Party, any Subsidiary of a Loan
Party or any ERISA Affiliate from a Multiemployer Plan, or (g) the imposition
of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (h)
any event or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or
condition which results in the termination of a Multiemployer Plan under
Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a
Multiemployer Plan under Section 4042 of ERISA.
"UCC" means the Uniform Commercial Code as in effect in the State of
North Carolina.
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"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1994 Revision), International Chamber of Commerce
Publication No. 500.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary of any Loan Party,
a Subsidiary all of the shares of capital stock or other ownership interests of
which are, directly or indirectly, owned or controlled by any Loan Party and/or
one or more of any Loan Party's Wholly-Owned Subsidiaries.
SECTION 1.2 GENERAL. Unless otherwise specified, a reference in
this Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either
the singular or plural shall include the singular and plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter. Any reference herein to "Charlotte time" shall
refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 OTHER DEFINITIONS AND PROVISIONS.
(a) Use of Capitalized Terms. Unless otherwise defined therein,
all capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
CREDIT FACILITY
SECTION 2.1 LOANS. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Loans to the Borrowers on a
joint and several basis from time to time from the Initial Funding Date through
the Termination Date as requested by the Borrowers in accordance with the terms
of Section 2.2(a); provided, that (a) the aggregate principal amount of all
outstanding Loans (after giving effect to any amount requested) shall not
exceed the Aggregate Commitment less the sum of all outstanding L/C Obligations
and (b) the principal amount of outstanding Loans from any Lender to the
Borrowers shall not at any time exceed such Lender's Commitment less such
Lender's Commitment Percentage of the outstanding L/C Obligations. Each Loan by
a Lender shall be in a principal amount equal to such Lender's Commitment
Percentage of the aggregate principal amount of Loans requested on
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such occasion. Subject to the terms and conditions hereof, the Borrowers may
borrow, repay and reborrow Loans hereunder until the Termination Date.
SECTION 2.2 PROCEDURE FOR ADVANCES OF LOANS.
(a) Requests for Borrowing. The Guarantor, on behalf of all
Borrowers, shall give the Administrative Agent irrevocable prior written notice
in the form attached hereto as Exhibit B (a "Notice of Borrowing") not later
than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate
Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of
the Borrowers' intention to borrow, specifying (A) the date of such borrowing,
which shall be a Business Day, (B) the amount of such borrowing, which shall be
(X) with respect to Base Rate Loans in an aggregate principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof and (Y) with
respect to LIBOR Rate Loans in an aggregate principal amount of $1,000,000 or a
whole multiple of $1,000,000 in excess thereof (except, in each case, the
amount of such borrowing may be in the aggregate amount available to the
Borrowers), (C) whether the Loans are to be LIBOR Rate Loans or Base Rate Loans
or a combination thereof, and (D) in the case of a LIBOR Rate Loan, the
duration of the Interest Period applicable thereto. Notices received after
11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day.
The Administrative Agent shall promptly notify the Lenders of each Notice of
Borrowing.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Charlotte
time) on the proposed borrowing date, each Lender will make available to the
Administrative Agent, for the account of the Borrowers, at the office of the
Administrative Agent in funds immediately available to the Administrative
Agent, such Lender's Commitment Percentage of the Loans to be made on such
borrowing date. The Borrowers hereby irrevocably authorize the Administrative
Agent to disburse the proceeds of each borrowing requested pursuant to Section
2.2(a) in immediately available funds by crediting or wiring such proceeds to
the deposit account of the Borrowers identified in the most recent Notice of
Account Designation substantially in the form of Exhibit G hereto (a "Notice of
Account Designation") delivered by the Borrowers to the Administrative Agent or
as may be otherwise agreed upon by the Borrowers and the Administrative Agent
from time to time. Subject to Section 4.7, the Administrative Agent shall not
be obligated to disburse the portion of the proceeds of any Loan requested
pursuant to Section 2.2(a) to the extent that any Lender has not made available
to the Administrative Agent its Commitment Percentage of such Loan.
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SECTION 2.3 REPAYMENT OF LOANS.
(a) Repayment on Termination Date. The Borrowers shall repay the
outstanding principal amount of all Loans in full on the Termination Date, with
all accrued but unpaid interest thereon.
(b) Mandatory Repayments of Excess Loans. If at any time the
outstanding principal amount of all Loans exceeds the Aggregate Commitment,
less the sum of all outstanding L/C Obligations, the Borrowers shall
immediately upon notice from the Administrative Agent (i) repay the Loans by
payment to the Administrative Agent for the account of the Lenders or (ii)
furnish cash collateral reasonably satisfactory to the Administrative Agent or
(iii) repay the L/C Obligations, in each case in an amount equal to such
excess. Such cash collateral shall be applied in accordance with Section
12.2(b). Each such repayment shall be accompanied by any amount required to be
paid pursuant to Section 4.9 hereof.
(c) Optional Repayments. The Borrowers may at any time and from
time to time repay the Loans, in whole or in part, upon at least three (3)
Business Days' irrevocable notice to the Administrative Agent with respect to
LIBOR Rate Loans and one (1) Business Day irrevocable notice with respect to
Base Rate Loans, in the form attached hereto as Exhibit C (a "Notice of
Prepayment"), specifying the date and amount of repayment and whether the
repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination thereof,
and, if of a combination thereof, the amount allocable to each. Upon receipt of
such notice, the Administrative Agent shall promptly notify each Lender. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date set forth in such notice. Partial repayments shall be in an
aggregate amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof with respect to Base Rate Loans and $1,000,000 or a whole multiple of
$1,000,000 in excess thereof with respect to LIBOR Rate Loans. Each such
repayment shall be accompanied by any amount required to be paid pursuant to
Section 4.9.
(d) Limitation on Repayment of LIBOR Rate Loans. The Borrowers
may not repay any LIBOR Rate Loan on any day other than on the last day of the
Interest Period applicable thereto unless such repayment is accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.4 NOTES. Each Lender's Loans and the obligation of the
Borrowers to repay such Loans shall be evidenced by a Note executed by the
Borrowers payable to the order of such Lender representing the Borrowers'
obligation to pay such Lender's Commitment or, if less, the aggregate unpaid
principal amount of all Loans made and to be made by such Lender to the
Borrowers hereunder, plus interest and all other fees, charges and other
amounts due thereon. Each Note shall be dated the date hereof and shall bear
interest on the unpaid principal amount thereof at the applicable interest rate
per annum specified in Section 4.1.
SECTION 2.5 PERMANENT REDUCTION OF THE AGGREGATE COMMITMENT.
(a) Voluntary Reduction. The Borrowers shall have the right at
any time and from time to time, upon at least five (5) Business Days prior
written notice not later than 11:00 a.m.
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(Charlotte time) to the Administrative Agent, to permanently reduce, in whole
at any time or in part from time to time, without premium or penalty, the
Aggregate Commitment in an aggregate principal amount equal to $2,500,000 or
any whole multiple thereof.
(b) Other Permanent Reductions. The Aggregate Commitment shall be
permanently reduced as follows by an amount equal to:
(i) Insurance Proceeds. One hundred percent (100%) of
Net Cash Proceeds received by any Loan Party in excess of $200,000 in the
aggregate during any twelve (12) month period or $1,000,000 in the aggregate
during the term of this Agreement; provided, that so long as no Default or
Event of Default then exists, such Net Cash Proceeds may be reinvested or
contractually committed to be reinvested toward the repair or replacement of
damaged properties within one hundred and eighty days after receipt thereof.
(ii) Sale of Assets. One hundred percent (100%) of Net
Cash Proceeds received by any Loan Party in connection with the sale of assets
(other than a sale of assets permitted pursuant to Sections 10.6(a)-(e) and
Section 10.6(h)) in excess of $1,000,000 in the aggregate during any twelve
(12) month period or $5,000,000 in the aggregate during the term of this
Agreement; provided, that so long as no Default or Event of Default then
exists, such Net Cash Proceeds may be used or contractually committed to be
used to purchase like assets within one hundred and eighty (180) days after
receipt thereof.
(iii) Offering Proceeds. Unless otherwise agreed by the
Loan Parties and the Required Lenders, fifty percent (50%) of Net Cash Proceeds
from any offering by any Loan Party of equity securities (other than (A) the
Net Cash Proceeds of any equity offering to ITC Holding Company, Inc., or any
of the parties listed on Schedule 2.5(b) attached hereto and (B) the Net Cash
Proceeds of an initial public offering of the Guarantor) within three (3)
Business Days of receipt thereof.
(c) Additional Payments. Each permanent reduction permitted or
required pursuant to this Section 2.5 shall be accompanied by a payment of
principal sufficient to reduce the aggregate outstanding principal amount of
the Extensions of Credit of the Lenders after such reduction to the Aggregate
Commitment as so reduced and if the Aggregate Commitment as so reduced is less
than the aggregate amount of all outstanding Letters of Credit, the Borrowers
shall be required to deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit. Any reduction of the Aggregate
Commitment to zero shall be accompanied by payment of all outstanding
Obligations (and furnishing of cash collateral satisfactory to the
Administrative Agent for all L/C Obligations) and shall result in the
termination of the Commitments and Credit Facility. Such cash collateral shall
be applied in accordance with Section 12.2(b). If the reduction of the
Aggregate Commitment requires the repayment of any LIBOR Rate Loan, such
repayment shall be accompanied by any amount required to be paid pursuant to
Section 4.9 hereof.
SECTION 2.6 TERMINATION OF CREDIT FACILITY. The Credit Facility
shall terminate on the earliest of (a) November 15, 2002, (b) the date of
termination by the Borrowers
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pursuant to Section 2.5(a) or Section 2.5(b) (by reduction of the Aggregate
Commitment to zero), and (c) the date of termination by the Administrative
Agent on behalf of the Lenders pursuant to Section 12.2(a).
SECTION 2.7 INCREASE IN COMMITMENTS. The Borrowers shall have
the right, so long as no Default or Event of Default shall have occurred and be
continuing (or would result therefrom), with the consent of the Majority
Lenders (which consent shall not be unreasonably withheld), to increase the
total amount of the Aggregate Commitments hereunder by (a) first, accepting the
offer of any existing Lender or Lenders to increase its (or their) Commitment
(or Commitments) up to the amount of any such increase (which such increase
shall be offered first to the Administrative Agent, then (to the extent any
such increase is not fully underwritten by the Administrative Agent) to the
existing other Lenders); and/or (b) second, accepting the offer or offers of
any Person or Persons (not then a Lender) constituting an Eligible Assignee to
become a new Lender hereto with a Commitment or Commitments up to the amount
(or aggregate amount) of any such increase to the extent any such increase is
not fully underwritten by the Administrative Agent or existing Lenders;
provided, that (i) in no event shall any Lender's Commitment be increased
without the consent of such Lender, (ii) if any Loans are outstanding hereunder
on the date that any such increase is to become effective, the Administrative
Agent shall make such transfers of funds as are necessary in order that the
outstanding balance of such Loans reflect the Commitment Percentages of the
Lenders after giving effect to any increase pursuant to this Section 2.7, and
(iii) in no event shall any such increase result in the amount of the Aggregate
Commitment exceeding $100,000,000. Any increase to the Aggregate Commitment
pursuant to clause (a) of the first sentence of this Section 2.7 shall become
effective upon the execution of a Commitment Increase Supplement in the form of
Exhibit K-1 hereto, executed by the Borrowers, the Administrative Agent and the
increasing Lender or Lenders and any increase to the Aggregate Commitment
pursuant to clause (b) of the first sentence of this Section 2.7 shall become
effective upon the execution of a New Lender Supplement in the form of Exhibit
K-2 hereto by the Borrowers, the Administrative Agent and relevant new Lender
or Lenders. The Administrative Agent shall forward copies of any such
supplement to the Lenders promptly upon receipt thereof.
SECTION 2.8 USE OF PROCEEDS. The Borrowers shall use the
proceeds of the Extensions of Credit (a) to finance capital expenditures, (b)
to make acquisitions permitted under Section 10.4 and (c) for working capital
and general corporate requirements of the Borrowers and their respective
Subsidiaries, including the payment of certain fees and expenses incurred in
connection with the foregoing.
SECTION 2.9 SECURITY. The Obligations of the Borrowers and the
Guarantor under this Agreement shall be secured by the Collateral described in
the Security Documents.
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ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C COMMITMENT. Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in Section 3.4(a), agrees to issue standby letters of credit
("Letters of Credit") for the account of the Borrowers on any Business Day from
the Initial Funding Date through but not including the Termination Date in such
form as may be approved from time to time by the Issuing Lender; provided, that
the Issuing Lender shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (a) the L/C Obligations would exceed the
L/C Commitment or (b) the Available Commitment of any Lender would be less than
zero. Each Letter of Credit shall (i) be denominated in Dollars in a minimum
amount of $250,000, (ii) be a standby letter of credit issued to support
obligations of the Borrowers or any of their respective Subsidiaries,
contingent or otherwise, incurred in the ordinary course of business, (iii)
expire no more than one year after the issuance date thereof, which date shall
be no later than the Termination Date and (iv) be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
North Carolina. The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
Applicable Law. References herein to "issue" and derivations thereof with
respect to Letters of Credit shall also include extensions or modifications of
any existing Letters of Credit, unless the context otherwise requires.
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The
Guarantor, on behalf of the Borrowers, may from time to time request that the
Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at
the Administrative Agent's Office an Application therefor, completed to the
satisfaction of the Issuing Lender, and such other certificates, documents and
other papers and information as the Issuing Lender may reasonably request. Upon
receipt of any Application, the Issuing Lender shall process such Application
and the certificates, documents and other papers and information delivered to
it in connection therewith in accordance with its customary procedures and
shall, subject to Section 3.1 and Article V hereof, promptly issue the Letter
of Credit requested thereby (but in no event shall the Issuing Lender be
required to issue any Letter of Credit earlier than three (3) Business Days
after its receipt of the Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise
may be reasonably agreed by the Issuing Lender and the Guarantor, on behalf of
the Borrowers. The Issuing Lender shall promptly furnish to the Guarantor a
copy of such Letter of Credit and promptly notify each Lender of the issuance
and upon request by any Lender, furnish to such Lender a copy of such Letter of
Credit and the amount of such Lender's L/C Participation therein.
SECTION 3.3 COMMISSIONS AND OTHER CHARGES.
(a) The Borrowers shall pay to the Administrative Agent, for the
account of the Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit
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in an amount equal to the Applicable Margin for LIBOR on a per annum basis on
the face amount of such Letter of Credit. Such commission shall be payable
quarterly in arrears on the last Business Day of each calendar quarter and on
the Termination Date.
(b) In addition to the foregoing commission, the Borrowers shall
pay to the Issuing Lender an issuance fee of 0.125% per annum on the face
amount of each Letter of Credit, payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Termination Date.
(c) The Administrative Agent shall, promptly following its
receipt thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Commitment Percentages.
SECTION 3.4 L/C PARTICIPATIONS.
(a) The Issuing Lender irrevocably agrees to grant and hereby
grants to each L/C Participant, and, to induce the Issuing Lender to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from the Issuing Lender, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
and risk an undivided interest equal to such L/C Participant's Commitment
Percentage in the Issuing Lender's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with
the Issuing Lender that, if a draft is paid under any Letter of Credit for
which the Issuing Lender is not reimbursed in full by the Borrowers in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed.
(b) Upon becoming aware of any amount required to be paid by any
L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of
any unreimbursed portion of any payment made by the Issuing Lender under any
Letter of Credit, the Issuing Lender shall notify each L/C Participant of the
amount and due date of such required payment and such L/C Participant shall pay
to the Issuing Lender the amount specified on the applicable due date. If any
such amount is paid to the Issuing Lender after the date such payment is due,
such L/C Participant shall pay to the Issuing Lender on demand, in addition to
such amount, the product of (i) such amount, times (ii) the daily average
Federal Funds Rate as determined by the Administrative Agent during the period
from and including the date such payment is due to the date on which such
payment is immediately available to the Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. A certificate of the Issuing Lender with
respect to any amounts owing under this Section 3.4(b) shall be conclusive in
the absence of manifest error. With respect to payment to the Issuing Lender of
the unreimbursed amounts described in this Section 3.4(b), if the L/C
Participants receive notice that any such payment is due (A) prior to 1:00 p.m.
(Charlotte time) on any Business Day, such payment shall be due that Business
Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment
shall be due on the following Business Day.
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<PAGE> 29
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant
its Commitment Percentage of such payment in accordance with this Section 3.4,
the Issuing Lender receives any payment related to such Letter of Credit
(whether directly from the Borrowers or otherwise, or any payment of interest
on account thereof, the Issuing Lender will distribute to such L/C Participant
its pro rata share thereof; provided, that in the event that any such payment
received by the Issuing Lender shall be required to be returned by the Issuing
Lender, such L/C Participant shall return to the Issuing Lender the portion
thereof previously distributed by the Issuing Lender to it.
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS. The
Borrowers agree to reimburse the Issuing Lender not later than 11:00 a.m.
(Charlotte time) on each date on which the Issuing Lender notifies the Borrower
of the date and amount of a draft paid under any Letter of Credit for the
amount of (a) such draft so paid and (b) any taxes, fees, charges or other
costs or expenses incurred by the Issuing Lender in connection with such
payment. Each such payment shall be made to the Issuing Lender at its address
for notices specified herein in lawful money of the United States and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Borrowers under this Article III from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue. If the Borrowers fail to
timely reimburse the Issuing Lender on the date the Borrowers receive the
notice referred to in this Section 3.5, the Borrowers shall be deemed to have
timely given a Notice of Borrowing hereunder to the Administrative Agent
requesting the Lenders to make a Base Rate Loan on such date in an amount equal
to the amount of such drawing and, regardless of whether or not the conditions
precedent specified in Article V have been satisfied, the Lenders shall make
Base Rate Loans in such amount, the proceeds of which shall be applied to
reimburse the Issuing Lender for the amount of the related drawing and costs
and expenses.
SECTION 3.6 OBLIGATIONS ABSOLUTE. The Borrowers' obligations
under this Article III (including without limitation the Reimbursement
Obligation) shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrowers may have or have had against the Issuing Lender or any beneficiary of
a Letter of Credit. The Borrowers also agree with the Issuing Lender that the
Issuing Lender shall not be responsible for, and the Borrowers' Reimbursement
Obligation under Section 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or any dispute between or among the Borrowers and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of a Borrower against any beneficiary of such Letter
of Credit or any such transferee. The Issuing Lender shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing Lender's
gross negligence or willful misconduct. The Borrowers agree that any action
taken or omitted by the Issuing Lender under or in connection with any Letter
of Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Customs and, to the extent not inconsistent therewith,
the UCC shall be binding on the Borrowers and shall not result in any liability
of the Issuing Lender to the Borrowers. The
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<PAGE> 30
responsibility of the Issuing Lender to the Borrowers in connection with any
draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are in
conformity with such Letter of Credit.
SECTION 3.7 EFFECT OF APPLICATION. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Article III, the provisions of this Article III
shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 INTEREST.
(a) Interest Rate Options. Subject to the provisions of this
Section 4.1, at the election of the Borrowers, the aggregate principal balance
of the Notes or any portion thereof shall bear interest at the Base Rate or the
LIBOR Rate plus, in each case, the Applicable Margin as set forth below;
provided that the LIBOR Rate shall not be available until three (3) Business
Days after the Closing Date. The Borrowers shall select the rate of interest
and Interest Period, if any, applicable to any Loan at the time a Notice of
Borrowing is given pursuant to Section 2.2(a) or at the time a Notice of
Conversion/Continuation is given pursuant to Section 4.2. Each Loan or portion
thereof bearing interest based on the Base Rate shall be a "Base Rate Loan",
each Loan or portion thereof bearing interest based on the LIBOR Rate shall be
a "LIBOR Rate Loan." Any Loan or any portion thereof as to which the Borrowers
have not duly specified an interest rate as provided herein shall be deemed a
Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan,
the Borrowers, by giving notice at the times described in Section 4.1(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1), three (3), or six (6)
months with respect to each LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the
date of advance of or conversion to any LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period shall expire
on the next succeeding Business Day; provided, that if any Interest Period with
respect to a LIBOR Rate Loan would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next preceding
Business Day;
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(iii) any Interest Period with respect to a LIBOR
Rate Loan that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
relevant calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the
Termination Date; and
(v) there shall be no more than five (5)
Interest Periods outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in
Section 4.1(a) with respect to the Loans (the "Applicable Margin") shall (i) on
the Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 5.2(e)(ii) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:
<TABLE>
<CAPTION>
Leverage Applicable Margin for
Ratio Base Rate Loans LIBOR Rate Loans
----- ----------------------------------------
<S> <C> <C>
greater than or equal to 7.00 1.500% 2.500%
less than 7.00 but greater than or
equal to 6.00 1.250% 2.250%
less than 6.00 but greater than or
equal to 5.00 1.000% 2.000%
less than 5.00 but greater than or
equal to 4.00 0.750% 1.750%
less than 4.00 0.500% 1.500%
</TABLE>
; provided, that at all times that Consolidated Cash Flow for the Loan Parties
and their Subsidiaries is less than or equal to zero Dollars ($0), the highest
Applicable Margin shall apply. Adjustments, if any, in the Applicable Margin
shall be made by the Administrative Agent on the tenth (10th) Business Day
after receipt by the Administrative Agent of quarterly financial statements for
the Loan Parties and the accompanying Officer's Compliance Certificate setting
forth the Leverage Ratio of the Loan Parties as of the most recent fiscal
quarter end. Subject to Section 4.1(d), in the event the Loan Parties fail to
deliver such financial statements and certificate within the time required by
Section 7.1(a), the Applicable Margin shall be the highest Applicable Margin
set forth above until the delivery of such financial statements and
certificate.
(d) Default Rate. Subject to Section 12.3, at the option of the
Administrative Agent and the Required Lenders, upon the occurrence and during
the continuance of an Event of Default, (i) the Borrowers shall no longer have
the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans
shall bear interest at a rate per annum two percent (2%) in excess of the rate
then applicable to LIBOR Rate Loans, as applicable, until the end of the
applicable Interest Period and thereafter at a rate equal to two percent (2%)
in excess of the rate then
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<PAGE> 32
applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall
bear interest at a rate per annum equal to two percent (2%) in excess of the
rate then applicable to Base Rate Loans. Interest shall continue to accrue on
the Notes after the filing by or against the Borrowers of any petition seeking
any relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate
Loan shall be payable in arrears on the last Business Day of each calendar
quarter commencing December 31, 1998 and interest on each LIBOR Rate Loan shall
be payable on the last day of each Interest Period applicable thereto, and if
such Interest Period extends over three (3) months, at the end of each three
(3) month interval during such Interest Period. Interest on all LIBOR Rate
Loans shall be computed on the basis of a 360-day year and assessed for the
actual number of days elapsed. All other interest rates, and all fees and
commissions provided hereunder shall be computed on the basis of a 365 or
366-day year, as applicable, and assessed for the actual number of days
elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the Borrowers any interest
received by Lenders in excess of the maximum lawful rate or shall apply such
excess to the principal balance of the Obligations. It is the intent hereof
that the Borrowers not pay or contract to pay, and that neither the
Administrative Agent nor any Lender receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by the Borrowers under Applicable Law.
SECTION 4.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF
LOANS. Provided that no Event of Default has occurred and is then continuing,
the Borrowers shall have the option to (a) convert at any time all or any
portion of its outstanding Base Rate Loans in a principal amount equal to
$5,000,000 or any whole multiple of $1,000,000 in excess thereof into one or
more LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i)
convert all or any part of its outstanding LIBOR Rate Loans in a principal
amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof
into Base Rate Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate
Loans. Whenever the Borrowers desire to convert or continue Loans as provided
above, the Borrowers shall give the Administrative Agent irrevocable prior
written notice in the form attached as Exhibit D (a "Notice of Conversion/
Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business
Days before the day on which a proposed conversion or continuation of such Loan
is to be effective specifying (A) the Loans to be converted or continued, and,
in the case of any LIBOR Rate Loan to be converted or continued, the last day
of the Interest Period therefor, (B) the effective date of such conversion or
continuation (which shall be a Business Day), (C) the principal amount of such
Loans to be converted or continued, and (D) the Interest Period to be
applicable to such converted or
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<PAGE> 33
continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the
Lenders of such Notice of Conversion/Continuation.
SECTION 4.3 FEES.
(a) Commitment Fee. Commencing on the Closing Date, the Borrowers
shall pay to the Administrative Agent, for the account of the Lenders, a
non-refundable commitment fee (the "Commitment Fee") at a rate per annum equal
to (i) 0.500% at all times that the Leverage Ratio is less than zero or is
greater than or equal to 6.0 to 1.0 and (ii) 0.375% at all times that the
Leverage Ratio is less than 6.0 to 1.0 but greater than or equal to zero, in
each case on the average daily unused portion of the Aggregate Commitment
(outstanding Letters of Credit shall be considered usage); provided that, at
all times that Consolidated Cash Flow is less than or equal to zero dollars
($0), the Commitment Fee shall be 0.750%. The Commitment Fee shall be payable
on a quarterly basis in arrears on the date that is five (5) Business Days
after the date of receipt by the Guarantor of an invoice setting forth the
amount of such Commitment Fee and on the Termination Date. Such Commitment Fee
shall be distributed by the Administrative Agent to the Lenders pro rata in
accordance with the Lenders' respective Commitment Percentages.
(b) Administrative Agent's and Other Fees. In order to compensate
the Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Borrowers agree to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Guarantor, on behalf of the Borrowers, and the Administrative
Agent dated October 16, 1998.
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<PAGE> 34
SECTION 4.4 MANNER OF PAYMENT. Each payment by the Borrowers on
account of the principal of or interest on the Loans or of any fee, commission
or other amounts (including the Reimbursement Obligation) payable to the
Lenders under this Agreement or any Note shall be made not later than 1:00 p.m.
(Charlotte time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of
the Lenders (other than as set forth below) pro rata in accordance with their
respective Commitment Percentages (except as specified below), in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for
the purposes of Section 12.1, but for all other purposes shall be deemed to
have been made on the next succeeding Business Day. Any payment received after
2:00 p.m. (Charlotte time) shall be deemed to have been made on the next
succeeding Business Day for all purposes. Upon receipt by the Administrative
Agent of each such payment, the Administrative Agent shall distribute to each
Lender at its address for notices set forth herein its pro rata share of such
payment in accordance with such Lender's Commitment Percentage (except as
specified below) and shall wire advice of the amount of such credit to each
Lender. Each payment to the Administrative Agent of the Issuing Lender's fees
or L/C Participants' commissions shall be made in like manner, but for the
account of the Issuing Lender or the L/C Participants, as the case may be. Each
payment to the Administrative Agent of Administrative Agent's fees or expenses
shall be made for the account of the Administrative Agent and any amount
payable to any Lender under Sections 4.8, 4.9, 4.10, 4.11 or 14.2 shall be paid
to the Administrative Agent for the account of the applicable Lender. Subject
to Section 4.1(b)(ii), if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day and such extension of time
shall in such case be included in computing any interest if payable along with
such payment.
SECTION 4.5 CREDITING OF PAYMENTS AND PROCEEDS. In the event
that the Borrowers shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 12.2(a), all payments
received by the Lenders upon the Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied first to all
expenses then due and payable by the Borrowers hereunder, then to all indemnity
obligations then due and payable by the Borrowers hereunder, then to all
Administrative Agent's and Issuing Lender's fees then due and payable, then to
all commitment and other fees and commissions then due and payable, then to
accrued and unpaid interest on the Notes, Reimbursement Obligation and any
termination payments due in respect of a Hedging Agreement with any Lender (pro
rata in accordance with all such amounts due), then to the principal amount of
the Notes and Reimbursement Obligation (pro rata in accordance with all such
amounts due) and then to the cash collateral account described in Section
12.2(b) hereof to the extent of any L/C Obligations then outstanding, in that
order.
SECTION 4.6 ADJUSTMENTS. If any Lender (a "Benefited Lender")
shall at any time receive any payment of all or part of the Obligations owing
to it, or interest thereon, or if any Lender shall at any time receive any
collateral in respect to the Obligations owning to it (whether voluntarily or
involuntarily, by set-off or otherwise) in a greater proportion than any such
payment to and collateral received by any other Lender, if any, in respect of
the Obligations owning to it such other Lender, or interest thereon, such
Benefited Lender shall purchase for
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<PAGE> 35
cash from the other Lenders such portion of each such other Lender's Extensions
of Credit, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, that if all or any portion
of such excess payment or benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned to the extent of such recovery, but without interest. The Borrowers
agree that each Lender so purchasing a portion of another Lender's Extensions
of Credit may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
SECTION 4.7 NATURE OF OBLIGATIONS OF LENDERS REGARDING
EXTENSIONS OF CREDIT; ASSUMPTION BY THE ADMINISTRATIVE AGENT. The obligations
of the Lenders under this Agreement to make the Loans and issue or participate
in Letters of Credit are several and are not joint or joint and several. Unless
the Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrowers on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount of such Lender's Commitment Percentage of such borrowing, times
(b) the daily average Federal Funds Rate during such period as determined by
the Administrative Agent, times (c) a fraction the numerator of which is the
number of days that elapse from and including such borrowing date to the date
on which such Lender's Commitment Percentage of such borrowing shall have
become immediately available to the Administrative Agent and the denominator of
which is 360. A certificate of the Administrative Agent with respect to any
amounts owing under this Section 4.7 shall be conclusive, absent manifest
error. If such Lender's Commitment Percentage of such borrowing is not made
available to the Administrative Agent by such Lender within three (3) Business
Days of such borrowing date, the Administrative Agent shall be entitled to
recover such amount made available by the Administrative Agent with interest
thereon at the rate per annum applicable to Base Rate Loans hereunder, on
demand, from the Borrowers. The failure of any Lender to make its Commitment
Percentage of any Loan available shall not relieve it or any other Lender of
its obligation, if any, hereunder to make its Commitment Percentage of such
Loan available on such borrowing date, but no Lender shall be responsible for
the failure of any other Lender to make its Commitment Percentage of such Loan
available on the borrowing date.
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<PAGE> 36
SECTION 4.8 CHANGED CIRCUMSTANCES.
(a) Circumstances Affecting LIBOR Rate Availability. If with
respect to any Interest Period the Administrative Agent or any Lender (after
consultation with Administrative Agent) shall determine that, by reason of
circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars, in the applicable amounts are not being quoted via
Telerate Page 3750 or offered to the Administrative Agent or such Lender for
such Interest Period, then the Administrative Agent shall forthwith give notice
thereof to the Borrowers. Thereafter, until the Administrative Agent notifies
the Borrowers that such circumstances no longer exist, the obligation of the
Lenders to make LIBOR Rate Loans and the right of the Borrowers to convert any
Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended, and the
Borrowers shall repay in full (or cause to be repaid in full) the then
outstanding principal amount of each such LIBOR Rate Loans together with
accrued interest thereon, on the last day of the then current Interest Period
applicable to such LIBOR Rate Loan or convert the then outstanding principal
amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of
such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date
hereof, the introduction of, or any change in, any Applicable Law or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any of their respective
Lending Offices) with any request or directive (whether or not having the force
of law) of any such Governmental Authority, central bank or comparable agency,
shall make it unlawful or impossible for any of the Lenders (or any of their
respective Lending Offices) to honor its obligations hereunder to make or
maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to
the Administrative Agent and the Administrative Agent shall promptly give
notice to the Borrowers and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrowers that such circumstances no longer
exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the
right of the Borrowers to convert any Loan or continue any Loan as a LIBOR Rate
Loan shall be suspended and thereafter the Borrowers may select only Base Rate
Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to
maintain a LIBOR Rate Loan to the end of the then current Interest Period
applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall
immediately be converted to a Base Rate Loan for the remainder of such Interest
Period.
(c) Increased Costs. If, after the date hereof, the introduction
of, or any change in, any Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any of the Lenders (or any of their respective Lending Offices)
with any request or directive (whether or not having the force of law) of such
Governmental Authority, central bank or comparable agency:
(i) shall subject any of the Lenders (or any of
their respective Lending Offices) to any tax, duty or other charge with respect
to any Note, Letter of Credit or Application or shall change the basis of
taxation of payments to any of the Lenders (or any of their respective Lending
Offices) of the principal of or interest on any Note, Letter of Credit or
Application or
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<PAGE> 37
any other amounts due under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income of any of the Lenders or
any of their respective Lending Offices imposed by the jurisdiction in which
such Lender is organized or is or should be qualified to do business or such
Lending Office is located); or
(ii) shall impose, modify or deem applicable
any reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit, insurance or capital
or similar requirement against assets of, deposits with or for the account of,
or credit extended by any of the Lenders (or any of their respective Lending
Offices) or shall impose on any of the Lenders (or any of their respective
Lending Offices) or the foreign exchange and interbank markets any other
condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing or participating in
Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a LIBOR Rate Loan or Letter of Credit or Application, then such
Lender shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify the Borrowers of such fact and demand compensation
therefor and, within fifteen (15) days after such notice by the Administrative
Agent, the Borrowers shall pay to such Lender such additional amount or amounts
as will compensate such Lender or Lenders for such increased cost or reduction.
The Administrative Agent will promptly notify the Borrowers of any event of
which it has knowledge which will entitle such Lender to compensation pursuant
to this Section 4.8(c); provided, that the Administrative Agent shall incur no
liability whatsoever to the Lenders or the Borrowers in the event it fails to
do so. The amount of such compensation shall be determined, in the applicable
Lender's sole discretion, based upon the assumption that such Lender funded its
Commitment Percentage of the LIBOR Rate Loans in the London interbank market
and using any reasonable attribution or averaging methods which such Lender
deems appropriate and practical. A certificate of such Lender setting forth the
basis for determining such amount or amounts necessary to compensate such
Lender shall be forwarded to the Borrowers through the Administrative Agent and
shall be conclusively presumed to be correct save for manifest error.
SECTION 4.9 INDEMNITY. The Borrowers hereby indemnify each of
the Lenders against any loss or expense which may arise or be attributable to
each Lender's obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain any Loan (a) as a consequence of any
failure by the Borrowers to make any payment when due of any amount due
hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the
Borrowers to borrow on a date specified therefor in a Notice of Borrowing or
Notice of Continuation/Conversion or (c) due to any payment, prepayment or
conversion of any LIBOR Rate Loan on a date other than the last day of the
Interest Period therefor. The amount of such loss or expense shall be
determined, in the applicable Lender's sole discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans in the London interbank market and using any reasonable attribution or
averaging methods which such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis for determining such amount
or amounts necessary to compensate such Lender shall be forwarded to
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<PAGE> 38
the Borrowers through the Administrative Agent and shall be conclusively
presumed to be correct save for manifest error.
SECTION 4.10 CAPITAL REQUIREMENTS. If either (a) the introduction
of, or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of
law), has or would have the effect of reducing the rate of return on the
capital of, or has affected or would affect the amount of capital required to
be maintained by, any Lender or any corporation controlling such Lender as a
consequence of, or with reference to the Commitments and other commitments of
this type, below the rate which the Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by any such Lender, the Borrowers shall pay
to such Lender from time to time as specified by such Lender additional amounts
sufficient to compensate such Lender or other corporation for such reduction. A
certificate as to such amounts submitted to the Borrowers and the
Administrative Agent by such Lender, shall, in the absence of manifest error,
be presumed to be correct and binding for all purposes.
SECTION 4.11 TAXES.
(a) Payments Free and Clear. Any and all payments by the
Borrowers hereunder or under the Notes or the Letters of Credit shall be made
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholding, and all liabilities
with respect thereto excluding, (i) in the case of each Lender and the
Administrative Agent, income and franchise taxes imposed by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case
may be) is organized or is or should be qualified to do business or any
political subdivision thereof and (ii) in the case of each Lender, income and
franchise taxes imposed by the jurisdiction of such Lender's Lending Office or
any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrowers shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder or under any Note or
Letter of Credit to any Lender or the Administrative Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.11) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrowers shall make such deductions, (C)
the Borrowers shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law, and (D) the
Borrowers shall deliver to the Administrative Agent evidence of such payment to
the relevant taxing authority or other authority in the manner provided in
Section 4.11(d).
(b) Stamp and Other Taxes. In addition, the Borrowers shall pay
any present or future stamp, registration, recordation or documentary taxes or
any other similar fees or charges or excise or property taxes, levies of the
United States or any state or political subdivision thereof or any applicable
foreign jurisdiction which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the
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Loans, the Letters of Credit, the other Loan Documents, or the perfection of
any rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrowers shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Evidence of Payment. Within thirty (30) days after the date
of any payment of Taxes or Other Taxes by the Borrowers, the Borrowers shall
furnish to the Administrative Agent, at its address referred to in Section
14.1, the original or a certified copy of a receipt evidencing payment thereof
or other evidence of payment satisfactory to the Administrative Agent.
(e) Assignment of Interest. In the event that the Borrowers shall
be required to withhold or deduct Taxes from any sum payable hereunder, then,
provided that no Default or Event of Default has occurred and is continuing at
such time, the Borrowers may, at their own expense (such expense to include any
transfer fee payable to the Administrative Agent), in their sole discretion (a)
require any Lender as to which Borrowers have been required to withhold or
deduct Taxes to transfer and assign in whole or in part, without recourse, all
or part of its interests, rights and obligations under this Agreement to an
Eligible Assignee which, subject to the consent thereof, shall assume such
assigned obligations; provided that (i) such assignment shall not relieve the
Borrowers from their obligation to pay such additional amounts that may be due
in accordance with this Section 4.11, (ii) such assignment shall not conflict
with any law, rule or regulation or order of any court or other Governmental
Authority and (iii) the Borrowers or such assignee shall have paid to the
assigning Lender in immediately available funds the principal of, and interest
accrued on, the Loans to the date of such assignment and all accrued fees and
other amounts owed to it hereunder or (b) terminate the Commitment of such
Lender as to which the Borrowers have been required to withhold or deduct Taxes
and prepay, in immediately available funds the principal of, and interest
accrued on, all outstanding Loans of such Lender as of the date of such
prepayment; provided that (i) such termination of the Commitment of such Lender
shall not relieve the Borrowers from their obligations to pay such additional
amounts that may be due in accordance with this Section 4.11 and (ii) such
termination of the Commitment of such Lender and prepayment of such Loans does
not conflict with any law, rule or regulation or order of any court or other
Governmental Authority.
(f) Delivery of Tax Forms. Each Lender organized under the laws
of a jurisdiction other than the United States or any state thereof shall
deliver to the Borrowers, with a copy to the Administrative Agent, on the
Closing Date or concurrently with the delivery of the relevant Assignment and
Acceptance, as applicable, (i) two United States Internal Revenue Service Forms
4224 or Forms 1001 (or successor forms), as applicable, properly completed and
certifying in each case that such Lender is entitled to a complete exemption
from withholding or deduction for or on account of any United States federal
income taxes, and (ii) an Internal
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Revenue Service Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding taxes. Each
such Lender further agrees to deliver to the Borrowers, with a copy to the
Administrative Agent, a Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or manner of certification, as the case may be, on or before
the date that any such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent form previously delivered by
it to the Borrowers, certifying in the case of a Form 1001 or 4224 that such
Lender is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes (unless in any such
case an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders such forms inapplicable or the exemption to
which such forms relate unavailable and such Lender notifies the Borrowers and
the Administrative Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes) and, in the
case of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(g) Survival. Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in this Section 4.11 shall survive the payment in full of
the Obligations and the termination of the Commitments.
SECTION 4.12 CHANGE IN LENDING OFFICE.
Each Lender agrees that, upon the occurrence of any event giving rise
to the operation of Section 4.8, 4.9, 4.10 or 4.11 with respect to such Lender,
it will use its best efforts to designate another lending office as its Lending
Office for any Loans affected by such event with the intent of avoiding the
consequence of the event giving rise to the operation of any such Section;
provided, that such designation is made on such terms that such Lender and its
Lending Office suffer no economic, legal or regulatory disadvantage as a
consequence thereof.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 CLOSING. The closing shall take place at the offices
of Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street,
Charlotte, North Carolina 28202 at 10:00 a.m. on December 22, 1998, or on such
other date as the parties hereto shall mutually agree.
SECTION 5.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF
CREDIT. The obligation of the Lenders to close this Agreement and to make the
initial Loan or issue the initial Letter of Credit are subject to the
satisfaction of each of the following conditions:
(a) Executed Loan Documents. The following Loan Documents, in
form and substance satisfactory to the Administrative Agent and each Lender:
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(i) this Agreement;
(ii) the Notes;
(iii) the Security Agreement dated as of the date hereof;
(iv) all Pledge Agreements dated as of the date hereof;
(v) all Mortgages dated as of the date hereof; and
(vi) all Collateral Assignments dated as of the date
hereof;
shall have been duly authorized, executed and delivered by the Loan Parties
which are parties thereto, shall be in full force and effect and no default
shall exist thereunder, and the Loan Parties which are parties thereto shall
have delivered original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officer's Certificates of the Loan Parties.
The Administrative Agent shall have received a certificate from a Responsible
Officer of the Guarantor, in form and substance satisfactory to the
Administrative Agent, to the effect that all representations and warranties of
each Loan Party contained in this Agreement and the other Loan Documents are
true, correct and complete; that no Loan Party is in violation of any of the
covenants contained in this Agreement and the other Loan Documents; that, after
giving effect to the transactions contemplated by this Agreement, no Default or
Event of Default has occurred and is continuing; and that each Loan Party has
satisfied each of the closing conditions applicable to such Loan Party.
(ii) General Certificates of the Loan Parties.
The Administrative Agent shall have received a certificate of the secretary or
assistant secretary of each Loan Party certifying that attached thereto is a
true and complete copy of the articles of incorporation of such Loan Party and
all amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation; that attached
thereto is a true and complete copy of the bylaws of such Loan Party as in
effect on the date of such certification; that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors of such
Loan Party authorizing the transactions contemplated hereunder and the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party; and as to the incumbency and genuineness of
the signature of each officer of such Loan Party executing Loan Documents to
which it is a party.
(iii) Certificates of Good Standing. The
Administrative Agent shall have received long-form certificates as of a recent
date of the good standing of each Loan Party under the laws of its jurisdiction
of organization and each other jurisdiction where such Loan Party is qualified
to do business and a certificate of the relevant taxing authorities of such
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jurisdictions certifying that such Person has filed required tax returns and
owes no delinquent taxes.
(iv) Opinions of Counsel. The Administrative
Agent shall have received favorable opinions of counsel to the Loan Parties
addressed to the Administrative Agent and the Lenders (A) with respect to the
Loan Parties, the Loan Documents, the Collateral, and such other matters, and
covering such jurisdictions, as the Lenders shall reasonably request, (B) with
respect to FCC matters and (C) with respect to state law communication matters,
each in form and substance reasonably satisfactory to the Administrative Agent.
(v) Tax Forms. The Administrative Agent shall
have received copies of the United States Internal Revenue Service forms
required by Section 4.11(f).
(c) Collateral.
(i) Filings and Recordings. All filings and
recordations that are necessary to perfect the security interests of the
Lenders in the collateral described in the Security Documents shall have been
properly executed and delivered by the Borrowers and the Administrative Agent
shall be reasonably satisfied that such security interests, upon proper filing
of such filings and recordations, shall constitute valid and perfected first
priority Liens therein.
(ii) Pledged Stock. The Administrative Agent
shall have received (A) original stock certificates or other certificates
evidencing the capital stock or other ownership interests pledged pursuant to
the Pledge Agreement, together with an undated stock or other power for each
certificate duly executed in blank by the registered owner thereof and (B) each
original promissory note pledged pursuant to the Pledge Agreement.
(iii) Lien Search. The Loan Parties shall have
delivered the results of a Lien search made against the Loan Parties under the
Uniform Commercial Code as in effect in any state in which any of its assets
are located, indicating among other things that its assets are free and clear
of any Lien except for Liens permitted hereunder.
(iv) Hazard and Liability Insurance. The
Administrative Agent shall have received certificates of insurance, evidence of
payment of all insurance premiums for the current policy year of each, and, if
requested by the Administrative Agent, copies (certified by an officer of a
Loan Party acceptable to the Administrative Agent) of insurance policies in the
form required under the Security Documents and otherwise in form and substance
reasonably satisfactory to the Administrative Agent.
(v) Title Insurance. The Administrative Agent
shall have received a commitment for a policy of title insurance, insuring
Lenders' first priority Liens and showing no Liens prior to Lenders' Liens
other than for ad valorem taxes not yet due and payable, with title insurance
companies acceptable to the Administrative Agent on the property subject to the
Mortgages with the final title insurance policy, being delivered within thirty
(30) days after the Closing Date. Further, the Loan Parties agree to provide or
obtain any customary affidavits and
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indemnities as may be required or necessary to obtain title insurance
satisfactory to the Administrative Agent.
(vi) System Documents. Copies of the CATV
Franchises (and resolutions relating thereto), Pole Agreements, Programming
Agreements, Communications Licenses, real property leases, and Capital Leases
in existence as of the date hereof and all required assignments thereof and
consents to such assignments requested by the Administrative Agent or Lenders
and not already delivered to the Administrative Agent.
(vii) Programming Agreements. A duly executed
copy of each Programming Agreement.
(viii) Network Agreements. A duly executed copy of
each Network Agreement.
(ix) Matters Relating to Flood Hazard
Properties. (a) Certification from the National Research Center regarding each
parcel of property subject to a Mortgage and (b) evidence of flood insurance,
in form and substance reasonably satisfactory to the Administrative Agent, for
each parcel of property subject to a Mortgage that is located in a flood plain
on any certificate delivered pursuant to clause (a) of this Section 5.2(c)(x).
(x) Surveys. Copies of surveys in form and
substance and as of a date satisfactory to the Administrative Agent for each
parcel of real property subject to a Mortgage.
(xi) Environmental Assessments. A Phase I
environmental assessment or similar assessment of each parcel of real property
subject to a Mortgage in form and substance acceptable to the Administrative
Agent.
(d) Consents; Defaults.
(i) Governmental and Third Party Approvals. All
necessary approvals, authorizations and consents, if any be required, of any
Person and of all Governmental Authorities and courts having jurisdiction with
respect to the transactions contemplated by this Agreement and the other Loan
Documents shall have been obtained; provided, that, with respect to any consent
of a third party required in connection with any grant of a security interest
pursuant to any of the Security Documents, if any Loan Party notifies the
Administrative Agent that such Loan Party cannot, as reasonably determined by
the Loan Parties in consultation with the Administrative Agent and Lenders,
obtain such consent following commercially reasonable efforts to obtain such
consent, the Administrative Agent and Lenders may waive any requirement that
the Loan Parties obtain such consent or may permit such assets to be excluded
from the Collateral, unless the Administrative Agent and Lenders determine, in
their reasonable judgment, that such consent or such grant of a security
interest in such assets is necessary to fully secure the Credit Facility.
Schedule 5.2(d) hereto sets forth the third party consents to the granting of
security interests pursuant to the Security Documents which the Borrowers (A)
are required to deliver on the Closing Date, and (B) are required to use best
efforts to obtain after the Closing Date pursuant to Section 8.12(c). In
addition to the third party
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consents to the granting of security interests pursuant to the Security
Documents which are expressly waived on Schedule 5.2(d), subject to Section
8.12(c), any such consent which is not expressly required pursuant to Schedule
5.2(d) shall be deemed to be waived..
(ii) Permits and Licenses. All material permits
and licenses, including permits and licenses required under Applicable Laws,
necessary to the conduct of business by the Loan Parties and their
Subsidiaries, including, without limitation, all Communications Licenses, CATV
Franchises and PUC Authorizations shall have been obtained.
(iii) No Injunction, Etc. No material action,
proceeding, investigation, regulation or legislation shall have been
instituted, or to the knowledge of any Loan Party, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to
obtain substantial damages in respect of, or which is related to or arises out
of this Agreement or the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby, or which, in the Administrative
Agent's reasonable discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement and such other Loan Documents.
(iv) Senior Discount Notes. All consents and
waivers necessary to permit the execution and delivery of this Agreement and
each other Loan Document and the performance of the obligations of the Loan
Parties hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby shall have been obtained.
(v) No Material Adverse Change. There shall not
have occurred any event, condition or state of facts that will or could
reasonably be expected to result in a Material Adverse Effect.
(vi) No Event of Default. No Default or Event of
Default shall have occurred and be continuing.
(e) Financial Matters.
(i) Payment at Closing; Fee Letters. There
shall have been paid by the Borrowers to the Administrative Agent and the
Lenders the fees set forth or referenced in Section 4.3 and any other accrued
and unpaid fees or commissions due hereunder (including, without limitation,
reasonable legal fees and expenses), and to any other Person such amount as may
be due thereto in connection with the transactions contemplated hereby,
including all taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of any of the Loan Documents. The
Administrative Agent shall have received duly authorized and executed copies of
the fee letter agreement referred to in Section 4.3(b).
(ii) Applicable Margin Certificate. The Loan
Parties shall have delivered to the Administrative Agent a certificate executed
by a Responsible Officer of the Guarantor setting forth the calculation of the
Applicable Margin pursuant to Section 4.1(c).
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(f) Miscellaneous.
(i) Proceedings and Documents. All opinions,
certificates and other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory in
form and substance to the Lenders. The Lenders shall have received copies of
all other instruments and other evidence as the Lenders may reasonably request,
in form and substance reasonably satisfactory to the Lenders, with respect to
the transactions contemplated by this Agreement and the taking of all actions
in connection therewith.
(ii) Due Diligence and Other Documents. The Loan
Parties shall have delivered to the Administrative Agent such other documents,
certificates and opinions as the Administrative Agent reasonably requests,
including without limitation copies of each document evidencing or governing
the Subordinated Debt, certified by a secretary or assistant secretary of a
Loan Party reasonably acceptable to the Administrative Agent as a true and
correct copy thereof.
SECTION 5.3 CONDITIONS TO INITIAL LOAN. The obligation of the
Lenders to make the initial Loan is subject to the satisfaction of each of the
conditions set forth in Section 5.2 and each of the following conditions:
(a) Financial Matters.
(i) Financial Statements. The Administrative Agent shall
have received the most recent audited Consolidated financial statements of the
Loan Parties, prepared in accordance with GAAP.
(ii) Financial Condition Certificate. The Loan Parties
shall have delivered to the Administrative Agent a certificate, in form and
substance satisfactory to the Administrative Agent, and certified as accurate
by a Responsible Officer of the Guarantor, that (A) the Loan Parties are
Solvent, (B) each Loan Party's trade payables are current and not past due in a
manner consistent with the Borrowers' customary payments practices (excluding
trade payables which are being contested in good faith and for which adequate
reserves are maintained to the extent required by GAAP) and (C) attached
thereto is a pro forma balance sheet of the Loan Parties, setting forth on a
pro forma basis the financial condition of the Loan Parties on a Consolidated
basis as of that date, reflecting on a pro forma basis the effect of the
transactions contemplated herein, including all fees and expenses in connection
therewith, and evidencing compliance on a pro forma basis with the covenants
contained in Articles IX and X hereof.
(b) Notices. The Administrative Agent shall have received a Notice
of Borrowing and a Notice of Account Designation from the Guarantor, on behalf
of the Borrowers, each in form and substance reasonably satisfactory to the
Administrative Agent.
SECTION 5.4 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The
obligations of the Lenders to make any Extensions of Credit are subject to the
satisfaction of the following conditions precedent on the relevant borrowing or
issue date, as applicable:
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(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and
correct on and as of such borrowing or issuance date with the same effect as if
made on and as of such date; except for any representation and warranty made as
of an earlier date, which representation and warranty shall remain true and
correct as of such earlier date.
(b) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder (i) on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made on such
date or (ii) on the issue date with respect to such Letter of Credit or after
giving affect to such Letters of Credit on such date.
(c) Officer's Compliance Certificate; Additional
Documents. The Administrative Agent shall have received the current Officer's
Compliance Certificate and each additional document, instrument, legal opinion
or other item of information reasonably requested by the Administrative Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES. To induce the
Administrative Agent to enter into this Agreement and the Lenders to make the
Extensions of Credit, the Loan Parties hereby represent and warrant to the
Administrative Agent and the Lenders that:
(a) Organization; Power; Qualification. The Guarantor and its
respective Subsidiaries are duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation,
has the power and authority to own its properties and to carry on its business
as now being and currently proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and
authorization. The jurisdictions in which the Guarantor and its respective
Subsidiaries are organized and qualified to do business as of the Closing Date
are described on Schedule 6.1(a).
(b) Ownership. Each Subsidiary of the Guarantor as of the Closing
Date is listed on Schedule 6.1(b). As of the Closing Date, the capitalization
of the Guarantor and its Subsidiaries consists of the number of shares,
authorized, issued and outstanding, of such classes and series, with or without
par value, described on Schedule 6.1(b). All outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
shareholders of the Subsidiaries of the Guarantor and the number of shares
owned by each as of the Closing Date are described on Schedule 6.1(b). As of
the Closing Date, there are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or other rights of any type or
nature whatsoever, which are convertible into, exchangeable for or otherwise
provide for or permit the issuance of capital stock of any Subsidiaries of the
Guarantor, except as described on Schedule 6.1(b).
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(c) Authorization of Agreement, Loan Documents and Borrowing.
Each Loan Party and its respective Subsidiaries, if any, has the right, power
and authority and has taken all necessary corporate and other action to
authorize the execution, delivery and performance of this Agreement and each of
the other Loan Documents to which it is a party in accordance with their
respective terms. This Agreement and each of the other Loan Documents have been
duly executed and delivered by the duly authorized officers of each Loan Party
and its respective Subsidiaries, if any, party thereto, and each such document
constitutes the legal, valid and binding obligation of such Loan Party or its
Subsidiary party thereto, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with
Laws, Etc. The execution, delivery and performance by the Loan Parties and
their Subsidiaries of the Loan Documents to which each such Person is a party,
in accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval which
has not been obtained or violate any Applicable Law relating to any Loan Party
or any of their Subsidiaries, (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation, bylaws or other
organizational documents of any Loan Party or any of their Subsidiaries or any
material indenture, agreement or other instrument to which such Person is a
party or by which any of its properties may be bound or any Governmental
Approval relating to such Person, or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Liens arising under the Loan
Documents, except, in each case, where any of the foregoing, either
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(e) Compliance with Law; Governmental Approvals. Except as set
forth on Schedule 6.1(e), each Loan Party and its Subsidiaries (i) has all
Governmental Approvals required by any Applicable Law for it to conduct its
business as presently conducted, each of which is in full force and effect, is
final and not subject to review on appeal and is not the subject of any pending
or, to the best of its knowledge, threatened attack by direct or collateral
proceeding, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws relating to
it or any of its respective properties, except where failure to so comply could
not reasonably be expected to result in a Material Adverse Effect.
(f) Tax Returns and Payments. Each Loan Party and its
Subsidiaries has duly filed or caused to be filed all federal, state, local and
other tax returns required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all federal, state, local and other
taxes, assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except where the failure
to so file, pay, or make such provision for payment could not reasonably be
expected to result in a Material Adverse Effect. No Governmental Authority has
asserted any Lien or other claim against the Loan Party or Subsidiary thereof
with respect to unpaid taxes which has not been discharged or resolved.
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The charges, accruals and reserves on the books of the Loan Parties and their
Subsidiaries in respect of federal, state, local and other taxes for all Fiscal
Years and portions thereof since the organization of the Loan Parties and their
Subsidiaries are in the judgment of the Loan Parties adequate, and the Loan
Parties do not anticipate any additional taxes or assessments for any of such
years.
(g) Intellectual Property Matters. Each Loan Party and its
Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required to
conduct its business. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination of any such
rights, and neither such Loan Party nor any Subsidiary thereof is liable to any
Person for infringement under Applicable Law with respect to any such rights as
a result of its business operations, except where such event or liability could
not reasonably be expected to result in a Material Adverse Effect.
(h) Environmental Matters. Except as set forth in the
environmental reports provided to the Administrative Agent and Lenders on or
prior to the Closing Date and identified on Schedule 6.1(h):
(i) The properties of the Loan Parties and
their Subsidiaries do not contain, and to their knowledge have not previously
contained, any Hazardous Materials in amounts or concentrations which (A)
constitute or constituted a violation of, or (B) could give rise to liability
under, applicable Environmental Laws, except where such violation or liability
could not reasonably be expected to result in a Material Adverse Effect;
(ii) Such properties and all operations
conducted in connection therewith are in compliance, and have been in
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about such properties or such operations which could
reasonably be expected to interfere with the continued operation of such
properties, except where failure to so comply or the existence of such
contamination could not reasonably be expected to result in a Material Adverse
Effect;
(iii) No Loan Party nor any Subsidiary thereof
has received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or compliance
with Environmental Laws with regard to any of their properties or the
operations conducted in connection therewith, and no Loan Party nor any
Subsidiary thereof has knowledge or reason to believe that any such notice will
be received or is being threatened, except where such notice could not
reasonably be expected to result in a Material Adverse Effect;
(iv) To the best knowledge of the Loan Parties
and their Subsidiaries, Hazardous Materials have not been transported or
disposed of from the properties of the Loan Parties or their Subsidiaries in
violation of, or in a manner or to a location which could give rise to
liability under, Environmental Laws, nor since the date of acquisition of such
property by any Loan Party have any Hazardous Materials been generated,
treated, stored or disposed of at, on or
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under any of such properties in violation of, or in a manner that could
reasonably be expected to give rise to liability under, any applicable
Environmental Laws, except where any such event could not reasonably be
expected to result in a Material Adverse Effect;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the Loan Parties,
threatened, under any Environmental Law to which the Loan Parties or any
Subsidiary thereof is or is expected to be named as a party with respect to
such properties or operations conducted in connection therewith, nor are there
any consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding
under any Environmental Law with respect to such properties or such operations,
except where any such event could not reasonably be expected to result in a
Material Adverse Effect; and
(vi) To the best knowledge of the Loan Parties
or their Subsidiaries, there has been no release, or to the best of the Loan
Parties' knowledge, the threat of release, of Hazardous Materials at or from
such properties, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws, except where such release could not
reasonably be expected to result in a Material Adverse Effect.
(i) ERISA.
(i) As of the Closing Date, no Loan Party nor
any ERISA Affiliate maintains or contributes to, or has any obligation under,
any Employee Benefit Plans other than those identified on Schedule 6.1(i);
(ii) Each Loan Party and each ERISA Affiliate is
in material compliance with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to all
Employee Benefit Plans except for any required amendments for which the
remedial amendment period as defined in Section 401(b) of the Code has not yet
expired. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code (A) has been determined by the Internal Revenue
Service to be so qualified, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the Code, or (B) is within the
remedial amendment period as defined in Section 401(b) of the Code as to the
initial adoption of such Employee Benefit Plan. No material liability has been
incurred by any Loan Party or any ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor
has any accumulated funding deficiency (as defined in Section 412 of the Code)
been incurred (without regard to any waiver granted under Section 412 of the
Code), nor has any funding waiver from the Internal Revenue Service been
received or requested with respect to any Pension Plan, nor has any Loan Party
or any ERISA Affiliate failed to make any contributions or to pay any amounts
due and owing as required by Section 412 of the Code, Section 302 of ERISA or
the terms of any Pension Plan prior to the due dates of such contributions
under Section 412 of the Code or Section 302 of ERISA, nor has there been any
event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA
with respect to any Pension Plan;
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(iv) Neither any Loan Party nor any ERISA
Affiliate has: (A) engaged in a nonexempt prohibited transaction described in
Section 406 of the ERISA or Section 4975 of the Code, (B) incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums and there are no premium payments which are due and unpaid, (C) failed
to make a required contribution or payment to a Multiemployer Plan, or (D)
failed to make a required installment or other required payment under Section
412 of the Code;
(v) No Termination Event has occurred or is
reasonably expected to occur; and
(vi) No proceeding, claim, lawsuit and/or
investigation is existing or, to the best knowledge of the Loan Parties after
due inquiry, threatened concerning or involving any (A) employee welfare
benefit plan (as defined in Section 3(1) of ERISA) currently maintained or
contributed to by any Loan Party or any ERISA Affiliate, (B) Pension Plan or
(C) Multiemployer Plan.
(j) Margin Stock. No Loan Party nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as
each such term is defined or used in Regulations U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any of the Loans or
Letters of Credit will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. No Loan Party nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and no Loan Party nor any Subsidiary thereof is, or after
giving effect to any Extension of Credit will be, subject to regulation under
the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act,
each as amended, or any other Applicable Law which limits its ability to incur
or consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
accurate list of all Material Contracts of the Loan Parties and their
Subsidiaries in effect as of the Closing Date not listed on any other Schedule
hereto; other than as set forth in Schedule 6.1(l), each such Material Contract
is, and after giving effect to the consummation of the transactions
contemplated by the Loan Documents will be, in full force and effect in
accordance with the terms thereof. The Loan Parties and their Subsidiaries have
delivered to the Administrative Agent a true and complete copy of each Material
Contract required to be listed on Schedule 6.1(l).
(m) Employee Relations. As of the Closing Date, each of the Loan
Parties and their respective Subsidiaries has a stable work force in place and
is not, except as set forth on Schedule 6.1(m), party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of its employees. The Loan Parties know of no pending,
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threatened or contemplated strikes, work stoppage or other collective labor
disputes involving their employees or those of their respective Subsidiaries.
(n) Burdensome Provisions. No Loan Party nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate or partnership restriction, Governmental Approval or
Applicable Law which is so unusual or burdensome as in the foreseeable future
could be reasonably expected to have a Material Adverse Effect. The Loan
Parties and their Subsidiaries do not presently anticipate that future
expenditures needed to meet the provisions of any statutes, orders, rules or
regulations of a Governmental Authority will be so burdensome as to have a
Material Adverse Effect.
(o) Financial Statements. The (i) Consolidated balance sheets of
the Loan Parties and their Subsidiaries as of December 31, 1997 and the related
Consolidated statements of income and retained earnings and cash flows for the
Fiscal Years then ended and (ii) unaudited Consolidated balance sheet of the
Loan Parties and their Subsidiaries as of June 30, 1998 and related
Consolidated unaudited interim statements of income and retained earnings and
cash flows, copies of which have been furnished to the Administrative Agent and
each Lender, are complete, correct and present fairly in all material respects
the assets, liabilities and financial position of the Loan Parties and their
Subsidiaries as at such dates, and the results of the operations and changes of
financial position for the periods then ended. All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP. The Loan Parties and their Subsidiaries have no Debt,
material obligation or other unusual material forward or long-term commitment
which is not fairly reflected in the foregoing financial statements or in the
notes thereto.
(p) No Material Adverse Change. Since December 31, 1997, there
has been no material adverse change in the properties, business, operations or
condition (financial or otherwise) of any Loan Party and the Subsidiaries
thereof and no event has occurred or condition arisen that could reasonably be
expected to have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect to
each Extension of Credit made hereunder, the Loan Parties will be Solvent.
(r) Real Property Matters. As of the Closing Date, Schedule
6.1(r) contains a correct listing of all real property owned by any Loan Party,
all easements owned by any Loan Party and all material leases of any Loan
Party. Each Loan Party and its Subsidiaries has such title to the real property
owned by it as is necessary or desirable to the conduct of its business and
valid and legal title to all of its personal property and assets, including,
but not limited to, those reflected on the balance sheets of such Loan Party
and its Subsidiaries delivered pursuant to Section 6.1(o), except those which
have been disposed of by such Loan Party or its Subsidiaries subsequent to such
date which dispositions have been in the ordinary course of business or as
otherwise expressly permitted hereunder.
(s) Liens. None of the properties and assets of the Loan Parties
nor any Subsidiary thereof is subject to any Lien, except Liens permitted
pursuant to Section 10.3. No financing statement under the Uniform Commercial
Code of any state which names the Loan Parties or any
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Subsidiary thereof or any of their respective trade names or divisions as
debtor and which has not been terminated, has been filed in any state or other
jurisdiction and no Loan Party nor any Subsidiary thereof has signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except to perfect those Liens
permitted by Section 10.3 hereof.
(t) Debt and Guaranty Obligations. Schedule 6.1(t) is a complete
and correct listing of all Debt and Guaranty Obligations of the Loan Parties
and their Subsidiaries as of the Closing Date in excess of $100,000. The Loan
Parties and their Subsidiaries have performed and are in compliance with all of
the material terms of such Debt and Guaranty Obligations and all instruments
and agreements relating thereto, and no default or event of default, or event
or condition which with notice or lapse of time or both would constitute such a
default or event of default on the part of the Loan Parties or their
Subsidiaries exists with respect to any such Debt or Guaranty Obligation.
(u) Litigation. Except as set forth on Schedule 6.1(u), as of the
Closing Date there are no actions, suits or proceedings pending nor, to the
knowledge of the Loan Parties, threatened against or in any other way relating
adversely to or affecting the Loan Parties or any Subsidiary thereof or any of
their respective properties in any court or before any arbitrator of any kind
or before or by any Governmental Authority, which, if decided adversely to any
of the Loan Parties, could reasonably be expected to result in a Material
Adverse Effect.
(v) Absence of Defaults. No event has occurred or is continuing
which constitutes a Default or an Event of Default, or which constitutes, or
which with the passage of time or giving of notice or both would constitute, a
default or event of default by the Loan Parties or any Subsidiary thereof under
any (A) Material Contract or (B) judgment, decree or order to which the Loan
Parties or their Subsidiaries are a party or by which the Loan Parties or their
Subsidiaries or any of their respective properties may be bound which would
require the Loan Parties or their Subsidiaries to make any material payment
thereunder prior to the scheduled maturity date therefor.
(w) Interactive Broadband Networks and Communications Law
Matters.
(i) Schedule 6.1(w)(i) hereto sets forth, as of
the Closing Date, and each subsequent date required pursuant to Section 8.12 or
Section 10.4, a true and complete list of each Interactive Broadband Network
owned or operated by any Loan Party identified by the jurisdiction served by
such Interactive Broadband Network.
(ii) Schedule 6.1(w)(ii) hereto sets forth, as
of the Closing Date, and each subsequent date required pursuant to Section 8.12
or Section 10.4, a true and complete list of the CATV Franchises (and
expiration dates thereof) of each Loan Party and the jurisdiction served
thereby.
(iii) Schedule 6.1(w)(iii) hereto sets forth, as
of the Closing Date, and each subsequent date required pursuant to Section 8.12
or Section 10.4, a true and complete list of all Communications Licenses and
other PUC Authorizations (and the expiration dates thereof)
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of each Loan Party pertaining to the provision of local telecommunications
services and high-speed internet access and, if applicable, the jurisdiction
served thereby.
(iv) Schedule 6.1(w)(iv) hereto sets forth, as
of the Closing Date, and each subsequent date required pursuant to Section 8.12
or Section 10.4, a true and complete list of all Communications Licenses and
other PUC Authorizations (and the expiration dates thereof) of each Loan Party
pertaining to the provision of long distance telecommunications services and
high-speed internet access and, if applicable, the jurisdiction served thereby.
(v) Schedule 6.1(w)(v) hereto sets forth, as of
the Closing Date, a true and complete list of all Communications Licenses and
other PUC Authorizations (and the expiration dates thereof) not listed on any
other Schedule hereto of any Loan Party, and, if applicable, the jurisdiction
served thereby.
(vi) Schedule 6.1(w)(vi) hereto sets forth, as
of the Closing Date, a true and complete list of the Network Agreements of each
Loan Party and its Subsidiaries which constitute Material Contracts, each of
which is in full force and effect and neither any Loan Party nor, to the best
knowledge of any Loan Party, any of the other parties thereto, is in default of
any of the provisions thereof in any material respect.
(vii) No Loan Party nor any of their respective
Subsidiaries is in violation of any duty or obligation required by any
Communications Law, the Cable Act or any other Applicable Law pertaining to or
regulating the operation of any Interactive Broadband Network or the provision
of Broadband Services, except where such violation could not reasonably be
expected to result in a Material Adverse Effect.
(viii) Each Loan Party and its Subsidiaries
possess all Governmental Approvals necessary to own and operate any Interactive
Broadband Network or any other long distance telecommunications systems
presently operated by such Loan Party or otherwise for the operations of their
businesses and are not in violation thereof, except where the failure to so
possess could not reasonably be expected to have a Material Adverse Effect. All
such material Governmental Approvals are in full force and effect and no event
has occurred that permits, or after notice or lapse of time could permit, the
revocation, termination or material and adverse modification of any such
Governmental Approval.
(ix) There is not pending or, to the best
knowledge of any Loan Party, threatened, any action by the FCC or any other
Governmental Authority to revoke, cancel, suspend or refuse to renew any
Communications License, CATV Franchise or PUC Authorization held by any Loan
Party or any of its Subsidiaries. There is not pending or, to the best
knowledge of any Loan Party, threatened, any action by the FCC or any other
Governmental Authority to modify adversely, revoke, cancel, suspend or refuse
to renew any other Governmental Approval. To the knowledge of the Loan Parties,
no event has occurred and is continuing which could reasonably be expected to
(A) result in the imposition of a material forfeiture or the revocation,
termination or adverse modification of any such Communications License or PUC
Authorization or (B) materially and adversely affect any rights of any Loan
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Party thereunder. Each Loan Party has no reason to believe and has no knowledge
that any of its Communications Licenses or PUC Authorizations will fail to be
renewed in the ordinary course.
(x) Except as set forth on Schedule 6.1(w)(x),
no franchising authority has notified any Loan Party or any of its Subsidiaries
of its application to be certified to regulate rates as provided in Section
76.910 of the FCC rules implementing the rate regulation provisions of the
Cable Act and no Governmental Authority that has issued a CATV Franchise to any
Loan Party has notified any Loan Party or any of its Subsidiaries that it has
been certified and has adopted regulations required to commence regulation as
provided in Section 76.910(c)(2) of such rate regulation rules.
(xi) There is not issued or outstanding or, to
the best knowledge of any Loan Party, threatened, any notice of any hearing,
violation or complaint against any Loan Party or any of its Subsidiaries with
respect to the provision of Broadband Services by any Loan Party or any of its
Subsidiaries or with respect to the operation of any portion of any Interactive
Broadband Network, except for any such hearing, violation or complaint which
could not reasonably be expected to have a Material Adverse Effect and no Loan
Party has any knowledge that any Person intends to contest renewal of any
Communication License, PUC Authorization, CATV Franchise or other Governmental
Approval or Pole Agreement.
(xii) All notices, statements of account,
supplements and other documents required under Section 111 of the Copyright Act
of 1976 and under the rules of the Copyright Office with respect to the
carriage of off-air signals by the Interactive Broadband Networks have been
duly filed, and the proper amount of copyright fees have been paid on a timely
basis, and each such Interactive Broadband Network qualifies for the compulsory
license under Section 111 of the Copyright Act of 1976, except where failure to
so file, pay or qualify could not reasonably be expected to result in a
Material Adverse Effect.
(xiii) The carriage of all off-air signals by the
Interactive Broadband Networks is permitted by valid retransmission consent
agreements or by must-carry elections by broadcasters, or is otherwise
permitted under Applicable Law.
(x) Condition of Systems. All of the material properties,
equipment and systems of each Loan Party and its Subsidiaries, including
without limitation the Interactive Broadband Networks, are, and all those to be
added in connection with any contemplated system expansion or construction will
be, in good repair and condition, ordinary wear and tear excepted, and in
working order and condition which is in accordance with applicable industry
standards, and are and will be in compliance with all standards or rules
imposed by any Governmental Authority, except where failure to be in such
condition or to so comply could not reasonably be expected to result in a
Material Adverse Effect.
(y) Fees. Each Loan Party and its Subsidiaries has paid all
franchise, license or other fees and charges material to the CATV Franchises,
Communications Licenses, PUC Authorizations, any Interactive Broadband Network
and other matters respecting the operation of its business which have become
due pursuant to any Governmental Approval or other permit in
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respect of its business, except where the failure to so pay could not
reasonably be expected to result in a Material Adverse Effect.
(z) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf of the
Loan Parties or any Subsidiary thereof and furnished to the Lenders were, at
the time the same were so furnished, complete and correct in all material
respects to the extent necessary to give the recipient a true and accurate
knowledge of the subject matter. No document furnished or written statement
made to the Administrative Agent or the Lenders by the Loan Parties or any
Subsidiary thereof in connection with the negotiation, preparation or execution
of this Agreement or any of the Loan Documents contains or will contain any
untrue statement of a fact material to the creditworthiness of the Loan Parties
or their Subsidiaries or omits or will omit to state a fact necessary in order
to make the statements contained therein not misleading. The Loan Parties are
not aware of any facts which they have not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as the Loan
Parties can now foresee, could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR. To
induce the Administrative Agent to enter into this Agreement and the Lenders to
make the Loans, the Guarantor hereby represents and warrants to the
Administrative Agent and Lenders that:
(a) the restrictions set forth in Section 10.7 on the ability of
the Subsidiaries of the Guarantor to pay dividends or make any distribution to
the Guarantor are not more materially disadvantageous to the holders of the
Senior Discount Notes than restrictions which are customary in financings
comparable to this Agreement; and
(b) the restrictions set forth in Section 10.7 on the ability of
the Subsidiaries of the Guarantor to pay dividends or make any distribution to
the Guarantor are not reasonably expected to materially effect the Guarantor's
ability to make principal or interest payments on the Senior Discount Notes.
SECTION 6.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty
made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
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ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 14.11, the Loan Parties will furnish or cause to be furnished
to the Administrative Agent and to the Lenders at their respective addresses as
set forth on Schedule 1.1(a), or such other office as may be designated by the
Administrative Agent and Lenders from time to time:
SECTION 7.1 FINANCIAL STATEMENTS AND PROJECTIONS.
(a) Quarterly Financial Statements. As soon as practicable and in
any event within sixty (60) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of the Loan Parties as of the close of
such fiscal quarter and unaudited Consolidated statements of income, retained
earnings and cash flows for the fiscal quarter then ended and that portion of
the Fiscal Year then ended, including the notes thereto, all in reasonable
detail setting forth in comparative form the corresponding figures for the
preceding Fiscal Year and prepared by the Loan Parties in accordance with GAAP
and, if applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of GAAP
accounting principles and practices during the period, and certified by a
Responsible Officer of the Guarantor to present fairly in all material respects
the financial condition of the Loan Parties as of their respective dates and
the results of operations of the Loan Parties for the respective periods then
ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in
any event within one hundred and twenty (120) days after the end of each Fiscal
Year, an audited Consolidated balance sheet of the Loan Parties as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting firm acceptable to the Administrative
Agent in accordance with GAAP and, if applicable, containing disclosure of the
effect on the financial position or results of operation of any change in the
application of GAAP accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is
not qualified with respect to scope limitations imposed by the Loan Parties or
with respect to accounting principles followed by the Loan Parties not in
accordance with GAAP.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within thirty (30) days after to the beginning of
each Fiscal Year, a business plan of the Loan Parties and their Subsidiaries
for the ensuing Fiscal Year, such plan to be prepared in accordance with GAAP
and to include, on a monthly basis, the following: a monthly operating and
capital budget, a projected income statement, statement of cash flows and
balance sheet and a report containing management's discussion and analysis of
such projections, accompanied by a certificate from a Responsible Officer of
the Guarantor to the effect that, to the best of such
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officer's knowledge, such projections are good faith estimates of the financial
condition and operations of the Loan Parties for such Fiscal Year.
SECTION 7.2 OFFICER'S COMPLIANCE CERTIFICATE. At each time
financial statements are delivered pursuant to Section 7.1 (a) or (b) and at
such other times as the Administrative Agent shall reasonably request, a
certificate of a Responsible Officer of the Guarantor in the form of Exhibit E
attached hereto (an "Officer's Compliance Certificate").
SECTION 7.3 ACCOUNTANTS' CERTIFICATE. At each time financial
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed
to the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such
Default or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants
required to establish whether or not the Loan Parties and their Subsidiaries
are in compliance with the financial covenants set forth in Article X hereof as
at the end of each respective period.
SECTION 7.4 OTHER REPORTS.
(a) As soon as practicable and in any event within sixty (60)
days after the end of each fiscal quarter, quarterly management reports, in
form and substance to be agreed with the Administrative Agent, detailing the
number Connections, the type of Connections and the revenue per Connection;
(b) Such other information regarding the operations, business
affairs and financial condition of the Loan Parties or any of their
Subsidiaries as the Administrative Agent or any Lender may reasonably request;
and
(c) In advance of (i) the entrance into any new market by any
Loan Party or (ii) any change of prospective markets of any Loan Party or (iii)
any deferral of any market, deliver to the Administrative Agent a revised
business plan, in form and substance reasonably satisfactory thereto, to
include such new market change in a prospective market or the deferral of any
market, as applicable.
SECTION 7.5 NOTICE OF LITIGATION AND OTHER MATTERS. Prompt (but
in no event later than ten (10) Business Days after any officer of any Loan
Party obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or
before any Governmental Authority and all actions and proceedings in any court
or before any arbitrator against or involving any Loan Party or any of their
respective properties, assets or businesses,
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which if adversely decided to such Loan Party, could reasonably be expected to
have a Material Adverse Effect;
(b) any notice of any violation received by any Loan Party from
any Governmental Authority including, without limitation, any notice of
violation of any Communications License or of Environmental Laws;
(c) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against any Loan Party where such
strike or work action can reasonably be expected to result in a Material
Adverse Effect;
(d) any attachment, judgment, lien, levy or order exceeding
$1,000,000 that may be assessed against any Loan Party;
(e) any Default or Event of Default, or any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
any Loan Party is a party or by which any Loan Party or any of their respective
properties may be bound;
(f) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy thereof), (ii) all notices
received by any Loan Party or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iii) all notices received by any Loan Party or any ERISA
Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA and (iv) any Loan
Party obtaining knowledge or reason to know that any Loan Party or any ERISA
Affiliate has filed or intends to file a notice of intent to terminate any
Pension Plan under a distress termination within the meaning of Section 4041(c)
of ERISA; and
(g) any event which makes any of the representations set forth in
Section 6.1 inaccurate in any respect.
SECTION 7.6 ACCURACY OF INFORMATION. All written information,
reports, statements and other papers and data furnished by or on behalf of the
Loan Parties to the Administrative Agent or any Lender (other than financial
forecasts) whether pursuant to this Article VII or any other provision of this
Agreement, or any of the Security Documents, shall be, at the time the same is
so furnished, complete and correct in all material respects to the extent
necessary to give the Administrative Agent or any Lender complete, true and
accurate knowledge of the subject matter based on the Loan Parties' knowledge
thereof.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner
provided for in Section 14.11, each Loan Party will, and will cause its
Subsidiaries to:
SECTION 8.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED
MATTERS. Except as permitted by Section 10.5, preserve and maintain its
separate corporate existence and all rights, franchises, licenses and
privileges necessary to the conduct of its business, and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect.
SECTION 8.2 MAINTENANCE OF PROPERTY. Protect and preserve all
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; maintain in good working order and
condition all such buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business.
SECTION 8.3 INSURANCE. Maintain insurance with financially sound
and reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and on the Closing Date and from time to time thereafter
deliver to the Administrative Agent upon its request a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts and rates of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.
SECTION 8.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority
having jurisdiction over it or any of its properties.
SECTION 8.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Pay and
perform all Obligations under this Agreement and the other Loan Documents (the
Lenders acknowledge that KNOLOGY of Georgia, Inc. has no such Obligations), and
pay or perform (a) all taxes, assessments and other governmental charges that
may be levied or assessed upon it or any of its property, and (b) all other
indebtedness (including, without limitation, Intercompany Debt), obligations
and liabilities in accordance with customary trade practices which shall
include payment of accounts payable within sixty (60) days; provided, that such
Loan Party may contest any item described in clauses (a) or (b) of this Section
8.5 in good faith so long as adequate reserves are maintained with respect
thereto in accordance with GAAP.
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SECTION 8.6 COMPLIANCE WITH LAWS AND APPROVALS. Observe and
remain in compliance with all Applicable Laws and maintain in full force and
effect all Governmental Approvals, in each case applicable to the conduct of
its business, except where the failure to so comply could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 8.7 ENVIRONMENTAL LAWS. In addition to and without
limiting the generality of Section 8.6, (a) comply with, and require such
compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and ensure that all
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except where the failure to so comply could not
reasonably be expected to result in a Material Adverse Effect, (b) conduct and
complete all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws, and promptly
comply with all lawful orders and directives of any Governmental Authority
regarding Environmental Laws, and (c) defend, indemnify and hold harmless the
Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of such Loan Party or such Subsidiary, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing directly result from
the gross negligence or willful misconduct of the party seeking indemnification
therefor.
SECTION 8.8 COMPLIANCE WITH ERISA. In addition to and without
limiting the generality of Section 8.6, (a) comply in all material respects
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans, (b) not
take any action or fail to take action the result of which could be a material
liability to the PBGC or to a Multiemployer Plan, (c) not participate in any
prohibited transaction that could result in any material civil penalty under
ERISA or tax under the Code, (d) operate each Employee Benefit Plan in such a
manner that will not incur any material tax liability under Section 4980B of
the Code or any material liability to any qualified beneficiary as defined in
Section 4980B of the Code and (e) furnish to the Administrative Agent upon the
Administrative Agent's request such additional information about any Employee
Benefit Plan as may be reasonably requested by the Administrative Agent.
SECTION 8.9 COMPLIANCE WITH AGREEMENTS. Comply in all respects
with each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Programming Agreement, any Network Agreement and any Material
Contract, except where the failure to so comply could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 8.10 CONDUCT OF BUSINESS. Unless otherwise agreed in
writing by the Administrative Agent and Required Lenders, engage only in a
Substantially Similar Business.
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SECTION 8.11 VISITS AND INSPECTIONS. Permit representatives of
the Administrative Agent or any Lender, from time to time and upon reasonable
notice, to: visit and inspect its properties; inspect, audit and make extracts
from its books, records and files, including, but not limited to, management
letters prepared by independent accountants; and discuss with its principal
officers, and its independent accountants, its business, assets, liabilities,
financial condition, results of operations and business prospects.
SECTION 8.12 ADDITIONAL SUBSIDIARIES; ADDITIONAL COLLATERAL; NEW
EQUITY.
(a) Upon the creation or acquisition of any Subsidiary possessing
assets in excess of One Thousand Dollars ($1,000) of any Loan Party permitted
by this Agreement and, with respect to KNOLOGY of Georgia, Inc., upon the
obtaining (but without imposing any obligation to seek such Governmental
Approval) of any Governmental Approval permitting KNOLOGY of Georgia, Inc. to
incur Debt and/or grant Liens on its assets (including, without limitation, a
change in Applicable Law such that Governmental Approval is no longer
required), cause to be executed and delivered to the Administrative Agent (i) a
joinder agreement hereto in form and substance reasonably satisfactory to the
Administrative Agent and Required Lenders in order that such Person becomes a
Borrower hereunder, (ii) a supplement substantially in the form attached as
Annex II to the Security Agreement, (iii) a supplement substantially in the
form attached as Exhibit A to the Pledge Agreement, or if applicable, a
separate pledge agreement substantially in the form of the Pledge Agreement
executed by the parent of such new Subsidiary, (v) one or more duly executed
Mortgages and/or Collateral Assignments, as applicable, with respect to any
real property owned or leased by such Subsidiary and such consents of third
parties as are required to grant a security interest in such real property
(except as cannot be obtained pursuant to the proviso set forth in Section
5.2(d)(i)), (vi) updated version of each Schedule referred to in Section 6.1(w)
to reflect all changes to such Schedules resulting from such creation or
acquisition of such Subsidiary and (vii) such other documents reasonably
requested by the Administrative Agent and Required Lenders consistent with the
terms of this Agreement which provide that such Subsidiary shall become bound
by all of the terms, covenants and agreements contained in the Loan Documents
and that the assets of such Subsidiary shall become Collateral for the
Obligations. Upon satisfaction of the conditions set forth in this Section
8.12(a), each Subsidiary shall become a Borrower hereunder and under the other
Loan Documents to the same extent as if such Subsidiary had been a party hereto
and thereto on the Closing Date. Notwithstanding the foregoing, nothing in this
Section 8.12 shall be deemed to prohibit any Lien or other encumberance
permitted pursuant to Section 10.3.
(b) Upon the acquisition by any Loan Party or Subsidiary thereof,
of any real property (whether owned in fee or leased) not listed on Schedule
6.1(r), provide to the Administrative Agent copies of the purchase or lease
documents, as applicable, with respect thereto; and if requested by the
Administrative Agent or Required Lenders, promptly execute and deliver to the
Administrative Agent and the Lenders a Mortgage, Collateral Assignment,
landlord agreement, and all documents and other items reasonably requested by
the Administrative Agent with respect to any such newly acquired real property
(except as cannot be obtained pursuant to the proviso set forth in Section
5.2(d)(i)), in each case in form and substance reasonably satisfactory to the
Administrative Agent and Required Lenders. Notwithstanding the foregoing,
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nothing in this Section 8.12 shall be deemed to prohibit any Lien or other
encumberance permitted pursuant to Section 10.3.
(c) Use best efforts to obtain consents of the applicable
Governmental Authority or third party to the security interest of the
Administrative Agent, on behalf of itself and the Lenders, in the CATV
Franchises, PUC Authorizations or Material Contracts identified on Schedule
5.2(d) (excluding any such CATV Franchise, PUC Authorization or Material
Contract for which a consent has previously been delivered or for which such
requirement has been waived), and, where required, in any CATV Franchise or PUC
Authorization acquired by any Loan Party subsequent to the date hereof and any
Material Contract executed subsequent to the date hereof which replaces,
supersedes or is entered into for substantially the same business purpose (as
reasonably determined by the Administrative Agent in consultation with the
Borrowers) as any Material Contract set forth on Schedule 5.2(d). For purposes
of this Section 8.12(c) the term "best efforts" shall mean, as applicable: (i)
the filing of an application or submission of a written request (in each case
with a copy delivered to the Administrative Agent) to the appropriate
Governmental Authority or third party for such consent within forty five (45)
days after the closing date or acquisition date, as applicable, (ii) compliance
with all applicable procedures with regard to obtaining any such consents,
(iii) good faith negotiations, (iv) payment of fees and charges necessary to
obtain such consents in such amount as are paid for such purposes in the
ordinary course of business and (v) with respect to any formal denial of any
such request by any Governmental Authority, the exhaustion of reasonable
appeals of such formal denial. Notwithstanding the foregoing, the Loan Parties
and their Subsidiaries shall have no obligation to seek such consents in those
situations where Applicable Law (other than the local municipal ordinances
creating or providing for any CATV Franchise) expressly prohibits or does not
recognize a security interest in a CATV Franchise or a PUC Authorization,
unless and until such Applicable Law changes so as to permit or recognize such
security interest.
(d) Notwithstanding anything contained in any one or more of the
Loan Documents to the contrary, it is agreed that the Loan Parties shall not be
deemed to have granted a security interest in any Communications License, CATV
Franchise, PUC Authorization or agreement with respect to which the consent or
approval of any third party is necessary for the creation of such a security
interest until such time, if ever, as the consents or approvals applicable with
respect to such Communications License, CATV Franchise, PUC Authorization or
agreement have been obtained.
(e) Upon the issuance of any new class or series of capital stock
or other equity ownership interest by any Borrower ("New Equity"), cause to be
executed and delivered to the Administrative Agent (i) a pledge agreement
substantially in the form of the Pledge Agreement and (ii) such other documents
as reasonably requested by the Administrative Agent and Lenders.
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SECTION 8.13 KNOLOGY OF GEORGIA. At any time as the book value of
all tangible assets owned by KNOLOGY of Georgia, Inc. (excluding any
Communications Licenses and/or PUC Authorizations) exceeds Three Million
Dollars ($3,000,000), cause KNOLOGY of Georgia, Inc. to promptly declare a
dividend or distribution in an amount equal to or greater than such excess
which such dividend shall be paid or distribution made within fifteen (15) days
after the declaration thereof. This Section 8.13 shall be of no further effect
upon such date, if any, as KNOLOGY of Georgia, Inc. is joined to this Agreement
as a Borrower pursuant to Section 8.12(a).
SECTION 8.14 YEAR 2000 COMPATIBILITY. Maintain and pursue with
reasonable diligence a plan of the type and extent as is customarily maintained
by similar businesses and is reasonably acceptable to the Administrative Agent,
and which is designed to assure that the Loan Parties' computer based systems
are able to operate on and after January 1, 2000 with respect to and
effectively process data which includes dates on and after January 1, 2000
("Year 200 Compatibility"). At the request of the Administrative Agent, the
Loan Parties shall provide information reasonably satisfactory to the
Administrative Agent regarding such plan, the steps taken to pursue such plan
and the Loan Parties' determinations regarding Year 2000 Compatibility.
SECTION 8.15 FURTHER ASSURANCES. Make, perform, execute and
deliver all such additional and further acts, things, deeds and instruments as
the Administrative Agent or any Lender may reasonably require to document and
consummate the transactions contemplated hereby and to vest completely in and
ensure the Administrative Agent and the Lenders of their respective rights
under this Agreement, the Notes, the Letters of Credit and the other Loan
Documents.
ARTICLE IX
FINANCIAL COVENANTS
Upon the Initial Funding Date and thereafter, until all of the
Obligations have been paid and satisfied in full and the Commitments
terminated, unless consent has been obtained in the manner set forth in Section
14.11, the Loan Parties and their Subsidiaries will not:
SECTION 9.1 MAXIMUM CONSOLIDATED SENIOR FUNDED DEBT TO
CONSOLIDATED ADJUSTED CASH FLOW RATIO. As of the end of any fiscal quarter
permit the ratio of (a) Consolidated Senior Funded Debt to (b) Consolidated
Adjusted Cash Flow to exceed 5.00 to 1.00.
SECTION 9.2 MINIMUM CONSOLIDATED ADJUSTED CASH FLOW TO CASH
INTEREST EXPENSE RATIO. As of the end of any fiscal quarter permit the ratio of
(a) Consolidated Adjusted Cash Flow to (b) Cash Interest Expense to be less
than 2.00 to 1.00.
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SECTION 9.3 MAXIMUM CONSOLIDATED SENIOR FUNDED DEBT TO
CONTRIBUTED CAPITAL RATIO. At any time permit the ratio of (a) Consolidated
Senior Funded Debt to (b) Contributed Capital to exceed 0.25 to 1.00.
SECTION 9.4 BORROWER PERFORMANCE TESTS.
(a) Minimum Number of Connections:
As of the end of any fiscal quarter, but only after an Extension of
Credit has been made under this Agreement, permit the average number of
Connections to be less than the corresponding minimum average number of
Connections for such fiscal quarter end set forth below:
<TABLE>
<S> <C>
12/31/98 77,500
3/31/99 86,700
6/30/99 94,900
9/30/99 104,500
12/31/99 115,800
3/31/00 127,800
6/30/00 141,000
9/30/00 157,000
12/31/00 175,000
3/31/01 195,000
6/30/01 220,000
9/30/01 240,000
12/31/01 260,000
3/31/02 280,000
6/30/02 305,000
9/30/02 325,000
12/31/02 340,000
</TABLE>
(b) Minimum Revenue per Connection:
As of the end of any fiscal quarter, but only after an Extension of
Credit has been made under this Agreement, permit (i) the quotient of (A) total
revenue (before discounts and allowances) for such fiscal quarter (excluding
Broadband Carrier Services revenues) divided by (B) three divided by (ii) the
average number of billed Connections as of such fiscal quarter to be less than
the corresponding minimum amount for such fiscal quarter end set forth below:
<TABLE>
<S> <C>
12/31/98 35.22
3/31/99 36.38
6/30/99 37.14
9/30/99 38.02
12/31/99 38.85
3/31/00 40.22
</TABLE>
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<TABLE>
<S> <C>
6/30/00 40.91
9/30/00 41.47
12/31/00 41.78
3/31/01 42.50
6/30/01 42.92
9/30/01 43.57
12/31/01 44.01
3/31/02 44.87
6/30/02 45.16
9/30/02 45.61
12/31/02 45.93
</TABLE>
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 14.11 hereof, the Loan Parties will not and will not permit
their Subsidiaries to:
SECTION 10.1 LIMITATIONS ON DEBT. Create, incur, assume or suffer
to exist any Debt except:
(a) the Obligations;
(b) Subordinated Debt;
(c) Debt existing on the Closing Date and not otherwise permitted
under this Section 10.1, as set forth on Schedule 6.1(t), and the renewal and
refinancing (but not the increase) thereof;
(d) Debt of the Borrowers incurred in connection with Capital
Leases in an aggregate amount not to exceed $10,000,000 on any date of
determination and the renewal and refinancing (but not the increase if such
increase would cause the foregoing Dollar amount limitation to be exceeded)
thereof;
(e) purchase money Debt of the Borrowers in an aggregate amount
not to exceed $10,000,000 on any date of determination and the renewal and
refinancing (but not the increase if such increase would cause the foregoing
Dollar amount limitation to be exceeded) thereof;
(f) Debt consisting of Guaranty Obligations permitted by Section
10.2;
(g) Debt of the Guarantor, not otherwise permitted under this
Section 10.1, on terms and conditions reasonably acceptable to the
Administrative Agent and Required Lenders and the renewal and refinancing (but
not the increase) thereof; provided that any additional Debt in the
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<PAGE> 66
form of senior notes issued by the Guarantor after the date hereof is hereby
deemed approved for all purposes of this Section 10.1(g) so long as such notes
(i) do not yield gross proceeds in excess of $275,000,000, (ii) do not provide
for any scheduled payment of principal thereunder prior to the Termination
Date, (iii) do not provide for any scheduled payment of interest thereunder
(other than out of an escrow account funded with proceeds of such notes at the
time of the issuance thereof) for a period of at least three years following
the date of issuance thereof, (iv) are unsecured (other than any security
interest in an escrow account funded with a portion of the proceeds of such
notes at the time of issuance thereof), and (v) do not contain any other
material covenants which are materially less favorable to the Guarantor than
the terms of the Senior Discount Notes;
(h) Intercompany Debt not otherwise permitted under this Section
10.1;
(i) Debt of any Loan Party not otherwise permitted under this
Section 10.1, incurred by reason of merger or otherwise assumed in connection
with any acquisition permitted pursuant to Section 10.4(c) in an aggregate
principal amount not to exceed $10,000,000 during the term of this Agreement,
the terms and conditions of which (including without limitation any collateral
security therefor) shall be reasonably acceptable to the Administrative Agent
and Lenders;
(j) Debt incurred in connection with any Hedging Agreement with a
counterparty satisfactory to the Administrative Agent (unless such counterparty
is (i) a Lender, (ii) an Affiliate of a Lender or (iii) any third party who
would qualify as an Eligible Assignee) and upon terms and conditions reasonably
satisfactory to the Administrative Agent; and
(k) Debt in respect of performance, surety or appeal bonds
provided in the ordinary course of business or in respect of indemnification or
other obligations incurred in connection with the disposition of any assets
permitted pursuant to Section 10.6.
provided, that none of the Debt permitted to be incurred by this Section shall
restrict, limit or otherwise encumber (by covenant or otherwise) the ability of
any Subsidiary of any Loan Party to make any payment to any Borrower or any of
their respective Subsidiaries (in the form of dividends, intercompany advances
or otherwise) for the purpose of enabling such Borrower to pay the Obligations.
Notwithstanding the foregoing, the Loan Parties will not and will not permit
their Subsidiaries to permit KNOLOGY of Georgia, Inc. to seek, apply or obtain
any Governmental Approval which would permit KNOLOGY of Georgia, Inc. to incur
any Debt or to grant any Lien on any of its assets, except in favor of the
Lenders.
SECTION 10.2 LIMITATIONS ON GUARANTY OBLIGATIONS. Create, incur,
assume or suffer to exist any Guaranty Obligations except:
(a) Guaranty Obligations in favor of the Administrative Agent for
the benefit of the Administrative Agent and the Lenders;
(b) Guaranty Obligations in an amount not to exceed $2,500,000 to
secure payment or performance of customer service contracts entered into in the
ordinary course of business;
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(c) Guaranty Obligations existing on the Closing Date and not
otherwise permitted under this Section 10.2, as set forth on Schedule 6.1(t)
and the renewal and refinancing (but not the increase) thereof; and
(d) Guaranty Obligations of any Loan Party of (i) Debt of any
other Loan Party permitted by Section 10.1 or (ii) contract performance
obligations of any other Loan Party that do not constitute Debt.
SECTION 10.3 LIMITATIONS ON LIENS. Create, incur, assume or
suffer to exist, any Lien on or with respect to any of its assets or properties
(including without limitation shares of capital stock or other ownership
interests), real or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments, customs duties and other
governmental charges or levies (excluding any Lien imposed pursuant to any of
the provisions of ERISA or Environmental Laws) (i) which are not overdue for a
period of more than ninety (90) days or (ii) which are being contested in good
faith and by appropriate proceedings if adequate reserves are maintained to the
extent required by GAAP;
(b) common law and statutory Liens of materialmen, mechanics,
carriers, warehousemen, processors or landlords for labor, materials, supplies
or rentals incurred in the ordinary course of business, (i) which are not
overdue for a period of more than ninety (90) days or (ii) which are being
contested in good faith and by appropriate proceedings if adequate reserves are
maintained to the extent required by GAAP;
(c) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
obligations (not to exceed $2,500,000) under customer service contracts,
statutory or regulatory obligations, bank acceptances, surety and appeal bonds,
government contracts, performance bonds and other obligations of a similar
nature incurred in the ordinary course of business;
(d) Liens constituting encumbrances in the nature of municipal
ordinances or zoning restrictions, easements and rights or restrictions of
record on the use of real property, title defects or other irregularities,
which in the aggregate are not substantial in amount and which do not, in any
case, detract in a material manner from the value of such property or impair
the use thereof in the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;
(f) Liens not otherwise permitted by this Section 10.3 and in
existence on the Closing Date and described on Schedule 10.3;
(g) Liens securing Debt permitted under Section 10.1(d);
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(h) Liens securing Debt permitted under Section 10.1(e); provided
that (i) such Liens shall be created within six months after the latest to
occur of the acquisition, the completion of construction or the commencement of
operation of the related asset, (ii) such Liens do not at any time encumber any
property other than the property financed by such Debt and improvements
thereon, (iii) the amount of Debt secured thereby is not increased and (iv) the
principal amount of Debt secured by any such Lien shall at no time exceed one
hundred percent (100%) of the original purchase price of such property at the
time it was acquired;
(i) leases (other than operating leases referred to in clause (k)
below) or subleases granted to others that do not materially interfere with the
ordinary course of business of the Loan Parties, taken as a whole;
(j) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of any Loan Party
relating to such property or assets;
(k) any interest or title of a lessor in the property subject to
any operating lease, including Liens arising from filing Uniform Commercial
Code financing statements regarding leases;
(l) Liens securing Debt permitted pursuant to Section 10.1(h) or
Section 10.1(j);
(m) Liens securing Debt permitted in accordance with Section
10.1(i) and existing on any property or asset prior to the acquisition thereof
by any Loan Party or any Subsidiary; provided, that (i) such Lien is not
created in contemplation of or in connection with such acquisition and (ii)
such Lien does not apply to any other property or assets of any Loan Party;
(n) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by any
Loan Party in the ordinary course of business in accordance with the past
practices of such Loan Party prior to the Closing Date; provided, that the fair
market value of the assets subject to such Liens does not exceed $1,000,000 in
the aggregate at any time;
(o) Liens that secure Debt permitted pursuant to Section 10.1(g)
(excluding additional Debt in the form of senior notes issued pursuant to the
proviso set forth in such Section 10.1(g)) with an aggregate principal amount
not to exceed $5,000,000 at any time outstanding;
(p) Liens made in the ordinary course of business on assets
subject to rights-of-way, pole attachment, use of conduit, use of trenches or
similar agreements securing any Loan Party's obligations under such agreements;
provided, that such Liens apply only to the assets subject to any of the
foregoing agreements; and
(q) Liens not otherwise permitted under this Section 10.3
securing Debt permitted under Section 10.1 or consisting of final judgments or
orders not constituting a Default or Event of Default in an aggregate amount
not to exceed $5,000,000.
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SECTION 10.4 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND
ACQUISITIONS. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture
(including without limitation in connection with the capitalization of any
Subsidiary), evidence of Debt or other obligation or security, substantially
all or a portion of the business or assets of any other Person or any other
investment or interest whatsoever in any other Person, or make or permit to
exist, directly or indirectly, any loans, advances or extensions of credit to,
or any investment in cash or by delivery of property in, any Person (such
loans, advances, investments and acquisitions collectively referred to as
"investments") except:
(a) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and having 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 "A-1"
(or higher) according to Standard & Poor's Ratings Services, (iii) time deposit
accounts, money market deposits and certificates of deposit maturing no more
than one (1) year from the date of creation thereof issued by commercial banks
or trust companies organized under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$500,000,000 and having a rating of "A" or better by a nationally recognized
rating agency; provided, that the aggregate amount invested in such
certificates of deposit shall not at any time exceed $5,000,000 for any one
such certificate of deposit and $10,000,000 for any one such bank, (iv)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the type described in clause (i) above entered into
with a commercial bank meeting the qualifications described in clause (iii)
above, or (v) securities with maturities of six months or less from the date of
acquisition issued or unconditionally guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings
Services or Moody's Investors Service, Inc.;
(b) (i) investments of any Loan Party in any other Loan Party,
and (ii) investments existing on the Closing Date and described on Schedule
10.4;
(c) investments by a Loan Party in the form of:
(i) the creation, acquisition or capitalization of any
Borrowers after the Closing Date not otherwise permitted under this Section
10.4;
(ii) acquisitions of assets through like kind exchanges;
provided, that (A) no Default or Event of Default has occurred and is
continuing or would result therefrom, (B) such investment has been previously
approved in writing by the Required Lenders, (C) the Loan Parties shall have
delivered to the Administrative Agent financial projections in form and
substance reasonably satisfactory to the Administrative Agent, evidencing
compliance, on a pro forma basis, with the covenants contained in Articles IX
and X hereof, and evidencing the ability of the Loan Parties to meet all of
their Obligations; and (D) the Borrowers and their respective Subsidiaries
shall have complied with all applicable provisions of Section 8.12; and
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(iii) investments by the Borrowers in the form of
acquisitions of all or substantially all of the business or a line of business
of any other Person (whether by the acquisition of capital stock or other
equity ownership interests, assets or any combination thereof) which are
consummated in accordance with the following requirements of this Section
10.4(c)(iii) (any such acquisition, a "Permitted Acquisition"): (A) the
acquired Person shall be and substantially all of the acquired assets shall be
utilized in a Substantially Similar Business as the Borrower, (B) no Default or
Event of Default shall have occurred and be continuing or be created by the
relevant Permitted Acquisition as evidenced by a certificate of the Borrowers
delivered on the closing date thereof to the Administrative Agent and the
Required Lenders in form and substance satisfactory to the Administrative Agent
and demonstrating pro forma compliance with the financial covenants set forth
in Article IX and the other terms of the Loan Documents, (C) a description of
the relevant Permitted Acquisition in reasonable detail and the corresponding
documentation shall be furnished by the Borrowers to the Lenders at least
fifteen (15) Business Days prior to the closing date thereof (to be followed by
any changed pages and fully executed copies promptly after the creation
thereof) and (D) the aggregate cash or any other consideration for any such
Permitted Acquisition or series of related acquisitions does not exceed Five
Million Dollars ($5,000,000) over the term of this Agreement; provided that any
Permitted Acquisition that is approved in writing by the Administrative Agent
and Required Lenders (either prior or subsequent to the closing date of such
acquisition) shall not be counted against the Five Million Dollar ($5,000,000)
limitation.
(d) commission, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses in accordance with GAAP;
(e) receipt of stock, obligations or securities received in
satisfaction of judgments in favor of any Loan Party;
(f) investments in prepaid expenses, negotiable instruments held
for collection, and lease, utility and workers' compensation, performance and
other similar deposits; and
(g) loans or advances to employees of any Loan Party made in the
ordinary course of business that do not in the aggregate exceed $500,000 at any
time outstanding.
SECTION 10.5 LIMITATIONS ON MERGERS AND LIQUIDATION. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) except:
(a) any Loan Party (except the Guarantor) may merge with any
other Loan Party;
(b) any Subsidiary may merge with or into the Person such
Subsidiary was formed to acquire in connection with an acquisition permitted by
Section 10.4(c); and
(c) any Subsidiary of any Loan Party may wind-up into such Loan
Party or any other Subsidiary of such Loan Party.
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SECTION 10.6 LIMITATIONS ON SALE OF ASSETS. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, the sale of any receivables and
leasehold interests and any sale-leaseback or similar transaction), whether now
owned or hereafter acquired except:
(a) the conveyance, sale, lease, assignment, transfer or other
disposition of assets or securities in the ordinary course of business;
(b) the conveyance, sale, lease, assignment, transfer or other
disposition of obsolete assets no longer used or usable in the business of the
applicable Loan Party;
(c) the conveyance, sale, lease, assignment, transfer or other
disposition of assets to any Loan Party (including in connection with a sale
leaseback transaction among Loan Parties); provided, that any assets
transferred to the Guarantor pursuant to this Section 10.6(c) shall at all
times be subject to a perfected first priority Lien in favor of the
Administrative Agent, on behalf of the Lenders;
(d) the conveyance, sale, lease, assignment, transfer or other
disposition or discount without recourse of accounts receivable arising in the
ordinary course of business in connection with the compromise or collection
thereof;
(e) the disposition of any asset pursuant to a like kind exchange
permitted pursuant to Section 10.4(c);
(f) issuance of equity securities by the Guarantor; provided,
that the Net Cash Proceeds from any such issuance of equity securities are used
in accordance with Section 2.5(b)(iii);
(g) any other sale of assets; provided, that (i) the aggregate
Net Cash Proceeds from any such sale of assets do not exceed $5,000,000 in any
Fiscal Year and (ii) the Net Cash Proceeds from any such sale of assets are
used in accordance with Section 2.5(b)(ii); and
(h) any sale of assets in connection with a sale leaseback
transaction not otherwise permitted under this Section 10.6; provided, that (i)
such transaction (A) does not involve the sale of any asset which constitutes
all or any portion of an Interactive Broadband Network and (B) the aggregate
salesprice in connection with all such transactions does not exceed $15,000,000
during the term hereof.
SECTION 10.7 LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS. Declare
or pay any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares
of its capital stock, or make any change in its capital structure that could
reasonably be expected to have a Material Adverse Effect; provided that:
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(a) each direct and indirect Subsidiary of the Guarantor may pay
dividends or make any other distributions permitted by Applicable Law on any
capital stock of such Subsidiary owned by the Guarantor or any of its direct
and indirect Subsidiaries;
(b) any Borrower or any Subsidiary may pay dividends in shares of
its own capital stock;
(c) any Borrower or any Subsidiary may repurchase shares of its
own capital stock in an amount not to exceed $100,000 per Fiscal Year in order
to eliminate fractional shares;
(d) any Subsidiary may pay cash dividends to any Borrower;
(e) any Loan Party may (i) make payments or distributions to
dissenting stockholders pursuant to Applicable Law in connection with a
consolidation, merger or transfer of assets that complies with the provisions
of this Agreement, (ii) purchase, redeem, acquire, cancel or otherwise retire
for value shares of stock of such Loan Party to the extent necessary, in the
judgment of its board of directors, to prevent the loss or secure the renewal
or reinstatement of any license or franchise held by such Loan Party from any
governmental agency and (iii) may purchase, redeem, retire or otherwise acquire
for value shares of stock of such Loan Party, or options to purchase such
shares, held by directors, employees, or former directors or employees of such
Loan Party (or their estates or beneficiaries under their estates) upon their
death, disability, retirement, termination of employment or pursuant to the
terms of any agreement under which such shares of stock or options were issued;
provided that, the aggregate amount of all payments, distributions, purchases,
redemptions, acquisitions, cancellations or retirements shall not exceed
$1,000,000 during the term hereof;
provided, that no Event of Default (other than a Event of Default described in
Section 12.1(c)) has occurred and is continuing; provided further, that unless
an Event of Default described in Sections 12.1(a), (b), (e)(ii), (j) (with
respect to the Guarantor only), or (k) (with respect to the Guarantor only) has
occurred and is continuing, this Section 10.7 shall not prevent the direct and
indirect Subsidiaries of the Guarantor from paying dividends or making any
other distributions to the Guarantor or any of its direct or indirect
Subsidiaries to enable the Guarantor to make scheduled interest payments on the
Senior Discount Notes or any Debt permitted pursuant to the proviso in Section
10.1(g) for more than 180 days in any consecutive 360 day period.
SECTION 10.8 LIMITATIONS ON GUARANTOR. Utilize, pay, invest, or
distribute any cash, cash equivalents, securities or Investment Property (as
such term is defined in the UCC), of the Guarantor received from any Subsidiary
(including, without limitation, the proceeds of Intercompany Debt, dividends,
distributions, loans, advances or investments pursuant to Sections 10.1(h),
10.4(b), and 10.7(a)) for any reason or purpose other than:
(a) to enable the Guarantor to meet its obligations under the
Senior Discount Notes and Debt permitted pursuant to Section 10.1,
(b) for reasonable and customary corporate overhead and operating
expenses,
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(c) to make Capital Expenditures in an amount not to exceed
$10,000,000 during the term hereof
(d) for Corporate Cash Management so long as (with regard to this
clause (d) only) (i) the Administrative Agent, on behalf of the Lenders,
possesses at all times a perfected first priority Lien in all such dividends
and distributions and (ii) all such dividends and distributions (whether in the
form of cash, cash equivalents, securities or Investment Property (as such term
is defined in the UCC)), and the proceeds thereof shall be maintained in
deposit and/or brokerage accounts with (A) the Administrative Agent or
Affiliate thereof or (B) a financial institution that has delivered a bank
agency letter in form and substance satisfactory to the Administrative Agent,
(pursuant to a deposit account assignment agreement executed by the Guarantor,
in form and substance satisfactory to the Administrative Agent) with regard to
all such deposit and/or brokerage accounts at such financial institution and an
account control agreement, in form and substance satisfactory to the
Administrative Agent with regard to all such deposit and/or brokerage accounts;
and
(e) to the extent any such property is not used for the purposes
set forth in Section 10.8(a-d), the Guarantor shall promptly loan, invest, or
otherwise contribute such property to its Subsidiaries.
SECTION 10.9 LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL
STOCK. Issue, sell or otherwise dispose of any class or series of capital stock
that, by its terms or by the terms of any security into which it is convertible
or exchangeable, is, or upon the happening of an event or passage of time would
be, (a) convertible or exchangeable into Debt (other than Intercompany Debt) or
(b) required to be redeemed or repurchased, including at the option of the
holder, in whole or in part for cash or property other than capital stock, or
has, or upon the happening of an event or passage of time would have, a cash
redemption or similar payment due (any such capital stock,
"Convertible/Redeemable Equity"); provided that, the foregoing restriction
shall not apply to any Convertible/Redeemable Equity which can not under any
circumstances be converted, exchanged, redeemed or repurchased at any time
prior to one (1) year after the Termination Date, as such Termination Date may
be extended.
SECTION 10.10 TRANSACTIONS WITH AFFILIATES OTHER THAN LOAN
PARTIES. Directly or indirectly: (a) make any loan or advance to, or purchase
or assume any note or other obligation to or from, any of its officers,
directors, shareholders or other Affiliates other than Loan Parties, or to or
from any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates other than Loan Parties, or subcontract any
operations to any of its Affiliates other than Loan Parties (other than loans
and advances permitted pursuant to Section 10.4(g)), or (b) enter into, or be a
party to, any transaction with any of its Affiliates, other than Loan Parties,
except with respect to clauses (a) or (b), pursuant to the reasonable
requirements of its business and upon fair and reasonable terms that are no
less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not its Affiliate.
SECTION 10.11 CERTAIN ACCOUNTING CHANGES. Change its Fiscal Year
end, or make any change in its accounting treatment and reporting practices
which such change would be in contravention of GAAP; provided that no change
that materially effects the calculation of
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the financial covenants set forth in Article IX hereof will be permitted
without the consent of the Administrative Agent or unless permitted pursuant to
Section 14.9.
SECTION 10.12 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED
DEBT OR SENIOR DISCOUNT NOTES. Amend or modify (or permit the modification or
amendment of) any of the terms or provisions of any Subordinated Debt, the
Senior Discount Notes or Debt permitted pursuant to Section 10.1(g), or cancel
or forgive, make any voluntary or optional payment or prepayment on, or redeem
or acquire for value (including without limitation by way of depositing with
any trustee with respect thereto money or securities before due for the purpose
of paying when due) any Subordinated Debt or the Senior Discount Notes or Debt
permitted pursuant to Section 10.1(g); except (a) to the extent permitted by
Section 10.7 and (b) that amendments and modifications may be made to the terms
or provisions of the Senior Discount Notes or Debt permitted pursuant to
Section 10.1(g) that do not provide for or result in (i) any scheduled payment
of principal thereunder prior to the Termination Date, (ii) any scheduled
payment of interest thereunder (other than out of an escrow account funded with
proceeds of such notes at the time of the issuance thereof) for a period of at
least three years (3) following the date of issuance thereof, (iii) such Senior
Discount Notes or Debt being secured (other than any security interest in an
escrow account funded with a portion of the proceeds of such notes at the time
of the issuance thereof) and (iv) any material covenants which are materially
less favorable to the Guarantor than the covenants of the Senior Discount Notes
as of the date hereof.
SECTION 10.13 RESTRICTIVE AGREEMENTS. Except as may be permitted
pursuant to the proviso set forth in Section 10.1(g) above, enter into any Debt
which contains any covenants more restrictive than the provisions of Articles
VIII, IX and X hereof, or enter into any Debt, other than the Senior Discount
Notes, any Debt permitted pursuant to the proviso in Section 10.1(g) or any
refinancing (but not the increase) of any of the foregoing, which contains any
negative pledge or which restricts, limits or otherwise encumbers its ability
to incur Liens on or with respect to any of its assets or properties other than
the assets or properties securing such Debt and improvements thereon and any
proceeds thereof.
ARTICLE XI
UNCONDITIONAL GUARANTY
SECTION 11.1 GUARANTY OF OBLIGATIONS. The Guarantor hereby
unconditionally guarantees to the Administrative Agent for the ratable benefit
of the Administrative Agent and the Lenders, and their respective successors,
endorsees, transferees and assigns, the prompt payment and performance of all
Obligations of the Borrowers, whether primary or secondary (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether
or not from time to time reduced or extinguished (except by payment thereof) or
hereafter increased or incurred, whether or not recovery may be or hereafter
become barred by the statute of limitations, whether enforceable or
unenforceable as against any such Borrower, whether or not discharged, stayed
or otherwise affected by any bankruptcy, insolvency or other similar law or
proceeding, whether created directly with any Administrative Agent or Lender or
acquired by any Administrative Agent or Lender through assignment, endorsement
or otherwise,
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whether matured or unmatured, whether joint or several, as and when the same
become due and payable (whether at maturity or earlier, by reason of
acceleration, mandatory repayment or otherwise), in accordance with the terms
of any such instruments evidencing any such obligations, including all
renewals, extensions or modifications thereof (all Obligations of each such
Borrower to any Administrative Agent or Lender, including all of the foregoing,
being hereinafter collectively referred to as the "Guaranteed Obligations").
SECTION 11.2 NATURE OF GUARANTY. The Guarantor agrees that this
Guaranty is a continuing, unconditional guaranty of payment and performance and
not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by (a) the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement or any other Loan Document or any other agreement,
document or instrument to which any such Borrower is or may become a party, (b)
the absence of any action to enforce this Guaranty, this Agreement or any other
Loan Document or the waiver or consent by the Administrative Agent or any
Lender with respect to any of the provisions of this Agreement (other than an
express written waiver of any provision of this Article XI pursuant to Section
14.11) or any other Loan Document, (c) the existence, value or condition of, or
failure to perfect its Lien against, any security for or other guaranty of the
Guaranteed Obligations or any action, or the absence of any action, by the
Administrative Agent or any Lender in respect of such security or guaranty
(including, without limitation, the release of any such security or guaranty)
or (d) any other action or circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor; it being
agreed by the Guarantor that its obligations under this Guaranty shall not be
discharged until the final and indefeasible payment and performance, in full,
of the Guaranteed Obligations and the termination of the Commitments. The
Guarantor expressly waives all rights it may now or in the future have under
any statute (including without limitation North Carolina General Statutes
Section 26-7, et seq. or similar law), or at law or in equity, or otherwise, to
compel the Administrative Agent or any Lender to proceed in respect of the
Guaranteed Obligations against any such Borrower or any other party or against
any security for or other guaranty of the payment and performance of the
Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, the Guarantor. The Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the Administrative Agent or any Lender to commence an action in respect of the
Guaranteed Obligations against any such Borrower, the Guarantor or any other
party or any security for the payment and performance of the Guaranteed
Obligations. The Guarantor agrees that any notice or directive given at any
time to the Administrative Agent or any Lender which is inconsistent with the
waivers in the preceding two sentences shall be null and void and may be
ignored by the Administrative Agent or Lender, and, in addition, may not be
pleaded or introduced as evidence in any litigation relating to this Guaranty
for the reason that such pleading or introduction would be at variance with the
written terms of this Guaranty, unless the Administrative Agent and the
Required Lenders have specifically agreed otherwise in writing. The foregoing
waivers are of the essence of the transaction contemplated by the Loan
Documents and, but for this Guaranty and such waivers, the Administrative Agent
and Lenders would decline to enter into this Agreement.
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SECTION 11.3 DEMAND BY THE ADMINISTRATIVE AGENT. In addition to
the terms set forth in Section 11.2, and in no manner imposing any limitation
on such terms, if all or any portion of the then outstanding Guaranteed
Obligations under this Agreement are declared to be immediately due and
payable, then the Guarantor shall, upon demand in writing therefor by the
Administrative Agent to the Guarantor, pay all or such portion of the
outstanding Guaranteed Obligations then declared due and payable. Payment by
the Guarantor shall be made to the Administrative Agent, to be credited and
applied upon the Guaranteed Obligations, in immediately available funds to an
account designated by the Administrative Agent or at the Administrative Agent's
office or at any other address that may be specified in writing from time to
time by the Administrative Agent.
SECTION 11.4 WAIVERS. In addition to the waivers contained in
Section 11.2, the Guarantor waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance by the
Guarantor of its obligations under, or the enforcement by the Administrative
Agent or the Lenders of, this Guaranty. The Guarantor further hereby waives
diligence, presentment, demand, protest and notice of whatever kind or nature
with respect to any of the Guaranteed Obligations and waives the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guaranty. The Guarantor represents, warrants and agrees that its obligations
under this Guaranty are not and shall not be subject to any counterclaims,
offsets or defenses of any kind (except the defense of payment of the
Guaranteed Obligation) against the Administrative Agent, the Lenders or any
such Borrower whether now existing or which may arise in the future.
SECTION 11.5 MODIFICATION OF LOAN DOCUMENTS ETC. If the
Administrative Agent or the Lenders shall at any time or from time to time,
with or without the consent of, or notice to, the Guarantor (a) change or
extend the manner, place or terms of payment of, or renew or alter all or any
portion of, the Guaranteed Obligations, (b) take any action under or in respect
of the Loan Documents in the exercise of any remedy, power or privilege
contained therein or available to it at law, in equity or otherwise, or waive
or refrain from exercising any such remedies, powers or privileges, (c) amend
or modify, in any manner whatsoever, the Loan Documents, (d) extend or waive
the time for performance by the Guarantor, any such Borrower or any other
Person of, or compliance with, any term, covenant or agreement on its part to
be performed or observed under a Loan Document (other than this Guaranty), or
waive such performance or compliance or consent to a failure of, or departure
from, such performance or compliance, (e) take and hold security or collateral
for the payment of the Guaranteed Obligations or sell, exchange, release,
dispose of, or otherwise deal with, any property pledged, mortgaged or
conveyed, or in which the Administrative Agent or the Lenders have been granted
a Lien, to secure any Debt of the Guarantor or any such Borrower to the
Administrative Agent or the Lenders, (f) release anyone who may be liable in
any manner for the payment of any amounts owed by the Guarantor or any such
Borrower to the Administrative Agent or any Lender, (g) modify or terminate the
terms of any intercreditor or subordination agreement pursuant to which claims
of other creditors of the Guarantor or any such Borrower are subordinated to
the claims of the Administrative Agent or any Lender or (h) apply any sums by
whomever paid or however realized to any amounts owing by the Guarantor or any
such Borrower to the
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Administrative Agent or any Lender on account of the Obligations in such manner
as the Administrative Agent or any Lender shall determine in its reasonable
discretion; then neither the Administrative Agent nor any Lender shall incur
any liability to the Guarantor as a result thereof, and no such action shall
impair or release the obligations of the Guarantor under this Guaranty.
SECTION 11.6 REINSTATEMENT. The Guarantor agrees that, if any
payment made by any such Borrower or any other Person applied to the
Obligations is at any time annulled, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, or the proceeds of Collateral are required to be returned by the
Administrative Agent or any Lender to any such Borrower, its estate, trustee,
receiver or any other party, including, without limitation, the Guarantor,
under any Applicable Law or equitable cause, then, to the extent of such
payment or repayment, the Guarantor's liability hereunder (and any Lien or
Collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, and, if prior thereto,
this Guaranty shall have been canceled or surrendered (and if any Lien or
Collateral securing the Guarantor's liability hereunder shall have been
released or terminated by virtue of such cancellation or surrender), this
Guaranty (and such Lien or Collateral) shall be reinstated in full force and
effect, and such prior cancellation or surrender shall not diminish, release,
discharge, impair or otherwise affect the obligations of the Guarantor in
respect of the amount of such payment (or any Lien or Collateral securing such
obligation).
SECTION 11.7 NO SUBROGATION. Until all amounts owing to the
Administrative Agent and Lenders on account of the Obligations are paid in full
and the Commitments are terminated, the Guarantor hereby waives any claims or
other rights which it may now or hereafter acquire against any such Borrower
that arise from the existence or performance of the Guarantor's obligations
under this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, any right to participate in any
claim or remedy of the Administrative Agent or the Lenders against any such
Borrower or any Collateral which the Administrative Agent or the Lenders now
have or may hereafter acquire, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, by any payment made
hereunder or otherwise, including without limitation, the right to take or
receive from any such Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to the Guarantor on
account of such rights at any time when all of the Obligations shall not have
been paid in full, such amount shall be held by the Guarantor in trust for the
Administrative Agent, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the Administrative
Agent in the exact form received by the Guarantor (duly indorsed by the
Guarantor to the Administrative Agent, if required) to be applied against the
Obligations, whether matured or unmatured, in such order as set forth herein.
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ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1 EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligations. The Loan Parties shall default in any payment of principal of any
Loan or Note or Reimbursement Obligation when and as due (whether at maturity,
by reason of acceleration or otherwise).
(b) Other Payment Default. The Loan Parties shall default in the
payment when and as due (whether at maturity, by reason of acceleration or
otherwise) of interest on any Loan or Note or Reimbursement Obligation or the
payment of any other Obligation, and such default shall continue unremedied for
three (3) Business Days.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by the Loan Parties or any of their Subsidiaries under this
Agreement, any Loan Document or any amendment hereto or thereto, shall at any
time prove to have been incorrect or misleading in any material respect when
made or deemed made.
(d) Default in Performance of Certain Covenants. The Loan Parties
shall default in the performance or observance of any covenant or agreement
contained in Sections 7.5(e) or Articles IX or X of this Agreement.
(e) Default under Material Contracts or Loss of Material License.
The Loan Parties or any of their Subsidiaries shall (i) default in any payment
or payments (which such payment or payments are material either individually or
in the aggregate) when due of any Material Contract or Material Contracts, or in
the performance or observance, of any material obligation or condition of any
Material Contract, unless, but only as long as, the existence of any such
default is being contested by such Loan Party in good faith by appropriate
proceedings and adequate reserves in respect thereof have been established on
the books of such Loan Party to the extent required by GAAP or (ii) allow any
Communications License or PUC Authorization of any Loan Party to be revoked,
suspended, cancelled or otherwise terminated and such revocation, suspension,
cancellation or other termination could reasonably be expected to have a
Material Adverse Effect.
(f) Default in Performance of Other Covenants and Conditions. The
Loan Parties or any Subsidiary thereof shall default in the performance or
observance of any material term, covenant, condition or agreement contained in
this Agreement (other than as specifically provided for otherwise in this
Section 12.1) or any other Loan Document and such default shall continue for a
period of thirty (30) days after written notice thereof has been given to the
Borrowers by the Administrative Agent.
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(g) Hedging Agreement. Any termination payment shall be due by any
Loan Party under any Hedging Agreement and such amount is not paid within five
(5) Business Days of the due date thereof.
(h) Debt Cross-Default. The Loan Parties or any of their
Subsidiaries shall (i) default in the payment of any Debt (other than the Notes)
or Reimbursement Obligation the aggregate outstanding amount of which Debt is in
excess of $1,000,000 beyond the period of grace if any, provided in the
instrument or agreement under which such Debt was created, or (ii) default in
the observance or performance of any other agreement or condition relating to
any Debt (other than the Notes) or Reimbursement Obligation the aggregate
outstanding amount of which Debt is in excess of $1,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, in either case the effect of which default
or other event or condition is to cause, or to permit the holder or holders of
such Debt (or a trustee or agent on behalf of such holder or holders) to cause,
with the giving of notice if required, any such Debt to become due prior to its
stated maturity (any applicable grace period having expired); provided, that if
prior to the acceleration, but only prior to the acceleration, of the
Obligations by the Administrative Agent in accordance with the terms hereof, the
default referred to in clauses (i) and (ii) above, which is responsible for the
Event of Default under this paragraph (h), is cured to the satisfaction of the
Administrative Agent, then such Event of Default shall be deemed cured
hereunder.
(i) Change in Control. Any such time as (a) (i) prior to the
occurrence of a Public Market, a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act")) becomes the ultimate "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of capital stock of any class or kind ordinarily
having the power to vote for the election of directors, managers or other voting
members of the governing body of the Guarantor ("Voting Stock") representing a
greater percentage of the total voting power of the Voting Stock of the
Guarantor, on a fully diluted basis, than is held by the Existing Stockholders
on such date and (ii) after the occurrence of a Public Market, a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than thirty-five percent (35%) of the total voting power
of the Voting Stock of the Guarantor, on a fully diluted basis and such
ownership represents a greater percentage of the total voting power of the
voting stock of the Guarantor, than is held by the Existing Stockholders on such
date; or (b) individuals who on the Closing Date constitute the Board of
Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by the
Guarantor's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office (any such
event, a "Change in Control").
(j) Voluntary Bankruptcy Proceeding. Any Loan Party or any
Subsidiary thereof shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to
take advantage of any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of
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debts, (iii) consent to or fail to contest in a timely and appropriate manner
any petition filed against it in an involuntary case under such bankruptcy laws
or other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing any
of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against any Loan Party or any Subsidiary thereof in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for any Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any material provision of this
Agreement or of any other Loan Document shall for any reason cease to be valid
and binding on the Loan Parties or any of their Subsidiaries party thereto or
any such Person shall so state in writing, or this Agreement or any other Loan
Document shall for any reason cease to create a valid and perfected first
priority Lien on, or security interest in, any of the collateral purported to be
covered thereby, in each case other than in accordance with the express terms
hereof or thereof.
(m) Termination Event. The occurrence of any of the following
events: (i) any Loan Party or any ERISA Affiliate fails to make full payment
when due of all amounts over $500,000 which, under the provisions of any Pension
Plan or Section 412 of the Code, such Loan Party or any ERISA Affiliate is
required to pay as contributions thereto, (ii) an accumulated funding deficiency
in excess of $500,000 occurs or exists, whether or not waived, with respect to
any Pension Plan, (iii) a Termination Event or (iv) any Loan Party or any ERISA
Affiliate as employers under one or more Multiemployer Plan makes a complete or
partial withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$500,000.
(n) Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $5,000,000 in any
Fiscal Year shall be entered against any Loan Party or any of their respective
Subsidiaries by any court and such judgment or order shall continue without
discharge or stay for a period of thirty (30) days.
SECTION 12.2 REMEDIES. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Loan Parties:
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(a) Acceleration; Termination of Facilities. Declare the principal
of and interest on the Loans and the Notes and the Reimbursement Obligations at
the time outstanding, and all other amounts owed to the Lenders and to the
Administrative Agent under this Agreement or any of the other Loan Documents
(other than any Hedging Agreement) (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and all other
Obligations (other than obligations owing under any Hedging Agreement), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facility and
any right of the Borrowers to request borrowings or Letters of Credit
thereunder; provided, that upon the occurrence of an Event of Default specified
in Section 12.1(j) or (k), the Credit Facility shall be automatically terminated
and all Obligations (other than obligations owing under any Hedging Agreement)
shall automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrowers at such
time to deposit in a cash collateral account opened by the Administrative Agent
an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrowers.
(c) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrowers' Obligations.
SECTION 12.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
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ARTICLE XIII
THE ADMINISTRATIVE AGENT
SECTION 13.1 APPOINTMENT. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent of such Lender under
this Agreement and the other Loan Documents and each such Lender irrevocably
authorizes First Union as Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Administrative Agent.
SECTION 13.2 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by the Administrative Agent with
reasonable care.
SECTION 13.3 EXCULPATORY PROVISIONS. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Loan Parties or any of their
Subsidiaries or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or the other Loan Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the other Loan Documents or for any failure of the Loan Parties or
any of their Subsidiaries to perform their respective obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Loan Parties or any of their Subsidiaries.
SECTION 13.4 RELIANCE BY THE ADMINISTRATIVE AGENT. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
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genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Loan Parties), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the payee of any Note as the owner thereof for all purposes unless
such Note shall have been transferred in accordance with Section 14.10. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders (or, when expressly
required hereby or by the relevant other Loan Document, all the Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action except for its own gross
negligence or willful misconduct. The Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders (or, when
expressly required hereby, all the Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Notes.
SECTION 13.5 NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless it has received notice from a Lender or the Loan
Parties referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, it shall promptly give notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
SECTION 13.6 NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER
LENDERS. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Loan Parties or any of their
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and their Subsidiaries and made
its own decision to make its Loans and issue or participate in Letters of Credit
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property,
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financial and other condition and creditworthiness of the Loan Parties and their
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder or by the
other Loan Documents, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Loan Parties or any of their Subsidiaries which may come
into the possession of the Administrative Agent or any of its respective
officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates.
SECTION 13.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Loan Parties without limiting the obligation of the Loan Parties to do
so) ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes or any Reimbursement Obligations) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 13.7 shall survive the payment of the Notes and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 13.8 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Loan Parties as though the Administrative Agent were not an Administrative
Agent hereunder. With respect to any Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued by it or
participated in by it, the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not an Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
SECTION 13.9 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Loan Parties. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000. If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such appointment within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. Upon the acceptance of any
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appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 13.9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 NOTICES.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to
it at the following addresses, or any other address as to which all the other
parties are notified in writing.
<TABLE>
<S> <C>
If to the Loan Parties: KNOLOGY Holdings, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Mr. James K. McCormick
Telephone No.: (706) 645-3815
Telecopy No.: (706) 645-3921
and
Attention: Chad Wachter, Esq.
Telephone No.: (706) 634-2663
Telecopy No.: (706) 645-0148
</TABLE>
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<TABLE>
<S> <C>
With copies (which shall
not constitute notice) to: Hogan & Hartson, L.L.P.
Columbia Square
555 13th Street, N.W.
Washington, DC 20004-1109
Attention: Benton R. Hammond, Esq.
Telephone No.: (202) 637-5600
Telecopy No.: (202) 637-5910
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288
With copies to: Kennedy Covington Lobdell & Hickman, L.L.P.
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 228202-4006
Attention: David L. Batty, Esq.
Telephone No.: (704) 331-7400
Telecopy No.: (704) 331-7598
If to any Lender: To the Address set forth on Schedule 1 hereto
</TABLE>
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Loan Parties and Lenders, as the Administrative Agent's Office referred to
herein, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit issued.
SECTION 14.2 EXPENSES; INDEMNITY. The Borrowers will (a) pay all
out-of-pocket expenses of the Administrative Agent in connection with (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all out-of-pocket syndication and due diligence expenses and
reasonable fees and disbursements of counsel for the Administrative Agent and
(ii) the preparation, execution and delivery of any waiver, amendment or consent
by the Administrative Agent or the Lenders relating to this Agreement or any
other Loan Document, including without limitation reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred in connection with the enforcement of any rights and remedies of the
Administrative Agent and Lenders under the Credit Facility, including consulting
with appraisers, accountants, engineers, attorneys and other Persons concerning
the nature, scope or value of any right or remedy of the Administrative Agent or
any Lender hereunder or under any other Loan Document or any factual matters in
connection therewith, which expenses shall
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include without limitation the reasonable fees and disbursements of such
Persons, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent or any
Lender is a party thereto) and the prosecution and defense thereof, arising out
of or in any way connected with the Agreement, any other Loan Document or the
Loans, including without limitation reasonable attorney's and consultant's fees,
except to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 14.3 SET-OFF. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof, the Lenders and any assignee or participant of a Lender in accordance
with Section 14.10 are hereby authorized by the Borrowers at any time or from
time to time, without notice to the Borrowers or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, time or demand, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured) and any other indebtedness at any time held or owing by the
Lenders, or any such assignee or participant to or for the credit or the account
of the Borrowers against and on account of the Obligations irrespective of
whether or not (a) the Lenders shall have made any demand under this Agreement
or any of the other Loan Documents or (b) the Administrative Agent shall have
declared any or all of the Obligations to be due and payable as permitted by
Section 12.2 and although such Obligations shall be contingent or unmatured.
SECTION 14.4 GOVERNING LAW. This Agreement, the Notes and the
other Loan Documents, unless otherwise expressly set forth therein, shall be
governed by, construed and enforced in accordance with the laws of the State of
North Carolina, without reference to the conflicts or choice of law principles
thereof.
SECTION 14.5 CONSENT TO JURISDICTION. The Loan Parties hereby
irrevocably consent to the personal jurisdiction of the state and federal courts
located in Mecklenburg County, North Carolina, in any action, claim or other
proceeding arising out of any dispute in connection with this Agreement, the
Notes and the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations. The Loan Parties
hereby irrevocably consent to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative Agent
or any Lender in connection with this Agreement, the Notes or the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations, on behalf of itself or its property, in the
manner specified in Section 14.1. Nothing in this Section 14.5 shall affect the
right of the Administrative Agent or any Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against the
Loan Parties or their properties in the courts of any other jurisdictions.
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SECTION 14.6 BINDING ARBITRATION; WAIVER OF JURY TRIAL.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("Disputes"), between or among parties to the Notes or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims concerning any aspect of the
past, present or future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one-hundred and twenty
(120) days after such demand. These time limitations may not be extended unless
a party hereto shows cause for extension and then such extension shall not
exceed a total of sixty (60) days. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted. The parties hereto do not waive any applicable Federal or state
substantive law except as provided herein. Notwithstanding the foregoing, this
paragraph shall not apply to any Hedging Agreement that is a Loan Document.
(b) Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE ADMINISTRATIVE
AGENT, EACH LENDER AND THE LOAN PARTIES HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE
NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto and the other Loan
Documents preserve, without diminution, certain remedies that such Persons may
employ or exercise freely, either alone, in conjunction with or during a
Dispute. Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or prosecute the
following remedies: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted in the Loan
Documents or under applicable law or by judicial foreclosure and sale, (ii) all
rights of self help including peaceful occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining provisional
or ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv)
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when applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.
SECTION 14.7 REVERSAL OF PAYMENTS. To the extent the Borrowers
make a payment or payments to the Administrative Agent for the ratable benefit
of the Lenders or the Administrative Agent receives any payment or proceeds of
the collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 14.8 INJUNCTIVE RELIEF; PUNITIVE DAMAGES.
(a) The Loan Parties recognize that, in the event the Loan Parties
fail to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to the
Lenders. Therefore, the Loan Parties agree that the Lenders, at the Lenders'
option, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
(b) The Administrative Agent, Lenders and Loan Parties (on behalf
of themselves and their Subsidiaries) hereby agree that no such Person shall
have a remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
(c) The parties agree that they shall not have a remedy of
punitive or exemplary damages against any other party in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or which
may arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
SECTION 14.9 ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Loan Parties or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Administrative Agent to the
contrary agreed to by the Loan Parties, be performed in accordance with GAAP as
in effect on the Closing Date. In the event that changes in GAAP shall be
mandated by the Financial Accounting Standards Board, or any similar accounting
body of comparable standing, or shall be recommended by the Loan Parties'
certified public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and after the date
the Loan Parties and the Lenders shall have amended this Agreement to the extent
necessary to
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reflect any such changes in the financial covenants and other terms and
conditions of this Agreement.
SECTION 14.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Loan Parties, the Administrative Agent and the
Lenders, all future holders of the Notes, and their respective successors and
assigns, except that the Loan Parties shall not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of
the Administrative Agent and, so long as no Default or Event of Default has
occurred and is continuing, the Borrowers, which consents shall not be
unreasonably withheld, assign to one or more Eligible Assignees all or a portion
of its interests, rights and obligations under this Agreement (including,
without limitation, all or a portion of the Loans at the time owing to it and
the Extensions of Credit held by it); provided that:
(i) each such assignment shall be of a constant,
and not a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's
Commitment is to be assigned, the Commitment so assigned shall not be less than
$5,000,000;
(iii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance in the form of Exhibit F
attached hereto (an "Assignment and Acceptance"), together with any Note or
Notes subject to such assignment;
(iv) such assignment shall not, without the
consent of the Borrowers, require the Borrowers to file a registration statement
with the Securities and Exchange Commission or apply to or qualify the Loans or
the Notes under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the
Administrative Agent an assignment fee of $3,000 upon the execution by such
Lender of the Assignment and Acceptance; provided that no such fee shall be
payable upon any assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
85
<PAGE> 91
(c) Rights and Duties Upon Assignment. By executing and delivering
an Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the amount of the
Extensions of Credit with respect to each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Administrative Agent and the Lenders may
treat each person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Loan Parties or Lenders at any reasonable time and from time
to time upon reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of Exhibit F:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in
the Register;
(iii) give prompt notice thereof to the Lenders
and the Borrowers; and
(iv) promptly deliver a copy of such Assignment
and Acceptance to the Borrowers.
Within five (5) Business Days after receipt of notice, the Borrowers shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to the Borrowers.
(f) Participations. Each Lender may sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); provided that:
86
<PAGE> 92
(i) each such participation shall be in an
amount not less than $5,000,000;
(ii) such Lender's obligations under this
Agreement (including, without limitation, its Commitment) shall remain
unchanged;
(iii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the
Notes held by it for all purposes of this Agreement;
(v) the Loan Parties, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement;
(vi) such Lender shall not permit such
participant the right to approve any waivers, amendments or other modifications
to this Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate on any
Loan or Reimbursement Obligation, extend the term or increase the amount of the
Commitment, reduce the amount of any fees to which such participant is entitled,
extend any scheduled payment date for principal of any Loan or, except as
expressly contemplated hereby or thereby, release substantially all of the
Collateral; and
(vii) any such disposition shall not, without the
consent of the Loan Parties, require the Loan Parties to file a registration
statement with the Securities and Exchange Commission to apply to qualify the
Loans or the Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Administrative
Agent and the Lenders shall hold all non-public information with respect to the
Loan Parties obtained pursuant to the Loan Documents in accordance with their
customary procedures for handling confidential information; provided, that the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other information customarily found in such publications and
provided further, that the Administrative Agent and Lenders may disclose any
such information to the extent such disclosure is required by law or request by
any regulatory authority. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant to this
Section 14.10, disclose to the assignee, participant, proposed assignee or
proposed participant, any information relating to the Loan Parties furnished to
such Lender by or on behalf of the Loan Parties; provided, that prior to any
such disclosure, each such assignee, proposed assignee, participant or proposed
participant shall agree with the Loan Parties or such Lender to preserve the
confidentiality of any confidential information relating to the Loan Parties
received from such Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit
any Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
87
<PAGE> 93
SECTION 14.11 AMENDMENTS, WAIVERS AND CONSENTS. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents (other than any Hedging Agreement, the terms and
conditions of which, subject to the provisions of Section 10.1(j), may be
amended, modified or waived by the parties thereto) may be amended or waived by
the Lenders, and any consent given by the Lenders, if, but only if, such
amendment, waiver or consent is in writing signed by the Required Lenders (or by
the Administrative Agent with the consent of the Required Lenders) and delivered
to the Administrative Agent and, in the case of an amendment, signed by the Loan
Parties; provided, that no amendment, waiver or consent shall (a) increase the
amount or extend the time of the obligation of the Lenders to make Loans or
issue or participate in Letters of Credit (including without limitation pursuant
to Section 2.7), (b) extend the originally scheduled time or times of payment of
the principal of any Loan or Reimbursement Obligation or the time or times of
payment of interest on any Loan or Reimbursement Obligation, (c) reduce the rate
of interest or fees payable on any Loan or Reimbursement Obligation, (d) reduce
or waive the principal amount of any Loan or Reimbursement Obligation, (e)
permit any subordination of the principal or interest on any Loan or
Reimbursement Obligation, (f) permit any assignment (other than as specifically
permitted or contemplated in this Agreement) of any of the Borrowers' rights and
obligations hereunder, (g) release any material portion of the Collateral or
release any Security Document (other than as specifically permitted or
contemplated in this Agreement or the applicable Security Document) or (h) amend
or waive the provisions of Section 5.3, this Section 14.11 or the definition of
Required Lenders, without the prior written consent of each Lender. In addition,
no amendment, waiver or consent to the provisions of (a) Article XIII shall be
made without the written consent of the Administrative Agent and (b) Article III
without the written consent of the Issuing Lender. Further, upon receipt of any
revised business plan pursuant to Section 7.4(d), the Loan Parties, the
Administrative Agent and the Lenders agree to negotiate, in good faith,
amendments, if necessary, to the covenants set forth in Article IX to reflect
such revised business plan; provided that, nothing in this Section 14.11 shall
be construed to obligate the Administrative Agent or any Lender to agree to any
such amendment.
SECTION 14.12 PERFORMANCE OF DUTIES. The Loan Parties' obligations
under this Agreement and each of the Loan Documents shall be performed by the
Loan Parties at their sole cost and expense.
SECTION 14.13 ALL POWERS COUPLED WITH INTEREST. All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as any
of the Obligations remain unpaid or unsatisfied or the Credit Facility has not
been terminated.
SECTION 14.14 SURVIVAL OF INDEMNITIES. Notwithstanding any
termination of this Agreement, the indemnities to which the Administrative Agent
and the Lenders are entitled under the provisions of this Article XIV and any
other provision of this Agreement and the Loan Documents shall continue in full
force and effect and shall protect the Administrative Agent and the Lenders
against events arising after such termination as well as before.
88
<PAGE> 94
SECTION 14.15 TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 14.16 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 14.17 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 14.18 GUARANTOR AS AGENT FOR BORROWERS. Each Borrower
hereby irrevocably appoints and authorizes the Guarantor (a) to provide the
Agent with all notices with respect to Loans obtained for the benefit of any
Borrower and all other notices and instructions under this Agreement and (b) to
take such action on behalf of the Borrowers as the Guarantor deems appropriate
to obtain Loans and to exercise such other powers as are reasonably incidental
thereto to carry out the purposes of this Agreement.
SECTION 14.19 TERM OF AGREEMENT. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall have been indefeasibly and irrevocably paid and satisfied in
full. The Administrative Agent is hereby permitted to release all Liens on the
Collateral in favor of the Administrative Agent, for the ratable benefit of
itself and the Lenders, upon repayment of the outstanding principal of and all
accrued interest on the Loans, payment of all outstanding fees and expenses
hereunder and the termination of the Lenders' Commitments. No termination of
this Agreement shall affect the rights and obligations of the parties hereto
arising prior to such termination.
SECTION 14.20 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT
EFFECT OF COVENANTS. (a) In the event there is a conflict or inconsistency
between this Agreement and any other Loan Document, the terms of this Agreement
shall control; provided, that any provision of the Security Documents which
imposes additional burdens on the Borrowers or their respective Subsidiaries or
further restricts the rights of the Borrowers or their respective Subsidiaries
or gives the Administrative Agent or Lenders additional rights shall not be
deemed to be in conflict or inconsistent with this Agreement and shall be given
full force and effect.
(b) Each Borrower expressly acknowledges and agrees that each
covenant contained in Articles VIII, IX or X hereof shall be given independent
effect. Accordingly, such Borrower shall not engage in any transaction or other
act otherwise permitted under any covenant contained in Articles VIII, IX or X
if, before or after giving effect to such transaction or act, such Borrower
shall or would be in breach of any other covenant contained in Articles VIII, IX
or X.
89
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
[CORPORATE SEAL] KNOLOGY OF COLUMBUS, INC., as Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF MONTGOMERY, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF PANAMA CITY, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF AUGUSTA, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
<PAGE> 96
[CORPORATE SEAL] KNOLOGY OF CHARLESTON, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF SOUTH CAROLINA, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF ALABAMA, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF FLORIDA, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF HUNTSVILLE, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO and Treasurer
--------------------------------------
[Signature Pages Continue]
<PAGE> 97
[CORPORATE SEAL] KNOLOGY OF BATON ROUGE, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO and Treasurer
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF LOUISIANA, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO and Treasurer
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF TENNESSEE, INC., as
Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO and Treasurer
--------------------------------------
[CORPORATE SEAL] TTE, INC., as Borrower
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Signature Pages Continue]
<PAGE> 98
[CORPORATE SEAL] KNOLOGY OF BATON ROUGE, INC., as
Borrower
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF LOUISIANA, INC., as
Borrower
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[CORPORATE SEAL] KNOLOGY OF TENNESSEE, INC., as
Borrower
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[CORPORATE SEAL] TTE, INC., as Borrower
By: /s/
-----------------------------------------
Name:
---------------------------------------
Title: Asst. Secretary
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Signature Pages Continue]
<PAGE> 99
[CORPORATE SEAL] KNOLOGY HOLDINGS, INC., as
Guarantor
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO and Secretary
--------------------------------------
[Signature Pages Continue]
<PAGE> 100
The undersigned hereby executes this Agreement solely to acknowledge and agree
to be bound by the provisions of Articles VI, VII, VIII, IX, X, XIII and XIV but
in no way by becoming a signatory hereto shall the undersigned become obligated
for the repayment of the Loans, Obligations or the payment of any other sum
referred to herein or incur any liability as a Borrower or Guarantor hereunder
or have any Obligation to pledge any of its assets pursuant to the Loan
Documents. Notwithstanding the foregoing, the parties hereto agree that the
occurrence of any event with regard to KNOLOGY of Georgia, Inc. that would
constitute a Default or Event of Default if such event occurred with respect to
any other Loan Party shall constitute a Default or Event of Default, if
applicable.
[CORPORATE SEAL] KNOLOGY OF GEORGIA, INC.
By: /s/ James K. McCormick
-----------------------------------------
Name: James K. McCormick
---------------------------------------
Title: CFO, Treasurer and Secretary
--------------------------------------
[Signature Pages Continue]
<PAGE> 101
FIRST UNION NATIONAL BANK, as
Administrative Agent and Lender
By: /s/ C. Mark Hedrick
-----------------------------------------
Name: C. Mark Hedrick
---------------------------------------
Title: Vice President
--------------------------------------
<PAGE> 102
EXHIBIT A
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTE
<PAGE> 103
REVOLVING CREDIT NOTE
$____________ December ____, 1998
FOR VALUE RECEIVED, the undersigned Subsidiaries of KNOLOGY Holdings,
Inc., a Delaware corporation (collectively, the "Borrowers"), hereby promise to
pay to the order of ______________________ (the "Lender"), at the times, at the
place and in the manner provided in the Credit Agreement hereinafter referred
to below, the principal sum of _____________ Dollars ($_________), or, if less,
the aggregate unpaid principal amount of all Loans (as defined in the Credit
Agreement) made by the Lender to the Borrowers from time to time pursuant to
the Credit Agreement, together with interest at the rates as in effect from
time to time with respect to each portion of the principal amount hereof,
determined and payable as provided in Article III of the Credit Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Credit Agreement dated as of December 22, 1998 (as amended, restated or
otherwise modified, the "Credit Agreement") by and among the Borrowers, KNOLOGY
Holdings, Inc., as Guarantor, the lenders (including the Lender) party thereto
and First Union National Bank, as Administrative Agent. The Credit Agreement
contains, among other things, provisions for the time, place and manner of
payment of this Note, the determination of the interest rate borne by and fees
payable in respect of this Note, acceleration of the payment of this Note upon
the happening of certain stated events and the mandatory repayment of this Note
under certain circumstances.
The Borrowers agree to pay on demand all costs of collection, including
reasonable attorneys' fees, if any part of this Note, principal or interest, is
collected after maturity with the aid of an attorney.
The Borrowers hereby waive all requirements as to diligence, presentment,
demand for payment, notice of dishonor, protest and notice of protest.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NORTH CAROLINA WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF
LAW PRINCIPLES THEREOF.
The Debt evidenced by this Note is senior in right of payment to all
Subordinated Debt referred to in the Credit Agreement.
<PAGE> 104
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by a duly authorized officer as of the day and year first above
written.
KNOLOGY OF COLUMBUS, INC.
[CORPORATE SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
KNOLOGY OF MONTGOMERY, INC.
[CORPORATE SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
KNOLOGY OF PANAMA CITY, INC.
[CORPORATE SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
KNOLOGY OF AUGUSTA, INC.
[CORPORATE SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
KNOLOGY OF CHARLESTON, INC.
[CORPORATE SEAL]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
[Revolving Credit Note]
<PAGE> 105
KNOLOGY OF SOUTH CAROLINA, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
KNOLOGY OF ALABAMA, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
KNOLOGY OF FLORIDA, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
KNOLOGY OF HUNTSVILLE, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
KNOLOGY OF LOUISIANA, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
KNOLOGY OF BATON ROUGE, INC.
[CORPORATE SEAL]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
[Revolving Credit Note]
<PAGE> 106
[CORPORATE SEAL] KNOLOGY OF TENNESSEE, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
-------------------------------
TTE, INC.
[CORPORATE SEAL]
By:
--------------------------------------
Name:
---------------------------------
Title:
-------------------------------
By:
--------------------------------------
Name:
---------------------------------
Title:
-------------------------------
<PAGE> 107
EXHIBIT B
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF BORROWING
<PAGE> 108
NOTICE OF BORROWING
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Borrowing is delivered to you by KNOLOGY
Holdings, Inc., on behalf of the Borrowers referred to below, under Section 2.2
(a) of the Credit Agreement dated as of December 22, 1998 (as amended, restated
or otherwise modified, the "Credit Agreement), by and among KNOLOGY HOLDINGS,
INC., a Delaware corporation, as guarantor (the "Guarantor"), certain
Subsidiaries of the Guarantor, as borrowers and any Additional Borrowers who may
become party thereto (such Subsidiaries and Additional Borrowers being
collectively, the "Borrowers"), the Lenders who are or may become a party
thereto (the "Lenders"), and FIRST UNION NATIONAL BANK, as Administrative Agent
for the Lenders.
1 . The Guarantor, on behalf of the Borrowers, hereby requests that the
Lenders make a Loan to the Borrowers in the aggregate principal amount of
$___________ (the "Loan"). (Complete with an amount in accordance with Section
2.2(a) of the Credit Agreement.)
2. The Guarantor, on behalf of the Borrowers, hereby requests that the
Loan be made on the following Business Day:_______________. (Complete with a
Business Day in accordance with Section 2.2(a) of the Credit Agreement.)
3. The Guarantor, on behalf of the Borrowers, hereby requests that the
Loan bear interest at the following interest rate, plus the Applicable Margin,
as set forth below:
<TABLE>
<S> <C> <C> <C>
Principal Component Interest Rate Termination Date for
Of [Base Rate or Interest Period Interest Period (if
Loan LIBOR Rate (LIBOR Rate only) applicable)
- ------------------- ------------- ----------------- --------------------
</TABLE>
4. The principal amount of all Loans and L/C Obligations outstanding as
of the date hereof (including the requested Loan) does not exceed the maximum
amount permitted to be outstanding pursuant to the terms of the Credit
Agreement.
5. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.
6. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
<PAGE> 109
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing this _______ day of ______________, ____.
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 110
EXHIBIT C
to
Credit Agreement
dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF PREPAYMENT
<PAGE> 111
NOTICE OF PREPAYMENT
First Union National Bank,
as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you by KNOLOGY
Holdings, Inc., on behalf of the Borrowers referred to below, under Section
2.3(c) of the Credit Agreement dated as of December 22, 1998 (as amended,
restated or otherwise modified (the "Credit Agreement"), by and among KNOLOGY
HOLDINGS, INC., a Delaware corporation, as guarantor (the "Guarantor"), certain
Subsidiaries of the Guarantor, as borrowers and any Additional Borrowers who may
become party thereto (such Subsidiaries and Additional Borrowers being
collectively, the "Borrowers"), the Lenders who are or may become a party
thereto (the "Lenders"), and FIRST UNION NATIONAL BANK, as Administrative Agent
for the Lenders.
1. The Guarantor, on behalf of the Borrowers, hereby provides notice to
the Administrative Agent that the Borrowers shall repay the following [Base Rate
Loans] and/or [LIBOR Rate Loans]: ___________________ (Complete with an amount
in accordance with Section 2.3 of the Credit Agreement.)
2. The Borrowers shall repay the above referenced Loans on the
following Business Day:________________. (Complete with a Business Day in
accordance with Section 2.3 of the Credit Agreement.)
3. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Prepayment this _______ day of _________, 19__.
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 112
EXHIBIT D
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF CONVERSION/CONTINUATION
<PAGE> 113
NOTICE OF CONVERSION/CONTINUATION
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (this "Notice") is
delivered to you by KNOLOGY Holdings, Inc., on behalf of the Borrowers referred
to below, under Section 4.2 of the Credit Agreement dated as of December 22,
1998 (as amended, restated or otherwise modified, the "Credit Agreement"), by
and among KNOLOGY HOLDINGS, INC., a Delaware corporation, as guarantor (the
"Guarantor"), certain Subsidiaries of the Guarantor, as borrowers and any
Additional Borrowers who may become party thereto (such Subsidiaries and
Additional Borrowers being collectively, the "Borrowers"), the lenders who are
or may become a party thereto (the "Lenders"), and FIRST UNION NATIONAL BANK, as
Administrative Agent for the Lenders.
1. This Notice is submitted for the purpose of: (Check one and complete
applicable information in accordance with the Credit Agreement.)
[ ]Converting all or a portion of a Base Rate Loan into a LIBOR
Rate Loan
(a) The aggregate outstanding principal balance of such Loan is
$________________.
(b) The principal amount of such Loan to be converted is $_________.
(c) The requested effective date of the conversion of such Loan is
_________________.
(d) The requested Interest Period applicable to the converted Loan
is ______________.
[ ]Converting a portion of LIBOR Rate Loan into a Base Rate Loan
(a) The aggregate outstanding principal balance of such Loan is
$____________.
(b) The last day of the current Interest Period for such Loan is
____________.
(c) The principal amount of such Loan to be converted is $_________.
<PAGE> 114
(d) The requested effective date of the conversion of such Loan is
_____________.
[ ]Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate
Loan
(a) The aggregate outstanding principal balance of such Loan is
_____________.
(b) The last day of the current Interest Period for such Loan is
_____________.
(c) The principal amount of such Loan to be continued is
$_____________.
(d) The requested effective date of the continuation of such Loan is
_____________.
(e) The requested Interest Period applicable to the continued Loan
is __________.
2. The principal amount of all Loans and L/C Obligations outstanding as
of the date hereof does not exceed the maximum amount permitted to be
outstanding pursuant to the terms of the Credit Agreement.
3. All of the conditions applicable to the conversion or continuation
of the Loan requested herein as set forth in the Credit Agreement have been
satisfied or waived as of the date hereof and will remain satisfied or waived to
the date of such Loan.
4. Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Credit Agreement.
[Signature Page Follows]
<PAGE> 115
IN WITNESS WHEREOF, the undersigned has executed this Notice this ____
day of ________, 19__.
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:_____________________________
Name:________________________
Title:_______________________
<PAGE> 116
EXHIBIT E
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
<PAGE> 117
OFFICER'S COMPLIANCE CERTIFICATE
KNOLOGY HOLDINGS, INC., a Delaware corporation, on behalf of the
Borrowers referred to below, hereby certifies to First Union National Bank, as
Administrative Agent ("First Union"), and the Lenders, each as defined in the
Credit Agreement, as follows:
1. This Certificate is delivered to you pursuant to Section 5.2 of
the Credit Agreement dated as of December 22, 1998 (as amended, restated or
otherwise modified, the "Credit Agreement"), by and among KNOLOGY Holdings,
Inc., as guarantor (the "Guarantor"), certain Subsidiaries of the Guarantor, as
borrowers and any Additional Borrowers who may become party thereto (such
Subsidiaries and Additional Borrowers being collectively, the "Borrowers"), the
lenders party thereto and First Union. Capitalized terms used herein and not
defined herein shall have the meanings assigned thereto in the Credit Agreement.
2. I have reviewed the financial statements of the Loan Parties dated
as of ____________ and for the ____________ period[s) then ended and such
statements fairly present in all material respects the financial condition of
the Loan Parties as of the dates indicated and the results of their operations
and cash flows for the period[s] indicated.
3. I have reviewed the terms of the Credit Agreement, the Notes and
the related Loan Documents and have made, or caused to be made under my
supervision, a review in reasonable detail of the transactions and the condition
of the Loan Parties during the accounting period covered by the financial
statements referred to in Paragraph 2 above. Such review has not disclosed the
existence during or at the end of such accounting period of any condition or
event that constitutes a Default or an Event of Default, nor do I have any
knowledge of the existence of any such condition or event as at the date of this
Certificate [except, [if such condition or event existed or exists, describe the
nature and period of existence thereof and what action the Loan Parties have
taken, are taking and propose to take with respect thereto]].
4. The Applicable Margin and calculations determining such figure are
set forth on the attached Schedule I and the Loan Parties are in compliance with
the financial covenants contained in Article IX of the Credit Agreement as shown
on such Schedule 1.
<PAGE> 118
WITNESS the following signature as of the _____day of ______,___.
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
<PAGE> 119
Schedule 1
to
Officer's Compliance Certificate
<PAGE> 120
EXHIBIT F
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 121
ASSIGNMENT AND ACCEPTANCE
Dated _______
Reference is made to the Credit Agreement dated as of December 22, 1998
(as amended, restated or otherwise modified, the "Credit Agreement"), by and
among KNOLOGY HOLDINGS, INC., a Delaware corporation, as guarantor (the
"Guarantor"), certain Subsidiaries of the Guarantor, as borrowers and any
Additional Borrowers who may become party thereto (such Subsidiaries and
Additional Borrowers being collectively, the "BORROWERS"), the lenders who are
or may become a party thereto, and FIRST UNION NATIONAL BANK, as Administrative
Agent for the Lenders. Capitalized terms used herein which are not defined
herein shall have the meanings assigned thereto in the Credit Agreement.
______________________________________________________(the "Assignor")
and ______________________________________(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, as of the Effective
Date (as defined below), a ____% interest in and to all of the Assignor's
interest, rights and obligations with respect to its Commitment and Loans
(including such percentage of the outstanding L/C Obligations) under the Credit
Agreement and the other Loan Documents and the Assignor thereby retains ____% of
its interest therein. This Assignment and Acceptance is entered pursuant to, and
authorized by, Section 14.10(b) of the Credit Agreement.
2. The Assignor (i) represents that, as of the date hereof, its
Commitment Percentage (without giving effect to assignments thereof which have
not yet become effective) under the Credit Agreement is ____%, and the
outstanding balance of its Loans (including its Commitment Percentage of
outstanding L/C Obligations) (unreduced by any assignments thereof which have
not yet become effective) under the Credit Agreement is $_____; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto, other
than that the Assignor is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Loan Parties or the performance
or observance by the Loan Parties of any of their obligations under the Credit
Agreement or any other Loan Document; and (iv) attaches the Revolving Credit
Note delivered to it under the Credit Agreement and requests that the Borrowers
exchange such Note for new Notes payable to each of the Assignor and the
Assignee as follows:
1
<PAGE> 122
<TABLE>
<CAPTION>
Revolving Credit Note
Payable to the Order of: Principal Amount of Note:
----------------------- -------------------------
<S> <C>
$
---------------------- -------------------------
$
---------------------- -------------------------
</TABLE>
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 7.1 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it will, independently and without reliance upon the Assignor
or any other Lender or the Administrative Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement; (iv)
confirms that it is an Eligible Assignee; (v) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement and the other Loan Documents as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the Credit
Agreement and the other Loan Documents are required to be performed by it as a
Lender; and (vii) agrees to hold all confidential information in a manner
consistent with the provision of Section 14.10(g) of the Credit Agreement.
4. The effective date for this Assignment and Acceptance shall be as
set forth in Section 1 of Schedule I hereto (the "Effective Date"). Following
the execution of this Assignment and Acceptance, it will be delivered to the
Administrative Agent to the extent required by the Credit Agreement, for consent
by the Administrative Agent and the Borrowers, acceptance and recording in the
Register.
5. Upon such consents, acceptance and recording, from and after the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and
the other Loan Documents to which Lenders are parties and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such agreement, and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement and the other Loan
Documents; provided, that to the extent that the Assignor retains any portion of
its Commitment, its rights and obligations under the Credit Agreements and the
other Loan Documents with respect to such retained portion of its Commitment
shall continue to be of full force and effect.
6. Upon such consents, acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in respect of
the interest assigned hereby (including payments of principal, interest, fees
and other amounts) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
2
<PAGE> 123
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT
UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
ASSIGNOR:
________________________________
By:_____________________________
Title:__________________________
ASSIGNEE:
________________________________
By:_____________________________
Title:__________________________
<PAGE> 124
Acknowledged and Consented to:
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
Consented to and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
-------------------------------
Title:
-------------------------
<PAGE> 125
Schedule I
to
Assignment and Acceptance
<TABLE>
<S> <C> <C>
1. Effective Date ____________,___
2. Assignor's Interest
Prior to Assignment
(a) Commitment Percentage ______%
(b) Outstanding balance of Loans $____________
(c) Outstanding balance of
Assignor's Commitment Percentage of the L/C Obligations $____________
3. Assigned Interest (from Section 1 of the Assignment
and Acceptance) of Loans ______%
4. Assignee's Extensions of Credit
After Effective Date
(a) Total Outstanding balance of
Assignee's Loans
(line 2(b) times line 3) $____________
(b) Total Outstanding balance of
Assignee's Commitment Percentage
of the L/C Obligations
(line 2(c) times line 3) $____________
5. Retained Interest of Assignor after
Effective Date
(a) Retained Interest (from Section 1 of the
Assignment and Acceptance) of
Commitment Percentage ______%
(b) Outstanding balance of Assignor's Loans
(line 2(b) times line 5(a)) $____________
(c) Outstanding balance of Assignor's
Commitment Percentage of L/C Obligations
(line 2(c) times line 5(a)) $____________
</TABLE>
<PAGE> 126
6. Payment Instructions
(a) If payable to Assignor,
to the account of Assignor to:
-------------------------------------
-------------------------------------
ABA No.:
------------------------------
Account Name:
---------------------------
Acct. No.
----------------------------
Attn:
--------------------------------
Ref:
---------------------------------
(b) If payable to Assignee, to the account
of Assignee to:
-------------------------------------
ABA No.:
------------------------------
Account Name:
---------------------------
Account. No.:
---------------------------
Ref:
---------------------------------
<PAGE> 127
EXHIBIT G
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF NOTICE OF ACCOUNT DESIGNATION
<PAGE> 128
NOTICE OF ACCOUNT DESIGNATION
Dated ______
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you by KNOLOGY
Holdings, Inc., on behalf of the Borrowers referred to below, under Section
2.2(b) of the Credit Agreement dated as of December 22, 1998 (as amended,
restated or otherwise modified, the "Credit Agreement") by and among KNOLOGY
HOLDINGS, INC., a Delaware corporation, as guarantor (the "Guarantor"), certain
Subsidiaries of the Guarantor, as borrowers and any Additional Borrowers who may
become party thereto (such Subsidiaries and Additional Borrowers being
collectively, the "Borrowers"), the Lenders who are or may become a party
thereto, and FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders.
The Administrative Agent is hereby authorized to disburse all Loan
proceeds into the following account(s):
Bank:
-------------------------------------
ABA Routing Number:
-----------------------
Account number:
---------------------------
2. This authorization shall remain in effect until revoked or until a
subsequent Notice of Account Designation is provided to the Administrative
Agent.
3. Capitalized terms used herein and not defined herein shall have
the meanings assigned thereto in the Credit Agreement.
1
<PAGE> 129
IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this ____ day of _________,____.
KNOLOGY HOLDINGS, INC., on behalf
of the Borrowers
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE> 130
EXHIBIT H
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF COLLATERAL ASSIGNMENT
<PAGE> 131
COLLATERAL ASSIGNMENT
This COLLATERAL ASSIGNMENT (as amended, restated, or otherwise
modified, this "Assignment"), dated as of_________ __, 199_ by and among
[____________], a corporation organized under the laws of [____________] (the
"Assignor"), and FIRST UNION NATIONAL BANK, a national banking association, as
Administrative Agent, for the benefit of the Administrative Agent and the
Lenders under the Credit Agreement (as hereinafter defined).
STATEMENT OF PURPOSE
Pursuant to the Credit Agreement of even date herewith (as amended,
restated or otherwise modified, the "Credit Agreement"), by and among KNOLOGY
HOLDINGS, INC., a Delaware corporation, as guarantor (the "Guarantor"), certain
Subsidiaries of the Guarantor, as borrowers and any Additional Borrowers who may
become party thereto (such Subsidiaries and Additional Borrowers being
collectively, the "Borrowers"), the Lenders who are or may become a party
thereto, and FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders,
the Lenders will provide certain credit facilities to the Borrowers as more
specifically described in the Credit Agreement.
Assignor is the occupant under one or more leases, easements or other
agreements for the use of real property, which leases, easements or agreements
and which real property are more particularly described on the attached Exhibit
I (which leases, easements and/or agreements, together with any and all
renewals, extensions, amendments, restatements and supplements thereto, are
collectively referred to in this Assignment as the "Agreements"). The owners of
the real estate under the Agreements (collectively referred to herein as the
"Owner") are as identified on Exhibit I.
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested that
the Assignor execute this Assignment, and the Assignor has agreed to do so
pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into and make available Loans
pursuant to the Credit Agreement, the Assignor hereby agrees with the
Administrative Agent for the ratable benefit of the Administrative Agent and
Lenders as follows:
SECTION 1. Defined Terms. Capitalized terms used and not otherwise
defined in this Assignment, including in the preambles and recitals hereof,
shall have the meaning assigned thereto in the Credit Agreement. In the event of
a conflict between capitalized terms defined herein and in the Credit Agreement,
the Credit Agreement shall control.
SECTION 2. Assignment of Agreements. As collateral security for the
payment and performance of the Obligations, Assignor grants, assigns, transfers
and sets over to the Administrative Agent, ratably for the benefit of itself and
the Lenders, a security interest in (a) all of Assignor's right, title and
interest, powers, privileges and other benefits under the Agreements, including,
without limitation, the right of use of, and where applicable, to take
possession of and use
<PAGE> 132
any and all of, the premises covered by the Agreements and related facilities
(the "Facilities") made available for use to Assignor, and the right to make all
waivers and agreements, to give all notices, consents and releases, to take all
action upon the happening of any default giving rise to a right in favor of
Assignor under the Agreements, and to do any and all other things whatsoever
which Assignor is or may become entitled to do under the Agreements, and (b)
Assignor's renewal and extension options, if any, under the Agreements or any
other agreement to extend the term of the Agreements.
SECTION 3. No Transfer of Agreements. This Assignment is executed as
partial security for Assignor's obligations and liabilities under the Security
Documents and, therefore, the execution and delivery of this Assignment shall
not subject the Administrative Agent or any Lender to, or transfer or pass to
the Administrative Agent or any Lender, or in any way affect or modify, the
liability of the Assignor under the Agreements, it being understood and agreed
that, notwithstanding this Assignment or any subsequent assignment, and subject
to the provisions of Section 2 of this Assignment, all of the obligations of the
Assignor to each and every other party under the Agreements, including without
limitation the Owner, shall be and remain enforceable by such other party, its
successors and assigns, against, but only against, the Assignor and not the
Administrative Agent or the Lenders or any of their successors and assigns.
SECTION 4. Representations and Warranties. The Assignor represents and
warrants as follows:
(a) The Assignor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
assign the Agreements pursuant to, this Assignment and has taken all necessary
corporate action to authorize its execution, delivery and performance of, and
assignment of the Agreements pursuant to, this Assignment.
(b) This Assignment constitutes a legal, valid and binding
obligation of the Assignor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) Except as set forth in Sections 8.12(c) and 8.12(d) of the
Credit Agreement, the execution, delivery and performance of this Assignment
will not violate any provision of any material Applicable Law or material
contractual obligation of the Assignor and will not result in the creation or
imposition of any Lien on any of the material properties or revenues of the
Assignor pursuant to any Applicable Law or contractual obligation of the
Assignor, except as contemplated hereby and except for such Liens which could
not be reasonably expected to have a Material Adverse Effect.
(d) Except as set forth in Sections 8.12(c) and 8.12(d) of the
Credit Agreement and as provided for in Section 13 hereof, no consent or
authorization of, filing with any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any equity owner,
partner, member or creditor of the Assignor) against the Assignor, is required
in connection with the execution, delivery, performance, validity or
enforceability of this Assignment, except filings with the Uniform Commercial
Code or any applicable real estate filings.
2
<PAGE> 133
(e) Except as set forth on Schedule 6.1(u) of the Credit
Agreement, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Assignor after due inquiry, threatened by or against the Assignor or against any
of its properties or revenues with respect to this Assignment or any of the
transactions contemplated hereby.
(f) The Assignor has good and marketable title to the Agreements,
free and clear of any Liens other than Permitted Liens (as defined in the
Security Agreement).
(g) No financing statement, mortgage, security agreement or
similar or equivalent document or instrument covering all or any part of the
Agreements is on file or of record in any jurisdiction, other than those
respecting Permitted Liens.
(h) All of the information set forth in the Perfection Certificate
(as defined in the Security Agreement) is true and correct as of the date
hereof.
(i) The UCC-1 financing statements naming the Assignor as Debtor
are in appropriate form and when filed in the offices specified in the
Perfection Certificate, the Administrative Agent, on behalf of itself and the
Lenders, will have a valid and perfected security interest in the Agreements,
prior to all other Liens and rights of others therein except for any Permitted
Liens (to the extent that a security interest therein may be created pursuant to
the UCC and perfected by filing pursuant to the UCC) and all filings and other
actions necessary or desirable to so perfect and protect such Assignment,
including any applicable real estate filings, have been duly taken.
SECTION 5. Further Assurances; Covenants. To protect the
security afforded by this Assignment, the Assignor agrees as follows:
(a) Assignor will, perform and comply with all of its material
obligations under the Agreements.
(b) Without the written consent of the Administrative Agent on
behalf of the Lenders (such consent not to be unreasonably withheld), the
Assignor will not amend, modify, or otherwise change any material portion of the
Agreements in a manner which could reasonably be expected to cause a Material
Adverse Effect or terminate the Agreements. Any amendment, modification, other
change or termination made in violation of the provisions of this Section 5(b)
shall be void.
(c) At Assignor's sole cost and expense, Assignor shall appear in
and defend any action or proceedings arising under, growing out of or in any
manner connected with the obligations of Assignor under the Agreements unless
the failure to so appear and defend could not reasonably be expected to cause a
Material Adverse Effect.
(d) Should Assignor fail to perform or discharge its obligations
or duties under the Agreements as required under this Assignment, then the
Administrative Agent may, but shall have no obligation to (and shall not thereby
release Assignor from any obligation hereunder), perform or discharge any such
obligation or duty to such extent as the Administrative Agent may deem
3
<PAGE> 134
reasonably necessary or advisable to protect the security provided hereby,
including appearing in and defending any action or proceeding purporting to
affect the security hereof and the rights or powers of Administrative Agent, on
behalf of itself and the Lenders hereunder. In exercising any such powers, the
Administrative Agent may pay necessary or advisable costs, and reasonable
attorneys fees (including attorneys' fees, paralegals' fees and expenses) and
all such expenses paid or incurred by Administrative Agent shall be additional
Obligations of the Assignor payable upon demand, and shall bear interest at the
default rate of interest set forth in the Credit Agreement.
(e) Upon the Administrative Agent's exercise of its rights
hereunder or any other succession of the Administrative Agent, on behalf of the
Lenders, to the role of "occupant" under the Agreements, the Administrative
Agent, on behalf of the Lenders, shall have the right to assign its rights and
interest in the Agreements.
(f) Assignor will, from time to time, do and perform any other act
or acts and will execute, acknowledge, deliver and file, register, record and
deliver (and will refile, reregister, rerecord and deliver whenever required)
any and all further instruments, including any extensions and renewals thereof,
required by law or reasonably requested by the Administrative Agent in order to
confirm, or further assure, the interests of Administrative Agent, on behalf of
the Lenders hereunder. In addition, upon the written request of the
Administrative Agent, Assignor shall use its best efforts to obtain the written
consent to this Assignment of the Owner and any other lender, mortgagee, or any
other party having an interest in the premises in form and substance reasonably
satisfactory to the Administrative Agent as the Administrative Agent may from
time to time require.
(g) The Assignor agrees to pay, and to indemnify and save the
Administrative Agent and the Lenders harmless from, any and all liabilities,
costs and expenses (including, without limitation, reasonable legal fees and
expenses) (i) with respect to, or resulting from, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to the
Agreements, (ii) with respect to, or resulting from, complying with any
Applicable Law applicable to the Agreements or (iii) in connection with any of
the transactions contemplated by this Assignment; provided, that said
indemnification shall not apply to the extent any such liabilities, costs and
expenses result from the gross negligence or willful misconduct of the
Administrative Agent or any Lender. The obligations of the Assignor under this
Section 5(g) shall survive the termination of the other provisions of this
Assignment.
SECTION 6. Reporting and Recordkeeping. The Assignor covenants and
agrees with the Administrative Agent and the Lenders that from and after the
date of this Assignment and until the Commitments have terminated and all
Obligations have been fully satisfied, the Assignor will keep and maintain at
its own cost and expense complete and accurate records of all transactions and
events involving or relating to the Agreements, all in a manner consistent with
Assignor's past practice.
SECTION 7. General Authority.
(a) The Assignor hereby irrevocably appoints the Administrative
Agent its true and lawful attorney, with full power of substitution, in the name
of the Assignor, the Administrative Agent, the Lenders or otherwise, for the
sole use and benefit of the Administrative Agent and the
4
<PAGE> 135
Lenders, but at the Assignor's expense, at any time and from time to time all
authority to ask, require, demand, receive and give acquittance for each and
every payment under or arising out of the Agreements to which Assignor is or may
become entitled, to enforce compliance by each or any other party with each or
any term or provision of the Agreements, to endorse each and every check or
other instrument or order in connection therewith, or any one or more of them,
and to file any claim or claims, take any action or actions or institute any
proceedings which the Administrative Agent may deem to be reasonably necessary
or advisable; provided that the Administrative Agent shall not take any of the
actions described above in this Section 7 unless an Event of Default shall have
occurred and be continuing.
Notwithstanding the foregoing provisions of this Section 7, no Person
shall be entitled to take any action with respect to any part or all of the
Agreements which would constitute a transfer of control in or an assignment by
the Assignor of its right, title or interest in and to any CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval, (each
as defined in the Security Agreement) in violation of the then-applicable rules,
regulations and written policies of the FCC, any applicable PUC (as defined in
Section 13 below), or any other Governmental Authority, until any required
consents, approvals or authorizations of such Person are obtained in accordance
with provisions of Section 13 hereof.
(b) Ratification. The Assignor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be irrevocable.
SECTION 8. Remedies Upon Event of Default. Upon the occurrence and
during the continuance of any Event of Default or any failure of Assignor to
perform or comply with all of its material obligations, covenants, agreements or
duties hereunder or under any of the Security Documents or the Agreements (which
shall continue beyond any applicable cure period permitted under the Credit
Agreement), at the option of Administrative Agent and the Lenders, in addition
to such other rights and remedies as may be afforded to the Administrative Agent
and the Lenders under the Security Documents and by law or in equity, Assignor
agrees that Administrative Agent and the Lenders shall have the rights, powers,
privileges, authorizations or benefits assigned and transferred to
Administrative Agent on behalf of itself and the Lenders pursuant to this
Assignment (all of which rights shall be subject to the terms and conditions of
the Agreements), including, without limitation, the right to take possession of
any portion of the Facilities to which Assignor has possessory rights itself or
by or through any agents or assigns, in which event Assignor agrees to
peacefully surrender the Facilities to the Administrative Agent, on behalf of
the Administrative Agent and the Lenders or its designees, together with all
improvements, appurtenances, machinery, equipment, furniture, furnishings,
fixtures and other property of Assignor then situated thereon or attached
thereto. Thereafter, any reasonable expenses including, without limitation,
rent, incurred by Administrative Agent in connection with its entry upon and/or
the taking of possession of this portion of the Facilities and appurtenances
thereto and improvements thereon shall be deemed to be additional obligations of
Assignor pursuant to the Security Documents, payable on demand, and shall bear
interest at the default rate of interest set forth in the Credit Agreement.
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SECTION 9. Termination. Upon the full discharge and satisfaction of all
of the Obligations, this Assignment and all rights herein assigned to
Administrative Agent and the Lenders shall terminate.
SECTION 10. Limitation on Duties of the Administrative Agent Regarding
Collateral. Beyond reasonable care in the custody thereof, the Administrative
Agent shall have no duty as to any Collateral (as defined in the Security
Agreement) in its possession or control or in the possession or control of any
agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Administrative
Agent shall be deemed to have exercised reasonable care in the custody of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and the
Administrative Agent shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Administrative Agent in good
faith.
SECTION 11. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Agreements shall be applied by the
Administrative Agent in accordance with the terms of Section 4.5 of the Credit
Agreement. The Administrative Agent may make distribution hereunder in cash or
in kind or, on a ratable basis, in any combination thereof.
SECTION 12. Concerning the Administrative Agent. The provisions of
Article XIII of the Credit Agreement shall inure to the benefit of the
Administrative Agent in respect of this Assignment and shall be binding upon the
Assignor and the Lenders. In furtherance and not in derogation of the rights,
privileges and immunities of the Administrative Agent therein set forth:
(a) The Administrative Agent is authorized to take all
such action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or,
when expressly required by this Assignment or the Credit Agreement, all
the Lenders) or, in the absence of such instructions, in accordance
with its discretion.
(b) The Administrative Agent shall not be responsible for
the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the security
interests therein purported to be granted by this Assignment, whether
impaired by operation of law or by reason of any action or omission to
act on its part (other than any such action or inaction constituting
gross negligence or willful misconduct). The Administrative Agent shall
have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Assignment by the Assignor.
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SECTION 13. Regulatory Approval.
(a) Notwithstanding anything herein to the contrary, this
Assignment, the other Loan Documents, and the transactions contemplated hereby
and thereby, prior to a foreclosure of the Liens granted under this Assignment
and the other Loan Documents, do not and will not (i) constitute, create or have
the effect of constituting or creating, directly or indirectly, (A) actual or
practical ownership of Assignor or any Subsidiary of Assignor by the
Administrative Agent or the Lenders, or (B) control by the Administrative Agent
or Lenders over the management or any other aspect of the operation of Assignor
or any Subsidiary of Assignor which ownership and control remains exclusively
and at all times in Assignor or such Subsidiary of Assignor, or (ii) constitute
(A) the transfer, assignment or disposition in any manner of any CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval issued
to Assignor or any Subsidiary of Assignor or (B) the transfer of control of
Assignor or any Subsidiary of Assignor within the meaning of the
Telecommunications Act of 1996, as amended, or any other Applicable Law.
(b) Notwithstanding any other provision of this
Assignment, any foreclosure on, sale, transfer or other disposition of, or the
exercise of any right to vote or consent with respect to, any of the Agreements
or any of the other collateral referenced in any of the other Loan Documents,
or any other action taken or proposed to be taken by the Administrative Agent
hereunder or under any of the other Loan Documents which would affect the
operational, voting or other control of any CATV Franchise, Communications
License, PUC Authorization or other Governmental Approval of Assignor or any
Subsidiary of Assignor shall be in accordance with Applicable Law.
(c) The Assignor will, at its expense, promptly execute
and deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements, and all other documents and
papers the Administrative Agent may reasonably request and as may be required by
law in connection with the obtaining of any consent, approval, registration,
qualification, or authorization of the FCC, any state, provincial or other local
regulatory agency or body that exercises jurisdiction over the rates or services
or the ownership, construction or operation of any telecommunications systems or
over Persons who own, construct or operate telecommunications systems, by reason
of the nature or type of business subject to regulation and not pursuant to laws
and regulations of general applicability (a "PUC") or of any other Person deemed
necessary or appropriate for the effective exercise of any rights under this
Assignment or the Security Documents. Without limiting the generality of the
foregoing, if an Event of Default shall have occurred and be continuing, the
Assignor shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or to such
one or more third parties as the Administrative Agent may designate, or to a
combination of the foregoing, each Communications License, CATV Franchise, PUC
Authorization or other Governmental Approval. To enforce the provisions of this
Section 13, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent is empowered to request the appointment of a
receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the FCC, any applicable PUC or other Governmental
Authority an involuntary transfer of control of each such Communications License
or other Governmental Approval for the purpose of seeking a bona fide purchaser
to whom control will ultimately be transferred. The Assignor hereby agrees to
authorize such an involuntary transfer of control upon the request of the
receiver so appointed and, if the Assignor shall refuse to authorize the
transfer, its
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approval may be required by the court. Upon the occurrence and continuance of an
Event of Default, the Assignor shall further use its best efforts to assist in
obtaining approval of the FCC, any applicable PUC or other Governmental
Authority, if required, for any action or transactions contemplated by this
Assignment or the Security Documents including, without limitation, the
preparation, execution and filing with the FCC, any applicable PUC or other
Governmental Authority of the assignor's or transferor's portion of any
application or applications for consent to the assignment of any Communications
License, CATV Franchise, PUC Authorization or other Governmental Approval or
transfer of control necessary or appropriate under the rules and regulations of
the FCC, any applicable PUC or other Governmental Authority for the approval of
the transfer or assignment of any portion of the assets of the Assignor,
together with any Communications License, CATV Franchise, PUC Authorization or
other Governmental Approval. Because the Assignor agrees that the Administrative
Agent's remedy at law for failure of the Assignor to comply with the provisions
of this Section 13 would be inadequate and that such failure would not be
adequately compensable in damages, the Assignor agrees that the covenants
contained in this Section 13 may be specifically enforced, and the Assignor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
SECTION 14. Notices. All notices and communications hereunder shall be
given to the addresses and otherwise made in accordance with Section 14.1 of the
Credit Agreement.
SECTION 15. Rights and Remedies Cumulative, Non-Waiver, etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Assignment is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Assignment or any of the other Loan Documents or to
constitute a waiver of any Event of Default. This Assignment is a Loan Document
executed pursuant to the Credit Agreement.
SECTION 16. Successors and Assigns. This Assignment is for the benefit
of the Administrative Agent and the Lenders and their permitted successors and
assigns. This Assignment shall be binding on the Assignor and its successors and
assigns; provided that the Assignor may not assign any of its rights or
obligations hereunder without the prior written consent of the Administrative
Agent and the Lenders.
SECTION 17. Amendments, Waivers and Consents. No term, covenant,
agreement or condition of this Assignment may be amended or waived, nor may any
consent be given, except in the manner set forth in Section 14.11 of the Credit
Agreement.
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SECTION 18. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Agreements are irrevocable and
powers coupled with an interest.
SECTION 19. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF, EXCEPT AS AN ASSIGNMENT MAY BE GOVERNED BY LOCAL LAW.
SECTION 20. Consent to Jurisdiction. The Assignor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Assignment, any rights or
obligations hereunder, or the performance of such rights and obligations. The
Assignor hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Assignment, any
rights or obligations hereunder, or the performance of such rights and
obligations, on behalf of itself or its property, in the manner provided in
Section 14.1 of the Credit Agreement. Nothing in this Section 20 shall affect
the right of the Administrative Agent or any Lender to serve legal process in
any other manner permitted by Applicable Law or affect the right of the
Administrative Agent or any Lender to bring any action or proceeding against the
Assignor or its properties in the courts of any other jurisdictions.
SECTION 21. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party,
whether made before or after institution of any judicial proceeding,
any dispute, claim or controversy arising out of, connected with or
relating to the Notes or any other Loan Documents ("Disputes"), between
or among parties to the Notes or any other Loan Documents shall be
resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party
to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class
actions, claims arising from supplements to this Assignment executed in
the future, or claims concerning any aspect of the past, present or
future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association and Title 9 of the U.S.
Code. All arbitration hearings shall be conducted in Charlotte, North
Carolina. The expedited procedures set forth in Rule 51, et seq. of
the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety
(90) days after such demand thereof and shall be concluded within
one-hundred and twenty (120) days after such demand. These time
limitations may not be extended unless a party hereto shows cause for
extension and then such extension shall not exceed a total of sixty
(60) days. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for
expedited procedure shall be a retired judge
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from the highest court of general jurisdiction, state or federal, of
the state where the hearing will be conducted. Notwithstanding the
foregoing, this Section shall not apply to any Hedging Agreement that
is a Loan Document.
(b) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW,
THE ADMINISTRATIVE AGENT, EACH LENDER, AND THE ASSIGNOR, BY THEIR
ACCEPTANCE OF THIS ASSIGNMENT OR THE BENEFITS HEREOF, HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE
IN CONNECTION WITH THIS ASSIGNMENT, ANY RIGHTS OR OBLIGATIONS
HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto preserve,
without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute.
Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against
any real or personal property or other security by exercising a power
of sale granted in this Assignment or under applicable law or by
judicial foreclosure and sale, (ii) all rights of self help including
peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding, and (iv) when applicable, a judgment
by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
SECTION 22. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (b) the invalidity or unenforceability of any
provisions hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 23. Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Assignment or any provisions hereof.
SECTION 24. Counterparts. This Assignment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed under seal by their duly authorized officers, all as of the day and
year first written above.
[ASSIGNOR]
[SEAL]
By:
----------------------------
ATTEST: Name:
--------------------------
Title:
- ------------------------ -------------------------
Secretary
- ---------------
STATE OF ___________, COUNTY OF ________________
This ____ day of _____________________ 199_, personally came before me
[__________________], who being by me duly sworn, says that he is the [_________
_______] of [_____________], a [_____________] [INSERT CORPORATION] and that the
seal affixed to the foregoing instrument in writing is the seal of the
[CORPORATION], and that the writing was signed and sealed by him in behalf of
the [CORPORATION], by its authority duly given. And the said [_________________]
acknowledged the writing to be the act and deed of the [CORPORATION].
Witness my hand and notary seal this ______ day of___________, 199__.
--------------------------------------
NOTARY PUBLIC
<PAGE> 142
EXHIBIT I
(To Collateral Assignment)
<PAGE> 143
EXHIBIT I
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF PLEDGE AGREEMENT
<PAGE> 144
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as amended, restated or otherwise modified, this
"Agreement"), dated as of December 22, 1998, is made by _______________________,
a corporation organized under the laws of Delaware (the "Pledge"), in favor of
FIRST UNION NATIONAL BANK, a national banking association (the "Administrative
Agent"), as Administrative Agent for the ratable benefit of the Administrative
Agent and the financial institutions (the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
STATEMENT OF PURPOSE
Pursuant to the Credit Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), by and
among KNOLOGY HOLDINGS, INC., a Delaware corporation, as guarantor (the
"Guarantor"), certain Subsidiaries of the Guarantor, as borrowers and any
Additional Borrowers who may become party thereto (such Subsidiaries and
Additional Borrowers being collectively, the "Borrowers"), the Lenders who are
or may become a party thereto, and FIRST UNION NATIONAL BANK, as Administrative
Agent for the Lenders, the Lenders will provide certain Extensions of Credit to
the Borrowers as more specifically described therein.
The Pledgor is the legal and beneficial owner of (a) the shares of
Pledged Stock (as hereinafter defined), (b) the Partnership Interests (as
hereinafter defined) in the partnerships (the "Partnerships") listed on Schedule
I hereto, (c) the Ownership Interests (as hereinafter defined) in the limited
liability companies (the "LLCs") listed on Schedule I hereto and (d) the Pledged
Debt (as hereinafter defined), in each case issued by the issuers (the
"Issuers") listed on Schedule I hereto.
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested that
the Pledgor execute this Agreement, and the Pledgor has agreed to do so pursuant
to the terms hereof.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into and make available Extensions
of Credit pursuant to the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent for the ratable benefit of the Administrative Agent and
Lenders as follows:
SECTION 27. Defined Terms. Capitalized terms used herein and not
otherwise defined in this Agreement, including the preambles and recitals hereof
shall have the meaning assigned thereto in the Credit Agreement. In the event of
a conflict between capitalized terms defined herein and in the Credit Agreement,
the Credit Agreement shall control. The following terms shall have the following
meanings:
"Code" means the Uniform Commercial Code from time to time in
effect in the State of North Carolina; provided that if by reason of
mandatory provisions of
<PAGE> 145
law, the perfection or the effect of perfection or non-perfection of
the security interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than North
Carolina, "Code" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection.
"Collateral" means the Stock Collateral, the Partnership
Collateral, the LLC Collateral and the Pledged Debt.
"LLC Collateral" means all of the Ownership Interests of the
Pledgor in the LLCs and all Proceeds therefrom.
"Ownership Interests" means the entire ownership interest of
the Pledgor in each LLC listed on Schedule I hereto, including, without
limitation, the Pledgor's capital account, its interest as an owner or
member in the net cash flow, net profit and net loss, and items of
income, gain, loss, deduction and credit of the LLCS, its interest in
all distributions made or to be made by the LLCs to the Pledgor and all
of the other rights, titles and interests of the Pledgor as an owner or
a member of the LLCS, whether set forth in the operating or membership
agreement of the LLCS, by separate agreement or otherwise.
"Partnership Collateral" means all of the Partnership
Interests of the Pledgor in the Partnerships and all Proceeds
therefrom.
"Partnership Interests" means the entire partnership interest
of the Pledgor in each Partnership listed on Schedule I hereto,
including, without limitation, the Pledgor's capital account, its
interest as an owner or a partner in the net cash flow, net profit and
net loss, and items of income, gain, loss, deduction and credit of the
Partnerships, its interest in all distributions made or to be made by
the Partnerships to the Pledgor and all of the other rights, titles and
interests of the Pledgor as an owner or a partner of the Partnerships,
whether set forth in the partnership agreement of the Partnerships, by
separate agreement or otherwise.
"Pledged Debt" means the indebtedness evidenced by the notes
made by each Issuer of such notes listed on Schedule I hereto, together
with all rights of any nature whatsoever that may be issued or granted
by such Issuer while this Agreement is in effect, and all Proceeds
therefrom.
"Pledged Stock" means the shares of capital stock of each
Issuer with respect to such stock listed on Schedule I hereto, together
with all stock certificates, options or rights of any nature whatsoever
that may be issued or granted by such Issuer to the Pledgor while this
Agreement is in effect.
"Proceeds" means all "proceeds" as such term is defined in
Section 9-306(L) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon, proceeds of sale thereof or
distributions with respect thereto.
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"Secured Obligations" means [the Obligations as defined in the
Credit Agreement and any renewals or extensions of any of such
Obligations] [the Guaranty Obligations as defined in the Credit
Agreement and any renewals or extension of any such Guaranty
Obligations.) (1)
"Stock Collateral" means the Pledged Stock and all Proceeds
therefrom.
SECTION 2. Pledge and Grant of Security Interests. In connection with
the creation and perfection of a security interest in the Collateral, the
Pledgor hereby delivers to the Administrative Agent, for the ratable benefit of
the Administrative Agent and the Lenders, all of the Pledged Stock and all
promissory notes evidencing the Pledged Debt and hereby grants to the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, a first priority security interest in such Pledged Stock, Pledged
Debt and all other Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
SECTION 3. Stock Powers; Register of Pledge.
(a) Concurrently with the execution of this Agreement and
delivery to the Administrative Agent of each certificate representing
one or more shares of Pledged Stock, (i) the Pledgor shall deliver an
undated stock power covering such certificate, duly executed in blank
by the Pledgor with, if the Administrative Agent so requests, signature
guaranteed and (ii) the Pledgor shall cause each Issuer of such Pledged
Stock to, and each such Issuer shall, deliver to the Administrative
Agent an Acknowledgment and Consent substantially in the form of
Exhibit A hereto.
(b) Concurrently with the execution of this Agreement,
the Pledgor shall send to each Issuer of Ownership Interests and each
Issuer of Partnership Interests an Authorization Statement
substantially in the form of Exhibit B hereto and shall cause each such
Issuer to, and each such Issuer shall, deliver to the Administrative
Agent a Transaction Statement substantially in the form of Exhibit C
hereto, confirming that each such Issuer has registered the pledge
effected by this Agreement on its books.
SECTION 4. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Pledgor shall remain liable to perform all of its
duties and obligations to the same extent as if this Agreement had not been
executed, (b) the exercise by the Administrative Agent or any Lender of any of
its rights hereunder shall not release the Pledgor from any of its duties or
obligations, and (c) neither the Administrative Agent nor any Lender shall have
any obligation or liability as a partner, or member of the Partnerships or LLCS,
by reason of this Agreement.
SECTION 5. Representations and Warranties. To induce the Administrative
Agent and the Lenders to execute the Credit Agreement, provide any Loans and
accept the security contemplated hereby, the Pledgor hereby represents and
warrants that:
- -------------------------------
(1) Delete as applicable.
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<PAGE> 147
(a) the Pledgor has the corporate, company or partnership power,
authority and legal right, as applicable, to execute and deliver, to perform its
obligations under, and to grant the Lien on the Collateral pursuant to, this
Agreement, and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Lien on the Collateral
pursuant to, this Agreement;
(b) this Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) the execution, delivery and performance of this Agreement will
not violate any provision of any material Applicable Law or material contractual
obligation of the Pledgor and will not result in the creation or imposition of
any Lien on any of the material properties or revenues of the Pledgor pursuant
to any Applicable Law or contractual obligation, except as contemplated hereby
and except for such Liens as are permitted under the Credit Agreement;
(d) except as contemplated in Sections 5, 10 and 16 hereof or as
set forth in Sections 8.12(c) and 8.12(d) of the Credit Agreement, no consent or
authorization of, filing with any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any stockholder,
member, partner or other owner or creditor of the Pledgor or any Issuer), is
required in connection with the execution, delivery, performance, validity or
enforceability against the Pledgor of this Agreement, except (i) as may be
required in connection with the disposition of the Collateral by laws affecting
the offering and sale of securities generally and (ii) filings under the Uniform
Commercial Code;
(e) the jurisdictions in which the Pledgor is located for purposes
of Sections 9-103 and 9-104 of the UCC are set forth in the Perfection
Certificate;
(f) except as set forth on Schedule 6.1(u) of the Credit
Agreement, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Pledgor, threatened by or against the Pledgor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby;
(g) the shares of Pledged Stock listed on Schedule I constitute
all the issued and outstanding shares of all classes of the capital stock of
each of the Borrowers;
(h) all the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable;
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<PAGE> 148
(i) the Pledged Debt has been duly authorized,
authenticated, issued and delivered, and is the legal, valid and
binding obligation of the issuers thereof, and is not in default;
(j) the Pledged Debt constitutes all of the outstanding
Debt of the respective Issuers thereof owed to the Pledgor and is
outstanding in the principal amount indicated on Schedule I;
(k) Pledgor has delivered to the Administrative Agent
true and complete copies of the partnership or membership or ownership
agreements, as applicable, for each of the Partnerships and LLCS, which
agreements are currently in full force and effect and have not been
amended or modified except as disclosed to the Administrative Agent in
writing;
(1) the Pledgor is the record and beneficial owner of,
and has good and marketable title to, the Collateral listed on Schedule
I, free of any and all Liens or options in favor of, or claims of, any
other Person, except the Lien created by this Agreement and Permitted
Liens;
(m) upon (i) delivery to the Administrative Agent of the
stock certificates evidencing the Pledged Stock, (ii) the delivery to
the Administrative Agent of the promissory notes evidencing the Pledged
Debt, (iii) the filing of properly completed financing statements in
all necessary jurisdictions, (iv) the registration of the interest
created by this Agreement on the books of each Partnership identified
on Schedule I hereto and (v) the registration of the interest created
by this Agreement on the books of each LLC identified on Schedule I
hereto, the Lien granted pursuant to this Agreement will constitute a
valid, perfected first priority Lien on the Pledged Stock and the
Proceeds related thereto, enforceable as such against all creditors of
the Pledgor and any Persons purporting to purchase any of the Pledged
Stock from the Pledgor.
SECTION 6. Certain Covenants. The Pledgor covenants and agrees with the
Administrative Agent for the ratable benefit of the Administrative Agent and the
Lenders that, from and after the date of this Agreement until the Secured
Obligations are paid in full and the Commitments are terminated:
(a) The Pledgor will not, without thirty (30) days' prior
written notice to the Administrative Agent, change its name, identity
or corporate structure so as to make any financing or other statement
filed as provided herein become seriously misleading. The Pledgor will,
upon request of the Administrative Agent, execute such financing
statements, notices of lien, notices of assignment and continuations or
amendments to any of the foregoing, and other documents (and pay the
costs of filing or recording the same in all public offices deemed
necessary by the Administrative Agent) and do such other acts and
things, all as the Administrative Agent may from time to time
reasonably request to establish and maintain a valid perfected pledge
and security interest in the Collateral. Pledgor hereby constitutes and
appoints the Administrative Agent (and any of its officers) as its
attorney-in-fact with full power and authority to execute and deliver
all documents necessary to perfect and keep perfected the security
interests created hereby. This power of
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attorney hereby granted is a special power of attorney coupled with an
interest and shall be irrevocable by Pledgor.
(b) The Pledgor will pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all
additional Debt owed to the Pledgor by any obligor in an amount
exceeding $100,000.
(c) If the Pledgor shall, as a result of its ownership
of the Collateral, become entitled to receive or shall receive any
stock or other certificate (including, without limitation, any
certificate representing a dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or
rights, whether in addition to, in substitution of, as a conversion of,
or in exchange for any portion of the Collateral, or otherwise in
respect thereof, the Pledgor shall accept the same as the agent of the
Administrative Agent, hold the same in trust for the Administrative
Agent and deliver the same forthwith to the Administrative Agent in the
exact form received, duly indorsed by the Pledgor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by the Pledgor, and with, if the
Administrative Agent so requests, signature guaranteed, to be held by
the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Secured Obligations. In addition, any sums
paid upon or in respect of the Collateral upon the liquidation or
dissolution of any Issuer shall be held by the Administrative Agent as
additional collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of any
Collateral shall be received by any Pledgor, such Pledgor shall, until
such money or property is paid or delivered to the Administrative
Agent, hold such money or property in trust for the Administrative
Agent, segregated from other funds of such Pledgor, as additional
collateral securing the Secured Obligations.
(d) Without the prior written consent of the
Administrative Agent, the Pledgor will not (i) vote to enable, or take
any other action to permit, any Issuer to issue any stock or other
equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any
stock or other equity securities of any nature of such Issuer, (ii)
except as expressly provided to the contrary herein, consent to any
modification, extension or alteration of the terms of any partnership,
membership or operating agreement of the LLCs or the Partnerships,
(iii) accept a surrender of any partnership, membership or operating
agreement of any of the Partnerships or LLCS, as applicable, or waive
any breach of or default under any such agreement by any other party
thereto, (iv) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Collateral, or (v) create,
incur or permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the Collateral, or any interest
therein, except for the Lien provided for by this Agreement. The
Pledgor will defend the right, title and interest of the Administrative
Agent in and to the Collateral against the claims and demands of all
Persons whomsoever.
(e) Such Pledgor will advise the Administrative Agent
promptly, in reasonable detail, (i) of any Lien or claim made or
asserted against any material part of the Collateral,
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(ii) of any material change in the composition of the Collateral, and
(iii) of the occurrence of any other event relating specifically to
such Pledgor or its assets which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on
the security interests created hereunder.
(f) Subject to the provisions of Section 16(c) hereof, at
any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgor, the
Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the
rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this
Agreement.
(g) The Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying,
any and all stamp, excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated
by this Agreement.
(h) On or prior to the formation or acquisition of any
Subsidiary of the Pledgor possessing assets in excess of One Thousand
Dollars ($1,000), the Pledgor agrees to execute such amendments and
supplements to this Agreement, including without limitation the Pledge
Agreement Supplement attached hereto, and such other documents and
instruments and to take any and all actions, all as shall be necessary,
in the reasonable judgment of the Administrative Agent, to pledge the
Pledgor's interest therein to the Administrative Agent for the ratable
benefit of itself and the Lenders.
SECTION 7. Cash Dividends and Other Payments; Voting Rights. Unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the Pledgor of the Administrative Agent's
intent to exercise its rights pursuant to Section 8 below, the Pledgor shall be
permitted to receive all cash dividends, distributions or other payments paid in
accordance with the terms of the Credit Agreement in respect of the Collateral
and to exercise all voting and corporate, company or partnership rights with
respect to the Collateral; provided, that no vote shall be cast or corporate,
company or partnership right exercised or other action taken which, in the
Administrative Agent's reasonable judgment, would impair the Collateral or which
would result in any material violation of any provision of the Credit Agreement,
the Notes, any other Loan Documents or this Agreement.
SECTION 8. Rights of the Administrative Agent.
(A) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the Pledgor, (i) the Administrative Agent shall have the right to receive any
and all cash dividends, distributions or other payments paid in
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respect of the Collateral and make application thereof to the Secured
Obligations, in the order set forth in Section 4.5 of the Credit Agreement and
(ii) if applicable, all of the Collateral shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (A) all voting, corporate and other rights pertaining to
such Collateral at any meeting of shareholders, partners, members or other
owners of the applicable Issuer or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such Collateral as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Collateral upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate, company or
partnership structure of the applicable Issuer, or upon the exercise by the
Pledgor or the Administrative Agent of any right, privilege or option pertaining
to such Collateral, and in connection therewith, the right to deposit and
deliver any and all of the Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as it
may determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to the Pledgor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against the Pledgor or
against any other Person which may be or become liable in respect of all or any
part of the Secured Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Neither the
Administrative Agent nor any Lender shall be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor shall the Administrative Agent be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.
SECTION 9. Remedies. If an Event of Default shall occur and be
continuing, with the consent of the Required Lenders, the Administrative Agent
may, and upon the request of the Required Lenders, the Administrative Agent
shall, exercise on behalf of itself and the Lenders, all rights and remedies
granted in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, and in addition thereto, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing with regard to the scope of the Administrative
Agent's remedies, the Administrative Agent, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon the Pledgor, or any
Issuer (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any
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right or equity of redemption in the Pledgor, which right or equity is hereby
waived or released. The Administrative Agent shall apply any Proceeds from time
to time held by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the Lenders hereunder,
including, without limitation, reasonable attorneys' fees and disbursements of
counsel thereto, to the payment in whole or in part of the Secured Obligations,
in the order set forth in Section 10 of the Security Agreement, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(l)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
SECTION 10. Registration Rights; Private Sales.
(a) If the Administrative Agent shall determine to exercise its
right to sell any or all of the Pledged Stock pursuant to Section 9 hereof, and
if in the opinion of the Administrative Agent it is necessary or advisable to
have the Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will cause the applicable Issuer to (i) execute and deliver, and cause
the directors and officers of the applicable Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the reasonable opinion of the Administrative Agent, necessary or
advisable to register such Pledged Stock, or that portion thereof to be sold,
under the provisions of the Securities Act, (ii) to use its best efforts to
cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of such Pledged Stock, or that portion thereof to be sold, and (iii) to
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause the applicable Issuer to comply with the provisions of
the securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act. For purposes of this Section 10(a), "applicable Issuer" shall mean each
Issuer which is a Subsidiary of the Pledgor.
(b) The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all of the Collateral, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that, in the event the Administrative
Agent is
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unable to effect a public sale, any such private sale shall be deemed to have
been made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay a sale of any of the Collateral for the period of
time necessary to permit the applicable Issuer to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if the applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Collateral pursuant to this Section 10 valid
and binding and in compliance with any and all other Applicable Laws. The
Pledgor further agrees that a breach of any of the covenants contained in this
Section 10 will cause irreparable injury to the Administrative Agent and the
Lenders not compensable in damages, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 10 shall be
specifically enforceable against the Pledgor, and the Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred under
the Credit Agreement.
SECTION 11. Amendments, etc. With Respect to the Secured
Obligations. The Pledgor shall remain obligated hereunder, and the Collateral
shall remain subject to the Lien granted hereby, notwithstanding that, without
any reservation of rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of any of the Secured Obligations
made by the Administrative Agent or any Lender may be rescinded by the
Administrative Agent or such Lender, and any of the Secured Obligations
continued, and the Secured Obligations, or the liability of the Pledgor or any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Administrative Agent or any
Lender, and the Credit Agreement, the Notes, any other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Lenders (or the
Required Lenders, as the case may be) may deem advisable from time to time, and
any guarantee, right of offset or other collateral security at any time held by
the Administrative Agent or any Lender for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Secured Obligations or any property subject thereto. The Pledgor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Secured Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon this Agreement; the Secured Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Agreement; and all dealings between the Pledgor, on the
one hand, and the Administrative Agent and the Lenders, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Agreement. The Pledgor waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Pledgor with
respect to any of the Secured Obligations.
SECTION 12. Irrevocable Authorization and Instruction to Issuers.
The Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by it from the
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Administrative Agent in writing that (a) states that an Event of Default has
occurred and is continuing and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from the Pledgor, and
the Pledgor agrees that such Issuer shall be fully protected in so complying.
SECTION 13. Limitation on Duties of the Administrative Agent
Regarding Collateral. The Administrative Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar securities
and property for its own account. Neither the Administrative Agent, any Lender
nor any of their respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or otherwise.
SECTION 14. Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be applied by
the Administrative Agent in accordance with the terms of Section 4.5 of the
Credit Agreement. The Administrative Agent may make distribution hereunder in
cash or in kind or, on a ratable basis, in any combination thereof.
SECTION 15. Concerning the Administrative Agent. The provisions
of Article XIII of the Credit Agreement shall inure to the benefit of the
Administrative Agent in respect of this Agreement and shall be binding upon the
Pledgor and the Lenders. In furtherance and not in derogation of the rights,
privileges and immunities of the Administrative Agent therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or,
when expressly required by this Agreement or the Credit Agreement, all
the Lenders) or, in the absence of such instructions, in accordance
with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the security
interests therein purported to be granted by this Agreement, whether
impaired by operation of law or by reason of any action or omission to
act on its part (other than any such action or inaction constituting
gross negligence or willful misconduct). The Administrative Agent shall
have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Pledgor.
SECTION 16. Retained Control; Regulatory Approval.
(a) Notwithstanding anything herein to the contrary, this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, prior to a foreclosure of
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the Liens granted under this Agreement and the other Loan Documents, do not and
will not (i) constitute, create or have the effect of constituting or creating,
directly or indirectly, (A) actual or practical ownership of Pledgor, any Issuer
of any Collateral or any Subsidiary of Pledgor by the Administrative Agent or
the Lenders, or (B) control by the Administrative Agent or the Lenders over the
management or any other aspect of the operation of Pledgor, any Issuer of
Collateral or any Subsidiary of Pledgor which ownership and control remains
exclusively and at all times in Pledgor, such Subsidiary of Pledgor or any
Issuer of Collateral, or (ii) constitute (A) the transfer, assignment or
disposition in any manner of any CATV Franchise, Communications License, PUC
Authorization or other Governmental Approval issued to Pledgor, any Issuer of
Collateral or any Subsidiary of Pledgor or (B) the transfer of control of
Pledgor, any Issuer of Collateral or any Subsidiary of Pledgor within the
meaning of the Telecommunications Act of 1996, as amended, or any other
Applicable Law.
(b) Notwithstanding any other provision of this
Agreement, any foreclosure on, sale, transfer or other disposition of, or the
exercise of any right to vote or consent with respect to, any of the Collateral
or any of the other collateral referenced in any of the other Loan Documents, or
any other action taken or proposed to be taken by the Administrative Agent
hereunder or under any of the other Loan Documents which would affect the
operational, voting or other control of any CATV Franchise, Communications
License, PUC Authorization or other Governmental Approval of Pledgor, any
Subsidiary of Pledgor or any Issuer of Collateral shall be in accordance with
Applicable Law.
(c) The Pledgor will, at its expense, promptly execute
and deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements, and all other documents and
papers the Administrative Agent may reasonably request and as may be required by
law in connection with the obtaining of any consent, approval, registration,
qualification, or authorization of the FCC, any state, provincial or other local
regulatory agency or body that exercises jurisdiction over the rates or services
or the ownership, construction or operation of any telecommunications systems or
over Persons who own, construct or operate telecommunications systems, by reason
of the nature or type of business subject to regulation and not pursuant to laws
and regulations of general applicability (a "PUC") or of any other Person deemed
necessary or appropriate for the effective exercise of any rights under this
Agreement or the Security Documents. Without limiting the generality of the
foregoing, if an Event of Default shall have occurred and be continuing, the
Pledgor shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or to such
one or more third parties as the Administrative Agent may designate, or to a
combination of the foregoing, each CATV Franchise, Communications License, PUC
Authorization or other Governmental Approval. To enforce the provisions of this
Section 16, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent is empowered to request the appointment of a
receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the FCC, any applicable PUC or other Governmental
Authority an involuntary transfer of control of each such CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval for the
purpose of seeking a bona fide purchaser to whom control will ultimately be
transferred. The Pledgor hereby agrees to authorize such an involuntary transfer
of control upon the request of the receiver so appointed and, if the Pledgor
shall refuse to authorize the transfer, its approval may be required by the
court. Upon the occurrence and
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continuance of an Event of Default, the Pledgor shall further use its best
efforts to assist in obtaining approval of the FCC, any applicable PUC or other
Governmental Authority, if required, for any action or transactions contemplated
by this Agreement or the Security Documents including, without limitation, the
preparation, execution and filing with the FCC, any applicable PUC or other
Governmental Authority of the assignor's or transferor's portion of any
application or applications for consent to the assignment of any CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval or
transfer of control necessary or appropriate under the rules and regulations of
the FCC, any applicable PUC or other Governmental Authority for the approval of
the transfer or assignment of any portion of the assets of the Pledgor, together
with any CATV Franchise, Communications License, PUC Authorization or other
Governmental Approval. Because the Pledgor agrees that the Administrative
Agent's remedy at law for failure of the Pledgor to comply with the provisions
of this Section 16 would be inadequate and that such failure would not be
adequately compensable in damages, the Pledgor agrees that the covenants
contained in this Section 16 may be specifically enforced, and the Pledgor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
SECTION 17. Notices. All notices and communications hereunder
shall be given to the addresses and otherwise made in accordance with Section
14.1 of the Credit Agreement.
SECTION 18. Rights and Remedies Cumulative; Non-Waiver, etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default. This Agreement is a Loan Document
executed pursuant to the Credit Agreement.
SECTION 19. Successors and Assigns. This Agreement is for the
benefit of the Administrative Agent and the Lenders and their permitted
successors and assigns. This Agreement shall be binding on the Pledgor and its
successors and assigns; provided that the Pledgor may not assign any of its
rights or obligations hereunder without the prior written consent of the
Administrative Agent and the Lenders.
SECTION 20. Control Agreement Acknowledgement by Issuers and
Partnership/LLC. (a) The Pledgor hereby authorizes and instructs each Issuer
and Partnership/LLC to comply, and each Issuer and Partnership/LLC hereby agrees
to so comply, with any instruction received thereby from the Administrative
Agent in accordance with the terms of this Agreement with respect to the
Collateral, without any consent or further instructions from the Pledgor and the
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Pledgor agrees that such Issuer and Partnership/LLC shall be fully protected in
so complying. Each Partnership/LLC agrees that its agreement set forth in the
preceding sentence shall be sufficient to create in favor of the Administrative
Agent, for the benefit of the Lenders, "control" of the Partnership/LLC
Interests within the meaning of such term under Section 8-106(c) of the Code.
(Notwithstanding the foregoing, nothing in this Pledge Agreement is intended or
shall be construed to mean or imply that the Partnership/LLC Interests
constitute "securities" within the meaning of such term under Section
8-102(a)(15) of the Code or otherwise to limit or modify the application of
Section 8-103(c)of the Code. Rather, the Administrative Agent has requested that
this provision be included in this Pledge Agreement solely out of an abundance
of caution in the event the Partnership/LLC Interests are, nevertheless, deemed
to constitute "securities" under the Code).
(b) Each Issuer and Partnership/LLC acknowledges receipt of a copy
of this Pledge Agreement and agrees to be bound thereby and to comply with the
terms thereof insofar as such terms are applicable to it. Each Issuer and
Partnership/LLC agrees to notify the Administrative Agent promptly in writing of
the occurrence of any of the events described in Section 6(c) of this Pledge
Agreement. Each Issuer and Partnership/LLC further agrees that the terms of
Section 10 of this Pledge Agreement shall apply to it with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 9 of this Pledge Agreement.
SECTION 21. Amendments, Waivers and Consents. No term, covenant,
agreement or condition of this Agreement may be amended or waived, nor may any
consent be given, except in the manner set forth in Section 14.11 of the Credit
Agreement.
SECTION 22. Powers Coupled with an Interest. All powers of
attorney herein contained with respect to the Collateral constitute irrevocable
powers coupled with an interest.
SECTION 23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
SECTION 24. Consent to Jurisdiction. The Pledgor hereby
irrevocably consents to the personal jurisdiction of the state and federal
courts located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of or any dispute in connection with this
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations. The Pledgor hereby irrevocably consents to the service
of a summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the manner
provided in Section 14.1 of the Credit Agreement. Nothing in this Section 24
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.
14
<PAGE> 158
SECTION 25. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether
made before or after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or
relating to the Notes or any other Loan Documents ("Disputes"), between
or among parties to the Notes or any other Loan Documents shall be
resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party
to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class
actions, claims arising from supplements to this Agreement executed in
the future, or claims concerning any aspect of the past, present or
future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association and Title 9 of the U.S.
Code. All arbitration hearings shall be conducted in Charlotte, North
Carolina. The expedited procedures set forth in Rule 51, et seq. of
the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety
(90) days after such demand thereof and shall be concluded within
one-hundred and twenty (120) days after such demand. These time
limitations may not be extended unless a party hereto shows cause for
extension and then such extension shall not exceed a total of sixty
(60) days. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for
expedited procedure shall be a retired judge from the highest court of
general jurisdiction, state or federal, of the state where the hearing
will be conducted. Notwithstanding the foregoing, this Section 25(a)
shall not apply to any Hedging Agreement that is a Loan Document.
(b) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER, AND THE PLEDGOR HEREBY ACKNOWLEDGE
THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION,
CLAIM OR OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto preserve,
without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute.
Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against
any real or personal property or other security by exercising a power
of sale granted in this Agreement or under applicable law or by
judicial foreclosure and sale, (ii) all rights of self help including
peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or
ancillary
15
<PAGE> 159
remedies including injunctive relief, sequestration, garnishment
attachment, appointment of receiver and in filing an involuntary
bankruptcy proceeding, and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
SECTION 26. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (b) the invalidity or unenforceability of any
provisions hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 27. Headings. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provisions hereof.
SECTION 28. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[Signature Page Follows]
16
<PAGE> 160
IN WITNESS WHEREOF, each of the undersigned as caused this Agreement to
be executed under seal by its duly authorized officers, all as of the day and
year first written above.
, as Pledgor
----------------------------
[CORPORATE SEAL]
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
Acknowledged and agreed to by the following
with respect to Section 20 hereof:
, as Issuer
------------------------------
[CORPORATE SEAL]
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 161
SCHEDULE I
----------
(to Pledge Agreement)
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Class of Stock Certificate No. No. of Shares
- ------ -------------- --------------- -------------
<S> <C> <C> <C>
</TABLE>
DESCRIPTION OF PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Partnership Partnership Interest
- ----------- --------------------
<S> <C>
</TABLE>
DESCRIPTION OF LLC INTERESTS
<TABLE>
<CAPTION>
LLC LLC Interest
- --- ------------
<S> <C>
</TABLE>
DESCRIPTION OF PLEDGED DEBT
<TABLE>
<CAPTION>
Debtor Description of Debt Date Original Principal Amount
- ------ ------------------- ---- -------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 162
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT, dated as of __________________, ____ (the
"Supplement"), made by ____________________, a _________________ corporation
(the "Pledgor"), in favor of First Union National Bank, a national banking
corporation, as Administrative Agent (in such capacity, the "Administrative
Agent"), under the Credit Agreement (as defined in the Pledge Agreement referred
to below) for the benefit of itself and the Lenders (as so defined).
1. Reference is hereby made to that Pledge Agreement, dated as of
________ _______, 1998, made by the Pledgor in favor of the Administrative Agent
(as further amended, restated or otherwise modified, the "Pledge Agreement").
This Supplement supplements the Pledge Agreement, forms a part thereof and is
subject to the terms thereof. Terms defined in the Pledge Agreement are used
herein as therein defined.
[2. The Pledgor hereby confirms and reaffirms the security interest in
the Collateral granted to the Administrative Agent for the ratable benefit of
itself and the Lenders under the Pledge Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations and in order
to induce the Lenders to make their Loans under the Credit Agreement, the
Pledgor hereby delivers to the Administrative Agent, for the ratable benefit of
the Administrative Agent and the Lenders, all of the issued and outstanding
shares of capital stock of [INSERT NAME OF NEW SUBSIDIARY] (the "New Issuer")
listed below, together with all stock certificates, options, or rights of any
nature whatsoever which may be issued or granted by the New Issuer in respect to
such stock which the Pledge Agreement, as supplemented hereby, is in force (the
"Additional Pledged Stock"; as used in the Pledge Agreement as supplemented by
this Supplement, "Pledged Stock" shall be deemed to include the Additional
Pledged Stock) and hereby grants to the Administrative Agent, for the ratable
benefit of itself and the Lenders, a first priority security interest in the
Additional Pledged Stock and all Proceeds thereof.]
or
[2. The Pledgor hereby confirms and reaffirms the security interest in
the Collateral granted to the Administrative Agent for the ratable benefit of
itself and the Lenders under the Pledge Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations and in order
to induce the Lenders to make their Loans under the Credit Agreement, the
Pledgor hereby grants to the Administrative Agent, for the ratable benefit of
itself and the Lenders, a first priority security interest in the entire
[partnership] [membership] or other ownership interest of Pledgor (the
"Additional Interest") in [INSERT NAME OF NEW SUBSIDIARY] (the "New
[Partnership] ["LLCI"]) listed below and all Proceeds thereof, as used in the
Pledge Agreement as supplemented by this Supplement, "Partnership Interests" and
"Ownership Interests," as applicable, shall be deemed to include the Additional
Interest.]
or
<PAGE> 163
[2. The Pledgor hereby confirms and reaffirms the security interest in
the Collateral granted to the Administrative Agent for the ratable benefit of
itself and the Lenders under the Pledge Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations and in order
to induce the Lenders to make their Loans under the Credit Agreement, the
Pledgor hereby delivers to the Administrative Agent, for the benefit of the
Lenders, all of the Pledged Debt listed below (the "Additional Pledged Debt;" as
used in the Pledge Agreement as supplemented by this Supplement, "Pledged Debt"
shall be deemed to include the Additional Pledged Debt) and hereby grants to the
Administrative Agent, for the ratable benefit of itself and the Lenders, a first
priority security interest in the Additional Pledged Debt and all Proceeds
thereof.]
3. The Pledgor hereby represents and warrants that the representations
and warranties contained in Section 5 of the Pledge Agreement are true and
correct on the date of this Supplement with references therein to the ["Pledged
Stock" to include the Additional Pledged Stock] or ["Partnership Interests" or
"Ownership Interests," as applicable, to include the Additional Interest] or
["Pledged Debt" to include the Additional Pledged Debt], with references therein
to the "Issuer" to include the New Issuer, and with references to the
"Agreement" to mean the Pledge Agreement as supplemented by this Supplement.
4. The Pledgor shall deliver to the Administrative Agent the
Acknowledgement and Consent substantially in the form of Exhibit A to the Pledge
Agreement attached hereto duly executed by the [New Issuer] [New Partnership]
[New LLC]. The Additional [Pledged Stock] [Interest] [Pledged Debt] pledged
hereby is described as follows which such description shall be deemed part of
Schedule I thereto:
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Issuer Class of Stock Certificate No. No. of Shares
- ------ -------------- --------------- -------------
<S> <C> <C> <C>
[New Issuer]
</TABLE>
DESCRIPTION OF PARTNERSHIP/LLC INTEREST
<TABLE>
<CAPTION>
Partnership Partnership Interest
- ----------- --------------------
<S> <C>
</TABLE>
DESCRIPTION OF PLEDGED DEBT
<TABLE>
<CAPTION>
Debtor Description of Debt Date Original Principal Amount
- ------ ------------------- ---- -------------------------
<S> <C> <C> <C>
</TABLE>
5. The Pledgor hereby agrees to deliver to the Administrative Agent
such certificates and other documents and take such other action as shall be
reasonably requested by the Administrative Agent in order to effectuate the
terms hereof and the Pledge Agreement.
<PAGE> 164
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed under seal and delivered as of the date first above written.
[CORPORATE SEAL] [NEW SUBSIDIARY]
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
<PAGE> 165
EXHIBIT J
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank,
as Administrative Agent
FORM OF SECURITY AGREEMENT
<PAGE> 166
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated or otherwise modified,
this "Agreement") dated as of December 22, 1998 made by KNOLOGY HOLDINGS, INC.,
a Delaware corporation, and certain undersigned Subsidiaries of KNOLOGY
Holdings, Inc. (collectively, the "Grantors") in favor of FIRST UNION NATIONAL
BANK, a national banking association, as Administrative Agent, for the ratable
benefit of the itself and the Lenders under the Credit Agreement (as hereinafter
defined).
STATEMENT OF PURPOSE
Pursuant to the Credit Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), by and
among KNOLOGY HOLDINGS, INC., a Delaware corporation, as guarantor (the
"Guarantor"), certain Subsidiaries of the Guarantor, as borrowers and any
Additional Borrowers who may become party thereto (such Subsidiaries and
Additional Borrowers being collectively, the "Borrowers", the Lenders who are or
may become a party thereto, and FIRST UNION NATIONAL BANK, as Administrative
Agent for the Lenders, the Lenders will provide certain Extension of Credit to
the Borrowers as more specifically described therein.
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested that
the Grantors grant a continuing security interest in and to the "Collateral" (as
hereinafter defined) to secure the "Secured Obligations" (as hereinafter
defined), and the Grantors have agreed to do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Administrative Agent and the Lenders to enter
into and make available Extension of Credit pursuant to the Credit Agreement,
the Grantors hereby agree with the Administrative Agent for the ratable benefit
of the Administrative Agent and Lenders as follows:
SECTION 1. Definitions. Capitalized terms used herein and not otherwise
defined in this Agreement, including the preambles and recitals hereof, shall
have the meaning assigned thereto in the Credit Agreement. In the event of a
conflict between capitalized terms defined herein and in the Credit Agreement,
the Credit Agreement shall control. The following additional terms when used in
this Agreement shall have the following meanings:
"Account Debtor" means any Person who is or may become obligated to any
Grantor under, with respect to, or on account of, an Account.
"Accounts" means all "accounts" (as defined in the UCC) of any Grantor
now or hereafter acquired, including without limitation all present or future
accounts receivable, all rights to payment for goods sold or leased or to be
sold or leased or for services rendered or to be rendered, whether or
<PAGE> 167
not earned by performance, all rights in any merchandise or goods which any of
the same may represent, all notes receivable, book debts, notes, bills, drafts,
acceptances, choses in action, contract rights, instruments and documents and
all sums of money due or to become due thereon and all proceeds thereof and all
rights, title, security interests and guarantees with respect to each of the
foregoing.
"Collateral" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Collateral Account" means a cash collateral account established by the
Grantors with the Administrative Agent, in the name and under the exclusive
dominion and control of the Administrative Agent, pursuant to Section 6 hereof.
"Copyright License" means any written agreement now or hereafter in
existence granting to any Grantor any right to use any Copyright.
"Copyrights" means, collectively, all of the following of any Grantor
whether now owned or hereafter acquired or created by Grantor: (a) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications anywhere in the world,
including, without limitation, any thereof referred to on Schedule I hereto, (b)
all reissues, extensions, continuations (in whole or in part) and renewals of
any of the foregoing, (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including, without limitation, damages or payments for past or
future infringements of any of the foregoing, (d) the right to sue for past,
present and future infringements of any of the foregoing and (e) all rights
corresponding to any of the foregoing throughout the world.
"Documents" means all "documents" (as defined in the UCC) or other
receipts of any Grantor covering, evidencing or representing goods or services,
whether now or hereafter owned or acquired by any Grantor.
"Equipment" means all "equipment" (as defined in the UCC) of any
Grantor, wherever located, and all other machinery, furniture, equipment and
goods (other than Inventory) and all other tangible assets of any Grantor used
or bought for use primarily in the business of such Grantor, including all
accessions, additions, attachments, improvements, alterations, modifications,
substitutions, repairs and replacements thereto and therefor, in all such cases
whether now owned or hereafter acquired by any Grantor.
"Financing Statements" shall mean the UCC Form UCC-1 Financing
Statements executed by any Grantor with respect to the Collateral and to be
filed in the jurisdictions set forth in the Perfection Certificate.
"Fixtures" shall mean all "fixtures" (as defined in the UCC) of any
Grantor, whether now owned or hereafter acquired.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) of any Grantor whether now owned or thereafter acquired by any Grantor,
including, without limitation, all
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<PAGE> 168
rights to indemnification, and all rights, title and interest which such Grantor
may now or hereafter have in or under all contracts (other than contracts
described in the definition of Accounts), agreements, permits, licenses
(subject, however, with respect to CATV Franchises, Communications Licenses and
PUC Authorizations, to the limitation set forth in Subsection 2(a)(ix) hereof),
causes of action, franchises, tax refund claims, customer lists, Intellectual
Property, license royalties, goodwill, trade secrets, data bases, business
records, and all other intangible property of every kind and nature.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) of any Grantor, including, without
limitation, instruments, chattel paper and letters of credit evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now or hereafter owned or acquired by any Grantor.
"Intellectual Property" means, collectively, all of the following of
any Grantor: (a) all systems software and applications software, including,
without limitation, screen displays and formats, program structures, sequence
and organization, all documentation for such software, including, without
limitation, user manuals, flowcharts, programmer's notes, functional
specifications, and operations manuals, all formulas, processes, ideas and
know-how embodied in any of the foregoing, and all program materials,
flowcharts, notes and outlines created in connection with any of the foregoing,
whether or not patentable or copyrightable, (b) concepts, discoveries,
improvements and ideas, (c) any useful information relating to the items
described in clause (a) or (b), including know-how, technology, engineering
drawings, reports, design information, trade secrets, practices, laboratory
notebooks, specifications, test procedures, maintenance manuals, research,
development, manufacturing, marketing, merchandising, selling, purchasing and
accounting, (d) Patents and Patent Licenses, Copyrights and Copyright Licenses,
Trademarks and Trademark Licenses, and (e) other licenses to use any of the
items described in the foregoing clauses (a), (b), (c) and (d) or any other
similar items of such Grantor necessary for the conduct of its business.
"Inventory" means all "inventory" (as defined in the UCC) of any
Grantor, including without limitation, all raw materials, inventory and other
materials and supplies, work-in-process, finished goods, all accessions thereto,
documents therefor and any products made or processed therefrom and all
substances, if any, commingled therewith or added thereto.
"Investment Property" means all "securities" (whether certificated or
uncertificated), "security entitlements", securities accounts", "commodity
contracts" and "commodity accounts" (in each case as defined in the UCC) of any
Grantor, whether now owned or hereafter acquired.
"Lockbox Letter" means a lockbox letter, substantially in the form of
Exhibit A hereto, duly executed by the Grantor and a bank in accordance with
Section 6.
"Patent License" means any written agreement now or hereafter in
existence granting to any Grantor any right to use any invention on which a
Patent is in existence.
3
<PAGE> 169
"Patents" means, collectively, all of the following of any Grantor: (a)
all patents, rights and interests in patents, patentable inventions and patent
applications anywhere in the world, including, without limitation, any thereof
referred to on Schedule ii hereto, (b) all reissues, extensions, continuations
(in whole or in part) and renewals of any of the foregoing, (c) all income,
royalties, damages or payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing, (d) the right to sue for past, present and future infringements of
any of the foregoing and (e) all rights corresponding to any of the foregoing
throughout the world.
"Perfection Certificate" means the perfection certificate dated as of
even date herewith, substantially in the form of Exhibit B hereto, in form and
substance satisfactory to the Administrative Agent, and duly certified by a
Responsible Officer of the Guarantor so authorized to act.
"Permitted Liens" means all liens and encumbrances respecting the
Collateral permitted pursuant to Section 10.3 of the Credit Agreement.
"Proceeds" means all "proceeds" (as defined by the UCC) of, and all
other profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or realization upon, the Collateral, including, without limitation, all
claims of any Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums with respect
to, policies of insurance in respect of, any Collateral, and any condemnation or
requisition payments with respect to any Collateral and the following types of
property acquired with cash proceeds: Accounts, Inventory, Documents, Fixtures,
Instruments, General Intangibles, Equipment and Vehicles.
"Secured Obligations" means (a) with regard to any Grantor that is a
Borrower, the Obligations of the Borrowers as defined in the Credit Agreement
and any renewals or extensions thereof and (b) with regard to the Guarantor, the
Guaranteed Obligations as defined in the Credit Agreement and any renewals or
extensions thereof
"Security Interests" means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"Trademark License" means any written agreement now or hereafter in
existence granting to any Grantor any right to use any Trademark.
"Trademarks" means, collectively, all of the following of any Grantor:
(a) all trademarks, rights and interests in trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on which any
of the foregoing have appeared or appear, all registrations and recordings
thereof, and all applications in connection therewith anywhere in the world,
including without limitation any thereof referred to on Schedule II hereto, (b)
all reissues, extensions, continuations (in whole or in part) and renewals of
any of the foregoing, (c) all income, royalties, damages and
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<PAGE> 170
payments now or hereafter due and/or payable under any of the foregoing or with
respect to any of the foregoing, including, without limitation, damages or
payments for past or future infringements of any of the foregoing, (d) the right
to sue for past, present and future infringements of any of the foregoing and
(e) all rights corresponding to any of the foregoing throughout the world.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of North Carolina; provide that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than North Carolina, "UCC"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
"Vehicles" means all cars, trucks, trailers, construction and earth
moving equipment of any Grantor and other vehicles covered by a certificate of
title law of any state, and all tires and other appurtenances to any of the
foregoing.
SECTION 2. The Security Interests.
(a) To secure the Credit Agreement in accordance with the terms
thereof, and to secure the payment and performance of all of the Secured
Obligations, each Grantor hereby grants to the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, a continuing
security interest in and to all of such Grantor's estate, right title and
interest in and to all of the following property, whether now or hereafter owned
or acquired by such Grantor or in which such Grantor may now or hereafter have
or acquire any estate right, title or interest, and wherever located
(collectively, along with any other property of such Grantor which may from time
to time secure the Secured Obligations, the "Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Equipment;
(v) Fixtures;
(vi) Instruments;
(vii) General Intangibles;
(viii) Investment Property;
(ix) Vehicles;
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<PAGE> 171
(x) The Collateral Account, all cash deposited therein
from time to time and other monies and property of any kind of any
Grantor in the possession or under the control of the Administrative
Agent and any Lender;
(xi) All CATV Franchises, Communications Licenses and PUC
Authorizations (collectively, the "Communications Licenses") of such
Grantor and all goodwill and going concern value relating thereto;
provided, however, that such security interest shall include such CATV
Franchises, Communications Licenses and PUC Authorizations only at such
times and to the extent, that such Grantor is permitted to grant a
security interest therein pursuant to the Telecommunications Act of
1996 as amended, and the policies and regulations promulgated
thereunder and all other Applicable Laws, and shall include, to the
maximum extent permitted by Applicable Law, all rights incident or
appurtenant to any such CATV Franchises, Communications Licenses and
PUC Authorizations, and the rights to receive all proceeds derived from
or in connection with the sale, assignment or transfer of any such CATV
Franchises, Communications Licenses and PUC Authorizations; and
provided further, to the extent that such Grantor is prohibited from
granting a security interest in any CATV Franchise, Communications
License or PUC Authorization, such Grantor agrees that a security
interest shall automatically attach to any such CATV Franchise,
Communications License or PUC Authorization, all rights incident or
appurtenant thereto, and the rights to receive proceeds derived from or
in connection with the sale, assignment or transfer of any such CATV
Franchise, Communications License or PUC Authorization, at such time
that such a security interest is permitted by Applicable Law;
(xii) Except as set forth in Section 8.12(c) of the Credit
Agreement, all Interactive Broadband Networks, as defined in the Credit
Agreement; provided, however, that such security interest shall include
such Interactive Broadband Networks only at such times and to the
extent, that such Grantor is permitted to grant a security interest
therein pursuant to the Telecommunications Act of 1996 as amended, and
the policies and regulations promulgated thereunder and all other
Applicable Laws, and shall include, to the maximum extent permitted by
Applicable Law, all rights incident or appurtenant to any such
Interactive Broadband Networks, and the rights to receive all proceeds
derived from or in connection with the sale, assignment or transfer of
any, such Interactive Broadband Networks; and provided further, to the
extent that such Grantor is prohibited from granting a security
interest in any Interactive Broadband Networks, such Grantor agrees
that a security interest shall automatically attach to any such
Interactive Broadband Networks, all rights incident or appurtenant
thereto, and the rights to receive proceeds derived from or in
connection with the sale, assignment or transfer of any such
Interactive Broadband Networks, at such time that such a security
interest is permitted by Applicable Law;
(xiii) All books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other
computer materials and records) of such Grantor pertaining to any of
the Collateral;
(xiv) All other goods and personal property of such Grantor,
whether tangible or intangible; and
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<PAGE> 172
(xv) All products and Proceeds of all or any of the Collateral
described in clauses (i) through (xiv) hereof.
Notwithstanding anything contained in any one or more of the Loan
Documents to the contrary, it is agreed that the Loan Parties shall not be
deemed to have granted a security interest in any Communications License, CATV
Franchise, PUC Authorization or agreement with respect to which the consent or
approval of any third party is necessary for the creation of such a security
interest until such time, if ever, as the consents or approvals applicable with
respect to such Communications License, CATV Franchise, PUC Authorization or
agreement have been obtained.
(b) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Lender to, or transfer to the
Administrative Agent or any Lender, or in any way affect or modify, any
obligation or liability of any Grantor with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 3. Representations and Warranties. Each Grantor represents and
warrants as follows:
(a) Such Grantor has the corporate power and authority and the legal
right to execute and deliver, to perform its obligations under, and to grant the
Security Interests in the Collateral pursuant to, this Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of, and grant of the Security Interests on the Collateral pursuant
to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation of
such Grantor enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement creditors' rights generally and by the
availability of equitable remedies.
(c) Except as set forth in Sections 8.12(c) and 8.12(d) of, the Credit
Agreement, the execution, delivery and performance of this Agreement will not
violate any provision of any material Applicable Law or material contractual
obligation of such Grantor and will not result in the creation or imposition of
any Lien on any of the material properties or revenues of such Grantor pursuant
to any Applicable Law or contractual obligation of such Grantor, except as
contemplated hereby and except for such Liens as are permitted under the Credit
Agreement.
(d) Except as set forth in Sections 8.12(c) and 8.12(d) of the Credit
Agreement, as provided for in Section 13, no consent or authorization of, filing
with any arbitrator or Governmental Authority and no consent of any other Person
(including, without limitation, any stockholder or creditor of such Grantor), is
required in connection with the execution, delivery, performance, validity or
enforceability against the Grantor of this Agreement, except filings under the
Uniform Commercial Code.
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(e) Except as set forth on Schedule 6.1 (u) to the Credit Agreement, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of such Grantor after due
inquiry, threatened by or against such Grantor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(f) Such Grantor has good and marketable title to all of its
Collateral, free and clear of any Liens other than the Permitted Liens.
(g) No Grantor has performed any acts that would prevent or hinder the
Administrative Agent from enforcing any of the terms of this Agreement. Other
than financing statements or other similar or equivalent documents or
instruments with respect to Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Collateral is on file or of record in any jurisdiction. No
Collateral is in the possession of any Person (other than such Grantor)
asserting any claim thereto or security interest therein, except that the
Administrative Agent or its designee may have possession of Collateral as
contemplated hereby.
(h) All of the information set forth in the Perfection Certificate is
true and correct as of the date hereof
(i) Such Grantor has, contemporaneously herewith, delivered to the
Administrative Agent possession of all originals of all negotiable Instruments,
documents and chattel paper constituting Collateral currently owned or held by
such Grantor, if any (duly endorsed in blank, if requested by the Administrative
Agent).
(j) With respect to any Intellectual Property the loss, impairment or
infringement of which could have a Material Adverse Effect on any Grantor:
(i) such Intellectual Property is subsisting and has not been
adjudged invalid or unenforceable, in whole or in part;
(ii) such Intellectual Property is valid and enforceable;
(iii) except for those items of Intellectual Property listed
on Schedule I and identified as unregistered, such Grantor has made all
necessary filings and recordations to protect its interest in such
Intellectual Property, including, without limitation, recordations of
all of its interests in the Patents and Trademarks in the United States
Patent and Trademark Office and its claims to the Copyrights in the
United States Copyright Office;
(iv) such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual
Property and no claim has been made that the use of such Intellectual
Property does or may violate the asserted rights of any third party;
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(v) except for those items of Intellectual Property listed on
Schedule I and identified as unregistered, such Grantor has performed
all acts and has paid all required fees and taxes to maintain such
Intellectual Property in full force and effect; and
(vi) with respect to any unregistered Intellectual Property
which has been listed on Schedule I and identified as unregistered, at
such time as any currently unregistered Intellectual Property becomes
registered, the Grantor shall comply with subsections (iii) and (v)
hereof.
(k) The Financing Statements naming each Grantor as Debtor are in
appropriate form and when filed in the offices specified in the Perfection
Certificate, the Administrative Agent, on behalf of itself and the Lenders, will
have a valid and perfected security interest in the Collateral of such Grantor,
prior to all other Liens and rights of others therein except for the Permitted
Liens (to the extent that a security interest therein may be created pursuant to
the UCC and perfected by filing pursuant to the UCC) and all filings and other
actions necessary or desirable to so perfect and protect such Security Interests
have been duly taken.
(l) The Inventory, Fixtures, Equipment and Vehicles are insured in
accordance with the requirements hereof and of the Credit Agreement.
(m) All Inventory, if any, has or will have been produced in
compliance with the applicable requirements of the Fair Labor Standards Act, as
amended, to the extent applicable.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor shall change the location of its chief
executive office or principal place of business in any state unless it
shall have given the Administrative Agent thirty (30) days prior
written notice thereof, executed and delivered to the Administrative
Agent all financing statements and financing statement amendments which
the Administrative Agent may request in connection therewith and
delivered evidence of perfection with respect thereto in accordance
with Section 4(a)(vi). No Grantor shall change the locations where it
keeps or holds any material Collateral or any material records relating
thereto from the applicable location described in the Perfection
Certificate unless such Grantor shall have given the Administrative
Agent thirty (30) days prior written notice of such change of location,
executed and delivered to the Administrative Agent all financing
statements and financing statement amendments which the Administrative
Agent may request in connection therewith and, if requested by the
Administrative Agent, delivered an opinion of counsel with respect
thereto in accordance with Section 4(a)(vii) hereof; provided, however,
that such Grantor may keep Inventory at, or in transit to, any location
described in the Perfection Certificate. No Grantor shall in any event
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be perfected
unless such Grantor has complied with the foregoing proviso of this
Section 4(a)(i).
(ii) No Grantor shall change its name, identity or corporate
structure in any manner such that any UCC financing statements would
become seriously misleading unless
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it shall have given the Administrative Agent thirty (30) days prior
written notice thereof, executed and delivered to the Administrative
Agent all financing statements and financing statement amendments which
the Administrative Agent may request in connection therewith, and
delivered an opinion of counsel with respect thereto in accordance with
Section 4(a)(vii) hereof
(iii) The Grantors shall maintain the Administrative Agent's
Lien on the Collateral as a first priority perfected Lien thereon,
subject to Permitted Liens. Except as set forth in Sections 8.12(c) and
8.12(d) of the Credit Agreement, each Grantor will, from time to time,
at its expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and take any
other action (including, without limitation, any filings of financing
or continuation statements under the UCC and any filings with the
United States Patent and Trademark Office and United States Copyright
Office) that from time to time may be necessary, or that the
Administrative Agent may reasonably request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect,
confirm or validate the Security Interests or to enable the
Administrative Agent and the Lenders to obtain the full benefits of
this Agreement, or to enable the Administrative Agent to exercise and
enforce any of its rights, powers and remedies hereunder with respect
to any of the Collateral. Prior to the irrevocable payment in full of
the Secured Obligations, each Grantor hereby authorizes the
Administrative Agent, upon the failure of such Grantor to so do within
three (3) Business Days after receipt of written notice from the
Administrative Agent to execute and file financing statements,
financing statement amendments or continuation statements without such
Grantor's signature appearing thereon. Each Grantor agrees that a
carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing
statement. The Grantors shall pay the costs of, or incidental to, any
recording or filing of the Financing Statements and any other financing
statements, financing statement amendments or continuation statements
concerning the Collateral.
(iv) If any Collateral exceeding in value $50,000 in the
aggregate is at any time in the possession or control of any
warehouseman, bailee (other than a carrier transporting Inventory to a
purchaser in the ordinary course of business), or any Grantor's agents
or processors, such Grantor shall notify in writing such warehouseman,
bailee, agent or processor of the Security Interests created hereby,
shall obtain such warehouseman's, bailee's, agent's or processor's
agreement in writing to hold all such Collateral for the Administrative
Agent's account subject the Administrative Agent's instructions, and
shall cause such warehouseman, bailee, agent or processor to issue and
deliver to the Administrative Agent warehouse receipts, bills of lading
or any similar documents relating to such Collateral in the
Administrative Agent's name and in form and substance acceptable to the
Administrative Agent
(v) Each Grantor will cause the Administrative Agent, for the
ratable benefit of the Lenders, to be named as loss payee on each
insurance policy covering risks relating to any of its Inventory,
Fixtures, Equipment and Vehicles, as reasonably requested by the
Administrative Agent. Each Grantor will deliver to the Administrative
Agent certificates of insurance, evidence of payment of all insurance
premiums for the current policy year, and, if
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requested by the Administrative Agent, copies (certified by a
responsible Officer of the applicable Grantor) of each such insurance
policy. Each such insurance policy shall provide that all insurance
proceeds shall be adjusted with and payable to the Administrative Agent
and provide that no cancellation or termination thereof shall be
effective until at least thirty (30) days have elapsed after receipt by
the Administrative Agent of written notice thereof.
(vi) Each Grantor will, promptly upon request, provide to the
Administrative Agent all information and evidence the Administrative
Agent may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Administrative Agent to enforce
the provisions of this Agreement.
(vii) Prior to each date on which any Grantor proposes to take
any action contemplated by Section 4(a)(i) or Section 4 (a)(ii) hereof,
such Grantor shall, as reasonably requested by the Administrative
Agent, at its cost and expense, cause to be delivered to the
Administrative Agent and the Lenders an opinion of counsel, in form and
content reasonably satisfactory to the Administrative Agent.
(viii) Each Grantor will comply in all material respects with
all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the Collateral or
any part thereof or to the operation of such Grantor's business.
(ix) Each Grantor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as
all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the
Collateral, except that no such tax. assessment, governmental charge,
levy or claim need be paid if (A) the validity thereof is being
contested in good faith by appropriate proceedings and (B) such charge
is adequately reserved against on such Grantor's books in accordance
with GAAP.
(x) No Grantor shall:
(1) sell, assign (by operation of law or otherwise)
or otherwise dispose of any of the Collateral, except as
permitted by the Credit Agreement; or
(2) create or suffer to exist any Lien or other
charge or encumbrance upon or with respect to any of the
Collateral to secure indebtedness of any Person or entity,
except for Permitted Liens and except as permitted by the
Credit Agreement.
(xi) Each Grantor will, upon request by the Administrative
Agent, deliver to the Administrative Agent possession of all originals
of all negotiable Instruments and Documents constituting Collateral
currently owned or held by such Grantor, if any (duly endorsed in
blank, if requested by the Administrative Agent).
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(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to cause to
be collected from its Account Debtors, as and when due in accordance
with prudent business practices generally customary in businesses
similar to those of such Grantor, any and all amounts owing under or on
account of each Account (including, without limitation, Accounts which
are delinquent, such Accounts to be collected in accordance with lawful
collection procedures) and to apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such
Account. The costs and expenses (including, without limitation,
reasonable attorneys' fees), of collection of Accounts incurred by such
Grantor or the Administrative Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Administrative Agent each Grantor
will promptly notify (and each Grantor hereby authorizes the
Administrative Agent so to notify) each Account Debtor in respect of
any Account that such Account has been assigned to the Administrative
Agent hereunder and that any payments due or to become due in respect
of such Account are to be made directly to the Administrative Agent or
its designee.
(iii) Each Grantor will perform and comply with all of its
material obligations in respect of Accounts and General Intangibles and
the exercise by the Administrative Agent of any of its rights hereunder
shall not release such Grantor from any of its duties or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to a material Account
in any manner which could reasonably be expected to materially
adversely affect the value of such Account as Collateral, (B) fail to
exercise promptly and diligently each and every material right which it
may have under each agreement giving rise to a material Account (other
than any right of termination) or (C) fail to deliver to the
Administrative Agent a copy of each material demand, notice or document
received by it relating in any way to any agreement giving rise to a
material Account.
(v) Other than in the ordinary course of business as generally
conducted by each Grantor over a period of time, such Grantor will not
grant any extension of the time of payment of any of the Accounts with
a face amount in excess of $50,000 or compromise, compound or settle
the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(c) Inventory, Etc. At the request of the Administrative Agent or any
Lender, each Grantor shall deliver to the Administrative Agent and each Lender a
schedule of Inventory. Unless otherwise indicated in writing by such Grantor,
each schedule of Inventory delivered by such Grantor to the Administrative Agent
and each Lender shall constitute a representation with respect to the Inventory
listed thereon or referred to therein that: (A) all such Inventory is located at
places of business listed in the Perfection Certificate or as to which such
Grantor has complied with the
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provisions of Section 4(a)(i) hereof or on the premises identified on the then
current schedule of Inventory or is Inventory in transit from one such location
to another such location; (B) no such Inventory is subject to any Lien
whatsoever, except for Permitted Liens and as permitted by the Credit Agreement;
(C) no such Inventory in aggregate value exceeding $50,000 at any time is, nor
shall at any time or times be, kept, stored or maintained with a bailee,
warehouseman, carrier or similar party (other than a carrier delivering
Inventory to a purchaser in the ordinary course of such Grantor's business)
unless the Administrative Agent has given its prior written consent and such
Grantor has complied with the provision of Section 4 (a)(iv) hereof
(d) Equipment, Etc. Each Grantor will maintain each material item of
Equipment in the same condition, repair and working order as when acquired,
ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and will as quickly as practicable provide all maintenance, service and
repairs necessary for such purpose and will promptly furnish to the
Administrative Agent a statement respecting any material loss or damage to any
material portion of the Equipment.
(e) Intellectual Property.
(i) Each Grantor shall notify the Administrative Agent
promptly (a) of its acquisition after the Closing Date of any material
Copyright, Copyright License, Patent, Patent License, Trademark or
Trademark License and (b) if it knows, or has reason to know of any
adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any
proceeding in the United States Copyright Office or United States
Patent and Trademark Office, as applicable, or any court) regarding
such Grantor's ownership of any material Copyright, Patent or
Trademark, its material right to register the same, or to keep and
maintain the same. In the event that any material Copyright, Copyright
License, Patent, Patent License, Trademark or Trademark License is
infringed, misappropriated or diluted by a third party, such Grantor
shall notify the Administrative Agent promptly after it learns thereof
and shall, unless such Grantor and the Administrative Agent shall
jointly determine that any such action would be of immaterial economic
value, promptly sue for infringement, misappropriation or dilution and
to recover any and all damages for such infringement, misappropriation
or dilution, and take such other actions as may be appropriate under
the circumstances to protect such Copyright, Copyright License, Patent,
Patent License, Trademark or Trademark License. If any Grantor, either
itself or through any agent, employee or licensee, files an application
for the registration of any Copyright, Patent or Trademark with the
United States Copyright Office or United States Patent and Trademark
Office, as applicable, or any similar office or agency in any other
country or any political subdivision thereof, such Grantor will so
inform the Administrative Agent, and, upon issuance of such Copyright,
Patent or Trademark, execute and deliver any and all agreements,
instrument, documents and papers the Administrative Agent may
reasonably request to evidence the Security Interests in such
Copyright, Patent or Trademark and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby. Each Grantor
hereby constitutes the Administrative Agent its attorney-in-fact to
execute and file all such writings for the foregoing purposes, all acts
of such attorney being hereby ratified and confirmed, and such power,
being coupled with an
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interest, shall be irrevocable until the Secured Obligations have been
paid in full and satisfied.
(ii) Each Grantor shall: (a) preserve and maintain in all
material respects rights in the Intellectual Property (including,
without limitation, the payment of all required fees and taxes to
maintain such Intellectual Property in full force and effect); and (b)
upon and after the occurrence of an Event of Default, use its best
efforts to obtain any consents, waivers or agreements necessary to
enable the Administrative Agent to exercise its remedies with respect
to the Intellectual Property. No Grantor shall abandon any right to
file a Copyright, Patent or Trademark application that is material to
the business of such Grantor nor shall such Grantor abandon any such
pending Copyright, Patent or Trademark application, or Copyright,
Copyright License, Patent, Patent License, Trademark or Trademark
License without the prior written consent of the Administrative Agent.
(iii) Each Grantor hereby assigns, transfers and conveys to
the Administrative Agent, effective upon the occurrence and during the
continuance of any Event of Default, the nonexclusive right and license
to use all Intellectual Property owned or used by such Grantor,
together with any goodwill associated therewith, all to the extent
necessary to enable the Administrative Agent to realize on the
Collateral (including, without limitation, completing production of,
advertising for sale and selling the Collateral) and any successor or
assign to enjoy the benefits of the Collateral. This right and license
shall inure to the benefit of all successors, assigns and transferees
of the Administrative Agent and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to such
Grantor by the Administrative Agent.
(f) Vehicle. Upon the reasonable request of the Administrative Agent,
all applications for certificates of title or ownership indicating the
Administrative Agent's first priority Lien (subject to Permitted Liens) on the
Vehicle covered by such certificate, and any other necessary documentation,
shall be filed in each office in each jurisdiction which the Administrative
Agent shall deem advisable to perfect its Liens on the Vehicles. Prior thereto,
each certificate of title or ownership relating to each Vehicle shall be
maintained by the applicable Grantor in accordance with Applicable Law to
reflect the ownership interest of such Grantor.
(g) Indemnification. The Grantors agree to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities,
costs and expenses (including, without limitation, reasonable legal fees and
expenses) (i) with respect to, or resulting from, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Collateral, (ii) with respect to, or resulting from, complying with any
Applicable Law applicable to any of the Collateral or (iii) in connection with
any of the transactions contemplated by this Agreement; provided, however, said
indemnifications shall not apply to the extent any such liabilities, costs and
expenses result from the gross negligence or willful misconduct of the
Administrative Agent or any Lender. In any suit, proceeding or action brought by
the Administrative Agent under any Account for any sum owing thereunder, or to
enforce any provisions of any Account, each Grantor will save, indemnify and
keep the Administrative Agent
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and the Lenders harmless from and against all expense, loss or damage suffered
by reason of any defense, setoff, counterclaim, recoupment or reduction or
liability whatsoever the Account Debtor or any other obligor thereunder, arising
out of a breach by such Grantor of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in favor
of such Account Debtor or obligor or its successors from such Grantor (except to
the extent any such expense, loss or damage results from the gross negligence or
willful misconduct of the Administrative Agent or any Lender). The obligations
of the Grantors under this Section 4(g) shall survive the termination of the
other provisions of this Agreement.
SECTION 5. Reporting and Recordkeeping. Each Grantor respectively
covenants and agrees with the Administrative Agent and the Lenders that from and
after the date of this Agreement and until the Secured Obligations have been
paid in full and satisfied:
(a) Maintenance of Records Generally. Such Grantor will keep and
maintain at its own cost and expense complete and accurate records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral and all other dealings with
the Collateral, all in a manner consistent with such Grantor's past practice.
All chattel paper given to such Grantor with respect to any Accounts will be
marked with the following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of First Union National
Bank, as Administrative Agent". For the Administrative Agent's and the Lenders'
further security, such Grantor agrees that upon the occurrence and during the
continuation of any Event of Default, such Grantor shall deliver and turn over
any such books and records directly to the Administrative Agent or its designee.
Such Grantor shall permit any representative of the Administrative Agent to
inspect such books and records in accordance with Section 8.11 of the Credit
Agreement and will provide photocopies thereof to the Administrative Agent upon
its reasonable request.
(b) Certain Provisions Regarding Maintenance of Records and Reporting
Re: Accounts.
(i) In the event any amounts due and owing in excess of
$50,000 individually or $100,000 in the aggregate are in dispute
between any Account Debtor and any Grantor, such Grantor shall provide
the Administrative Agent with written notice thereof promptly after
such Grantor's learning thereof, explaining in detail the reason for
the dispute, all claims related thereto and the amount in controversy.
(ii) Each Grantor will promptly notify the Administrative
Agent in writing if any Account, the face value of which exceeds
$50,000 arises out of a contract with the United States of America, or
any department, agency, subdivision or instrumentality thereof, or of
any state (or department, agency, subdivision or instrumentality
thereof) where such state has a state assignment of claims act or other
law comparable to the Federal Assignment of Claims Act, and will take
any action required or requested by the Administrative Agent or give
notice of the Administrative Agent's Security Interest in such Accounts
under the provisions of the Federal Assignment of Claims Act or any
comparable law or act enacted by any state or local Governmental
Authority. Any notifications or other documents executed and delivered
to the Administrative Agent in connection with the Federal Assignment
of Claims Act or any comparable state law may be promptly filed with
the
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appropriate Governmental Authority by the Administrative Agent or held
by the Administrative Agent until the Administrative Agent decides in
its sole discretion to make any such filing.
(iii) Each Grantor will promptly upon, but in no event later
than five (5) Business Days after: (A) such Grantor's learning thereof,
inform the Administrative Agent, in writing, of any material delay in
such Grantor's performance of any of its obligations to any Account
Debtor and of any assertion of any claims, offsets or counterclaims by
any Account Debtor and of any allowances, credits and/or other monies
granted by such Grantor to any Account Debtor, in each case involving
amounts in excess of $50,000 for any single Account or Account Debtor
or in excess of $100,000 in the aggregate for all Accounts and Account
Debtors; and (B) such Grantor's receipt or learning thereof, furnish to
and inform the Administrative Agent of all adverse information of a
material nature relating to the financial condition of any Account
Debtor with respect to Accounts exceeding $50,000 individually or
$100,000 in the aggregate.
(c) Further Identification of Collateral. Each Grantor will, if so
requested by the Administrative Agent, furnish to the Administrative Agent
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
may reasonably request, all in reasonable detail.
(d) Notices. In addition to the notices required by Section 5(b hereof,
each Grantor will advise the Administrative Agent promptly, in reasonable
detail, (i) of any material Lien or claim made or asserted against any of the
Collateral, (ii) of any material adverse change in the composition of the
Collateral, and (iii) of the occurrence of any other event which could have a
Material Adverse Effect on the Collateral or on the validity, perfection or
priority of the Security Interests.
SECTION 6. Collateral Account.
(a) There is hereby established with the Administrative Agent a
Collateral Account in the name and under the exclusive dominion and control of
the Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to Section 6(b) hereof or any other provision of
this Agreement. Any income received by the Administrative Agent with respect to
the balance from time to time standing to the credit of the Collateral Account,
shall remain, or be deposited, in the Collateral Account, shall vest in the
Administrative Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Secured Obligations until applied thereto as
hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event of
Default, if requested by the Administrative Agent, each Grantor shall instruct
all Account Debtors and other Persons obligated in respect of all Accounts to
make all payments in respect of the Accounts either (i) directly to the
Administrative Agent (by instructing that such payments be remitted to a post
office box which shall be in the name and under the exclusive dominion and
control of the Administrative Agent) or (ii) to one or more other banks in any
state in the United States (by instructing that such
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payments be remitted to a post office box which shall be in the name and under
the exclusive dominion and control of such bank) under a Lockbox Letter
substantially in the form of Exhibit A hereto duly executed by such Grantor and
such bank or under other arrangements, in form and substance satisfactory to the
Administrative Agent, pursuant to which such Grantor shall have irrevocably
instructed such other bank (and such other bank shall have agreed) to remit all
proceeds of such payments directly to the Administrative Agent for deposit into
the Collateral Account or as the Administrative Agent may otherwise instruct
such bank, and thereafter if the proceeds of any Collateral shall be received by
such Grantor, such Grantor will promptly deposit such proceeds into the
Collateral Account and until so deposited, all such proceeds shall be held in
trust by such Grantor for and as the property of the Administrative Agent, for
the benefit of itself and the Lenders and shall not be commingled with any other
funds or property of such Grantor. At any time after the occurrence and during
the continuance of an Event of Default, the Administrative Agent may itself so
instruct such Grantor's Account Debtors. All such payments made to the
Administrative Agent shall be deposited in the Collateral Account.
(c) Upon the occurrence and during the continuance of an Event of
Default, amounts on deposit in the Collateral Account shall be promptly
liquidated and applied to the payment of the Secured Obligations in the manner
specified in Section 10 hereof.
SECTION 7. General Authority.
(a) Each Grantor hereby irrevocably appoints the Administrative Agent
its true and lawful attorney, with full power of substitution, in the name of
such Grantor, the Administrative Agent, the Lenders or otherwise, for the sole
use and benefit of the Administrative Agent and the Lenders, but at such
Grantor's expense, to exercise, at any time and from time to time all or any of
the following powers:
(i) to file the Financing Statements and any financing
statements, financing statement amendments and continuation statements
referred to in Sections 4(a)(i), 4(a)(ii), and 4(a)(iii) hereof,
(ii) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due with respect to
any Collateral or by virtue thereof,
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral,
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral and the Proceeds thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof, and
(v) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference to the
Collateral;
provided that the Administrative Agent shall not take any of the actions
described in this Section 7 except those described in clause (i) above unless an
Event of Default shall have occurred and be
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continuing and the Administrative Agent shall give such Grantor not less than
ten (10) days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral which is
perishable or threatens to decline speedily in value. Each Grantor agrees that
any such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC (to the extent such Section is applicable).
Notwithstanding the foregoing provisions of this Section 7, no Person
shall be entitled to take any action with respect to any part or all of the
Collateral which would constitute a transfer of control in or an assignment by
such Grantor of its right, title or interest in and to any Communications
License in violation of Applicable Law or the then applicable rules, regulations
and written policies of the FCC or any applicable PUC or other Governmental
Authority until any required consents, approvals or authorizations of the FCC or
such PUC or Governmental Authority are obtained.
(b) Each Grantor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(c) Each Grantor also authorizes the Administrative Agent at any time
and from time to time, to execute, in connection with the sale provided for in
Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
(a) If any Event of Default has occurred and is continuing, the
Administrative Agent may exercise on behalf of itself and the Lenders all rights
of a secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, in addition, the Administrative Agent may
(i) withdraw all cash, if any, in the Collateral Account and investments made
with amounts on deposit in the Collateral Account, and apply such monies,
investments and other cash, if any, then held by it as Collateral as specified
in Section 10 hereof and (ii) if there shall be no such monies, investments or
cash or if such monies, investments or cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale, for cash, upon credit or for future delivery, and at such price
or prices as the Administrative Agent may deem satisfactory. The Administrative
Agent or any Lender may be the purchaser of any or all of the Collateral so sold
at any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable law, at any
private sale) and thereafter hold the same, absolutely, free from any right or
claim of whatsoever kind. Each Grantor will execute and deliver such documents
and take such other action as the Administrative Agent deems reasonably
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale the Administrative Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold
(without warranty). The purchaser at any such sale shall hold the Collateral so
sold to it absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of any Grantor. To the extent
permitted by law, such Grantor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale shall be given to
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<PAGE> 184
such Grantor ten (10) days prior to such sale and (A) in case of a public sale,
state the time and place fixed for such sale, and (B) in the case of a private
sale, state the day after which sale may be consummated. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Administrative Agent may fix in the notice of such sale.
At any such sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Administrative Agent may determine. The Administrative
Agent shall not be obligated to make any such sale pursuant to any such notice.
The Administrative Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Administrative Agent until the selling
price is paid by the purchaser thereof, but the Administrative Agent shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Administrative Agent, instead of exercising
the power of sale herein conferred upon it, may proceed by a suit or suits at
law or in equity to foreclose the Security Interests and sell the Collateral, or
any portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction. The Grantors shall remain liable for any deficiency.
(b) For the purpose of enforcing any and all rights and remedies under
this Agreement, the Administrative Agent may (i) require each Grantor to, and
such Grantor agrees that it will, at its expense and upon the request of the
Administrative Agent, forthwith assemble all or any part of the Collateral as
directed by the Administrative Agent and make it available at a place designated
by the Administrative Agent which is, in the Administrative Agent's opinion,
reasonably convenient to the Administrative Agent and such Grantor, whether at
the premises of such Grantor or otherwise, (ii) to the extent permitted by
Applicable Law, enter, with or without process of law and without breach of the
peace, any premise where any of the Collateral is or may be located and, without
charge or liability to the Administrative Agent, seize and remove such
Collateral from such premises, (iii) have access to and use such Grantor's books
and records relating to the Collateral and (iv) prior to the disposition of the
Collateral, store or transfer such Collateral without charge in or by means of
any storage or transportation facility owned or leased by such Grantor, process,
repair or recondition such Collateral or otherwise prepare it for disposition in
any manner and to the extent the Administrative Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
Trademark, trade name, Copyright, Patent or technical process used by such
Grantor.
(c) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) the Administrative Agent may license, or sublicense,
whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Copyright, Patents or Trademarks included in
the Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Administrative Agent shall in its
sole discretion determine;
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<PAGE> 185
(ii) the Administrative Agent may (without assuming any
obligations or liability thereunder), at any time and from time to
time, enforce (and shall have the exclusive right to enforce) against
any licensee or sublicensee all rights and remedies of each Grantor in,
to and under any Copyright License, Patent Licenses or Trademark
Licenses and take or refrain from taking any action under any thereof,
provided, however, that the Administrative Agent shall not take any
such actions that shall result in the failure of such Copyright
License, Patent Licenses or Trademark Licenses to remain in compliance
with all Applicable Laws, and each Grantor hereby releases the
Administrative Agent and each of the Lenders free and harmless from and
against any claims arising out of any action so taken or omitted to be
taken in compliance with the foregoing provisions; and
(iii) upon request by the Administrative Agent, each Grantor
will execute and deliver to the Administrative Agent a power of
attorney, in form and substance satisfactory to the Administrative
Agent, for the implementation of any lease, assignment, license,
sublicense, grant or option, sale or other disposition of a Copyright,
Patent or Trademark. In the event of any such disposition pursuant to
this Section, each Grantor shall supply its know-how and expertise
relating to such Copyrights, the manufacture and sale of the products
bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records
relating to such Copyrights, Patents or Trademarks and to the
distribution of said products, to the Administrative Agent.
SECTION 9. Limitation on Duties of the Administrative Agent Regarding
Collateral. Beyond reasonable care in the custody thereof, the Administrative
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Administrative Agent shall be deemed to have exercised reasonable
care in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and the Administrative Agent shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the
Administrative Agent in good faith.
SECTION 10. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Administrative Agent in accordance with the terms of Section 4.5 of the Credit
Agreement. The Administrative Agent may make distribution hereunder in cash or
in kind or, on a ratable basis, in any combination thereof.
SECTION 11. Concerning the Administrative Agent. The provisions of
Article XIII of the Credit Agreement shall inure to the benefit of the
Administrative Agent in respect of this Agreement and shall be binding upon the
Grantors and the Lenders. In furtherance and not in derogation of the rights,
privileges and immunities of the Administrative Agent therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
20
<PAGE> 186
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or,
when expressly required by this Agreement or the Credit Agreement, all
the Lenders) or, in the absence of such instructions, in accordance
with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by reason of any
action or omission to act on its part (other than any such action or
inaction constituting gross negligence or willful misconduct). The
Administrative Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
any Grantor.
SECTION 12. Appointment of Administrative Agents. At any time or
times, in order to comply with any legal requirement in any jurisdiction or in
order to effectuate any provision of the Loan Documents, the Administrative
Agent may appoint another bank or trust company or one or more other Persons,
either to act as collateral agent or agents, jointly with the Administrative
Agent or separately, on behalf of the Administrative Agent and the Lenders with
such power and authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment (which may, in
the discretion of the Administrative Agent, include provisions for the
protection of such collateral agent similar to the provisions of Section 11
hereof).
SECTION 13. Regulatory Approval.
(a) Notwithstanding anything herein to the contrary, this Agreement,
the other Loan Documents, and the transactions contemplated hereby and thereby,
prior to a foreclosure of the Liens granted under this Agreement and the other
Loan Documents, do not and will not (i) constitute, create or have the effect of
constituting or creating, directly or indirectly, (A) actual or practical
ownership of any Grantor or any Subsidiary of any Grantor by the Administrative
Agent or the Lenders, or (B) control by the Administrative Agent or the Lenders
over the management or any other aspect of the operation of any Grantor or any
Subsidiary of any Grantor which ownership and control remains exclusively and at
all times in any Grantor or such Subsidiary of any Grantor, or (ii) constitute
(A) the transfer, assignment or disposition in any manner of any CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval issued
to any Grantor or any Subsidiary of any Grantor or (B) the transfer of control
of any Grantor or any Subsidiary of any Grantor within the meaning of the
Telecommunications Act of 1996, as amended, or any other Applicable Law.
(b) Notwithstanding any other provision of this Agreement, any
foreclosure on, sale, transfer or other disposition of, or the exercise of any
right to vote or consent with respect to, any of the Collateral or any of the
other collateral referenced in any of the other Loan Documents, or any other
action taken or proposed to be taken by the Administrative Agent hereunder or
under any of the other Loan Documents which would affect the operational, voting
or other control of any CATV Franchise, Communications License, PUC
Authorization or other Governmental Approval of any Grantor or any Subsidiary of
any Grantor shall be in accordance with Applicable Law.
21
<PAGE> 187
(c) Each Grantor will, at its expense, promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers the
Administrative Agent may reasonably request and as may be required by law in
connection with the obtaining of any consent, approval, registration,
qualification, or authorization of the FCC, any state, provincial or other local
regulatory agency or body that exercises jurisdiction over the rates or services
or the ownership, construction or operation of any telecommunications systems or
over Persons who own, construct or operate telecommunications systems, by reason
of the nature or type of business subject to regulation and not pursuant to laws
and regulations of general applicability (a "PUC") or of any other Person deemed
necessary or appropriate for the effective exercise of any rights under this
Agreement or the Security Documents. Without limiting the generality of the
foregoing, if an Event of Default shall have occurred and be continuing, each
Grantor shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or to such
one or more third parties as the Administrative Agent may designate, or to a
combination of the foregoing, each CATV Franchise, Communications License, PUC
Authorization or other Governmental Approval. To enforce the provisions of this
Section 13, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent is empowered to request the appointment of a
receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the FCC, any applicable PUC or other Governmental
Authority an involuntary transfer of control of each such CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval for the
purpose of seeking a bona fide purchaser to whom control will ultimately be
transferred. Each Grantor hereby agrees to authorize such an involuntary
transfer of control upon the request of the receiver so appointed and, if such
Grantor shall refuse to authorize the transfer, its approval may be required by
the court. Upon the occurrence and continuance of an Event of Default, such
Grantor shall further use its best efforts to assist in obtaining approval of
the FCC, any applicable PUC or other Governmental Authority, if required, for
any action or transactions contemplated by this Agreement or the Security
Documents including, without limitation, the preparation, execution and filing
with the FCC, any applicable PUC or other Governmental Authority of the
assignor's or transferor's portion of any application or applications for
consent to the assignment of any CATV Franchise, Communications License, PUC
Authorization or other Governmental Approval or transfer of control necessary
or appropriate under the rules and regulations of the FCC, any applicable PUC or
other Governmental Authority for the approval of the transfer or assignment of
any portion of the assets of such Grantor, together with any CATV Franchise,
Communications License, PUC Authorization or other Governmental Approval.
Because such Grantor agrees that the Administrative Agent's remedy at law for
failure of such Grantor to comply with the provisions of this Section 13 would
be inadequate and that such failure would not be adequately compensable in
damages, such Grantor agrees that the covenants contained in this Section 13 may
be specifically enforced, and such Grantor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants.
SECTION 14. Expense. In the event that any Grantor fails to comply with
the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of the Security Interests are thereby diminished or potentially
diminished or put at risk, the Administrative Agent may, but shall not be
required to, effect such compliance on behalf of such Grantor, and the Grantors
shall reimburse the Administrative Agent for the costs thereof on demand. All
insurance expenses and all expenses of
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<PAGE> 188
protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, any and all excise, stamp, intangibles, transfer,
property, sales, and use taxes imposed by any state, federal, or local authority
or any other Governmental Authority on any of the Collateral, or in respect of
the sale or other disposition thereof, shall be borne and paid by the Grantors;
and if the Grantors fail promptly to pay any portion thereof when due, the
Administrative Agent or any Lender may, at its option, but shall not be required
to, pay the same and charge the Grantors' account therefor, and the Grantors
agree to reimburse the Administrative Agent or such Lender therefor on demand.
All sums so paid or incurred by the Administrative Agent or any Lender for any
of the foregoing and any and all other sums for which any Grantor may become
liable hereunder and all costs and expenses (including reasonable attorneys'
fees, legal expenses and court costs) incurred by the Administrative Agent or
any Lender in enforcing or protecting the Security Interests or any of their
rights or remedies thereon shall be payable by the Grantors on demand and shall
bear interest (after as well as before judgment) until paid at the rate then
applicable to Base Rate Loans under the Credit Agreement and shall be additional
Secured Obligations hereunder.
SECTION 15. Notices. All notices and communications hereunder shall be
given to the addresses and otherwise made in accordance with Section 14.1 of the
Credit Agreement.
SECTION 16. Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default. This Agreement is a Loan Document
executed pursuant to the Credit Agreement.
SECTION 17. Successors and Assigns. This Agreement is for the benefit
of the Administrative Agent and the Lenders and their permitted successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement shall be
binding on each Grantor and its successors and assigns; provide that no Grantor
may assign any of its rights or obligations hereunder without the prior written
consent of the Administrative Agent and the Lenders.
SECTION 18. Amendments, Waivers and Consents. No term, covenant,
agreement or condition of this Agreement may be amended or waived, nor may any
consent be given, except in the manner set forth in Section 14.11 of the Credit
Agreement.
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<PAGE> 189
SECTION 19. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
SECTION 20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
SECTION 21. Consent to Jurisdiction. Each Grantor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and obligations. Each
Grantor hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, any rights
or obligations hereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner provided in Section 14.1 of the
Credit Agreement. Nothing in this Section 21 shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Administrative Agent or
such Lender to bring any action or proceeding against any Grantor or its
properties in the courts of any other jurisdictions.
SECTION 22. Binding Arbitration, Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement or any
of the Loan Documents ("Disputes"), between or among the parties thereto shall
be resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from Loan
Documents executed in the future, or claims concerning any aspect of the past,
present or future relationships arising out or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one-hundred and twenty
(120) days after such demand. These time limitations may not be extended unless
a party hereto shows cause for extension and then such extension shall not
exceed a total of sixty (60) days. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted. Notwithstanding the foregoing, this paragraph shall not apply to
any interest rate swap agreement that is a Loan Document.
24
<PAGE> 190
(b) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT, EACH LENDER, AND EACH GRANTOR, HEREBY ACKNOWLEDGE THAT BY
AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Person may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
SECTION 23. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (b) the invalidity or unenforceability of any
provisions hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 24. Heading. The various headings of this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provisions hereof.
SECTION 25. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
[Signature Page Follows]
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<PAGE> 191
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized officers, all as of the day and
year first written above.
GRANTORS:
KNOLOGY OF COLUMBUS, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF MONTGOMERY, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF PANAMA CITY, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF AUGUSTA, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF CHARLESTON, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 192
KNOLOGY OF SOUTH CAROLINA, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF ALABAMA, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF FLORIDA, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF HUNTSVILLE, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF LOUISIANA, Inc.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY OF TENNESSEE, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 193
KNOLOGY OF BATON ROUGE, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
TTE, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
KNOLOGY HOLDINGS, INC.
[CORPORATE SEAL]
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 194
ADMINISTRATIVE AGENT:
FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender
By:
----------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 195
SCHEDULE I
(to Security Agreement)
Copyrights and Related Rights
<PAGE> 196
SCHEDULE II
(to Security Agreement)
Patents, Trademarks and Related Rights
<PAGE> 197
EXHIBIT A
(to Security Agreement)
[FORM OF LOCKBOX LETTER]
__________________, ___
[Name and Address of Lockbox Bank)
Re: [GRANTOR]
Ladies and Gentlemen:
We hereby notify you that effective __________, __, we have transferred
exclusive ownership and control of our lock-box account(s) no[s]. ______________
________ (the "Lockbox Account[s]") maintained with you under the terms of the
[Lockbox Agreement] attached hereto as Exhibit A (the "Lockbox Agreement[s]") to
First Union National Bank, as Administrative Agent (the "Administrative Agent").
We hereby irrevocably instruct you to make all payments to be made by
you out of or in connection with the Lockbox Account(s) (i) to the
Administrative Agent for credit to account no. __________ maintained by it at
its office at ____________________________ or (ii) as you may otherwise be
instructed by the Administrative Agent.
We also hereby notify you that the Administrative Agent shall be
irrevocably entitled to exercise any and all rights in respect of or in
connection with the Lockbox Account(s), including, without limitation, the right
to specify when payments are to be made out of or in connection with the Lockbox
Account(s).
All funds deposited into the Lockbox Account(s) will not be subject to
deduction, set-off, banker's lien or any other right in favor of any other
person than the Administrative Agent, except that you may set-off against the
Lockbox Account(s) the face amount of any check deposited in and credited to
such Lockbox Account(s) which is subsequently returned for any reason. Your
compensation for providing the service contemplated herein shall be mutually
agreed between you and us from time to time and we will continue to pay such
compensation.
<PAGE> 198
Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below.
Very truly yours,
--------------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Acknowledged and agreed
to as of this ________ day of
_______________, ___.
[LOCKBOX BANK]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 199
EXHIBIT B
(to Security Agreement)
[FORM OF PERFECTION CERTIFICATE]
Reference is made to that certain Security Agreement dated as of ______
___, 1997, executed by the entities set forth on the signature pages thereto
(collectively, the "Grantors" and each, a "Grantor"), in favor of FIRST UNION
NATIONAL BANK, as Administrative Agent (the "Agent"), for the ratable benefit of
the Administrative Agent and the lenders who are or may become a party to the
Credit Agreement referred to below (collectively, the "Lenders"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Credit Agreement dated as of ________ ____, 1998, by and among
KNOLOGY HOLDINGS, INC., a Delaware Corporation, as guarantor (the "Guarantor"),
certain Subsidiaries of the Guarantor, as borrowers and any Additional Borrowers
who may become party thereto (such Subsidiaries and Additional Borrowers being
collectively, the "Borrowers"), the Lenders who are or may become a party
thereto, and FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders
(as amended, restated, or otherwise modified, the "Credit Agreement").
The Grantors hereby certify to the Administrative Agent and each Lender
as follows:
1. Names, etc.
(a) The exact name of each Grantor as it appears in its Articles or
Certificate of Incorporation is as follows:
(b) Except as set forth in Schedule I attached hereto, no Grantor has
changed its identity or structure in any way within the past five years.
(c) The following is a list of all other names (including trade names
or similar appellations) used by any Grantor or any of their respective
divisions or other business units at any time during the past five years:
(d) The taxpayer identification numbers of the Grantors are as follows:
2. Current Locations.
(a) The chief executive offices of each of the Grantors are located at
the following addresses:
Mailing Address Country State
<PAGE> 200
(b) The following are the only locations at which the Grantors maintain
any books or records relating to any Accounts:
Mailing Address Country State
(c) The following are all the locations not identified above where the
Grantors maintain any Inventory or Equipment:
3. Unusual Transactions. Other than as set forth below, all Accounts
have been originated by the Grantors and all Inventory and Equipment have been
acquired by the Grantors in the ordinary course of business.
4. Reliance. The undersigned acknowledges that the Administrative Agent
and the Lenders are entitled to rely and have, in fact, relied on the
information contained herein, and any successor or assign of the Agent or the
Lenders is entitled to rely on the information contained therein.
IN WITNESS WHEREOF, the undersigned have executed this Perfection
Certificate, this ___ day of ______________, 1998.
KNOLOGY of Columbus, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Montgomery, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 201
KNOLOGY of Panama City, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Augusta, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Charleston, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of South Carolina, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Alabama, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 202
KNOLOGY Florida, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY Huntsville, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Louisiana, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Tennessee, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY of Baton Rouge, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 203
TTE, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
KNOLOGY Holdings, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 204
EXHIBIT K-1
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank
as Administrative Agent
FORM OF COMMITMENT INCREASE SUPPLEMENT
<PAGE> 205
AGGREGATE COMMITMENT INCREASE SUPPLEMENT
THIS AGGREGATE COMMITMENT INCREASE SUPPLEMENT, dated as of the
___________, day of 199 ___ (this "Commitment Increase Supplement"), to the
Credit Agreement referred to below is entered into by and among KNOLOGY
HOLDINGS, INC., a Delaware corporation, on behalf of the Borrowers referred to
below, FIRST UNION NATIONAL BANK, as Administrative Agent (the "Administrative
Agent") and ____________________________ (the "Increasing Lender").
Statement of Purpose
The Borrowers are party to a Credit Agreement dated as of December 22,
1998 (as supplemented hereby and as further amended, supplemented or otherwise
modified, the "Credit Agreement"), by and among KNOLOGY HOLDINGS, INC., as
guarantor (the "Guarantor"), certain Subsidiaries of the Guarantor, as
borrowers and any Additional Borrowers who may become party to this Agreement
(such Subsidiaries and Additional Borrowers being collectively, the
"Borrowers"), the Increasing Lender, the other Lenders who are or may become
party thereto and the Administrative Agent.
Pursuant to Section 2.7 of the Credit Agreement, the Borrowers are
entitled to increase the total amount of the Aggregate Commitment thereunder by
accepting the offer of a Lender to increase its Aggregate Commitment thereunder
(such Lender being the "Increasing Lender"). Pursuant to Section 2.7 of the
Credit Agreement, the Increasing Lender, the Borrowers and the Administrative
Agent hereby agree that the Aggregate Commitment of the Increasing Lender under
the Credit Agreement shall be increased as set forth herein and in connection
therewith shall execute this Commitment Increase Supplement. All capitalized
terms used and not defined herein shall have the meanings given thereto in the
Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. Aggregate Commitment Increase.
Section 1.1 Aggregate Commitment Increase. Pursuant to Section 2.7 of
the Credit Agreement, the Increasing Lender hereby agrees that its Aggregate
Commitment under the Credit Agreement shall be increased to $______________.
Section 1.2 Commitment Adjustment. If any Loans are outstanding on the
date hereof, the Administrative Agent shall make such transfer of funds as are
necessary in order that the outstanding balance of such Loans reflects the
Commitment Percentages of the Lenders after giving effect to the increase in the
Aggregate Commitment of the Increasing Lender and the corresponding increase in
the Aggregate Commitments pursuant hereto.
<PAGE> 206
Section 1.3 Updated Schedule. Attached hereto is an updated Schedule 1
to the Credit Agreement revised to include the increase in the Increasing
Lender's Commitment thereunder and the corresponding increase in the total
amount of the Aggregate Commitments.
SECTION 2. Representations and Warranties of the Borrower.
The Guarantor, on behalf of itself and the Borrowers hereby confirms
that each of the representations and warranties under the Loan Documents is true
and correct in all material respects as of the date hereof unless such
representation or warranty relates to an earlier date, in which such case it was
true and correct as of such earlier date, and that no Default or Event of
Default has occurred or is continuing under the Credit Agreement.
SECTION 3. General Provisions.
Section 3.1 Limited Effect. Except as supplemented hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Agreement shall not be deemed (i) to be a waiver
of, or consent to, or a modification or amendment of, any other term or
condition of the Credit Agreement or (ii) to prejudice any right or rights which
the Agents or Lenders may now have or may have in the future under or in
connection with the Credit Agreement or the Loan Documents or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
Section 3.2 Costs and Expenses. The Borrowers hereby agree to pay or
reimburse the Administrative Agent for all reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation and execution of this Agreement including, without limitation, the
reasonable fees and disbursements of counsel.
Section 3.3 Counterparts. This Agreement may be executed by one or more
of the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
Section 3.4 Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
[SIGNATURE PAGES FOLLOW]
<PAGE> 207
IN WITNESS WHEREOF the undersigned have duly executed this Aggregate
Term Loan Commitment Increase Supplement as of the date first above written.
KNOLOGY HOLDINGS, INC. on behalf of
the Borrowers
[CORPORATE SEAL]
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
[SIGNATURE PAGES CONTINUE]
<PAGE> 208
FIRST UNION NATIONAL BANK, as
Administrative Agent
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
[SIGNATURE PAGES CONTINUE]
<PAGE> 209
[NEW LENDER]
[CORPORATE SEAL]
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 210
EXHIBIT K-2
to
Credit Agreement dated as of December 22, 1998
by and among
KNOLOGY Holdings, Inc.,
as Guarantor,
Certain Subsidiaries of the Guarantor,
as Borrowers,
the Lenders party thereto,
and
First Union National Bank
as Administrative Agent
FORM OF NEW LENDER SUPPLEMENT
<PAGE> 211
NEW LENDER SUPPLEMENT
THIS NEW LENDER SUPPLEMENT dated as of the _____ day of_______, 19
(this "New Lender Supplement" ), to the Credit Agreement referred to below is
entered into by and among KNOLOGY HOLDINGS, INC., a Delaware corporation on
behalf of the Borrowers referred to below, FIRST UNION NATIONAL BANK, as
Administrative Agent (the "Administrative Agent") and ________________ (the "New
Lender).
Statement of Purpose
The Borrowers are party to a Credit Agreement dated as of December 22,
1998 (as supplemented hereby and as further amended, supplemented or otherwise
modified, the "Credit Agreement"), by and among KNOLOGY HOLDINGS, INC., as
guarantor (the "Guarantor"), certain Subsidiaries of the Guarantor, as
borrowers and any Additional Borrowers who may become party to this Agreement
(such Subsidiaries and Additional Borrowers being collectively, the "Borrower"),
the Lenders who are or may become party thereto and the Administrative Agent.
Pursuant to Section 2.7 of the Credit Agreement, the Borrowers are
entitled to increase the total amount of the Aggregate Commitment thereunder by
accepting the offer of any Person (other than a Lender) constituting an Eligible
Assignee to become a new Lender thereunder. Pursuant to Section 2.7 of the
Credit Agreement, the New Lender, the Borrowers and the Administrative Agent
hereby agree that the New Lender shall be a Lender under the Credit Agreement
and in connection therewith execute this New Lender Supplement. All capitalized
terms used and not defined herein shall have the meanings given thereto in the
Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. Joinder of New Lender.
Section 1.1 Joinder. Pursuant to Section 2.7 of the Credit Agreement,
the New Lender hereby agrees that it is a Lender under the Credit Agreement as
if a signatory thereto on the Closing Date, and the New Lender shall comply
with and be subject to and have the benefit of all of the terms, conditions,
covenants, agreements and obligations set forth therein. The New Lender hereby
agrees that each reference to a "Lender" or the "Lenders" in the Credit
Agreement shall include the New Lender. The New Lender acknowledges that it has
received a copy of the Credit Agreement and that it has read and understands the
terms thereof.
Section 1.2 Commitment Adjustment. If any Loans are outstanding on the
date hereof, the Administrative Agent shall make such transfers of funds as are
necessary in order that the outstanding balance of such Loans reflects the
Commitment Percentages of the Lenders after giving effect to the joinder of the
New Lender pursuant to this New Lender Supplement and any increase in the
Aggregate Commitments pursuant hereto.
<PAGE> 212
Section 1.3 Updated Schedule. Attached hereto is an updated Schedule I
to the Credit Agreement revised to include the joinder of the New Lender as a
Lender and its Commitment thereunder and the corresponding increase in the total
amount of the Aggregate Commitments.
SECTION 2. Representations and Warranties.
Section 2.1 The Guarantor hereby confirms on behalf of itself and the
Borrowers that each representation and warranty under the Loan Documents is true
and correct in all material respects as of the date hereof unless such
representation or warranty relates to an earlier date, in which case it was true
and correct as of such earlier date and that no Default or Event of Default has
occurred or is continuing under the Credit Agreement.
Section 2.2 Representations and Warranties of the New Lender. The New
Lender hereby represents and warrants that it is an Eligible Assignee, and it
has complied with the provisions of Section 4.11(e) if applicable thereto.
SECTION 3. General Provisions.
Section 3.1 Limited Effect. Except as supplemented hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Agreement shall not be deemed (i) to be a waiver
of, or consent to, or a modification or amendment of, any other term or
condition of the Credit Agreement or (ii) to prejudice any right or rights which
the Agents or Lenders may now have or may have in the future under or in
connection with the Credit Agreement or the Loan Documents or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
Section 3.2 Costs and Expenses . The Borrowers hereby agree to pay or
reimburse the Administrative Agent for all reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation and execution of this Agreement including, without limitation, the
reasonable fees and disbursements of counsel.
Section 3.3 Counterparts. This Agreement may be executed by one or more
of the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
Section 3.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF.
[SIGNATURE PAGES FOLLOW]
2
<PAGE> 213
IN WITNESS WHEREOF the undersigned have duly executed this Aggregate
Term Loan Commitment Increase Supplement as of the date first above written.
KNOLOGY HOLDINGS, INC. on behalf
of the Borrowers
[CORPORATE SEAL]
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
[SIGNATURE PAGES CONTINUE]
<PAGE> 214
FIRST UNION NATIONAL BANK, as
Administrative Agent
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
[SIGNATURE PAGES CONTINUE]
<PAGE> 215
[NEW LENDER]
[CORPORATE SEAL]
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE> 216
SCHEDULE 1.1(a): LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
COMMITMENT
LENDER PERCENTAGE COMMITMENT
- ------ ---------- ----------
<S> <C> <C>
First Union National Bank 100% $50,000,000
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704)383-0281
Telecopy No.: (704)382-0288
</TABLE>
<PAGE> 217
SCHEDULE 1.1(b)
DESIGNATED BORROWERS
None.
<PAGE> 218
SCHEDULE 2.5(b)
AFFILIATED PARTIES
ITC Holding Company, Inc. Affiliates
KNOLOGY Holdings, Inc. Affiliates
AT&T Ventures
Century Telephone Enterprises, Inc.
Globe Telecommunications, Inc.
HeadHunter, Inc.
ITC Deltacom, Inc.
ITC Globe, Inc.
ITC Service Company
InterCall, Inc.
Interstate Telephone Company
J. Smith Lanier & Co.
MindSpring
Powertel, Inc.
SCANA Communications, Inc. and Affiliates
South Atlantic Ventures
Valley Telephone Company
<PAGE> 219
SCHEDULE 5.2(d)
(Schedule of Required Consents to the Granting of Security Interest)
REGULATORY MATTERS
- ------------------
1. SOUTH CAROLINA
A. CATV Franchises
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Consent to Date by which
Franchising Security Interest Consent to Consent is
Authority Franchise Holder Required Security Obtained Required
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charleston KNOLOGY of N N/A N/A
Charleston
- --------------------------------------------------------------------------------------------------
North Charleston KNOLOGY of N (Controlling N/A N/A
Charleston Regulations are
silent)(1)
- --------------------------------------------------------------------------------------------------
Charleston County KNOLOGY of N N/A N/A
(pending - Charleston
anticipated
12/15/98)
- --------------------------------------------------------------------------------------------------
Hanahan KNOLOGY of N (Document N/A N/A
Charleston silent on
assignment)(1)
- --------------------------------------------------------------------------------------------------
Summerville KNOLOGY of N (Document N/A N/A
Charleston silent on
assignment)(1)
- --------------------------------------------------------------------------------------------------
Lincolnville KNOLOGY of N (Document N/A N/A
Charleston silent on
assignment)(1)
- --------------------------------------------------------------------------------------------------
Goose Creek KNOLOGY of N N/A N/A
Charleston
- --------------------------------------------------------------------------------------------------
Dorchester KNOLOGY of N (Document N/A N/A
Charleston silent on
assignment)(1)
- --------------------------------------------------------------------------------------------------
Berkley County KNOLOGY of N (Document N/A N/A
Charleston silent on
assignment)(1)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) Local counsel to confirm that lack of assignment provisions permits granting
of security interest.
<PAGE> 220
B. PUC Authorizations
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Security Interest Security Interest Consent is
Certificate Purpose Certificate Holder Required Obtained Required
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Local Exchange Held by Y N Borrowers to use
KNOLOGY of Best Efforts to
South Carolina for Obtain Consent
the Benefit of TTE After Closing Date
- ----------------------------------------------------------------------------------------------------------
Inter-exchange Held by Y N Borrowers to use
KNOLOGY of Best Efforts to
South Carolina for Obtain Consent
the Benefit of TTE After Closing Date
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 221
11. GEORGIA
A. CATV Franchises
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Franchising Security Interest Security Interest Consent is
Authority Franchise Holder Required Obtained Required
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Augusta/ KNOLOGY of N N/A N/A
Richmond County Augusta
- -------------------------------------------------------------------------------------------------------------
Town of Bibb City KNOLOGY of Y Waived-- N/A
Columbus Borrower used
(Francise in name best efforts to
American Cable, obtain consent, but
Inc. due to request was
Municipality's denied.
refusal to assign.)
- -------------------------------------------------------------------------------------------------------------
Harris County KNOLOGY of Y Waived-- N/A
Columbus Borrower used
(Francise in name best efforts to
American Cable, obtain consent, but
nc. due to request was
Municipality's denied.
refusal to assign.)
- -------------------------------------------------------------------------------------------------------------
Columbia County KNOLOGY of N N/A N/A
Augusta
- -------------------------------------------------------------------------------------------------------------
Columbus KNOLOGY of Consent contained N Borrowers to use
(Renewal) Columbus in Renewal Best Efforts to
Application Obtain Renewal
After Closing Date
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 222
III. FLORIDA
A. CATV Franchises
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Franchising Security Interest Security Interest Consent is
Authority Franchise Holder Required Obtained Required
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Panama City KNOLOGY of Y Y 1/23/98 N/A
Beach Panama City
- ---------------------------------------------------------------------------------------------------
Panama City KNOLOGY of N N/A N/A
Panama City
- ---------------------------------------------------------------------------------------------------
Bay County KNOLOGY of N Y 1/23/98 N/A
Panama City
- ---------------------------------------------------------------------------------------------------
Lynn Haven KNOLOGY of N N/A N/A
Panama City
- ---------------------------------------------------------------------------------------------------
Cedar Grove KNOLOGY of N N/A N/A
Panama City
- ---------------------------------------------------------------------------------------------------
</TABLE>
B. PUC Authorizations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Security Interest Security Interest Consent is
Certificate Purpose Certificate Holder Required Obtained Required
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Local Exchange KNOLOGY of Y N Borrowers to use
Florida Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
Inter-exchange KNOLOGY of Y N Borrowers to use
Florida Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 223
IV. ALABAMA
A. CATV Franchises
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Franchising Security Interest Security Interest Consent is
Authority Franchise Holder Required Obtained Required
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Montgomery KNOLOGY of N N/A N/A
Montgomery
- -------------------------------------------------------------------------------------------------------------
Prattville KNOLOGY of N N/A N/A
Montgomery
- -------------------------------------------------------------------------------------------------------------
Autauga County KNOLOGY of N N/A N/A
Montgomery
- -------------------------------------------------------------------------------------------------------------
Maxwell AFB KNOLOGY of N N/A N/A
Montgomery
- -------------------------------------------------------------------------------------------------------------
Huntsville KNOLOGY of N N/A N/A
Huntsville
- -------------------------------------------------------------------------------------------------------------
Madison KNOLOGY of Y N Borrowers to use
Huntsville Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
Madison County KNOLOGY of Y N Borrowers to use
Huntsville Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
Limestone County KNOLOGY of N (Document is N/A N/A
Huntsville silent on
assignment)1
- -------------------------------------------------------------------------------------------------------------
Redstone Arsenal KNOLOGY of Franchise not N/A N/A
Huntsville presently
documented or
required to be
documented
- -------------------------------------------------------------------------------------------------------------
</TABLE>
B. PUC Authorizations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Consent to Consent to Date by which
Security Interest Security Interest Consent is
Certificate Purpose Certificate Holder Required Obtained Required
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Local Exchange KNOLOGY of Y N Borrowers to use
Montgomery Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
Inter-exchange KNOLOGY of Y N Borrowers to use
Montgomery Best Efforts to
Obtain Consent
After Closing Date
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 224
HEADEND AND OTHER MATERIAL LEASES
(KCLH in the process of reviewing)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Date by which
Landlord Waiver Landlord Waiver
Collateral and Estoppel and Estoppel
CATV System or Assignment Agreement Agreement is
Headend Site Lease Property Delivered Obtained Required
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Panama City Panama City Y Y, 12/18/98 Closing Date
Montgomery Montgomery Y Y, 12/21/98 Borrowers to use
Form Provided by Best Efforts to
Landlord Obtain Form
Consent Prepared
by Lender After
Closing Date
- ---------------------------------------------------------------------------------------------------------
Columbus (Lot 96, Columbus Y, 12/22/98 Y, 12/23/98 Borrowers to use
Coweta Reserve, Best Efforts to
Muscogee County) Obtain Form
Consent Prepared
by Lender After
Closing Date
- ---------------------------------------------------------------------------------------------------------
West Point (lease Network Y Y, 12/21/98 Closing Date
with Interstate Operations Center
FiberNet dated as
of 8/23/97)
- ---------------------------------------------------------------------------------------------------------
Georgia Power POP Site N N Borrowers to use
Lease Agreement Best Efforts to
10/5/98 Obtain Consent
After Closing
Date.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 225
OTHER MATERIAL CONTRACTS
- ------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Consent to
Assignment or
Security Interest Date by which
Material Contract Required Consent Obtained Consent is Required
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEAG Fiber Capacity Y Y 1/23/98 N/A
Lease
- ---------------------------------------------------------------------------------------------------
ITC Deltacom Fiber Y Y 1/23/98 and N/A
Capacity Lease Blanket Consent
Dated 12/16/98
- ---------------------------------------------------------------------------------------------------
ITC Deltacom Y Y 1/23/98 and Closing Date
Telecomm. Agreement Blanket Consent
Dated 12/16/98
- ---------------------------------------------------------------------------------------------------
First Amendment to Y Y 1/23/98 N/A
Service Agreement
Above dated 7/7/97
- ---------------------------------------------------------------------------------------------------
ITC Deltacom Internet Y Y 1/23/98 and N/A
Access (Vipernet) Blanket Consent
Contract (9/1/98) Dated 12/16/98
- ---------------------------------------------------------------------------------------------------
Interstate FiberNet Y Y 1/23/98 and N/A
Collocation Agreement Blanket Consent
dated 7/1/97 Dated 12/16/98
- ---------------------------------------------------------------------------------------------------
Interstate FiberNet N Blanket Consent N/A
Collocation Agreement Dated 12/16/98
dated 10/5/98
- ---------------------------------------------------------------------------------------------------
Palmetto Net Fiber N/A N/A N/A
Capacity Lease
(This is an oral contract.
Knology will attempt to
get a consent.)
- ---------------------------------------------------------------------------------------------------
BTI Fiber Capacity Y Y 12/16/98 Closing Date
Lease
- ---------------------------------------------------------------------------------------------------
BTI Operator Services Y Y 12/16/98 Closing Date
Agreement
- ---------------------------------------------------------------------------------------------------
BTI Toll Agreement Y Y 12/16/98 Closing Date
- ---------------------------------------------------------------------------------------------------
SCNet Toll Agreement N (Document silent N/A N/A
on assignment)1
- ---------------------------------------------------------------------------------------------------
Switching Agreement Y Y 12/16/98 Closing Date
with Interstate/Valley
Telephone dated 5/l/98
- ---------------------------------------------------------------------------------------------------
Interstate Telephone N (Document silent Y 1/23/98 N/A
Company Billing on assignment)1
Company Billing and
Collection Contract
(4/2/97)
- ---------------------------------------------------------------------------------------------------
Operations & Related Y Y 1/23/98 N/A
Services Agreement with
Eastern Telecom, Inc.
d/b/a Interquest dated as
of 4/14/97
- ---------------------------------------------------------------------------------------------------
BellSouth Y Waived N/A
Interconnection
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 226
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Agreement
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
7/14/96 Interconnection Y Waived N/A
Agreement with
Illuminet
- -----------------------------------------------------------------------------
Network access N N/A N/A
agreement dated as of
July 1, 1998 between
SCANA and
KNOLOGY Holdings
- -----------------------------------------------------------------------------
</TABLE>
RAILROAD CROSSING LICENSES
- --------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Landlord
Waier and Date by which
Collateral Estoppel Landlord Waver and
Assignment Agreement Estoppel Agreement is
Licenses Delivered Obtained Required
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Agreement between Borrower to Deliver N Borrowers to use Best
Central of Georgia after Closing Date if Efforts to Obtain
Railroad Company Landlord Waiver Consent After Closing
(Norfolk Southern) and Obtained Date.
American Cable
Company for wireline
crossings at 3181' NE of
MP R-4 and 1417' NE of
MP R-4 dated / /90
- -----------------------------------------------------------------------------------------------
Agreement between Borrower to Deliver N Borrowers to use Best
Central of Georgia after Closing Date if Efforts to Obtain
Railroad Company Landlord Waiver Consent After Closing
(Norfolk Southern) and Obtained Date.
American Cable
Company for wireline
crossing at 1630' NE of
MP R-4 dated / -/90
- -----------------------------------------------------------------------------------------------
Agreement between Borrower to Deliver N Borrowers to use Best
Central of Georgia after Closing Date if Efforts to Obtain
Railroad Company Landlord Waiver Consent After Closing
(Norfolk Southern) and Obtained Date.
American Cable
Company for wireline
crossing at MP M-285
plus 800' dated 10/15/92
- -----------------------------------------------------------------------------------------------
Railroad Crossing Borrower to Deliver N Borrowers to use Best
Agreement at MP 340-A after Closing Date if Efforts to Obtain
plus 1,236 feet (listed in Landlord Waiver Consent After Closing
No. 7 on Schedule 3.14) Obtained Date.
between Norfolk
Southern Railway Co.
and Cable Alabama
dated 5/1/97
- -----------------------------------------------------------------------------------------------
License to construct and Borrower to Deliver N Borrowers to use Best
maintain communication after Closing Date if Efforts to Obtain
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 227
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
cable crossing property Landlord Waiver Consent After Closing
at 179' W of MP 347-A Obtained Date.
and at 1,865' E of MP
349-A between Southern
Railway Co. (licensor)
and Satellite Cable TV
Corp. (licensee) dated
1/29/79
- ---------------------------------------------------------------------------------------------------
License to construct and Borrower to Deliver N Borrowers to use Best
maintain CATV wires after Closing Date if Efforts to Obtain
over property at Milepost Landlord Waiver Consent After Closing
340-A plus 1236 feet at Obtained Date.
or near Huntsville,
Madison County, AL
between Norfolk
Southern Railway Co.
(licensor) and Cable
Alabama Corp. (licensee)
dated 5/l/97
- ---------------------------------------------------------------------------------------------------
License to install & Borrower to Deliver N Borrowers to use Best
maintain CATV wires after Closing Date if Efforts to Obtain
over property at 179' W Landlord Waiver Consent After Closing
of MP 347-A and 1,864' Obtained Date.
E of MP 349-A between
Norfolk Southern
Railway Co. (licensor)
and Cable Alabama
Corp. (licensee) dated
3/17/94
- ---------------------------------------------------------------------------------------------------
License to install & Borrower to Deliver N Borrowers to use Best
maintain CATV wires after Closing Date if Efforts to Obtain
over property at 940' W Landlord Waiver Consent After Closing
of MP 344-A between Obtained Date.
Norfolk Southern
Railway Co. (licensor)
and Cable Alabama
Corp. (licensee) dated
2/3/94
- ---------------------------------------------------------------------------------------------------
License to construct & Borrower to Deliver N Borrowers to use Best
maintain aerial television after Closing Date if Efforts to Obtain
cable over property at Landlord Waiver Consent After Closing
280' W of MP 346-A Obtained Date.
between Norfolk
Southern Railway Co.
(licensor) and Cable
Alabama (licensee) dated
4/30/87
- ---------------------------------------------------------------------------------------------------
Wireline Crossing Borrower to Deliver N Borrowers to use Best
Agreement dated as of after Closing Date if Efforts to Obtain
April 29,1998 with CSX Landlord Waiver Consent After Closing
Obtained Date.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 228
SCHEDULE 6.1(a)
JURISDICTIONS OF ORGANIZATION AND QUALIFICATION
TO DO BUSINESS AS FOREIGN CORPORATION
<TABLE>
<CAPTION>
Jurisdiction Jurisdiction
Guarantor of Organization of Qualification
- --------- --------------- ----------------
<S> <C> <C>
KNOLOGY Holdings, Inc. Delaware Alabama
Georgia
South Carolina
</TABLE>
<TABLE>
<CAPTION>
Subsidiaries
- ------------
<S> <C> <C>
KNOLOGY of Alabama, Inc. Delaware Alabama
KNOLOGY of Augusta, Inc. Delaware Georgia
KNOLOGY of Baton Rouge, Inc. Delaware N/A
KNOLOGY of Charleston, Inc. Delaware South Carolina
KNOLOGY of Columbus, Inc. Delaware Georgia
KNOLOGY of Florida, Inc. Delaware Florida
KNOLOGY of Georgia, Inc. Delaware Georgia
KNOLOGY of Huntsville, Inc. Delaware Alabama
KNOLOGY of Louisiana, Inc. Delaware Louisiana
KNOLOGY of Montgomery, Inc. Alabama N/A
KNOLOGY of Panama City, Inc. Florida N/A
KNOLOGY of South Carolina, Inc. Delaware North Carolina
South Carolina
KNOLOGY of Tennessee, Inc. Delaware Tennessee
TTE, Inc. South Carolina N/A
</TABLE>
<PAGE> 229
SCHEDULE 6.1(b)
SUBSIDIARIES AND CAPITALIZATION
<TABLE>
<CAPTION>
Guarantor Shares of Stock Shares of Stock Issued
--------- Authorized and Outstanding
--------------- ----------------------
<S> <C> <C>
KNOLOGY Holdings, Inc. 16,000,000 common stock; 49,852 preferred stock;
100,000 preferred stock 444,100 warrants to
purchase 1,658 preferred
stock; SCANA warrants
to purchase 753 preferred
stock; options to
purchase 569,250 common
stock
SUBSIDIARY Shares of Authorized Shares Issued
---------- -------------------- and Outstanding
---------------
KNOLOGY of Alabama, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Augusta, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Baton Rouge, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Charleston, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Columbus, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Florida, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Georgia, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Huntsville, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Louisiana, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Montgomery, Inc. (1) 200,000 (Common Stock) 1,000 (Common Stock)
1,000 (Preferred Stock) 197 (Preferred Stock)
KNOLOGY of Panama City, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of South Carolina, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
KNOLOGY of Tennessee, Inc. (1) 1,000 (Common Stock) 1,000 (Common Stock)
TTE, Inc. (2) 1,000 (Common Stock) 837.4 (Common Stock)
</TABLE>
- -------------------
(1) Wholly-owned by KNOLOGY Holdings, Inc.
(2) Wholly-owned by KNOLOGY of South Carolina, Inc.
<PAGE> 230
SCHEDULE 6.1(e)
COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS
The CATV Franchise in Columbus, Georgia is operating under an extension.
KNOLOGY of Huntsville, Inc.
WNHN243 currently is operating under Special Temporary Authorization until
4/30/99.
<PAGE> 231
SCHEDULE 6.1(h)
ENVIRONMENTAL
(1) KNOLOGY of Charleston, Inc.
Report of Final Geotechnical Exploration
for
KNOLOGY Office Building & Communications Complex
North Charleston, South Carolina
S&ME JOB NO. 1131-98-275
Prepared By: S&ME, Inc.
July 7, 1998
(2) KNOLOGY of Augusta, Inc.
Report of Phase I Environmental Site Assessment
Proposed KNOLOGY Office Building Site
Augusta, Georgia
Prepared By: Graves Engineering Services, Inc.
March 2, 1998
(3) KNOLOGY of Huntsville, Inc,
Report of Phase I & II Environmental Site Assessment
CABLE ALABAMA 2401 10th Street
Huntsville, Alabama
Prepared By: Law Engineering And Environmental Services, Inc.
October 21, 1998 & November 24, 1998
(4) KNOLOGY of Huntsville, Inc.
Report of Phase I Environmental Site Assessment
CABLE ALABAMA 915 Miller Blvd.
Madison, Alabama
Prepared By: Law Engineering And Environmental Services, Inc.
October 21, 1998
<PAGE> 232
SCHEDULE 6.1(i)
SUMMARY OF ERISA PLANS
<TABLE>
<CAPTION>
Plan Location Plan Year
---- -------- ---------
<S> <C> <C>
Medical/Dental All locations except Montgomery February 1
Medical/Dental Montgomery June 1
Dental Montgomery March 1
401(k) All locations January 1
Flexible Spending All locations January 1
<CAPTION>
Plan Eligibility Third Party Provider
---- ----------- --------------------
<S> <C> <C>
Medical/Dental Full-time/1st of month after 30 days Mid-South Insurance Company
Medical/Dental Full-time/1st of month after 30 days United Healthcare-Insurance Company
Dental Full-time/1st of month after 30 days Guardian Insurance Company
401(k) Full-time/part-time/3 months Benefit Elect
Flexible Spending Full-time/part-time/1st of month after 30 days Benefit Elect
</TABLE>
<PAGE> 233
SCHEDULE 6.1(1)
MATERIAL CONTRACTS - PART I
1. Placement Agreement dated October 16, 1997 between KNOLOGY Holdings,
Inc. and Morgan Stanley & Co. Incorporated, for itself and the other
Placement Agents.
2. Agreement and Plan of Merger dated December 5, 1997 among KNOLOGY
Holdings, Inc., KNOLOGY of Panama City, Inc., Beach Cable, Inc. and L.
Charles Hilton.
3. Indenture dated as of October 22, 1997 between KNOLOGY Holdings, Inc.
and United States Trust Company of New York, as Trustee, relating to
the 11 7/8% Senior Discount Notes Due 2007 of KNOLOGY Holdings, Inc.
4. Registration Rights Agreement dated October 22, 1997 between KNOLOGY
Holdings, Inc., the Placement Agents and SCANA Communications, Inc.
5. Unit Purchase Agreement dated as of October 16, 1997 between KNOLOGY
Holdings, Inc. and SCANA Communications, Inc.
6. Warrant Agreement dated as of October 22, 1997 between KNOLOGY
Holdings, Inc. and United States Trust Company of New York.
7. Warrant Registration Rights Agreement dated as of October 22, 1997
between KNOLOGY Holdings, Inc. and United States Trust Company of New
York.
8. Sub-Lease Indenture dated November 1, 1995 between J. Smith Lanier &
Co. Financial Services, Inc. and ITC Holding Company, Inc.
9. Lease Agreement dated April 15, 1996 between D.L. Jordan and American
Cable Company, Inc.
10. Lease Agreement dated April 19, 1996 between B.E. Satterwhite and
American Cable Company, Inc.
11. Pole Attachment Agreement dated January 1, 1998 between Gulf Power
Company and Beach Cable, Inc.
12. Lease Agreement dated August 19, 1996 between Vaughn/Taylor, L.L.C. and
Montgomery Cablevision and Entertainment, Inc.
13. Lease Agreement dated August 20, 1996 between William H. McLemore and
Montgomery Cablevision and Entertainment, Inc.
14. Lease Agreement dated November 7, 1996 between Samuel B. Hewitt and
American Cable Company, Inc.
15. Site Agreement dated November 19, 1996 between John Walter Stowers and
Montgomery Cablevision and Entertainment, Inc.
16. Office Lease Agreement dated February 15, 1997 between Scott P.
Pinckard and Cybernet Holdings, Inc.
1
<PAGE> 234
17. Lease Agreement dated April 2, 1997 between Interstate Telephone
Company and Cybernet Holding, Inc.
18. Lease Agreement dated May 15, 1997 between Southern Boulevard
Corporation and Cybernet Holding d/b/a Montgomery Cablevision and
Entertainment, Inc.
19. Lease Agreement dated August 23, 1997 between Interstate FiberNet,
Inc. and KNOLOGY Holdings, Inc.
20. Telecommunications Facility Lease and Capacity Agreement, dated
September 10, 1996, between Troup EMC Communications, Inc. and Cybernet
Holding, Inc.
21. Master Pole Attachment Agreement dated January 12, 1998 between South
Carolina Electric and Gas and KNOLOGY Holdings, Inc. d/b/a/ KNOLOGY of
Charleston.
22. Pole Attachment Agreement dated May 21, 1990 between the Georgia Power
Company and American Cable Company.
23. License Agreement for Pole Attachments dated June 19, 1990 between
South Central Bell Telephone Company and Montgomery Cablevision and
Entertainment, Inc.
24. Agreement for Attachments of Cables, Amplifiers, and Associated
Equipment for the Provision of Cable Television Service dated March 1,
1993 between Alabama Power Company and Montgomery Cablevision and
Entertainment, Inc.
25. License Agreement for Pole Attachments and/or Conduit Occupancy dated
July 28, 1993 between BellSouth Telecommunications, Inc. d/b/a Southern
Bell Telephone and Telegraph Company and American Cable Company.
26. License Agreement dated September 29, 1995 between Montgomery
Cablevision and Entertainment, Inc. and American Communications
Services of Montgomery, Inc.
27. License Agreement dated January 17, 1996 between American Cable, Inc.
and American Communication Services of Columbus, Inc.
28. Addendum to License Agreement dated April 21, 1997 between American
Cable, Inc. and American Communication Services of Columbus, Inc.
29. Lease Agreement, dated December 5, 1997 between The Hilton Company and
KNOLOGY of Panama City, Inc.
30. Billing and Collection Services Agreement dated April 2, 1997 between
Interstate Telephone Company and Cybernet Holding, Inc.
31. Operator and Related Services Agreement dated April 14, 1997 between
Eastern Telecom Inc. d/b/a Inter Quest and Cybernet Holding, Inc.
32. Agreement for Telecommunication Services dated May 1, 1997 between
Cybernet Holding, Inc. and DeltaCom, Inc.
33. First Addendum to Service Agreement dated July 7,1997 between KNOLOGY
Holdings, Inc. and DeltaCom, Inc.
2
<PAGE> 235
34. Interconnection Agreement among BellSouth Communications, Inc.,
Cybernet Holding, Inc., American Cable, Inc. and Montgomery Cablevision
& Entertainment, Inc., dated April 15, 1997.
35. Amendment To Interconnection Agreement among BellSouth
Telecommunications, Inc., Cybernet Holding, Inc., American Cable, Inc.
and Montgomery Cablevision & Entertainment, dated May 1, 1997.
36. Second Amendment To Interconnection Agreement among BellSouth
Telecommunications, Inc., Cybernet Holding, Inc., American Cable, Inc.
and Montgomery Cablevision & Entertainment, dated July 7, 1997.
37. Commitment Letter from First Union National Bank to KNOLOGY Holdings,
Inc., dated October 16, 1998.
38. Certificate of Membership with National Cable Television Cooperative
dated January 29, 1996 of Cybernet Holding, Inc.
39. Stockholders' Agreement among KNOLOGY Holdings, Inc. and certain
stockholders thereof dated as of December 8, 1995 as amended by
Amendment No. 1 to Stockholders' Agreement dated as of January 25, 1996
and Amendment No. 2 to Stockholders' Agreement dated as of April 18,
1996.
40. Amended and Restated Agreement Among Shareholders among KNOLOGY
Holdings, Inc. and certain shareholders thereof dated as of July 28,
1997.
41. Ordinance (Harris County, Georgia) dated April 6, 1982.
42. Ordinance (Harris County, Georgia) to Amend Cable Franchise Ordinance
of April 6, 1982, dated November 5, 1996.
43. Ordinance (Bibb City, Georgia) dated October 5, 1990.
44. Ordinance No. 88-53 (Columbus, Georgia) dated May 17, 1988.
45. Ordinance No. 89-3 (Columbus, Georgia) dated January 10, 1989.
46. Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990.
47. Ordinance No. 50-76 (Montgomery, Alabama).
48. Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990.
49. Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995.
50. Resolution No. 92-7 (Panama City Beach, Florida) dated July 23, 1992.
51. License (Bay County, Florida) dated January 5, 1993.
52. Resolution No. 97-22 (Panama City Beach, Florida) dated December 3,
1997.
53. Resolution No. 2075 (Bay County, Florida) dated November 18, 1997.
54. Collocation Agreement between Interstate FiberNet and Cybernet Holding,
Inc., dated July 1, 1997.
3
<PAGE> 236
55. License Agreement for Pole Attachments and/or Conduit Occupancy in
Florida dated September l5, 1993 between BellSouth Telecommunications,
Inc. d/b/a Southern Bell Telephone and Telegraph and Beach Cable, Inc.
56. Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998.
57. Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998.
58. Lease dated March 1, 1989 (DACA 01-1-90-264) between the Department of
the Army and Cable Alabama Corporation (Satellite Cable TV
Corporation). Supplemental Agreement No. 1 to Lease No. DACA
01-l-90-264 dated January 8, 1997.
59. Ground and Tower Sublease between Satellite Cable TV Corporation (d/b/a
Cable Alabama) and Crowley Cellular Telecommunications Huntsville, Inc.
dated February 2, 1994.
60. Ground and Tower Sublease between Cable Alabama Corporation and the
City of Huntsville dated February 2, 1995.
61. Contract between Huntsville Utilities and Cable Alabama Corporation
dated August 15, 1977.
62. License Agreement for Pole Attachments dated December 23, 1977 between
South Central Bell Telephone Company and Satellite Systems Corp.
/Redstone Cable TV Co.
63. Agreement for Attachments of Cables, Amplifiers and Associated
Equipment for the Distribution of Television Signals dated May 22, 1990
between the Electric Department of the City of Athens Utilities and
Cable Alabama Corporation.
64. Agreement between Cable Alabama Corporation and Smith Broadcasting
Corporation dated July 26, 1996.
65. Letter notification dated August 15, 1996 from WAAY-TV, Channel 31,
electing retransmission consent.
66. Letter notification Dated September 6, 1996 from WAFF-TV. Channel 48,
electing retransmission consent.
67. Retransmission Consent Agreement as of September 21, 1993 between AFLAC
Broadcast Partners and Cable Alabama Corporation.
68. Notice of Designation of Principal Headend of Cable Alabama Corporation
to Alabama Educational Television Commission and WHIQ-TV dated April
28, 1993.
69. Retransmission Consent Agreement dated August 9, 1993 between the New
York Times Broadcasting Service, Inc. and Cable Alabama Corporation.
Letter of Agreement dated July 29, 1996 extending the terms of the
Retransmission Consent Agreement.
70. Service Contract between Huntsville Radio Service, Incorporated and the
Cable Alabama Corporation dated August 1, 1988.
71. Channel Service Agreement dated October 7, 1994 between the Cable
Alabama Corporation and Teledyne Brown Engineering.
4
<PAGE> 237
72. License Agreement between Southern Railway Company and Satellite Cable
TV Corp. effective as of January 29, 1979.
73. License Agreement between Southern Railway Company and Cable Alabama
Corporation effective as of April 10, 1987.
74. License Agreement between Norfolk Southern Railway Company and Cable
Alabama Corporation dated as of February 3, 1994.
75. License Agreement and between Norfolk Southern Railway Company and
Cable Alabama Corporation dated as of March 17, 1994.
76. License Agreement between Norfolk Southern Railway Company and Cable
Alabama Corporation dated as of May 1, 1997.
77. Cable Television Franchise Agreement dated September 14, 1998 between
the City of Hanahan, South Carolina and KNOLOGY of Charleston, Inc.
(with Unconditional Acceptance of Cable Television Franchise).
78. Ordinance No. 284 dated June 9, 1998 adopted by the Town of Cedar
Grove, Florida, granting franchise to KNOLOGY of Panama City, Inc.
79. Ordinance No. 647 dated May 12, 1998 adopted by the City of Lynn
Haven, Florida granting a non-exclusive franchise to KNOLOGY of Panama
City, Inc.
80. Franchise Agreement for Cable Television (CATV) Services dated as of
October 1, 1998 between the United States of America and KNOLOGY of
Montgomery, Inc. (Maxwell AFB and Maxwell AFB-Gunter Annex).
81. An Ordinance (Ratification Number 1998-77) dated April 28, 1998
adopted by the City of Charleston, South Carolina granting a
non-exclusive franchise to KNOLOGY of Charleston, Inc.
82. An Ordinance (1998-47) dated May 28, 1998 adopted by the City of North
Charleston, South Carolina granting a franchise to KNOLOGY of
Charleston, Incorporated.
83. Franchise Agreement dated as of May 28, 1998 between the City of North
Charleston, South Carolina and KNOLOGY of Charleston, Incorporated.
84. Ordinance 98-4 dated March 26, 1998 adopted by the Board of
Commissioners of Columbia County, Georgia, inter alia, granting a
franchise to KNOLOGY of Augusta, Inc.
85. Ordinance dated July 7, 1998 adopted by the City Council of the City of
Prattville, Alabama granting a franchise to KNOLOGY of Montgomery, Inc.
86. Ordinance adopted in December, 1998 by the County of Dorchester, South
Carolina granting a non-exclusive right and franchise to KNOLOGY of
Charleston, Inc.
87. Ordinance dated September 1, 1998 adopted by the Town Council of the
Town of Summerville, South Carolina granting a non-exclusive right and
franchise to KNOLOGY of Charleston, Inc.
88. Operator and Related Services Agreement dated March 6, 1995 between
Farmers Long Distance, Inc. and TTE, Inc.
5
<PAGE> 238
89. Asset Purchase Agreement dated as of October 19, 1998 between Cable
Alabama Corporation and KNOLOGY of Huntsville, Inc.
90. Purchase and Sale Agreement dated as of October 16, 1998 between
William G. Jackson and Gloria J. Jackson and KNOLOGY of Huntsville,
Inc.
91. On/Line Operating & License Agreement dated [March 18, 1998] between
Cabledata, Inc. and KNOLOGY Holdings, Inc. with Amendment to On/Line
Operating & License Agreement dated March 18, 1998
92. On/Line Operating & License Agreement Attachment A Amendment dated May
20, 1998 between Cabledata, Inc. and KNOLOGY Holdings, Inc.
93. Memorandum of Agreement and Easement dated as of September 10, 1998
between CP Limited Partnership d/b/a Saddlebrook and KNOLOGY of
Charleston, Inc.
94. Ordinance No. 1751 dated September 22, 1998 adopted by the city of
Panama City, Florida.
95. Ordinance No. 1753 dated September 22, 1998 adopted by the city of
Panama City, Florida.
96. Ordinance No. 1754 dated September 22, 1998 adopted by the city of
Panama City, Florida.
97. Ordinance No. 1756 dated October 13, 1998 adopted by the city of Panama
City, Florida.
6
<PAGE> 239
MATERIAL CONTRACTS - PART II
NOTE: SOME OR ALL OF THE FOLLOWING AGREEMENTS MAY BE DUPLICATIVE OF AGREEMENTS
LISTED IN PART I
MISC. SERVICE AGREEMENTS
CORPORATE
Abbreviated Form of Agreement is between Knology and Batson-Cook Company
First Addendum to Collocation Agreement is between Knology Inc. and Interstate
FiberNet Inc.
Master Capacity Lease is between Interstate FiberNet and CyberNet Holding
Standard Terms and Conditions is between Illuminet Inc. and Agreement Customer
Agreement for 800 Database Service is between Illuminet Inc. and Customer
Software License Agreement is between JD Edwards and Knology Holding Inc.
Telecommunications Facility Lease and Capacity Agreement between Troup EMC
Communications
RIGHT-AWAY
COLUMBUS
License Agreement between Bell South Communications Inc. and American Cable
Company
PANAMA CITY
Assignment Agreement between Gulf Power Company and Knology of Panama City Inc,
AUGUSTA
Natural Gas Extension Contact between Atlanta Gas Light and Knology Right of
Entry Agreement between Enterprise Mill LLC and Knology of Augusta Inc.
CABLE PROGRAMMING
CORPORATE
Lease Agreement between Southern Company Services Inc, and Knology Holding Inc.
Lease Agreement for Internet Local Transport between Knology of Alabama Inc.
and MindSpring Enterprises Inc.
7
<PAGE> 240
SCHEDULE 6.1(m)
LABOR AND COLLECTIVE BARGAINING AGREEMENTS
None.
<PAGE> 241
SCHEDULE 6.1(r)
REAL PROPERTY
REAL ESTATE OWNED
(1) KNOLOGY of Charleston, Inc. - Corp. Offices
4506 Dorchester Rd.
N. Charleston, SC 29405
(2) KNOLOGY of Charleston Inc. - Headend
4506 Dorchester Rd.
N. Charleston, SC 29405
(3) KNOLOGY of Augusta, Inc. - Headend & Corp Offices
3633 Wheeler Rd.
Augusta, GA 30909
(4) KNOLOGY Holdings, Inc. - Corp. Offices
1241 O.G. Skinner Drive
West Point, GA 31833
(5) KNOLOGY of Huntsville, Inc.- Headend
2401 10th Street S.W.
Huntsville, AL 35810
(6) KNOLOGY of Huntsville Inc. - Const. Building
915 Miller Blvd.
Madison, AL 35758
<PAGE> 242
SCHEDULE 6.1(r) -- (Continued)
REAL PROPERTY
MATERIAL LEASES
(7) KNOLOGY of Panama City, Inc.- 13200 Panama City Beach Parkway
Lessor- The Hilton Company Panama City, FL 32407
(8) KNOLOGY of Montgomery, Inc. - Headend
Lessor-Williams Leasing & Development 1450 Ann Street
Montgomery, AL 36107
(9) KNOLOGY of Columbus, Inc.- Headend and Corp. Offices
Lessor- D.L. Jordan 1701 Boxwood Place
Columbus, GA 31908
(10) Easements set forth in agreements with multiple Dwelling Units as set
forth in Schedule 6.1(1)
(11) Railroad Crossing Licenses as listed in Schedule 5.2(d)
(12) Hub Site Leases as listed in Schedule 6.1 (1) and as entered into by
KNOLOGY Holdings, Inc. and its subsidiaries from time to time.
<PAGE> 243
SCHEDULE 6.1(t)
DEBT AND GUARANTY OBLIGATIONS
<TABLE>
<CAPTION>
Dec. 31 Sept. 30
1997 1998
------------------ ----------------
<S> <C> <C>
Senior Debt Notes, with a face value of $444,100,000,
bearing interest at 11.875% beginning October 15, 2002,
payable semi-annually beginning April 15, 2003 with principal
and any unpaid interest due October 15, 2007 $ 249,910,431 $ 249,716,303
Troup capitalized lease obligation, at a rate of 10%, Payable
in quarterly installments of $6,304 through December 2006, secured 145,898 137,729
Accrued interest thereon $ 3,201,688 $ 16,355,125
------------------- ----------------
Total Debt $ 253,258,017 $ 276,209,157
=================== ================
</TABLE>
In the fourth quarter of 1997, the Company issued units consisting of senior
discount notes due 2007 and warrants to purchase Preferred Stock for gross
proceeds of approximately $250 million. The notes were offered at a substantial
discount from face value, with no interest payment for the first five years.
Approximately $2.5 million of the gross proceeds has been allocated to warrants.
Each warrant allows the holder to purchase .003734 shares of the Company's
preferred stock.
Subordinated Debt -- None.
Guaranty Obligations -- None.
<PAGE> 244
SCHEDULE 6.1(u)
LITIGATION
(1) Thelma Robinson and David Herring vs KNOLOGY of Montgomery, Inc. for
compensatory and punitive damages for late fee charges.
<PAGE> 245
SCHEDULE 6.1(w)(i)
INTERACTIVE BROADBAND NETWORKS
Two-way, interactive high-capacity hybrid fiber coaxial networks, including
those being constructed or to be converted or upgraded to meet such criteria,
owned or leased by any Loan Party or Subsidiary pursuant to an agreement with
any person, and which provides Broadband Services are as follows:
<TABLE>
<CAPTION>
Metropolitan Area Loan Party of Subsidiary
- ----------------- ------------------------
<S> <C>
Columbus, Georgia KNOLOGY of Columbus, Inc.
Montgomery, Alabama KNOLOGY of Montgomery, Inc.
Panama City and Panama City Beach, Florida KNOLOGY of Panama City, Inc.
Augusta, Georgia KNOLOGY of Augusta, Inc.
Charleston, South Carolina KNOLOGY of Charleston, Inc.
Huntsville, Alabama KNOLOGY of Huntsville, Inc.
</TABLE>
<PAGE> 246
SCHEDULE 6.1(w)(ii)
CATV FRANCHISES
FRANCHISING AUTHORITY FRANCHISE HOLDER
<TABLE>
<CAPTION>
South Carolina
- --------------
<S> <C>
Charleston KNOLOGY of Charleston, Inc.
North Charleston KNOLOGY of Charleston, Inc.
Charleston County KNOLOGY of Charleston, Inc.
Hanahan KNOLOGY of Charleston, Inc.
Summerville KNOLOGY of Charleston, Inc.
Lincolnville KNOLOGY of Charleston, Inc.
Goose Creek KNOLOGY of Charleston, Inc.
Dorchester KNOLOGY of Charleston, Inc.
Berkley County KNOLOGY of Charleston, Inc.
Georgia
- -------
Augusta/Richmond County KNOLOGY of Augusta, Inc.
Town of Bibb City KNOLOGY of Columbus, Inc.
(franchise in name of American
Cable, Inc.)
Harris County KNOLOGY of Columbus, Inc.
(franchise in name of American
Cable, Inc.)
Columbia County KNOLOGY of Augusta, Inc.
Columbus (renewal)* KNOLOGY of Columbus, Inc.
- ----------------------------------------
* See Schedule 6.1(e)
Florida
- -------
Panama City Beach KNOLOGY of Panama City, Inc.
Panama City KNOLOGY of Panama City, Inc.
Bay County KNOLOGY of Panama City, Inc.
Lynn Haven KNOLOGY of Panama City, Inc.
Cedar Grove KNOLOGY of Panama City, Inc.
Alabama
- -------
Montgomery KNOLOGY of Montgomery, Inc.
Prattville KNOLOGY of Montgomery, Inc.
Autauga County KNOLOGY of Montgomery, Inc.
Maxwell AFB KNOLOGY of Montgomery, Inc.
Huntsville KNOLOGY of Huntsville, Inc.
Madison KNOLOGY of Huntsville, Inc.
Madison County KNOLOGY of Huntsville, Inc.
Limestone County KNOLOGY of Huntsville, Inc.
Redstone Arsenal KNOLOGY of Huntsville, Inc.
</TABLE>
<PAGE> 247
SCHEDULE 6.1(w)(iii)
LOCAL SERVICE COMMUNICATIONS LICENSES/PUC AUTHORIZATIONS
South Carolina
KNOLOGY of South Carolina, Inc. (held for TTE, Inc.)
Georgia
KNOLOGY of Georgia, Inc.
Florida
KNOLOGY of Florida, Inc.
Alabama
KNOLOGY of Montgomery, Inc.
<PAGE> 248
SCHEDULE 6.1(w)(iv)
LONG DISTANCE SERVICE COMMUNICATIONS LICENSES/PUC AUTHORIZATIONS
South Carolina
KNOLOGY of South Carolina, Inc. (held for TTE, Inc.)
Georgia
KNOLOGY of Georgia, Inc.
Florida
KNOLOGY of Florida, Inc.
Alabama
KNOLOGY of Montgomery, Inc.
<PAGE> 249
SCHEDULE 6.1(w)(v)
OTHER COMMUNICATIONS LICENSES/PUC AUTHORIZATIONS
BUSINESS RADIO LICENSES:
KNOLOGY of Columbus, Inc.
WNXY245
KNOLOGY of Montgomery, Inc.
WNTG868
KNOLOGY of Panama City
WPFC985
KNOLOGY of Huntsville, Inc.
WNHN243 1/
214 AUTHORIZATIONS:
- -------------------
<TABLE>
<CAPTION>
Entity File No. Date Granted
- ------ -------- ------------
<S> <C> <C>
KNOLOGY Holdings, Inc. 2/ I-T-C-97-213 June 5, 1997
KNOLOGY of Alabama, Inc. 3/ I-T-C-97-664 December 29, 1997
KNOLOGY of Georgia, Inc. 4/ I-T-C-97-717 January 9, 1998
KNOLOGY of Florida, Inc. I-T-C-98-400 July 16, 1998
KNOLOGY of South Carolina, Inc. I-T-C-98-619-TC October 1, 1998
Inter-exchange (alternate operator services)
KNOLOGY of Georgia, Inc.
</TABLE>
- --------------------
1/ Currently operating under Special Temporary Authorization until 4/30/99.
2/ Originally granted to CyberNet Holding, Inc.; FCC was notified of name
change to KNOLOGY Holdings, AS Inc. on Oct. 15, 1997.
3/ Originally granted to KNOLOGY of Montgomery, Inc.; transfer effective
11/6/98.
4/ Originally granted to KNOLOGY of Columbus, Inc.; transfer effective 11/6/98.
<PAGE> 250
SCHEDULE 6.1(w)(vi)
NETWORK AGREEMENTS - PART I
1. Pole Attachment Agreement dated January 1, 1998 between Gulf Power
Company and Beach Cable, Inc.
2. Lease Agreement dated August 23, 1997 between Interstate FiberNet, Inc.
and KNOLOGY Holdings, Inc.
3. Telecommunications Facility Lease and Capacity Agreement, dated
September 10, 1996, between Troup EMC Communications, Inc. and Cybernet
Holding, Inc.
4. Master Pole Attachment Agreement dated January 12, 1998 between South
Carolina Electric and Gas and KNOLOGY Holdings, Inc. d/b/a/ KNOLOGY of
Charleston.
5. Pole Attachment Agreement dated May 21, 1990 between the Georgia Power
Company and American Cable Company.
6. License Agreement for Pole Attachments dated June 19, 1990 between
South Central Bell Telephone Company and Montgomery Cablevision and
Entertainment, Inc.
7. Agreement for Attachments of Cables, Amplifiers, and Associated
Equipment for the Provision of Cable Television Service dated March 1,
1993 between Alabama Power Company and Montgomery Cablevision and
Entertainment, Inc.
8. License Agreement for Pole Attachments and/or Conduit Occupancy dated
July 28, 1993 between BellSouth Telecommunications, Inc. d/b/a Southern
Bell Telephone and Telegraph Company and American Cable Company.
9. License Agreement dated September 29, 1995 between Montgomery
Cablevision and Entertainment, Inc. and American Communications
Services of Montgomery, Inc.
10. License Agreement dated January 17, 1996 between American Cable, Inc.
and American Communication Services of Columbus, Inc.
11. Addendum to License Agreement dated April 21, 1997 between American
Cable, Inc. and American Communication Services of Columbus, Inc.
12. Billing and Collection Services Agreement dated April 2, 1997 between
Interstate Telephone Company and Cybernet Holding, Inc.
13. Operator and Related Services Agreement dated April 14, 1997 between
Eastern Telecom Inc. d/b/a Inter Quest and Cybernet Holding, Inc.
14. Agreement for Telecommunication Services dated May 1, 1997 between
Cybernet Holding, Inc. and DeltaCom, Inc.
15. First Addendum to Service Agreement dated July 7, 1997 between KNOLOGY
Holdings, Inc. and DeltaCom, Inc.
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<PAGE> 251
16. Interconnection Agreement among BellSouth Communications, Inc.,
Cybernet Holding, Inc., American Cable, Inc. and Montgomery Cablevision
& Entertainment, Inc., dated April 15, 1997.
17. Amendment To Interconnection Agreement among BellSouth
Telecommunications, Inc., Cybernet Holding, Inc., American Cable, Inc.
and Montgomery Cablevision & Entertainment, dated May 1, 1997.
18. Second Amendment To Interconnection Agreement among BellSouth
Telecommunications, Inc., Cybernet Holding, Inc., American Cable, Inc.
and Montgomery Cablevision & Entertainment, dated July 7, 1997.
19. Ordinance (Harris County, Georgia) dated April 6, 1982.
20. Ordinance (Harris County, Georgia) to Amend Cable Franchise Ordinance
of April 6, 1982, dated November 5, 1996.
21. Ordinance (Bibb City, Georgia) dated October 5, 1990.
22. Ordinance No. 88-53 (Columbus, Georgia) dated May 17, 1988.
23. Ordinance No. 89-3 (Columbus, Georgia) dated January 10, 1989.
24. Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990.
25. Ordinance No. 50-76 (Montgomery, Alabama).
26. Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990.
27. Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995.
28. Resolution No. 92-7 (Panama City Beach, Florida) dated July 23, 1992.
29. License (Bay County, Florida) dated January 5, 1993.
30. Resolution No. 97-22 (Panama City Beach, Florida) dated December 3,
1997.
31. Resolution No. 2075 (Bay County, Florida) dated November 18, 1997.
32. Collocation Agreement between Interstate FiberNet and Cybernet Holding,
Inc., dated July 1, 1997.
33. License Agreement for Pole Attachments and/or Conduit Occupancy in
Florida dated September 15, 1993 between BellSouth Telecommunications,
Inc. d/b/a Southern Bell Telephone and Telegraph and Beach Cable, Inc.
34. Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998.
35. Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998.
36. Lease dated March 1, 1989 (DACA 01-1-90-264) between the Department of
the Army and Cable Alabama Corporation (Satellite Cable TV
Corporation). Supplemental Agreement No. 1 to Lease No. DACA
01-1-90-264 dated January 8, 1997.
37. Ground and Tower Sublease between Satellite Cable TV Corporation (d/b/a
Cable Alabama) and Crowley Cellular Telecommunications Huntsville, Inc.
dated February 2, 1994.
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<PAGE> 252
38. Ground and Tower Sublease between Cable Alabama Corporation and the
City of Huntsville dated February 2, 1995.
39. Contract between Huntsville Utilities and Cable Alabama Corporation
dated August 15, 1977.
40. License Agreement for Pole Attachments dated December 23, 1977 between
South Central Bell Telephone Company and Satellite Systems
Corp./Redstone Cable TV Co.
41. Agreement for Attachments of Cables, Amplifiers and Associated
Equipment for the Distribution of Television Signals dated May 22, 1990
between the Electric Department of the City of Athens Utilities and
Cable Alabama Corporation.
42. Agreement between Cable Alabama Corporation and Smith Broadcasting
Corporation dated July 26, 1996.
43. Letter notification dated August 15, 1996 from WAAY-TV, Channel 31,
electing retransmission consent.
44. Letter notification Dated September 6, 1996 from WAFF-TV. Channel 48,
electing retransmission consent.
45. Retransmission Consent Agreement as of September 21, 1993 between AFLAC
Broadcast Partners and Cable Alabama Corporation.
46. Retransmission Consent Agreement dated August 9, 1993 between the New
York Times Broadcasting Service, Inc. and Cable Alabama Corporation.
Letter of Agreement dated July 29, 1996 extending the terms of the
Retransmission Consent Agreement.
47. Service Contract between Huntsville Radio Service, Incorporated and the
Cable Alabama Corporation dated August 1, 1988.
48. Home Ticket ANI Custom Service Agreement dated January 3, 1994 between
the Cable Alabama Corporation and Telecorp Systems, Inc.
49. Channel Service Agreement dated October 7, 1994 between the Cable
Alabama Corporation and Teledyne Brown Engineering.
50. License Agreement dated July 22, 1983 between Morrell Mobile Home
Services, Inc. d/b/a West Valley Trailer Park and Satellite Cable TV
Corp.
51. Cable Television Service and Easement Agreement effective as of
November 1, 1996 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Aronov Realty.
52. Cable Television Service and Easement Agreement effective as of May 1,
1998 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Southeastern Property Management d/b/a Cambridge Court.
53. Cable Television Service and Easement Agreement effective as of May 1,
1998 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Flagstone.
54. Cable Television Service and Easement Agreement effective as of May 1,
1998 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and The Landing.
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<PAGE> 253
55. Cable Television Service and Easement Agreement effective as of March
7, 1995 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Mayfair Village Associates L.P. d/b/a Whispering Hills
Apartments.
56. Cable Television Service and Easement Agreement effective as of April
10, 1995 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Westbrooke Apartments, Ltd. d/b/a Westbrooke Apartment
Complex.
57. Cable Television Service and Easement Agreement dated as of August 30,
1995 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Alaprop Corporation d/b/a Monte Sano Terrace.
58. Cable Television Service and Easement Agreement effective as of July 1,
1996 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Jamison Park Apartments, Ltd.
59. Cable Television Service and Easement Agreement effective as of July 1,
1996 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Oaks Apartments, Ltd.
60. Cable Television Service and Easement Agreement effective as of July 1,
1996 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Ridgecrest Apartments, Ltd.
61. Cable Television Service and Easement Agreement effective as of
September 1, 1996 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Sentry Asset Management d/b/a Westland Park Apartments.
62. Cable Television Service and Easement Agreement effective as of
September 1, 1996 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Sentry Asset Management d/b/a Westgate II Apartments,
Ltd.
63. Cable Television Service and Easement Agreement effective as of
December 1, 1996 between Cable Alabama Corporation d/b/a CableAlabama
Corporation and Executive Lodge Suite Hotel.
64. Cable Television Service and Easement Agreement dated as of August 20,
1997 between Cable Alabama Corporation d/b/a CableAlabama Corporation
and Sunrise, Inc. d/b/a Sunrise Point Apartments.
65. Installation and Sales Agreement dated July 3, 1996 between the Cable
Alabama and Interconnect Systems Corporation.
66. License Agreement between Southern Railway Company and Satellite Cable
TV Corp. effective as of January 29, 1979.
67. License Agreement between Southern Railway Company and Cable Alabama
Corporation effective as of April 10, 1987.
68. License Agreement between Norfolk Southern Railway Company and Cable
Alabama Corporation dated as of February 3, 1994.
69. License Agreement and between Norfolk Southern Railway Company and
Cable Alabama Corporation dated as of March 17, 1994.
70. License Agreement between Norfolk Southern Railway Company and Cable
Alabama Corporation dated as of May 1, 1997.
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<PAGE> 254
71. Disney Channel Toon Disney Affiliation Agreement dated April 1, 1998
between Disney Channel and KNOLOGY, as amended by Amendment Letters
dated July 20, 1998.
72. Adultvision Television License Agreement dated June 1, 1998 between
Adultvision Communication, Inc. and KNOLOGY Holdings, Inc.
73. Playboy Television License Agreement dated December 1, 1997 between
Playboy Entertainment Group, Inc. and KNOLOGY Holdings, Inc.
74. MTV Networks Power Pack Agreement dated July 10, 1998 (effective June
30, 1998) between MTV Networks, a division of Viacom International,
Inc., and KNOLOGY Holdings, Inc.
75. TVData Licensed Materials Agreement dated June 1, 1998 between TV Data
Technologies, L.P., and KNOLOGY Holdings, Inc.
76. Amendment to ESPN Agreement dated as of May 21, 1998 between ESPN, Inc.
and KNOLOGY Holdings, Inc.
77. Construction Agreement dated as of June 22, 1998 between KNOLOGY
Holdings, Inc. and Premier Cable Communications (Augusta, GA system).
78. Construction Agreement dated as of June 25, 1998 between KNOLOGY
Holdings, Inc. and Premier Cable Communications (Panama City and Panama
City Beach, FL systems).
79. Agreement for 800 Database Services dated July 14, 1997 between
Illuminet, Inc. and KNOLOGY Holdings, Inc.
80. Non-Residential Gas Extension Contract dated May 7, 1998 between
Atlanta Gas Light Company and KNOLOGY of Augusta, Inc.
81. Non-residential Gas Extension Contract dated June 19, 1998 between
Atlanta Gas Light Company and KNOLOGY of Augusta, Inc.
82. Non-residential Gas Extension Contract dated July 9, 1998 between
Atlanta Gas Light and KNOLOGY of Augusta, Inc. (Rosier Rd.).
83. Non-residential Gas Extension Contract dated July 14, 1998 between
Atlanta Gas Light and KNOLOGY of Augusta, Inc. (Silverdale Rd.).
84. Non-residential Gas Extension Contract dated July 14, 1998 between
Atlanta Gas Light and KNOLOGY of Augusta, Inc. (Wheeler Rd.).
85. Non-residential Gas Extension Contract dated July 23, 1998 between
Atlanta Gas Light and KNOLOGY of Augusta, Inc. (Fury's Ferry Road).
86. Easement Agreement dated May 19, 1998 between TTE Group, Inc. and
KNOLOGY of Charleston, Inc.
87. Construction Agreement dated February 17, 1998 between KNOLOGY
Holdings, Inc. and Cable Constructors, Inc.
88. Construction Agreement dated as of April 21, 1998 between KNOLOGY
Holdings, Inc. and ProMark Utility Locators, Inc.
5
<PAGE> 255
89. Construction Agreement dated April 2, 1998 between KNOLOGY Holdings,
Inc. and First South Utility Const., Inc.
90. Construction Agreement dated April 1, 1998 between KNOLOGY Holdings,
Inc. and Gateway CATV Const., Inc.
91. Headend In The Sky(R) Programming Transport Agreement dated as of May
1, 1998 between National Digital Television Center, Inc. d/b/a Headend
In The Sky(R) and KNOLOGY Holdings, Incorporated.
92. AIA Abbreviated Form of Agreement between Owner and Contractor dated as
of July 17, 1997 between KNOLOGY and Batson-Cook Company.
93. Wireline Crossing Agreement dated as of April 29, 1998 between CSX
Transportation, Inc. and KNOLOGY of Augusta, Inc.
94. Showtime Networks Service Agreement dated April 1, 1998 between
Showtime Networks Inc. and KNOLOGY Holdings Inc.
95. Cable Television and Telephone Services Agreement dated June 26, 1998
between Foshee Builders, Inc. and KNOLOGY Holdings, Inc. (with
Memorandum of Agreement and Easement).
96. Cable Television and Telephone Services Agreement dated June 1, 1998
between Robert Monday and KNOLOGY of Montgomery, Inc. (with Memorandum
of Agreement and Easement) (Fair Manor Apartments).
97. Cable Television and Telephone Services Agreement dated June 1, 1998
between Robert Monday and KNOLOGY of Montgomery, Inc. (with Memorandum
of Agreement and Easement) (Fairview Villa Apartments).
98. Cable Television and Telephone Services Agreement dated June 2, 1998
between Redding Rentals, LTD and KNOLOGY of Columbus, Inc. (with
Memorandum of Agreement and Easement) (Cusseta Road).
99. Cable Television and Telephone Services Agreement dated June 2, 1998
between Redding Rentals, LTD and KNOLOGY of Columbus, Inc. (with
Memorandum of Agreement and Easement) (Brennan Road).
100. Cable Television and Telephone Services Agreement dated May 29, 1998
between Three Flags Apartments LLC and KNOLOGY Holdings, Inc. (with
Memorandum of Agreement and Easement).
101. Cable Television and Telephone Services Agreement dated June 23, 1998
between Harbour's Edge Condominiums and KNOLOGY of Panama City, Inc.
(with Memorandum of Agreement and Easement).
102. Cable Television and Telephone Services Agreement dated May 18, 1998
between Big "D" Inc. and KNOLOGY of Panama City, Inc. (with Memorandum
of Agreement and Easement).
103. Cable Television and Telephone Services Agreement dated June 29, 1998
between Mark-Montgomery Associates, Ltd. d/b/a The Mark Apartments and
KNOLOGY of Montgomery, Inc. (with Memorandum of Agreement and
Easement).
104. Cable Television and Telephone Services Agreement dated June 1, 1998
between Robert Monday and KNOLOGY of Montgomery, Inc. (with Memorandum
of Agreement and Easement) (Clayton Court Apartments).
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<PAGE> 256
105. Cable Television Agreement dated July 9, 1998 between UDRT of Alabama,
Inc. and KNOLOGY of Montgomery, Inc.
106. Memorandum of Agreement dated July 9, 1998 between UDRT of Alabama and
KNOLOGY of Montgomery.
107. Cable Television and Telephone Services Agreement dated July 9, 1998
between The Parker Development Company and KNOLOGY Holdings, Inc. (with
Memorandum of Agreement and Easement).
108. Cable Television and Telephone Services Agreement dated April 29, 1998
between Laurmest Montgomery Corporation and KNOLOGY Holdings, Inc.
109. Installation Agreement dated as of September 14, 1998 between KNOLOGY
Holdings, Inc. and Frankie L. Tillman d/b/a Tillman Contractors.
110. Agreement dated August 7, 1998 between Bravo Company and KNOLOGY
Holdings, Inc.
1ll. Release regarding QVC/Q2 Charter Affiliation Agreement and Addendum
dated September 2, 1998 between QVC and KNOLOGY Holdings, Inc.
112. Letter Agreement - Loan of the Weather Star III Unit Pending Delivery
of the Weather Star XL Unit dated July 2, 1998 between The Weather
Channel and KNOLOGY Holdings, Inc.
113. The Weather Star XL Agreement dated August 17, 1998 between The Weather
Channel, Inc. and KNOLOGY Holdings, Inc.
114. Service Affiliation Agreement dated August 31, 1998 between The Box
Worldwide, Inc. and KNOLOGY Holdings, Inc.
115. Affiliation Agreement dated July 31, 1998 (effective April 1, 1998)
between FOX SPORTS WORLD L.L.C. and KNOLOGY.
116. Cable Television and Telephone Services Agreement dated September 10,
1998 between CP Limited Partnership d/b/a Saddlebrook and KNOLOGY OF
Charleston, INC.
117. Cable Television and Telephone Service Agreement dated September 4,
1998 between Southgate, Inc. and KNOLOGY OF COLUMBUS, INC. (with
Memorandum of Agreement and Easement).
118. Cable Television and Telephone Services Agreement dated August 4, 1998
between CP Limited Partnership d/b/a Woodland Hills and KNOLOGY of
Montgomery, Inc. (with Memorandum of Agreement and Easement).
119. Cable Television and Telephone Services Agreement dated August 19, 1998
between KNOLOGY Holdings, Inc. and Montgomery Alabama Hotel Limited
Partnership.
120. Cable Television and Telephone Services Agreement dated August 24, 1998
between Coliseum Properties and KNOLOGY of Montgomery, Inc. (with
Memorandum of Agreement and Easement).
121. Cable Television and Telephone Services Agreement dated August 24, 1998
between Bonnie Crest Company and KNOLOGY of Montgomery, Inc.
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<PAGE> 257
122. Cable Television and Telephone Services Agreement dated July 10, 1998
between Narrow Lane, LTD d/b/a Narrow Lane Apartments and KNOLOGY of
Montgomery, Inc. (with Memorandum of Agreement and Easement).
123. Cable Television and Telephone Services Agreement dated July 10, 1998
between Bell Station Associates, LTD d/b/a Bell Station Apartments and
KNOLOGY of Montgomery, Inc. (with Memorandum of Agreement and
Easement).
124. Cable Television and Telephone Services Agreement dated July 10, 1998
between Turtle Place, LTD d/b/a Turtle Place Apartments and KNOLOGY of
Montgomery, Inc. (with Memorandum of Agreement and Easement).
125. Cable Television and Telephone Services Agreement dated August 5, 1998
between Turtle Lake Associates, LTD d/b/a Turtle Lake Apartments and
KNOLOGY of Panama City, Inc. (with Memorandum of Agreement and
Easement).
126. Exclusive Cable Television Services Agreement dated August 3, 1998
between Wes Burnham and KNOLOGY of Panama City, Inc. (with Memorandum
of Agreement and Easement).
127. Cable Television and Telephone Services Agreement dated June 6, 1998
between John S. Tilley and KNOLOGY of Panama City, Inc. (with
Memorandum of Agreement and Easement).
128. Construction Agreement dated as of August 17, 1998 between KNOLOGY
Holdings, Inc. and Checkmate Communications, Inc.
129. Ordinance No. 1746 dated August 25, 1998 adopted by City of Panama
City, Florida.
130. Home Ticket(TM)/Home Ticket(TM) Express Service Agreement dated August
31, 1998 between Syntellect Interactive Services, Inc. and KNOLOGY
Holdings, Inc.
131. Agreement for Attachments of Cables, Amplifiers and Associated
Equipment dated August 25, 1998 between Central Alabama Electric
Cooperative and KNOLOGY Holding, Inc.
132. Cable Television Franchise Agreement dated September 14, 1998 between
the City of Hanahan, South Carolina and KNOLOGY of Charleston, Inc.
(with Unconditional Acceptance of Cable Television Franchise).
133. Ordinance No. 294 dated June 9, 1998 adopted by the Town of Cedar
Grove, Florida, granting franchise to KNOLOGY of Panama City, Inc.
134. Ordinance No. 647 dated May 12, 1998 adopted by the City of Lynn Haven,
Florida granting a non-exclusive franchise to KNOLOGY of Panama City,
Inc.
135. Franchise Agreement for Cable Television (CATV) Services dated as of
October 1, 1998 between the United States of America and KNOLOGY of
Montgomery, Inc. (Maxwell AFB and Maxwell AFB-Gunter Annex).
136. An Ordinance (Ratification Number 1998-77) dated April 28, 1998 adopted
by the City of Charleston, South Carolina granting a non-exclusive
franchise to KNOLOGY of Charleston, Inc.
137. An Ordinance (1998-47) dated May 28, 1998 adopted by the City of North
Charleston, South Carolina granting a franchise to KNOLOGY of
Charleston, Incorporated.
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<PAGE> 258
138. Franchise Agreement dated as of May 28, 1998 between the City of North
Charleston, South Carolina and KNOLOGY of Charleston, Incorporated.
139. Ordinance 98-4 dated March 26, 1998 adopted by the Board of
Commissioners of Columbia County, Georgia, inter alia, granting a
franchise to KNOLOGY of Augusta, Inc.
140. Ordinance dated July 7, 1998 adopted by the City Council of the City of
Prattville, Alabama granting a franchise to KNOLOGY of Montgomery, Inc.
141. Ordinance adopted in December, 1998 by the County of Dorchester, South
Carolina granting a non-exclusive right and franchise to KNOLOGY of
Charleston, Inc.
142. Ordinance dated September 1, 1998 adopted by the Town Council of the
Town of Summerville, South Carolina granting a non-exclusive right and
franchise to KNOLOGY of Charleston, Inc.
143. CAS End-User Object Code License Agreement and RealWorld(R) Software
Sublicense Agreement dated March 21, 1997 between TTE, Inc. and
Highland Lakes Software.
144. CAS Installation and Support Agreement dated March 21, 1997 between
TTE, Inc. and Highland Lakes Software.
145. Agreement regarding the Sale of BST's Telecommunications Services to
Reseller for the Purposes of Resale effective April 1, 1997 between
BellSouth Telecommunications, Inc. and TTE Group, Inc.
146. Reseller Services Agreement dated May 8, 1997 between Business Telecom,
Inc. and TTE Group.
147. Telecommunications Agreement dated December 11, 1992 between Enterprise
Telephone Company, Inc., d/b/a Tel Tec Exchange of Charleston (TTE) and
Dial 1 Long Distance, Inc.
148. Operator and Related Services Agreement dated March 6, 1995 between
Farmers Long Distance, Inc. and TTE, Inc.
149. Agreement dated July 22, 1997 between TTE, Inc. and The Club @
Seabrook, Inc.
150. Interconnection, Resale and Unbundling Agreement dated December 5, 1997
between GTE South Incorporated and TTE, Inc.
151. Pole Attachment Agreement between GTE, Inc. and TTE, Inc.
152. Conduit Occupance Agreement between GTE, Inc. and TTE, Inc.
153. Lease dated February 22, 1996 between Alabama Christian Academy, Inc.
and Montgomery Cablevision Inc.
154. Right of Entry Agreement dated as of February 4, 1998 between Thomas
Irvin and KNOLOGY Holdings, Inc.
155. Right of Entry Agreement dated as of January 30, 1998 between Turman
Realty and KNOLOGY Holdings, Inc.
156. Right of Entry Agreement dated as of December 12, 1997 between [Narrow
Lane Ltd. d/b/a Narrow Lane Villas] and KNOLOGY Holdings, Inc.
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<PAGE> 259
157. Standard Commercial Agreement (Hotel-Motel) dated as of August 12, 1996
between Montgomery Cablevision and Entertainment, Inc. and Alabama Inns
Associates [d/b/a Ramada Inn].
158. Standard Commercial Agreement (Hotel-Motel) dated as of August 26, 1996
between Montgomery Cablevision and Entertainment, Inc. and Eastern
Bypass Inns, Ltd. [Eastern Bypass Inn L.P.] [d/b/a Hampton Inn].
159. Bulk Cable Communications Service and Access Agreement dated as of
April 10, 1997 between Montgomery Cablevision and Entertainment, Inc.
and Foshee Builders, Inc.
160. Multi-Unit Service Agreement dated as of December 31, 1997 between
KNOLOGY Holdings, Inc. and Lynwood Terrace LLC.
161. Multi-Unit Service Agreement dated as of November 12, 1997 between
KNOLOGY Holdings, Inc. and Festival Apartments LLC.
162. Multi-Unit Service Agreement dated as of November 10, 1997 between
KNOLOGY Holdings, Inc. and March Management Company [d/b/a Eden East
Apartments].
163. Bulk Cable Communications Service and Access Agreement dated as of
October 3, 1998 between Montgomery Cablevision and Entertainment, Inc.
and USA Hotel Corporation.
164. Right of Entry Agreement dated September 22, 1997 between [Turtle
Place, Ltd.] Turtle Place Apartments and KNOLOGY.
165. Right of Entry Agreement dated April as of 24, 1996 between Palmer
Construction and Montgomery CableVision and Entertainment.
166. Multi-Unit Service Agreement dated November 12, 1998 between KNOLOGY
Holdings, Inc. and Park Towne Apartments.
167. Right of Entry and Easement between Montgomery CableVision and
Entertainment, Inc. and Montgomery Partners, Ltd. [d/b/a Oxford Gardens
and Spanish Gardens] dated March 23/24, 1992.
168. Bulk Cable Television Multiple-Unit Agreement dated as of June 13, 1998
between Montgomery Motel Associates d/b/a Montgomery Days Inn and
Montgomery Cablevision & Entertainment Inc.
169. Multi-Unit Service Agreement dated as of January 5, 1997 [or 1998]
between KNOLOGY Holdings, Inc. and Wesley Gardens.
170. Multi-Unit Service Agreement dated as of December 31, 1997 between
KNOLOGY Holdings, Inc. and Lynwood Terrace LLC.
171. Multi-Unit Service Agreement dated October 28, 1997 between KNOLOGY
Holdings, Inc. and Whisperwood Spa & Club LP.
172. Right of Entry Agreement dated as of August 13, 1997 between WLB, LLC
and American Cable Company.
173. Right of Entry Agreement dated as of May 22, 1997 between Bellewood
Square Apartments [the Spanish Quarter Group, Limited Partnership?] and
Montgomery CableVision and Entertainment, Inc.
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174. Right of Entry Agreement dated as of April 24, 1997 between Bell
Station Apartments and Montgomery CableVision and Entertainment, Inc.
175. Cable Television Services Agreement dated as of October 26, 1990
between Montgomery CableVision and Entertainment, Inc. and C&E
Enterprises [Cambridge Park Apartment Investors, Ltd.].
176. Service Agreement dated as of December 31, 1998 between KNOLOGY
Holdings, Inc. and Columbia Doctor's Hospital.
177. Right of Entry granted by Vaughn Pointe Apartments to Montgomery
CableVision and Entertainment, Inc. dated [October 28, 1993].
178. Cable Television Services Agreement dated as of March 18, 1991 between
Montgomery CableVision and Entertainment, Inc. and Stratford Village
Realty Trust.
179. Multi-Unit Service Agreement dated as of November 6, 1997 between
KNOLOGY Holdings, Inc. and Efficiency Lodge of Columbus, Inc.
180. Cable Television Services Agreement dated as of [June/July] 10, 1997
between KNOLOGY and Alabama State University.
191. Multi-Unit Service Agreement dated December 17, 1997 between KNOLOGY
Holdings, Inc. and Cloverland Apartments LLC.
182. Multiple Unit Service Agreement dated as of March 1, [ ] between
American Cable Company Partnership and [Jim Weatherington].
183. Agreement for the Sale and Installation of Equipment dated March 18,
1998 between Cabledata, Inc. and KNOLOGY Holdings, Inc. with Amendment
to Sale & Installation of Equipment Agreement of even date.
184. On/Line Operating & License Agreement dated [March 18, 1998] between
Cabledata, Inc. and KNOLOGY Holdings, Inc. with Amendment to On/Line
Operating & License Agreement dated March 18, 1998.
185. On/Line Operating & License Agreement Attachment A Amendment dated May
20, 1998 between Cabledata, Inc. and KNOLOGY Holdings, Inc.
186. License Agreement dated July 1, 1998 between Berkeley Electric
Cooperative, Inc. and KNOLOGY of Charleston, Inc. (Charleston, Berkeley
and Dorchester Counties)
187. Software License Agreement dated May 5, 1998 between J. D. Edwards
World Solutions Company and KNOLOGY Holdings, Inc. with Addendum to
Software License Agreement of even date.
188. Maintenance Agreement dated May 5, 1998 between J.D. Edwards World
Solutions Company and KNOLOGY Holdings, Inc.
189. Construction Agreement dated as of June 1, 1998 between KNOLOGY
Holdings, Inc. and First Coast Cable Construction, Inc. (Charleston,
SC)
190. Construction Agreement dated as of June 4, 1998 between KNOLOGY
Holdings, Inc. and First Coast Cable Construction, Inc. (Montgomery,
AL)
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191. Construction Agreement dated as of June 17, 1998 between KNOLOGY
Holdings, Inc. and First Coast Cable Construction, Inc. (Columbus, GA)
192. Construction Agreement dated as of May 19, 1998 between KNOLOGY
Holdings, Inc. and Sub Aqueous Engineering Services, Inc. (Panama City
and Panama City Beach, FL)
193. Construction Agreement dated as of April 20, 1998 between KNOLOGY
Holdings, Inc. and Harrison Wright Co., Inc. (Augusta, GA)
194. Construction Agreement dated as of May 4, 1998 between KNOLOGY
Holdings, Inc. and Lexus Cabling Corp. (Columbus, GA)
195. Construction Agreement dated as of May 4, 1998 between KNOLOGY
Holdings, Inc. and A-Com Protection Services (Columbus, GA)
196. Construction Agreement dated as of July 3, 1998 between KNOLOGY
Holdings, Inc. and Colin M. Hurd, Inc. (Columbus, GA)
197. FIRST COLLECTION SERVICES Client Service Agreement dated July 2, 1998
between International Computer Systems, Inc. d/b/a First Collection
Services and KNOLOGY (unpaid account recovery).
198. FIRST COLLECTION Client Service Agreement dated July 2, 1998 between
International Computer Systems, Inc. d/b/a First Collection Services
and KNOLOGY (account processing).
199. Cable Television and Telephone Services Agreement dated April 20, 1998
between Calvary Community, Inc. and Calvary Community II, Inc. and
KNOLOGY of Columbus, Inc. with Memorandum of Agreement and Easement
(7482 Old Moon Road, Columbus, GA)
200. Network Access Agreement dated July 1, 1998 between SCANA
Communications, Inc. f/k/a MPX Systems, Inc. and KNOLOGY Holdings, Inc.
201. Right of Entry Agreement dated January 14, 1998 between Colonial
Properties and KNOLOGY Holdings, Inc.
202. Carriage Agreement dated as of May 11, 1998 between ZDTV, L.L.C. and
KNOLOGY Holdings, Inc.
203. Letter dated June 5, 1998 from United Video Network Sales to KNOLOGY
Holdings, Inc. regarding notice of assignment of rights under WGN
Affiliate Agreement dated March 1, 1996 to UVTV, Inc.
204. Great American Country Launch Incentive offer letter dated June 12,
1998 from Great American Country, Inc. to KNOLOGY Holdings, Inc.
205. Name Change Amendment Letter dated as of June 1, 1997 between Home Box
Office, a division of Time Warner Entertainment Company, L.P., CyberNet
Holding, Inc. and KNOLOGY Holdings, Inc. amending HBO Service Network
Affiliation Agreement and CINEMAX Service Network Affiliation
Agreement, both dated as of April 28, 1995, among Home Box Office and
CyberNet Holding, Inc. (Montgomery CableVision and American Cable
Company name changes)
206. Amendment to Affiliate Agreement dated June 1, 1997 between Cable News
Network, Inc. and KNOLOGY Holdings, Inc. and CyberNet Holding, Inc.
amending Affiliate Agreement for CNNfn/CNN International and CNN/SI
between Cable News Network, Inc. and CyberNet Holding, Inc. dated as of
September 3, 1996.
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207. Assignment dated November 9, 1995 by American Cable Company to CyberNet
Holding, L.L.C. of rights under Affiliate Agreement dated as of
September 30, 1994 between American Cable Company and Cable News
Network, Inc. (CNN and Headline News)
208. Assignment dated November 9, 1995 by American Cable Company to CyberNet
Holding, L.L.C. of rights under Affiliate Agreement dated as of August
30, 1994 between American Cable Company and Turner Network Television
(TNT)
209. Assignment dated November 9, 1995 by American Cable Company to CyberNet
Holding, L.L.C. of rights under Affiliate Agreement dated as of July
27, 1992 between American Cable Company and Cartoon Network (Cartoon
Network)
210. Assignment dated November 9, 1995 by American Cable Company to CyberNet
Holding, L.L.C. of rights under Affiliate Agreement dated as of March
1, 1994 between American Cable Company and Turner Classic Movies, Inc.
(Turner Classic Movies)
211. Right of Entry Agreement dated as of September 1, 1998 between
Enterprise Mill, LLC and KNOLOGY of Augusta, Inc.
212. Cable Television and Telephone Services Agreement dated as of October
15, 1998 between Bailey Investment Company and KNOLOGY of Augusta, Inc.
213. Memorandum of Agreement and Easement dated as of September 10, 1998
between CP Limited Partnership d/b/a Saddlebrook and KNOLOGY of
Charleston, Inc.
214. Ordinance No. 1751 dated September 22, 1998 adopted by the city of
Panama City, Florida.
215. Ordinance No. 1753 dated September 22, 1998 adopted by the city of
Panama City, Florida.
216. Ordinance No. 1754 dated September 22, 1998 adopted by the city of
Panama City, Florida.
217. Ordinance No. 1756 dated October 13, 1998 adopted by the city of Panama
City, Florida.
218. Form of Change Order dated October 16, 1998 to "Agreement for
Construction Work dated July 3, 1998 between KNOLOGY Holdings, Inc. and
C.M. Hurd, Inc. (Columbus, Georgia).
219. License Agreement for Rights of Way (Row), Conduits, and Pole
Attachments, dated March 3, 1998 between BellSouth Telecommunications,
Inc. and KNOLOGY Holdings, Inc.
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NETWORK AGREEMENTS - PART II
Note: Some or all of the following agreements may be duplicative of
agreements listed in Part I
CABLE PROGRAMMERS
CORPORATE
Affiliate Agreement to Arts and Entertainment Network
License Agreement between American Movie Classics Company and Cybernet
Holdings, Inc.
Agreement dated August 10, 1998 between Bravo Company and KNOLOGY Holdings, Inc.
Affiliation Agreement between DMX Inc. and KNOLOGY Holdings, Inc.
Verification of eligibility for KNOLOGY Holdings, Inc. and Encore Media
Group LLC.
ESPN between ESPN, Inc. and KNOLOGY Holdings, Inc.
Affiliation Agreement between KNOLOGY Holdings, Inc. and Home Box Office
Headend in the Sky Programming Transport Agreement
Programming Transport Agreement between KNOLOGY Holdings, Inc. and National
Digital Television Center, Inc.
Affiliation Agreement between Home Shopping Club, Inc. and
Cybernet Holding, Inc.
Affiliation Agreement between Nick At Nite's TV Land and KNOLOGY Holdings, Inc.
Affiliation Agreement between National Cable Television Cooperative, Inc.
and KNOLOGY Holdings, Inc.
Agreement between Romance Classics and Cybernet Holdings, Inc.
Affiliation Agreement between Charter Spice Networks and KNOLOGY Holdings, Inc.
Affiliate Agreement for SportsSouth Network and Cybernet Holding, Inc.
Non-disclosure Agreement between United Video Network Sales and
KNOLOGY Holdings, Inc.
UVTV/WGN Satellite Transmission Service Agreement and CyberNet Holdings, Inc.
Affiliate Agreement between the Weather Channel, Inc. (TWC) and
KNOLOGY Holdings, Inc.
COLUMBUS
Affiliate Agreement between Arts and Entertainment Network and
CyberNet Holding LLC
Retransmission Consent Agreement between Aflac Broadcast Partners, WTVM and
American Cable Company Partnership
Charter Affiliate Agreement between CyberNet Holding, Inc. and American Cable
c/o CyberNet
Affiliation Agreement for Cable News Network with American Cable Co
Partnership
Affiliate Agreement for HeadLine News and American Cable Co. Partnership
Contractual Agreement between CNBC, Inc. and American Cable Management
The Disney Channel Affiliation Agreement with American Cable Company,
Partnership
Affiliation Agreement between ESPN, INC and American Cable Management Part.
Agreement between Eternal Ward Television Network, Inc. and
American Cable Company
Affiliate Agreement between TNN and American Cable Management
Affiliation Agreement ICN Enterprises and American Cable
Retransmission Agreement between Lewis Broadcasting Corporation and American
Cable Co.
Letter of Acceptance with Prevue networks, Inc and CyberNet Holding, Inc.
Affiliation Agreement between QVC/Q2 and KNOLOGY Holdings, Inc. Columbus
Retransmission Consent Agreement between Spartan Communications, Inc and
CyberNet d/b/a American Cable
Retransmission Agreement with WRBL and American Cable
Affiliation Agreement with Turner Network Television and American Cable
Co. Partnership
Affiliation Agreement between USA Networks and Cable American Cable Company
Partnership
MONTGOMERY
Distributor Agreement between Cable News Network, Inc, and Montgomery Cable
Vision & Entertainment, Inc.
Affiliation Agreement ESPN Inc and Montgomery Cablevision & Entertainment, Inc.
Executed Contract for Montgomery Cablevision and Entertainment Inc.
Affiliation Agreement with Disney Channel and Montgomery Cablevision and
Entertainment, Inc.
Flix Service Agreement between ShowTime Networks, Inc. and Montgomery
Cablevision.
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<PAGE> 264
Affiliation Agreement between Home Shopping Club, Inc. and CyberNet
Holding, Inc.
Affiliation Agreement between Lifetime and Cybernet Holdings, Inc.
Service Agreement between Prevue Networks, Inc and Montgomery Cablevision and
Entertainment, Inc.
Preliminary Agreement between The Box Worldwide, Inc, and Montgomery Cablevision
and Entertainment, Inc.
Affiliation Agreement between The USA Network Service and Montgomery
Cablevision and Entertainment, Inc.
Retransmission Consent Agreement between WCOV-TV20 and CyberNet Holding, Inc.
America's Talking Agreement between Turner broadcasting's Cable News Network
and Headline News and Montgomery Cablevision
License Agreement between Country Music Television, Inc, and Montgomery
Cablevision and Entertainment, Inc.
Affiliation Agreement between CNBC and America's Talking and Montgomery
Cablevision and Entertainment, Inc.
Affiliation Agreement with The Disney Channel and Montgomery Cablevision
PANAMA CITY (BEACH CABLE)
Affiliation Agreement between Hearst/ABC/NBC and Beach Cable, Inc.
Affiliate Agreement between Animal Planet and Beach Cable
Affiliate Agreement between Cable News Network, Inc, and Beach Cable, Inc.
Affiliate Agreement between Headline News and Beach Cable, Inc.
Affiliate Agreement between the Cartoon Network and Beach Cable, Inc.
Affiliation Agreement between CNBC Inc and Beach Cable, Inc.
Affiliation Agreement between Comedy Central and Beach Cable, Inc.
Affiliation Agreement Between Courtroom Television Network and Beach
Cable, Inc.
Affiliate Renewal Agreement between Discovery Channel and Beach Cable, Inc.
Affiliation Agreement between The Disney Channel and Beach Cable, Inc.
Affiliation Agreement between Cable Television Network and Beach Cable, Inc.
Affiliation Letter Agreement between Encore Media Corporation and Beach Cable,
Inc.
Affiliation Agreement between ESPN2 and Beach Cable, Inc.
Affiliate Agreement between Flix Service Agreement and Beach Cable, Inc.
Affiliate Agreement between The Golf Channel and Beach Cable, Inc.
Affiliate and Retransmission Agreement between HGTV/MSO and Beach Cable, Inc.
HBO Service
Affiliation Agreement between Home Box Office and Beach Cable
Cinemax Service Affiliation Agreement between Home Box Office and
Beach Cable
Affiliation Agreement between Home Shopping Club, Inc., and Beach Cable, Inc.
Affiliation Agreement between International Cablecasting Technologies Inc. and
Beach Cable, Inc.
Affiliation Agreement between National Cable Satellite Corporation and
Beach Cable, Inc.
Affiliate Renewal Agreement between Discovery Communications, Inc. and Beach
Cable, Inc.
Affiliation Agreement between Lifetime Entertainment Services and Beach
Cable, Inc.
Affiliation Agreement between MSNBC Cable and Beach Cable, Inc.
Affiliate Agreement between Opryland USA Inc, and Beach Cable Inc.
Affiliate Agreement between Nick at Nite's TV Land Co, MTV Networks and
beach Cable, Inc.
Affiliation Agreement between Outdoor Life Network and Speedvision
and Beach Cable, Inc.
System Service Agreement between Prevue Networks, Inc. and Beach Cable, Inc.
Affiliation Agreement between QVC Network Inc. and Beach Cable, Inc.
Affiliation Agreement between STT Video Partners and Beach Cable, Inc.
Service Agreement between ShowTime networks Sales and Marketing and Beach
Cable, Inc.
ShowTime Service Agreement between ShowTime Networks Sales and Marketing
and Beach Cable, Inc.
Five Year Service Agreement between Southern Satellite Systems, Inc. and
Beach Cable, Inc.
Agreement between Beach Cable and Sports Channel Florida Associates
Affiliation Agreement between Sunshine Network and Beach Cable, Inc.
Affiliate Agreement for TBS Superstation between Turner Network Sales, Inc
and Beach Cable, Inc.
Affiliate Agreement between Television food Network and Beach Cable
Affiliation Agreement between The Travel, Inc and Beach Cable, Inc.
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<PAGE> 265
Affiliate Agreement for Turner Network Television Inc. and Beach Cable, Inc.
Affiliate Agreement for Turner Classic Movies Inc, and Beach Cable, Inc.
Transmission Service Agreement between United Video and Beach Cable, Inc.
Affiliate Agreement for Cable Exhibition between USA Networks and Beach
Cable, Inc.
Affiliation Agreement between The Weather Channel, Inc. and Beach Cable, Inc.
Affiliation Agreement between Z Music, Inc and Beach Cable, Inc.
Letter of Proposal pertaining to Playboy TV and AdulTVision Carriage by KNOLOGY
Holdings, Inc.
Knowledge TV Launch Incentive
Affiliate Agreement between Great American Country and Beach Cable, Inc.
PROVISION OF SERVICE AGREEMENTS
AUGUSTA
Cable Televisions and Telephone Services Agreement between Bailey Investment
Company and KNOLOGY of Augusta, Inc.
CHARLESTON
Agreement between CP Limited Partnership, Saddlebrook and KNOLOGY of
Charleston, Inc.
CORPORATE
Cable Television and Telephone Service Agreement between Azalea Hills Apts. And
KNOLOGY Holdings, Inc
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Cloverland
Apartments
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Festival
Apartments
Cable Television and Telephone Service Agreement between Foshee Builders, Inc.
and KNOLOGY Holdings, Inc.
Services Agreement between Hinson Properties and KNOLOGY Holdings, Inc.
Services Agreement between Irving Winter Co. Inc. and KNOLOGY Holdings, Inc
Right of Entry Agreement between Lake forest Trailer Park, Inc and
KNOLOGY Holdings, Inc
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Lynwood Terrace.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and March
Management Co.
Right of Entry Agreement between Narrow Lane Villa, and KNOLOGY Holdings, Inc.
Cable and Telephone Services Agreement between The Parker Development Company
and KNOLOGY Holdings, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Ray M.
Wright Inc.
Right of Entry Agreement between Mr. Thomas Irvin, and KNOLOGY Holdings, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Shady Oaks
Apartments
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Sunvil, Inc.
Right of Entry Agreement between Turman Realty and KNOLOGY Holdings, Inc.
Right of Entry Agreement between Caches Apartments and KNOLOGY Holdings, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Wesley Gardens
Right of Entry Agreement between Colonial Properties and KNOLOGY Holdings, Inc.
Doctor's Hospital Service Agreement between KNOLOGY Holdings, Inc. and
Columbia Doctors Hospital.
Right of Entry Agreement between Narrow Lane Villa and KNOLOGY Holdings, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Shady
Oaks Apartments
Right of Entry Agreement between Vaughn Halcyon LLC Corporation of Peppertree
Center an KNOLOGY Holdings, Inc.
Right of Entry Agreement between Caches Apartments and KNOLOGY Holdings, Inc.
COLUMBUS
Cable Television and Telephone Agreement between the Argus Group and KNOLOGY of
Columbus, Inc.
Cable Television and Telephone Agreement between Country Club Properties and
KNOLOGY of Columbus, Inc.
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<PAGE> 266
Cable Televisions and Telephone Agreement between Columbus Properties LTD and
KNOLOGY of Columbus, Inc.
Multi-Unit Services Agreement between KNOLOGY Holdings, Inc. and Efficiency
Lodge of Columbus, Inc.
Multi-Unit Service Agreement between American Cable Company Partnership and
Homer Garner.
Cable Television and Telephone Services Agreement between Huckleberry
Hill, LTD and KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Mccorlew Realty Inc.
and KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Mid-America Apartment
Communities, Inc. and KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Oak Hill
Associates, d.b.a. Oak Hill Mobile Home Park and KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Redding
Rentals, LTD and KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Dexter Smith and
KNOLOGY of Columbus, Inc.
Cable Television and Telephone Services Agreement between Southgate, Inc. and
KNOLOGY of Columbus, Inc.
Multi-Unit Service Agreement between American Cable Company Partnership
and Mr. Wetherington.
Multiple Unit Service Agreement between American Cable Company Partnership
and Country Club Properties, Inc.
Right of Entry Agreement between Lake Forest Trailer Park, Inc. and KNOLOGY
Holding, Inc.
Right of Entry Agreement between Turman Realty and KNOLOGY Holding, Inc.
Bulk Rate Multiple Unit between Parker Development and KNOLOGY Holdings, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and
Ray M. Wright Inc.
Cable Television and Telephone Service Agreement between WLB, LLC, and
KNOLOGY of Columbus, Inc,
PROVISION OF SERVICES
MONTGOMERY
Standard Commercial Agreement between Montgomery Cable Vision and
Entertainment, Inc. and Alabama Inns Associates.
Cable Television Services Agreement between KNOLOGY in Montgomery and Alabama
State University of Montgomery, AL.
Right of Entry Agreement between Bell Station Apartments and Montgomery Cable
Vision and Entertainment, Inc.
Cable Television and Telephone Service Agreement between Bell Station
Associates, LTD and KNOLOGY of Montgomery, Inc.
Cable Television and Telephone Service Agreement between Bonnie Crest
Company and KNOLOGY of Montgomery, Inc.
Cable Television and Telephone Service Agreement between Montgomery Cablevision
and Entertainment, Inc. and Bragg Development CO Inc.
Cable Television and Telephone Service Agreement between Montgomery Cablevision
and Entertainment Inc. and Born Toaks United a limited partnership.
Cable Television and Telephone Service Agreement between Coliseum Properties
and KNOLOGY of Montgomery, Inc.
Right of Entry Agreement between Carriage Hills Apartments of Montgomery and
Montgomery Cablevision and Entertainment, Inc.
Cable Television and Telephone Services Agreement between Montgomery Cablevision
and Entertainment Inc. and C&E Enterprise.
Agreement for Attachments between Central Alabama Electric Cooperative and
KNOLOGY Holding Inc.
Pole Attachment Bond between KNOLOGY Holdings, Inc. and Pacific Insurance
Company.
Right of Entry between Jonean Deal and Eagle Landing.
Standard Commercial Agreement between Montgomery Cablevision and
Entertainment, Inc. and Eastern Bypass Inns, LTD
Right of Entry between Montgomery Cablevision and Entertainment and Eagle
Landing Apartment Complex
Bulk Cable Communications Service and Access Agreement between Montgomery
Cablevision and Entertainment Inc. and Foshee Builders Inc.
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<PAGE> 267
Cable Television Service Agreement between Montgomery Cablevision and
Entertainment and Foxcroft.
Cable Television Service Agreement between Montgomery Cablevision and
Entertainment Inc, and Hillwood Apartments
Service Agreement between International Computer Systems, Inc. and Montgomery
Cablevision
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and March Management
Company
Cable Television and Telephone Services Agreement between Mark Montgomery
Associates, LTD and KNOLOGY of Montgomery, Inc.
Cable Television and Telephone Services Agreement between Robert Monday and
KNOLOGY of Montgomery, Inc.
Cable Television and Telephone Services Agreement between Mid-America Apartments
Communities, Inc. and KNOLOGY of Montgomery, Inc.
Service Agreements between KNOLOGY Holdings, Inc. and Montgomery Alabama Hotel
Limited Partnership
Multiple-Unit Agreement between Montgomery Motel Associates Montgomery Day Inn
and Montgomery Cablevision and Entertainment, Inc.
Right of Entry Agreement between Palmer Construction and Montgomery Cablevision
and Entertainment, Inc.
Cable Television and Telephone Service Agreement between Narrow Lane, LTD
Narrow Lane Apartments and KNOLOGY of Montgomery, Inc.
Multi-Unit Service Agreement between KNOLOGY Holding Inc. and Park Towne
Apartments LTD
Bulk Rate Multiple-Unit between Parker Development Company and KNOLOGY
Holdings, Inc.
Non-Exclusive Cable Television and Telephone Services Agreement between
Harry H. Shugart and KNOLOGY of Montgomery, Inc.
Cable Television Services Agreement between Montgomery Cablevision and
Entertainment Inc. and Stratford Village Realty Trust
Cable Television and Telephone Service Agreement between Three Flags
Apartments LLC and KNOLOGY Holdings, Inc.
Right of Entry Agreement between Turtle Place Apartments and KNOLOGY
Cable Television and Telephone Services Agreement between UDRT of Alabama Inc.
and KNOLOGY of Montgomery, Inc.
Memorandum of Agreement between UDRT of Alabama and KNOLOGY of Montgomery
Service and Access Agreement between Montgomery Cablevision and
Entertainment, Inc. and USA Hotel Corporation
Right of Entry between Vaughn Pointe Apartments and Montgomery Cablevision and
Entertainment, Inc.
Multi-Unit Service Agreement between KNOLOGY Holdings, Inc. and Wesley Gardens
Service Agreement between CP Limited Partnership Woodland Hills and
KNOLOGY of Montgomery, Inc.
PROVISION OF SERVICE
PANAMA CITY
Service Subscription Agreement between Lollye on the Beach and Beach Cable Inc.
Installation and Service Subscription Agreement between Mariner West Owners
Assoc. Inc. and Beach Cable, Inc.
Installation and Service Subscription Agreement between Dan McDonald and
Beach Cable Inc.
Installation and Service Subscription Agreement between McKenzie Inn and
Beach Cable Inc.
Installation and Service Subscription Agreement between Michael R. Means and
Beach Cable Inc.
Cable Television and Telephone Services Agreement between Mid-America and
KNOLOGY of Panama City, Inc.
Installation and Service Subscription Agreement between Miracle Strip
Beach Motel and Beach Cable, Inc.
Installation and Service Subscription Agreement between Misty Harbour
Condominiums and Beach Cable Inc.
Installation and Service Subscription Agreement between Nautical Watch
Homeowners Assoc.
Installation and Service Subscription Agreement between Beach Cable, Inc.
and Nautilus Condominiums Homeowners Asso.
Installation and Service Subscription Agreement between Diane and Michael Nix
Installation and Service Subscription Agreement between Ospray Hotel and Beach
Cable Inc.
Installation and Service Subscription Agreement between Oxygen Zone Motel Inc.
and KNOLOGY of Bay County Inc.
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<PAGE> 268
Installation and Service Subscription Agreement between The Palms Homeowners
Association and Beach Cable Inc.
Installation and Service Subscription Agreement between Panama Palms Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Parson's Place and
Beach Cable Inc.
Installation and Service Subscription Agreement between Raj. Patel and
Beach Cable Inc.
Installation and Service Subscription Agreement between PCB Properties and
Beach Cable Inc.
Installation and Service Subscription Agreements between Peachtree Place Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreements between Peachtree Place I
Homeowners Association and Beach Cable Inc.
Installation and Services Subscription Agreements between Pier 99 Beachfront
Motel and Beach Cable Inc.
Installation and Service Subscription Agreements between Polynesian Village
and Beach Cable Inc.
Installation and Service Subscription Agreements between Port of Call Motel
and Beach Cable Inc.
Installation and Service Subscription Agreements between Ramsgate Harbour
Condos Homeowners Assoc. and Beach Cable Inc.
Installation and Service Subscription Agreement between The Reef Motel
and Beach Cable Inc.
Installation and Service Subscription Agreement between Regency Towers Owners
Assn. and Beach Cable Inc.
Installation and Service Subscription Agreement between Reynolds Cottages
and Beach Cable Inc.
Installation and Service Subscription Agreement between Rick Hughes and
Howard Cox Inc. d.b.a. Palmetto Court Motel and Beach Cable Inc.
Installation and Service Subscription Agreement between RI Panama City, LTD
and Beach Cable Inc.
Installation and Service Subscription Agreement between Sandpiper Villas
Condominiums and Beach Cable Inc.
Installation and Service Subscription Agreement between Sands of Laguna and
Beach Cable Inc.
Installation and Service Subscription Agreement between B.J. Schmertmann and
Beach Cable Inc.
Installation and Service Subscription Agreement between Sea Starr Inn and
Beach Cable Inc.
Installation and Service Subscription Agreement between Sidney L. Cowgill and
Beach Cable Inc.
Installation and Service Subscription Agreement between Siesta Motel and
Beach Cable Inc.
Installation and Service Subscription Agreement between Skyway Motel and
Beach Cable Inc.
Installation and Service Subscription Agreement between Mr. Dennis Smith and
Beach Cable Inc.
Installation and Service Subscription Agreement between Spain Apartments and
Cottages and Beach Cable Inc.
Installation and Service Subscription Agreement between Sugar Beach and
Beach Cable Inc.
Installation and Service Subscription Agreement between Sugar Sands Motel and
Beach Cable Inc.
Installation and Service Subscription Agreement between Summer Breeze Inn Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Summer House Of
P.C. Assn. Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between The Summit Owners
Association Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between Sun Dial Motel and
Beach Cable Inc.
Installation and Service Subscription Agreement between Surf High Inn Inc.
and Beach Cable Inc.
Service Agreement between John S. Tilley and KNOLOGY of Panama City Inc.
Installation and Service Subscription Agreement between Tradewinds of Bay
County Inc. and KNOLOGY of Panama City Inc.
Installation and Service Subscription Agreement between Twin Palms Motel
of PCB Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between John and/or Sandra
Vann and Beach Cable Inc.
Installation and Service Subscription Agreement between Vero Mar
Development LTD. and Beach Cable Inc.
Installation and Service Subscription Agreement between Beach Cable Inc. and
Villas Bahama West Homeowners Assoc.
Installation and Service Subscription Agreement between Wendwood Condominiums
and Beach Cable Inc.
Installation and Service Subscription Agreement between John Williams and
Beach Cable Inc.
Installation and Service Subscription Agreement between Admiral Imperial and
Beach Cable Inc.
Installation and Service Subscription Agreement between Altan's Beach Motel
and Beach Cable Inc.
Installation and Service Subscription Agreement between American Valley of
Panama City LTD and Beach Cable Inc.
Installation and Service Subscription Agreement between Arquette
Development Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between Patsy Badham and
Beach Cable Inc.
Cable Television Easement Agreement between Bayside Partnership and
Beach Cable Inc.
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<PAGE> 269
Installation and Service Subscription Agreement between Beachcomber by the
Sea Inc. and KNOLOGY of Bay County Inc.
Installation and Service Subscription Agreement between Beachtime Cottages
and Beach Cable Inc.
Installation and Service Subscription Agreement between Bennett's Reef Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Blue Water Town Houses
Assoc. and Beach Cable Inc.
Installation and Service Subscription Agreement between Bright Starr Motel
and Beach Cable Inc.
Installation and Service Subscription Agreement between Catalina Court and
Beach Cable Inc.
Installation and Service Subscription Agreement between Coconut Grove Inn. Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Mr. Travis Cosby
and Beach Cable Inc.
Services Agreement between Big "D" Inc. and KNOLOGY of Panama City Inc.
Installation and Service Subscription Agreement between Mr. Bob Dalton and
Beach Cable Inc.
Installation and Service Subscription Agreement Mitch Dever, BBA Big D Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Dockside North
Condominiums and Beach Cable Inc.
Installation and Service Subscription Agreement between Driftwood Lodge and
Beach Cable Inc.
Installation and Service Subscription Agreement between Edge Water
Construction and Beach Cable Inc.
Installation and Service Subscription Agreement between El Centro Condo
Association and Beach Cable Inc.
Installation and Service Subscription Agreement between Emerald Beach Motel
and Beach Cable Inc.
Installation and Service Subscription Agreement between Emerald Coast Club and
Beach Cable Inc.
Installation and Service Subscription Agreement between Emerald Coast RV Park
and Beach Cable Inc.
Installation and Service Subscription Agreement between Fiesta Motel and Beach
Cable Inc.
Installation and Service Subscription Agreement between Gateway Ventures Inc.
and Beach Cable Inc.
Installation and Service Subscription Agreement between Gemini Beach Condo
and Beach Cable Inc.
Installation and Service Subscription Agreement between Georgian Terrance Motel
and Beach Cable Inc.
Installation and Service Subscription Agreement between Doug Gilmore and Beach
Cable Inc.
Installation and Exclusive Cable Provider Agreement between Beach Cable Inc.
Installation and Service Subscription Agreement between Andy Gothard and
Beach Cable Inc.
Installation and Service Subscription Agreement between Grande Gulf Motel and
Beach Cable Inc.
Installation and Service Subscription Agreement between Mr. Eddie Green and
Beach Cable Inc.
Installation and Service Subscription Agreement between Gulf Edge Court and
Beach Cable Inc.
Installation and Service Subscription Agreement between Gulf Highlands Beach
Resort Homeowners Association Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between Gulf Winds and
Beach Cable Inc.
Installation and Service Subscription Agreement between Wade Hamilton and Beach
Cable Inc.
Service Agreement between Harbour's Edge Condominiums and KNOLOGY of Panama City
Installation between Hilton Inc. and Beach Cable Inc.
Installation and Service Subscription Agreement between Mr. John Holloway and
Beach Cable Inc.
Exclusive Cable Television Services Agreement between Wes Burnham and
KNOLOGY of Panama City Inc.
Installation and Service Subscription Agreement between Hoyt Cook Jr. and
Beach Cable Inc.
Installation and Service Subscription Agreement between Charles King and
Beach Cable Inc.
Installation and Service Subscription Agreement between LaBrisa Inn and Beach
Cable Inc.
Installation and Service Subscription Agreement between Laguna Beach Christian
Retreat and Beach Cable Inc.
Installations and Service Subscription Agreement between La Valencia Beach
Resort Owner's Association Inc. and KNOLOGY of Panama City Inc.
HUB LEASES
COLUMBUS
Lease Agreement between Samuel B. Hewitt and American Cable Company Inc.
Non-Disturbance and Attornment Agreement with Mortgage between American
Cable Company Inc. and First Alabama Bank of Columbus.
Lease Agreement B.E. Satter White and American Cable Company Inc.
MONTGOMERY
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Lease Agreement between WMH Mclemore and Montgomery Cablevision and
Entertainment
Lease Agreement between Vaughn/Taylor, LLC and Montgomery Cablevision
and Entertainment
PANAMA CITY
Lease Agreement between Coulliett's Auto Mall Inc. and KNOLOGY of Panama
City Inc.
Lease Agreement between Neil C. Jones/Assign and KNOLOGY of Panama City Inc.
EQUIPMENT AND OTHER
MONTGOMERY
Lease Agreement between Southern Boulevard Corporation and Cybemet Holding
d/b/a/ Montgomery Cablevision and Entertainment Inc.
Equipment Lease between Baker Equipment Leasing Co. and Montgomery Cablevision
and Entertainment Inc.
MISC. SERVICE AGREEMENTS
CORPORATE
Independent Contractor's Agreement is between KNOLOGY Holdings Inc.and
Communications Cable Inc.
First Addendum to Collocation Agreement is between KNOLOGY Inc. and
Interstate FiberNet Inc.
Master Capacity Lease is between Interstate FiberNet and CyberNet Holding
Standard Terms and Conditions is between Illuminet Inc. and Agreement Customer
Agreement for 800 Database Service is between Illuminet Inc. and Customer
Software License Agreement is between JD Edwards and KNOLOGY Holding Inc.
Lease Agreement is between Interstate Telephone Company and CyberNet
Holding Inc.
Agreement regarding Co Delivery is between Mind Spring Enterprises Inc.
and KNOLOGY Holding Inc.
Client Service Agreement is between International Computer Systems Inc.
and KNOLOGY
Product Attachment between Northern Telecom Inc. and KNOLOGY Holding Inc.
Executed Contract between Syntellect Inc. and KNOLOGY Holding Inc.
Contractual Agreement between Rawle Murdy Associates Inc. and KNOLOGY
CONSTRUCTION AGREEMENTS
AUGUSTA
Construction Agreement between KNOLOGY Holdings Inc. and Cable Constructors Inc.
Form of Change Order Agreement between KNOLOGY Holdings Inc. and Cable
Construction Inc.
Construction Agreement between KNOLOGY Holdings Inc. and Premier Cable
Communications
Construction Agreements between KNOLOGY Holdings Inc. and Harrison
Wright Co Inc.
Construction Agreements between KNOLOGY Holdings Inc. and Pratt Communications
Construction Agreements between KNOLOGY Holdings Inc. and ProMark Utility
Locators Inc.
Construction Agreements between KNOLOGY Holdings Inc. and P&T Electric Inc.
COLUMBUS
Construction Agreement between Holding Inc. and A-Com Protection Services
Construction Agreement between KNOLOGY Holding Inc. and Cable
Constructors Inc.
Construction Agreement between KNOLOGY Holdings Inc. and Colin M. Hurd Inc.
Construction Agreements between KNOLOGY Holdings Inc. and Control Technologies
Inc.
Installations Agreement between KNOLOGY Holdings Inc. and Gateway CATV
Construction Inc.
Construction Agreement between KNOLOGY Holdings Inc. and First Coast
Cable Construction Inc.
Construction Agreements between KNOLOGY Holdings Inc. and Lexus Cabling Corp.
Installation Agreement between KNOLOGY Of Columbus Inc. and Major Cable
Installation Agreement between American Cable Inc. and Professional Cable
Installations Inc.
21
<PAGE> 271
MONTGOMERY
Construction Agreement between KNOLOGY Holding Inc. and Cable Constructors Inc.
Construction Agreement between KNOLOGY Holding Inc, and First Coast Cable
Construction Inc.
Accordance with the Agreements for construction between Mich-Com Cable
Services Inc. and KNOLOGY Holdings Inc.
Construction Agreement between KNOLOGY Holdings Inc. and Pratt Communications
PANAMA CITY
Construction Agreement between KNOLOGY Holding Inc. and Cable Constructors Inc.
Construction Agreement between KNOLOGY Holding Inc. and Pratt Communications
Construction Agreement between KNOLOGY Holding Inc. and Premier Cable
Communications
Installation Agreement between KNOLOGY Holding Inc. and Frankie L. Tillman
d/b/a/ Tillman Contr.
Construction Agreement between KNOLOGY Holdings Inc. and Sub Aqueous Engineering
Services Inc.
CHARLESTON
Construction Agreements between KNOLOGY Holdings Inc. and First Coast Cable
Construction
Construction Agreements between KNOLOGY Holding Inc. and First South Utility
Construction
CONSTRUCTION AGREEMENTS
COLUMBUS
Installation Agreement between American Cable Inc. and Gateway CATV Contruction
Construction Agreement between KNOLOGY Holdings Inc. and Professional
Cable Installation
Agreement between KNOLOGY Of Columbus Inc. and Williams Underground Services
MONTGOMERY
Installation Agreement between KNOLOGY of Montgomery Inc. and Amerilink Corp.
Installation Agreement between KNOLOGY of Montgomery Inc. and Cable Constructors
RIGHT-AWAY
COLUMBUS
License Agreement between American Cable Inc. and American Communications
Services of Columbus Inc.
Addendum to license Agreement between American Cable Inc. and American
Communications Services of Columbus Inc.
Pole Attachment Agreement between Georgia Power Company and American Cable
Company
License Agreement between Bell South Communications Inc. and American Cable
Company
Consent to Assignment between American Cable Inc. and Georgia Power
MONTGOMERY
Agreement for Attachments between Montgomery Cablevision and Entertainment Inc.
and Alabama Power Company
22
<PAGE> 272
License Agreement for Pole Attachments between South Central Bell Telephone
Company and Montgomery Cablevision and Entertainment Inc.
PANAMA CITY
License Agreement between Bell South Telecommunications Inc. and Beach
Cable Inc.
Pole Attachment Agreement between Gulf Power Company and Beach Cable Inc.
Assignment Agreement between Gulf Power Company and KNOLOGY of Panama City Inc.
CHARLESTON
License Agreement between Berkeley Electric Cooperative, Inc and KNOLOGY of
Charleston, Inc.
Facilities Transfer Agreement between South Carolina Electric and Gas Company
and KNOLOGY of Charleston
Master Pole Attachment Agreement between South Carolina Electric and Gas
and KNOLOGY Holdings Inc.
Network Access Agreement between SCANA Communications, Inc. and KNOLOGY
AUGUSTA
Right of Entry Agreement between Enterprise Mill LLC and KNOLOGY of Augusta Inc.
RIGHT AWAY
Georgia Power Standard Pole Agreement
SCANA
CABLE PROGRAMMING
CORPORATE
Discovery Communications Inc. Showcase Services Affiliation Agreement
ESPN2 Affiliate Agreement
ESPN Inc. News Affiliate Agreement
Great American Country Launch Affiliate Agreement
Home and Garden Network Television
KNOLOGY TV Launch Affiliate Agreement
Playboy Entertainment Group Inc. Carriage Agreement
Show Time Network Service Agreement
Value Vision Enervation Inc. Carriage Agreement
Value Vision Short Form Agreement
ZDTV LLC Carriage Agreement
COLUMBUS
Country Music Television Inc.
America's Health Network Affiliate Launch
United Video Satellite Transmission Service Agreement
MONTGOMERY
Cable News Network Inc. Affiliate Agreement
ESPN Inc, Affiliation Agreement
Eternal Worlds Television Network
QVC Affiliate Agreement
Show Time Network Inc. July 9, 1990
23
<PAGE> 273
The Movie Channel Service Agreement
CORPORATE
Interstate Office Park Agreement
Laurmest Montgomery Corp. Service Agreement
Montgomery Alabama Hotel Limited d.b.a. Days Inn
Three Flags Apartments Service Agreement
Henry Walker Right of Entree
Whisperwood Spa and Club LP Multi-Unit
COLUMBUS
Calvary Community Inc, Service Agreement
The Argus Group Garden Brook Apt. Comm.
Country Club Properties Hillcrest Apt. Service Agreement
Winthrop Apartments Service Agreement
MONTGOMERY
Cambridge Park Apartments Service Agreement
Clayton Court Service Agreement
USA Hotel Corp. Service Agreement
Hillwood Apartments and Service Agreement
Oxford Gardens and Spanish Gardens
PANAMA CITY
The Disney Channel Affiliation Agreement
Driftwood Lodge Provider Agreement
E! Entertainment Television Inc, Affiliation Agreement
Encore Media Corporation Affiliation Letter Agreement
ESPN Inc. Affiliation Agreement
ESPN News Affiliation Agreement
ESPN 2 Affiliation Agreement June 1, 1994
ESPN 2 Amendment to Affiliation Agreement
The Family Channel Affiliation Agreement
Flix Service Agreement
The Golf Channel Affiliation Agreement
Headline News Affiliation Agreement
HGTV Affiliate and Retransmission Consent
The History Channel Affiliation Agreement
Home Shopping Club Inc, Affiliation Agreement
TCT Inc. Affiliation Agreement
The Learning Channel Affiliate Renewal
Life Time Affiliation Agreement
MSNBC Affiliation Agreement
MTV Networks Affiliate Agreement
The Nashville Network Affiliate Agreement
The Television Food Network Extended Affiliate Agreement
The Travel Channel Affiliation Agreement
Turner Network Television Affiliate Agreement
Turner Classics Movies Affiliate Agreement
Turtle Lake Associates LTD Turtle Lake Service Agreement
24
<PAGE> 274
United Transmission Service Agreement
The Weather Channel Affiliation Agreement
The Weather Channel Inc. Affiliation Agreement
The Weather Star XL Addendum Amendment
John Williams Provider Agreement
Nick at Nites TV Land Affiliate Agreement
Oxygen Zone Motel Inc, Provider Agreement
Outdoor Life Speed Vision Affiliation Agreement
Prevue Guide Channel Service Agreement
QVC Network Inc. Affiliation Agreement
Science Fiction Channel Affiliation Agreement
Summer House of P.C. Assn. Inc, Provider Agreement
Southern Satellite Systems Five Year Agreement
Sunshine Network Affiliation Agreement
TBS Superstation Affiliate Agreement
Sports Channel Affiliate Agreement
Show Time Networks Service Agreement October 10, 1994
MONTGOMERY
John Walter Stowers Site Agreement
Williams Leasing and Development Co. Construction Agreements
Hamilton Cable Inc. Construction Agreements
Construction Agreement between KNOLOGY Holdings Inc. and Hal-Tec
Construction Inc.
Lease Agreement between Interstate Telephone Company and KNOLOGY Holding Inc.
Make Ready Agreement between KNOLOGY of Columbus Inc. and ACSI Communications
Service of Columbus
License Agreement between KNOLOGY Holdings Inc. and ITC Globe Inc.
Site Agreement between Hub G and Montgomery Cablevision and Entertainment Inc.
Option and Lease Agreement between Todd Stephens Builder LLC and KNOLOGY of
Montgomery Inc.
Collocation Agreement for Multiples Sites between Interstate FiberNet Inc.
and [Fiber Net Inc.]
Hub Lease Agreement between Gerhard Jung and KNOLOGY of Charleston Inc.
Installation Agreement between American Cable Inc. and Stevens
Communication Inc.
Release and Indemnity Agreement NPAC/SMS User Agreement between and by
KNOLOGY Holdings Inc.
Master Service Agreement and Illuminate LPN Service Order Administrator
Exclusive Cable Television Service Agreement between Couch Family Trust and
KNOLOGY of PC Cable Television and Telephone Service Agreement
La Femme Inc. KNOLOGY of Montgomery
Service Agreement between Regency Towers Owners Association and KNOLOGY of
Panama City
Service Agreement between Lowell E. Mix and KNOLOGY of Panama City Inc.
Service Agreement between Ridgeway Rentals and KNOLOGY of Charleston Inc.
Lease Agreement between Southern Company Services Inc. and KNOLOGY Holding Inc.
25
<PAGE> 275
SCHEDULE 6. 1 (w)(x)
NOTICES OF RATE REGULATION
None.
<PAGE> 276
SCHEDULE 10.3
EXISTING LIENS
1 . Colonial South Corp. assigned to Southtrust Bank of Charleston, N.A. its
interest in and to certain Leased Equipment of TTE, Inc., South Carolina
Secretary of State UCC filing #135153B, dated December 17, 1993.
2. Colonial South Corp. assigned to Southtrust Bank of Charleston, N.A. its
interest in and to certain Leased Equipment of TTE, Inc., South Carolina
Secretary of State UCC filing #133602A, dated February 4, 1994.
<PAGE> 277
Schedule 10.4
EXISTING LOANS, ADVANCES AND INVESTMENTS(3)
<TABLE>
<CAPTION>
Employee
Advances/Loans Investments
-------------- -----------
<S> <C> <C>
Knology Holdings $ 3,400 885,000 (1)(2)
Knology of Montgomery 15,500 None
Knology of Columbus 1,000 None
Knology of Panama City 4,500 None
Knology of Charleston 3,000 None
Knology of Augusta 200 None
Knology of Huntsville 12,500 None
Knology of TTE 1,000 None
Knology of Baton Rouge None None
Knology of Alabama None None
Knology of Florida None None
Knology of Georgia None None
Knology of Louisiana None None
Knology of South Carolina None None
Knology of Tennessee None None
</TABLE>
(1) Consisting of $60,000 co-ownership of Corporate jet, $825,000
investment in ClearSource
(2) Excludes commitment to fund additional S4,250,000 investment in
ClearSource, existing at closing and agreed to by the Lenders under Section
10.4(b) of Credit Agreement
(3) Excludes intercompany investments between Loan Parties allowed under
Section 10.4(b) of Credit Agreement and prepaids and similar deposits
allowed under Section 10.4(f) of Credit Agreement
<PAGE> 1
EXHIBIT 10.54
ORDINANCE NO. 284
AN ORDINANCE GRANTING TO KNOLOGY OF PANAMA CITY, INC., AUTHORIZING IT TO
INSTALL, MAINTAIN AND OPERATE A SYSTEM FOR THE TRANSMISSION OF AUDIO,
VOICE, DATA AND/OR VIDEO SIGNALS AND ELECTRONIC DATA OVER, ACROSS AND UNDER
PRESENT AND FUTURE PUBLIC STREETS, ALLEYS, ROADS AND RIGHTS OF WAY IN CEDAR
GROVE, FLORIDA UNDER CERTAIN CONDITIONS AND RESTRICTIONS; TO REPEAL
CONFLICTING ORDINANCES; AND FOR OTHER PURPOSES.
BE IT ENACTED BY THE PEOPLE OF THE TOWN OF CEDAR GROVE:
SECTION 1. Definitions. For the purpose of this Ordinance, the following
term's phrases, words and their derivations shall have their meanings given
herein unless more specifically defined within other sections of this Ordinance.
When not inconsistent, with the content, words used in the present term include
the plural number. The word "shall" is always mandatory and not merely
directory,
(A) "Cedar Grove" means the Town of Cedar Grove, Florida
(B) "CATV SYSTEM" means community antennae television system and related
cable or fiber optic networks for transmission of audio and/or video
signals and electronic data by cable or other means and such related
services as Grantee may choose to provide in connection with cable
television services.
(C) "Commission" means the Town of Cedar Grove Commission.
(D) "Franchise" is the authorization, and any renewal thereof, issued by
the Commission, as franchising authority, whether such authorization
is designated as a franchise, permit, license, resolution, contract,
certificate, agreement or otherwise, for Grantee to construct, install
and operate the System in the public streets, alleys, roads, and right
of way identified in said Franchise.
(E) "Grantee" is KNOLOGY of Panama City, Inc., and its permitted
successors and assigns.
(F) "Gross Revenues" shall mean revenues collected by Grantee from
subscribers for cable television services provided in Cedar Grove, in
each case excluding (i) penalty or other fees received for late
payments or canceled checks, (ii) revenues received from advertising,
(iii) taxes, fees, assessments or similar charges collected by the
Grantee on behalf of any governmental agency (including without
<PAGE> 2
limitation the franchise fees collected pursuant to Section 2), (iv)
installation, connection, disconnection or other non-reoccurring
fees charged to subscribers, (v) all revenues from equipment sold,
leased or rented to subscribers upon subscriber's premises; (vi) all
local telephone service revenue, toll and long distance revenues
(whether Interlata, Intralata, or International) and (vii) all
revenues related to Internet content. Grantee will pay
fees/percentage equal to but no greater than competing service
providers in Cedar Grove.
(G) "Person" is any person, firm, partnership, trust, joint stock
company, association, corporation, company, government entity, or
organization of any kind.
(H) "Right of Way" shall mean all present and future streets, alleys,
roads and rights of way within the limits of the town of Cedar
Grove as they now or hereafter exist.
(I) "Street" shall mean the entire width between the boundary lines of
every highway, alley, street, avenue, bridge, viaduct, tunnel, and
causeway in Cedar Grove, dedicated or devoted to public use and
easements related thereto.
(J) "System" shall mean, collectively, the CATV System and the
Telecommunications System.
SECTION 2. Consideration. The grant of the right, privilege and
Franchise under this Ordinance has been determined to be in the best interest
of the citizens of Cedar Grove and shall be in accordance with the terms and
conditions set forth herein. The subject should annually pay to Cedar Grove a
fee of five percent (5) of Gross Receipts as defined in this Agreement, a pro
rata share of any ad sales revenue received by Grantee, provided however in no
event shall Grantee be required to pay a fee greater than that being paid by
Grantees's competitors within the Town of Cedar Grove, Florida. Said annual
fee, for each year of the term of this Franchise shall be paid quarterly with
each quarterly payment becoming due thirty (30) days following the end of the
months of March, June, September and December hereafter. All rents or other
monetary obligations, if not paid when due, shall bear interest at the maximum
legal rate from the date such payments are due. Within sixty (60) days of the
end of each December, the Grantee shall also file a statement executed by
Grantee's chief executive officer, which shall certify the amount of gross
receipts and the Franchise fee for the previous calendar year. All Franchise
fees will be in accordance with state and federal laws. The Grantee shall
credit a subscriber's account for any service interruption within the Grantee's
control, that exceeds forty-eight (48) hours from the time the Grantee is
notified that a subscriber is without service; provided, however that the
Grantee need not credit any subscriber for such time that such service
interruption continues as a result of (1) the subscriber's failure to afford
the Grantee necessary access to the subscriber's premises, (2) equipment not
provided by the Grantee or employees, provided that the equipment provided by
the Grantee does not partially or wholly cause the interruption, or (3)
equipment damaged as a result of subscriber misuse.
<PAGE> 3
SECTION 3. GRANT OF AUTHORITY AND TERM.
A. GRANT OF AUTHORITY
(1) There is hereby granted, subject to the terms and conditions of
this Franchise, to Grantee the nonexclusive right and privilege
to have, own, acquire, construct, expand, reconstruct, maintain,
repair, use and operate the System in, along, across, on, over,
through, above and under the Streets and Rights of Way of Cedar
Grove, Florida.
(2) Except as otherwise provided herein, this Ordinance is granted to
Grantee for the sole purpose of directly serving its end-user
customer.
(3) Grantee shall provide service throughout all of Cedar Grove as a
public service provider.
(4) Nothing herein contained shall ever be constructed to confer upon
Grantee, its successors and/or assigns, exclusive rights or
privileges of any nature whatsoever.
B. TERM. This Franchise is granted for a period fifteen (15) years
following the effective date of this Ordinance, shall be nonexclusive and
revocable at the pleasure of the Town Council for cause. Thereafter, this
Franchise shall be subject to renewal following receipt by City of written
notice from Grantee at least twelve (12) months before the end of the initial
term granted herein of Grantee's intention to seal renewal and within ninety
(90) days after receipt of said notice the Town will convene a public hearing
to review Grantee's performance of this Franchise. The City and Grantee agree
to renegotiate in good faith changes proposed by either party which would apply
to a renewal or extension of this Franchise so as to insure continuity of
service to the public.
SECTION 4. CONDITIONS OF USE.
(a) The Grantee shall not necessarily obstruct or impair traffic upon any
street, road or other public way of Cedar Grove and shall comply with
all of the Commission's rules and regulations designed to prevent
damage to trees and shrubbery on or adjacent to such public streets or
rights of way which may be caused by installation and operation of the
System. Upon making an opening in any public way, street, sidewalk or
road as authorized by this Franchise for the purpose of laying,
constructing, repairing and/or maintaining the System and any related
facilities or equipment, the Grantee shall, without unnecessary delay,
replace and restore same to its former condition as nearly as
possible, and in full compliance with the provisions of Cedar Grove's
policies, rules, regulations and
<PAGE> 4
/or ordinances. Grantee shall comply with Cedar Grove's Underground
Facility Damage Prevention and Safety Ordinance. The Town of Cedar Grove
reserves the right of reasonable regulation of the erection and
construction of any work by the grantee and to reasonably designate where
such works and construction shall be placed. The Grantee agrees when
requested by the Town to make minor changes in its equipment to conform
to the reasonably necessary requirements of small localized areas, such
changes to be effected when so requested within a reasonable time.
(b) In all sections of Cedar Grove where the cables, wires or other like
facilities of public utilities are placed underground, Grantee shall
place its cables, wires or other like facilities underground to the
maximum extent that existing technology reasonably permits Grantee to do
so.
(c) The Grantee shall file with the Cedar Grove Planning Council and
Development Department true and correct as-built maps or plats of all
existing and proposed cable plant construction and the types of equipment
and facilities installed or constructed, property identified and
described as to the type of equipment and facility by appropriate symbols
and marks and which shall include annotations of all public ways,
streets, road, and conduits where the work is to be undertaken.
(d) If, at any time during the period of this Franchise, Cedar Grove shall
lawfully elect to vacate, relocate, abandon, alter or other public way
including any related drainage and utility areas, the Grantee, upon
reasonable notice from Cedar Grove, shall remove, relay and relocate its
wires, cables, and other fixtures and equipment at its own expense and
within reasonable time schedules established by Cedar Grove. Should
Grantee fail to do so, it shall be deemed to have waived its rights to
claim said wire, cable or other equipment and Grantee shall be liable to
Cedar Grove for any costs and expenses incurred by Cedar Grove should
Cedar Grove elect to remove, relay or relocate the wires, cables and
other fixtures and equipment.
(e) The Commission may at any time make inquiries pertaining to Grantee's
operation of the System with Cedar Grove. Grantee shall respond to such
inquiries on a timely basis.
(f) Grantee shall, upon request, provide the Commission with copies of
notices of all petitions, applications, communications and reports
submitted by between Grantee and the FCC, Securities and Exchange
Commissions and the Florida Public Service Commission or their successor
agencies, relating to any matters affecting the use of Cedar Grove's
Streets and Rights of way and/or the System authorized pursuant to this
Franchise Ordinances.
(g) Charges for service offered to the public by Grantee shall comply with
all applicable state and federal laws and regulations regarding
subscriber rates.
<PAGE> 5
Grantee shall provide notice to the Commission prior to any rate change,
and shall maintain on file with said Commission a schedule of the current
rates and fees charged for its services offered to the public.
(h) Grantee shall install and maintain its wires, cables, fixtures and other
equipment in accordance with the requirements of all applicable Cedar
Grove codes, ordinances and regulations, and in such a manner that they
will not interfere with any existing installations of Cedar Grove or the
operation of a public utility serving Cedar Grove.
(i) No poles or other wire-holding structures shall be erected by Grantee
without prior written approval of Cedar Grove Planning Council and
Development Department with regard to location, height, type and other
pertinent considerations. Any poles and wire-holding structures of
grantee erected pursuant to this subsection shall be moved or modified by
Grantee at its sole expense, upon reasonable notice, whenever Cedar Grove
Planning Council and Development Department has determined that the
public convenience would be enhanced thereby.
(j) Should Grantee fail to begin construction of the System within one
hundred twenty (120) days from the date this franchise Ordinance is
adopted by the Commission, Cedar Grove shall be entitled to terminate
this Franchise immediately.
(k) Grantee shall provide continuous service under this Franchise. Should
services be disrupted or disconnected for thirty (30) days out of any
ninety (90) consecutive days, grantee shall be in default of this
Franchise and Cedar Grove shall be entitled to terminate this Franchise
immediately, provided, however, that any such disruption or
discontinuance which is an act of God shall not result in termination of
the Franchise if Grantee immediately, continuously, and diligently works
toward restoring service to its full capacity.
SECTION 5. LIABILITY AND INDEMNIFICATION.
(a) By acceptance of this Franchise and right, Grantee agrees that it shall
indemnify, protect and hold forever harmless Cedar Grove, its elected
officials, officers, agents, representatives and assigns, from any and
all claims, liabilities, losses, costs, judgements, penalties, damages
and expenses (including reasonable attorney's fees and expenses of
litigation incurred in the defense of any such claim), arising out of or
relating to the installation, operation or maintenance by the Grantee of
the System, or the Grantee's failure to perform any of the obligations of
this Franchise, including but not limited to claims for injury or death
to any person or persons, or damages to any property, as may be incurred
by or asserted against Cedar Grove, its elected officials, officers,
agents, representatives, and/or employees, directly or indirectly, by
reason of the
<PAGE> 6
installation, operation or maintenance by the Grantee of System within
Cedar Grove.
(b) Nothing contained in subsection (a) of Section 5., shall in any way be
deemed a waiver by the Town of its sovereign immunity.
(c) Grantee shall furnish the Commission at least annually (and at such
other times as may be reasonably requested by the Commission) a
certificate from the insurance carrier(s) providing such insurance
coverage certifying that such coverage is in full force and effect.
Such certificates shall be in such form as is approved by the
Commission and designate Cedar Grove as an additional insured.
(d) During all periods of this Franchise, Grantee shall maintain all
insurance coverage required by law, and shall also maintain
comprehensive general liability coverage in a single limit sum of 1.6
Million Dollars ($1,600,000.00) for any one occurrence for bodily
injury, including death, and property damage. Compliance with all
insurance requirements shall be evidenced by a prepaid Certificate of
Insurance designation Cedar Grove as an additional insured, which by
its terms shall prohibit any cancellation or material change in
coverage absent thirty (30) days written notice to Lessor. On or
before the anniversary date of the insurance coverage, Grantee shall
furnish like evidence of continuing or replacement coverage.
(e) Lessee shall maintain worker's compensation insurance and any other
such insurance or coverage as may be required by law. The obligation
to maintain worker's compensation insurance coverage exists without
regard to any exemption under Florida law.
SECTION 6. TOWN RIGHTS IN FRANCHISE
(a) The Grantee shall at all times comply with all reasonable
requirements, regulations, laws, and ordinances now in force, and
which may hereafter be adopted by the Commission and be applicable to
the construction, repair, or maintenance or operation of the System
or use of Cedar Grove-owned conduit.
(b) The following events shall constitute an "Event of Default" under this
Franchise:
(i) Grantee breaches any material covenant set forth in this
Franchise;
(ii) Grantee fails to begin construction of the System within one
hundred twenty (120) days from the date of this Franchise
Ordinance is adopted by the Commission.
Cedar Grove's right to terminate this Franchise may be exercised only
after delivery of a written notice of an Event of Default to Grantee
and a sixty (60) day period for Grantee to cure and Event of Default.
Not withstanding the foregoing,
<PAGE> 7
this Franchise shall not be terminate unless Grantee has had the
opportunity to present its case before a meeting of the Commission.
(c) The right is hereby reserved to Cedar Grove to adopt in addition to
the provisions contained herein and in existing applicable
ordinances, such additional regulations or general application to all
Franchises providing competing services, including regulating
relating to customer service obligations, as it shall find necessary
in the exercise of its police power, provided, that such regulations,
by ordinances or otherwise, shall be reasonable and not in conflict
with the rights herein granted.
(d) Cedar Grove shall have the right, when the Commission in its sole
discretion finds it necessary to or appropriate, to hold a public
hearing with regard to this Franchise, and Grantee shall make
representatives available to attend any such hearing.
(c) Upon reasonable notice, Cedar Grove shall have the right to inspect
the business records of Grantee. Cedar Grove or its designee shall
have the right to conduct an audit of Grantee's books at any time.
Grantee shall be responsible for the costs and expenses of the audit
if the results of the audit reveal Grantee owes Cedar Grove more than
5% of the amount paid during the period subject to the audit. The
prevailing party shall be liable for all costs and expenses,
reasonable attorney's fees, incurred to collect any amounts claimed
by Grantor.
SECTION 7. ACCEPTANCE. This Franchise and the rights, privileges and
authority hereby granted, shall take effect and be in force from and after
enactment of this Ordinance and execution by the Mayor and Town Clerk, provided
that within fifteen (15) days after the date of the enactment of this
Ordinance, the Grantee shall file with the person specified in Section 10.,
herein its unconditional acceptance of this Franchise, which acceptance shall
include its agreement to comply with and abide by all its promotions, terms, and
conditions. Such acceptance and agreement shall be in writing, duly executed
by or on behalf of the Grantee and accompanied by an insurance certificate as
specified in Section 5., unless these documents or evidence thereof have been
filed with the Town Manager.
SECTION 8. TRANSFER OF TITLE. The Grantee shall not transfer this
Franchise to another person or entity without prior written approval of Cedar
Grove, provided that such approval will not be unreasonably withheld or
delayed. Cedar Grove shall have the absolute right to withhold consent to
transfer of this Franchise at any time before substantial buildout is achieved
and three (3) years have passed since the adoption of this Ordinance. This
provision shall not be construed as requiring Cedar Grove's approval of secured
financing agreements.
<PAGE> 8
SECTION 9. NOTICE. All notices, demands, or other writings this Franchise
requires to be given or made or sent, or which may be given or made or sent, by
either party, shall be deemed to have been fully given or made or sent when made
in writing and deposited in the United States mail, registered certified and
postage prepaid, and addressed as follows:
TO GRANTEE:
KNOLOGY of Panama City, Inc.
1241 O.G. Skinner Drive
West Point, Georgia 31833
Attention President
Fax - (706) 645-1446
TO CEDAR GROVE:
Town of Cedar Grove Commission
2728 East 14th Street
Cedar Grove, FL 32401
Attention Town Manager
Fax - (850) 763-4862
The address of party may be changed by written notice given to the other
party in the manner above provided.
Alternatively, a notice or other communication shall be deemed to be duly
received, if delivered by hand or sent by a method requiring a signature of
recipient, or is received by facsimile on a day which is not a business day, or
after 5:00 p.m. on a business day at the addressee's location, such notice or
communication shall be deemed to be duly received by the recipient at 10:00
a.m., on the first business day thereafter. Provided further the sender
maintains as a business record activity report generated by the sender's
facsimile machine.
SECTION 10. SEVERABILITY. If any section, subsection, sentence, clause,
phrase, or portion of this Ordinance is, for any reason held invalid,
unenforceable, unconstitutional by any court of competent jurisdiction, such
portion shall be deemed a separate, distinct, independent, and severable
provision and such holding shall not affect the validity of the remaining
portions hereof.
SECTION 11. CONTROLLING LAW. This Franchise shall be interpreted and
construed in accordance with the laws of the State of Florida.
SECTION 12. EXCLUSIVE VENUE. All claims, disputes and other matters in
question between the Grantee and Cedar Grove arising out of or relating to the
Agreement, or the breach thereof, shall be decided in the Circuit Court of Bay
County, Florida. The Grantee, by executing this Agreement, specifically consents
to venue in Bay County, Florida and waives any right to contest the venue in
the Circuit Court of Bay County, Florida or to remove action.
<PAGE> 9
SECTION 13. EFFECTIVE DATE. This Ordinance shall be effective upon its
passage and Grantee executing within fifteen (15) days thereafter the proper
document or documents acceptable to Cedar Grove binding itself, its predecessors
or its assigns to the terms herein.
PASSED, APPROVED, AND ADOPTED this 9 day of June, 1998
TOWN OF CEDAR GROVE, FLORIDA
BY: /s/ HILDRIE PEEL
----------------------------------
Hildrie Peel, Mayor
ATTEST: /s/ JAMES WOODS
------------------------------
James Woods, Acting Town Clerk
<PAGE> 1
EXHIBIT 10.55
L I C E N S E
STATE OF FLORIDA
COUNTY OF BAY
WHEREAS, the Board of County Commissioners of Bay County, Florida,
(the "Board" and the "County") on this 5th day of January, 1993, in regular
meeting, conducted a public hearing pursuant to the request from Beach Cable,
Inc. (the "Licensee") whose address is 4116 North Highway 231, Panama City,
Florida 32404, for a County license to use County highways or other public
roads or highways, or rights-of-way, acquired by the County and outside the
corporate limits of any municipality, for the construction, maintenance,
repair, operation and removal of cable, other communication lines and such
other equipment as may be necessary for the transmission of television and
radio signals (the "License"), and
WHEREAS, said License shall be issued only upon certain terms and
conditions as hereinafter set forth,
NOW THEREFORE, in consideration of the foregoing, the Board does
hereby grant a non-exclusive license to Beach Cable, Inc. as follows:
Section 1. That a License is hereby granted to Licensee to locate,
construct, maintain and operate a television cable distribution system,
including poles, wires and fixtures where necessary upon, along, through, over
and under the streets, alleys, bridges and public places of Bay County,
Florida, under the terms
<PAGE> 2
and conditions herein provided in the unincorporated areas of Bay County between
Hathaway Bridge as the Eastern boundary, the Phillips Inlet Bridge as the
Western boundary, the Gulf of Mexico as the Southern boundary, and St. Andrews
Bay, North Bay and the Intercoastal Waterway as the Northern boundary. The
Licensee shall use the existing poles of the Gulf Power Company and the Southern
Bell Telephone for the said system whenever possible, and the Licensee shall not
install any additional pole or poles unless such installation be first approved
by the Bay County Engineer. Licensee further agrees to move television lines and
other communication lines and equipment subject to this license at no cost to
the County in the event of widening or repair or reconstruction of any road.
SECTION 2. All cables, wires, fixtures and other installations erected
under the provision hereof shall comply with and meet the minimum standards
provided by the ordinances of Bay County, Florida, from time to time adopted,
and shall comply with all applicable County codes.
SECTION 3. This License shall be effective for a period of fifteen (15)
years following the effective date of this License, except as hereinafter
provided. This License shall not be construed to be a "franchise" within the
meaning of the term as provided by the laws of the State of Florida and shall be
nonexclusive. Further, this License shall be revocable at the pleasure of the
County for cause. This license shall also be
2
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subject to and governed by future federal or state legislation regulating cable
television.
Section 4. the Licensee agrees to indemnify and save the County harmless
from any and all liability of any nature whatsoever resulting from or arising
out of this agreement, said promise to indemnify shall include costs incurred
by the County, including attorneys' fees, in defending claims. In furtherance
of the obligation to indemnify and hold harmless the County from such claims
including attorneys' fees, the Licensee shall carry during the term of this
License general liability insurance in singular limits of at least Five Hundred
Thousand and 00/100 Dollars ($500,000.00) for bodily injury or death, One
Million and 00/100 Dollars ($1,000,000.00) for property damage per occurrence.
Compliance with the insurance provision shall be evidenced by a prepaid
certificate of insurance referencing the existence of the coverage, which
certificate, in its terms, shall prohibit any material change in coverage or
cancelation of insurance absent thirty (30) days notice to the County. On or
before the expiration date of the coverage, the Licensee shall submit to the
County like evidence of continuing or replacement coverage.
More particularly, the Licensee herein, its successors and assigns, does
hereby agree to indemnify and hold harmless the County from any and all
liability, claim, demand or judgment growing out of injury to any person or
property as a result of the violation or failure on the part of the Licensee,
its successor and assigns, to observe their proper duty or because of negligence
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<PAGE> 4
in whole or in part arising out of construction, repair, extension, maintenance
of duration of its equipment of any kind or character used in connection with
this License.
SECTION 5. The Licensee shall at all times make and keep full and complete
plats, maps and records showing the exact location of all cable distribution
system equipment located and used by the Licensee in the County.
SECTION 6. All of such installations and equipment shall be of a permanent
nature, durable and of sufficient height or depths, not to unreasonably
interfere in any manner with the rights of the public or individual property
owners, and shall not unreasonably interfere with the travel and use of public
places by the public during its construction, repair and removal. The County
reserves the right of reasonable regulation of the erection and construction of
any work by the Licensee and to reasonably designate where such works and
construction shall be placed.
SECTION 7. The Licensee shall have the right to operate a cable
distribution system during the existence of this License.
SECTION 8. The Licensee shall have the right to assign or otherwise
transfer this License only after two (2) years from the date of this Licensee.
Any assignment is subject to the approval of the County, and approval will not
be unreasonably denied. This restriction shall not affect the rights of
Licensee's creditors. Any assignee must meet the requirements as established by
Florida Statutes for the granting of new license.
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<PAGE> 5
Section 9. Failure or refusal to observe the terms and provisions of
this License by the Licensee, its successors and assigns, shall entitle the
County to forfeit and terminate this License and all rights thereunder. Prior
to a termination of this License, the County shall give ninety (90) days
written notice to the Licensee of its failure or observe the terms hereof and
should the Licensee fail to correct any default or to comply with the terms and
provisions of this License within the ninety (90) day period, the County shall
have the right to terminate the franchise of the Licensee.
Section 10. In the exercise of this License, the Licensee may, with
the consent of the owner, or if otherwise permitted by law, use the poles,
conduits and other equipment of public utilities holding franchises in the
County.
Section 11. The provisions of this License shall be construed to be
severable and the holding of any provisions hereof invalid or unconstitutional
shall in no way affect the remaining portions of this License.
Section 12. The Licensee shall, at its expense, promptly repair any
and all streets, sidewalks or other public and/or private property damaged or
destroyed by the Licensee, his agents, servants or employees, in exercising the
privilege herein granted.
Section 13. Licensee shall operate and maintain its cable system so
as not to interfere with those residents and inhabitants of the County who may
not be subscribers.
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Section 14. Licensee shall not as a condition of serving any subscriber,
request or require that any subscriber remove any television antenna from the
subscriber's premises.
Section 15. Not later than thirty (30) days prior to commencement of
construction of the CATV system, the Licensee shall deposit with the County an
irrevocable surety bond, letter of credit or cash from a financial institution
(or a bond with one good and sufficient surety) in the amount of twenty-five
thousand dollars ($25,000) subject to the approval by the County. Upon
completion of construction, said performance bond shall be reduced from
twenty-five thousand dollars ($25,000) to ten thousand dollars ($10,000), which
shall be maintained for the duration of this License. Said reduction in the
performance bond shall be subsequent to the determination of the County
Engineer that the construction has been completed. At any time after
construction is complete, Licensee may request the County to eliminate the
performance bond requirement or reduce it to an amount less than ten thousand
dollars ($10,000); however, the County may within its sole discretion refuse to
honor Licensee's request. The surety bond, letter of credit, or cash
(performance bond) shall be used to insure the faithful performance by the
Licensee of all provisions of the License, and compliance with all orders,
permits and direction of any agency, commission, board, department, division or
office of the County having jurisdiction over its acts or defaults under the
franchise, and the payment by the Licensee of any claims, liens and taxes which
arise by reason of the construction,
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operation or maintenance of the system. Failure to provide the surety bond,
letter of credit, or cash as provided herein shall result in the revocation of
this license.
BOARD OF COUNTY COMMISSIONERS
OF BAY COUNTY, FLORIDA
By: /s/ Danny Sparks
--------------------------
Danny Sparks, Chairman
ATTEST:
By: /s/ Harold Bazzel
--------------------------
Harold Bazzel
Clerk of Circuit Court
Accepted
By: /s/ L. Charles Hilton
--------------------------
L. Charles Hilton
Chairman, Beach Cable, Inc.
7
<PAGE> 1
EXHIBIT 10.56
ORDINANCE NO. 647
AN ORDINANCE GRANTING A FRANCHISE TO KNOLOGY OF PANAMA CITY, INC.,
AUTHORIZING IT TO INSTALL, MAINTAIN AND OPERATE A SYSTEM FOR THE
TRANSMISSION OF AUDIO, VOICE, DATA AND/OR VIDEO SIGNAL AND ELECTRONIC DATA
OVER, ACROSS AND UNDER PRESENT AND FUTURE PUBLIC STREETS, ALLEYS, ROADS,
AND RIGHTS OF WAY IN LYNN HAVEN, FLORIDA UNDER CERTAIN CONDITIONS AND
RESTRICTIONS; TO REPEAL CONFLICTING ORDINANCES; AND FOR OTHER PURPOSES.
BE IT ENACTED BY THE PEOPLE OF THE CITY OF LYNN HAVEN:
SECTION 1. DEFINITIONS.
For the purpose of this Ordinance, the following terms, phrases, words
and their derivations shall have the meanings given herein unless more
specifically defined within other sections of this Ordinance. When not
inconsistent with the content, words used in the present tense include the
future tense, and words in the single number include the plural number. The word
"shall" is always mandatory and not merely directory.
(A) "Lynn Haven" means the City of Lynn Haven, Florida.
(B) "CATV System" means community antenna television system and
related cable or fiber optic networks for transmission of audio and/or video
signals and electronic data by cable or other means and such related services as
Grantee may choose to provide in connection with cable television services.
Grantee shall at all times comply with federal and state laws regulating such
systems.
(C) "Commission" means the City of Lynn Haven Commission.
(D) "Franchise" is the authorization, and any renewal thereof,
issued by the Commission, as franchising authority, whether such authorization
is designated as a franchise, permit, license, resolution, contract,
certificate, agreement or otherwise, for Grantee to construct,
<PAGE> 2
install and operate the System in the public streets, alleys, roads, and rights
of way identified in said Franchise.
(E) "Grantee" is KNOLOGY of Panama City, Inc., and its permitted
successors and assigns.
(F) "Gross Revenues" shall mean all revenues recognized directly
or indirectly by Franchisee from any source whatsoever arising from,
attributable to or in any way derived from the sale or exchange of cable
services from the operation of a cable system by the Franchisee within the City
of Lynn Haven. Gross revenues shall include but not be limited to (a) revenues
derived by Grantee from subscribers or cable television services provided in
Lynn Haven, (b) penalty or other fees received for late payments or canceled
checks, (c) revenues derived from advertising (gross advertising revenues, not
net), (d) taxes, fees, assessments or similar charges derived by Grantee on
behalf of any governmental agency (including without limitation the franchise
fees derived pursuant to Section 2), (e) installation connection, disconnection
or other non-recurring fees charged to subscribers, (f) all revenues from
equipment sold, leased or rented to subscribers upon subscribers' premises, (g)
any itemized franchise fee to the subscribers, (h) any financial inducements
from program service providers, (i) marketing or launch support payments from
program service providers, and (j) any commissions received from merchandise
sales to customers who are subscribers. "Gross Revenue" shall not include
revenue received by Grantee upon sale of the System. Grantee will pay
fees/percentage equal to but no greater than competing service providers in Lynn
Haven.
(G) "Person" is any person, firm, partnership, trust, Joint Stock
Company, association, corporation, company, governmental entity or organization
of any kind.
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(H) "Rights of Way" shall mean all present and future streets,
alleys, roads, and rights of way within the limits of the City of Lynn Haven as
they now or hereafter exist.
(I) "Street" shall mean the entire width between the boundary
lines of every highway, alley, street, avenue, bridge, viaduct, tunnel, and
causeway in Lynn Haven, dedicated or devoted to public use and easements related
thereto
(J) "Substantial Buildout" shall mean the development of cable
services capability to seventy-five percent (75%) of all residential and
commercial structures within the City of Lynn Haven at the time of the signing
of this agreement by both parties.
(K) "System" shall mean, collectively, the CATV System and the
Telecommunications System.
SECTION 2. CONSIDERATION.
The grant of the right, privilege and franchise under this Ordinance
has been determined to be in the best interest of the citizens of Lynn Haven and
shall be in accordance with the terms and conditions set forth herein. The
Grantee shall annually pay to Lynn Haven a fee of four percent (4%) of Gross
Receipts as defined in this Agreement. However, in no event shall Grantee be
required to pay a fee greater than that being paid by Grantee's competitors
within the City of Lynn Haven, Florida. Said annual fee, for each year of the
term of this Franchise, shall be paid quarterly with each quarterly payment
becoming due thirty (30) days following the end of the months of March, June,
September and December hereafter. All rents or other monetary obligations, if
not paid when due, shall bear interest at the maximum legal rate from the date
such payments are due. Within 90 days of end of every 5th year, fee structure
may be reviewed and adjusted. Within 60 days of the end of each December, the
Grantee shall also file a statement executed by Grantee's
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<PAGE> 4
chief executive officer, which shall certify the amount of the Gross Receipts
and the Franchise fee for the previous calendar year. All franchise fees will be
in accordance with state and federal laws.
SECTION 3. GRANT OF AUTHORITY AND TERM.
(A) Grant of Authority.
(1) There is hereby granted, subject to the terms and
conditions of this Franchise, to Grantee the nonexclusive right and privilege to
have, own, acquire, construct, expand, reconstruct, maintain, repair, use and
operate the System in, along, across, on, over, through, above and under the
Streets and Rights of Way of Lynn Haven.
(2) Except as otherwise provided herein, this Ordinance
is granted to Grantee solely for the purpose of directly serving its end-user
customers.
(3) Grantee shall provide free cable service for up to
five (5) separate locations owned by the City of Lynn Haven after the system has
been substantially built out.
(4) Grantee shall provide service throughout all of Lynn
Haven in accordance with the schedule set forth herein.
(i) Seventy-five percent (75%) of the
residential and commercial structures in the City's boundaries as they exist on
this date will be serviced within three (3) years of the effective date of this
ordinance.
(ii) Within five (5) years of the execution of
this Franchise, Grantee will be able to provide service to all residential and
commercial structures for which cable service is presently available from other
Franchisees.
(5) Grantee shall notify the City of Lynn Haven when it
first provides telecommunication services.
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(6) Nothing herein contained shall ever be held or
construed to confer upon Grantee, its successors and/or assigns, exclusive
rights or privileges of any nature whatsoever.
(B) Term. This Franchise is granted for an initial term of twenty
(20) years the date this Ordinance is adopted by the Commission. Any renewal of
this Franchise shall comply with the provisions of ss. 626 of the Cable Act.
SECTION 4. CONDITIONS OF USE.
(A) The Grantee shall not unnecessarily obstruct or impair
traffic upon any street, road or other public way of Lynn Haven and shall comply
with all of the Commission's rules and regulations designed to prevent damage to
trees and shrubbery on or adjacent to such public streets or rights of way which
may be caused by installation and operation of the System. Upon making an
opening in any public way, street, sidewalk or road as authorized by this
Franchise for the purpose of laying, constructing, repairing and/or maintaining
the System and any related facilities or equipment, the Grantee shall, without
unnecessary delay, replace and restore same to its former condition as nearly as
possible, and in full compliance with the provisions of Lynn Haven's policies,
rules, regulations, and/or ordinances. Grantee shall comply with Lynn Haven's
underground facility damage prevention and safety ordinance.
(B) In all sections of Lynn Haven where the cables, wires or other
like facilities of public utilities are placed underground, Grantee shall place
its cable, wires or other like facilities underground to the maximum extent that
existing technology reasonably permits Grantee to do so.
(C) The Grantee shall file with Lynn Haven Engineering Department
true and correct as-built maps or plats of all existing and proposed cable plant
construction and the types of equipment and facilities installed or constructed,
properly identified and described as to the type of
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equipment and facility by appropriate symbols and marks and which shall include
annotations of all public ways, streets, road and conduits where the work is to
be undertaken.
(D) If, at any time during the period of this Franchise, Lynn
Haven shall lawfully elect to vacate, relocate, abandon, alter, reconstruct or
change the grade of any street, sidewalk, alley or other public way including
any related drainage and utility areas, the Grantee, upon reasonable notice from
Lynn Haven, shall remove, relay and relocate its wires, cables and other
fixtures and equipment at its own expense and within reasonable time schedules
established by Lynn Haven. Should Grantee fail to do so, it shall be deemed to
have waived its right to claim said wire, cable or other equipment and the
Grantee shall be liable to Lynn Haven for any costs and expenses incurred by
Lynn Haven should Lynn Haven elect to remove, relay or relocate the wires,
cables and other fixtures and equipment.
(E) The Commission may at any time make inquiries pertaining to
Grantee's operation of the System within Lynn Haven. Grantee shall respond to
such inquiries on a timely basis.
(F) Grantee shall, upon request, provide the Commission with
copies of notices of all petitions, applications, communications and reports
submitted between Grantee and the FCC, Securities and Exchange Commissions and
the Florida Public Service Commission or their successor agencies, relating to
any matters affecting the use of Lynn Haven's Streets and Rights of Way and/or
the System authorized pursuant to this Franchise ordinance.
(G) Charges for services offered to the public by Grantee shall
comply with all applicable state and federal laws and regulations regarding
subscriber rates. Grantee shall provide notice to the Commission prior to any
rate change and shall maintain on file with said Commission
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a schedule of the current rates and fees charged for its services offered to the
public.
(H) Grantee shall install and maintain its wires, cables, fixtures
and other equipment in accordance with the requirements of all applicable Lynn
Haven codes, ordinances and regulations, and in such a manner that they will not
interfere with any existing installations of Lynn Haven or the operation of a
public utility serving Lynn Haven.
(I) No poles or other wire-holding structures shall be erected by
Grantee without prior written approval of Lynn Haven Planning and Development
Department with regard to location, height, type and other pertinent
considerations. Any poles and wire-holding structures of Grantee erected
pursuant to this subsection shall be moved or modified by Grantee at its sole
expense, upon reasonable notice, whenever Lynn Haven Planning and Development
Department has determined that the public convenience would be enhanced thereby.
(J) Should Grantee fail to begin construction of the System within
one hundred twenty (120) days from the date this Franchise Ordinance is adopted
by the Commission, Lynn Haven shall be entitled to terminate this Franchise
immediately.
(K) Grantee shall provide continuous service under this Franchise.
Should services be disrupted or discontinued for thirty (30) days out of any
ninety (90) consecutive days, Grantee shall be in default of this Franchise, and
Lynn Haven shall be entitled to terminate this Franchise immediately, provided,
however, that any such disruption or discontinuance which is caused by an act of
God shall not result in a termination of the Franchise if Grantee immediately,
continuously, and diligently works toward restoring service to its full
capacity.
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<PAGE> 8
SECTION 5. LIABILITY AND INDEMNIFICATION.
(A) By acceptance of this Franchise and right, Grantee agrees that
it shall indemnify, protect and hold forever harmless Lynn Haven, its elected
officials, officers, agents, represents and employees, and their successors,
legal representatives and assigns, from any and all claims, liabilities, losses,
costs, judgments, penalties, damages and expenses (including reasonable
attorney's fees and expenses of litigation incurred in the defense of any such
claim), arising out of or relating to the installation, operation or maintenance
by the Grantee of the System, or the Grantee's failure to perform any of the
obligations of this Franchise, including but not limited to claims for injury or
death to any person or persons, or damages to any property, as may be incurred
by or asserted against Lynn Haven, its elected officials, officers, agents,
representatives and/or employees, directly or indirectly, by reason of the
installation, operation or maintenance by the Grantee of the System within Lynn
Haven.
(B) Nothing contained in subsection (A) of Section 5 shall in any
way be deemed a waiver by City of its sovereign immunity.
(C) Grantee shall furnish the Commission at least annually (and at
such other times as may be reasonably requested by the Commission) a certificate
from the insurance carrier(s) providing such insurance coverage certifying that
such coverage is in full force and effect. Such certificates shall be in such
form as is approved by the Commission and designate Lynn Haven as an additional
insured.
(D) During all periods of this Franchise, Grantee shall maintain
all insurance coverage required by law, and shall also maintain comprehensive
general liability insurance coverage in a single limit sum of One Million
Dollars ($1,000,000.00) for any one occurrence for
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<PAGE> 9
bodily injury, including death, and property damage. Compliance with all
insurance requirements shall be evidenced by a prepaid certificate of Insurance
designating Lynn Haven as an additional insured, which by its terms shall
prohibit any cancellation or material change in coverage absent thirty (30) days
written notice to Lessor. On or before the anniversary date of the insurance
coverage, Grantee shall furnish like evidence of continuing or replacement
coverage. Grantee shall post a $50,000 performance bond which shall be retained
by the City of Lynn Haven until the cable system has been built throughout
seventy five percent (75%) of the City of Lynn Haven as it exists this date.
(E) Lessee shall maintain workers' compensation insurance and
any other such insurance or coverage as may be required by law. The obligation
to maintain workers' compensation insurance coverage exists without regard to
any exemptions under Florida law.
SECTION 6. CITY RIGHTS IN FRANCHISE.
(A) The Grantee shall at all times comply with all reasonable
requirements, regulations, laws and ordinances now in force, and which may
hereafter be adopted by the Commission and be applicable to the construction,
repair or maintenance or operation of the System or use of Lynn Haven-owned
conduit.
(B) The following events shall constitute an "Event of Default"
under this Franchise:
(1) Grantee breaches any material covenant set forth in
this Franchise;
(2) Grantee fails to begin construction of the System
within one hundred twenty (120) days from the date this Franchise Ordinance is
adopted by the Commission.
Lynn Haven's right to terminate this Franchise may be exercised only after
delivery of a
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written notice of an Event of Default to Grantee and a sixty (60) day period for
Grantee to cure an Event of Default. Notwithstanding the foregoing, this
Franchise shall not be terminated unless Grantee has had the opportunity to
present its case before a meeting of the Commission.
(C) The right is hereby reserved to Lynn Haven to adopt, in
addition to the provisions contained herein and in existing applicable
ordinances, such additional regulations or general application to all Franchises
providing competing services, including regulations relating to customer service
obligations, as it shall find necessary in the exercise of its police power;
provided, that such regulations, by ordinance or otherwise, shall be reasonable
and not in conflict with the rights herein granted.
(D) Lynn Haven shall have the right, when the Commission in its
sole discretion finds it necessary or appropriate, to hold a public hearing with
regard to this Franchise, and Grantee shall make representatives available to
attend any such hearing.
(E) Upon reasonable notice, Lynn Haven shall have the right to
inspect the business records of Grantee. Lynn Haven or its designee shall have
the right to conduct an audit of Grantee's books at any time. Grantee shall be
responsible for the costs and expenses of the audit if the results of the audit
reveal grantee owes Lynn Haven more than 5% of the amount paid during the period
subject to the audit. The prevailing party shall be liable for all costs and
expenses, including reasonable attorney's fees, incurred to collect any amounts
claimed by Grantor.
SECTION 7. ACCEPTANCE.
This Franchise and the rights, privileges and authority hereby granted,
shall take effect and be in force from and after enactment of this Ordinance and
execution by the Mayor and City Manager/Clerk, provided that within fifteen (15
days after the date of the enactment of this
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Ordinance, the Grantee shall file with the person specified in Section 9 herein
its unconditional acceptance of this Franchise, which acceptance shall include
its agreement to comply with and abide by all its provisions, terms and
conditions. Such acceptance and agreement shall be in writing, duly executed by
or on behalf of the Grantee and accompanied by an insurance certificate as
specified in Section 5 unless these documents or evidence thereof have been
previously filed with the City Manager.
SECTION 8. TRANSFER OF TITLE.
(a) The Grantee shall not transfer this Franchise to another
person or entity without prior written approval of Lynn Haven, provided that
such approval will not be unreasonably withheld or delayed. Lynn Haven shall
have the absolute right to withhold consent to a transfer of this Franchise at
any time before substantial buildout is achieved and three (3) years have passed
since the adoption of this ordinance. This provision shall not be construed as
requiring Lynn Haven's approval of secured financing arrangements.
SECTION 9. NOTICE.
All notices, demands or other writings this Franchise requires to be
given or made or sent, or which may be given or made or sent, by either party,
shall be deemed to have been fully given or made or sent when made in writing
and deposited in the United States mail, registered certified and postage
prepaid, and addressed as follows:
TO GRANTEE:
KNOLOGY of Panama City, Inc.
1241 O.G. Skinner Drive
West Point, GA 31833
Attention: President
FAX: (706) 645-1446
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TO LYNN HAVEN:
City of Lynn Haven Commission
825 Ohio Avenue
Lynn Haven, FL 32444
Attention: City Manager/Clerk
FAX: (850) 265-8931 '
The address of a party may be changed by written notice given to the other party
in the manner above provided.
Alternatively, a notice or other communication shall be deemed to be duly
received, if delivered by hand or sent by a method requiring a signature of
recipient, or is received by facsimile on a day which is not a business day, or
after 5:00 p.m. on any business day at the addressee's location, such notice or
communication shall be deemed to be duly received by the recipient at 10:00 a.m.
on the first business day thereafter. Provided further the sender maintains as a
business record an activity report generated by the sender's facsimile machine.
SECTION 10. SEVERABILITY.
If any section, subsection, sentence, clause, phrase or portion of this
Ordinance is for any reason held invalid, unenforceable or unconstitutional by
any court of competent jurisdiction, such portion shall be deemed a separate,
distinct, independent, and severable provision and such holding shall not affect
the validity of the remaining portions hereof.
SECTION 11. CONTROLLING LAW.
This Franchise shall be interpreted and construed in accordance with
the laws of the State of Florida.
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SECTION 12. Exclusive Venue.
All claims, disputes and other matters in question between the Grantee and
Lynn Haven arising out of or relating to the Agreement, or the breach thereof,
shall be decided in the Circuit Court of Bay County, Florida. The Grantee, by
executing this Agreement, specifically consents to venue in Bay County, Florida
and waives any right to contest the venue in the Circuit Court of Bay County,
Florida or to remove action.
SECTION 13. Effective Date.
This Ordinance shall become effective upon its passage and Grantee
executing within fifteen (15) days thereafter the proper document or documents
acceptable to Lynn Haven binding itself, its successors or its assigns to the
terms herein.
PASSED, APPROVED and ADOPTED this 12th day of May, 1998.
CITY OF LYNN HAVEN, FLORIDA
By: /s/ Walter T. Kelley
-----------------------------------
Walter T. Kelley, Mayor
ATTEST:
/s/ Ricky A. Horst
- ----------------------------
Ricky A. Horst
City Clerk First Reading: 14 April 98
Second and
final reading: 5/12/98
Examined and approved by me this 12th day of May, 1998.
/s/ Walter T. Kelley
--------------------------------------
Walter T. Kelley, Mayor
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EXHIBIT 10.57
ORDINANCE NO. 1723
AN ORDINANCE GRANTING A FRANCHISE TO KNOLOGY OF PANAMA CITY, INC.,
AUTHORIZING IT TO INSTALL, MAINTAIN AND OPERATE A SYSTEM FOR THE
TRANSMISSION OF AUDIO, AND/OR VIDEO SIGNALS AND ELECTRONIC DATA
OVER, ACROSS AND UNDER PUBLIC STREETS AND RIGHTS OF WAY IN PANAMA
CITY, FLORIDA UNDER CERTAIN CONDITIONS AND RESTRICTIONS; TO REPEAL
CONFLICTING ORDINANCES; AND FOR OTHER PURPOSES.
BE IT ENACTED BY THE PEOPLE OF THE CITY OF PANAMA CITY, FLORIDA:
SECTION 1. DEFINITIONS. For the purpose of this Ordinance, the
following terms, phrases, words and their derivations shall have the meanings
given herein unless more specifically defined within other sections of this
Ordinance. When not inconsistent with the content, words used in the present
tense include the future tense, and words in the single tense include the plural
number. The word "shall" is always mandatory and not merely directory.
(A) "Panama City" means the City of Panama City, Florida.
(B) "Business Plan" means the business plans and documents related
thereto given from Grantee to Panama City as an inducement to
grant this Franchise.
(C) "CATV System" means a community antenna television system and
related cable or fiber optic networks for transmission of
audio and/or video signals and electronic data by cable or
other means and such related services as Grantee may choose to
provide in connection with cable television services.
(D) "Commission" means the City of Panama City Commission.
(E) "Franchise" is the authorization, and any renewal thereof,
issued by the Commission as franchising authority, whether
such authorization is designated as
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a franchise, permit, license resolution, contract,
certificate, agreement or otherwise, for Grantee to construct,
install and operate the System in the public streets, alleys,
roads and rights of way identified in said Franchise.
(F) "Grantee" is KNOLOGY of Panama City, Inc., and its permitted
successors and assigns.
(G) "Gross Revenues" shall mean all revenues recognized directly
or indirectly by Franchisee from any source whatsoever arising
from, attributable to or in anyway derived from the sale or
exchange of cable services from the operation of a cable
system by the Franchisee within the City of Panama City. Gross
revenues shall include but not be limited to (a) revenues
derived by Grantee from subscribers for cable television
services provided in Panama City, (b) penalty or other fees
received for late payments or canceled checks, (c) revenues
derived from advertising (gross advertising revenues, not
net), (d) taxes, fees, assessments or similar charges derived
by Grantee on behalf of any governmental agency (including
without limitation the franchise fees derived pursuant to
Section 2), (e) installation connection, disconnection or
other non-recurring fees charged to subscribers, (f) all
revenues from equipment sold, leased or rented to subscribers
upon subscribers' premises, (g) any itemized franchise fee to
the subscribers; (h) any financial inducements from program
service providers, (i) marketing or launch support payments
from program service providers, and (j) any commissions
received from merchandise sales to customers who are
subscribers. "Gross Revenue" shall not include revenue
received by Grantee upon sale of the System.
2
<PAGE> 3
Grantee will pay fee/percentage equal to but no greater than
competing service providers in Panama City.
(H) "Person" is any person, firm, partnership, trust, joint stock
company, association, corporation, company, governmental
entity or organization of any kind.
(I) "Rights of Way" shall mean all present and future streets
within the limits of the City of Panama City.
(J) "Street" shall mean the entire width between the boundary
lines of every highway, alley, street, avenue, bridge,
viaduct, tunnel, and causeway in Panama City, dedicated or
devoted to public use and easements related thereto.
(K) "Substantial Buildout" shall mean development of cable
services capability to seventy-five percent (75%) of all
residential and commercial structures within the City of
Panama City at the time of the signing of this agreement by
both parties.
(L) "System" shall mean the CATV System.
SECTION 2. CONSIDERATION. The grant of the right, privilege and
franchise under this Ordinance has been determined to be in the best interest of
the citizens of Panama City and shall be in accordance with the terms and
conditions set forth herein. Until 2006, the Grantee shall annually pay to
Panama City a fee of three and one-half percent (3 1/2%) of Gross Revenues as
defined in this Agreement. Beginning in 2006, the annual payment shall increase
to a fee of four percent (4%) of Gross Revenue provided however in no event
shall Grantee be required to pay a fee greater than that being paid by Grantee's
competitors within the City of Panama City, Florida. Said annual fee, for each
year of the term of this Franchise, shall be paid quarterly with each quarterly
payment becoming due thirty (30) days following the end of the months of March,
3
<PAGE> 4
June, September and December hereafter. All rents or other monetary obligations,
if not paid when due, shall bear interest at the maximum legal rate from the
date such payments are due. Within sixty (60) days of the end of each December,
the Grantee shall also file a statement executed by Grantee's chief executive
officer which shall certify the amount of Gross Revenues and the Franchise fee
for the previous calendar year. All franchise fees will be in accordance with
state and federal laws.
SECTION 3. GRANT OF AUTHORITY AND TERM.
A. GRANT OF AUTHORITY.
(i) There is hereby granted, subject to the terms and
conditions of this, Franchise, to Grantee the
nonexclusive right and privilege to have, own,
acquire, construct, expand, reconstruct, maintain,
repair, use and operate the System in, along, across,
on, over, through, above and under the Streets and
Rights of Way of Panama City, Florida.
(ii) Except as otherwise provided herein, this Ordinance
is granted to Grantee for the sole purpose of
directly serving its end-user customer.
(iii) Grantee shall provide service throughout all of
Panama City as a public service provider in
accordance with the schedule set forth in Grantee's
business plan. Said business plan shall contain
development provisions for the construction and
operation of fiber optic cable services for all
residential and commercial structures, as set out
herein below. The business plan shall contain
measures to meet the following minimal criteria:
4
<PAGE> 5
a. Fifty percent (50%) of the residential and commercial
structures in the City's boundaries as they exist on
this date will be serviceable within three (3) years
of the execution of this Franchise.
b. Within five (5) years of the execution of this
Franchise, Grantee will be able to provide service to
all residential and commercial structures for which
cable service is presently available from other
Franchisees.
(iv) Nothing herein contained shall ever be construed to confer
upon Grantee, its successors and/or assigns, exclusive rights
or privileges of any nature whatsoever.
B. TERM. This Franchise is granted for an initial term of twenty (20) years
from and after the date this Ordinance is adopted by the Commission.
SECTION 4. CONDITIONS OF USE.
A. The Grantee shall not unnecessarily obstruct or impair traffic upon any
street, road or other public way of Panama City and shall comply with all
of the Commission's rules and regulations designed to prevent damage to
trees and shrubbery on or adjacent to such public streets or rights of way
which may be caused by installation and operation of the System. Upon
making an opening in any public way, street sidewalk or road as authorized
by this Franchise for the purpose of laying, constructing, repairing and/or
maintaining the System and any related facilities or equipment, the Grantee
shall, without unnecessary delay, replace and restore same to its former
condition as nearly as possible, and in full compliance with the provisions
of Panama City's
5
<PAGE> 6
policies, rules, regulation's and/or ordinances.
B. In all sections of Panama City where the cables, wires or other like
facilities of public utilities are placed underground, Grantee shall place
its cable, wires or other like facilities underground to the maximum extent
that existing technology reasonably permits Grantee to do so.
C. The Grantee shall file with Panama City Engineering Department true and
correct as-built maps or plats of all existing and proposed cable plant
construction and the types of equipment and facilities installed or
constructed, property identified and described as to the type of equipment
and facility by appropriate symbols and marks and which shall include
annotations of all public ways, streets, road and conduits where the work
is to be undertaken.
D. If, at any time during the period of this Franchise, Panama City shall
lawfully elect to vacate, relocate, abandon, alter, reconstruct or change
the grade of any street, sidewalk, alley or other public way including any
related drainage and utility areas, the Grantee upon reasonable notice from
Panama City, shall remove, relay and relocate its wires, cables and other
fixtures and equipment at its own expense and within reasonable time
schedules established by Panama City. Should Grantee fail to do so, it
shall be deemed to have waived its right to claim said wire, cable or other
equipment and Grantee shall be liable to Panama City for any costs and
expenses incurred by the City should the City elect to remove, relay or
relocate the wires, cables and other fixtures and equipment.
E. The Commission may at any time make inquiries pertaining to Grantee's
operation of
6
<PAGE> 7
the System with Panama City. Grantee shall respond to such inquiries on a
timely basis.
F. Grantee shall, upon request, provide the Commission with copies of notices
of all petitions, applications, communications and reports submitted
between Grantee and the FCC, Securities and Exchange Commissions and the
Florida Public Service Commission or their successor agencies, relating to
any matters affecting the use of Panama City's Streets and Rights of Way
and/or the System authorized pursuant to this Franchise ordinance.
G. Charges for service offered to the public by Grantee shall comply with all
applicable state and federal laws and regulations regarding subscriber
rates. Grantee shall provide notice to the Commission prior to any rate
change, and shall maintain on file with said Commission a schedule of the
current rates and fees charged for its services offered to the public.
H. Grantee shall install and maintain its wires, cables, fixtures and other
equipment in accordance with the requirements of all applicable Panama City
codes, ordinances and regulations, and in such a manner that they will not
interfere with any existing installations of Panama City or the operation
of a public utility serving Panama City.
I. No poles or other wire-holding structures shall be erected by Grantee
without prior written approval of the Panama City Engineering Department
with regard to the location, height, type and other pertinent
considerations. Any poles and wire-holding structures of Grantee erected
pursuant to this subsection shall be moved or modified by Grantee at its
sole expense, upon reasonable notice, whenever the Engineering
7
<PAGE> 8
Department has determined that the public convenience would be enhanced
thereby.
J. Should Grantee fail to begin construction of the System within one hundred
twenty (120) days from the date this Franchise ordinance is adopted by the
Commission, Panama City shall be entitled to terminate this Franchise
immediately.
K. Grantee shall provide continuous service under this Franchise. Should
services be disrupted or discontinued for thirty (30) days out of any
ninety (90) consecutive days, Grantee shall be in default of this Franchise
and Panama City shall be entitled to terminate the Franchise immediately;
provided, however, that any such disruption or discontinuance which is
caused by an act of God shall not result in a termination of this Franchise
if Grantee immediately, continuously and diligently works toward restoring
service to its full capacity.
SECTION 5. LIABILITY AND INDEMNIFICATION.
A. By acceptance of this Franchise and right Grantee agrees that it shall
indemnify, protect and hold forever harmless Panama City, its elected
officials, officers, agents, represents and employees, and their
successors, legal representatives and assigns, from any and all claims,
liabilities, losses, costs, judgments, penalties, damages and expenses
(including reasonable attorney's fees and expenses of litigation incurred
in the defense of any such claim), arising out of or relating to the
installation, operation or maintenance by the Grantee of the System, or the
Grantee's failure to perform any of the obligations of this Franchise,
including but not limited to claims for injury or death to any person or
persons, or damages to any property, as may be incurred by or asserted
against Panama City, its elected officials, officers, agents,
representatives
8
<PAGE> 9
and/or employees, directly or indirectly, by reason of the installation,
operation or maintenance by the Grantee of the System within Panama City.
B. During all periods of this Franchise, Grantee shall maintain all insurance
coverage required by law, and shall also maintain comprehensive general
liability insurance coverage in a single limit sum of 1.6 Million Dollars
($1,600,000.00) for any one occurrence for bodily injury, including death,
and property damage. Compliance with all insurance requirements shall be
evidenced by a prepaid Certificate of Insurance designating Panama City as
an additional insured, which by its terms shall prohibit any cancellation
or material change in coverage absent thirty (30) days written notice, to
Lessor. On or before the anniversary date of the insurance coverage,
Grantee shall furnish like evidence of continuing or replacement coverage.
C. Lessee shall maintain worker's compensation insurance and any other such
insurance or coverage as may be required by law. The obligation to maintain
workers' compensation insurance coverage exists without regard to any
exemptions under Florida law.
SECTION 6. CITY RIGHTS IN FRANCHISE.
A. The Grantee shall at all times comply with all reasonable requirements,
regulations, laws and ordinances now in force, and which may hereafter be
adopted by the Commission and be applicable to the construction, repair, or
maintenance or operation of the System or use of Panama City-owned conduit.
B. The following events shall constitute an "Event of Default" under this
Franchise:
(i) Grantee breaches any material covenant set forth in this
Franchise;
9
<PAGE> 10
(ii) Grantee fails to begin construction of the System within one
hundred twenty (120) days from the date this Franchise
ordinance is adopted by the Commission.
Panama City's right to terminate this Franchise may be exercised only
after delivery of a written notice of an Event of Default to Grantee
and a sixty (60) day period for Grantee to cure an Event of Default
Notwithstanding the foregoing going, this Franchise shall not be
terminated unless Grantee has had the opportunity to present its case
before a meeting of the Commission.
C. The right is hereby reserved to Panama City to adopt, in addition to the
provisions contained herein and in existing applicable ordinances, such
additional regulations of general application to all Franchisees providing
competing services, including regulations relating to customer service
obligations, as it shall find necessary in the exercise of its police
power, provided, that such regulations, by ordinance or otherwise, shall be
reasonable and not in conflict with the rights herein granted.
D. Panama City shall have the right when the Commission in its sole discretion
finds it necessary or appropriate, to hold a public hearing with regard to
this Franchise, and Grantee shall make representatives available to attend
any such hearing.
E. Upon reasonable notice, Panama City shall have the right to inspect the
business records of Grantee. Panama City shall have the right to conduct an
audit of Grantee's book at any time. Grantee shall be responsible for the
costs and expenses of the audit if the results of the audit reveal Grantee
owes Panama City more than three percent (3%) of the amount paid during the
period subject to the audit. The prevailing party
10
<PAGE> 11
shall be liable for all costs and expenses, including reasonable attorneys'
fees, incurred to collect any amounts claimed by Grantor.
SECTION 7. ACCEPTANCE. This Franchise and the rights, privileges and
authority hereby granted, shall take effect and be in force from and after
enactment of this Ordinance and execution by the Mayor and City Clerk, provided
that within fifteen (15) days after the date of the enactment of this Ordinance,
the Grantee shall file with the person specified in Section 10 herein its
unconditional acceptance of this Franchise, which acceptance shall include its
agreement to comply with and abide by all its provisions, terms and conditions.
Such acceptance and agreement shall be in writing, duly executed by or on behalf
of the Grantee and accompanied by an insurance certificate as specified in
Section 5 unless these documents or evidence thereof have been filed with the
City Clerk.
SECTION 8. TRANSFER OF TITLE. The Grantee shall not transfer this
Franchise to another person or entity without prior written approval of Panama
City, provided that such approval will not be unreasonably withheld or delayed.
Panama City shall have the absolute right to withhold consent to a transfer of
this Franchise at any time before substantial buildout is achieved and three (3)
years have passed since the adoption of this ordinance. This provision shall not
be construed as requiring Panama City's approval of secured financing
arrangements.
SECTION 9. NOTICE. All notices, demands or other writings in this
Franchise provided to be given or made or sent, or which may be given or made or
sent, by either party, shall be deemed to have been fully given or made or sent
when made in writing and deposited in the United States mail, registered and
postage prepaid, and addressed as follows:
TO GRANTEE:
11
<PAGE> 12
KNOLOGY of Panama City, Inc.
312 West 8th Street
West Point, Georgia 31833
Attention: President
(706) 645-1446 (fax)
TO PANAMA CITY:
City of Panama City
P.0. Box 1880
Panama City, Florida 32402
Attention: City Manager
(850) 872-3024
The address of a party may be changed by written notice given to the other party
in the manner above provided.
Alternatively, a notice or other communication shall be deemed to be
duly received, if delivered by hand or sent by business courier, when left at
the address of the recipient, and if sent by facsimile transmission, upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent in its entirety to the recipient's
facsimile number, provided that if such notice or other communication is
delivered by hand or business courier, or is received by facsimile on a day
which is not a business day, or after 5:00 p.m. on any business day at the
addressee's location, such notice or communication shall be deemed to be duly
received by the recipient at 10:00 a.m. on the first business day thereafter.
SECTION 10. SEVERABILITY. If any section, subsection, sentence, clause,
phrase or portion of this Ordinance is for any reason held invalid,
unenforceable or unconstitutional by any court of competent jurisdiction, such
portion shall be deemed a separate, distinct, independent, and severable
provision and such holding shall not affect the validity of the remaining
portions
12
<PAGE> 13
hereof.
SECTION 11. CONTROLLING LAW. This Franchise shall be interpreted and
construed in accordance with the laws of the State of Florida.
SECTION 12. VENUE. All claims, disputes and other matters in question
between the Grantee and Panama City arising out of or relating to the Agreement,
or the breach thereof, shall be decided in the Circuit Court of Bay County,
Florida. The Grantee, by executing this Agreement, specifically consents to
venue in Bay County, Florida and waives any right to contest the venue in the
Circuit Court of Bay County, Florida.
SECTION 13. EFFECTIVE DATE. This ordinance shall become effective upon
its passage.
PASSED, APPROVED and ADOPTED this 10th day of March, 1998.
CITY OF PANAMA CITY, FLORIDA
By: /s/ Girard L. Clemons, Jr.
-----------------------------------
Girard L. Clemmons, Jr.
Mayor
ATTEST:
/s/ Michael Bush
- --------------------------------
Michael Bush
City Clerk
13
<PAGE> 1
EXHIBIT 10.58
RESOLUTION NO. 97-22
A RESOLUTION GRANTING BEACH CABLE, INC. THE RIGHT TO ASSIGN ITS NON-EXCLUSIVE
PERMIT TO LOCATE, CONSTRUCT, MAINTAIN, AND OPERATE A TELEVISION CABLE
DISTRIBUTION SYSTEM IN THE CITY OF PANAMA CITY BEACH, FLORIDA TO KNOLOGY OF
PANAMA CITY, INC.
WHEREAS, the City Council of Panama City Beach, Florida (the "City"), has,
by Resolution 92-7 (the "Permit"), granted a non-exclusive permit authorizing
Beach Cable, Inc. (the "Permittee"), to locate, construct, maintain, and operate
a television cable distribution system ("Cable System") in the City of Panama
City Beach, Florida; and
WHEREAS, L. Charles Hilton, Jr., the sole stockholder of the Permittee,
wishes to convert his ownership interest in the Permittee to an ownership
interest in Knology Holdings, Inc., a Delaware Corporation ("Knology"), through
a transaction in which Knology of Panama City, Inc., a Delaware corporation and
wholly owned subsidiary of Knology, and the Permittee will be merged; and
WHEREAS, the Permittee and Knology are in the process of negotiating a
merger agreement to effectuate the merger transactions; and
WHEREAS, Section Fourteen of the Permit states that after completion of the
Cable System, the Permittee shall have a right to assign the Permit, but only
subject to, and after obtaining, the approval of the City; and
WHEREAS, the said proposed merger might be considered an assignment of said
Permit to Knology of Panama City, Inc., the corporation which will result from
the proposed merger; and
WHEREAS, the City believes that such merger will be in the public interest;
NOW, THEREFORE, BE IT RESOLVED by the City of Panama City Beach, Florida,
that the proposed assignment of said Permit to Knology of Panama City, Inc. is
hereby approved subject to consummation of a merger agreement between Permittee
and Knology, provided that Knology shall notify the City in writing promptly
after the consummation of the merger transaction, and
BE IT FURTHER RESOLVED that the approval granted by this Resolution shall
expire at midnight, January 31, 1998, if the merger transactions between
Permittee and Knology have
<PAGE> 2
not been consummated by that time.
PASSED, APPROVED, AND ADOPTED THIS 3RD DAY OF DECEMBER, 1997.
CITY OF PANAMA CITY BEACH
By: /s/ Philip W. Griffitts
--------------------------
Philip W. Griffitts, Mayor
ATTEST:
/s/ Mark Schnitker
- -----------------------------
Mark Schnitker, City Clerk
<PAGE> 1
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED FOUR MONTHS ENDED EIGHT MONTHS ENDED
DECEMBER 31, 1994 APRIL 30, 1995 DECEMBER 31, 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
FIXED CHARGES:
Interest expense and amortization
of debt issuance costs 230,575 21,878 567,913
Interest element of rent expense 25,667 9,000 22,000
----------- ----------- -----------
256,242 30,878 589,913
=========== =========== ===========
EARNINGS:
Consolidated Net Loss (874,235) (123,985) (1,185,534)
Minority Interest -- -- 109,837
Income Tax Benefit -- -- 334,451
Fixed Charges 256,242 30,878 589,913
----------- ----------- -----------
(617,993) (93,107) (1,039,909)
=========== =========== ===========
RATIO OF EARNINGS TO FIXED CHARGES (2.41) (3.02) (1.76)
=========== =========== ===========
COVERAGE DEFICIENCY 874,235 123,985 1,629,822
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- ----------------- -----------------
<S> <C> <C> <C>
FIXED CHARGES:
Interest expense and amortization
of debt issuance costs 1,055,498 6,406,811 31,671,645
Interest element of rent expense 23,333 31,000 60,333
----------- ----------- -----------
1,078,831 6,437,811 31,731,978
=========== =========== ===========
EARNINGS:
Consolidated Net Loss (3,125,428) (9,091,533) (36,476,436)
Minority Interest -- -- --
Income Tax Benefit 373,323 -- 6,785,691
Fixed Charges 1,078,831 6,437,811 31,731,978
----------- ----------- -----------
(2,419,920) (2,653,722) (11,530,149)
=========== =========== ===========
RATIO OF EARNINGS TO FIXED CHARGES (2.24) (.41) (.36)
=========== =========== ===========
COVERAGE DEFICIENCY 3,498,751 9,091,533 43,262,127
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 19, 1999 included in this Form 10-K. It should be noted that we
have not audited any financial statement so the company subsequent to December
31, 1998 or performed any audit procedures subsequent to the date of the report.
ARTHUR ANDERSEN LLP
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET OF KNOLOGY HOLDINGS, INC. AS OF DECEMBER 31, 1998 AND THE
RELATED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998.
THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,859,508
<SECURITIES> 66,231,397
<RECEIVABLES> 12,287,949
<ALLOWANCES> 393,767
<INVENTORY> 32,142,503
<CURRENT-ASSETS> 83,415,898
<PP&E> 176,761,061
<DEPRECIATION> 13,406,947
<TOTAL-ASSETS> 332,550,650
<CURRENT-LIABILITIES> 30,710,461
<BONDS> 284,242,833
0
499
<COMMON> 4
<OTHER-SE> 14,987,823
<TOTAL-LIABILITY-AND-EQUITY> 332,550,650
<SALES> 25,770,427
<TOTAL-REVENUES> 25,770,427
<CGS> 11,854,733
<TOTAL-COSTS> 68,450,013
<OTHER-EXPENSES> 18,834,891
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,676,035
<INCOME-PRETAX> (42,679,586)
<INCOME-TAX> 6,785,691
<INCOME-CONTINUING> (35,893,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (582,541)
<NET-INCOME> (36,476,436)
<EPS-PRIMARY> (4.87)
<EPS-DILUTED> (4.87)
</TABLE>
